P & C Manual Flashcards
What is risk?
The uncertainty of loss.
What is another term for risk?
Exposure
What is a “pure” risk?
They involve only the possibility of loss, as opposed to speculative risks, which involve the possibility of loss or gain.
What is meant by “insurable interest”?
Even if a risk is insurable in the general sense, you may not insure it unless you are the person who will suffer the financial loss.
What is meant by the fact that insuring the Risk must be “affordable”?
The risk must not be so great that the premiums required to fund loss payments would be prohibitively high.
What is meant by the fact that a loss must not happen to a large number of insureds at the same time?
If a great number of insureds were to suffer a loss at the same time, it would be catastrophic for the insurance company. A company would not want to insure every home in a small town because a fire or tornado might destroy the entire town. Instead, the company would insure homes in many towns and states to spread the risk.
What is a peril?
A cause of a loss.
What is a hazard?
Something that increases the chance of loss.
What are the three types of hazards and describe
a. Physical–occupying property next to a hazardous site, having faulty brakes on your car, worn wiring in your home, lack of pride of ownership
b. Morale–This is someone with carelessness of attitude, someone who is irresponsible. They go through life saying, “Why should i worry, I have insurance?”
c. Moral–The most dangerous hazard. These are people who purchase insurance with intent to commit fraud.
What are the four elements of a legally enforceable contract?
- Competent parties–legal incompetency examples: insane, those under the influence of alcohol or drugs, and minors
- Must be for legal purpose–they are not enforceable if they are illegal, immoral, or against public policy
- Offer and Acceptance–must be an agreement between 2 parties
- Consideration–each party must commit something of value. The insured’s consideration is the policy premium. The company’s consideration is its promise to pay losses subject to the conditions specified in the insurance contract.
What is a principle of indemnity?
This means that when a loss occurs, insureds should be restored to the approximate financial condition they were in before the loss. They should not suffer financially from the loss, not should they be allowed to gain from it.
What is a unilateral contract?
A contract that requires that a promise be exchanged for an act.
What is a contract of utmost good faith?
This means that the parties have a duty to disclose to each other all material facts relating to the contract.
What is a conditional contract?
It contains a number of conditions that both the insured and the insurer must comply with
What are “conditions”?
The responsibilities and obligations of each party–what the insured must do in the event of a loss, etc.
What is an endorsement?
These are attached to the policy in order to modify it in some way
All of the following are techniques for handling risk EXCEPT:
a. avoidance
b. loss control
c. retention
d. speculation
d. speculation
The law of large numbers states:
a. Future losses are unpredictable.
b. It is possible to precisely predict losses for groups of people.
c. The more examples used to develop a statistic, the more reliable the statistic will be.
d. A small sample of losses can be used to develop rates.
c. The more examples used to develop a statistic, the more reliable the statistic will be.
All of the following are elements of insurability EXCEPT:
a. There must be an insurable interest
b. Insuring the risk must be affordable
c. The loss must happen to a large number of people at the same time.
d. The loss must be calculable
c. The loss must happen to a large number of people at the same time.
Having worn tires is an example of:
a. A physical hazard
b. A moral hazard
c. A morale hazard
d. a peril
a. A physical hazard
All of the following are elements of a legally enforceable contract EXCEPT:
a. a legal purpose
b. a signature of both parties
c. competent parties
d. consideration
b. a signature of both parties
Being placed in the same financial positions after a loss as before the loss is an example of:
a. the principle of alienation
b. the principle of adherence
c. the principle of indemnity
d. the principle of personality
c. the principle of indemnity
All of the following are parts of an insurance policy EXCEPT:
a. conditions
b. definitions
c. insuring agreement
d. binder
d. binder
A form which modifies coverage is called:
a. an binder
b. a modification form
c. an endorsement
d. a change form
c. an endorsement
What kind of company is organized as a corporation in the business of providing insurance, where the stockholders own the business and are entitled to its profits?
Stock Companies
What kind of company is not incorporated and does not issue stock, but rather its policyholders, who also elect its managers, own the company?
Mutual Companies
What kind of company is no incorporated but is managed by an attorney-in-fact, who assures that the loss-sharing agreements are carried out?
Reciprocal Companies
In what kind of company are certain types of insurance are offered or subsidized by the state or federal government?
Residential Market Insurance (Government Insurers)
What type of insurance insures against the economic loss caused when things we own are damaged or destroyed?
Property Insurance
What is the formula for loss ratio?
losses/premium=loss ratio
What is derived by comparing paid claims to premiums?
Loss Ratio
What compares the company’s expenses to premiums?
Expense Ratio
What is a person who stands in a special relationship of trust to another person?
A fiduciary
What is giving a customer anything of value not specified in the policy in order to induce a sale?
Rebating–typical rebate is giving a customer part or all of the commission on a sale
A company that is formed as a corporation and owned by investors is called a:
a. mutual company
b. stock company
c. residual company
d. fraternal company
b. stock company
Policyholders are owners of which of the following type of company:
a. reinsurance company
b. mutual company
c. fire company
d. Lloyd’s company
b. mutual company
Insurance offered by or subsidized by government entities is called the:
a. reciprocal market
b. residual market
c. refinancing market
d. reimbursement market
b. residual market
All of the following are roles of an insurance agent EXCEPT:
a. interpret contracts for clients
b. countersign policies
c. provide a link between the policyholder and company
d. collect the initial policy premium
a. interpret contracts for clients
Powers given to an agent in the agency contract are called:
a. implied authority
b. apparent authority
c. express authority
d. written authority
c. express authority
Agents who are independent business people contracted to write only for one company are called:
a. direct writing agents
b. independent agents
c. exclusive agents
d. direct response agents
c. exclusive agents
An insurance agent primarily represents:
a. the customer
b. the broker
c. the company
d. a 3rd party
c. the company
The insurance company department that evaluates applications for eligibility and determines proper pricing is:
a. claims
b. auditing
c. underwriting
d. legal
c. underwriting
The insurance company department that uses data to develop rates is called:
a. actuarial
b. marketing
c. rating
d. investment
a. actuarial
Insurance companies that share the risk with another company is called:
a. an intermediary company
b. a reinsurance company
c. a post-risk company
d. a financial guarantee company
b. a reinsurance company
A company that is licensed to conduct business in the state is called:
a. an admitted company
b. a non-admitted company
c. an alien company
d. a reciprocal company
a. an admitted company
All the following are considered “unfair trade practices” except:
a. rebating
b. twisting
c. unfair discrimination
d. representation
d. representation
Requiring that forms and rates be filed before they can be used is called:
a. prior approval
b. file and use
c. use and file
d. open competition
b. file and use
The ratio determined by comparing paid claims to premiums is called:
a. expense ratio
b. combined ratio
c. loss ratio
d. claims ratio
c. loss ratio
Insurance departments review rates to determine they are all the following except:
a. adequate
b. fairly distributed
c. not excessive
d. fairly discriminatory
b. fairly distributed
What is the withholding of material facts from the insurance company?
