Personal Lines - Cumulative

Question 1

Cheryl has a country home with an orchard of 20 citrus trees on her property near the forest. One summer, a wildfire spreads from the nearby forest and completely destroys her house before consuming the entire orchard. Cheryl has a DP-2 policy with a coverage A limit of $150,000 and additional coverage for Trees, Shrubs, and Other Plants. It will cost $500 to replace each citrus tree. How much will her policy pay for this loss (ignoring any deductible)?

A.
$150,000
B.
$160,000
C.
$157,500
D.
$152,500

Answer 1

C.
$157,500

Cheryl’s insurer will pay the full $150,000 under coverage A for her house. Coverage for Trees, Shrubs, and Other Plants will pay $500 for any one plant and up to 5% of the coverage A limits. Further, it pays on top of the coverage A limit. In this case, 5% of coverage A is $7,500 (.05 x $150,000 = $7,500). Altogether, then, her policy will pay $157,500 for her losses ($150,000 + $7,500).

Question 2

The Risk Management Agency is responsible for all of the following, except:
A.
issuing crop assignments to farmers.
B.
reimbursing private crop insurers for administrative costs.
C.
setting critical production dates.
D.
assigning commodity prices.

Answer 2

A.
issuing crop assignments to farmers.

Actually, the RMA does set production dates. It also assigns commodity prices and reimburses private crop insurers for their administrative costs, among other things. But, it does not issue crop assignments to farmers.

Question 3

A dryer fire scorches the interior of Bill’s home, and he is billed $627 by the fire department. Assuming Bill has the Fire Department Service Charge additional coverage, how much will Bill have to pay out-of-pocket?
A.
$0
B.
$377
C.
$127
D.
$427

Answer 3

C.
$127

Fire Department Service Charge coverage will pay up to $500 if the fire department charges for responding to a covered peril, which leaves $127 for Bill to pay out-of-pocket.

Question 4

William’s $400,000 seasonal home is fully insured by a DP-3 policy with a coverage C limit of $30,000. One summer night, some mischievous teenagers decide to sneak onto William’s property and shoot some fireworks through the windows, setting the property on fire. The house is completely destroyed with $10,000 worth of furniture inside. A $20,000 detached garage is also destroyed along with a $20,000 car inside. Ignoring any deductible, how much can William expect to receive to cover the damages under his DP-3 coverages A, B and C?

A.
$420,000
B.
$400,000
C.
$430,000
D.
$450,000

Answer 4

C.
$430,000

William will receive the full $400,000 for damages to his house under coverage A. He will receive $20,000 for the detached garage under coverage B (since $20,000 is less than 10% of the $400,000 coverage A limit). Under coverage C, he will receive $10,000 for the furniture, but he will not receive anything for his $20,000 car because vehicles are excluded under coverage C of a dwelling policy. Altogether, then, William will receive $430,000 ($400,000 + $20,000 + $10,000).

Question 5

Rodney has a typical farm policy with a limit of $200,000 for the main house. During a storm, lightning strikes a $2,500 satellite dish, which sparks a fire that destroys a little guest house worth $25,000. How much can Rodney receive from his insurer in response to his claim?

A.
$25,000
B.
$20,000
C.
$27,500
D.
$26,000

Answer 5

B.
$20,000

Rodney’s guest house and satellite dish both fall under Coverage B, which is limited to 10% of the Coverage A limit. 10% of $200,000 is $20,000, so Rodney’s policy will only pay up to $20,000.

Question 6

In addition to the minimum required liability limits, Liam has Collision coverage with a $500 deductible, plus the California minimum UM/UIM and UMPD coverage for each of his three vehicles. One Sunday afternoon while he is out driving his car along the coast, Liam comes around a curve and is hit head-on by a speeding car driving in the wrong lane. His car is totalled, and Liam is badly injured in the accident. Unfortunately, the at-fault driver is uninsured, leaving Liam with $12,000 in property damage and $35,000 in bodily injury. According to California law, which of the following is NOT an option for Liam?

A.
Using his UMPD as a Collision Deductible Waiver (CDW) and receiving payment under his Collision coverage without having to pay a deductible
B.
Receiving $3,500 from his UMPD coverage to help pay for his totalled car
C.
Stacking his UM/UIM coverages to help cover the $35,000 in bodily injury
D.
Receiving $15,000 from his UM/UIM coverage for bodily injury

Answer 6

C.
Stacking his UM/UIM coverages to help cover the $35,000 in bodily injury

In California, UM/UIM stacking is not allowed in any form.

