State Insurance Regulation and Contract Law

Question 1

admitted insurer

Answer 1

an insurer entitled and certified to transact insurance business in California (or one’s state they reside)

Question 2

non admitted insurer

Answer 2

an insurer that is not entitled or certified to transact business in CA having not complied with the laws (or the state they reside).

Question 3

domestic insurer

Answer 3

an insurer organized under the laws of CA, whether or not admitted

Question 4

foreign insurer

Answer 4

an insurer NOT organized under the laws of California, whether or not admitted

Question 5

alien insurer

Answer 5

an insurer organized under the laws of another country, whether or not admitted

Question 6

insurance

Answer 6

to indemnify another against loss, damage, or liability arising from a contingent or unknown event

Question 7

insurable event

Answer 7

Any contingent or unknown event, whether past or future, which may harm a person having an insurable interest or create a liability against him or her

Question 8

insurance policy

Answer 8

The written instrument in which a contract of insurance is set forth

Question 9

insurer

Answer 9

Any person who undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event

Question 10

claimant

Answer 10

A first or third party who asserts a right of recovery or payment under an insurance policy

Question 11

contract

Answer 11

agreement between two or more parties. focusing on the rights, obligations, duties, and responsibilities arising from the agreement between the parties

Question 12

Concealment

Answer 12

Neglect to communicate when a party knows they ought to communicate

Question 13

warranty

Answer 13

a promise that a proposition of a fact is true (expressed or implied aka opinion)

Question 14

express warranty

Answer 14

assertion or fact

Question 15

California regulates the insurance business within its state lines. However, the federal government regulates insurance business that is associated with

Answer 15

interstate commerce

Question 16

Transacting insurance in violation of federal law governing interstate commerce is punishable by

Answer 16

imprisonment for up to 15 years, a fine of up to $50,000, or both

Question 17

tort

Answer 17

A breach of a duty that originates by law and not by agreement

Question 18

The parties to an insurance contract include the

Answer 18

insurer and policyowner

Question 19

How long must agents keep their business records available for inspection by the California Insurance Commissioner?

Answer 19

5 years

Question 20

Property Insurance

Answer 20

indemnifies (covers) the owner or user of property for its loss, or the loss of it’s income producing ability when the loss is caused by a covered peril (fire, earthquake, flood)

Question 21

What are the two types of Insurable property?

Answer 21

1. Real property (buildings and land) & 2. Personal Property (tangible item other than real property)

Question 22

direct loss

Answer 22

loss incurred due to direct damage to a property. Ex: fire burns house

Question 23

indirect loss

Answer 23

related to a direct loss. ex: fire damages home and owner incurs additional living expenses to stay somewhere else until home is repaired

Question 24

consequential loss

Answer 24

loss related to equipment failure. ex: food that spoils because refrigeration system is out of operation

Question 25

Insurable interest

Answer 25

a policy owner’s financial interest in a property. Must always have insurable interest

Question 26

Secondary Insurable Interest

Answer 26

other party that may have insurable interest in property. Es: Bank or Mortgage holder. or Loan financer

Question 27

indemnity contracts

Answer 27

Reimburse a percentage of the loss. Most p & c insurance policies are this

Question 28

Valued contracts

Answer 28

pay a lump sum or agreed listed amount. ex; for artwork, jewelry, etc

Question 29

Functional Replacement Cost

Answer 29

how much it would cost to repair or replace a damaged OLDER building with out of date components. Modernizing the building after damage

Question 30

Cash Value

Answer 30

replacement cost minus physical depreciation. Mainly for household contents & other personal property. Over time items depreciate in value so the cash value lowers

Question 31

Market Value

Answer 31

establishing the value of cars and other personal property. For a building, the market value is the value of the land & location

Question 32

Agreed Value

Answer 32

“Valued Contracts” pays the dollar amount listed in the policy without regard to the objects depreciated or replacement value

Question 33

For an insurer to pay a property insurance claim, when must the policyholder have an insurable interest in the insured property?

Answer 33

at the time of the loss

Question 34

proximate cause of loss

Answer 34

What caused the loss. sets in motion an unbroken chain of events

Question 35

named perils

Answer 35

loss is covered by a peril that is clearly stated in the policy. the burden of proof lies with the policyholder

Question 36

What is theft?

Answer 36

a broad term that includes any type of stealing or attempted stealing. There are certain types of theft: burglary or robbery

Question 37

Burglary

Answer 37

theft of property from within a premises by a person who unlawfully enters the premises

Question 38

Robbery

Answer 38

is theft during which force is used or threatened against a person (think armed robbery)

Question 39

Mysterious Disappearance

Answer 39

where property dissapeared from a known place and was probably stolen

Question 40

Vandalism

Answer 40

willful & malicious damage to covered property WITHOUT theft (covered in open & named perils policies generally)

Question 41

Open Perils policy

Answer 41

lists the perils that are not covered. The insurer has to prove the cause of the loss was an excluded peril. the burden of proof lies with the insurer to prove a loss was caused

Question 42

concurrent causation

Answer 42

if a given loss involves two or more given perils, and at least one is a covered peril under the policy, then the loss is covered

Question 43

Difference-In-Conditions (D-I-C)

Answer 43

property insurance policy purchased in addition to a commercial property policy to obtain coverage for perils that the commercial property policy does not cover (think like gap coverage)

Question 44

What is Liability Insurance?

Answer 44

Casualty Insurance. “lawsuit protection” insurance. It involves an area of law known as tort law

Question 45

plaintiff

Answer 45

the person suing

Question 46

defendant

Answer 46

person being sued. With liability insurance the insured is the defendant

Question 47

What are the two types of compensatory Damages?

Answer 47

1. Special Damages - based on factawarded when there’s a tangible loss (ex: doctor bill. prescription, & loss of income)
2. General Damages - award designed to compensate for an injured person’s pain & suffering (can’t be measured in dollars)

Question 48

Punitive Damages are imposed when?

Answer 48

When the defendant acts in a deliberate manner & is required to pay a punishment

Question 49

What is an example of an Assumption of Risk?

Answer 49

The owner of a sports stadium is not responsible for someone in the stands getting hit by a fly ball. They voluntarily sat there in that setting

Question 50

Contributory Negligence

Answer 50

if the plaintiff (person suing) is even 1% at fault AS WELL AS the defendant, then the defendant is free from liability (not as common)

Question 51

Comparative Negligence

Answer 51

Where the plaintiff is held reliable for their portion of his or her fault & same for the defendant. They are held liable for their portion

Question 52

Strict (absolute) liability

Answer 52

is imposed when an act or situation is inherently dangerous. Involves injury or damage

Question 53

Vicarious Liability

Answer 53

exists when on person is legally responsible for the acts of another. Ex: a parent is vicariously liable for the injury or damage done by their child to another OR an employer responsible for it’s employees negligence (think “living vicariously through one another”)

Question 54

Attractive Nuisances

Answer 54

someone can be held accountable for maintaining something on its property that appeals to curious children even if trespassing (Ex: neighborhood child falls into an unfenced pool)

Question 55

When can a Binder be issued?

Answer 55

When an application is pending and before a policy has been issued. provides temporary coverage

Question 56

What is a loss control report?

Answer 56

report describing what an applicant has done to reduce the possibility or severity of a major loss (what preventative measures were taken?)

Question 57

Loss Ratio

Answer 57

dividing incurred losses by earned premiums

Question 58

Earned Premium

Answer 58

Paid premium

Question 59

Expense Ratio

Answer 59

divides the insurer’s incurred expenses with its written premium (include: commissions, underwriting expenses, general expenses, and taxes)

Question 60

Combined Ratio

Answer 60

determines an insurer’s profitability. The sume of the Loss Ratio + the Expense Ratio

Question 61

Class Rating

Answer 61

all insureds with similar characteristics are charged the same rates. (Used for High Volume Insurance such as auto & homeowners)

Question 62

Individual Rating

Answer 62

Used when ever insured is unique and could not readily be placed in a “Class”. (used with property insurance on complex commercial buildings)

Question 63

Loss Costs

Answer 63

reflect past claims & estimated future claims

Question 64

Expenses

Answer 64

include commission to its producers, employee salaries, office expenses, taxes, & other costs of doing business

Question 65

Insurance rates are what?

Answer 65

the cost of insurance per unit of exposure

Question 66

Insurance premiums are what?

Answer 66

Equal to the insurance rate times the number of exposure units. What the policyholder pays

Question 67

What is an endorsement?

Answer 67

A change or addition to the provisions included in a policy

Question 68

Declarations of a policy:

Answer 68

the front page of the policy. declares information about the policy like name and policy period & limits

Question 69

Who is an an automatic insured?

Answer 69

covered by a policy by not named on the policy. (ex: business’s employees or family members who live in the same household

Question 70

Is earthquake coverage included?

Answer 70

Because of it’s potentially catastrophic nature, earthquakes are usually excluded. Unless, coverage was added through an endorsement for those willing to pay for it

Question 71

Are Nuclear Hazards included in P & C policies?

Answer 71

Most all policies excluded Nuclear Hazards because of the possible catastrophic consequences

Question 72

Where can you obtain Flood Insurance?

Answer 72

Only through the federal government through the National Flood Insurance Program (NFIP)

Question 73

Is Leakage or Seepage covered or excluded?