Concealment
What is a written or verbal misstatement of a material fact involved in the contract on which the insurer relies?
Misrepresentation
What is a deliberate misrepresentation that causes financial harm?
Fraud
What is a specified agreement made between the insured and the insurer that certain conditions will be met?
Warranty
What, in insurance terminology, is giving up a known right or privilege?
A waiver
What does it mean when coverage will be continued through to a policy’s expiration date but not beyond?
Non-renewal
What is termination of coverage in advance of the policy’s expiration?
Cancellation
The insurance application represents the applicant’s:
a. offer
b. acceptance
c. counteroffer
d. consideration
a. offer
A binder provides:
a. a guaranty that a policy will be issued
b. immediate and temporary coverage
c. free coverage until a policy is issued
d. an extension of permanent coverage
b. immediate and temporary coverage
Which of the following information do underwriters use to determine eligibility of a risk:
a. inspection services
b. MVR’s
c. financial information
d. all of the above
d. all of the above
The Fair Credit Reporting Act:
a. provides adverse information to a customer
b. requires disclosure of information to an insurance company
c. protects consumers
d. assures adverse selection
c. protects consumers
Judgment rating is based on:
a. an underwriter’s past experience
b. a rate taken from a rating manual
c. information obtained form an application
d. a court judgment
a. an underwriter’s past experience
The most common method of rating is called:
a. retrospective rating
b. manual or class rating
c. merit rating
d. unclassified rating
b. manual or class rating
All of the following will void an insurance policy EXCEPT:
a. misrepresentation
b. concealment
c. fraud
d. providing an inaccurate middle name
d. providing an inaccurate middle name
A warranty is:
a. a statement the applicant believes to be true
b. a statement that must be material
c. a guarantee that certain conditions will be met
d. a statement the company makes that guarantees the policy will not be cancelled
c. a guarantee that certain conditions will be met
Giving up a known right is known as a:
a. waiver
b. stop gap
c. relinquishment
d. statement of estopped
a. waiver
A cancellation method that allows an insurance company to keep part of the premium in excess of the earned premium is called:
a. pro rata
b. flat rate
c. short rate
d. comp rate
c. short rate
Policies can be standardized by:
a. law
b. a rating organization
c. a company
d. all of the above
d. all of the above
The property declaration page contains all the following information except:
a. name of the insured
b. conditions
c. property covered
d. policy period
b. conditions
The part of the policy that describes what property and perils are covered is called:
a. insuring agreement
b. conditions
c. exclusions
d. provisions
a. insuring agreement
Policies that cover all causes of loss not specifically excluded are called:
a. exclusive peril
b. deluxe peril
c. open peril
d. named peril
c. open peril
Losses that occur as the result of a direct loss are called:
a. inconsequential losses
b. fortuitous losses
c. indirect losses
d. non-descript losses
c. indirect losses
Common types of exclusions include:
a. non-accidental losses
b. controllable losses
c. catastrophic losses
d. all of the above
d. all of the above
The most common property valuation method is:
a. market value
b. agreed value
c. actual cash value
d. original cost value
c. actual cash value
The purpose of coinsurance is to do all the following except:
a. assure rate adequacy
b. encourage insurance-to-value
c. penalize the insured
d. guarantee that a loss will be paid in full
d. guarantee that a loss will be paid in full
Appraisal and arbitration clauses:
a. help settle disputes about coverage
b. keep the insured and the company out of court
c. are called “alternative dispute resolution” methods
d. all of the above
d. all of the above
If the company broadens a policy without requiring an additional premium, it is called:
a. liberalization
b. waiver
c. subrogation
d. rebating
a. liberalization
What is proximate cause?
Proximate cause is the action, which produced the loss. The loss would not have occurred without the proximate cause.
Liability is defined as:
a. a moral responsibility for another’s loss
b. a legal responsibility for someone’s loss
c. an ethical responsibility for someone’s loss
d. an institutional responsibility for someone’s
b. a legal responsibility for someone’s loss
All of the following are considered “torts” EXCEPT:
a. intentional torts
b. unintentional torts
c. unexceptional torts
d. strict liability torts
c. unexceptional torts
A duty to others can be expressed in terms of degree of care. All the following represent degrees of care EXCEPT:
a. invitee
b. interloper
c. trespasser
d. licensee
b. interloper
If someone’s own negligence contributes to a loss, it is called:
a. contributory negligence
b. statutory negligence
c. compounded negligence
d. comparative negligence
a. contributory negligence
Which of the following are defenses against negligence?