Question 7

Which of the following crops is covered under a Coarse Grains Provision?
A.
Corn
B.
Barley
C.
Oats
D.
Wheat

Answer 7

A.
Corn

Oats are considered a small grain, as are barley and wheat. Coarse grains are corn, grain sorghum, and soybeans.

Question 8

Which statement is FALSE about coverage for Trees, Shrubs, and Other Plants in the DP-2 and DP-3?
A.
It includes the perils of windstorm and hail.
B.
It pays in addition to the Coverage A limit of liability.
C.
It is limited to $500 per tree or plant.
D.
It cannot pay more than 5% of the Coverage A limit of liability.

Answer 8

A.
It includes the perils of windstorm and hail.

The DP-2 and DP-3 provide coverage for trees, shrubs, plants or lawns for covered perils, which do not include windstorm or hail. This is additional insurance, and it is limited to 5% of the Coverage A limit, but no more than $500 for any one tree or plant.

Question 9

A “transitional yield,” or “T-yield,” is:
A.
a supplemental crop planted between growing seasons of the farmer’s primary crop.
B.
the threshold for the amount of damage sustained to a crop before insurance coverage will apply.
C.
the average yield of an entire farm for at least the previous 4 years.
D.
the average yield of other farms in the county, used to calculate a farmer’s APH when the farmer does not have 4 years of production records.

Answer 9

D.
the average yield of other farms in the county, used to calculate a farmer’s APH when the farmer does not have 4 years of production records.

A “transitional yield”, or “T-yield”, is the average yield of other farms in the county, used to calculate a farmer’s APH when the farmer does not have 4 years of production records.

Question 10

Farmer Ron wants to make some changes to the insurance policy covering his wheat crop, but he must do so before the:

A.
sales closing date.
B.
production reporting date.
C.
final planting date.
D.
debt termination date.

Answer 10

A.
sales closing date.

The sales closing date is the last day a farmer can apply for a crop insurance policy or, as in Farmer Ron’s case, make changes to an existing policy.

Question 11

When would a farmer receive an indemnity payment under an Area Yield Protection policy?
A.
When the farmer suffers loss of yield and production is low for the entire county
B.
Only after the governor declares a state of emergency for the county in which the farm is located
C.
Any time the farmer has damage to his crops
D.
Only after the actual county revenue decreases by at least 50% because of a disastrous loss

Answer 11

A.
When the farmer suffers loss of yield and production is low for the entire county

Area Yield Protection indemnifies a farmer for loss of yield or revenue anytime production or prices are low for the entire county.

Question 12

Cheryl has an orchard of 20 citrus trees on her property near the forest. One summer, a wildfire spreads from the nearby forest onto her property. The fire department manages to stop the fire before it reaches her house, but all of her citrus trees are destroyed. Cheryl has a DP-2 policy with a coverage A limit of $150,000 and additional coverage for Trees, Shrubs, and Other Plants. It will cost $500 to replace each citrus tree. How much will she have to pay out of pocket if she replaces all 20 of her citrus trees?

A.
$2,500
B.
$7,500
C.
$0
D.
$10,000

Answer 12

A.
$2,500

Coverage for Trees, Shrubs, and Other Plants will pay $500 for any one plant and up to 5% of the coverage A limits, in this case, $7,500 (.05 x $150,000 = $7,500). Altogether, it will cost Cheryl $10,000 to replace her citrus trees ($500 x 20 = $10,000). Therefore, Cheryl will still have to pay $2,500 out of pocket to replace all of her trees ($10,000 - $7,500 = $2,500).

Question 13

Lanny was unloading his steers from the transport when the ramp slipped off the back of the trailer and two steers fell and broke their legs. As a result of this accident, Lanny had to put down the injured steers. Which farm policy cause of loss form would indemnify Lanny for this loss?
A.
Basic, Broad, and Special Forms
B.
Broad Form and Special Form
C.
Broad Form only
D.
Special Form only

Answer 13

D.
Special Form only

The Basic and Broad form does cover loading and unloading accidents, however, the Special form provides open peril coverage, so it will also cover this type of loss as long as it is not specifically excluded.

Question 14

Who is responsible for providing homeowners and dwelling policyholders with a copy of the California Residential Property Insurance disclosure statement?

