Section Review Questions - P

Question 1

The HO-2 provides vandalism coverage for a maximum of how many days after the beginning of the vacancy?

Select one:

a. 30 days
b. 60 days
c. 90 days
d. 120 days

Answer 1

Chapter 13: Dwelling and Homeowner Policies

The correct answer is: 60 days

Question 2

The owner of a business carelessly left the rear door unlocked over the weekend, resulting in merchandise being stolen. Under a Building and Personal Property policy – Special, this loss:

Select one:

a. will not be covered
b. will be covered as a theft loss

Answer 2

My personal inclination is to somehow punish this store owner by denying coverage for the store owner’s negligence. But, wait a minute! That is exactly why the store owner wants a property policy - to cover the owner’s mistakes. A perfect store owner wouldn’t need insurance. So, the negligence of the store owner is irrelevant - we will pay the claim.

Chapter 7: BPP

The correct answer is: will be covered as a theft loss

Question 3

The owner of a new office building is unable to move in for 80 days. Which provision will restrict coverage?

Select one:

a. indemnity
b. abandonment
c. coinsurance
d. vacancy

Answer 3

Chapter 7: BPP

The correct answer is: vacancy

Question 4

Ocean Marine Insurance covers:

Select one:

a. ships’ cargo
b. warehouses
c. buildings
d. single family homes

Answer 4

Chapter 12: Ocean and Inland Marine Insurance

The correct answer is: ships’ cargo

Question 5

Boiler policies cover losses due to:

Select one:

a. Corrosion
b. Accidental breakdown

Answer 5

The peril covered by a boiler policy is “accidental breakdown,” which means boom. Such occurrences as corrosion, deterioration, and leakage are excluded.

Chapter 9: Boiler and Machinery Insurance

The correct answer is: Accidental breakdown

Question 6

A building with no occupants or contents is:

Select one:

a. unoccupied
b. vacant

Answer 6

Chapter 7: BPP

The correct answer is: vacant

Question 7

Which form of Business Interruption coverage allows a business to continue partial or full operation after loss caused by a covered peril?

Select one:

a. Direct loss coverage.
b. Extra Expense coverage.

Answer 7

Chapter 8: Business Interruption Policies

The correct answer is: Extra Expense coverage.

Question 8

After 60 days, a property with no people and no significant amount of personal property is considered to be:

Select one:

a. vacant
b. unoccupied

Answer 8

Chapter 7: BPP

The correct answer is: vacant

Question 9

A Mobile Home policy covers a detached garage:

Select one:

a. to 10% of A (with at least $2,000 coverage)
b. to 20% of A
c. with no limit
d. only by a rider, endorsement, separate policy

Answer 9

Chapter 13: Dwelling and Homeowner Policies

The correct answer is: to 10% of A (with at least $2,000 coverage)

Question 10

Which is true regarding the HO-8?

Select one:

a. There is no liability coverage.
b. It allows the insured to operate a small business in the home and still have both liability and property coverage as well as work comp coverage for employees.
c. It is only designed for multi-family dwellings.
d. It was created because replacement cost is too costly for some homes.

Answer 10

Chapter 13: Dwelling and Homeowner Policies

The correct answer is: It was created because replacement cost is too costly for some homes.

Question 11

Which of the following is covered by a Commercial Package Policy (CPP)?

Select one:

a. Ships
b. Partners’ Accounting
c. Aircraft
d. Crime

Answer 11

The Commercial Package Policy may be used for such things as Commercial Property (BPP), Commercial General Liability, Commercial Crime, and Commercial Auto.

Chapter 6: Commercial Package Policies

The correct answer is: Crime

Question 12

Extra Expense coverage may be provided with:

Select one:

a. Liability insurance
b. Business Income

Answer 12

Be careful, “Business Income with Extra Expense” is often referred to as simply “Business Income.” So, there could be an Extra Expense policy attached to the Business Income policy. I know, I know, why isn’t the language of insurance clearer????

Chapter 8: Business Interruption Policies

The correct answer is: Business Income

Question 13

Which section of a Special (Extended Coverage) form BPP contains information regarding whether a peril is covered?

