ADJUSTER PRO TEXAS STUDY EXAM GUIDE

ADJUSTER PRO TEXAS STUDY EXAM GUIDE All of the following pieces of information can be found in the conditions section of an insurance policy EXCEPT: - CORRECT ANSWER-Causes of loss that are not covered Which of the following best defines the principle of indemnity? - CORRECT ANSWERAfter a loss, the insured should be restored to his approximate financial condition before the loss SureTrust Insurance was founded and operates in Texas. In Texas, Suretrust is considered - CORRECT ANSWER-a domestic insurer What is a reserve, in insurance terms? - CORRECT ANSWER-A pool of collected premiums that the insurer sets aside to pay claims Which of the following would you find in the Conditions section of an insurance policy? - CORRECT ANSWER-The insured's duty after a loss Which of the following is found in the declarations page of an insurance policy? - CORRECT ANSWER-The name of the insured party Which of the following refers to being restored to the financial condition you were in before a loss? - CORRECT ANSWER-Indemnification Dr. Nelson routinely schedules her patients for lab tests that they dont need so she can charge their insurers for more money. Dr. Nelson is: - CORRECT ANSWER-committing health insurance fraud Six Starts Development Company has just purchased several large properties in Las Vegas. As a result of this large purchase, they are a little short on money and decide to save money by not purchasing insurance on their new properties. Six Stars is practicing: - CORRECT ANSWER-Risk retention Which of the following people committed soft fraud? - CORRECT ANSWER-Rafael accidentally slipped on a wet floor at the supermarket. Although his only injury was a sprained ankle, he claimed he had back and neck pain when he sued the supermarket in an effort to get more money in the settlement. When a car stops short in front of Mike's car, he manages to hit the brakes in time and avoids a collision. To Mike's surprise, the other driver then throws the car into reverse and backs into Mike's car! The other drivers actions are an example of: - CORRECT ANSWER-Hard fraud When Louise goes online and fills out phony applications with XYZ Auto Insurance in order to print the temporary insurance cards and sell them for a profit on the black market, she is: - CORRECT ANSWER-Committing hard fraud Lucy has insurance on an expensive necklace she likes to wear to work every day. After work, she takes it off and leaves it in her car's cupholder so she can put it back on in the morning on her way to work. Lucy's behavior would be considered a: - CORRECT ANSWER-Morale hazard When an insurer issues an insurance policy, the actual item, person, or organization that is being insured is called the: - CORRECT ANSWER-Risk Which of the following situations does not involve an instance of "pure risk" - CORRECT ANSWER-Loss of money invested in the stock market Which of the following is an example of how some insurers are fighting back against insurance fraud? - CORRECT ANSWER-Starting fraud busting units staffed with former detectives and police officers Which of the following is NOT a form of insurance fraud? - CORRECT ANSWERIncreasing your insurance coverage when you think a loss is likely Steve has just purchased a wedding ring for his new bride. If something were to happen to the ring, he'd be out of a lot of money, so he purchases an insurance policy. He is able to do this because: - CORRECT ANSWER-The ring is a pure risk Haley takes a bottle of water into a store, pours some of it on the floor when no one is looking, and then pretends to slip and fall. She cries out for help in apparent pain until someone comes to her aid. She then sues the store for her fake injury in an effort to collect an insurance settlement. What has Haley committed? - CORRECT ANSWERHard fraud After an earthquake, Jake's home is still standing, but it is a little shaken. The damage is not extensive but Jake wants to cash in on the situation, so he takes a sledgehammer to some of his extra belongings and adds them to his claim. Jake has committed: - CORRECT ANSWER-Property insurance fraud Which of the following is an example of a hazard? - CORRECT ANSWER-Sandra's home is in an area of Los Angeles that is often hit by earthquakes Risk avoidance is a risk management technique that: - CORRECT ANSWER-Eliminates risk An "occurrence" is defined as: - CORRECT ANSWER-An unexpected event that causes loss When Sally applies for an auto policy, her agent issues her a _______ so that she can benefit from insurance protection while he underwrites the policy. - CORRECT ANSWER-Binder Jane's shed burns to the ground during a tornado, when the high winds break a wall of the shed, knocking over a lantern inside. What is the proximate cause of the loss? - CORRECT ANSWER-Wind During a storm, lightning strikes a tree in Harry's yard and starts a fire that spreads to his shed where he keeps all his equipment for his landscaping business. In addition to the shed, Harry has to purchase all new equipment to stay in business. The cost to replace the equipment would be considered: - CORRECT ANSWER-A direct loss Clark is filling out an application for