Answer 73

Excluded usually. Unless it’s sudden water damage

Question 74

What is an Artificially Generated Electrical Current? & is it covered or excluded?

Answer 74

Usually excluded. Does not cover damage caused by short circuits, power surges, burnouts, and so forth

Question 75

Steam Boiler Explosion. Is it covered or excluded?

Answer 75

Excluded. Boilers require their own specific insurance policy

Question 76

A statement in an auto insurance policy that reads: “We will pay damages for bodily injury or property damage for which any insured becomes legally responsible because of an auto accident” is from which standard policy provision?

Answer 76

insuring agreement

Question 77

Policy Conditions do what?

Answer 77

set forth the RULES that determine what is required to qualify for coverage

Question 78

Who is entitled to coverage in a P or C policy?

Answer 78

First named insured, named insureds, additional insureds, AND secured creditors or lendors

Question 79

Who is the loss payee in a property owner’s policy?

Answer 79

The lending institution or creditor. (ex: who you finance your car through)

Question 80

What does the loss payable clause ensure?

Answer 80

that the loss payee will be included in any claim payment. By making a check payable to both parties

Question 81

What does the mortgage (mortgagee) clause do?

Answer 81

Gives certain rights to the mortgagee. They get paid if the property suffers a loss, their coverage continues even if the policy was voided by the insured, and has advanced written notice of cancellation

Question 82

What is a mortgagee?

Answer 82

a financial institution that lends money to a borrower to purchase a home or other real estate

Question 83

What is a bailee?

Answer 83

an outside party that offers a service. (repair man or dry cleaner). THEY DO NOT GET COVERAGE.

Question 84

Liberalization clause

Answer 84

a change in coverage that expands coverage to deal with court decisions, new exposures, or a need to clarify the insurer’s intentions

Question 85

what is a policy limit?

Answer 85

the maximum amount an insurer will pay for a covered loss

Question 86

What are sublimits?

Answer 86

the maximum amount the insurer will pay for a SPECIFIC type of property. (ex: money, jewelry, or trees)

Question 87

What do deductibles do?

Answer 87

1. encourage insureds to exercise care by making them share in losses
2. help keep premiums low by not covering small losses

Question 88

Per Occurence Limitation of Liability provision establishes what?

Answer 88

the maximum amount the insurer will pay for all claims resulting from a single occurrence no matter how much damage there is

Question 89

What is a per person limit?

Answer 89

the maximum amount the insurer will pay for one person’s injuries

Question 90

What are the 3 split limits?

Answer 90

1. per person limit
2. per occurrence limit
3. a per occurrence limit that applies to property damage claims

Question 91

Insurance is regulated at what level?

Answer 91

Primarily the state level (every state has a DOI)

Question 92

What is the federal government’s role in insurance regulation?

Answer 92

1. Privacy Protection

2. Special Coverages

Question 93

Gramm-Leavh-Bliley Act did what?

Answer 93

stopped a financial institution from disclosing a consumer’s nonpublic personal information to an unaffiliated third party

Question 94

Federal Trade Commission Act did what?

Answer 94

makes deceptive or unfair trade practices illegal

Question 95

Violent Crime Control & Law Enforcement Act did what?

Answer 95

made it a criminal offense for anyone who has been convicted of a felony involving breach of trust or dishonesty to willfully engage or participate in the business of insurance without first obtaining written consent from the commissioner

Question 96

National Flood Insurance Program

Answer 96

most P & C policies do not cover major floods. This program is very important in that it makes this coverage available

Question 97

Under the Terrorism Risk Insurance Act, all of the following lines of insurance are covered EXCEPT:

Answer 97

homeowners and dwelling insurance

Question 98

What is covered under a TRIA or Terrorism Risk Insurance Act?

Answer 98

an act must be intentionally violent or dangerous to human life, property, or infrastructure; have resulted in damage within the U.S., to an air carrier, to a U.S. flag vessel, or on the premises of a U.S. mission such as an embassy or consulate; and produce total losses of over $200 million

Question 99

What is a Libel?

Answer 99

an intentional Tort this is a written or printed untrue statement that damages a person’s reputation

Question 100

What is Slander?

Answer 100

intentional tort that is a spoken statement that damage’s a person’s reputation

Question 101

What is a false arrest?

Answer 101

an unlawful physical restraint of somebody’s freedom. (ex: store employee detains an innocent customer suspected of shoplifting)

Question 102

What is Gross Negligence?

Answer 102

worse than ordinary negligence because it involves willful and wanton conduct

Question 103

What is Vicarious Liability?

Answer 103

the legal responsibility of a principal (parent or a teacher) for acts of its agents (children or employees)

Question 104

What does a package policy do?

Answer 104

combines two or more coverages. (Property & liability). Referring to Homeowners insurance

Question 105

In property coverages, who is We, Us, and Our?

Answer 105

The insurance company

Question 106

In property coverages, who is You, Your, and Insured?

Answer 106

The named insured and spouse. whether or not the spouse is named. Including other household residents

Question 107

How much does one need to make in order to be considered a “Business”?

Answer 107

At least $2,000 a year

Question 108

What is a single-family dwelling?

Answer 108

Residence premises that is used strictly for private residence. Where the named insured lives. Anything listed in the declarations

Question 109

What is a Motor Vehicle?

Answer 109

a self propelled vehicle or trailer connected to it. Not just cars but also motorcycles, self-propelled lawn mowers, and even motorized wheelchairs

Question 110

“Coverage A-Dwelling”, covers what?

Answer 110

covered the named insured’s house or structures attached like a garage or tool shed. Also permanent attachments like central AC. Construction materials on or next to the premises that will be used to build or repair the dwelling is also considered part of the dwelling

Question 111

“Coverage B - Other Structures”, covers what?

Answer 111

covers structures on the residence premises that are not attached to the dwelling (Ex: gazebo, She Shed, driveway, swimming pool, fence)

Question 112

What does “Coverage B- Other Structures” NOT cover?

Answer 112

1. Structures rented to someone who is not a tenant of the dwelling
2. Structures in which a business is operated
3. Structures that store business property unless owned by an insured or a tenant of the dwelling

Question 113

What is covered under “Coverage C- Personal Property”?

Answer 113

TV’s, washing machine, or clothes. Also, items outside like patio furniture or a lawn mower. Applies ANYWHERE in the world. Subject to a $1,000 limit if at another residence (not including a hotel or temporary residence)

Question 114

What personal property is not covered? (Coverage C)

Answer 114

1. items insured by another insurance policy;
2. animals, birds, or fish;
3. Motor vehicles (accept electric wheelchairs);
4. Aircraft & parts designed to carry people or cargo
5. Hovercraft
6. Personal property of room mates
7. personal property thats frequently rented out to others
8. Credit Cards

Question 115

What do Sub limits do?

Answer 115

They further restrict a policies limitations. They apply to property of higher value and attractive to thieves

Question 116

What does “Coverage D- Loss of Use” protect?

Answer 116

a policyholder whose residence premises cannot be used because of an insured loss

Question 117

What is “Additional Living Expense Coverage”?

Answer 117

When a covered loss makes the residence unfit to live in the insurer covers the increased living expenses so that the household can maintain its normal way of living while the house is being repaired or they are relocated

Question 118

What is “Fair Rental Value Coverage?”

Answer 118

When a covered loss included part of a residence premises that is rented out to other, the insurer subtracts the usual expenses that stop while the home is unlivable from the insurance payment

Question 119

What is the “Civil Authority Prohibits Use Coverage”?

Answer 119

Where a federal, state, or local government agency or state police can prohibit residents from living in undamaged houses in damaged neighborhoods or communities. Additional living expenses & lost rents are covered up to 2 weeks

Question 120

When is Debris Removal Covered? & what all does it cover?

Answer 120

If a covered peril causes the loss or any volcanic ash damages the covered home or personal property. Covers $500-$1,000 for each fallen tree due to wind, hail, snow or sleet. Also a neighbors tree that falls on the insured’s premises

Question 121

What are Reasonable Repairs?

Answer 121

reasonable expenses to protect covered property from further damage following initial damage by a covered peril

Question 122

What is a Fire Department Service Charge?

Answer 122

The policy will pay up to $500 for fire department charges when they are called to protect a property from a covered peril

Question 123

What does “Property Removed” coverage protect?

Answer 123

covered property from direct loss due to any cause while it is being removed from the premises that is endangered by a covered peril & up to 30 days while it is removed

Question 124

What is a “Loss Assessment”?

Answer 124

Many homeowners belong to an association of property owners. If the associations coverage is inadequate or unavailable to cover a property loss, the homeowners are assessed to pay for the damage. This policy will pay up to $1,000

Question 125

When is “Collapse” coverage applied?

Answer 125

Only if all or part of a building has fallen or caved in. DOES NOT APPLY to structural deterioration

Question 126

What is covered under “Landlord’s Furnishings”?

Answer 126

covers up to $2,500 in losses to appliances, carpeting & other household furnishings. Must be caused by a peril. DOES NOT COVER theft

Question 127

What does the “Ordinance or Law” cover?

Answer 127

coverage for loss caused by construction regulation

Question 128

How much coverage for Grave Markers?

Answer 128

covers up to $5,000 of a loss form a covered perils to grave markers on or away from the residence premises

Question 129

HO 3’s form’s (the most common) dwelling coverage is based on Open or Named Perils?