Select one:

a. declarations
b. insuring agreement
c. definitions
d. exclusions

Answer 13

Chapter 7: BPP

The correct answer is: exclusions

Question 14

A mobile home policy:

Select one:

a. will pay $500 of the cost of transporting the mobile home to a new permanent location.
b. May be used if the mobile home has at least 200 square feet.
c. Provides Replacement Cost coverage.
d. May be used if the mobile home has at least 300 square feet.

Answer 14

All of the HO policies provide Replacement Cost coverage on the structure if it is insured to at least 80% of replacement cost. The Mobile Home endorsement will only pay $500 to move the mobile home to protect it from a covered peril. The Mobile Home endorsement can only be used if the mobile home is at least 40’ by 10’ feet (400 square feet).

Note: The Replacement Cost answer is the “best” answer although we know that the personal property would be covered on an ACV basis.

Chapter 13: Dwelling and Homeowner Policies

The correct answer is: Provides Replacement Cost coverage.

Question 15

If a business insured by a Building and Personal Property policy (BPP) acquires a new business, the new business is insured for a grace period of:

Select one:

a. 30 days
b. 60 days
c. 90 days
d. 120 days

Answer 15

Chapter 7: BPP

The correct answer is: 30 days

Question 16

An appliance repair business is robbed of $10,000 in equipment and $500 cash. The $75,000 Special Businessowner’s policy will cover the loss for:

Select one:

a. $0
b. $500
c. $10,000
d. $10,500

Answer 16

The BOP and the BPP don’t cover money and securities. However, a Special property policy will cover theft of almost everything except money and securities. Thus, the policy will cover the theft of equipment but not the theft of money. So, what policy will cover theft of money? That is a Commercial Crime policy which is (strangely) covered under Casualty Insurance and can only be sold with a Casualty license in most states.

Chapter 14: Business Owner Policy

The correct answer is: $10,000

Question 17

The definition of vacancy under a Homeowner policy is:

Select one:

a. 10 days
b. 15 days
c. 20 days
d. 30 days

Answer 17

New Point: Vacancy comes up twice in the HO policy. If the home is vacant for 30 days, we lose coverage for vandalism damage to the glass. Then, after 60 days vacancy, we lose coverage for vandalism damage to the structure. So, the definition of vandalism under the HO policy is either 30 or 60 days, depending on what property was vandalized. I try to remember that the definition of vacancy for vandalism on the “little” glass is 30 days, but for the “big” structure, the definition of vandalism is 60 days. Because 60 days isn’t in the list, the “best” answer is 30 days.

Chapter 13: Dwelling and Homeowner Policies

The correct answer is: 30 days

Question 18

The deductible under an earthquake policy is:

Select one:

a. $250.
b. a percentage.

Answer 18

Chapter 11: Earthquake Insurance

The correct answer is: a percentage.

Question 19

A carpenter working on a house has a hammer slip from his hands, but no damage occurs. This is not an accident because:

Select one:

a. it happened very suddenly.
b. no damage occurred.
c. it was unexpected.
d. it was not intentional.

Answer 19

Chapter 9: Boiler and Machinery Insurance

The correct answer is: no damage occurred.

Question 20

Which coverage applies under an Ocean Marine policy when cargo is jettisoned to save the ship?

Select one:

a. sue and labor expense
b. total loss
c. particular average
d. general average

Answer 20

When we jettison cargo to save the ship, all of the other insurers have to chip in to cover the jettisoned cargo. This is referred to as coverage on a “general average” basis. If our cargo is jettisoned but not to save the cargo of others, it is covered on a “particular average” basis - the other Insurers won’t chip in.

Chapter 12: Ocean and Inland Marine Insurance

The correct answer is: general average

Question 21

A Personal Articles Floater:

Select one:

a. provides named peril coverage.
b. is an unscheduled blanket policy.
c. covers inherent vice.
d. provides all-risk coverage.

Answer 21

Floaters are all-risk (except for a few exclusions like inherent vice) and they require the covered items to be scheduled in the policy.

Chapter 12: Ocean and Inland Marine Insurance

The correct answer is: provides all-risk coverage.

Question 22

Under the pair or set rule:

Select one:

a. In no event will the loss of one item in the pair or set be considered to be the loss of all items in the pair or set.
b. Both items in the pair or set must be insured for full replacement or actual cash value.

Answer 22

Chapter 13: Dwelling and Homeowner Policies

The correct answer is: In no event will the loss of one item in the pair or set be considered to be the loss of all items in the pair or set.