a. contributory negligence
b. assumption of risk
c. statue of limitations
d. all of the above
d. all of the above
When someone is liable for the actions of others, it is called:
a. verbatim liability
b. vindictive liability
c. virtual liability
d. vicarious liability
d. vicarious liability
All the following are types of damages EXCEPT:
a. general
b. special
c. punitive
d. composite
d. composite
Policies that have separate liability limits for bodily injury and property damage are called:
a. split limits
b. single limits
c. aggregate limits
d. divided limits
a. split limits
All the following are dwelling policy forms EXCEPT:
a. basic
b. comprehensive
c. broad
d. special
b. comprehensive
Coverage A in the dwelling form covers:
a. personal property
b. dwelling
c. other structures
d. rental value
b. dwelling
All the following are listed on the dwelling form as “property not covered” EXCEPT:
a. money
b. animals
c. books of account
d. rowboats and canoes
d. rowboats and canoes
When property is taken away from the described location the coverage is:
a. 20% of coverage A
b. 5% of coverage D
c. 10% of coverage C
d. 100% of coverage C
c. 10% of coverage C
Coverage D in the dwelling form is:
a. additional living expense
b. loss of use
c. rental value
d. extra expense
c. rental value
The minimum perils automatically covered by the basic dwelling form are:
a. fire, windstorm, and theft
b. fire, vandalism, and riot
c. fire, lightning and internal explosion
d. fire, hail, and volcanic eruption
c. fire, lightning and internal explosion
The dwelling policy excludes all of the following except:
a. ordinance of law
b. earthquake
c. flood
d. unintentional losses caused by the named insured
d. unintentional losses caused by the named insured
In the basic dwelling form, losses are valued at:
a. replacement cost
b. cost to repair
c. actual cash value
d. functional replacement cost
c. actual cash value
The dwelling broad form covers all of the basic forms perils plus:
a. damage by burglars
b. weight of ice, sleet and snow
c. volcanic eruption
d. all of the above
d. all of the above
Both the broad and special dwelling forms provide additional coverage NOT found in the basic form. All of the following are included in the additional coverage EXCEPT:
a. specified peril coverage for lawns, shrubs, trees and plants
b. breakage of glass
c. rental value
d. collapse of buildings
c. rental value
Which of the following are dwelling endorsements?
a. automatic increase in insurance
b. broad form theft coverage
c. liability and medical payments to others
d. all of the above
d. all of the above
Which of the following advantages are provided by a package policy?
a. helps prevent gaps in coverage
b. helps prevent overlaps in coverage
c. provides a broad policy at a better price
d. all of the above
d. all of the above
Section I of the homeowners provides all the following coverage EXCEPT:
a. dwelling
b. liability and medical payments to others
c. personal property
d. loss of use
b. liability and medical payments to others
The HO-2 broad form homeowners policy provides:
a. open peril coverage on all property
b. broad named perils on dwellings and basic perils on personal property
c. broad named perils on all property
d. open perils coverage on dwellings and broad named perils on personal property
c. broad named perils on all property
The HO-3 policy is:
a. the most frequently used homeowners form
b. Provides open perils coverage on dwellings and broad named perils on personal property
c. is written for dwelling owners
d. all of the above
d. all of the above
The HO-4 policy is used to provide coverage for:
a. dwelling coverage for homeowners
b. building coverage for apartment building owners
c. personal property of tenants
d. personal property of condominium owners
c. personal property of tenants
The HO-6 policy has one type of property coverage not found in the HO-4 policy:
a. personal property coverage
b. loss of use coverage
c. limited dwelling coverage
d. other structures coverage
c. limited dwelling coverage
The major advantage of the HO-5 policy is that:
a. it has no exclusions
b. it provides replacement cost coverage on dwellings, others structures and personal property
c. it provides open peril coverage on both buildings and personal property
d. it has broader liability coverage than the other forms
c. it provides open peril coverage on both buildings and personal property
In the homeowners policy, Section I Coverage A provides coverage for:
a. personal property
b. liability
c. loss of use
d. dwelling
d. dwelling
The limit for Coverage B – Other Structures is:
a. 20% of Coverage C – Personal Property
b. $25,000
c. 10% of Coverage A – Dwelling
d. Selected by the insured
c. 10% of Coverage A
The Coverage C – Personal Property in the homeowners policy would cover all of the following except:
a. money
b. watercraft
c. animals
d. residence service vehicles
c. animals
In the homeowners policy, the limit for theft of jewelry is:
a. $10,000
b. $500
c. $1500
d. The Coverage C – Personal Property limit
c. $1500
All of the following is true regarding Coverage D – Loss of Use on the homeowners policy EXCEPT:
a. it pays loss of rental value for any part of the premises rented to others
b. it pays loss of business income for a home-based business
c. the limit for the coverage is 30% of Coverage A–Dwelling
d. It pays for additional living expenses in the event of a loss
b. it pays loss of business income for a home-based business
The homeowners policy would cover all of the following losses EXCEPT:
a. fire damage to a front porch
b. wind damage to a detached garage
c. increased cost of construction due to ordinances or laws
d. freezing of plumbing as long as the heat is maintained
c. increased cost of construction due to ordinances or laws
All of the following would be “insured locations” on the homeowners policy EXCEPT:
a. the described premises
b. a hotel room
c. a cemetery plot
d. the insured’s business office
d. the insured’s business office
Homeowners Coverage F is sometimes called:
a. bodily injury coverage
b. guest medical coverage
c. property damage coverage
d. personal injury coverage
b. guest medical coverage
The minimum limit for Coverage E – Liability is:
a. $500,000
b. $50,000
c. $100,000
d. $1,000,000
c. $100,000
Coverage E – Liability would pay for all the following EXCEPT:
a. injury to a golfer hit by an insured’s golf ball
b. injury to a client visiting the insured’s business office
c. injury to a mailman bitten by the insured’s dog
d. the cost of defending the insured
b. injury to a client visiting the insured’s business office
In the homeowners policy, watercraft liability is:
a. fully covered up to the Coverage E–Liability limit
b. completely excluded
c. covered if the watercraft is under a certain horsepower rating or length
d. only covered by endorsement
c. covered if the watercraft is under a certain horsepower rating or length
A homeowners endorsement that can be used to insure jewelry is called a:
a. Scheduled Personal Property Endorsement
b. All Risk Property Endorsement
c. Comprehensive Endorsement
d. Special Peril Endorsement
a. Schedule Personal Property Endorsement
On a homeowners policy, earthquake damage is:
a. covered up to 10% of the dwelling limit
b. automatically covered by the policy
c. only covered by endorsement
d. never covered under any circumstances
c. only covered by endorsement
The Personal Auto Policy makes available all of the following coverage EXCEPT:
a. Liability coverage
b. Medical payments coverage
c. Physical damage coverage
d. Liability coverage for injury to an insured
d. Liability coverage for injury to an insured
In the Personal Auto Policy, the term “you” describes which of the following:
a. the named insured listed in the declarations page
b. a named insured’s spouse who lives in another city
c. a resident family member
d. a foreign exchange student
a. the named insured listed on the declarations page
All of the following would be “insured’s” on the Personal Auto Policy EXCEPT:
a. the named insured’s resident son
b. a car thief
c. a foster child
d. a ward of the court
b. a car thief
When an insured is using his personal auto on behalf of his employer, who is protected by liability coverage?