an insurance policy. The application asks for his birth date, and Clark writes 1/24/67. His actual birthday is 1/24/63, but he likes to appear younger so he uses a different date. This would be called: - CORRECT ANSWER-Misrepresentation Jason's auto policy states that the insurer may cancel coverage if a premium is more than 30 days late. However, Jason is currently more than 30 days late, and has been so five times in the last year, and his insurer has done nothing about it. When Jason gets into an accident and files a claim, which of the following is most likely to happen? - CORRECT ANSWER-The insurer will pay the claim because of the implied waiver they have made by not canceling Jason's policy the previous times he was late with his payments. What is a binder? - CORRECT ANSWER-Temporary coverage for an insurance applicant until the policy is issued In order to qualify for an insurance policy, Lydia's Fine Jewels must agree to have a security guard on the premises 24/7. This is called a: - CORRECT ANSWER-Warranty Which of the following statements about the principle of estoppel is TRUE? - CORRECT ANSWER-Estoppel protects the insured party from an insurer who initially approves coverage, but then later denies coverage after the insured pays for repairs. Driving home after a 14-hour shift Sam falls asleep at the wheel and plows into Sandra's home, causing extensive damage to the East wall and roof. As a result, Sandra and her family must move into a hotel until the repairs are completed. The cost of staying in a hotel is: - CORRECT ANSWER-An indirect loss When Jim is involved in an accident, he immediately calls his insurer and files a claim. When his insurer denies the claim, it is required to provide Jim with: - CORRECT ANSWER-A reason for denying the claim Sue decides to get a valued insurance policy on her antique car. She and her insurance company agree to a value of $85,000. Three years later, the car is destroyed when a tree falls on it in a parking lot. The car depreciates at $2,000 a year, and its replacement cost is 100,000. Ignoring any deductible, how much can Sue expect her insurer to indemnify her? - CORRECT ANSWER-$85,000 When Zach purposefully burned down Matt's restaurant, Matt's insurer paid the claim and then went after Zach for the damages. Matt is furious about what Zach did and wants to sue him as well. Why is it NOT possible for Matt to sue Zach? - CORRECT ANSWER-Matt has already received indemnification from his insurer Jesse's home is worth $200,000 and he has a homeowners policy with a $160,000 limit. After a covered loss, Jesse is left with a total of $10,000 in damages. Assuming the insurer requires the standard 80% level of insurance for coinsurance purposes, and ignoring any deductibles, how much will Jesse receive in indemnification? - CORRECT ANSWER-$10,000 While making a right-hand turn from the right lane, Ben is sideswiped by Roxanne, totaling the car he bought new 12 years ago for $15,000. Roxanne is judged to be at fault. She has an auto policy with limits of 50/100/25 and a $500 deductible on her collision coverage. Assuming Ben's car depreciates at a rate of $1,100 a year, how much will Roxanne have to pay out of pocket when Ben files a claim against her insurer for the damages? - CORRECT ANSWER-0 Which of the following does not have an insurable interest in Big Ed's Steak House, a local restaurant? - CORRECT ANSWER-Jim, who regularly eats at Big Ed's Steak House because it's his favorite restaurant. ABC Masonry, Inc. has an aggregate liability policy with limits of 100,000/300,000. One day, an accident at a construction site leads to $150,000 in damage to public property. Assuming the cause of loss is covered under ABC Masonry's liability policy, how will this claim be paid? - CORRECT ANSWER-The insurer pays $100,000; the aggregate limits is now $200,000; and ABC Masonry must pay $50,000 A few weeks ago Christopher's garage was destroyed by an out of control motorist. Fortunately, the motorist had sufficient liability insurance to cover the damages. However, the insurer insists that Christopher's garage is worth far less than the appraisals he has received from contractors. Christopher and insurer have gone back and forth in negotiations for weeks, making little headway. Christopher decides it's time to: - CORRECT ANSWER-issue a complaint against the policyholder Ricky was watching a baseball game at XYZ stadium, when the railing on which he was leaning gave way and he fell two stories. As a result of his fall, Ricky broke his back and is now paralyzed from the waist down. Ricky sued the owners of XYZ stadium and was awarded $150,000 to cover his medical bills and $2.5 million in _______ because of the permanent nature of his injury. - CORRECT ANSWER-General damages Sam is a claimant seeking damages from XYZ insurance. The XYZ adjuster comes to meet with Sam to hear the circumstances of her injury. The adjuster determines that Sam played an active role in her own injuries, and therefore XYZ Insurance will pay her nothing at all for her injuries. What defense is the adjuster using? - CORRECT ANSWER-Contributory Negligence Strict Liability - CORRECT ANSWER-holds