Section Review Questions - PC

Question 1

Cancellation involves:

Select one:

a. termination by either the insurer or insured during the policy term.
b. the insurer’s refusal to continue the coverage at the end of the policy term.

Answer 1

Chapter 2: Property and Casualty Key Terms

The correct answer is: termination by either the insurer or insured during the policy term.

Question 2

Each of the following provides coverage over and above the policy limit EXCEPT:

Select one:

a. Debris removal
b. Preservation of Property
c. Fire Department Service Charge

Answer 2

Key words “over and above.”

Chapter 4: Typical Property Policy

The correct answer is: Preservation of Property

Question 3

A mortgagee who is not notified that the policy has been canceled may recover:

Select one:

a. the balance owing on the mortgage
b. the policy limit

Answer 3

Chapter 4: Typical Property Policy

The correct answer is: the balance owing on the mortgage

Question 4

A mortgage clause:

Select one:

a. Obligates the Insurer to pay the mortgage payments if the Insured is disabled.
b. Grants the mortgagee specific rights not granted to the Insured.

Answer 4

The mortgagee can get paid by the Insurer even if the Insured intentionally torches the property.

Chapter 4: Typical Property Policy

The correct answer is: Grants the mortgagee specific rights not granted to the Insured.

Question 5

Each of the following can have an insurable interest EXCEPT:

Select one:

a. an ex-owner who didn’t cancel the policy
b. a mortgagee
c. an ex-owner carrying the mortgage
d. a tenant

Answer 5

The ex-owner who neglected to cancel the policy has no financial interest in the property and thus no longer has an insurable interest.

Chapter 2: Property and Casualty Key Terms

The correct answer is: an ex-owner who didn’t cancel the policy

Question 6

Which section of a property policy requires the Insured to submit a sworn proof of loss form?

Select one:

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

Answer 6

Chapter 3: Policies are Contracts

The correct answer is: conditions

Question 7

The rules of conduct between the Insurer and Insured are set forth in which section of the policy?

Select one:

a. Declarations
b. Exclusions
c. Conditions
d. Insuring Agreement

Answer 7

Chapter 3: Policies are Contracts

The correct answer is: Conditions

Question 8

A Special Form policy covers:

Select one:

a. decay that causes a wall to collapse.
b. termite damage.
c. fungus.
d. rats eat wiring insulation.

Answer 8

Special (as well as Broad Form) will cover collapse. However, insects and vermin are excluded perils.

Chapter 4: Typical Property Policy

The correct answer is: decay that causes a wall to collapse.

Question 9

If your building is destroyed by fire, you must notify the Insurer:

Select one:

a. within 60 days
b. promptly

Answer 9

Chapter 4: Typical Property Policy

The correct answer is: promptly

Question 10

Payment based on the fact that the Insured owns the property involved is:

Select one:

a. Indemnity
b. Replacement cost
c. Insurable interest
d. Actual cash value

Answer 10

Property ownership is evidence of an insurable interest. One must have an insurable interest to collect under a policy.

Chapter 4: Typical Property Policy

The correct answer is: Insurable interest

Question 11

Which of the following is considered to be part of the policy?

Select one:

a. proof of loss form
b. premium
c. insured
d. application

Answer 11

Chapter 3: Policies are Contracts

The correct answer is: application

Question 12

To prevent recovery beyond the amount of the insured’s actual loss, the policy will contain:

Select one:

a. an Other Insurance Clause
b. a Coinsurance Clause

Answer 12

Chapter 2: Property and Casualty Key Terms

The correct answer is: an Other Insurance Clause

Question 13

An Insurer’s required assignment of rights of recovery after paying a claim is:

Select one:

a. coinsurance
b. salvage
c. risk
d. subrogation

Answer 13

Chapter 4: Typical Property Policy

The correct answer is: subrogation

Question 14

A mortgagee must be given how much notice of cancellation?

Select one:

a. 10 days
b. 20 days
c. 40 days
d. 80 days

Answer 14

Chapter 4: Typical Property Policy

The correct answer is: 10 days

Question 15

Which section of a Special form policy determines whether a peril is covered?

Select one:

a. Insuring agreements
b. Declarations
c. Conditions
d. Exclusions

Answer 15

Under a Special Form, the only way we can determine whether a peril is covered is to read the exclusions. If the peril isn’t in the list of exclusions, it will be covered.