Question 23

Three trees valued at $1,900, $600, and $200 were destroyed by fire. The businessowner policy will cover this loss to a total of:

Select one:

a. $0
b. $1,500
c. $1,800
d. $2,500

Answer 23

The maximum coverage per tree under the BOP has recently been changed from $500 to $1,000, but the $2,500 total limit is unchanged. So, the policy will pay:

$1,000 (for the $1,900 tree), + $600 + $200 = a total payment of $1,800

Chapter 14: Business Owner Policy

The correct answer is: $1,800

Question 24

If all of a business’s trees are destroyed in a fire, the maximum the BOP will pay is a total of:

Select one:

a. $250
b. $500
c. $2,500
d. $5,000

Answer 24

Chapter 14: Business Owner Policy

The correct answer is: $2,500

Question 25

The HO’s Medical Payments pays:

Select one:

a. in addition to the limits of liability.
b. only up to the limit of liability.
c. only after the limit of liability is reached.
d. after the deductible is satisfied.

Answer 25

Med Pay has its own limit of liability but doesn’t have a deductible because this is a Section II Liability coverage. It doesn’t cover the Insured, it covers the victims.

Chapter 13: Dwelling and Homeowner Policies

The correct answer is: only up to the limit of liability.

Question 26

The HO’s Personal Liability section covers:

Select one:

a. Medical expenses of the Insured’s children.
b. Damage to the property of other persons.
c. Damage to the insured’s home.
d. A tenant’s suit for wrongful eviction.

Answer 26

The HO policy will not cover wrongful eviction because it excludes “personal injury.”
Medical expenses of the Insured’s children are covered under Health Insurance - Med Pay only covered medical expenses of persons other than Insureds who are injured on premises or by an Insured.

Damage to the Insured’s home is covered by Section I of the HO policy (the property coverage section).

So, the HO Personal Liability section (Section II) will cover damage to the property of other persons.

Chapter 13: Dwelling and Homeowner Policies

The correct answer is: Damage to the property of other persons.

Question 27

A homeowner policy requires notice of a loss to be given to each of the following EXCEPT:

Select one:

a. the credit card company if a credit card is stolen.
b. the police if a crime is involved.
c. the insurer.
d. other insureds.

Answer 27

Chapter 13: Dwelling and Homeowner Policies

The correct answer is: other insureds.

Question 28

Each of the following could be included in a CPP EXCEPT:

Select one:

a. Equipment Breakdown
b. Commercial Auto
c. Ocean Marine
d. Inland Marine

Answer 28

Chapter 6: Commercial Package Policies

The correct answer is: Ocean Marine

Question 29

Which can get a Businessowner policy?

Select one:

a. theatre
b. a bungee jump at an amusement park
c. a factory
d. a small restaurant

Answer 29

The BOP is designed for the small, safe business and any size apartment building. Places of amusement are not covered.

Chapter 14: Business Owner Policy

The correct answer is: a small restaurant

Question 30

Inland Marine will NOT cover:

Select one:

a. exports
b. leased buildings
c. cattle shipped to market
d. imports

Answer 30

Chapter 12: Ocean and Inland Marine Insurance

The correct answer is: leased buildings

Question 31

Extra Expense covers:

Select one:

a. all expenses necessary to continue the business after a loss.
b. only the additional expenses necessary to continue the business after a loss.

Answer 31

Chapter 8: Business Interruption Policies

The correct answer is: only the additional expenses necessary to continue the business after a loss.

Question 32

In comparing an HO-2 and HO-3, the HO-3 has:

Select one:

a. better Property Damage limits.
b. better Bodily Injury limits.
c. higher Med Pay coverage limits.
d. None of the above.

Answer 32

Chapter 13: Dwelling and Homeowner Policies

The correct answer is: None of the above.

Question 33

Under the Building and Personal Property policy, the mortgagee is entitled to:

Select one:

a. 45 days notice of cancellation for nonpayment of premium
b. Payment as per the mortgagee’s interest at the time of loss

Answer 33

Chapter 7: BPP

The correct answer is: Payment as per the mortgagee’s interest at the time of loss

Question 34

For the dwelling, Mobile Home policies cover loss settlement:

Select one:

a. on a stated or agreed value basis.
b. on a Replacement Cost basis.
c. without a deductible.
d. on an ACV basis.