Answer 129

Open Perils

Question 130

HO 3’s form’s (the most common) personal property coverage is based on Open or Named Perils?

Answer 130

Named Perils

Question 131

What is does the Liberalization Clause do?

Answer 131

If the insurer broadens the policy’s coverage without increasing the premium, the change automatically takes effect on the date of the change. Change has to happen within the first 60 days of the policy period

Question 132

What does an Assignment do?

Answer 132

Transfers the rights of a party to a contract to a third party

Question 133

What property losses are settled on an Actual Cash Value (ACV) basis at the time of the loss?

Answer 133

Personal Property; awnings, carpeting, household appliances, outdoor equipment; structures that are not buildings; grave markers

Question 134

What does the 80% Rule do?

Answer 134

To get coverage without a deduction for depreciation in the event of a partial loss, the insured must provide a dwelling coverage limit of at least 80% of the ACV

Question 135

When does the Appraisal process come into play?

Answer 135

If the insurer and the named insured cannot agree on the loss payment amount

Question 136

When can the insured sue the insurer?

Answer 136

There are a statute of limitations, however the insurer can’t get sued if the insured has complied with the terms of the policy & the lawsuit begins within 2 years after the loss (CA state is 1 year and can extend to 2 years in the case of a state of emergency)

Question 137

The liability coverage in all Homeowner’s policies are the same. True or False?

Answer 137

True

Question 138

The property coverage in all Homeowner’s policies are the same? True or False?

Answer 138

False

Question 139

HO2 form?

Answer 139

Lists the covered perils in a homeowners policy (Not open perils)

Question 140

HO3 Form?

Answer 140

Further improvement of HO2 form but still keeps HO2 contents. Broadens coverage to the building on an “all risks” basis. (OPEN PERILS BASIS)

Question 141

HO4 Form is for who?

Answer 141

People who don’t own homes or the building. (Ex: people who live in apartments) “tenants policy” - has the same contents as HO2 & HO3 but NO BUILDING coverage

Question 142

HO5 Form:

Answer 142

The Cadillac of all the forms. Includes Open Perils for both the building & the contents or personal property (Most expensive)

Question 143

HO6 is form is for:

Answer 143

Those with condo’s. They are a little different than those with apartments.

Question 144

HO8 form is for:

Answer 144

For the more difficult to insure homes. Usually for much older homes where the current market value is MUCH lower than the replacement value of the home.

Question 145

Josefa sells her house. She wants to end her homeowners insurance policy nine months before the end of the policy term and get a refund of the unused premium. What must she do to end coverage?

Answer 145

Cancel

Question 146

Owen’s house is damaged when Latrice’s car crashes into it. After Owen’s insurer pays to repair the house, the insurer tries to recover its costs from Latrice. What provision in Owen’s policy gives the insurer this right?

Answer 146

subrogation

Question 147

Section I of a homeowner’s policy provides what?

Answer 147

Property coverages

Question 148

Section II of a homeowner’s policy provides what?

Answer 148

The liability coverages

Question 149

Bernard’s homeowners insurance policy refers to an “insured location.” Which one of the following locations would NOT qualify as an insured location?

Answer 149

Bernard’s office in a downtown building owned by his employer

Question 150

Homeowner’s Insurance comes in a package policy combining what?

Answer 150

Property & Liability coverage in a single policy

Question 151

Section II- Coverage E in a homeowner’s policy is for:

Answer 151

Personal Liability

Question 152

Section II Coverage F in a homeowner’s policy is for:

Answer 152

Medical Payments to others

Question 153

Home Business Insurance Coverage Endorsement does:

Answer 153

extends coverage to certain risks from a home business (not usually covered)

Question 154

Permitted Incidental Occupancies Endorsement does what?

Answer 154

it covers incidental types of business conducted on the residence premises, such as offices, schools, & studios

Question 155

Home Day Care Coverage Endorsement does what?

Answer 155

provides property & liability coverage for a home day care center that an insured operates on the residence premises

Question 156

When is a Boat owner’s Policy needed?

Answer 156

To cover their watercraft. Many HO policies do not cover watercraft so this policy is needed

Question 157

What are the “Medical Payments to Others” Exclusions?

Answer 157

1. Residence Employee Exclusion- not covered outside the scope of employment
2. Any Person Eligible to Receive Other Benefits (workers comp or nonoccupational disability)
3. Nuclear Exclusions
4. Other Persons Exclusion- only covers the residence employee

Question 158

A deck collapses during a party at an insured’s house, and the guests sustain minor injuries. The medical payments to others coverage of the insured’s homeowners policy will pay for whose medical bills?

Answer 158

Sanford’s, the guest of honor (does not cover the insured’s or people living in the home)

Question 159

Does a Bankruptcy release the insurer from its contractual obligations under the HO policy?

Answer 159

No. they are still responsible for any loss if an insured files bankruptcy before a claim is submitted

Question 160

What does the mortgage clause protect?

Answer 160

the mortgage holder against losses to the mortgaged property

Question 161

A homeowners insurance policy does NOT provide liability coverage for anyone who:

Answer 161

makes false statements with respect to the insurance

Question 162

Because Ahmad has a home-based business with three employees, his homeowners insurance policy includes the home business insurance coverage endorsement. This HOBIZ endorsement includes all the following coverages EXCEPT:

Answer 162

workers compensation coverage

Question 163

Bert faced two personal liability claims during the past year. His homeowners insurance policy has a $100,000 personal liability limit. The first claim was $125,000 for bodily injury and $50,000 for property damage. The second claim was $2,000 for bodily injury. How much did Bert’s insurer pay in damages?

Answer 163

$102,000

; The insurer will pay the $100,000 limit for the first occurrence and $2,000 for the second.

Question 164

Marcus sells homemade jams and jellies from his home in a town that is popular with tourists. Marcus wants the broad protection of a home business insurance coverage (HOBIZ) endorsement. Which factor makes him ineligible for coverage under this endorsement?

Answer 164

His business involves the sale of food products.

Question 165

Unlike the medical payments to others coverage, liability coverage applies only when:

Answer 165

an insured is legally responsible to pay damages because someone has been injured.

Question 166

The term “Damages” refers to:

Answer 166

the monetary compensation to someone who has suffered a loss or damage

Question 167

When is a Dwelling Policy used?

Answer 167

When a Homeowners policy is unsuitable

Question 168

What is the difference between a Homeowners policy & a Dwelling policy?

Answer 168

Homeowner policies cover Property & Liability risks while a Dwelling policy only covers property risk; A HO policy is a comprehensive insurance package (insureds can’t tailor the policy to their needs) while a dwelling policy covers only basic property insurance (additional coverage can be added through endorsements)

Question 169

When is a house ineligible for a homeowners insurance?

Answer 169

1. A tenant who is renting is ineligible for a HO policy because it is not occupied by the owner
2. A residence that houses a certain number of families may be ineligible for a HO policy because it exceeds the maximum number of families that can inhibit an insured home
3. A house may be ineligible for a HO policy because it is below the insurance company’s minimum insurable value
4. A house that is under construction in ineligible for homeowners insurance

Question 170

If the policy form included Coverages A,B, or D then who is considered the “Insured”?

Answer 170

The building’s owner

Question 171

If the policy form includes only Coverages C & E then who is considered the “insured”?

Answer 171

The tenant may be the insured & the policy owner. Sometimes called “renters insurance”

Question 172

“Dwelling Property 1- Basic Form: Limited Property Insurance coverage” covers what?

Answer 172

overs losses to all property—including the dwelling—on an actual cash value (ACV) basis. It is the least comprehensive form.

Question 173

“Dwelling Property 2- Broad Form: Broad property coverage” covers what?

Answer 173

covers the same perils as the basic form and several more. covers the dwelling and other structures on a replacement cost basis. However, it covers personal property on an actual cash value basis

Question 174

“Dwelling Property 3- Special Form: Open Perils property coverage” covers what?

Answer 174

covers all perils unless they are excluded. It is the most comprehensive form. Provides Open Perils coverage for the dwelling & structures but it covers personal property on a named perils basis

Question 175

Coverage A:

Answer 175

mainly covers the dwelling listed in the declarations. Also protects structures attached to the dwelling

Question 176

Coverage B:

Answer 176

Other Structures- other structures on the residence that are physically separated from the dwelling or only connected by a fence or wall

Question 177

Coverage C:

Answer 177

Personal Property

Question 178

Coverage D:

Answer 178

Fair Rental Value- protects an insured when a loss makes part of the covered premises that is rented to others or held for rental unfit to live in

Question 179

Coverage E:

Answer 179

Additional Living Expense- covers any increase in living expenses for the household to maintain its normal standard of living, such as hotel charges and restaurant bills.

Question 180

DP 1 Basic Form - First group included what?

Answer 180

fire, lightning, and internal explosion, all mandatory coverages.

Question 181

DP 1 Basic Form - Second Group includes what?

Answer 181

Extended coverage perils (Hail, riots, aircraft, smoke etc)

Question 182

DP 1 Basic Form - Third Group includes what?

Answer 182

vandalism and malicious mischief

Question 183

What are the 9 exclusions (not covered) applied to all property coverages?