Chapter 4: Typical Property Policy

The correct answer is: Exclusions

Question 16

Which section of the policy requires the Insurer to provide coverage?

Select one:

a. Exclusions
b. Insuring Agreements
c. Conditions
d. Declarations

Answer 16

This is the Insurer’s promise to pay the claim, which is part of the Insuring Agreements.

Chapter 3: Policies are Contracts

The correct answer is: Insuring Agreements

Question 17

To collect on a loss, the Insured must comply with the procedures set forth in the?

Select one:

a. Declaration
b. Exclusions
c. Insuring Agreements
d. Conditions

Answer 17

Chapter 3: Policies are Contracts

The correct answer is: Conditions

Question 18

Uncertainty of future outcomes is:

Select one:

a. risk
b. insurance

Answer 18

Chapter 1: Introduction to Insurance

The correct answer is: risk

Question 19

The insurer’s exposure under a policy is restricted by:

Select one:

a. reserve requirements.
b. the Limit of Liability.

Answer 19

Chapter 2: Property and Casualty Key Terms

The correct answer is: the Limit of Liability.

Question 20

Under the Other Insurance Clause, if the Insured is covered by two policies, what will happen if a loss occurs?

Select one:

a. Each policy will pay a part of the loss.
b. Each policy must pay in full.

Answer 20

Chapter 2: Property and Casualty Key Terms

The correct answer is: Each policy will pay a part of the loss.

Question 21

Which of these involves negligence?

Select one:

a. A driver runs a stop light.
b. A driver goes too fast and hits another vehicle.

Answer 21

Without injury or damage, there is no negligence.

Chapter 5: Liability Insurance Basics

The correct answer is: A driver goes too fast and hits another vehicle.

Question 22

Uncertainty of future outcomes is:

Select one:

a. risk
b. insurance

Answer 22

Chapter 1: Introduction to Insurance

The correct answer is: risk

Question 23

The liability policy may cover each of the following except:

Select one:

a. Intentional Acts
b. Bodily injury coverage (BI)
c. Supplementary Coverage
d. Personal Injury Liability (PI)

Answer 23

Chapter 5: Liability Insurance Basics

The correct answer is: Intentional Acts

Question 24

Which is an indirect loss?

Select one:

a. a water pipe breaks on the top floor and floods a basement
b. a business loses money due to a fire

Answer 24

Chapter 4: Typical Property Policy

The correct answer is: a business loses money due to a fire

Question 25

Which of the following is issued by the agent to notify the parties of the date coverage becomes effective?

Select one:

a. presumption of proposition
b. binder
c. condition
d. quotation

Answer 25

The binder is issued by the agent, not by the company. The binder will also state the date the coverage becomes effective and thus give notice to both the Insured and the Insurer that coverage is in effect.

Chapter 3: Policies are Contracts

The correct answer is: binder

Question 26

The limit payable for all losses in a policy year is the:

Select one:

a. aggregate limit.
b. occurrence limit.

Answer 26

Chapter 5: Liability Insurance Basics

The correct answer is: aggregate limit.

Question 27

The primary concept behind insurance is:

Select one:

a. risk elimination
b. transfer of risk

Answer 27

Chapter 1: Introduction to Insurance

The correct answer is: transfer of risk

Question 28

Prior to issuing the policy, the agent may provide evidence of temporary insurance. This is a:

Select one:

a. endorsement
b. binder

Answer 28

Chapter 3: Policies are Contracts

The correct answer is: binder

Question 29

If the Insured tries to turn partially or totally destroyed property over to the Insurer while demanding full payment is, this could be construed as the Insured’s illegal attempt at:

Select one:

a. abandonment
b. salvage

Answer 29

Chapter 4: Typical Property Policy

The correct answer is: abandonment

Question 30

Using a disinterested third party to resolve a claim dispute is:

Select one:

a. arbitration
b. assignment

Answer 30

Chapter 4: Typical Property Policy

The correct answer is: arbitration

Question 31

The limit of liability is the maximum amount that:

Select one:

a. can be charged for a deductible.
b. the insurer will pay for all losses in a particular state in a given year.
c. the insured can collect for any one loss.
d. can be charged for a policy premium.

Answer 31

Chapter 2: Property and Casualty Key Terms

The correct answer is: the insured can collect for any one loss.