a person liable for his actions regardless of how much care he demonstrates Which of the following best describes a Fraternal Benefit Society? - CORRECT ANSWER-A fraternal benefit society is a social organization based around common interests and beliefs. The fee paid by the insured in exchange for an insurance policy is called a: - CORRECT ANSWER-Premium A captive insurance company: - CORRECT ANSWER-exists solely to provide insurance for its parent company The purpose of the principle of indemnity is: - CORRECT ANSWER-to prevent an insured from making a profit on a loss Xavier owns a small insurance company. Recently the company won a bid to insure a new housing development in Omaha, NE. His company can handle any claims that arise, but if a series of tornados were to tear through the area and destroy the entire development, Xavier's company would suffer financially. Which type of insurer could help Xavier's company protect itself the most from this potential loss? - CORRECT ANSWER-Re-Insurer In a ________, only one party is legally obligated to perform - CORRECT ANSWERUnilateral contract Which section of an insurance policy is designed to OMIT certain risks from coverage? - CORRECT ANSWER-Exclusions Jim is out turkey hunting on a private ranch when he hears some movement in the brush. Assuming it's a turkey, Jim raises his shotgun and fires. Unfortunately for Jim, he has not taken a turkey, but has severely injured one of the landowner's calves instead. Jim is responsible for the cost of the calf because he acted with: - CORRECT ANSWER-Negligence Once a claimant files a complaint to the court, the claimant will become the: - CORRECT ANSWER-Plaintiff Which of the following incidents would a liability insurance policy cover? - CORRECT ANSWER-A man slips inside a grocery store and injures himself The severability of Interests condition states that: - CORRECT ANSWER-A coverage applies to each insured separately, as if no other insured existed Frank purchased a $150,000 insurance policy for his home, which is valued at $125,000, with the hopes of making a $25,000 profit in the event his home is destroyed. After Frank burns his house down, he files a claim against his homeowners policy. Assuming that Frank's policy includes an overinsurance provision, how much will his insurer indemnify Frank for his loss? - CORRECT ANSWER-$0 Bob has been in the construction business a long time and is ready to retire. He sells the company to his friend Scott and then lets the insurer know that any claims against his policy should be paid to Scott from now on. The insurer informs Bob that they cannot do this due to which condition? - CORRECT ANSWER-Assignment According to the Mortgagee Clause, what is NOT one of the rights of the mortgagee - CORRECT ANSWER-The mortgagee may change the coverage amount Jim has two policies that cover the same risk, but they respond differently: Policy X is primary and Policy Z is excess. Policy X has a limit of $50,000 and Policy Z has a limit of $25,000. When Jim suffers an insured loss totaling $62,000, how will each policy respond? - CORRECT ANSWER-Policy X will pay $50,000 and Policy Z will pay $12,000 Which of the following is NOT true of the Company's Options provision in the standard fire policy? - CORRECT ANSWER-It requires the insurer to settle the claim, in whichever manner it chooses within 30 days of receiving notice of the claim. A staff adjuster is a: - CORRECT ANSWER-salaried employee working for only one insurer. When an adjuster is engaging in salvage misappropriation, he is: - CORRECT ANSWER-taking possession of salvaged property for his own use or benefit A Reservation of Rights letter is sent by: - CORRECT ANSWER-insurance company Which of the following is NOT true about a scheduled payment release? - CORRECT ANSWER-It cant be used with Workers' Compensation claims Barbara has been negotiating a property claim with a claimant for a few hours now. She has displayed her assessments, gone over the policy and offered a fair settlement amount within the policy limits. However, the claimant has dismissed it completely without any counter-offer. The most appropriate next step is for Barbara to: - CORRECT ANSWER-submit her backup offer Which of the following statements about the Standard Fire Policy is TRUE? - CORRECT ANSWER-It is the basis of all property insurance policies Stan built a porch for his home three years ago at a cost of $10,000. The value of the porch has depreciated by $6,000, and it would cost $12,000 to replace it today. After Stan's porch burnt down during a BBQ today, how much would a Standard Fire Policy indemnify Stan for his porch? - CORRECT ANSWER-$6,000 Which of the following statement s is NOT true of endorsements? - CORRECT ANSWER-An endorsed policy will always provide more coverage than an unendorsed policy There are several terms that are often interchangeable with "endorsements." Which of the following is NOT one of these terms? - CORRECT ANSWER-Binders Anton is purchasing homeowner's insurance for his new house. He wants to make sure his policy offers the BEST coverage available. Which policy should Anton choose? - CORRECT ANSWER-HO-5 How much of a