A.
The insurer, upon receiving the application
B.
The real estate agentIncorrect
C.
The insured’s legal counsel at the property closing
D.
The Department of Insurance

Answer 14

A.
The insurer, upon receiving the application

The insurer is responsible for providing homeowners and dwelling policyholders with a copy of the California Residential Property Insurance disclosure statement.

Question 15

Jake grows soybeans and strawberries on his farm. He is currently applying for Crop-Hail insurance with his agent. Which of the following statements is true in Jake’s case?
A.
Both of Jake’s crops can be covered under this policy.
B.
Jake’s policy will provide coverage against flood damage to his crops.
C.
Jake’s coverage will be based on the amount of acreage he has.
D.
Part of Jake’s policy premiums are subsidized by the federal government.

Answer 15

C.
Jake’s coverage will be based on the amount of acreage he has.

Question 16

Zane’s farmhouse was burglarized. The thieves stole his $4,000 sofa, his $3,000 silverware collection, and his $5,000 watch. Under Zane’s farm insurance policy, which has a Coverage A limit of $150,000, how much can he expect to receive in indemnification for this loss, assuming there are no endorsements and ignoring any deductibles?
A.
$8,000
B.
$9,000
C.
$12,000
D.
$7,500

Answer 16

B.
$9,000

Coverage C has a special limits of $2,500 for silverware and for watches. Zane will be indemnified $4,000 for the sofa, $2,500 for the silverware, and $2,500 for the watch. $4,000 + $2,500 + $2,500 = $9,000.

Question 17

Bob’s California home is destroyed in a fire. Since his original house was built ten years ago, there have been upgrades to the building codes and zoning laws. To bring his dwelling into compliance with these current laws, re-building will cost more than his policy will pay. Which optional coverage would cover these additional costs?

A.
New Zoning Law coverage
B.
State Updates coverage
C.
New Laws coverage
D.
Building Code Upgrade coverage

Answer 17

D.
Building Code Upgrade coverage

Building Code Upgrade coverage, also called Ordinance and Law coverage, is an important option that covers additional costs needed to bring the dwelling into compliance with the building codes and zoning laws in effect at the time of loss or rebuilding.

Question 18

Which of the following provides the broadest coverage for a homeowner?

A.
Guaranteed Replacement Cost coverage
B.
Actual Cash Value coverage
C.
Replacement Cost coverage
D.
Extended Replacement Cost coverage

Answer 18

A.
Guaranteed Replacement Cost coverage

Guaranteed Replacement Cost coverage provides the broadest coverage for a homeowner.

Question 19

In which case would the insured be indemnified by her auto liability coverage?
A.
She has to pay a fee to retrieve relevant court documents.
B.
Her dog causes extensive damage in her neighbor’s yard.
C.
None; liability coverage never indemnifies the insured.
D.
She gets into an accident that leaves her car totaled.

Answer 19

A.
She has to pay a fee to retrieve relevant court documents.

Liability coverage wouldn’t cover damage to the insured’s own car; it covers the damage an insured causes to a third party. It can also indemnify the insured for any reasonable expenses she incurs at the insurer’s request. So, the fee for retrieving relevant court documents would be covered.

Question 20

Greg’s neighbor Sam is trimming his trees in his backyard. In the process, a big limb from one of Sam’s trees crashes down onto Greg’s fence. Assuming Greg has a DP-1 policy with the Extended Coverage endorsement, which of the following could help indemnify Greg for the repairs to his fence?
A.
Reasonable Repairs
B.
Trees, Shrubs, Other Plants
C.
None
D.
Debris Removal

Question 21

Farm Insurance policies can include all of the following EXCEPT:
A.
Farm Insurance for raising show animals.
B.
Property Insurance for the main dwelling.
C.
Farm Liability Insurance.
D.
Mobile Agricultural Machinery and Livestock.

Answer 21

A.
Farm Insurance for raising show animals.

Mobile Agricultural Machinery and Livestock coverage can be included in Farm Insurance policies; however, farms that primarily raise race or show animals are not eligible for the Farm policy.

Question 22

Kris has collision coverage with a $500 deductible on her 2012 pickup truck. She gets into an accident and discovers that it will cost $34,000 to repair the truck. The truck’s actual cash value is $21,000, and a brand new pickup truck would cost $67,000. How much will Kris’ insurer indemnify her for this loss?