Question 32

Depreciated value is:

Select one:

a. Replacement cost
b. Actual cash value

Answer 32

Chapter 4: Typical Property Policy

The correct answer is: Actual cash value

Question 33

The applicant believes the statement to be true with a/an?

Select one:

a. representation
b. misrepresentation
c. concealment
d. warranty

Answer 33

Chapter 3: Policies are Contracts

The correct answer is: representation

Question 34

Assume that a property is insured by two policies. Each policy has an equal amount of coverage. If the property is damaged by a covered peril:

Select one:

a. only the first policy issued will pay on the claim.
b. both insurers will share equally in the loss.

Answer 34

Insurance policies contain an “Other Insurance Clause” specifying what will happen if there are two or more policies covering the same claim. It is easy to remember that with a property policy, the insurers share the loss proportionally, that is, pro rata.

Chapter 2: Property and Casualty Key Terms

The correct answer is: both insurers will share equally in the loss.

Question 35

“Bodily injury” includes each of the following except:

Select one:

a. personal injury
b. pain and suffering
c. disease
d. death

Answer 35

Chapter 5: Liability Insurance Basics

The correct answer is: personal injury

Question 36

Negligence is determined by:

Select one:

a. how the accused has acted in the past.
b. how a reasonable person would have acted under the circumstances.

Answer 36

Chapter 5: Liability Insurance Basics

The correct answer is: how a reasonable person would have acted under the circumstances.

Question 37

Q sold a building but did not cancel the policy. The building was later destroyed by a covered peril. Q will not collect under the policy due to:

Select one:

a. lack of insurable interest.
b. the coinsurance clause.

Answer 37

Chapter 2: Property and Casualty Key Terms

The correct answer is: lack of insurable interest.

Question 38

The deductible:

Select one:

a. decreases the insurer’s losses.
b. increases the Insurer’s administrative expenses.

Answer 38

Chapter 2: Property and Casualty Key Terms

The correct answer is: decreases the insurer’s losses.

Question 39

To avoid the concentration of insurance risks, an insurer should:

Select one:

a. raise premiums.
b. reduce the number of policies sold.
c. cover only one Insured.
d. spread the risk.

Answer 39

Spreading the risk refers to insuring a variety of risks in a variety of areas. Insurance companies attempt to avoid a concentration of risks, such as insuring persons only in hurricane regions.

Chapter 1: Introduction to Insurance

The correct answer is: spread the risk.

Question 40

Which best demonstrates indemnification?

Select one:

a. An Insured demands a new car when the old car is destroyed
b. After a fire, a homeowner is paid retail prices for personal property as well as the cost of rebuilding the structure
c. After a loss, an Insured collects from both her insurance and another person’s insurance
d. After a car wreck, an injured person is paid for medical expenses and vehicle damages

Answer 40

Indemnification refers to being made whole but not coming out ahead. Being paid for medical expenses and the damages after a car wreck is the best example of indemnification.

Chapter 1: Introduction to Insurance

The correct answer is: After a car wreck, an injured person is paid for medical expenses and vehicle damages

Question 41

A binder becomes effective when:

Select one:

a. the insured delivers the premium payment.
b. made by the agent.

Answer 41

Chapter 3: Policies are Contracts

The correct answer is: made by the agent.

Question 42

The Other Insurance Clause:

Select one:

a. allows more than one person to be insured under the policy.
b. prohibits other insurance on the same property.
c. allows coverage for catastrophic losses.
d. upholds the principle of indemnity.

Answer 42

The “Other Insurance Clause” prohibits stacking by the Insured who might try to collect in full under multiple policies. This prevents the Insured from coming out ahead. So, we can then say that the “Other Insurance Clause” upholds the principle of indemnity by preventing the double recovery.

Chapter 2: Property and Casualty Key Terms

The correct answer is: upholds the principle of indemnity.

Question 43

The amount an insured may recover under an airplane policy is restricted by the:

Select one:

a. subrogation provision
b. limit of liability

Answer 43

I know that we don’t cover airplane policies, but the theory is the same. Under any policy, the amount the Insured may recover is restricted by the Limit of Liability stated in the policy’s declarations.