Answer 34

On our exam, assume that the mobile home policy uses Replacement Cost for the mobile home (reference video 13.2). Obviously, in the real world, an Insurer would only do this on a relatively new mobile home in good repair. You are right, not a fair question.

Chapter 13: Dwelling and Homeowner Policies

The correct answer is: on a Replacement Cost basis.

Question 35

The earthquake deductible is applied:

Select one:

a. once each 7 days (168 hours)
b. with each aftershock

Answer 35

This prevents a quick series of quakes from wiping out all of the policy’s coverage.

Chapter 11: Earthquake Insurance

The correct answer is: once each 7 days (168 hours)

Question 36

The most a HO policy will pay for a liability slip and fall claim under Section II of the policy is:

Select one:

a. $15,000.
b. $25,000.
c. $40,000.
d. the policy’s limit of liability.

Answer 36

Chapter 13: Dwelling and Homeowner Policies

The correct answer is: the policy’s limit of liability.

Question 37

The additional coverages under the Building and Personal Property policy include each of the following EXCEPT:

Select one:

a. Debris Removal
b. Removal/Preservation of Property
c. Fire Department Service Charges
d. Theft of Money

Answer 37

This question is a great example of why you need to memorize the 3 additional coverages - Debris Removal, Removal/Preservation of Property, and Fire Department Service Charge. Two key points to remember: (1) There is no deductible under the Fire Department Service Charge; and (2) Each of these adds to the policy’s limit of liability EXCEPT Removal/Preservation of Property.

Chapter 7: BPP

The correct answer is: Theft of Money

Question 38

Joe has a building covered by a Building and Personal Property policy. What must he do to cover a new lawnmower used to service the premises?

Select one:

a. nothing
b. list the items on an endorsement

Answer 38

Chapter 7: BPP

The correct answer is: nothing

Question 39

Loading docks and cattle shipped to market are insured by what area of insurance?

Select one:

a. ocean marine
b. inland marine

Answer 39

Chapter 12: Ocean and Inland Marine Insurance

The correct answer is: inland marine

Question 40

A building valued at $100,000 has a policy with an 80% coinsurance clause. The minimum coverage needed to fully cover a $15,000 fire loss is:

Select one:

a. $15,000
b. $50,000
c. $80,000
d. $100,000

Answer 40

Chapter 7: BPP

The correct answer is: $80,000

Question 41

A business is insured by a $400,000 BOP. If three trees valued at $600, $700, and $400 are destroyed by fire, the policy will pay how much?

Select one:

a. $500
b. $1,000
c. $1,400
d. $1,700

Answer 41

The limit per tree under the BOP is $1,000, with a maximum payment of $2,500 for all trees. So, these trees are fully covered for a total of $1,700.

Chapter 14: Business Owner Policy

The correct answer is: $1,700

Question 42

The Business Income form covers each of these EXCEPT:

Select one:

a. necessary continuing operating expenses
b. payroll
c. lost profits
d. property replacement

Answer 42

The replacement of the property will be covered by the BPP.

Chapter 8: Business Interruption Policies

The correct answer is: property replacement

Question 43

Most Personal Articles Floaters are written on:

Select one:

a. an open perils (all-risk) basis.
b. a stated value basis.

Answer 43

Chapter 12: Ocean and Inland Marine Insurance

The correct answer is: an open perils (all-risk) basis.

Question 44

Under a CPP, the duration of the policy’s coverage is found in the:

Select one:

a. exclusions
b. conditions
c. declarations
d. insuring agreements

Answer 44

Chapter 6: Commercial Package Policies

The correct answer is: declarations

Question 45

The HO’s Personal Property coverage applies to:

Select one:

a. the insured’s clothing.
b. the insured’s dog.
c. the insured’s automobile.
d. property owned by an unrelated tenant.

Answer 45

Chapter 13: Dwelling and Homeowner Policies

The correct answer is: the insured’s clothing.

Question 46

A DP-1 (Dwelling Policy -1) covers each of the following EXCEPT:

Select one:

a. fire and smoke
b. earth movement
c. hail
d. explosion

Answer 46

Chapter 13: Dwelling and Homeowner Policies

The correct answer is: earth movement

Question 47

Which would NOT purchase a bailee’s floater?

