Fundamentals of Insurance - Practice Exam Questions & Answers Correct 100%

Three Main Categories Of Risk - Anawer1) Personal Risk 2)Property Risk 3)Liability Risk What are the FIVE elements of a contract? A) Agreement, Risk, Loss, Consideration, Legality B) Legal Capacity, Legality of Object, Consideration, Agreement, Genuine Intention C) Agreement, Legal Capacity, Risk, Loss, Consideration. D) None of the above - AnawerB) Legal Capacity, Legality of Object, Consideration, Agreement, Genuine Intention What is needed for an agreement to exist? - AnawerAn offer made; AND an unconditional acceptance of the terms of that offer What do these abbreviations stand for? 1) T/a 2)D/b/a 3)O/a - Anawer1) Trading as 2) Doing Business as 3) Operating as How long are insurance contracts usually written for? A) 6 Months B) 3 Years C) 1 Year D) For life unless cancelled and reissued - AnawerC) 1 Year An insurer is not required to provide coverage when losses are caused by: A) Application of heat B) Lightening / Electrical surges that cause damage to electrical devices C) Contamination by radioactive material D) All of the Above E) A and C - AnawerD) All of the Above The onus to prove Misrepresentation rests with: A) The Insured B) The Insurer C) The Police D) A Bailee for hire - AnawerB) The Insurer Material Facts can include: A) Details concerning previous claims B) Details regarding previous cancellation or refusal of Insurance C) Details concerning existing property protection systems D) All of the Above E) A and B - AnawerD) All of the Above The following are examples of the Statutory Condition Requirements After Loss EXCEPT: A) Required to give a complete inventory of destroyed or damaged property B) Stating when and how the loss occurred C) Stating the loss did not occur due to a negligent or willing act D) All of the above - AnawerD) All of the above Which of the following is NOT a Statutory Condition of Insuring the peril of fire? A) Termination B) Fraud C) Salvage D) Risk Summary - AnawerD) Risk Summary When the insured and insurer cannot agree on the value of the property after a loss, what Statutory condition is in place to settle this matter? A) Termination B) Action C) Appraisal D) When loss is payable - AnawerC) Appraisal Under Statutory Condition When Loss is Payable what is the time frame the loss is payable within? A) 60 days after completion of proof of loss B) Less than 60 days after proof of loss if stated in contract C) 90 days after completion of proof of loss D) All of the above E) A and B - AnawerE) A and B E&O claims are the result of: A) Failure to advise clients of exclusions B) Failure to place coverage or placing it too late C) Providing the incorrect coverage D) Incorrect advice about coverage available E) All of the above - AnawerE) All of the above Insurers have the right to expect that brokers: A) Will not make mistakes B) Will tell the truth about the risks they submit C) Will not withhold or conceal important information D) A and B E) B and C - AnawerE) B and C What are the two types of hazards: A) Hostile Hazards, Physical Hazards B) Moral Hazards, Physical Hazards C) Moral Hazards, Hostile Hazards D) None of the above - AnawerB) Moral Hazards, Physical Hazards When a broker submits an application to the insurer, who makes the decisions? - AnawerThe Underwriter TRUE OR FALSE: Physical hazards are observable and once identified can be reduced - AnawerTrue Applicants who are not prepared to take measures to reduce the chance of loss because "everything is insured" are a: A) Moral Hazard B) Physical Hazard C) None of the above - AnawerA) Moral Hazard TRUE OR FALSE: Claims adjusters settle claims - AnawerTrue Brokers, Adjusters, and Insurance Companies will often refer to an Insurance contract as: A) Form B) Wording C) Policy D) All of the above - AnawerD) All of the above What is a Named Peril Policy? - AnawerWhen a loss happens that was not by a peril named in the policy it will not be covered. What is a Broad Policy? - AnawerBroad policies insure against all risks of direct physical loss or damage, but are subject to conditions and exclusions Which of the following facts are true of Statutory conditions: A) They are in All property policies insuring the peril of fire B) They are in accident and sickness insurance C) They are established in statute and are legally binding to all parties D) All of the above E) B and C - AnawerD) All of the above What happens when the insured breaches warranty: A) There is no coverage B) Rates Increase C) Contract Nullified D) All of the Above E) A and C - AnawerE) A and C How long can property be vacant before it falls under Property Exclusion? A) 60 days D) 15 days C) 30 days D) 45 days - AnawerC) 30 days Some examples of property exclusions are Evidences of debt or title, Securities, Automobiles, Books of Accounts and Vacant property; Select another example of property exclusions: A) Money, Aircraft, Watercraft B) Aircraft, Shrubs, Private Structures C) Money, Shrubs, Private Structures D) None of the above - AnawerA) Money, Aircraft, Watercraft What is the Rationale behind a deductible? - AnawerA deductible charged to all losses helps to keep insurance affordable. If the deductible on the policy is stated to be $500 and there is a loss resulting in $1500 of damage; the insurer is responsible for how much of the claim: A) $1500 B) $500 C) $1000 D) $2000 - AnawerC) $1000 - the Insured is required to absorb $500 of the cost as that is the amount of their deductible How is Actual Cash Value is calculated ? - AnawerACV= Replacement Cost - Depreciation The Underwriter has the option to: A) Reject a risk B) Accept the risk on basis presented C) Accept the risk with increased premium D) Accept the risk with increased deductible E) All of the above - AnawerE) All of the above A Mortgagee is anyone having: *(Select best answer)*