Chapter 2: Property and Casualty Key Terms

The correct answer is: limit of liability

Question 44

In addition to requiring that Insurers protect clients’ privacy rights, the Gramm-Leach-Bliley Act:

Select one:

a. encourages the states to adopt uniform licensing requirements to make it easier for Producers to sell insurance across state lines.
b. prohibits the sale of property insurance in America.

Answer 44

Sorry, new point that I hadn’t put in the textbook. But you will remember this, right?

Chapter 3: Policies are Contracts

The correct answer is: encourages the states to adopt uniform licensing requirements to make it easier for Producers to sell insurance across state lines.

Question 45

Risk is the:

Select one:

a. cause of the loss
b. uncertainty or chance of loss

Answer 45

Chapter 1: Introduction to Insurance

The correct answer is: uncertainty or chance of loss

Question 46

Indemnification is:

Select one:

a. making a profit.
b. making whole.

Answer 46

Chapter 1: Introduction to Insurance

The correct answer is: making whole.

Question 47

A proof of loss form:

Select one:

a. settles disputes regarding whether losses are covered
b. assists the insurer in settling a loss covered by the policy
c. which contains a false statement will automatically void coverage

Answer 47

Chapter 3: Policies are Contracts

The correct answer is: assists the insurer in settling a loss covered by the policy

Question 48

Which is an indirect loss?

Select one:

a. water damage from firefighters
b. a fire causes a business to close
c. heavy snows cause a roof to collapse
d. smoke from an oven damages living room drapes

Answer 48

Chapter 4: Typical Property Policy

The correct answer is: a fire causes a business to close

Question 49

Cindy and Hal own a commercial building. Cindy asks the Insurer to increase the coverage but Hal objects. What should the Insurer do?

Select one:

a. Comply with the desire of whichever Insured is named first in the policy’s declarations.
b. Refer the matter to the state Insurance Commissioner.
c. Comply with the desire of whichever Insured is named last in the policy’s declarations.
d. Reject the request until both parties agree on the issue.

Answer 49

The first-named Insured controls the policy.

Chapter 2: Property and Casualty Key Terms

The correct answer is: Comply with the desire of whichever Insured is named first in the policy’s declarations.

Question 50

Which section of the policy contains the Insurer’s obligation to repair, replace or pay?

Select one:

a. Declaration
b. Exclusions
c. Conditions
d. Insuring Agreements

Answer 50

The Insuring Agreement contains the Insurer’s obligation which is the promise to pay covered claims.

Chapter 3: Policies are Contracts

The correct answer is: Insuring Agreements

Question 51

To guarantee that depreciation will not be a factor in calculating the amount to be paid at the time of a loss, an Insured should purchase:

Select one:

a. Replacement cost
b. Actual cash value

Answer 51

Chapter 4: Typical Property Policy

The correct answer is: Replacement cost

Question 52

Indemnity is:

Select one:

a. making whole
b. coming out ahead

Answer 52

Chapter 1: Introduction to Insurance

The correct answer is: making whole

Question 53

The insured cancels a policy half way through its term yet receives less than a 50% refund. This is:

Select one:

a. fraud
b. a short-rate refund

Answer 53

Chapter 2: Property and Casualty Key Terms

The correct answer is: a short-rate refund

Question 54

Liability insurance is a:

Select one:

a. three party contract with payment to the insured.
b. two party contract with payment to a third party.

Answer 54

We can say it both ways. It is a two-party contract with payment to a third party or it is a three-party contract with payment to a third party. But it doesn’t pay the Insured! Property policies pay the Insured. Liability policies pay the third party - the victim.

Chapter 5: Liability Insurance Basics

The correct answer is: two party contract with payment to a third party.

Question 55

A consequential loss is:

Select one:

a. an indirect loss
b. a direct loss

Answer 55

Chapter 4: Typical Property Policy

The correct answer is: an indirect loss

Question 56

The Actual Cash Value formula is:

Select one:

a. Replacement cost minus physical depreciation
b. Original cost minus physical depreciation

Answer 56

Chapter 4: Typical Property Policy

The correct answer is: Replacement cost minus physical depreciation

Question 57

The burden of proving a loss rests on the:

Select one:

a. insured
b. insurer

Answer 57

Chapter 4: Typical Property Policy

The correct answer is: insured

Question 58

A policy may be voided due to each of these EXCEPT:

Select one:

a. fraud
b. failure to pay premiums
c. failure to file a proof of loss form
d. increase in the hazards

Answer 58

An Insurer may cancel a policy due to a substantial increase in the risk. Thus, it could cancel due to an “increase in the hazards.” However, an Insurer has no right to cancel a policy due to a mere failure to file a proof of loss form. The Insurer may refuse to pay that claim but can’t cancel the policy.