A.
$20,500
B.
$21,000
C.
$33,500
D.
$45,500

Answer 22

A.
$20,500

Collision coverage pays actual cash value in the case of a total loss. The ACV of the truck is $21,000, minus the $500 deductible = $20,500.

Question 23

Which endorsement extends the liability coverage of a homeowners policy to include a rental property?

A.
Residence Rented to Others
B.
Personal Injury
C.
Earthquake
D.
Business Pursuits

Answer 23

A.
Residence Rented to Others

Residence Rented to Others extends the liability coverage of a homeowners policy to include a rental property.

Question 24

Which of the following is true for Crop-Hail insurance?
A.
It cannot be added during the growing season.
B.
Generally it is available from private insurers.
C.
It is subsidized by the government.
D.
It does not cover fire.

Question 25

Bonnie has Bodily Injury UM/UIM coverage with limits of 30/60 when Clyde causes an accident. The accident leaves Bonnie with $60,000 in medical bills. If Clyde only carries the minimum liability coverage for California, and his policy pays up to its limit for Bonnie’s injuries, how much can Bonnie collect under her UIM coverage?

A.
$30,000
B.
$45,000
C.
$10,000
D.
$15,000

Answer 25

D.
$15,000

The minimum liability coverage for California is 15/30/5, so Bonnie can collect $15,000 for her injuries.

Question 26

Which of the following would NOT be covered under a Personal Auto Policy?
A.
A passenger car loaned to a friend
B.
A passenger car used by a son or daughter who is home from college
C.
An 18-wheeler with a driver and a passenger
D.
A 15-passenger van weighing 7,200 lbs

Answer 26

C.
An 18-wheeler with a driver and a passenger

PAPs can cover individuals and family members who live with them, as well as anyone who drives a covered car with the owner’s permission. The PAP only covers 4-wheeled vehicles weighing under 10,000 pounds, so the 18-wheeler would not be covered.

Question 27

Daniel’s $150,000 home, $5,000 detached garage, and $10,000 worth of personal belongings burn to the ground after an internal explosion catches his house on fire. Daniel is also charged with a $650 service fee from the fire department. The property was fully insured by a DP-1 policy with a coverage C limit of $20,000. How much can Daniel expect to receive from his insurer to cover his losses?

A.
$160,000
B.
$150,500
C.
$165,500
D.
$155,000

Answer 27

C.
$165,500

Internal explosion and fire are covered perils in a DP-1 policy. Daniel will receive full coverage for the direct losses to his property ($150,000 under coverage A + $5,000 under coverage B + $10,000 under coverage C = $165,000) since they all fall within the limits of coverage in his DP-1 policy. He will also receive $500 for the fire department service fee, adding up to a total of $165,500 in indemnity.

Question 28

What is the current minimum amount of liability coverage required by the state of California?

A.
25/50/10
B.
15/30/10
C.
15/30/5
D.
It depends on the value of the car.

Answer 28

C.
15/30/5

The current minimum amount of liability coverage required by the state of California is 15/30/5.

Question 29

Susan runs a red light and side swipes Maybel’s minivan, causing $6,000 in property damage and $20,000 in bodily injury. If Susan has the California state minimum insurance requirements, how much will she have to pay out of pocket after her insurance pays its share?

A.
$1,000
B.
$6,000
C.
$5,000
D.
$0. Her insurance will cover all of the expenses.

Answer 29

B.
$6,000

The California minimum liability insurance requirements are $15,000 for bodily injury per person, $30,000 total for bodily injury per accident, and $5,000 for property damage per accident (15/30/5). After the insurance company pays its $5,000 limit for the property damage, Susan will still owe $1,000 to Maybel ($6,000 - $5,000 = $1,000). After the insurance company pays its $15,000 limit for bodily injury, Susan will still owe Maybel the remaining $5,000 ($20,000 - $15,000 = $5,000). Altogether, that means Susan will have to pay $6,000 out of pocket for the damages she caused ($1,000 + $5,000 = $6,000).

Question 30

A policyholder must sign an acknowledgement that he received the California Residential Property Insurance disclosure statement from his insurer within ____ days of applying for property insurance.

A.
30
B.
90
C.
10
D.
60

Answer 30

D.
60

The insurer must send the disclosure statement to the policyholder within 3 days of receiving his application and the policyholder has 60 days to sign an acknowledgment of receipt.