Select one:

a. computer repair business
b. dry cleaner
c. a furrier
d. a credit union

Answer 47

A bailee is one who has temporary possession of personal property belonging to another. Most policies refuse to cover bailees who have “property of others in their care, custody, and control.” The solution is to buy a Customer Bailee policy. The furrier, dry cleaner, and computer repair shop are good examples of a bailee. However, a credit union is not an example of a bailee. Credit unions and other types of banks do not have property of others in their care, custody, and control. Even property in a safety deposit box requires two keys to open the box - so the credit union is not a bailee.

Chapter 12: Ocean and Inland Marine Insurance

The correct answer is: a credit union

Question 48

A Business Income policy has a $10,000 limit of liability with a 25% monthly limit of liability. The Business is destroyed by a covered peril. The actual loss of income was $2,000 for the first month and $3,000 for the second month. The Business Income policy will pay a total of how much for the two months?

Select one:

a. $2,000
b. $2,500
c. $4,500
d. $5,000

Answer 48

The policy will pay $2,000 for the first month, and a maximum of 25% of the $10,000 for the second month. ($2,000 + $2,500 = $4,500)

Chapter 8: Business Interruption Policies

The correct answer is: $4,500

Question 49

Which federal agency runs the flood insurance program?

Select one:

a. EPA
b. FTC
c. IRS
d. FEMA

Answer 49

The number of days to wait for flood coverage is now 30. The number has recently changed. However, there is no waiting period when applying for flood coverage for a newly purchased property.

Chapter 10: Flood Insurance

The correct answer is: FEMA

Question 50

The Building and Personal Property policy covers outdoor furniture located within a maximum of:

Select one:

a. 50 feet
b. 100 feet
c. 200 feet
d. 250 feet

Answer 50

Chapter 7: BPP

The correct answer is: 100 feet

Question 51

Earth movement insurance is available:

Select one:

a. only as an endorsement
b. only as a stand-alone policy

Answer 51

Earthquake insurance is designed as a rider - we have to add it to another property policy. It is not a “stand alone” policy.

Chapter 11: Earthquake Insurance

The correct answer is: only as an endorsement

Question 52

Flood insurance covers:

Select one:

a. mudslides
b. leaky roofs
c. foundation seepage
d. broken water pipes

Answer 52

Chapter 10: Flood Insurance

The correct answer is: mudslides

Question 53

Inland Marine covers each of the following EXCEPT:

Select one:

a. domestic shipments
b. exports
c. imports
d. real estate and buildings

Answer 53

Chapter 12: Ocean and Inland Marine Insurance

The correct answer is: real estate and buildings

Question 54

If the insured is injured in her home, she will be compensated under:

Select one:

a. Medical Payments under the HO
b. Her health insurance policy, but not under the HO at all
c. Section I of the HO
d. Section II of the HO

Answer 54

Chapter 13: Dwelling and Homeowner Policies

The correct answer is: Her health insurance policy, but not under the HO at all

Question 55

If the insured’s dog bites a jogger, the HO will pay a maximum of defense costs plus:
Select one:

a. $1,000
b. $100,000
c. $101,000
d. $250,000

Answer 55

The HO policy will include the Med Pay in the limit of liability when paying the victim. So, the injured person may collect only $100,000, not $101,000. However, it will pay the Insured’s defense costs (supplementary) without limit.

Chapter 13: Dwelling and Homeowner Policies

The correct answer is: $100,000

Question 56

A store’s business owner’s policy covers the store’s portable shelving. The shelving, which was destroyed by fire, had the following valuations: replacement cost - $7,000; actual cash value - $3,000; original purchase price - $5,000; fair market value - $280. The policy will pay how much on this claim?

Select one:

a. $280
b. $3,000
c. $5,000
d. $7,000

Answer 56

Assume that a BOP will provide Replacement Cost coverage.

Chapter 14: Business Owner Policy

The correct answer is: $7,000

Question 57

Pollution over a long period of time is:

Select one:

a. an accident
b. an occurrence

Answer 57

Chapter 9: Boiler and Machinery Insurance

The correct answer is: an occurrence

Question 58

The Building and Personal Property policy deductible does not apply to:

Select one:

a. Removal/Preservation of Property
b. Trees
c. Fire Department Service Charge
d. Newly Acquired or Constructed Property

Answer 58

Chapter 7: BPP

The correct answer is: Fire Department Service Charge

Question 59

If the insured’s dog bites a jogger, the HO’s Bodily Injury Liability will pay for:

Select one:

a. retraining the dog.
b. a new kennel.
c. fencing for the dog.
d. defense costs if the jogger sues.