Chapter 4: Typical Property Policy

The correct answer is: failure to file a proof of loss form

Question 59

Which policy section should the Insured check to determine if a particular coverage is provided in a named peril policy?

Select one:

a. Conditions
b. Declaration
c. Exclusions
d. Insuring Agreements

Answer 59

Chapter 3: Policies are Contracts

The correct answer is: Insuring Agreements

Question 60

An application says no fire wood will be stored on the premises. If a later fire is caused by fire wood stored on the premises, the insurer may refuse coverage if the insured:

Select one:

a. misrepresented material facts.
b. unintentionally made a misstatement.
c. concealed immaterial facts.
d. misrepresented immaterial facts.

Answer 60

Chapter 3: Policies are Contracts

The correct answer is: misrepresented material facts.

Question 61

The conditions section of the policy contains:

Select one:

a. the insured’s obligations if a loss occurs
b. the insurer’s obligations if a loss occurs

Answer 61

Chapter 3: Policies are Contracts

The correct answer is: the insured’s obligations if a loss occurs

Question 62

A peril is:

Select one:

a. the proximate cause of the loss.
b. any factor which increases the likelihood of a loss.

Answer 62

Chapter 2: Property and Casualty Key Terms

The correct answer is: the proximate cause of the loss.

Question 63

An electrical interruption causes a business to temporarily close. The electrical interruption is known as the?

Select one:

a. catastrophe
b. proximate cause

Answer 63

Chapter 5: Liability Insurance Basics

The correct answer is: proximate cause

Question 64

If the Insured fails to submit a proof of loss, the mortgagee should:

Select one:

a. file a proof of loss form.
b. sue the insurer.

Answer 64

Chapter 4: Typical Property Policy

The correct answer is: file a proof of loss form.

Question 65

Chance of a windstorm causing a loss to one’s property is:

Select one:

a. uninsurable
b. hazard
c. risk
d. peril

Answer 65

A windstorm is a peril. The chance of a windstorm occurring is a risk.

Chapter 1: Introduction to Insurance

The correct answer is: risk

Question 66

Which section of the policy contains the cancellation provisions?

Select one:

a. Conditions
b. Exclusions
c. Insuring Agreements
d. Declaration

Answer 66

Chapter 3: Policies are Contracts

The correct answer is: Conditions

Question 67

Which of the following is considered to be a “participating” Insurer?

Select one:

a. a government insurer
b. a mutual insurer
c. a stock insurer
d. a fraternal insurer

Answer 67

A mutual is a “participating” insurer because the policyholders participate in the profits.

Chapter 1: Introduction to Insurance

The correct answer is: a mutual insurer

Question 68

Concealment is:

Select one:

a. misstating material facts
b. intentional nondisclosure of material facts

Answer 68

Chapter 3: Policies are Contracts

The correct answer is: intentional nondisclosure of material facts

Question 69

The creation of a contract requires each of these EXCEPT:

Select one:

a. consideration
b. notarization
c. competent parties
d. legal purpose

Answer 69

Chapter 3: Policies are Contracts

The correct answer is: notarization

Question 70

A person with an alleged injury notifies a Producer that the Producer’s client negligently caused the injury. The producer should first notify the:

Select one:

a. Police
b. Insurance Commissioner
c. Client
d. Insurer

Answer 70

New Point: The Producer’s fiduciary responsibility is to the Insurer. So, the Producer should first notify the Insurer.

Chapter 5: Liability Insurance Basics

The correct answer is: Insurer

Question 71

A written document providing evidence that coverage is in effect and which summarizes the coverage is known as:

Select one:

a. an application
b. a certificate of insurance

Answer 71

Chapter 2: Property and Casualty Key Terms

The correct answer is: a certificate of insurance

Question 72

Which section of the policy contains the premium?

Select one:

a. Exclusions
b. Declaration
c. Insuring Agreements
d. Conditions

Answer 72

Chapter 3: Policies are Contracts

The correct answer is: Declaration

Question 73

Which of the following is an example of vicarious liability?