limit is included for Credit Card Fraud or Forgery, an additional coverage in a homeowners policy? - CORRECT ANSWER-$500 Andy owns a home in Texas, which is covered by a Texas HO-A policy. Which of the following is FALSE? - CORRECT ANSWER-Andy's detached garage is covered under Coverage B in his policy. Which of the following is NOT a requirement of an insurer if it does not intend to renew a homeowners policy in Texas? - CORRECT ANSWER-Offer to continue coverage until the insured has secured a new policy for the property Mark is on vacation in Italy when his luggage is stolen, including a $2,000 laptop, a $500 suitcase, and $400 in clothes. Mark has an HO-3 homeowners policy. Excluding any applicable deductible, which of the following statements is true? - CORRECT ANSWER-Mark's homeowners policy will cover $2400 of this loss During a severe windstorm, a large tree in Jeff's yard was blown down and two large bushes were ripped from the ground. Jeff has an HO-3. What is the maximum amount that Jeff can receive for the replacement of the tree and bushes that were damaged by the windstorm? - CORRECT ANSWER-$0 In the case of condominiums: - CORRECT ANSWER-the unit owner and condo association share responsibility for insuring the property. Lightning strikes one of Christy's trees in her backyard and starts a fire that spreads to two other trees before firefighters are able to put it out/ The fire department charges her $600 for responding to her call. Christy's DP-2 policy has a Coverage A limit of $95,000. What is the maximum amount of indemnification that Christy can expect to receive for this loss (ignoring any deductible) - CORRECT ANSWER-$2,000 Which of the following is NOT eligible for Dwelling coverage? - CORRECT ANSWERAn 8-unit apartment building in which the owner resides A dwelling policy would NOT be appropriate for: - CORRECT ANSWER-A motorhome owned by an individual The DP-3 is known as the: - CORRECT ANSWER-Special Form Which of the following would NOT be covered by comprehensive Coverage - CORRECT ANSWER-Eddie overturns his parents' Jeep on the way to a baseball game In a Personal Auto Policy, deductibles are applied on a/an ________basis. - CORRECT ANSWER-per claim Hank has collision coverage with a $2,000 deductible on his 2010 truck. One dark, rainy night, Hank's truck slips off the road and rolls over down the embankment. The truck sustains $45,000 in damages, but the actual cash value of the vehicle is only $25,000. Which of the following statements is TRUE? - CORRECT ANSWER-Hank will be indemnified by his insurer for $23,000 Which part of a PAP lists the insured's duties after an accident or loss? - CORRECT ANSWER-Part E Which of the following is NOT true of Personal Injury Protection - CORRECT ANSWERPIP is usually secondary coverage UM/UIM coverage excludes: - CORRECT ANSWER-government vehicles Jim drops his car off at ABC Garage to have his exhaust system repaired and takes the train to work. When he returns, he finds that his car has been vandalized. Jim has comprehensive coverage, but feels the garage is responsible for the damage since Jim entrusted the car to ABC Garage. Which coverage type under ABC's garagekeepers policy would cover the cost of the loss that Jim's policy does not cover? - CORRECT ANSWER-Direct Excess Coverage Randy runs a business where he takes on the possessions of others and transports them from one location to another in exchange for a fee. What type of occupation does Randy have? - CORRECT ANSWER-Trucker Which of the following statements is TRUE regarding Mechanical Breakdown Insurance? - CORRECT ANSWER-It will not cover the cost of repairs that exceed the value of a vehicle. Jimmy owns a pawn shop which brings with it a certain amount of risk. He decides to hire a security guard, and install a surveillance system and an alarm system to reduce his monthly premiums on his commercial property policy through the: - CORRECT ANSWER-Protective Safeguard endorsement Which of the following events would trigger the end to a commercial property Builders Risk Coverage From - CORRECT ANSWER-The building is accepted by the purchaser Under the Earthquake and Volcanic Eruption endorsement in a commercial property policy, what is the time span within which multiple earthquake or volcanic events are considered a "single occurrence" for coverage purposes? - CORRECT ANSWER-168 hours (7 days) After Tony, the owner of XYZ Cleaners, accidentally starts a fire, XYZ Cleaners burns to the ground, taking all the garments with it. Afterwards, Tony has to rent a new building and purchase new equipment and supplies. He is also responsible for all the clothing that was in his care. Which type of coverage in his commercial property policy could help Tony with the cost of paying for his customers' destroyed clothing? - CORRECT ANSWER-Legal Liability Coverage Craig is just starting out with his business. He needs an insurance policy to cover his liability against any unknown defects within his products. Of the four types of CGL policies listed below, which offers the best coverage for Craig's business, regardless of when a claim is filed? - CORRECT ANSWER-Occurrence Policy Grace purchased