Answer 183

1. Ordinance or Law
2. Earth Movement
3. Water Damage - loss from flood, backed up sewers or drains, & water that seeps through a building/foundation
4. Power Failure- has to be on the premises to be considered covered (think a neighborhood losing power & someones pipes rupture in their house)
5. Neglect
6. War
7. Nuclear Hazard
8. Intentional Loss
9. Governmental Action

Question 184

The 3 Exclusions pertaining to the Dwelling & Other Structures:

Answer 184

1. Weather Conditions - (think a mudslide caused by heavy rains damages a homes foundation- the policy will not cover the damage to foundation)
2. Acts or Decisions (when a person fails to take action or decide the face of a loss about to happen
3. Faulty, Inadequate, or Defective Processes, Procedures, Materials, or Maintenance

Question 185

What are the 4 most popular standard dwelling policy endorsements?

Answer 185

1. Personal Liability Supplement - covers medical payments
2. Broad Theft Coverage - theft and vadalism
3. Automatic Increase in Insurance endorsement - “inflation guard provision”; gradually increases the limit of insurance over a specified period of time
4. Dwelling Under Construction - endorsement added to the adjust the policy to accommodate the increasing value of the home under construction

Question 186

Caleb wants a dwelling policy that will protect the trees and shrubs on his property. He should therefore avoid buying:

Answer 186

a DP 1 policy

- does not include “other coverage” for trees, shrubs, & other plants

Question 187

Because his home does not qualify for the homeowners coverage he wants, Olin buys a DP 3 special form for its comprehensive coverage. What kind of coverage and valuation basis does Olin have under this policy?

Answer 187

open perils coverage on a replacement cost basis

Question 188

Which coverage does a homeowners insurance policy provide that a standard dwelling policy does not?

Answer 188

liability

Question 189

Despite the lower cost of a DP 1 basic dwelling policy, Jerrold buys a DP 2 policy on his home and his personal property. Which causes of loss does the DP 2 cover that the DP 1 does NOT cover?

Answer 189

weight of ice, snow, or sleet

Question 190

The dwelling policy provides more comprehensive coverage for less premium.
True or False?

Answer 190

False

Question 191

The Jones family spends $500 every month on groceries. A fire leaves their kitchen unusable, so they eat their meals in restaurants while the kitchen is being repaired. They spend $2,000 in one month. Their dwelling policy includes coverage for additional living expenses. How much of their expenses will the insurer pay?

Answer 191

$1,500 (Subract the 2 numbers)

Question 192

Under an insurance contract, the uncertainty of events can lead to unequal financial results for the two parties. This means that insurance is what kind of contract?

Answer 192

Aleatory

Question 193

A mutual insurance company is:

Answer 193

Is owned by its insureds.

Question 194

At DEF Insurance Company, agents are employees of the company who are paid a salary plus commissions. This is an example of what type of insurance marketing system?

Answer 194

Direct writer - (the insurer’s agents are actually employees)

Question 195

Agent Blondell is offering a free television to every applicant who agrees to buy insurance through his agency. In most states, this is an illegal practice known as:

Answer 195

Rebating

Question 196

To void a policy, misrepresentation or concealment must be which of the following?

Answer 196

Concern material facts

Question 197

An agreement between the insured and the insurer that certain conditions will be met is which of the following?

Answer 197

Warranty

Question 198

What is a self- contained policy?(Commercial Property Insurane)

Answer 198

a single doc. that contain all agreements between the insurer and the insured(ex: workers comp polich)

Question 199

What is a Modular Policy? (Commercial Property Insurance?)

Answer 199

(think it includes not just 1 single document but MULTIPLE document)

contains a matched set of components designed around one basic component

Question 200

Commercial Package is what?

Answer 200

a policy that includes two or more coverage parts

Question 201

Module Definition

Answer 201

Descriptive term. - “Any in series of standardized units for use together”

Question 202

Why are single package policies more beneficial?

Answer 202

they can include several different types of insurance, so fewer form are need to address a wide range of needs.

• Better to interpret a policy that uses consistent terms and definitions
• AND because it’s easier for an INSURER to process a single policy,, insurers will then offer a discount

Question 203

What i a Monoline Policy?

Answer 203

one that covers only one “line” or type of insurance.

Question 204

What is the basic direct damage coverage?

Answer 204

is the Building and Personal Property Coverage Form

Question 205

What do Cause of Loss Forms do?

Answer 205

describe the causes of loss to property that the policy covers. They also state limitations and Exclusions in coverage

Question 206

How is an emendatory endorsement used?

Answer 206

to modify the policy to conform to a states specific requirements

Question 207

Earthquake shock or Volcanic eruptions are treated if?

Answer 207

The earthquake of volcanic eruption happened with a 168-hour period

Question 208

Do Commercial Property Coverage Forms list there covered perils in these forms?

Answer 208

No. Instead, they describe them in a separate cause of loss form.

Question 209

Covered Property is valued as what?

Answer 209

Cash Value & subject to a coinsurance provision

Question 210

What is a fixture?

Answer 210

an item that has been physically attached to land or a building or structure in a manner that indicates an intent that it remain part of the land or structure.

Question 211

Debri Removal Coverage? (Additional coverage you have to add)

Answer 211

Up to 25% of the amount of the direct damage loss + the amount of the deductible + plus $25,000 if the combined loss from property damage and debris removal exhuasts the limit of insurance

Question 212

What does the pollutant cleanup and removal cover?

Additional coverage you have to add

Answer 212

removes pollutants from land or water at the insureds premises UP TO $10,000, IF the release of the pollutants is caused by a covered cause of loss

Question 213

What is covered under the fire department service charge?

Additional coverage you have to add

Answer 213

Service charges imposed by a Fire Department called to protect a property/community from a covered cause of loss. (Up to $1,000 of coverage)

Question 214

Preservation of Property coverage does what?

Additional coverage you have to add

Answer 214

Loss to covered property that must be moved to another location to protect it from a covered cause of loss. Coverage applies during the move and for up to 30 days at the new location.

Question 215

What is covered under the Increased Cost of Construction?

Additional coverage you have to add

Answer 215

Coverage applies only to costs related to damaged property. Coverage for demolition or increased cost of construction of undamaged portions of the property must be added by endorsement.

Question 216

What is covered under the electronic data?

Additional coverage you have to add

Answer 216

Cost of replacing or restoring electronic data destroyed or corrupted by a covered cause of loss, including a computer virus, up to an annual aggregate limit of $2,500

Question 217

What is the Newly Acquired Property Extension?

Answer 217

Temp coverage for loss to buildings under constructions at scheduled locations up to $25,000 per building;
temporary coverage for loss to personal property at newly acquired premises up to $100,000 a building;
Coverage ends 30 days after acquisition or start of construction, when values are reported or when the policy expires whatever comes first

Question 218

personal effects and property of others (Coverage extension)

Answer 218

Loss to personal effects of the insured and the insured’s employees, and to personal property of others, up to $2,500 at each location. No coverage for theft.

Question 219

valuable papers and records (coverage extension)

Answer 219

Loss to valuable papers and records, including the cost to research and restore information contained in valuable papers and records damaged by a covered cause of loss, up to $2,500

Question 220

property off-premises (coverage extension)

Answer 220

Loss to property at a fair, exposition, or trade show; property stored at a location leased after the policy takes effect; and property temporarily away from the insured premises at a location that the insured does not own, lease, or operate, up to $10,000.

Question 221

Outdoor Property-(Coverage Extension)

Answer 221

Loss to outdoor property consisting of trees, shrubs, plants, detached signs, fences, and antennas, up to $1,000. A sublimit of $250 each applies to trees, shrubs, and plants. Covered perils are limited to fire, lightning, explosion, riot and civil commotion, and aircraft.

Question 222

nonowned detached trailers (Coverage Extension)

Answer 222

Loss to nonowned detached trailers used in the insured’s business and in the insured’s care, custody, and control, up to $5,000 (unless the declarations show a higher limit)

Question 223

What does the Builders Risk Coverage Form protect?

Answer 223

1. Buildings under constructions and the materials and supplies and machinery and equipment that are intended to be permanently located in or on the building or within 100 feet of the premises
2. temp structures (ex: scaffolding)
   * unless covered by other insurance* Coverage applied ONLY to property located at the insureds premises

Question 224

What is not covered under the Builders Rick Coverage Form?

Answer 224

land, signs that are not attached to buildings, or radio and television antennas.

Question 225

What is the coverage extension to the Builders Risk Coverage Form?

Answer 225

A coverage extension covers damage to sod, trees, and plants caused by fire, lightning, explosion, riot or civil commotion, or aircraft, up $1,000 per occurrence and up to $250 per tree, shrub, or plant. Any other damage to lawns, trees, shrubs, and plants is not covered.

Question 226

What is Consisted in a Commercial Property Policy?

Answer 226

1. has a declarations page
2. common policy conditions form
3. endorsements (where applicable)
4. coverage forms
5. Cause of Loss Forms
6. and endorsements (where applicable)

Question 227

he common conditions form has conditions that apply to any ISO commercial lines policy, such as:

Answer 227

cancellation and change provisions, and premiums

Question 228

The commercial property conditions form applies only to coverage when?

Answer 228

under an ISO commercial property policy.

Question 229

Causes of loss forms describe what?:

Answer 229

the causes of loss that the policy covers and the coverage limitations or exclusions.

Question 230

Interline endorsements can do what?