Select one:

a. A store owner is held liable for carelessly dropping a box on a customer’s foot.
b. A store owner is held liable when a store employee carelessly drops a box on a customer’s foot.

Answer 73

Chapter 5: Liability Insurance Basics

Vicarious liability refers to liability for the acts of another. An employer has vicarious liability for the acts of its employees. This point is covered in the Update on the last page of Chapter 5.

The store owner dropping the box is ordinary negligence by the store owner. It does not involve liability for the acts of another.

The correct answer is: A store owner is held liable when a store employee carelessly drops a box on a customer’s foot.

Question 74

The cause of the loss is:

Select one:

a. peril
b. risk

Answer 74

Chapter 2: Property and Casualty Key Terms

The correct answer is: peril

Question 75

Each of the following is true about the mortgagee EXCEPT:

Select one:

a. The mortgagee may file a claim if the insured fails to do so.
b. The mortgagee is entitled to coverage which exceeds the policy limits.
c. The mortgagee must be notified of cancellation or nonrenewal.
d. The mortgagee has an insurable interest.

Answer 75

Remember, we are looking for the false answer with EXCEPT questions. The mortgagee may only collect up to the balance owing on the mortgage debt but certainly cannot recover more than the policy limit.

Chapter 4: Typical Property Policy

The correct answer is: The mortgagee is entitled to coverage which exceeds the policy limits.

Question 76

Deductibles:

Select one:

a. eliminate large claims and increase administrative expenses.
b. eliminate small claims and reduce administrative expenses.

Answer 76

Chapter 2: Property and Casualty Key Terms

The correct answer is: eliminate small claims and reduce administrative expenses.

Question 77

Nonrenewal requires the Insurer to:

Select one:

a. mail notice to the insured in advance.
b. provide 90 days notice to the state insurance department.

Answer 77

The state’s Insurance Department prefers not to hear about such trivial matters.

Chapter 2: Property and Casualty Key Terms

The correct answer is: mail notice to the insured in advance.

Question 78

Which is a hazard?

Select one:

a. a collision
b. a slippery road
c. a flood
d. a fire

Answer 78

A hazard increases the likelihood of a peril occurring - the slippery road does that. The others are all perils which actually cause the loss.

Chapter 3: Policies are Contracts

The correct answer is: a slippery road

Question 79

Under the appraisal provision:

Select one:

a. the court selects the umpire.
b. each party selects an umpire.
c. the court selects the appraisers.
d. each party selects an appraiser.

Answer 79

Chapter 4: Typical Property Policy

The correct answer is: each party selects an appraiser.

Question 80

“Acts of God” are best covered by:

Select one:

a. Liability policies
b. Basic form
c. Broad form
d. Special form

Answer 80

New Point: If we are concerned about unusual forces of nature, nothing can provide better coverage than the good old Special form policy! Liability insurance covers acts of the Insured, not acts of God.

Chapter 4: Typical Property Policy

The correct answer is: Special form

Question 81

Which section of the policy contains the Insured’s right to bring legal action against the Insurer?

Select one:

a. Exclusions
b. Insuring Agreements
c. Conditions
d. Declaration

Answer 81

Chapter 3: Policies are Contracts

The correct answer is: Conditions

Question 82

Which section of the policy may require the Insured to use the claim payment to replace the destroyed property?

Select one:

a. Declaration
b. Insuring Agreements
c. Conditions
d. Exclusions

Answer 82

Chapter 3: Policies are Contracts

The correct answer is: Conditions

Question 83

Insurable interest and actual cash value are both related to:

Select one:

a. Speculative risk
b. Law of Large Numbers
c. Peril
d. Indemnity

Answer 83

Both serve to make the Insured whole but to not allow the Insured to come out ahead. By requiring an insurable interest, we prevent the Insured from insuring property owned by others. By only paying ACV, we keep the Insured from coming out ahead by getting “new for old.”

Chapter 4: Typical Property Policy

The correct answer is: Indemnity

Question 84

Broad form covers:

Select one:

a. Glass breakage.
b. Water damage to the floor due to water backing up through a clogged floor drain.

Answer 84

Sewer backup is an exclusion in all of our policies - that drain is connected to the sewer system.