a recliner from XYZ Furniture. After getting it home, she decided to try out the new chair. While leaning back, the chair breaks and Grace injures her neck. She sues XYZ Furniture and is awarded $300,000. The costs for the legal defense come to $45,000. XYZ Furniture's CGL policy has a Products-Completed Operations Aggregate limit of $750,000, with a per occurrence limit of $250,000. How much will XYZ Furniture have to pay out of pocket for this claim? - CORRECT ANSWER-$50,000 ABC Roofing has two CGL policies that cover the same losses. Both policies are occurrence forms, thus pay out on a pro rata basis. The first policy is through KLM Insurance and has a limit of $300,000. The second is through XYZ Mutual, with a limit of $600,000. One day, ABC Roofing suffers an occurrence resulting in a $150,000 covered loss. How will this loss be indemnified? - CORRECT ANSWER-KLM insurance will pay $50,000; XYZ Mutual will pay $100,000 Randy owns a clothing store. One day, he notices a shady character with a backpack who is hanging around acting nervous. Randy becomes suspicious and approaches the young man. As the boy makes an effort to avoid him, Randy grabs his arm and detains him until the police arrive. Not finding any stolen merchandise, the police let the boy go. Two weeks later Randy is notified that he will be sued for violation of the young man's civil rights. This is an example of what type of personal injury covered under Randy's Commercial General Liability policy? - CORRECT ANSWER-False Arrest, Detention, or Imprisonment Which of the following professionals would be most likely to purchase malpractice insurance? - CORRECT ANSWER-Lawyer Cliff receives a letter from IRS, informing him that he has severely underestimated his Adjusted Gross Income for the past year. Cliff was oblivious to this fact because XYZ accounting has filed his taxes for him for the past 15 years. Now, Cliff owes $15,000 in back taxes. He sues XYZ Accounting for this mistake. Which of the following would cover the cost of the lawsuit for XYZ Accounting? - CORRECT ANSWER-Errors and Omissions Insurance What BOP endorsement would cover a company's lost business income and extra expense due to loss of electrical service? - CORRECT ANSWER-Utility Time Element Liability coverage in a BOP is provided on: - CORRECT ANSWER-an occurrence basis, only. What requirements must Wholesalers and Distributors meet in order to be eligible for a BOP? - CORRECT ANSWER-25% or less of floor space is available to the general public, and less than 25% of gross income may come from retail sales A Discovery Form Commercial Crime policy can apply to losses discovered during the policy period, as well as up to how many days after its expiration date? - CORRECT ANSWER-60 Frank owns a bakery specializing in authentic French bread. He uses two specialty ovens for his daily production of French bread. If one of these giant ovens were to break down, it would cost Frank's bakery a lot of money to repair, not to mention the loss of revenue caused by lower production. On his Equipment Breakdown Protection Form, each of Frank's ovens would be considered: - CORRECT ANSWER-an "object" XYZ Films is getting ready to shoot a new Western film. As with most film productions, XYZ Films uses a surety bond from ABC Bonds to help protect the distributor's financial investment in the movie. Because of the magnitude of the budget for the film, ABC Bonds has XYZ Films secure a/an _____________ to act as a co-signer. - CORRECT ANSWER-Indemnitor Which of these is NOT a party to a surety bond? - CORRECT ANSWER-collateral Which financial institution bond is designed for all types of insurance companies? - CORRECT ANSWER-Standard Form 25 A fidelity bond covers: - CORRECT ANSWER-an insured business for loss resulting from any dishonest acts committed by its bonded employees. Which of the following would NOT be covered under a typical Ocean Marine policy? - CORRECT ANSWER-The owner sustains a financial loss when her vessel is confiscated by the government In Ocean Marine insurance, this clause appropriates the loss to one company, rather than spreading the loss among all cargo owners - CORRECT ANSWER-Particular Average In Ocean Marine insurance, this term of sale states that the seller of goods is responsible for damage to the cargo during shipment: - CORRECT ANSWER-Cost, Insurance, and Freight (CIF) Which of the following best describes inland marine insurance? - CORRECT ANSWERInsurance designed to protect property being transported on land and property related to transporation Anna's Rare Books in Birmingham needs to ship three F.Scott Fitzgerald first editions to a customer in Mobile. The combined value of the books is over $400000. What type of Inland Marine insurance policy should Anna's Rare Books buy to cover this shipment? - CORRECT ANSWER-A trip transit policy Which statement about Personal Article Floaters is FALSE? - CORRECT ANSWERThey have a $500 deductible In order to adjust claims for the NFIP, adjusters must meet several requirements. Which of the following is NOT one of these requirements? - CORRECT ANSWER-Attend an NFIP claims presentation every 3 months A stand alone excess