P Test

Question 1

A business using its own trucks to move its own cargo would insure the cargo using
a) Motor truck cargo - carriers form.
b) Motor carrier form.
c) Trip transit coverage.
d) Motor truck cargo - owners form.

Answer 1

D. A business using its own trucks to move its own cargo would insure the cargo using the owners form.

Question 2

Which of the following is covered under the Camera and Musical Instruments Dealers floater?
a) A customer’s camera left at a camera shop for repair
b) A musical instrument sold and delivered to a customer
c) Furniture, fixtures and office supplies in a music store
d) Money kept on premises of a camera shop

Answer 2

A. Covered property includes customer’s property left for repair, cleaning or service.

Question 3

The Physicians and Surgeons Equipment Floater in NOT intended for which of the following?
a) Surgeon’s supplies located in the surgeon’s office
b) Waiting room furniture in a doctor’s office
c) Office equipment located in a dentist’s office
d) Medical supplies located in a hospital

Answer 3

D. This coverage form protects individuals in the medical or dental profession for loss to valuable medical and dental equipment, materials and supplies, including office equipment and furniture, and similar property of others. Coverage is not intended for hospitals, schools or other institutions.

Question 4

All of the following are conditions commonly found in the insurance policy EXCEPT
a) Insuring agreement.
b) Cancellation and nonrenewal.
c) Subrogation.
d) Appraisal.

Answer 4

A. The insuring agreement provides information on the policy’s coverages. Conditions state the legal obligations and duties of the parties to the contract.

Question 5

Theft coverage under an HO-8 is restricted to
a) The actual cash value of what was stolen, with limits for certain classes of property.
b) The larger of 10% of the personal property limit or $1,000.
c) There is no theft coverage under an HO-8.
d) $250.

Answer 5

A. Since HO-8 policies are for older homes, they insure dwellings at actual cash value, not replacement cost because the cost of rebuilding with the materials and details of the original home would make replacement cost coverage prohibitively expensive. Theft is the actual cash value of what was stolen, with limits for certain classes of property.

Question 6

Which part of an insurance policy covers claims-related expenses, reasonable expenses incurred by an insured to protect damaged property from further loss, or defense expenses?
a) Additional coverage
b) Exclusions
c) Declarations
d) Insuring agreement

Answer 6

A. The additional coverage portion of a policy provides an additional amount of coverage for specific loss expense, at no additional premium.

Question 7

All of the following statements concerning coinsurance are true EXCEPT
a) It is used to help adequacy and equity in rates.
b) The insured agrees to maintain insurance equal to some specified percentage of the value of the property.
c) If the insurance carried is less than required, the insurance may not cover the whole loss.
d) The coinsurance formula will also be applied to total losses.

Answer 7

D. In the event of a total loss, the coinsurance clause does not operate and the face amount of the policy is paid.

Question 8

When the amount of insurance written in a property policy is not subject to any coinsurance provision and that amount is paid in the event of a covered loss, the coverage is said to be written as
a) Replacement cost.
b) Actual cash value.
c) Specific insurance.
d) Stated amount.

Answer 8

D. In stated amount coverage, the value of the insured property is determined at the time the policy is written. In the event of a loss, that amount is paid without regard to any coinsurance provision. However, if the loss is less than total, the insurer has salvage rights with the insured having first right of refusal of the salvage.

Question 9

Which of the following would NOT be considered a flood?
a) Runoff of surface waters
b) Sewer backup
c) Overflow of tidal waters
d) Mudslides

Answer 9

B. Flood is defined by the National Flood Insurance Program. It does not include sewer backup.

Question 10

Which coverage form would provide coverage for all incoming and outgoing shipments?
a) Trip transit
b) Motor truck cargo
c) Mail coverage
d) Annual transit

Answer 10

D. Annual transit policies provide coverage for a shipper’s or receiver’s incoming and outgoing shipments during the year.

Question 11

The extension of coverage under the Commercial Fine Arts Floater includes coverage for newly acquired property for a maximum of
a) $15,000.
b) $20,000.
c) $5,000.
d) $10,000.

Answer 11

D. An extension of coverage is included for newly acquired property for 30 days for up to 25% of the total limit of insurance, for a maximum of $10,000.

