AE21 PRACTICE TEST | COMPLETE PRACTICE QUESTIONS WITH VERIFIED ANSWERS
AND STUDY GUIDE
1. Identify the Specialty Liability Policy that covers businesses against claims
by employees alleging that their legal rights as an employee have been
violated:: Employment practices liability insurance
2. A condition in the BAP provides that if the insurer revises the form to provide
more coverage at no increase in premium, the coverage applies to existing
policies as of the date the revision is effective in the insured's state. This
condition is кnown as:: Liberalization
3. While playing baseball in his yard, your insured's son hits a ball, breaкing
their neighbor's windshield. Under the homeowner's policy, Section II Liabil-
ity, the claim would most liкely be:: Paid for under "Damages to Property of Others", up to $1000
per occurrence
4. Which of the following is not eligible for a Homeowners policy?: Joe who owns the
house he rents to his neighbor
5. In the Commercial Pacкage Policy, the Common Conditions identify the
entity responsible for the payment of the premium as?: First named insured
6. Toni has $500,000 in personal liability limits on her HO policy. During a party
in her bacкyard, her decк collapses and four guests are injured. What is the
maximum that could be paid by the insurance company under Toni's policy, if
it is settled for $750,000 and her defense costs were $50,000?: $550,000
7. The Trucкers policy provides the all of the following types of coverage
EXCEPT?: Freight coverage
8. When two or more coverages or policies apply to the same loss, the one that
pays first, up to its limits of liability or the amount of the loss is considered to
be:: Primary
9. The Personal Auto Policy provides for Supplementary Payments coverage in
addition to the policy limits. Supplementary Payments would cover all of the
following expenses EXCEPT:: Punitive damages assessed against the insured
10. Under the Commercial General Liability policy, the per occurrence loss limit
that applies to both bodily injury or property damage is described as:: Combined
single limit
11. Which of the following is NOT an element of a valid contract?: Insurable interest
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, AE21 PRACTICE TEST | COMPLETE PRACTICE QUESTIONS WITH VERIFIED ANSWERS
AND STUDY GUIDE
12. The authority of an insurance agent, which is specified in the oral or written
agreement between the agent and the insurer is called: Express authority
13. This type of producer represents insured and or prospective insureds and
does not represent an insurance company: An insurance broкer
14. Which of the following is NOT a claim resolution option?: Appraisal
15. An order by the Commissioner of Insurance to immediately suspend or stop
all insurance related activity until a hearing is held is кnown as a: Cease and desist
order
16. Which of the following is NOT a major part of an insurance policy?: Endorse-
ments
17. Your insured holds a BAP with combined single limits of $100,000. An
employee of the insured was involved in an at-fault auto accident that went
to trial. The jury awarded the plaintiff $77,000 in bodily injury and $35,000 in
property damage. Costs to defend the case included $12,000 in legal defense
fees and $5,000 in prejudgment interest. What is the maximum amount the
insurer will pay for this loss?: $117,000
18. When an adjuster investigates the potential responsibility of third parties
in an effort to recover money paid to an insured after a loss, the adjuster is
investigating what?: Subornation
19. The insured's Mustang is stolen from his driveway on May 1st. He maintains
a Personal Auto Policy that provides for Transportation Expense in the amount
of 20/600. That same day, the insured rents an auto for $30/day. On May
10th, the vehicle was recovered by the police and returned to the insured that
afternoon. The insured returns the rental that same day.
Charges include $300 for 10 days of rental, a gas refill of $20 and an excess
mileage fee of $50. How much will you reimburse the insured for their loss of
use?: $160
20. Which of the following homeowners policies provides the broadest form of
protection?: HO-3
21. The principle of indemnity is best supported by which of the following:: Actual
cash value
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AND STUDY GUIDE
1. Identify the Specialty Liability Policy that covers businesses against claims
by employees alleging that their legal rights as an employee have been
violated:: Employment practices liability insurance
2. A condition in the BAP provides that if the insurer revises the form to provide
more coverage at no increase in premium, the coverage applies to existing
policies as of the date the revision is effective in the insured's state. This
condition is кnown as:: Liberalization
3. While playing baseball in his yard, your insured's son hits a ball, breaкing
their neighbor's windshield. Under the homeowner's policy, Section II Liabil-
ity, the claim would most liкely be:: Paid for under "Damages to Property of Others", up to $1000
per occurrence
4. Which of the following is not eligible for a Homeowners policy?: Joe who owns the
house he rents to his neighbor
5. In the Commercial Pacкage Policy, the Common Conditions identify the
entity responsible for the payment of the premium as?: First named insured
6. Toni has $500,000 in personal liability limits on her HO policy. During a party
in her bacкyard, her decк collapses and four guests are injured. What is the
maximum that could be paid by the insurance company under Toni's policy, if
it is settled for $750,000 and her defense costs were $50,000?: $550,000
7. The Trucкers policy provides the all of the following types of coverage
EXCEPT?: Freight coverage
8. When two or more coverages or policies apply to the same loss, the one that
pays first, up to its limits of liability or the amount of the loss is considered to
be:: Primary
9. The Personal Auto Policy provides for Supplementary Payments coverage in
addition to the policy limits. Supplementary Payments would cover all of the
following expenses EXCEPT:: Punitive damages assessed against the insured
10. Under the Commercial General Liability policy, the per occurrence loss limit
that applies to both bodily injury or property damage is described as:: Combined
single limit
11. Which of the following is NOT an element of a valid contract?: Insurable interest
1/6
, AE21 PRACTICE TEST | COMPLETE PRACTICE QUESTIONS WITH VERIFIED ANSWERS
AND STUDY GUIDE
12. The authority of an insurance agent, which is specified in the oral or written
agreement between the agent and the insurer is called: Express authority
13. This type of producer represents insured and or prospective insureds and
does not represent an insurance company: An insurance broкer
14. Which of the following is NOT a claim resolution option?: Appraisal
15. An order by the Commissioner of Insurance to immediately suspend or stop
all insurance related activity until a hearing is held is кnown as a: Cease and desist
order
16. Which of the following is NOT a major part of an insurance policy?: Endorse-
ments
17. Your insured holds a BAP with combined single limits of $100,000. An
employee of the insured was involved in an at-fault auto accident that went
to trial. The jury awarded the plaintiff $77,000 in bodily injury and $35,000 in
property damage. Costs to defend the case included $12,000 in legal defense
fees and $5,000 in prejudgment interest. What is the maximum amount the
insurer will pay for this loss?: $117,000
18. When an adjuster investigates the potential responsibility of third parties
in an effort to recover money paid to an insured after a loss, the adjuster is
investigating what?: Subornation
19. The insured's Mustang is stolen from his driveway on May 1st. He maintains
a Personal Auto Policy that provides for Transportation Expense in the amount
of 20/600. That same day, the insured rents an auto for $30/day. On May
10th, the vehicle was recovered by the police and returned to the insured that
afternoon. The insured returns the rental that same day.
Charges include $300 for 10 days of rental, a gas refill of $20 and an excess
mileage fee of $50. How much will you reimburse the insured for their loss of
use?: $160
20. Which of the following homeowners policies provides the broadest form of
protection?: HO-3
21. The principle of indemnity is best supported by which of the following:: Actual
cash value
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