a. only the insured
b. only the employer
c. no on is an insured in this situation
d. both the insured and the employer
d. both the insured and the employer
Bob has a Personal Auto Policy with limits of $100,000/$300,000 bodily injury and $50,000 property damage. These limits mean:
a. $100,000 bodily injury per accident and $300,000 bodily injury per occurrence, $50,000 medical payments
b. $100,000 bodily injury per occurrence and $300,000 aggregate per year, $50,000 uninsured motorists
c. $100,000 bodily injury per person and $300,000 bodily injury per accident, $50,000 property damage per accident
d. $100,000 property per year, $300,000 bodily injury per year and $50,000 property damage per year
c. $100,000 bodily injury per person and $300,000 bodily injury per accident, $50,000 property damage per accident
The purpose of the “out of state” provision in the Personal Auto Policy is to:
a. Assure that the insured is always in compliance with the financial responsibility laws of other states
b. Guaranty physical damage coverage in all states
c. Allow the insured to purchase coverage in other states
d. Protect the insured against uninsured motorists in other states
a. assure that the insured is always in compliance with the financial responsibility laws of other states
Judy borrows her neighbors car and is involved in an accident. How would Judy’s Personal Auto Policy respond to the accident?
a. it would not respond because the car does not belong to Judy
b. It would provide coverage on primary basis
c. It would provide excess coverage over the neighbor’s policy limits
d. Judy’s policy and the neighbor’s policy would share the loss equally
c. It would provide excess coverage over the neighbor’s policy limits
Medical payments coverage:
a. only applies to occupants of other vehicle
b. only applies to the named insured
c. applies to the name insured, family members and occupants of the insured’s vehicle
d. only applies to the occupants of the insured’s vehicle
c. applies to the named insured, family members and occupants of the insured’s vehicle
Uninsured motorists coverage:
a. provides coverage for injuries to the insured caused by an uninsured motorist
b. covers compensatory damages
c. requires the uninsured motorist to be legally responsible for the injuries
d. all of the above
d. all of the above
The Uninsured Motorist definition of insured includes all of the following EXCEPT:
a. the named insured
b. relatives who reside with the named insured
c. the passengers in another vehicle
d. anyone entitled to recover damage for injuries to an insured
c. the passengers in another vehicle
Other Than Collision (Comprehensive) coverage applies to all the following losses EXCEPT:
a. hitting a cow
b. theft
c. overturn of the vehicle
d. flood
c. overturn of the vehicle
The Extended Non-Owned Coverage for Named Individual would be used for:
a. an insured who has a furnished company car
b. an insured who rents a car
c. an insured who borrows someone else’s car
d. an insured who does not own a car
a. an insured who has a furnished company car
The purpose of Assigned Risk Plans is to:
a. provide an insurance market for drivers with bad driving records
b. provide coverage assigned to the vehicle owner by the state
c. distribute auto insurance equally among all of the auto insurers in the state
d. provide a superior policy for excellent drivers
a. provide an insurance market for drivers with bad driving records
Flood coverage:
a. is never provided by insurance
b. can be purchased form a federally subsidized program
c. is only available for residential property
d. Is only available in non-flood prone areas
b. can be purchased from a federally subsidized program
The NFIP flood policy excludes all the following property EXCEPT:
a. money
b. personal property
c. fences
d. underground structures
b. personal property
Earthquake insurance:
a. can be purchased as a separate policy
b. can be endorsed to a policy
c. is excluded from standard property policies
d. all of the above
d. all of the above
A Personal Articles form:
a. provides coverage on the same property as the homeowners schedule personal property endorsement
b. can be used to cover money
c. is only available if the insured does not have a homeowners policy
d. provides a blanket limit of insurance
a. provides coverage on the same property as the homeowners schedule personal property endorsement
A watercraft package policy:
a. provides property coverage only
b. provides liability coverage only
c. is needed because watercraft is not properly covered on a homeowners policy
d. is only available to owners of outboard boats
c. is needed because watercraft is not properly covered on a homeowners policy
Characteristics of Personal Umbrella insurance include:
a. provides broader coverage than an underlying policy
b. provides excess liability coverage
c. contains a retention limit
d. all of the above
d. all of the above
FAIR Plans are:
a. available in some states to provide property insurance to those unable to obtain it in a standard market
b. markets for crime insurance
c. plans developed in the 1890’s as a response catastrophic fires
d. liability plans that provide fair insurance premiums to all insureds
a. available in some states to provide property insurance to those unable to obtain it in a standard market
In order to have a package policy an insured must purchase:
a. ocean marine and aviation insurance
b. Any two coverage parts
c. property and liability coverage
d. Flood insurance
b. any two coverage parts
In the Common Conditions form, the first named insured is the only insured who:
a. can cancel the policy
b. can change the policy
c. can pay policy premiums
d. all of the above
d. all of the above
Transfer of rights and duties:
a. can be done with the insured’s signature
b. requires the insurance company’s written consent
c. is never permissible
d. does not cover a legal representative if the insured dies
b. requires the insurance company’s written consent
Inspections and surveys:
a. must be conducted by the insured
b. are required before an insurance policy can be issued
c. may be conducted by the insurance company
d. must be done every year
c. may be conducted by the insurance company
A businessowners policy is best suited for:
a. a manufacturer
b. an auto repair shop
c. a bank
d. an apartment
d. an apartment
For a business to be eligible for a BOP, none of its locations can exceed:
a. 3 million square feet and $50,000 in annual gross sales
b. 50,000 square feet and $100,000 in annual payroll
c. 25,000 square feet and $3 million in annual gross sales
d. 150 stories and $1,000,000 in net income
c. 25,000 square feet and $3 million in annual gross sales
Businessowners coverage extensions include all the following EXCEPT:
a. property in transit or off premises
b. glass coverage
c. valuable papers and records
d. accounts receivable
b. glass coverage
The BOP limits Business Income from Dependent Properties to:
a. $1,000
b. $25,000
c. $100,000
d. $5,000
d. $5,000
Cause of loss forms:
a. are needed to describe covered perils
b. are included in the Commercial Building Property form
c. are not required because everything is covered
d. are optional
a. are needed to describe covered perils
The commercial property coverage territory is:
a. Worldwide
b. United States and Canada
c. United States, Puerto Rico, and Mexico
d. United States, territories and possessions, Puerto Rico and Canada
d. United States, territories and possessions, Puerto Rico and Canada
Liberalization applies to:
a. changes that broaden coverage without a premium charge
b. all risk policies only
c. coverage that is endorsed on the policy if the coverage changes
d. reduction of coverage that reduces the premium
a. changes that broaden coverage without a premium charge
The Building and Personal Property form covers all the following EXCEPT:
a. building
b. Personal property
c. Bailees property
d. property of others
c. bailees property
The Building and Personal Property form excludes all the following EXCEPT:
a. money
b. pets
c. contraband
d. furniture and fixtures
d. furniture and fixtures
Which of the following are Additional Coverages in the Building and Personal Property form?