Answer 59

Chapter 13: Dwelling and Homeowner Policies

The correct answer is: defense costs if the jogger sues.

Question 60

The HO-5 policy provides:

Select one:

a. both Coverage E (Personal Liability) and Coverage F (Medical Payments)
b. neither Coverage E (Personal Liability) nor Coverage F (Medical Payments)
c. Coverage E (Personal Liability) only
d. Coverage F (Medical Payments) only

Answer 60

Chapter 13: Dwelling and Homeowner Policies

The correct answer is: both Coverage E (Personal Liability) and Coverage F (Medical Payments)

Question 61

A person who owns jewelry worth over $50,000 should get a:

Select one:

a. Personal Effects Floater
b. Personal Articles Floater

Answer 61

Chapter 12: Ocean and Inland Marine Insurance

The correct answer is: Personal Articles Floater

Question 62

Which BOP is not available?

Select one:

a. Special (open perils) coverage
b. Basic and Special coverages
c. Basic (standard) coverage
d. Broad form coverage

Answer 62

Chapter 14: Business Owner Policy

The correct answer is: Broad form coverage

Question 63

A Business Income Coverage Form has a $100,000 limit of liability with a 25% monthly limit of indemnity. If the insured loses $47,000 in a particular month, the most the policy will pay for that month’s losses is:

Select one:

a. $0
b. $25,000
c. $47,000
d. $100,000

Answer 63

Chapter 8: Business Interruption Policies

The correct answer is: $25,000

Question 64

The Extended Business Income is intended to provide 30 days coverage that begins:

Select one:

a. on the date the policy is purchased.
b. on the date the loss occurs.
c. after the policy terminates.
d. after the reopening of the business following the loss restoration.

Answer 64

Chapter 8: Business Interruption Policies

The correct answer is: after the reopening of the business following the loss restoration.

Question 65

Commercial floaters cover:

Select one:

a. birthday gifts
b. salespersons’ samples

Answer 65

Chapter 12: Ocean and Inland Marine Insurance

The correct answer is: salespersons’ samples

Question 66

Each of these is true regarding flood insurance EXCEPT:

Select one:

a. One to four family dwellings are covered.
b. Flood policies contain a coinsurance requirement.
c. There are both regular and emergency programs.
d. Flood insurance is sponsored by the federal government because private insurance companies did not meet the need.

Answer 66

There is no coinsurance clause in a flood policy. The result is that, if I choose, I can fully insure only the lower stories of my building. Although one to four family dwellings are covered, actually it can be used to cover all residential structures.

Chapter 10: Flood Insurance

The correct answer is: Flood policies contain a coinsurance requirement.

Question 67

A refinery’s pipe suddenly bursts and pollutes the atmosphere. This is an:

Select one:

a. occurrence
b. accident

Answer 67

Because this is sudden, it is classified as an accident rather than an occurrence which is slow, gradual, and repeated. But, even though it is an accident, it will not be covered because the typical property and liability policies will exclude pollution claims.

Chapter 9: Boiler and Machinery Insurance

The correct answer is: accident

Question 68

Inland Marine policies are called?

Select one:

a. floaters
b. reservations
c. certificates
d. mariners

Answer 68

Chapter 12: Ocean and Inland Marine Insurance

The correct answer is: floaters

Question 69

A car is destroyed by a hurricane. This is:

Select one:

a. an occurrence
b. an accident

Answer 69

Chapter 9: Boiler and Machinery Insurance

The correct answer is: an accident

Question 70

Under Section II of the HO policy, Med Pay will cover a claim:

Select one:

a. for pain and suffering.
b. only if the insured is negligent and liable.
c. regardless of liability.
d. for medical expenses of the insured.

Answer 70

Chapter 13: Dwelling and Homeowner Policies

The correct answer is: regardless of liability.

Question 71

A single unexpected event is:

Select one:

a. an occurrence.
b. an accident.

Answer 71

Chapter 9: Boiler and Machinery Insurance

The correct answer is: an accident.

Question 72

Which floater covers a heating/air conditioning dealer putting a new furnace system in an office building?