Question 31

Which statement about the Catastrophic Risk Protection Endorsement is FALSE?
A.
It pays on crop losses in excess of 50%.
B.
The premiums are paid by the insured.
C.
It is an optional coverage of MPCI.
D.
It pays 55% of the price of the commodity.

Answer 31

B.
The premiums are paid by the insured.

CAT Coverage is an optional endorsement to MPCI. But, farmers do not have to pay premiums for CAT coverage.

Question 32

Maria had a detached shed on her residence premises that she remodeled into a guest apartment and rents to a tenant. Which homeowners endorsement can make this structure count as an “insured location” under Coverages E and F of her homeowners policy?

A.
Premises Liability
B.
Personal Liability
C.
Structures Rented to Others
D.
Mobile Home Endorsement

Answer 32

C.
Structures Rented to Others

The Structures Rented to Others endorsement covers structures described in the schedule that are: 1) on the residence premises, 2) rented to anyone who is not a tenant of the dwelling, and 3) used as a private residence. It also adds the structure as an “insured location” under Coverages E (Liability) and F (Medical Payments).

Question 33

Which of the following can NOT cover the death of the insured’s cow due to a lightning strike?

A.
Unscheduled Farm Personal Property coverage
B.
Scheduled Farm Personal Property coverage
C.
Property Damage Liability
D.
Livestock Floater

Answer 33

C.
Property Damage Liability

Question 34

In a farm policy, which form provides blanket coverage to all farm personal property?
A.
Scheduled Farm personal property
B.
Barns, Outbuildings, and Other Farm Structures
C.
Mobile Agricultural Machinery and Equipment
D.
Unscheduled Farm personal property

Answer 34

D.
Unscheduled Farm personal property

Unscheduled Farm Personal Property provides blanket insurance for a large variety of farm machines, livestock, feed, and farm products and supplies.

Question 35

Which of these statements about Multi-Peril Crop insurance is true?
A.
MPCI does not cover earthquake.
B.
MPCI must be run by the state.
C.
MPCI is too expensive for most farmers.
D.
MPCI cannot be purchased after the sales closing date.

Question 36

A lightning strike sparks a fire on the ground of Blake’s property, causing damage to several trees and shrubs in the process. Assuming Blake carries a $120,000 DP-2 on his home with a Trees, Shrubs, and Other Plants endorsement, what is the maximum Blake can receive for his 15 damaged plants?
A.
$0 - Lightning is not a covered peril with the Trees and Shrubs Additional Coverage
B.
$7,500- all perils are covered and all damaged plants are covered at $500 per plan
C.
$6,000- Lightning is a covered peril and damaged plants are covered at $500 per plant up to 5% of Coverage A limit
D.
$500 - only one occurrence is paid

Answer 36

C.
$6,000- Lightning is a covered peril and damaged plants are covered at $500 per plant up to 5% of Coverage A limit

This endorsement pays up to $500 per plant, not per occurrence, up to 5% of Coverage A limit. So, at $500 apiece, the 15 damaged plants add up to $7,500. However, the Trees, Shrubs, and Other Plants endorsement is limited to 5% of the Coverage A limit. Five percent of $120,000 is $6,000, so Blake can receive up to $6,000 for his damaged plants.

Question 37

Terry is fully insured by his farm policy. When a tornado rips through Terry’s farm, it destroys a barn worth $15,600, a corral and two livestock chutes worth $6,200, and a light pole worth $400. How much indemnification can Terry expect to receive for this claim?
A.
$22,050
B.
$22,750
C.
$21,800
D.
$22,200

Answer 37

A.
$22,050

Barns, Outbuildings, and Other Farm Structures coverage will cover the barn, the corral, and the livestock chutes at actual cash value, but the light pole is subject to a $250 limit. $15,600 + $6,200 + $250 = $22,050.

Question 38

Insurance that provides coverage against the loss of crop value is called:
A.
Crop-Revenue insurance.
B.
Multi-Peril Crop Insurance.
C.
Crop-Hail insurance.
D.
Crop-Yield insurance.

Answer 38

A.
Crop-Revenue insurance.

Crop-Revenue Insurance protects against losses due to a reduction in a crop’s value. Crop-Hail is a form of Crop-Yield insurance, which protects against physical losses to the crop itself.