a. Debris removal
b. Preservation of property
c. Increased cost of construction
d. all of the above
d. all of the above
All of the following are building and personal property form coverage extensions EXCEPT:
a. Newly acquired or constructed property
b. property off-premises
c. pollutant clean-up removal
d. non-owned, detached trailers
c. pollutant clean-up and removal
Property insured on a Building and Personal Property form is valued at:
a. replacement cost
b. actual cash value
c. functional replacement cost
d. market value
b. cash value
All of the following is true about the vacancy clause of the Building and Personal Property Coverage form EXCEPT:
a. all covered loss, except those excluded are reduced by 15%
b. vandalism losses are excluded
c. vacancy eliminates all coverage
d. the clause impacts buildings vacant more than 60 consecutive days
c. vacancy eliminates all coverage
All of the following are optional valuation provisions in the Building and Personal Property Coverage form EXCEPT:
a. actual cash value
b. agreed value
c. inflation guard
d. replacement cost
a. actual cash value
Which of the following is true about a Builders Risk Coverage form?
a. the form covers a building under construction
b. the coverage can end before the policy expiration date if construction is completed
c. the form covers damage to the building foundation
d. all of the above are true
d. all of the above are true
Which is true about the Business Income Coverage form’s “period of restoration”?
a. coverage begins 72 hours after the direct loss and ends when the property is restored
b. There is no waiting period
c. Coverage begins on the date of the loss and ends 60 days after restoration
d. Coverage beings 48 hours after the loss and ends in 180 days
a. Coverage begins 72 hours after the direct loss and ends when the property is restored
Additional Coverages on the Business Income form include all the following EXCEPT:
a. Extended Business Income
b. Order of Civil Authority
c. Extended Period of Indemnity
d. Alterations and New Buildings
c. Extended Period of Indemnity
The Maximum Period of Indemnity option on the Business Income form:
a. limits coverage to 120 days
b. is subject to coinsurance
c. limits coverage based on a fraction of the limit
d. begins 120 days after the loss and provides coverage until the restoration is completed
a. limits coverage to 120 days
The purpose of the Extra Expense Coverage form is to:
a. Cover non-continuing expenses after a direct loss
b. Cover loss of income after a direct loss
c. Cover all expenses after a direct loss
d. Cover only extra expenses of continuing to operate after a direct loss
d. Cover only extra expenses of continuing to operate after a direct loss
All of the following Cause of Loss forms are “named peril EXCEPT:
a. Basic
b. Special
c. Broad
d. Earthquake
b. Special
The Peak Season endorsement:
a. provides increased coverage during certain seasons when inventory is higher than normal
b. begins on the date listed on the endorsement and ends on the policy expiration date
c. requires a monthly report of values
d. guarantees that all losses will be fully covered during the season
a. provides increased coverage during certain seasons when inventory is higher than normal
Three types of coverage available include:
a. Ocean Marine Hull Insurance
b. Ocean Marine Cargo Insurance
c. Ocean Marine Freight
d. All of the above
d. all of the above
Protection and Indemnity Coverage provides:
a. liability coverage
b. property coverage on the hull of the vessel
c. coverage only when the insured is not at fault for an accident
d. indemnity to the insured for any losses
a. liability coverage
“Perils on the Sea” include all of the following EXCEPT:
a. fire
b. wind and hail
c. stranding
d. smoking
c. stranding
Jettison:
a. occurs when property is thrown overboard to save the ship
b. is a “peril of the sea”
c. is a “particular average” loss
d. covers property swept overboard by large waves
a. occurs when property is thrown overboard to save the ship
A “general average loss” is:
a. paid solely by the owner of the ship
b. paid when jettison occurs
c. paid solely by the owner of the lost cargo
d. is paid by a 3rd party who is legally responsible for damage to cargo
b. paid when jettison occurs
“Instrumentalities of communication” include:
a. bridges
b. tunnels
c. radio and TV antennas
d. docks
c. radio and TV antennas
The purpose of the Nationwide Marine definition is to:
a. Identify the types of property eligible for inland marine coverage
b. Identify the types of property that can only be written on a commercial property form
c. Identify the types of property that can only be written on a casualty form
d. Define the term “marine”
a. Identify the types of property eligible for inland marine coverage
A CGL policy is designed to cover:
a. liquor liability
b. premises liability
c. aircraft liability
d. pollution liability
b. premises liability
The two types of CGL coverage forms are:
a. basic and broad
b. occurrence and discovery