Chapter 4: Typical Property Policy

The correct answer is: Glass breakage.

Question 85

Which section of the policy requires the insured to assume a stated amount of the loss?

Select one:

a. Deductible
b. Risk

Answer 85

All of the legal trivia that you have never heard of is in the big section of the policy, the CONDITIONS section.

Chapter 2: Property and Casualty Key Terms

The correct answer is: Deductible

Question 86

The mortgagee should receive how much notice of cancellation?

Select one:

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

Answer 86

Chapter 4: Typical Property Policy

The correct answer is: 10 days

Question 87

After a loss by a covered peril, the Insured demands full payment for damaged property given to the Insurer. This is an illegal attempt at:

Select one:

a. abandonment
b. indemnity

Answer 87

This is not a very “nice” question, but you have to know this. An Insured cannot ask for the claim payment and then give the damaged property to the Insurer. This would be attempt at abandoning the property. The Insured can’t do this. Don’t confuse that with the fact that the Insurer has the right to take it as salvage. Hey, you can handle this!

Chapter 4: Typical Property Policy

The correct answer is: abandonment

Question 88

A promise by the insured that certain future conditions will exist is a?

Select one:

a. misrepresentation
b. representation
c. concealment
d. warranty

Answer 88

Chapter 3: Policies are Contracts

The correct answer is: warranty

Question 89

One who can lose financially in the event of a loss has:

Select one:

a. an insurable interest
b. a moral hazard

Answer 89

Chapter 2: Property and Casualty Key Terms

The correct answer is: an insurable interest

Question 90

In situations involving misrepresentation, the insurer may:

Select one:

a. charge an extra premium.
b. cancel the policy.

Answer 90

Chapter 3: Policies are Contracts

The correct answer is: cancel the policy.

Question 91

Which section of the policy specifies the Insured’s responsibilities?

Select one:

a. Exclusions
b. Declaration
c. Conditions
d. Insuring Agreements

Answer 91

Chapter 3: Policies are Contracts

The correct answer is: Conditions

Question 92

Consideration is evidenced by:

Select one:

a. issuing a policy
b. endorsing a policy
c. filing a proof of loss form
d. paying a premium

Answer 92

Chapter 3: Policies are Contracts

The correct answer is: paying a premium

Question 93

An assignment must be:

Select one:

a. agreed to prior to a property loss.
b. notarized.
c. approved by the state insurance commissioner.
d. agreed to in writing by the insurer.

Answer 93

An assignment is an agreement to transfer coverage or benefits under a policy. The assignment must be written and agreed to by all parties.

Chapter 2: Property and Casualty Key Terms

The correct answer is: agreed to in writing by the insurer.

Question 94

Binders must show each of these EXCEPT:

Select one:

a. the date the binder becomes effective
b. list of covered items
c. name of insurer and insured
d. the amount of the premium

Answer 94

Chapter 3: Policies are Contracts

The correct answer is: the amount of the premium

Question 95

Which section of the policy contains the covered perils?

Select one:

a. Declaration
b. Exclusions
c. Conditions
d. Insuring Agreements

Answer 95

Chapter 3: Policies are Contracts

The correct answer is: Insuring Agreements

Question 96

During a fire, one wall of a building collapses and damages an adjacent building. This is:

Select one:

a. an indirect loss
b. a direct loss

Answer 96

Chapter 4: Typical Property Policy

The correct answer is: a direct loss

Question 97

Concealment involves intentionally hiding:

Select one:

a. a material fact.
b. an immaterial fact.

Answer 97

Chapter 3: Policies are Contracts

The correct answer is: a material fact.

Question 98

A tenant is wrongfully evicted. This is an example of:

Select one:

a. personal injury
b. bodily injury

Answer 98

“Wrongful entry or eviction” is a Personal Injury covered under Part B of the CGL.

Chapter 5: Liability Insurance Basics

The correct answer is: personal injury

Question 99

The limit of liability in a policy refers to the extent of the:

Select one:

a. deductible.
b. insurer’s liability.

Answer 99

Chapter 2: Property and Casualty Key Terms

The correct answer is: insurer’s liability.

Question 100

A binder is:

Select one:

a. a policy of insurance
b. confirmation of temporary insurance

Answer 100

Chapter 3: Policies are Contracts

The correct answer is: confirmation of temporary insurance