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AD Bankers Comprehensive Exam Questions
with Detailed Verified Answers
L has a Basic Form Dwelling policy with a Coverage A limit of
$300,000. Following a severe storm, L sustains a covered loss to
the dwelling of $275,000 and a covered loss to a detached
swimming pool of $30,000. How much will L's policy pay?
A
$300,000
B
$250,000
C
$275,000
D
$305,000
⼀Answer:⼀ A. $300,000
The pool is covered under Coverage B, which is automatically
provided by the policy. The Coverage B limit is 10% of Coverage A,
or $30,000. However, because L's policy is written on the DP-1 form,
the Coverage B limit is included in, not additional to, the Coverage A
limit. The losses to the dwelling and swimming pool total $305,000, so
the most the policy will pay is the $300,000 policy limit.
Damaged household and personal property in transit between the
insured's old and new residences is covered by the DP-1 for up to:
A
5% of the Coverage B limit
B
20% of the Coverage D limit
C
10% of the Coverage A limit
D
10% of the Coverage C limit
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⼀Answer:⼀ D. 10% of the Coverage C limit
The Worldwide Coverage Other Coverage allows 10% of the
Coverage C limit of insurance to apply to personal property while it is
away from the premises.
The court requires an insurer to pay a claim because it declared the
language of a policy exclusion to be unreasonable in the eyes of a
prudent policyholder. This is an example of:
A
The doctrine of reasonable expectations
B
Estoppel
C
An aleatory contract
D
The doctrine of utmost good faith
⼀Answer:⼀ A. The doctrine of reasonable expectations
The doctrine of reasonable expectations is a legal principle guiding
policy interpretation that says that policy provisions must be
interpreted in a way that a reasonable and prudent policyholder
would expect, even if it goes against the strict terms of the policy.
If a grave marker is vandalized, an HO-3 policy will:
A
Act as excess insurance against a policy written specifically to
cover grave markers
B
Pay up to $5,000 for the loss if the Grave Marker Endorsement is
included with the policy
C
Exclude coverage for the loss
D
Provide up $5,000 as an Additional Coverage
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⼀Answer:⼀ D. Provide up $5,000 as an Additional Coverage
The Grave Markers Additional Coverage provides up to $5,000 for
damage to grave markers resulting from a peril insured against by
Coverage C, meaning it has open perils coverage on HO-5 policies
and named perils coverage on all other Homeowners policies.
The principle of indemnity helps avoid which of the following?
A
Overpayment of a claim
B
Adverse selection
C
Loss exposure
D
Underinsurance
⼀Answer:⼀ A. Overpayment of a claim
The principle of indemnity restores the insured to the same financial
status as before the loss, protecting against overpayment and making
a profit from a loss.
If an insured has a Personal Auto policy with collision coverage,
transportation expenses incurred after a collision are covered, up to
a total of:
A
$1,000
B
$600
C
$500
D
$200
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⼀Answer:⼀ B. $600
If the insured incurs transportation expenses after a covered accident
that damages their auto, the policy will pay up to $20 a day, up to
$600 total, for those expenses.
Statements that are guaranteed to be true at the time of application
are known as:
A
Waivers
B
Warranties
C
Material representations
D
Statements of adhesion
⼀Answer:⼀ B. Warranties
Warranties are statements that are guaranteed to be true at the time
of application and are the basis of the contract's validity. Material
representations are important to the acceptance or rating of the
policy, but are statements that are believed to be true to the best of
the applicant's knowledge and belief.
Which of the following coverages is not provided by the Personal
Liability Supplement?
A
First aid expenses
B
Medical payments to an injured residence employee
C
Defense costs
D
Medical payments to a regular resident of the dwelling who
sustains an injury
AD Bankers Comprehensive Exam Questions
with Detailed Verified Answers
L has a Basic Form Dwelling policy with a Coverage A limit of
$300,000. Following a severe storm, L sustains a covered loss to
the dwelling of $275,000 and a covered loss to a detached
swimming pool of $30,000. How much will L's policy pay?
A
$300,000
B
$250,000
C
$275,000
D
$305,000
⼀Answer:⼀ A. $300,000
The pool is covered under Coverage B, which is automatically
provided by the policy. The Coverage B limit is 10% of Coverage A,
or $30,000. However, because L's policy is written on the DP-1 form,
the Coverage B limit is included in, not additional to, the Coverage A
limit. The losses to the dwelling and swimming pool total $305,000, so
the most the policy will pay is the $300,000 policy limit.
Damaged household and personal property in transit between the
insured's old and new residences is covered by the DP-1 for up to:
A
5% of the Coverage B limit
B
20% of the Coverage D limit
C
10% of the Coverage A limit
D
10% of the Coverage C limit
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⼀Answer:⼀ D. 10% of the Coverage C limit
The Worldwide Coverage Other Coverage allows 10% of the
Coverage C limit of insurance to apply to personal property while it is
away from the premises.
The court requires an insurer to pay a claim because it declared the
language of a policy exclusion to be unreasonable in the eyes of a
prudent policyholder. This is an example of:
A
The doctrine of reasonable expectations
B
Estoppel
C
An aleatory contract
D
The doctrine of utmost good faith
⼀Answer:⼀ A. The doctrine of reasonable expectations
The doctrine of reasonable expectations is a legal principle guiding
policy interpretation that says that policy provisions must be
interpreted in a way that a reasonable and prudent policyholder
would expect, even if it goes against the strict terms of the policy.
If a grave marker is vandalized, an HO-3 policy will:
A
Act as excess insurance against a policy written specifically to
cover grave markers
B
Pay up to $5,000 for the loss if the Grave Marker Endorsement is
included with the policy
C
Exclude coverage for the loss
D
Provide up $5,000 as an Additional Coverage
, Page | 3
⼀Answer:⼀ D. Provide up $5,000 as an Additional Coverage
The Grave Markers Additional Coverage provides up to $5,000 for
damage to grave markers resulting from a peril insured against by
Coverage C, meaning it has open perils coverage on HO-5 policies
and named perils coverage on all other Homeowners policies.
The principle of indemnity helps avoid which of the following?
A
Overpayment of a claim
B
Adverse selection
C
Loss exposure
D
Underinsurance
⼀Answer:⼀ A. Overpayment of a claim
The principle of indemnity restores the insured to the same financial
status as before the loss, protecting against overpayment and making
a profit from a loss.
If an insured has a Personal Auto policy with collision coverage,
transportation expenses incurred after a collision are covered, up to
a total of:
A
$1,000
B
$600
C
$500
D
$200
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⼀Answer:⼀ B. $600
If the insured incurs transportation expenses after a covered accident
that damages their auto, the policy will pay up to $20 a day, up to
$600 total, for those expenses.
Statements that are guaranteed to be true at the time of application
are known as:
A
Waivers
B
Warranties
C
Material representations
D
Statements of adhesion
⼀Answer:⼀ B. Warranties
Warranties are statements that are guaranteed to be true at the time
of application and are the basis of the contract's validity. Material
representations are important to the acceptance or rating of the
policy, but are statements that are believed to be true to the best of
the applicant's knowledge and belief.
Which of the following coverages is not provided by the Personal
Liability Supplement?
A
First aid expenses
B
Medical payments to an injured residence employee
C
Defense costs
D
Medical payments to a regular resident of the dwelling who
sustains an injury