liability policy: - CORRECT ANSWER-follows a base policy, but may have different exclusions and limitations. Logan has a small plane that he enjoys flying on the weekends, but he never takes friends or passengers with him. Which of the following is TRUE? - CORRECT ANSWER-Logan should buy Bodily Injury Excluding Passengers and Property Damage Liability, but he doesn't need to spend the money on Passenger Bodily Injury Liability According to Lonnie's health insurance policy, she is responsible for paying 15% of all of her medical costs. This percentage is Lonnie's: - CORRECT ANSWER-Coinsurance Payment Residual market insurance programs are primarily designed to meet the needs of which type of consumer? - CORRECT ANSWER-High-risk consumers What is one of the things an applicant has to do in order to qualify for coverage under the Texas FAIR plan? - CORRECT ANSWER-Make a real attempt to secure coverage for the property in the voluntary market. When handling a Business Interruption claim, the adjuster must do all of the following EXCEPT: - CORRECT ANSWER-determine the waiting period that applies to each indirect loss being claimed What must be proven in order for Time Element Insurance to cover a loss? - CORRECT ANSWER-The indirect losses were the result of a covered direct loss Which Farm policy would cover animal waste overflow and chemical spills? - CORRECT ANSWER-Farm Pollution Liability Who sets the critical production dates and assigns commodity market prices for MPCI policies? - CORRECT ANSWER-The Risk Management Agency Cody made $800/week before he lost an arm in a work-related injury. By the time his Impairment Income Benefits run out, he has a job answering phones in an office, where he makes $300/week. How much could Cody receive per week in Supplemental Income Benefits? - CORRECT ANSWER-$272 Which statement about the Federal Employer Liability Act is TRUE? - CORRECT ANSWER-It protects only interstate railroad workers and their families Under the Longshore and Harbor Workers' Compensation Act, how much would the surviving spouse of a deceased worker receive in benefits? - CORRECT ANSWER50% of the deceased worker's Average Weekly Wage Workers' compensation insurance can provide compensation for all of the following, EXCEPT: - CORRECT ANSWER-lost vacation time Acme Construction, Inc. has one contractor and one receptionist. The contractor makes $25/hr, and the receptionist makes $10/hr. The contractor worked exactly 8 hours in 2010, so he made $200. The receptionist worked 10 hours, so she made $100. Therefore, Acme's entire payroll for 2010 was $300. Assume that, for every $100 of payroll, the WC rate for contractors is $50 and the rate for receptionists is $5. How much did Acme owe in WC premiums? - CORRECT ANSWER-$105 In 1945 Congress passed the McCarran-Ferguson Act. What does that act do? - CORRECT ANSWER-Gives the states the authority to regulate the insurance industry The HIPAA was enacted by the US congress in _________. - CORRECT ANSWER1996 Cary is an insurance agent who has started to work as a third party administrator for Jamie, another insurance agent. Which of the following statements is TRUE? - CORRECT ANSWER-Cary does not need to be licensed as a TPA, since she is an insurance agent Once a claim has been accepted and is undisputed, the insurer has ___ days to pay the claim. - CORRECT ANSWER-5 Eric works in Texas for Gemutlich Insurance. His company is licensed to sell insurance in Texas, but is based out of Munich, Germany. Gemutlich Insurance was formed under German law, but follows all applicable Texas laws and possesses a Texas certificate of authority. Which type of insurer does Eric work for? - CORRECT ANSWER-Alien Insurer Which of the following is NOT a rating factor for a personal auto liability policy? - CORRECT ANSWER-The condition of the vehicle Which of the following is FALSE about risk retention groups in Texas? - CORRECT ANSWER-Risk retention groups are considered an insurer of last resort Under which law is an insurer required to explain its reasons for denying coverage? - CORRECT ANSWER-IIPPA Guaranty Associations are funded by: - CORRECT ANSWER-Insurers Bill is going to switch employers, and therefore switch healthcare providers. Which federal law ensures that he won't be denied coverage when he switches health plans? - CORRECT ANSWER-HIPAA The Insurance Guaranty Association is a mechanism that covers claims in the event of: - CORRECT ANSWER-an insurer's insolvency RWW Insurance creates a radio promotion where they advertise that they will insure any car for $200 a year. They don't actually offer such a plan, but they figure they will be able to sell hundreds of policies to people who show up looking for the bargain. What type of unfair insurance trade practice does this behavior exemplify? - CORRECT ANSWER-False information and advertising The state of Texas requires insurance companies to keep all records of complaints against the company for a period of at least: - CORRECT ANSWER-3 years Which unfair claims settlement practice involves an adjuster making false statements about policy coverage in order to reduce the settlement? - CORRECT ANSWERMisrepresentation