Question 12

Which of the following covers a carrier for liability for loss to cargo while it is being transported in a truck?
a) Motor truck cargo policy - carriers form
b) Motor truck cargo policy - owners form
c) Trip transit policy
d) Truckers coverage form

Answer 12

A. The motor trucker cargo - carriers form is liability insurance and the owners form is property coverage.

Question 13

In which of the following types of property valuation will the policy pay the full value as specified on the policy schedule, regardless of the insured property’s appreciation or depreciation?
a) Agreed value
b) Replacement cost
c) Stated amount
d) Market value

Answer 13

A. Agreed value is a property policy with a provision agreed upon by the insurer and insured as to the amount of insurance that represents a fair valuation for the property at the time the insurance is written. When a loss occurs, the policy pays the agreed value as specified on the policy schedule, regardless of the insured property’s appreciation or depreciation.

Question 14

A unique feature in a bailee form is that it covers
a) Customers’ property whether or not the insured has been negligent.
b) Fire and theft losses to the insured’s stock held for sale without any deductibles.
c) All loss and has no exclusions.
d) The building occupied by the insured whether it is owned or leased.

Answer 14

A. The bailee/customers form is liability coverage for the customers’ property the bailee has accepted into his care. Negligence on the part of the bailee is not required for a loss to be covered.

Question 15

Which of the following is NOT covered under accounts receivable coverage form?
a) Any loans required to offset uncollectible amounts
b) Interest on loans required to offset uncollectible amounts pending payment of the insurance proceeds
c) Sums due the insured that are uncollectible due to a covered loss
d) Expenses to reestablish the records, if possible, and collection expenses that are in excess of normal costs

Answer 15

A. Loan principal amounts are not covered under the form. However, other expenses, such as interest on necessary loans, are covered.

Question 16

The major portion of the premium for an equipment breakdown policy pays
a) For inspections and examinations.
b) For repairs after a loss.
c) For coverage for bodily injury and property damage of others.
d) For replacement parts.

Answer 16

A. Inspecting the machinery to be insured is critical to the underwriting of equipment breakdown coverage. Finding flaws that could lead to losses and requiring corrective action is the purpose.

Question 17

An insured is driving her car through a residential area when she loses control and crashes into a neighbor’s front porch. The neighbor, who was sitting on the porch, is injured. The insured’s liability policy has a limit of $500,000. This amount applies to the total of damages for any bodily injury and property damage resulting from one accident. Which type of limit of liability does the insured have?
a) Split
b) Aggregate
c) Per occurrence
d) Combined single

Answer 17

D. Combined single is a single dollar limit of liability applying to the total of damages for bodily injury and property damage combined resulting from one accident or occurrence.

Question 18

What is the purpose of the coinsurance clause found in property insurance policies?
a) Encourage higher standards of care by requiring the insured to pay a portion of every loss
b) Ensure that insureds do not overinsure their property
c) Prevent insureds from profiting from a loss
d) Encourage the insured to insure the property closer to its full value

Answer 18

D. In return for the insured’s promise to insure the property to some certain percent of its value, the insurer agrees to give the insured a reduced rate per hundred on the insurance and pay partial losses in full.

Question 19

The process of determining the premium charged and how much insurance is required for a particular loss is called
a) Loss valuation.
b) Agreed value.
c) Loss payment.
d) Coinsurance.

Answer 19

A. Loss valuation is the process of determining appropriate monetary value to a particular loss and its resulting repair or replacement.

Question 20

In business income additional coverage in a businessowners policy (BOP), the waiting period that must occur before the period of restoration is
a) 72 hours.
b) 45 hours.
c) 36 hours.
d) 24 hours.

Answer 20

A. Under the business income additional coverage, there is no coverage for the first 3 days following the loss. The 72-hour deductible can be reduced by an endorsement for an additional premium.

Question 21

How does the mobilehome endorsement affect the other coverage of law or ordinance in a homeowners policy?
a) It limits the coverage.
b) It has no effect on this coverage.
c) It removes the coverage.
d) It broadens the coverage.

Answer 21

C. The mobilehome endorsement makes the other coverage of law or ordinance inapplicable to the policy.

Question 22

An insured’s business is damaged because of a fire, and he is forced to close the business temporarily for repairs. As a result, the insured lost income. What type of loss is this?
a) Consequential
b) Direct
c) Special
d) Additional

Answer 22

A. Consequential loss, also known as indirect loss, is a second financial loss caused by a covered direct loss.

Question 23

What is the resident producer license fee payable once every two years?
a) $50
b) $105
c) $215
d) $250

Answer 23

C. $215 is payable once every two years for a resident insurance producer license.

Question 24

If a person is working toward becoming permanently licensed as a producer and is issued a temporary license, what else must the person also do?
a) Shadow a licensed producer
b) Take a training course
c) File weekly reports to the Director
d) Pay a fee for each 30-day period of the license

Answer 24

B. During the 90-day period, the applicant must be enrolled in a training course or training program conducted by or on behalf of the appointing insurer and be in the process of fulfilling the prelicensing requirements.