c. occurrence and claims made
d. claims occurred and known loss
c. occurrence and claims made
A supplemental Extended Reporting Period:
a. pays losses that occur after the policy period
b. is only available on an occurrence form
c. is automatically provided for free
d. extends the time to report claims arising out of occurrences that took place while the policy was in force
d. extends the time to report claims arising out of occurrences that took place while the policy was in force
The primary coverage territory of a CGL policy is:
a. US and the Bahamas
b. US and Mexico
c. Anywhere in the world
d. US territories and possessions, Puerto Rico and Canada
d. US, territories and possessions, Puerto Rico and Canada
The CGL policy excludes:
a. bodily injury and property damage
b. personal & advertising injury
c. medical payments
d. excess liability
a. bodily injury and property damage
The definition of Personal & Advertising Injury includes all the following EXCEPT:
a. libel
b. slander
c. bodily injury
d. wrongful eviction
c. bodily injury
The Coverage C – Medical Payments:
a. provides coverage on a “no fault” basis
b. has a separate “per person” limit
c. excludes injuries covered by workers compensation insurance
d. all of the above
d. all of the above
The General Aggregate on the CGL:
a. applies to all losses except products-completed operations
b. limits the amount paid for any one occurrence
c. applies only when the occurrence limit is exhausted
d. cannot be reinstated when the policy renews
a. applies to all losses except products-completed operations
The “other insurance” “contributions by equal shares” provision provides:
a. each policy pays equally until the limit of the smallest is reached
b. each policy pays its proportional share of the loss
c. one policy will be primary and the other will be excess
d. each policy shares the loss until it is totally paid
a. each policy pays equally until the limit of the smallest is reached
The Commercial Auto Coverage form contains the following two coverages:
a. liability and medical payments
b. liability and physical damage
c. liability and uninsured motorists
d. liability and personal injury protection
b. liability and physical damage
Symbol 1 provides coverage for:
a. owned autos
b. borrowed autos
c. any auto
d. leased autos
c. any auto
Symbol 7 provides coverage for:
a. non-owned autos
b. autos subject to no-fault laws
c. mobile equipment
d. specifically described autos
d. specifically described autos
The “who is an insured” provision includes all the following as insured’s EXCEPT:
a. anyone responsible for the actions of an insured
b. the named insured
c. bodily injury to a 3rd party
d. all of the above
d. all of the above
The liability section of the Commercial Auto form covers which of the following losses?:
a. liability assumed in an “insured contract”
b. loading and unloading of an auto
c. bodily injury to a 3rd party
d. all of the above
d. all of the above
“Specified Causes of Loss” physical damage coverage:
a. is an alternative to comprehensive coverage
b. provides coverage for towing and labor
c. includes transportation expense coverage
d. covers only collision losses
a. is an alternative to comprehensive coverage
The physical damage section of the Commercial Auto form excludes all of the following losses EXCEPT:
a. freezing
b. flood
c. mechanical breakdown
d. road damage to tires
b. flood
The Garage Coverage form:
a. is an auto coverage form
b. is a combination of auto and CGL-type coverage
c. is available to cover auto dealerships
d. all of the above
d. all of the above
The Motor Carrier Act of 1980:
a. Requires trucking companies to certify they can meet financial responsibility if they become responsible for injury or damages
b. does not require coverage for damage to cargo
c. is addressed through the use of the MSL-60 endorsement
d. Never applies to pick up trucks
a. requires trucking companies to certify they can meet financial responsibility if they become responsible for injury or damages
If an employee uses his own personal vehicle on behalf of his employer, the employer’s Commercial Auto policy can be endorsed to provide excess liability by adding the:
a. driver other car coverage endorsement
b. employees as Insureds endorsement
c. Individual named insured endorsement
d. employee hired auto endorsement
b. employees as insureds endorsement
All of the following coverage may be endorsed to a Commercial Auto policy:
a. medical payments coverage
b. uninsured motorists coverage
c. rental reimbursement coverage
d. all of the above
d. all of the above
What covers loss sustained during the policy period and discovered during the policy period or up to one year after the policy expires?
Loss Sustained Form
What is the taking of property by someone unlawfully entering or leaving the premises, evidenced by visible signs of forcible entry or exit?
Burglary
What is the taking or attempted taking of property by the threat or use of bodily harm, or by someone who has committed a witnessed, obviously unlawful act?