Question 39

Anton is driving in the car with his wife when he runs a red light and hits a pickup truck carrying two people. The driver of the pickup truck sustains $70,000 in injuries, and the passenger has $40,000 in injuries. The damage to the truck comes to $30,000, and Anton and his wife each suffer $5,000 in injuries. Anton’s PAP has liability limits of 50/100/10, and he has Medical Payments coverage of $3,000 per person. Assuming Anton and his wife don’t have health insurance, how much will Anton have to pay out-of-pocket in this situation?

A.
$34,000
B.
$44,000
C.
$40,000
D.
$38,000

Answer 39

B.
$44,000

Anton’s liability coverage will pay for $50,000 of the truck driver’s injuries, all $40,000 of the passenger’s injuries, and $10,000 of the damage to the pickup truck. This leaves $20,000 of the truck driver’s injuries plus $20,000 in property damage that Anton will need to pay for. In addition to this, Anton’s Medical payments will cover $3,000 of his own injuries, and $3,000 of his wife’s, leaving $4,000 that he will need to pay out-of-pocket. So, Anton’s total out-of-pocket costs are $20,000 + $20,000 + $4,000 = $44,000.

Question 40

Molly leaves town for a one-week vacation. When she returns, she finds that the back door to her house has been kicked in and damaged. Her laptop is gone, and—to her surprise—she finds that the copper piping in the basement has been torn out and stolen as well! She has a DP-3 with coverage for contents but no additional endorsements. What, if anything, is covered?

A.
The damage to the door and the copper piping
B.
Nothing; all theft is excluded under the DP-3
C.
The damage to the door, the laptop, and the copper piping
D.
The copper piping only

Answer 40

A.
The damage to the door and the copper piping

Molly’s laptop (Coverage C) is not covered because theft is not a named peril. However, the damage to the door and theft of copper piping are covered under Coverage A, since theft of part of a structure is covered.

Question 41

A distracted driver rear-ends a 12 passenger van full of people at a stoplight, causing $5,000 in property damage and $6,000 in bodily injury to each of the 12 passengers. Assuming the at-fault driver carries the state minimum insurance requirements for California, how much will the distracted driver’s liability insurance pay for this accident?

A.
$72,000
B.
$77,000
C.
$35,000
D.
$11,000

Answer 41

C.
$35,000

The California minimum liability insurance requirements are $15,000 for bodily injury per person, $30,000 total for bodily injury per accident, and $5,000 for property damage per accident (15/30/5). Thus, the insurance company will pay the full $5,000 in property damage and the $6,000 for the first 5 passengers’ bodily injuries ($6,000 x 5 = $30,000), which comes to a total of $35,000. The at-fault driver will be responsible for the remaining 7 passengers’ bodily injuries since they exceed the $30,000 limit for bodily injury per accident.

Question 42

Leona is navigating heavy traffic and texting her best friend when she runs into the sedan in front of her. Two people in the sedan are injured: the driver sustains $60,000 in injuries, and the passenger $40,000. There is $20,000 in damage to the sedan. Leona’s liability policy has limits of 50/100/25. How much of the damage will Leona’s insurer pay for?

A.
$100,000
B.
$130,000
C.
$110,000
D.
$120,000

Answer 42

C.
$110,000

Leona’s policy has limits of 50/100/25, so it will cover $50,000 of the driver’s injuries, $40,000 of the passenger’s injuries, and the $20,000 of damage to the sedan. This comes to $110,000 total.

Question 43

Liam leaves town for a weekend business trip. When he returns, he sees that two of the windows of his house have been broken. Once inside, he finds that his dining room and living room light fixtures have been ripped out, damaging the ceiling above. His television and brand new espresso machine have also been stolen. Liam has a DP-2 policy with no additional endorsements. What, if anything, is covered?

A.
The windows, the television, and the espresso machine
B.
The windows and the ceiling
C.
The windows, the ceiling, and the light fixtures
D.
None of the losses are covered under a DP-2 policy

Answer 43

B.
The windows and the ceiling

A DP-2 policy covers property damage caused during a burglary, but it does not cover the stolen items themselves. Thus, Liam’s policy will pay for the broken windows and the damaged ceiling under coverage A, but it will not pay to replace the light fixtures, television, or espresso machine since theft is not a named peril in a DP-2 policy.