Martin works as an accountant for Smith Manufacturing. Smith Manufacturing has tasked Martin with finding an insurance provider to meet the company's needs, so Martin interviews several insurers. At the end of one interview with PRO Insurance, the insurance representative hands Martin an envelope containing $5,000 in cash, on the condition that Smith Manufacturing selects PRO Insurance as its insurance provider. What would we call the $5,000 in cash? - CORRECT ANSWER-A kickback Greg, an agent for ABC Insurance Brokers, is trying to sell a new policy to Sally. Sally, however, is perfectly happy with her current policy and has no intention of cancelling it. Greg tells Sally that upcoming legislation is set to increase the minimum requirements for insurance, and that her current policy will not be available once the bill passes. He fails to tell her that if her policy is already in effect, this legislation won't affect her insurance. Which unlawful or unfair practice is Greg guilty of? - CORRECT ANSWERTwisting What is sit called when an insurer makes a habit of delaying payment on legitimate claims? - CORRECT ANSWER-An Unfair Settlement Practice Robert applies for an auto loan from his local bank. He meets with a loan officer, who goes over Robert's paperwork. The loan officer tells Robert: "I'll give you a loan as long as you insure the car with ABC Insurance." This is an example of: - CORRECT ANSWER-Coercion Under which circumstance would it be legal for an insurer to charge on insured more than another insured for the same coverage? - CORRECT ANSWER-When the insured is statistically more likely to experience a loss John and Lucy both apply for policies with Acme Insurance at the same time. They are exposed to similar hazards and would present essentially the same amount of risk to Acme Insurance. Acme Insurance offers Lucy a premium policy at excellent rates, but restricts John to a very limited policy with high premiums. Acme Insurance may be guilty of: - CORRECT ANSWER-Unfair discrimination In which of the following scenarios is the insurance company NOT engaging in an unfair settlement practice? - CORRECT ANSWER-An insurance agent fails to verbally review each provision of the insurance policy in the presence of the insured before accepting the first premium payment. Six Stars Development Company has just been offered a great deal on ten large properties in Las Vegas. The economy in Las Vegas has been declining recently, but the CEO of Six Stars expects it to recover soon. This could be an exceptional opportunity for Six Stars, but it's also pretty risky. Ultimately, the Six Stars executive team decides not to purchase the properties. This is an example of: - CORRECT ANSWER-Risk Avoidance When would a default judgement occur? - CORRECT ANSWER-When a defendant does not answer a complaint During a strong storm, Missy's grain drill was mangled by a tornado, which rendered it useless. Before the damage, the grain drill was worth $25,000, but it would cost $45,000 to buy a new one today. Missy's farm policy has a replacement cost endorsement, and the grain drill is scheduled on a Mobile Agricultural Machinery and Equipment form with a $36,000 limit. Missy replaces her grain drill with one she found on sale for $40,000. How much total indemnification will she receive? - CORRECT ANSWER-$45,000 (?) When a flood inundates Paul's property, it causes $190,000 in damage to his home and $18,000 in damage to his detached garage. Paul has a Dwelling Form flood policy with a $200,000 limit. How much coverage should Paul use for his garage if he wants to have enough coverage to repair his home completely? - CORRECT ANSWER-Paul should apply 5% to his garage and the remainder to the home. Nancy borrows Drew's car so she can run to the grocery store. While out, she rear-ends an SUV, injuring the driver and 3 other passengers. Each of the passengers suffers $45,000 in injuries, while the driver suffers $40,000. Assuming Drew has a liability policy with limits of 50/100/50, while Nancy carries minimum coverage, how much will Nancy have to pay out of pocket? Assume the passengers will be covered first. - CORRECT ANSWER-$15,000 If an adjuster needs to find clarification about what actually constitutes a collision, in which section of an insurance policy would she find that information? - CORRECT ANSWER-Definitions The Insurance Commissioner: - CORRECT ANSWER-enforces state laws relating to insurance Chandler is a photographer who is taking pictures at a reenactment of the Battle of Gettysburg, when Harper (Union Cavalry) crashes through the brush and into Chandler, breaking both his arms and his camera. In court, Chandler demands payment not only for his medical bills and broken camera, but for future lost business; now that he is unable to take pictures for the next 6 months, his clients are moving on and entering into contracts with other photographers. When Chandler speaks of this total amount of all damages that have resulted and will result from Harper's mistake, he is referring to: - CORRECT ANSWER-Diminution of value When record-breaking rainfall causes severe flooding in Janie's home town, Janie's rental property