Robbery
What is any unlawful taking of property? (includes burglary, robbery, and taking by stealth)
Theft
The Loss Sustained Form covers:
a. loss sustained during the policy period and discovered during the policy period or up to one year after policy expiration
b. loss sustained at any time and discovered during the policy period
c. loss sustained in the prior policy only
d. loss sustained up to two years after policy expiration
a. loss sustained during the policy period an discovered during the policy period or up to one year after policy expiration
Burglary requires:
a. a witness act
b. signs of forcible entry or exit
c. the loss of money
d. a threat of violence
b. signs of forcible entry or exit
The broadcast crime definition is:
a. burglary
b. robbery
c. larceny
d. theft
d. theft
A custodian is:
a. a janitor
b. a person who has care of property inside the premises
c. a watch person
d. a person who has care of property outside the premises
b. a person who has care of property inside the premises
A crime form can cover all the following EXCEPT:
a. money
b. other property
c. securities
d. contraband
d. contraband
A computer fraud form:
a. provides worldwide coverage
b. covers property at the listed location only
c. covers property in the US
d. covers property only outside of the United States
a. provides worldwide coverage
Money is valued at:
a. actual cash value
b. replacement cost
c. the face value of the currency
d. a stated amount
c. the face value of the currency
In a Fidelity Bond, the principal is:
a. the party that agrees to pay the loss
b. the person protected by the bond
c. the person on whom the bond is written
d. the same as the obligee
c. the person on whom the bond is written
The fidelity bond which applies the limit separately to each employee involved in the loss is called:
a. name schedule
b. commercial blanket
c. blanket position
d. position schedule
c. blanket position
Before workers compensation, employers had all of the following defenses EXCEPT:
a. assumption of risk
b. comparative negligence
c. fellow servant
d. contributory negligence
b. comparative negligence
The benefit of workers compensation laws is:
a. an employee does not have to sue to collect benefits
b. benefits are determined by statute
c. employers are less likely to have to defend against employee suits
d. all of the above
d. all of the above
Workers compensation laws require payments for all the following EXCEPT:
a. medical expenses
b. death
c. care and loss of services
d. rehabilitation
c. care and loss of services
Types of disability under workers compensation laws include:
a. permanent partial
b. temporary total
c. permanent total
d. all of the above
d. all of the above
Workers compensation can be funded in the following ways:
a. private insurance
b. self-insurance fund
c. state funds
d. all the above
d. all the above
Part One – Workers Compensation can be funded in the following ways:
a. private insurance
b. self-insurance
c. state funds
d. all the above
d. all the above
Part One – Workers Compensation provides coverage:
a. that complies with all state laws
b. that pays benefits according to the states listed on the information page
c. for employee suits
d. for loss of consortium claims
b. that pays benefits according to the states listed on the information page
Part three - Other States coverage provides:
a. Coverage in monopolistic states
b. Benefits for all states not listed under Part One
c. Coverage in listed states if the insured begins work there
d. Coverage as long as the work began prior to the policy period
c. Coverage in listed states if the insured begins work there
All of the following would be excluded by employers liability coverage EXCEPT:
a. contractual liability
b. dual capacity claims
c. workers compensation obligations
d. intentional injury
b. dual capacity claims
The Longshore & Harbor Workers Endorsement covers:
a. Injury to crewmembers of a ship
b. Injury to an independent contractor
c. Injury to maritime workers
d. injury to railroad workers
c. injury to maritime workers
The Workers Compensation premium is:
a. a deposit premium subject to premium audit at the end of the policy period
b. based on payroll
c. subject to experience rating
d. all the above
d. all the above
The following coverages are available on the Farm Coverage EXCEPT:
a. farm dwellings, appurtenant structures and personal property
b. scheduled Farm Personal Property
c. Pollution coverage for crop dusting
d. Barns, outbuildings and other farm structures
c. Pollution coverage for crop dusting
The Farm Coverage form can cover all the following causes of loss EXCEPT:
a. electrocution of livestock
b. damage to growing crops
c. accidental shooting of livestock
d. attacks on livestock by wild animals
b. damage to growing crops
The Farm Liability coverage part provides coverage for which of the following:
a. damage caused by pollutants
b. bodily injury to 3rd parties
c. injury to farm workers
d. damage to the insured’s products
b. bodily injury to 3rd parties
The Equipment Breakdown Coverage form covers which of the following:
a. damage caused by equipment breakdown
b. steam boiler explosion
c. damage caused by electrical current
d. all of the above
d. all of the above
Expediting expenses on the Equipment Breakdown Coverage form are limited to:
a. $5,000
b. $10,000
c. $25,000
d. $100,000
c. $25,000
Aviation Insurance covers all the following EXCEPT:
a. personal effects
b. bodily injury
c. hull coverage
d. passenger liability
a. personal effects
Professional Liability insurance:
a. is called “malpractice insurance” for medical providers
b. covers the insured for “rendering or failing to render” professional services
c. is a “claims made” form
d. all of the above
d. all of the above
Which of the following is true about Employment Practices Liability insurance:
a. it cannot be part of a Directors and Officers Policy
b. It is usually covered by a CGL
c. It covers sexual harassment and wrong termination of employment
d. it covers mass layoffs of employees
c. it covers sexual harassment and wrongful termination of employment
A Difference in Conditions policy is:
a. written to insure one or more causes of loss excluded by standard property forms
b. not standardized coverage
c. usually written on large risks with a high deductible
d. all of the above
d. all of the above
The type of bond needed by an executor of a will is:
a. performance bond
b. court bond
c. fiduciary bond
d. permit bond
c. fiduciary bond
Which of the following is NOT true about surplus lines insurance?
a. an agent can go directly to a surplus lines broker before going to a standard market company
b. surplus lines brokers deal with non-admitted carriers
c. coverage may not be obtained solely for getting a better contract or lower premium
d. an agent must attempt to obtain coverage from an authorized insurer
a. an agent can go directly to a surplus lines broker before going to a standard market company
The Department of Insurance:
a. regulates insurance in the state
b. passes laws regarding insurance
c. cannot issue rules and regulations
d. establishes insurance rates
a. regulates insurance in the state
The Insurance Commissioner:
a. is chosen in a general election
b. can hold any elected office
c. cannot examine insurance companies
d. enforces insurance laws
d. enforces insurance laws
An aggrieved party can make a demand for a hearing and the commissioner must hold the hearing within:
a. 45 days
b. 6 months
c. 30 days
d. 60 days
c. 30 days
An authorized company:
a. must receive a certificate of insurance form the department of insurance
b. is also known as an admitted carrier
c. may operate in several different states
d. all of the above