Select one:

a. Installation Floater
b. Contractor’s Equipment Floater
c. Installment Sales Floater
d. Physicians and Surgeons Floater

Answer 72

Chapter 12: Ocean and Inland Marine Insurance

The correct answer is: Installation Floater

Question 73

A Fine Art Floater:

Select one:

a. covers private art works.
b. covers public art collections.

Answer 73

Chapter 12: Ocean and Inland Marine Insurance

The correct answer is: covers private art works.

Question 74

The Building and Personal Property policy covers each of the following EXCEPT:

Select one:

a. a tenant’s furnishings
b. building materials used to make repairs
c. fire extinguishers
d. appliances furnished by the land lord in a tenant’s unit

Answer 74

Chapter 7: BPP

The correct answer is: a tenant’s furnishings

Question 75

While playing with fireworks, Smith’s 16-year-old child negligently destroyed the neighbor’s $250,000 home. Smith’s homeowner’s policy will cover the liability up to:

Select one:

a. $0
b. $1,000
c. $100,000
d. $250,000

Answer 75

The HO covers negligence of the Insured’s children up to the standard $100,000 limit of liability. If this had been an intentional act, however, it would have not been covered at all because the child was 13 or older.

Chapter 13: Dwelling and Homeowner Policies

The correct answer is: $100,000

Question 76

The Business Income coinsurance requirement to maintain the Coverage Extensions is:

Select one:

a. 20%
b. 50%
c. 80%
d. 90%

Answer 76

Chapter 8: Business Interruption Policies

The correct answer is: 50%

Question 77

The Building and Personal Property policy (BPP) covers:

Select one:

a. retaining walls not attached to the building
b. fences not attached to the building
c. automobiles
d. a rowboat stored in the building

Answer 77

Chapter 7: BPP

The correct answer is: a rowboat stored in the building

Question 78

Which of the following is eligible for flood insurance?

Select one:

a. a retail store only
b. a retail store and its inventory

Answer 78

Watch out for “only” at the end of a question. Flood insurance covers both buildings and contents.

Chapter 10: Flood Insurance

The correct answer is: a retail store and its inventory

Question 79

After a Building and Personal Property policy proof of loss is filed, the claim must be paid within:

Select one:

a. 10 days
b. 30 days
c. 60 days
d. 90 days

Answer 79

Chapter 7: BPP

The correct answer is: 30 days

Question 80

Which is least likely to be eligible for a BOP?

Select one:

a. small office buildings
b. large restaurants
c. jewelry stores
d. shoe stores

Answer 80

The BOP is designed for small, relatively safe businesses. It will cover an office building up to 6 stories, any sized apartment building, and retailers. But, it won’t cover large restaurants although it will cover small restaurants. What exactly is a small versus a large restaurant. Those definitions are so complex that you don’t want to know (at least not until after you pass the exam).

Chapter 14: Business Owner Policy

The correct answer is: large restaurants

Question 81

Which of the following will result in an “automatic” assignment of a CPP?

Select one:

a. bankruptcy of the Insurer
b. bankruptcy of the business
c. sale of the business
d. death of the Insured

Answer 81

Upon death of the Insured, the policy is automatically assigned to the personal representative of the Insured’s estate (without needing written consent from the Insurer).

Chapter 6: Commercial Package Policies

The correct answer is: death of the Insured

Question 82

Inland Marine policy losses are usually calculated with which method of valuation:

Select one:

a. replacement cost
b. actual cash value

Answer 82

Chapter 12: Ocean and Inland Marine Insurance

The correct answer is: actual cash value

Question 83

The HO’s Supplementary (Additional) Payments pays:

Select one:

a. after the deductible is satisfied.
b. only up to the limit of liability.
c. in addition to the limits of liability.
d. only after the limit of liability is reached.

Answer 83

Chapter 13: Dwelling and Homeowner Policies

The correct answer is: in addition to the limits of liability.

Question 84

The purpose of the National Flood Insurance Program is to:

Select one:

a. require all Americans to have flood insurance.
b. provide flood insurance at subsidized rates.

Answer 84

Chapter 10: Flood Insurance

The correct answer is: provide flood insurance at subsidized rates.