suffers extensive damage. Which of the following is an indirect loss? - CORRECT ANSWER-Janie loses a month of rental income when her tenant must move out while repairs are made to the home. What is it called when an insurer makes a habit of delaying payment on legitimate claims? - CORRECT ANSWER-An unfair claims settlement practice Which of these is NOT typically excluded from coverage in a property insurance policy? - CORRECT ANSWER-Lightning Jane has a $150,000 homeowners policy with a 3% percentage deductible. One night, an oven fire destroys her kitchen, causing $50,000 in damage. How much of the damage falls under Jane's responsibility? - CORRECT ANSWER-$15,000 (?) Which of the following statements is TRUE of a claim dispute litigation in a state that follows the doctrine of Contributory Negligence? - CORRECT ANSWER-If the plaintiff if found to be at all negligent, she will receive no settlement James is walking down the street when Andrea, an uninsured motorist, strikes him with her car. James suffers $12,000 in injuries from the accident. He has personal injury protection of $10,000 from his own automobile insurance policy, which immediately pays him the full amount. By accepting $10,000 from his own insurance company, James has waived the right to sue Andrea for more than _____ for personal injury. - CORRECT ANSWER-$2,000 Mark incurred $8,000 damage to his car in an accident. He received $8,000 from his insurance company and $4,000 from the other driver. By receiving a profit from the loss, Mark could be in violation of: - CORRECT ANSWER-The principle of indemnity Which endorsement to the Commercial Crime policy would protect a bank against its legal liability for burglary, robbery, destruction, or damage to customers' belongings kept in safe deposit at the bank? - CORRECT ANSWER-Safe Depository Rachel is filling out an application for a homeowners policy. She is truthfully answering the questions regarding her home's location, size, age, etc. Which of the following is a true statement? - CORRECT ANSWER-Rachel is providing representations James owns a masonry business and has a commercial liability with the following liability limits: $150,000 per occurrence/ $500,000 per policy term. While at a job site, his cement truck's chute cannot reach the pour site, so the operator adds two extra chutes, extending its length. The chute collapses under the weight of the concrete, causing $35,000 in injury to one of the workers. The loss is covered by the policy, and James' insurer pays the claim. What will the new limits be for the remainder of the policy term? - CORRECT ANSWER-$150,000/$465,000 Which of the following is NOT a feature of a typical Business Owners Policy? - CORRECT ANSWER-Usually Actual Cost Valuation In dwelling policies, Coverage D pays for: - CORRECT ANSWER-lost rental income. The first step in the claim process is to: - CORRECT ANSWER-acknowledge the claim within the required time frame In a dwelling policy, how much will the Fire Department Service Charge coverage pay? - CORRECT ANSWER-Up to $500 if the fire department charges for responding to a covered peril Tina has two policies (Policy X and Policy Y) that cover the same risk on a pro rata basis. Policy X has a limit of $100,000 and Policy Y has a limit of $25,000. When Tina suffers a loss totaling $75,000, how will the two policies respond? - CORRECT ANSWER-Policy X will pay $60,000 and Policy Y will pay $15,000 A reciprocal insurer is: - CORRECT ANSWER-an unincorporated organization of subscribers that operates through an attorney-in-fact to provide insurance benefits for its members. Ryan has been adjusting claims for six years, but he must complete continuing education courses before he can renew his license. Ryan has been putting off his coursework and now its time to renew. He is 8 hours short in terms of the requirement. What can he expect? - CORRECT ANSWER-He will be fined $400 for his missing credit hours. Who is NOT eligible for a homeowners policy? - CORRECT ANSWER-An owner of a house in which he does not live, but rents to a tenant Craig has an HO-3 policy covering his primary residence with a Coverage A limit of $250,000, Coverage B limit of $25,000, and a Coverage C limit of $150,000. Craig also has a cabin on the lake, which was burglarized. The thieves stole much of the cabin's contents, for a total loss of $18,500. Ignoring any deductibles, how much will Craig's HO-3 policy pay for this claim? - CORRECT ANSWER-15000(?) Dr. Smith has a claims-made malpractice insurance policy with a policy period from June 30, 2006 to June 30, 2007. Which claim would trigger this policy? - CORRECT ANSWER-A claim filed on January 13, 2007 for surgery performed on June 28, 2005 Which of the following is NOT a requirement for a legally binding contract? - CORRECT ANSWER-It must be a notarized document Peter works as a real estate agent and uses the internet extensively for sales leads and advertising. One day, he finds another realtor's ad online and copies it, using his own information as the contact info. This generates a lot of business for Peter, but unfortunately Peter gets a call one day and is informed that he is being sued for