Question 44

Bonnie’s PAP includes Comprehensive coverage. Which of the following losses could this coverage pay for?
A.
Bonnie’s car breaks down due to an engine malfunction.
B.
Bonnie’s car catches fire.
C.
Bonnie rolls her vehicle in a one-car accident.
D.
Bonnie rear-ends another vehicle.

Answer 44

B.
Bonnie’s car catches fire.

Comprehensive coverage pays for damage to your own vehicle that is caused by anything other than a collision or overturn. So, it would cover Bonnie’s car if it were damaged by fire, but not if it were damaged in a one-car accident. This would be covered by collision coverage.

Question 45

A widespread disaster can cause an effect known as _________________________, which means the cost of construction increases dramatically as a result of the unusually high demand for contractors, building supplies, and construction labor.

A.
increased cost of construction
B.
demand surge
C.
workers spread thin
D.
dramatic pricing

Answer 45

B.
demand surge

After a widespread disaster, the cost of construction can increase dramatically as a result of the unusually high demand for contractors, building supplies, and construction labor. This effect is known as demand surge, and can increase the cost of rebuilding a home.

Question 46

Which of these would be covered by Comprehensive coverage in a Personal Auto Policy?

A.
Injuries to a passenger after colliding with a deer
B.
Collision with a tractor
C.
Collision with a bird breaks the windshield
D.
Damage caused by the car rolling into a ditch on a dirt road

Answer 46

C.
Collision with a bird breaks the windshield

Comprehensive coverage (also called “Other Than Collision”) covers damage to the vehicle which is caused by something other than overturn or collision. It covers things like contact with birds and animals, damage from falling branches or trees, damage from hail and windstorms, etc.

Question 47

Dan has a DP-3 policy on his home. During a storm, a tree falls onto his attached garage. The tree crashes through the garage roof and lands on Dan’s water softener tank, destroying it completely. Which of these damages would be covered under Coverage A?
A.
The water softener only
B.
None
C.
The roof only
D.
The roof AND the water softener

Answer 47

D.
The roof AND the water softener

Coverage A covers the dwelling, attached structures, and machinery that services the dwelling. So, both the roof of the attached garage AND the water softener would be covered under Coverage A.

Question 48

Reggie lives in Virginia and has a Personal Auto Policy on her jeep. Which of the following places is NOT within the policy territory outlined in Reggie’s policy?

A.
Cabo San Lucas, Mexico
B.
Washington, DC
C.
Montreal, Quebec
D.
Marine Corps Base Camp Lejeune, North Carolina

Answer 48

A.
Cabo San Lucas, Mexico

Mexico is not part of the policy territory.

Question 49

Rosa’s barn burned down when it was struck by lightning during a storm. The barn was fully insured at replacement cost under Rosa’s Farm policy. At the time of the loss, the barn was valued at $45,000, but it will cost $60,000 to replace it. How will Rosa’s insurer respond to her claim?

A.
The insurer will pay Rosa $30,000 first, and then up to another $30,000 once repairs are complete.
B.
The insurer will give Rosa one check for $60,000.
C.
The insurer will give Rosa one check for $45,000.
D.
The insurer will pay Rosa $45,000 first, and then up to another $15,000 once repairs are completed.

Answer 49

D.
The insurer will pay Rosa $45,000 first, and then up to another $15,000 once repairs are completed.

Replacement cost policies pay Actual Cash Value at first and reimburse the insured for the full cost of repair or replacement once the work is complete. Rosa’s insurer will pay the ACV of the barn ($45,000) at first. Then, once Rosa has finished the repairs, it will pay her up to $15,000 more.

Question 50

Jessica and her sister Ashley each purchase a DP-2 policy on their $250,000 co-owned house. Jessica’s policy has a limit of $200,000 and Ashley’s has a limit of $50,000, and both pay on a pro-rata basis. The house also has a basement that they rent out to a tenant for $1,000/month plus a $150/month flat rate for utilities. When an accidental overflow of water floods the basement, it causes $20,000 in property damage and makes the space uninhabitable for 3 months. How much of the losses will be covered under Jessica’s policy (ignoring any deductible)?

A.
$20,000
B.
$18,400
C.
$23,000
D.
$16,000

Answer 50

B.
$18,400

Question 51

A Crop-Hail insurance policy would provide coverage for all of the following, except:
A.
Olivia’s crop was destroyed by a hail storm.
B.
Lucy’s crop was destroyed by a wildfire started by a lightning strike.
C.
Martin’s crop was destroyed by caterpillars despite the fact that he used insecticide.
D.
Tom’s crop was destroyed when he crashed his truck while transporting his crop to the silo for storage.