Answer 230

apply to more than one line of coverage

Question 231

A complete commercial property policy has at least one:

Answer 231

causes of loss form.

Question 232

Cause of loss form- Basic From VS. Broad Form- which one covers more perils?

Answer 232

The broad form

Question 233

Jodi’s real estate office leases a photocopy machine from an office equipment supplier. Which coverage in Jodi’s building and personal property coverage form would apply if the machine is damaged by a covered peril?

Answer 233

personal property of others

Question 234

Marjorie has a mail-order business and insures her building and its contents under a building and personal property coverage form. The special causes of loss form applies to all covered property. While taking inventory, Marjorie discovers that several cases of stock are missing, so she submits a theft claim. Her claim is:

Answer 234

not covered because the cause of the missing inventory is not known

Question 235

What is a businessowners policy (BOP)?

Answer 235

a “package policy” (combination policy) that provides property AND general liability coverage for small to medium-sized businesses

Question 236

What is a BOP?

Answer 236

Business Owners Policy - provides most if not all the coverage a typical small to medium biz would need

Question 237

Do large businesses buy BOP policies?

Answer 237

No. BOP will not meet large businesses needs

Question 238

When is a business eligible for BOP coverage?(Business Owners Policy)

Answer 238

coverage is based on the size and nature of a business. To qualify for a BOP policy, a business cannot exceed certain limits in physical size and annual revenue

Question 239

What type of businesses are not eligible for BOP coverage, regardless of their size?

Answer 239

Manufacturers, auto repair shops, bars & pubs. amusement places, banks, &self storage storing motor vehicles

Question 240

How many sections are in a ISO Businessowners Policy?

Answer 240

3 - Property, Liability, & Common Policy Conditions

Question 241

What does the common policy conditions section in a BOP policy pertain to?

Answer 241

cancellation, changes, fraud, audits, inspections, other insurance, liberalization, premiums, recovery rights against others, assignment of the policy, and premium audits. (applies to property and liability coverage sections)

Question 242

While a business owners policy combines coverages that might otherwise be written on several forms, it does NOT include coverage for:

Answer 242

workers compensation

Question 243

The BOP covers not only direct damage to buildings & personal property, but also indirect losses like lost business income & extra expenses. True or False?

Answer 243

True

Question 244

Building coverage values losses on what kind of basis?

Answer 244

A replacement cost basis

Question 245

What does Business personal property coverage protect?

Answer 245

protects property in the open or in a vehicle within 100 feet of the building

Question 246

Which property is not covered under a BOP?

Answer 246

money, illegal goods, aircraft or watercraft, trees & fences, valuable papers/records, electronic data, and animals

Question 247

The property section of the BOP provides open or closed perils?

Answer 247

Open. It covers all losses except those that it specifically excludes

Question 248

What is the Utility Service Exclusion in a BOP?

Answer 248

it does not cover loss resulting from electrical power failure- from a source away from the premises

Question 249

When is fungus or mold covered in a BOP policy?

Answer 249

If water used to extinguish a fire create the mold. NOT covered if there is a plumbing leak

Question 250

What is the Product Errors Exclusion in a BOP policy?

Answer 250

no coverage for manufacturing errors that result in worthless or defective products

Question 251

What is the false pretenses or voluntary parting exclusion in a BOP policy?

Answer 251

no coverage for property lost because it was willingly transferred to a person or place beyond the insured premises on the basis of unauthorized instructions.

Question 252

What does the BOP’s inflation guard provision do?

Answer 252

Automatically increases the building coverage limits by 8 percent annually unless the declarations specify a different percentage

Question 253

What does Peak Season Coverage in a BOP do?

Answer 253

increases the business personal property limit by 25 percent (unless the declarations show a different percentage) to accommodate seasonal variations in the insured’s business

Question 254

The “Optional Coverage Deductible” of the BOP applies to what optional coverages?

Answer 254

money & securities, employee dishonesty, outdoor signs, & forgery or alterations

Question 255

Replacement cost coverage only applies when in a BOP?

Answer 255

when the property is actually repaired or replaced. Otherwise, the loss is settled at actual cash value

Question 256

Vacancy for more than 60 consecutive days voids coverage for losses from vandalism, sprinkler leakage, building glass breakage, theft, and attempted theft. True or False?

Answer 256

True

Question 257

What is a party wall?

Answer 257

a shared wall that divides two adjoining buildings owned by different parties

Question 258

The declarations in a BOP give a dollar limit for each category of covered property. True or False?

Answer 258

True

Question 259

Clare, a convenience store owner, accepts a $100 bill from a customer who buys a pack of cigarettes. Her bank tells her the bill is counterfeit. Does her businessowners policy cover this loss?

Answer 259

The money orders and counterfeit money additional coverage provides $1,000 coverage for loss due to the insured having accepted counterfeit money.

Question 260

Which statement is correct about businessowners policy coverage for loss of income from a business interruption?

Answer 260

The BOP covers business income and extra expense coverage when the business premises are inaccessible.

Question 261

The glass expenses additional coverage applies to what?

Answer 261

the expense of temporarily boarding up openings of broken glass that is part of a building, subject to the applicable limit of insurance.

Question 262

What are the 3 catefories of liability coverage in a BOP & what do they pay?

Answer 262

1. business liability coverage- pay damages for which the insured is legally liable, subject to the applicable limit of insurance
2. supplementary payments- pay expenses associated with claims and lawsuits against the insured, which are in addition to the limits of insurance
3. medical expenses arising from an accident on the insured’s premises or involving the insured’s operations, regardless of fault. subject to a limit

Question 263

What does Bodily Injury include?

Answer 263

injury, sickness, disease, and death

Question 264

Personal and Advertising injury consists of what?

Answer 264

Slander, violation of privacy rights, false arrest, or use of another’s advertising idea

Question 265

Supplementary payments are made in addition to the policy limit and cover the cost of what?

Answer 265

THINK LAW SUIT DEFENDED BY THE INSURER investigation & defense (Private investigator fees, attorney’s fees, court costs) * pre and post judgement interest on the amount the insured is ordered to pay

Question 266

When are Medical Expenses paid for on a BOP general liability?

Answer 266

if the incident incurred and was reported within 1 year of it happening. they are paid in connection with an accident on the insured’s premises, without regard to fault

Question 267

When are Medical Expenses NOT paid for on a BOP?

Answer 267

does not apply to the bodily injury expenses of an insured, a tenant, or persons hired, or anyone covered by workers compensation. Also, it does not apply to injuries from physical exercises or sports

Question 268

Who is Insured under a BOP if the named insured is designated an individual?

Answer 268

The named insured & the insured’s spouse are covered

Question 269

Who is insured under a BOP if the insured is a partnership or joint business?

Answer 269

its members and partners and their spouses are covered

Question 270

In a BOP, if the insured is a limited liability company, who is covered?

Answer 270

It’s members & managers

Question 271

The liability risks that the BOP excludes from coverage can still be covered through an endorsement of by a separate policy. True or False?

Answer 271

True

Question 272

Is bodily injury or property damage arising from the transportation of mobile equipment by an auto owned or operated by the insured covered?

Answer 272

NO

Question 273

What is “continuous injury” and is covered under business liability coverage?

Answer 273

It is an injury or damage that occurs during more than one policy period. & yes it is covered under a business liability policy

Question 274

What are the 5 limits of insurance a BOP has?

Answer 274

1. liability expense limit
2. medical expenses limit
3. fire legal liability limit
4. a products-completed operations aggregate limit
5. general aggregate limit

Question 275

Merrill’s insurance agency has an ISO businessowners policy. A customer claims that Merrill failed to recommend the necessary insurance policies for his firm. What will Merrill’s insurer do?

Answer 275

deny coverage- The BOP excludes coverage for liability arising from the insured’s providing or failing to provide professional service.

Question 276

Which is NOT one of the business owners policy’s three categories of liability coverage?

Answer 276

damage to the property of others

Question 277

Which pollution-related liability claim would an ISO business owners policy cover?

Answer 277

carbon-monoxide fumes from a defective furnace that make motel guests ill
- (Despite the breadth of the BOP’s pollution exclusion, it covers bodily injury from fumes emitted by a building’s heating equipment.)

Question 278

The Protective Safeguards Endorsement requires what?

Answer 278

the insured to maintain the working order & protection of the biz (Such as an automatic sprinkler system). The insured cannot neglect the maintenance on these

Question 279

The Utility Services-Direct Damage endorsement in a BOP adds what?

Answer 279

coverage for loss resulting from an interruption of electricity or other utility service (usually excluded in BOP hence the endorsement)

ex: an interruption of electrical supply could ruin perishable food in a restaurant

Question 280

The Utility Services- Time Element endorsement in a BOP adds what?

Answer 280

covers lost income or extra expense that the insured incurs as a result of an interruption in utility service. The interruption must be caused by damage from a covered cause of loss to the type of utility service property identified in the endorsement schedule

Question 281

The Hired Auto and Non owned Auto Liability endorsement in a BOP covers what?

Answer 281

bodily injury or property damage caused by the maintenance or use of a hired auto by the insured or the insured’s employees in the course of the insured’s business. *excludes covering any damage to the rented auto. Only for bodily injury and damage to OTHER vehicles

Question 282

A company executive rents a car to attend a business conference. The car is a:

Answer 282

Hired Auto

Question 283

A pizza parlor employee uses her car to deliver pizzas for her employer. The car is a:

Answer 283

Non owned auto

Question 284

The identity fraud expense coverage endorsement covers stolen property. True or False?