d. all of the above
A certificate of authority can be suspended or revoked if:
a. the law requires the action
b. the company no longer meets the state requirements
c. the company’s authority to do business in its home state is revoked
d. all of the above
d. all of the above
The two major lines of authority requiring licensing are:
a. property and casualty and life and health
b. rental insurance and bonding
c. casualty and life insurance
d. auto and property insurance
a. Property and Casualty and Life and Health
To obtain a Property-Casualty license the applicant must:
a. be at least 21 years of age
b. be an Alabama resident for 30 days
c. Pass a written exam
d. Complete a 24-hour pre-licensing course
c. pass a written exam
A person who passes a pre-licensing course must take and pass a written exam within:
a. 90 days
b. One year from the completion of the course
c. 6 months
d. there is no time limit once the course has been completed
b. one year from the completion of the course
Licensed agents moving to Alabama from another state must:
a. take the 40 hour pre-licensing course
b. apply for an Alabama license
c. pass the written exam
d. keep his or her license
b. apply for an Alabama license
A temporary license:
a. is available to anyone
b. is good for one year
c. requires a 10 hour pre-licensing course
d. is available only under a couple of circumstances
d. is available only under a couple of circumstances
An insurance producer’s license may be revoked for all the following reasons EXCEPT:
a. lying on the license application
b. getting a speeding ticket
c. failing to comply with a child support order
d. misappropriating funds
b. getting a speeding ticket
A name or address change must be reported to the insurance department:
a. at the next license renewal date
b. at once
c. within 30 days
d. no reporting is necessary
c. within 30 days
An insurance producer must keep all records:
a. for the policy term
b. for three years
c. until the statute of limitations expires
d. for one year
b. for three years
Continuing education compliance requires:
a. 24 hours of continuing education credit every year
b. 10 hours of continuing education credit every year
c. 24 hours of continuing education (including 3 hours of ethics credit) every 2 years
d. 12 hours of continuing education (including 1 hour of ethics credit) every 6 months
c. 24 hours of continuing education (including 3 hours of ethics credit) every 2 years
Customer Service Representatives who work inside the agency and who do not have a non-resident license in another state need:
a. 24 hours of continuing education credit every year
b. 10 hours of continuing education credit every year
c. 24 hours of continuing education (including 3 hours of ethics credit) every 2 years
d. 12 hours of continuing education (including 2 hours of ethics credit) every 2 years
d. 12 hours of continuing education (including 2 hours of ethics credit) every two years
Producers may ask for a 3 month extension to complete the CE requirement. If the request is denied, the producer has __ days to complete the requirement:
a. 30
b. 60
c. 90
d. 120
a. 30
All of the following are Unfair Trade Practices EXCEPT:
a. twisting
b. sharing commission with a licensed agent
c. rebating
d. boycott
b. sharing commission with a licensed agent
An agent can charge extra fees for which of the following:
a. collecting surplus lines taxes
b. charging a fee for a medical exam
c. charging a collection fee on unpaid premium balances
d. all of the above
d. all of the above
Binders are valid for up to ___ days unless extended with the commissioner’s approval:
a. 20
b. 30
c. 60
d. 90
d. 90
The requirement(s) for holding a surplus license are:
a. be a licensed non-resident P&C agent and post a $75,000 bond
b. be a licensed resident P&C agent and post a $50,000 bond
c. pass a surplus lines licensing exam
d. pass a surplus lines licensing exam and post a $100,000 bond
b. be a licensed resident P&C agent and post a $50,000 bond
The Insurance Guaranty Association will pay all claims:
a. in excess of $500 and less than $1,000,000
b. in excess of $1,000 and less than $50,000
c. in excess of $100 and less than $150,000
d. in excess of $250 and less than $100,000
c. in excess of $100 and less than $150,000
Which of the following are subject to workers compensation:
a. employers with 5 or more employees
b. contractors building new dwellings with three or more employees
c. employers of any domestic employees or farm laborers
d. employers of real estate brokers
a. employers with 5 or more employees
Workers compensation will not cover injury caused by:
a. mental disorders where there is no physical injury involved
b. self-inflicted injury
c. refusal to use a safety device
d. all of the above
d. all of the above
The maximum payment for Temporary Total Disability is:
a. 100% of the lost income for 6 months
b. 66 2/3% of the state average workers wage for two years
c. 66 2/3% of the state average workers wage during the period of disability
d. 75% of the wage for that occupation for 5 years
c. 66 2/3% of the state average workers wage during the period of disability
If an employee who has no dependents dies within three years of suffering an occupational injury, the following lump sum compensation will be paid to the estate:
a. $25,000
b. $10,000
c. $100,000
d. $7,500
d. $7,500
The burial expense for workers compensation is up to:
a. $10,000
b. $5,000
c. $3,000
d. $1,000
c. $3,000
No person may operate a motor vehicle without proof of financial responsibility. This can be accomplished by:
a. having insurance
b. posting a $50,000 motor vehicle liability bond
c. posting a $50,000 cash deposit with the state treasurer
d. all of the above
d. all of the above
The minimum legal auto liability limit in Alabama is:
a. $10,000 per person for bodily injury, $20,000 per accident for bodily injury and $5,000 per accident for property damage
b. $30,000 per person for bodily injury, $60,000 per accident for bodily injury and $20,000 per accident for property damage
c. $25,000 per person for bodily injury, $50,000 per accident for bodily injury and $25,000 per accident for property damage
d. $100,000 per person for bodily injury, $100,000 per accident for bodily injury and $100,000 per accident for property damage
c. $25,000 per person for bodily injury, $50,000 per accident for bodily injury and $100,000 per accident for property damage
Failure to show a law enforcement officer evidence of insurance is:
a. a class D felony
b. a class C misdemeanor
c. a class A felony
d. a class F misdemeanor
b. a class C misdemeanor
Uninsured motorists coverage must be offered on all auto policies. The minimum limit for uninsured motorists coverage is:
a. 10/25 or $50,000 single limit
b. 50/100 or $200,000 single limit
c. 100/30 or $300,000 single limit
d. 25/50 or $75,000 single limit
d. 25/50 or $75,000 single limit
Drivers age 55 or older who have taken an 8-hour accident prevention class will receive a rate reduction on their automobile insurance for:
a. 3 years
b. 6 months
c. 1 year
d. 2 years
a. 3 years
Acceptable reasons for cancelling an auto policy include all of the following EXCEPT:
a. not paying the premium
b. having 2 moving violations in three years
c. having epilepsy
d. driving an unsafe vehicle
b. having 2 moving violations in three years
Except for non-payment of premium, notice of cancellation must be mailed at least ____ days prior to the auto policy cancellation date:
a. 30 days
b. 10 days
c. 20 days
d. 60 days
c. 20 days
The Automobile Assigned Risk Plan is:
a. for high risk drivers
b. for drivers over age 70
c. for preferred drivers
d. for drivers with any accidents or violations
a. for high risk drivers