Question 25

Which of the following practices would be considered “engaged in Insurance premium financing”?
a) Allowing 25% or more of a producer’s premium accounts receivable to be more than 60 days past due.
b) Allowing 10% or more of a producer’s premium accounts receivable to be more than 90 days past due.
c) Allowing 10% or more of a producer’s premium accounts receivable to be more than 30 days past due.
d) Allowing 25% or more of a producer’s premium accounts receivable to be more than 30 days past due.

Answer 25

B. To be engaged in the practice of allowing 10% or more of a producer’s or registered firm’s premium accounts receivable to be more than 90 days past due is considered to be engaged in insurance premium financing.

Question 26

f an insured requests forms that are necessary to present a claim, within how many working days must the insurer provide the forms?
a) 5
b) 10
c) 15
d) 20

Answer 26

C. Failing to provide forms necessary to present claims within 15 working days of a request constitutes improper claims practice.

Question 27

Prior to requesting renewal of an insurance producer’s license, how many hours of continuing education must a producer complete?
a) 16 hours
b) 20 hours
c) 24 hours
d) 30 hours

Answer 27

C. Once licensed, producers must complete at least 24 hours of study in approved CE courses before every license renewal. Failure to do so will result in automatic termination of the license.

Question 28

In order for a firm to maintain its registration as a legal insurance company, what must it do?
a) Submit a biennial fee to the Director
b) Nothing. Once a firm is registered with the Director, there is nothing that an insurer must do in order to maintain the registration.
c) Submit registration application annually
d) Pass a semi-annual inspection for the first 2 years

Answer 28

A. Business entities are required to pay the license renewal fee to the Director to maintain their registration every 2 years.

Question 29

A person is in the process of becoming permanently licensed as a producer. A temporary producer’s license may be issued for a maximum period of
a) 90 days.
b) 100 days.
c) 120 days.
d) 180 days.

Answer 29

A. The Director may grant a temporary insurance producer license to an applicant, without requiring an examination, for a period of 90 days, when the applicant otherwise meets the requirements for a license.

Question 30

Producers who broker insurance must file a bond along with the application for license. The bond must be issued in favor of the people of Illinois, and must be on a continuous form and for an amount equal to 5% of the premium brokered the previous year, NOT to exceed
a) $10,000
b) $25,000
c) $50,000
d) $100,000

Answer 30

C. The bond must be conditioned upon full accounting and due payment to the person or company entitled there to funds coming into the producer’s possession as a result of any insurance transaction covered by the producer’s license.

Question 31

If a licensee charges any fee separate from a commission off of the insured’s premium, and if the fee exceeds 10% of the premium’s value, what must the licensee obtain?
a) Special tax form
b) Premium Fund Trust form
c) Insured’s signature
d) Director’s permission

Answer 31

C. If the combined compensation or fee exceeds 10% of the premium amount, the disclosure must also include the signature of the consumer.

Question 32

All policy applications must identify which of the following?
a) Producer who solicited the applicant’s business
b) Conditions of acceptance
c) MIB
d) Director

Answer 32

A. All policies must identify the producer or insurer that solicited the business. Applications for individual life, accident and health or group coverages must bear the name and signature of the producer who solicited and wrote the application.

Question 33

How much is the premium for the dwelling under construction endorsement under the dwelling policy?
a) 50% of the actual value premium
b) The average amount of insurance during construction
c) 75% of the gross premium
d) The full value of the house

Answer 33

B. The premium is based on the average value of the house and building materials from the first day of construction until completion.

Question 34

Older homes with replacement costs greater than ACV or market value are insured on
a) HO-3.
b) HO-3 with an HO-15 endorsement.
c) HO-8.
d) HO-8 with an inflation guard endorsement.

Answer 34

C. HO-8 is used to insure houses with replacement cost more than market value and those built with irreplaceable materials. It is a modified HO-1 and provides ACV coverage for Coverage A.

Question 35

Both the broad theft and limited theft endorsements on the dwelling program exclude all of the following types of property EXCEPT
a) Credit cards.
b) Motor vehicles licensed for the road.
c) Aircraft.
d) Watercraft.

Answer 35

D. Canoes have limited coverage.

Question 36

The Mail Coverage Form is always written on a reporting form basis; after the end of each reporting period shown in the declarations, reports are due within
a) 45 days.
b) 15 days.
c) 30 days.
d) 31 days.

Answer 36

C. The Mail Coverage Form is always written on a reporting form basis, with reports due within 30 days after the end of each reporting period shown in the declarations.