Answer 284

FALSE

Question 285

An employee accidentally damaged a sprinkler head that is part of Jumbo Store’s automatic sprinkler system. The manager shuts off the system’s main valve and notifies the sprinkler company, which schedules the repair for that evening. Shortly before the store closes that night, a fire breaks out in the storeroom. How will the protective safeguards endorsement to Jumbo’s businessowners policy respond to the claim for fire damage?

Answer 285

The policy will cover the loss because the protective system was shut off for less than 48 hours.

Question 286

The Utility Services-direct damage endorsement covers direct damage loss only. True or False?

Answer 286

True

Question 287

Cathy’s business does not own or lease any autos. When necessary, she and her employees use their own cars on business errands. Why should Cathy’s businessowners policy include the hired auto and nonowned auto liability endorsement?

Answer 287

Nonowned auto coverage will protect the business if an employee has an accident while using a personal car on company business.

Question 288

Dairy products in Bette’s ice cream shop would be destroyed if her freezers failed for more than a few hours. So Bette added the utility services-direct damage endorsement, scheduling overhead transmission lines, to her businessowners policy. When the shop loses electrical power due to a mechanical breakdown of the utility company’s equipment:

Answer 288

Bette’s loss will not be covered because mechanical breakdown is not a covered peril

Question 289

Earl’s businessowners policy has an endorsement that excludes coverage for a fire loss if he does not maintain his building’s automatic sprinkler system. Which endorsement is attached to Earl’s BOP?

Answer 289

protective safeguards endorsement

Question 290

Marine Insurance provides what type of coverage?

Answer 290

which provides coverage for the transportation of goods by land (inland marine insurance) and over water (ocean marine insurance) as well as protection of property that has no fixed location

Question 291

What do Marine Insurers call “Floaters”?

Answer 291

which provides coverage for the transportation of goods by land (inland marine insurance) and over water (ocean marine insurance) as well as protection of property that has no fixed location

Question 292

Are Floater Policies Open or Closed perils?

Answer 292

Open Perils - they cover “all risks” except those specified in the policy

Question 293

In case of loss or damage to a part of covered property that consists of several parts, the most the insurer will pay is the value of the lost or damaged part.

True or False?

Answer 293

True

Question 294

Accounts Receivable Floater does what?

Answer 294

pays the increased costs of collecting accounts, the cost to reestablish the accounts. The destruction of accounts receivable records can make it difficult or impossible for a business to collect on accounts due

Question 295

Bailees’ Customers Floater:

Answer 295

A bailee coverage floater covers customers’ property for loss or damage by a covered peril while it is in the insured bailee’s custody, regardless of whether the bailee is legally liable for the loss. Coverage is available on either a named perils or open perils basis.

Question 296

Commercial Articles Floater:

Answer 296

The commercial articles coverage form insures either camera equipment or musical instruments used commercially or by nonprofit organizations (e.g., movie producers, professional musicians, orchestras, school districts, and churches).

Question 297

Contractors’ Equipment Floater:

Answer 297

coverage on equipment and tools ranging from gigantic earthmovers and tunneling equipment to wrenches and hammers. Because equipment tends to depreciate quickly, contractors’ equipment policies are typically written on an actual cash value basis (not a replacement cost basis)

Question 298

Electronic Data Processing (EDP) Floater:

Answer 298

cover computer equipment, software, and data. provide open perils coverage

Question 299

Installation Floater:

Answer 299

covers property while it is in transit and while it is being installed and tested during its installation. The floater usually provides open perils coverage

Question 300

Signs Floater:

Answer 300

covers lighted signs owned by the insured. Coverage does not apply to billboards or other signs that are fixed and not lighted. Open perils coverage

Question 301

The protection of records provision in the ISO valuable papers and records form requires that insured papers and records be kept in the containers described in the declarations whenever the premises is closed for business and whenever the records are not in use.

True or False?

Answer 301

True

Question 302

There are two causes of lost for which carriers are generally not liable:

Answer 302

1. “acts of God,” such as a flood or tornado

2. fault of the shipper, such as improper packing of cartons

Question 303

Motor truck cargo and transit coverage forms generally do include a coinsurance provision.

True or False & why?

Answer 303

False. generally do not include a coinsurance provision because, as a practical matter, insurers presume shippers want to cover the full value of property for which they are liable

Question 304

Can Insureds can have an insurable interest in property they don’t own, as long as they are liable for its safe transit?

Answer 304

Yes

Question 305

After the insurer receives the sworn proof of loss from the insured, the insurer will give the insured notice of its intentions within _____ days.

Answer 305

30

Question 306

Inland Marine Insurance refers to what?

Answer 306

Floaters because they float in transit

Question 307

Five years ago, Joe bought a piece of business equipment that he insured under a commercial inland marine floater. When a water leak damaged the equipment, its actual cash value was $1,000, but it would cost $5,000 to replace it. A qualified repairman bid $2,000 to repair the water damage. Disregarding any deductibles that might apply, what will Joe’s insurer pay?

Answer 307

$1,000

(the ACV)

Question 308

Adeline purchased a personal articles floater that covers her ring because her homeowners policy, form HO 3, has a sublimit on theft of jewelry. Why should Adeline also cover her expensive camera under the personal articles floater?

Answer 308

The floater includes coverage for breakage, which her homeowners policy would not cover.

Question 309

If the owner of a dry-cleaning shop wishes to insure customers’ clothes in her shop, what kind of floater should she buy?

Answer 309

bailees’ customers floater

Question 310

Hull insurance in regards to Marine insurance does what?

Answer 310

protects a ship’s owner against loss to the vessel

Question 311

Cargo insurance in regards to Marine insurance does what?

Answer 311

protects an owner of cargo being transported on a ship

Question 312

In an ocean marine policy, the insured party is referred to as the:

Answer 312

Assured

Question 313

What is “particular average” in regards to Marine insurance?

Answer 313

a partial loss sustained by a specified cargo or vessel (think percentage %)

Question 314

The adventure clause requires what?

Answer 314

requires the insured to provide the insurer with a detailed description of the voyage

Question 315

“Perils of the Sea” refers to what?

Answer 315

extraordinary forces of nature (e.g., heavy weather, gale winds, and large waves) that can result in the sinking, stranding, or collision of the vessel.

Question 316

Maritime law requires that all parties participating in a venture share the loss when one party’s goods are sacrificed to save the venture.

True or False?

Answer 316

True

Question 317

Collision Liability clause in regards to Marine insurance protects what?

Answer 317

the insured against loss to another ship or its cargo resulting from a collision

Question 318

pilotage and towage clause:

Answer 318

he insurer is obligated to pay collision damages related to a pilot’s or tugboat’s actions in the midst of towing

Question 319

Salvage charges in regards to

Ocean Marine insurance are what?

Answer 319

expenses paid to third-party “salvors” (which may be other ships in the area) that render assistance in saving property exposed to loss.

Question 320

In the context of ocean marine insurance, freight is?

Answer 320

is the charge for carrying goods.

Question 321

What is a “general charge” in regards to Ocean Marine Insurace?

Answer 321

is a loss incurred for the common good that is shared by all parties to the venture.

Question 322

What kind of insurance is the coverage in an ocean marine insurance policy that protects a shipowner against a covered loss to the vessel but not to its cargo?

Answer 322

hull insurance

Question 323

After striking a shoal, the freighter Benita was in danger. The fishing vessel Flossie was in the area and provided assistance. Flossie then billed the Benita to recover its expenses, which marine insurers refer to as:

Answer 323

Salvage charges which are are expenses paid to third-party “salvors” (including other ships) who render assistance in saving property that was exposed to loss.

Question 324

Twenty percent of Aubrey’s cargo was damaged when the ship transporting it encountered a violent storm in the Bermuda triangle. In terms of ocean marine insurance, what is this partial loss to Aubrey’s cargo called?

Answer 324

a particular average

Question 325

What does ISO stand for?

Answer 325

Insurance Services Office, inc

Question 326

Is a barn considered a dwelling?

Answer 326

No because a barn is used in agricultural operations while a “dwelling” is a residential building

Question 327

The Farm Property-Barns, Outbuildings and Other Farm Structures Coverage Form (FP 00 14) can cover all the following types of structures, EXCEPT:

Answer 327

field or pasture fences

Question 328

When reading his livestock coverage form, Tad discovers that it excludes coverage for some perils he thought would be covered and covers some perils he thought would be excluded. For instance, he finds that the policy covers loss to covered livestock caused by:

Answer 328

flood

Question 329

Why do the ISO farm forms combine homeowners coverage with property & liability coverage?

Answer 329

because Farms have residential as well as commercial risks

Question 330

The Farm Liability Coverage Form can be a stand-alone policy or combined with farm property forms to form a package policy.

True or False?

Answer 330

True

Question 331

Coverage for personal and advertising injury is on an occurrence basis.

True or False?

Answer 331

False. It’s on an offense basis

Question 332

Medical payments coverage extends to reasonable medical expenses incurred within_____ years of the accident that causes bodily injury.

Answer 332

three

Question 333

The three basic coverages for Farm Insurance are:

Answer 333

bodily injury and property damage (Coverage H), personal and advertising injury (Coverage I), and medical payments (Coverage J).