Question 85

An Earth Movement policy covering a shopping mall would most likely cover a claim involving:

Select one:

a. volcanic eruption
b. flood
c. nuclear
d. war

Answer 85

Chapter 11: Earthquake Insurance

The correct answer is: volcanic eruption

Question 86

Section I of the HO covers each of these EXCEPT?

Select one:

a. Additional Living Expenses
b. Unscheduled personal property
c. Bodily Injury Liability
d. Appurtenant structures

Answer 86

Chapter 13: Dwelling and Homeowner Policies

The correct answer is: Bodily Injury Liability

Question 87

When there is no transfer of title, flood insurance is effective how many days after application?

Select one:

a. 1
b. 5
c. 10
d. 30

Answer 87

Chapter 10: Flood Insurance

The correct answer is: 30

Question 88

The Building and Personal Property policy may be used to cover each of the following EXCEPT?

Select one:

a. building additions
b. property of others
c. tenant’s improvements and betterments
d. property damage liability

Answer 88

Chapter 7: BPP

The correct answer is: property damage liability

Question 89

Ocean Marine covers:

Select one:

a. loading bridges
b. buildings

Answer 89

Chapter 12: Ocean and Inland Marine Insurance

The correct answer is: loading bridges

Question 90

Building materials used for repairs are not covered for:

Select one:

a. wind and hail damage
b. vandalism
c. theft
d. fire damage

Answer 90

Whether we are talking about a HO policy or a BPP, building materials are not covered for theft.

Chapter 7: BPP

The correct answer is: theft

Question 91

A mobile home policy:

Select one:

a. may provide Replacement Cost coverage for the structure if it is insured to 80% of replacement cost.
b. does not provide Section II liability coverage.

Answer 91

Chapter 13: Dwelling and Homeowner Policies

The correct answer is: may provide Replacement Cost coverage for the structure if it is insured to 80% of replacement cost.

Question 92

For a business, Extra Expense would cover:

Select one:

a. rebuilding the structure
b. rental of substitute space
c. lost business income
d. payment of normal payroll

Answer 92

Chapter 8: Business Interruption Policies

The correct answer is: rental of substitute space

Question 93

Under a Homeowner policy, abandonment is:

Select one:

a. not permitted
b. permitted

Answer 93

Chapter 13: Dwelling and Homeowner Policies

The correct answer is: not permitted

Question 94

The National Flood Insurance Program is operated by the:

Select one:

a. federal government
b. state government

Answer 94

Chapter 10: Flood Insurance

The correct answer is: federal government

Question 95

The optional coverage under a BOP is:

Select one:

a. Burglary and Robbery
b. Liability coverage
c. Building coverage
d. Personal Property coverage

Answer 95

A Standard (basic) Form BOP has no theft coverages, so that person has the option of buying separate Burglary and Robbery coverage.

Chapter 14: Business Owner Policy

The correct answer is: Burglary and Robbery

Question 96

Marine Transportation Insurance covers:

Select one:

a. domestic shipments of goods
b. commercial buildings

Answer 96

Chapter 12: Ocean and Inland Marine Insurance

The correct answer is: domestic shipments of goods

Question 97

If a fire causes $100,000 damage and the debris removal expense is $14,000, a Building and Personal Property policy will pay how much (assuming it has adequate limits of coverage)?

Select one:

a. $14,000
b. $100,000
c. $114,000
d. $135,000

Answer 97

The policy will pay the loss of $100,000 plus up to an additional 25% for debris removal (plus $10,000). So, the policy could have paid a maximum of $135,000, but, because the loss was $114,000, it will pay only the $114,000. You might wonder what happened to the deductible. For the sake of simplicity, forget about deductibles unless they are specifically mentioned in the question.

Chapter 7: BPP

The correct answer is: $114,000

Question 98

Which is a coverage extension?

Select one:

a. vans
b. lawns and crops
c. newly acquired property
d. fire extinguishers

Answer 98

Chapter 7: BPP

The correct answer is: newly acquired property

Question 99

Ocean marine floaters cover each of these EXCEPT:

Select one:

a. insects and vermin
b. barratry
c. theft
d. jettison

Answer 99

Chapter 12: Ocean and Inland Marine Insurance

The correct answer is: insects and vermin

Question 100

An accident is:

Select one:

a. repeated and continuous
b. sudden and unintended

Answer 100

Chapter 9: Boiler and Machinery Insurance

The correct answer is: sudden and unintended