Question 37

Business personal property coverage form covers all of the following EXCEPT
a) Machinery that is not permanently installed.
b) Stock.
c) Automobiles held for sale.
d) Furniture and fixtures.

Answer 37

C. Automobiles held for sale are among the exclusions in the BPP form. The rest are covered types of property.

Question 38

The homeowners policy form that covers condominium unit owners is
a) HO-2.
b) HO-3.
c) HO-4.
d) HO-6.

Answer 38

D. HO-6 is designed specifically to cover the exposure of a condominium unit owner.

Question 39

An additional loss that results from a direct loss of property is called a/an
a) Liability loss.
b) Punitive loss.
c) Indirect loss.
d) Proximate loss.

Answer 39

C. Direct losses come about because of perils named in the policy. Indirect losses, also known as consequential losses, come about as a result of a direct loss.

Question 40

In a watercraft policy, which coverage part will respond to a claim for damages for bodily injury or property damage for which the insured becomes legally liable because of a watercraft accident?
a) Part A
b) Part B
c) Part D
d) Part E

Answer 40

A. Part A is Liability Coverage and will pay for damages for bodily injury or property damage for which any insured becomes legally liable because of a watercraft accident.

Question 41

The part of the insurance contract that describes the covered perils and the nature of coverage of the contractual agreement between the insurer and the insured is called the
a) Insuring agreement.
b) Conditions.
c) Exclusions.
d) Declarations.

Answer 41

A. The insuring agreement is the part of the policy structure that describes the insured perils and the method of indemnification.

Question 42

Valuable papers and records form provides coverage for the reconstruction of all of the following types of records EXCEPT
a) Blueprints.
b) Deeds.
c) Historical records.
d) Prepackaged software.

Answer 42

D. Coverage for reconstructing prepackaged software is specifically excluded.

Question 43

Under a dwelling policy, which of the following is NOT a factor in determining a loss?
a) The policy limit
b) The amount reflecting the insured’s interest in the property at the time of loss
c) The amount necessary to repair or replace the property
d) The amount negotiated by the insured

Answer 43

D. The value of a loss is decided according to the actual cash value of the property, the policy limit, the amount needed to repair or replace the property, or the amount reflective of the insured’s interest in the property.

Question 44

Coverage under a Floor Plan Merchandise form is written on a reporting form basis that requires the insured to file reports with the insurer. What is the time frame for those reports?
a) By the 15th of each month
b) 20 days after the report is due
c) Within 30 days after the end of each month
d) Within the first 10 days of each month

Answer 44

C. Coverage is written on a reporting form basis that requires the insured to file reports with the insurer within 30 days after the end of each month.

Question 45

Under a businessowners policy, the inspections and surveys condition specifies all of the following EXCEPT
a) The insurer does not have the right to inspect the insured’s property and operations.
b) The insurer does not make safety inspections for the insured.
c) The insurer does not guarantee that conditions are safe or healthful.
d) The insurer does not guarantee that the insured is meeting all required safety regulations.

Answer 45

A. The inspection and survey condition DOES allow the insurer the right to inspect the property and operations. These inspections are important in determining the insurability of the insured’s property and operations, in setting proper insurance rates, and in making loss control recommendations.

Question 46

A policy that insures all property at multiple locations for a single amount is referred to as
a) Specific.
b) Blanket.
c) Reporting.
d) Special.

Answer 46

B. Blanket coverage provides one limit of insurance for multiple locations or classes of property with the entire limit of insurance available to respond to any loss. No single item is assigned a specific amount of insurance. However, different amounts of insurance may be shown for buildings in general and contents in general.

Question 47

A commercial package policy (CPP) allows the insured to select the coverage needed and customize the policy to meet the needs of the insured’s business. In a CPP, the business owner may select from all of the following types of coverage EXCEPT
a) Workers compensation coverage
b) Crime coverage
c) Boiler and machinery coverage
d) General liability coverage

Answer 47

A. Workers compensation is not available through the commercial package policy (CPP).

Question 48

All of the following are correct regarding misrepresentation EXCEPT
a) The fines for misrepresentation range from $50 to $1,000.
b) The fines for misrepresentation range from $200 up to $10,000.
c) Misrepresentation includes the guarantee of dividends.
d) Misleading advertisements are considered misrepresentations.

Answer 48

A. Misrepresentations include guaranteeing dividends and creating misleading advertisements. Penalties for misrepresentation include fines of $200 up to $10,000.

Question 49

When an insurer receives a written complaint from a policyholder, the insurer must respond to the complaint, in writing, within
a) 31 days.
b) 5 days.
c) 14 days.
d) 21 days.

Answer 49

Companies must provide a written response to written inquiries and complaints within 21 days of receipt.