Question 334

NFIP stands for what?

Answer 334

National Flood Insurance Program

Question 335

In Write Your Own (WYO) policies, who has full responsibility for covering losses?

Answer 335

The Federal Government

Question 336

Who is FEMA & What do they do?

Answer 336

Federal Emergency Management Agency. They set the flood insurance coverages and premium rates & they are the same regardless of which insurer issues the policy

Question 337

For its residents to be eligible for flood coverage, a community must participate in the NFIP program.

True or False?

Answer 337

True

Question 338

What is FIRM & what doees it do?

Answer 338

Flood Insurance Rate Map which identifies all of the flood hazard zones in the community

Question 339

For a building to be insurable under a flood policy, it must:

Answer 339

1. have two or more outside rigid walls
2. have a fully secured roof
3. have at least 51% OF the property above ground level
4. resist flotation, collapse, and sideways motion

Question 340

What type of buildings/structures are ineligible for flood insurance coverage?

Answer 340

1. ones that violet a flood plan management law
2. container structures
3. when 50% or more of the structure is below ground level
4. boat repair docs
5. buildings constructed entirely over water
6. greenhouses (unless has two rigid walls and a roof)

Question 341

To be eligible for coverage, contents must be located in a fully enclosed building or secured to prevent flotation out of the building.

True or False?

Answer 341

True

Question 342

Coverage on Building property (Coverage A) under Flood Insurance includes what?

Answer 342

additions and extensions attached to the building by means of a common wall, stairway, walkway, or roof. It also includes attached fixtures, machinery, and equipment within the building

Question 343

Besides applying at the location described on the declarations page, building property coverage also applies at another location—for up to _______ days—if the property is moved there to protect it from the imminent danger of flood.

Answer 343

45

Question 344

Covered Personal Property (Coverage B) under a Flood Insurance policy covers what?

Answer 344

personal property that is inside the fully enclosed building described in the application. It also covers, at the insured’s option, property owned by guests or servants.

Question 345

How does one obtain flood coverage under the NFIP?

Answer 345

directly through the insurer who writes their other property coverage

Question 346

Mortgage lenders require flood insurance on property in high-risk flood zones.

True or False?

Answer 346

True

Question 347

What are the 3 standard flood insurance policy coverage forms?

Answer 347

the dwelling form, general property form, and residential condominium building association policy (RCBAP) form

Question 348

For flood coverage to apply, the flood must be what?

Answer 348

a general condition that covers two or more acres of normally dry land area or two or more properties (at least one of which is the insured’s property)

Question 349

In a flood policy, coverage is provided for loss of use of the covered property, lost revenue or profits, loss from interruption of business or production, or any other economic loss.

True or False?

Answer 349

FALSE. there is no coverage for such things under a flood policy

Question 350

The NFIP provides no coverage for what?

Answer 350

no coverage for loss of use, lost revenue, or lost profits

Question 351

under an NFIP Residential Condominium Building Association Policy, if desired, provides what?

Answer 351

provides coverage for commonly owned contents for residential condominium buildings with 75 percent or more of their total floor area in residential use

Question 352

The NFIP makes flood insurance available only on properties located in participating communities.

True or False?

Answer 352

True

Question 353

After a flood severely damaged Serena’s home, floodplain management ordinances required her to reconstruct it at a higher elevation. Some or all of Serena’s expenses to comply with these ordinances may be available from what kind of coverage from her National Flood Insurance Policy?

Answer 353

increased cost of compliance coverage

Question 354

When is Equipment breakdown insurance needed?

Answer 354

must be purchased to close these potentially important gaps in insurance coverage. AKA covering boilers.

intended to pay for unexpected breakdowns of equipment

Question 355

In the equipment breakdown policy, which of the following losses is subject to a sublimit regardless of the policy’s coverage limits?

Answer 355

data and media losses

Question 356

Which of the following does NOT qualify as covered equipment under the equipment breakdown coverage form?

Answer 356

laboratory beakers

Question 357

Excess and surplus lines (E&S) insurance is:

Answer 357

any type of coverage that cannot be placed with an insurer admitted to do business in a certain state

Question 358

Excess and surplus lines (E&S) insurance is:

Answer 358

any type of coverage that cannot be placed with an insurer admitted to do business in a certain state (risks under these are usually unusual i.e. earthquake, watercraft, windstorm insurance)

Question 359

Excess and surplus lines (E&S) marketplace usually involves a “wholesale agent or broker” who does what?

Answer 359

they middle man between the insurer and the retail agent who is admitted in a different state

Question 360

What is a surplus lines broker?

Answer 360

a broker who is licensed to place coverage with non admitted insurers (insurers not licensed to do business in a given state)

Question 361

What does a managing general agent (MGA) do?

Answer 361

perform certain functions ordinarily performed only by insurers, such as binding coverage, underwriting and pricing, appointing retail agents, and handling claims

Question 362

Premium taxes must be collected and remitted to each state involved in an E&S transaction. This is the responsibility of the surplus lines licensee.

True or False?

Answer 362

True

Question 363

A boat owners policy generally covers watercraft up to _____ feet in length

Answer 363

26 (anything above uses a “yacht policy”)

Question 364

Liability coverage in regards to a boat owners policy:

Answer 364

the insurer promises to pay covered damages that an insured becomes legally obligated to pay arising from the operation, maintenance, or use of the described watercraft or newly acquired watercraft

Question 365

What is crop-hail insurance?

Answer 365

A common type of crop insurance is crop-hail insurance, which is often used to fill the gap in other types of crop insurance that may not cover hail

Question 366

A standard crop-hail policy, offered and underwritten by private insurers, is not subsidized by the federal government.

True or False?

Answer 366

True

Question 367

Crop-hail insurance may be purchased at any stage of the growing season prior to harvest as long as ____ percent of the crop is visible and provided the crop has not already suffered hail damage

Answer 367

50

Question 368

Federal Crop Insurance does what?

Answer 368

protects farmers against production or revenue losses when a particular insured crop does not meet a preset production guarantee

Question 369

Malcolm is a surplus lines broker who places a customer’s risk with a nonadmitted insurer who later files for bankruptcy just as the insured filed a claim. Which of the following will likely be responsible for payment of the claim?

Answer 369

Malcolm

Question 370

The uninsured watercraft coverage of a boatowners insurance policy:

Answer 370

pays compensatory damages arising from bodily injury that insured Jonathon is legally entitled to recover from the owner or operator of another watercraft that is uninsured

Question 371

Dewey Insurance Company is a nonadmitted insurer that is on a state’s white list. From this information, it seems most likely that Dewey:

Answer 371

writes excess and surplus lines insurance in that state

Question 372

What does Short Rate Cancellation do?

Answer 372

discourages the named insured from canceling the policy before its normal expiration date (think a fee)

Question 373

What is a flat cancellations?

Answer 373

he cancellation of an insurance policy or bond as of its effective date, before the insurer has covered anything

Question 374

Does a flat cancellation require a full return of the premium?

Answer 374

Yes - because the insured has never been covered under the policy

Question 375

What is a Pro Rata Cancellation?

Answer 375

cancellations where the insurer has to return the full proportion of unearned premium for the unexpired term of the policy, without penalty for cancellation

Question 376

What is the difference between unearned and earned premium?

Answer 376

earned premium is the portion that the insurer has collected while unearned premium is the remainder of the premium that has been paid

Question 377

Who is the first party to an insurance company?

Answer 377

the insured

Question 378

Who’s a third party to an insurance contract?

Answer 378

someone who is not listed in the contract but what affected by someone in the contract. (think pedestrian getting hit ina crosswalk by a car)

Question 379

Shauna’s insurance premium is lower than Louise’s. Shauna has had no traffic citations or accidents during the past three years. Louise has a poor driving record in comparison. Shauna’s premium is lower because her insurer probably uses what rating system?

Answer 379

Merit rating

Question 380

In deciding what insurance his company should buy, Ward bases his decisions on the company’s past loss history. What is the biggest disadvantage of this approach?

Answer 380

It overlooks the types of losses that have not happened yet but could happen in the future.

Question 381

Based in New Jersey, Insurance Services Office (ISO) provides several important services in California. However, ISO does not

Answer 381

ISO does not rate insurance companies’ financial stability

Question 382

Estelle transferred the legal title to her home to her son Jimmie. However, she cannot transfer her insurance policy to Jimmie without the insurer’s permission because of what clause in her policy?

Answer 382

Assignment

Question 383

Colby purchased an open-perils property policy on the building that houses his business and a separate named-perils policy on his business personal property. Some personal property, such as his outdoor furniture, is covered by both policies. With respect to the items that both policies cover, Colby’s policies are

Answer 383

Nonconcurrent - Two policies that cover the same property for different causes of loss are nonconcurrent.

Question 384

Colossal Casualty has introduced a new property insurance policy form that provides broader coverage with no increase in premium. Its current policyholders will also benefit from these coverage enhancements if their policies include what provision?

Answer 384

Liberalization

Question 385

When is a Return of Premium applied?

Answer 385

When an insurance policy is terminated before its expiration date

Question 386

Differences between HO3 & HO5:

Answer 386

The HO-3 covers personal property on a specified perils basis, which means that a loss is covered if it is caused by one of the causes listed in the policy. The HO-5 provides broader coverage on personal property by insuring this property on an open-perils basis, meaning that a loss is covered unless the cause of the loss is excluded.