Question 52

If Farmer Brown sustains a 10% loss to his crop, and he has Crop-Hail Insurance with a $10,000 limit and a 5% minimum loss percentage, how much will his policy pay him?
A.
$10,000
B.
$1,000
C.
$500
D.
$1,500

Answer 52

B.
$1,000

Farmer Brown didn’t sustain a total loss, so he will not receive the full amount of his coverage. Instead, his loss exceeds the minimum 5% threshold, he’ll receive indemnification for his actual loss: 10% of $10,000 or $1,000.

Question 53

Mateo from southern California often travels over the border about 10 miles into Mexico on 2-3 day business trips. Which coverage can insure that Mateo’s vehicle is covered from losses that may occur while he is in Mexico?

A.
UM/UIM Coverage
B.
Mexico Coverage Endorsement
C.
Foreign Country Endorsement
D.
Out of State Coverage

Answer 53

B.
Mexico Coverage Endorsement

Mateo can purchase the Mexico Coverage Endorsement, which covers auto losses occurring in Mexico, as long as they are within 25 miles of the U.S. border and the insured is travelling in Mexico for no more than 10 days.

Question 54

The insuring agreement for Part A-Liability in a personal auto policy states that:
A.
the insurer has the right to settle liability cases out of court.
B.
the insurer will cover the costs to defend the insured in court in subsequent lawsuits related to the same occurrence, even after the policy limit is reached.
C.
the insurer will pay for “bodily injury” or “property damage” to any “insured” because of an auto accident.
D.
the insurer will cover the costs to defend the insured in court, up to the policy limit.

Answer 54

A.
the insurer has the right to settle liability cases out of court.

In Part A of the insuring agreement, the insurer retains the right to settle liability cases outside of the courtroom. Part A of a PAP is liability coverage

Question 55

Sonia maintains collision coverage with a $1,000 deductible on her 2015 sedan. While returning home from work, Sonia swerves to miss a raccoon and ends up crashing into a telephone pole. Sonia’s car sustains $25,000 in damages, yet the actual cash value of the vehicle is only $15,000. Which of the following statements is TRUE?

A.
Sonia will be indemnified by her insurer for $24,000.
B.
Sonia will be indemnified by her insurer for $14,000.
C.
Sonia will be indemnified by her insurer for $11,000.
D.
Collision coverage will not pay for Sonia’s accident.

Answer 55

B.
Sonia will be indemnified by her insurer for $14,000.

Collision coverage pays actual cash value for damages to the insured’s car caused by a collision. Since Sonia’s car was only worth $15,000 at the time of the accident, her insurer would pay her $15,000 minus the $1,000 deductible, which comes to $14,000.

Question 56

Actual Production History (APH) is based on a farmer’s previous crop yields. A farmer must provide how many years of records to determine the APH?
A.
2 years
B.
10 years
C.
4 years
D.
5 years

Answer 56

C.
4 years

a farmer’s APH is based on the previous 4 years of records.

Question 57

Jake’s house is covered under a DP-2 policy with a $100,000 Coverage A limit of liability. A fire destroys the dwelling and a $30,000 detached guest house. Assuming he has not endorsed or otherwise modified the coverage amounts of the policy, how much can Jake expect to receive from his insurer?
A.
$100,000
B.
Nothing – fire is not a covered peril under a DP-2 policy
C.
$110,000
D.
$130,000

Answer 57

C.
$110,000

Question 58

In the DP-2 and DP-3, what is the time-based limit for Coverage D - Fair Rental Value?
A.
The amount of time that it takes for the insured to start receiving rental income again after a loss
B.
60 days
C.
180 days, or the amount of time needed to repair or replace damaged property, whichever is shorter
D.
The shortest time required to make repairs or replacements needed to return the property to rentable condition

Answer 58

D.
The shortest time required to make repairs or replacements needed to return the property to rentable condition

Question 59

A California auto insurer must offer __________ coverage to every policyholder, but the policyholder may choose to exclude it.

A.
PIP
B.
Uninsured Motorist
C.
Property Damage liability
D.
Physical Damage

Answer 59

B.
Uninsured Motorist

A California auto insurer must offer Uninsured Motorist coverage to every policyholder, but the policyholder may choose to exclude it.