Question 387

The following types of property can be scheduled:

Answer 387

Jewelry
Furs and garments
Cameras and related items
Musical instruments and related items
Silverware and related items
Golfer’s equipment
Fine arts
Postage stamps
Rare and current coins

Question 388

Insured Perils Under Standard Fire Policy:

Answer 388

Fire & lightning

Question 389

Differences between HO4 & HO6:

Answer 389

The HO-4 provides no building coverage; tenants don’t need it (apartment/renters coverage)

Question 390

Subject to policy limits, deductibles, or other applicable constraints, loss to property valued on a replacement cost basis is covered for its full replacement cost if the applicable limit of insurance in the policy equals at least 80 percent of the property’s replacement cost value.

True or False?

Answer 390

True

Question 391

The specified additional amount of insurance for coverage a—dwelling (HO 04 20) endorsement does what?

Answer 391

provides extended replacement cost coverage, increases the dwelling limit when the loss to the building insured under the dwelling coverage is greater than the dwelling limit listed on the declarations,

Question 392

when is a FAIR plan issued?

Answer 392

The FAIR Plan issues insurance as a last resort, and it should be used only after a diligent effort to obtain coverage in the voluntary market has been made.

Question 393

Angela’s personal articles floater, like most inland marine policies, excludes losses caused by

Answer 393

Normal wear and tear

Question 394

Building contractors’ costs skyrocket when many homes in the same area are damaged by a wildfire. Therefore, some California insurers have offered homeowners policies with extended replacement cost coverage, in which the insurer

Answer 394

Agrees to pay 25 to 50 percent more than the policy limit, if necessary, to replace the covered property.

Question 395

In the ________ system, the insurer’s agents are actually employees. They can receive a salary, be paid on commission, or both

Answer 395

direct writer

Question 396

Agent Blondell is offering a free television to every applicant who agrees to buy insurance through his agency. In most states, this is an illegal practice known as

Answer 396

Rebating

Question 397

What rating method makes modifications to manual rates to reflect the unique characteristics of each risk?

Answer 397

Merit rating

Question 398

To void a policy, misrepresentation or concealment must be which of the following?

Answer 398

Concern material facts.

Question 399

An agreement between the insured and the insurer that certain conditions will be met is which of the following?

Answer 399

Warranty

Question 400

Walt and Joanna are co-owners of a bagel shop. Both Walt and Joanna are listed in the declarations of the policy that insures the business, with Joanna’s name appearing first. The declarations also list First State Bank, which has an outstanding loan on the business. Who is considered a named insured on the policy?

Answer 400

Both Walt and Joanna

First State Bank has an insurable interest as the mortgagee, but is not a named insured

Question 401

Renata’s home is demolished in a fire that started when a neighbor misdirected the fireworks he set off to celebrate the Fourth of July. Renata’s insurance company pays her for the damage, and then files suit against the neighbor to recover the amount it paid for the loss. This is an example of the application of what policy condition?

Answer 401

Subrogation

Question 402

Property insurance provides protection against _____ claims, and liability insurance protects against ______ claims

Answer 402

first party; third party

Question 403

Adding a scheduled personal property endorsement or a personal articles floater to a personal policy provides better coverage for eligible types of _______ items.

Answer 403

valuable

Question 404

An action that, in a natural and continuous sequence, produces a loss is the

Answer 404

Proximate cause.

Question 405

Liability that is imposed as a matter of law without regard to negligence is called what?

Answer 405

Absolute liability

Question 406

Liability that an insured incurs because of the actions of others, such as employees, is called what?

Answer 406

Vicarious liability

Question 407

Theresa, a spectator at a baseball game, is injured when an errant ball hits her in the head. She sues the stadium owners for negligence. Which one of the following defenses against negligence would the owners probably use?

Answer 407

Assumption of risk - applies when a person knowingly exposes himself or herself to danger or injury.

Question 408

As a result of a successful lawsuit, Agnes receives $10,000 to cover her specific losses, an additional $40,000 for pain and suffering, and because the defendant was considered to have acted with willful disregard for others’ safety, Agnes was awarded an additional $75,000. This additional $75,000 award can best be described as what type of damages?

Answer 408

Punitive damages

Question 409

Liability coverage does pay for property or bodily injury to an insuredone’s own property and medical insurance is needed for that.

True or False?

Answer 409

False- Liability coverage DOES NOT pay

Question 410

Four months ago Betty purchased a strip mall building that can house five businesses of equal size. Although she has been trying to find tenants, only one of the five units is in use when vandals break into one of the empty units causing $10,000 in damage. Betty has a standard building and personal property coverage form with a vacancy clause. Assuming the amount of building insurance is adequate and vandalism is a covered peril, and ignoring deductibles, how much will Betty’s insurer pay for this loss?

Answer 410

nothing - Since the building has been vacant (less than 31 percent occupied) for more than 60 days and the loss was caused by vandalism, this loss is not covered.

Question 411

Agustin’s building has an insurable value of $100,000, but he has insured it for only $80,000 in a property policy with a 90 percent coinsurance clause. If Agustin’s building has a $10,000 loss caused by a covered peril, the insurer will pay him (ignore any deductible that might apply)

Answer 411

$8,889 - To avoid a coinsurance penalty, Agustin should have carried at least $90,000 insurance. He will recover $80,000/$90,000, or 8/9 of his $10,000 loss, which comes to $8,889.

Question 412

Vicente’s business property is insured by a standard building and personal property coverage form to which no endorsements or optional coverages apply. This tells us that Vicente’s building and personal property are covered

Answer 412

On an actual cash value basis and are subject to a coinsurance provision.

Question 413

Joaquin plans to buy a businessowners policy (BOP) to cover the building and contents of his small retail store. Unless modified by endorsement, a current ISO BOP

Answer 413

Provides open-perils coverage on the building and contents.

Question 414

The Special Dwelling policy form provides which of the following?

Answer 414

Open peril coverage for the dwelling and broad coverage for personal property

Question 415

Which of the following Other Coverages is not included in the Basic Dwelling coverage form?

Answer 415

Collapse

Question 416

After a PAP has been in effect for at least _____ days or has been renewed, the insurer can cancel it only for nonpayment of premium, for suspension or revocation of the insured’s driver’s license, or because the policy was obtained through material misrepresentation.

Answer 416

60

Question 417

Which is better? Compulsory insurance laws or financial responsibility laws in a PAP?

Answer 417

Compulsory insurance laws are better than financial responsibility laws because they provide more protection to the public against loss.

Question 418

Which homeowners form provides broad coverage for both the dwelling and its contents?

Answer 418

HO-2

Question 419

What is the limit on coverage for grave markers under the homeowners policy?

Answer 419

$5,000

Question 420

_________ protects the vehicle from loss due to fire or collision. __________ protects the owner or operator if the vehicle is involved in an accident that results in injury or death.

Answer 420

Property Insurance; Liability Insurance

Question 421

What is a newly acquired auto?

Answer 421

an auto that the named insured takes ownership of during the policy term

Question 422

Carol has been convicted twice for driving while intoxicated (DWI). Insurers refuse to issue a personal auto policy (PAP) to cover her husband Perry’s car unless he is willing to buy a policy with a:

Answer 422

named driver exclusion

Question 423

Because Hallie’s employees often use their personal vehicles for business-related errands, the liability coverage of her business auto policy (BAP) should show either symbol 1 or:

Answer 423

symbol 9

Question 424

What is the standard deductible under the regular program of the National Flood Insurance Program?

Answer 424

$500

Question 425

What is the maximum amount of coverage that can be purchased for a single-family home under the emergency Flood insurance program?

Answer 425

$35,000 for buildings and $10,000 for contents

Question 426

In addition to maximum floor space, the BOP eligibility rules limit eligible risks to what maximum?

Answer 426

$3 million in annual sales

Question 427

The fellow servant rule defense states:

Answer 427

that an employer is not liable for an injury to an employee that results solely from the negligence of a fellow employee

Question 428

The exclusive remedy provision stipulates that

Answer 428

an injured employee is legally entitled to the workers compensation benefits provided by law but is not permitted to sue the employer.

Question 429

Which one of the following federal acts provides employment-related benefits to employees of interstate railroads?

Answer 429

Federal Employers Liability Act

Question 430

Will is employed as a roofer for Shingle-Minded Roofing. While working one day, Will falls from a roof and is injured. When he seeks to file a workers compensation claim, he discovers that Shingle-Minded failed to secure workers compensation insurance which is a violation of state law. In most states, what should Will do?

Answer 430

Will should seek statutory workers compensation benefits and sue his employer for negligence if allowed by statute.

Question 431

Coverage for seamen protected by the Jones Act can be obtained under a standard workers compensation policy by adding what kind of endorsement?

Answer 431

a maritime coverage endorsement

Question 432

For how long after the date of a direct physical loss will the insurance company pay for extra expenses under the extra expense additional coverage?

Answer 432

12 months

Question 433

Unless a higher limit is shown in the declarations, what is the limit on coverage for business income from dependent properties?

Answer 433

$5,000

Question 434

What is Embezzlement?

Answer 434

theft by an employee, typically achieved in the course of the employee’s performance of his or her duties.