Fundamentals of Insurance - Practice Exam 12 Questions With Correct Answers

A building valued at $120,000 is insured for $30,000 and there is an 80% co-insurance clause on the policy. The building was totally destroyed by fire last weekend. The insured would receive a settlement of: a. 7,000 b. 12,000 c. 30,000 d. 37,5000 - Answerc. 30,000 The reinstatement clause contained in most policies of commercial property insurance provided that: a. The insureds shall have as much insurance on the property after an insured loss as they had immediately prior to it b. Coverage which is suspended due to a breach of policy conditions is automatically reinstated when that breach is corrected c. Coverage which has been terminated by the insurer may be re-instated at the request of the insured upon application to the insurer in writing d. Property lost or damaged shall be re-instated with equivalent property of like kind and quality - Answera. The insureds shall have as much insurance on the property after an insured loss as they had immediately prior to it The locked vehicle warranty requires that: a. The vehicle be equipped with a theft deterrent system b. The vehicle locked between the house of 9:00 p.m. and 6:00 a.m. and when not in motion c. The vehicle containing the property insured be properly licensed and registered by the highway traffic board d. Visible signs of forcible entry must be present before the insurer will agree to pay any claim for theft - Answerd. Visible signs of forcible entry must be present before the insurer will agree to pay any claim for theft Loss resulting from the taking of property by a person breaking into the premises is defined as: a. Theft b. Robbery c. Burglary d. Hold-up - Answerc. Burglary Crime policies define certain terms as they relate to coverage. The broadest meaning is given to: a. Burglary b. Theft c. Kidnapping d. Robbery - Answerb. Theft In addition to the coverage provided for the explosion of boilers and pressure vessels, boiler, and machinery policies also provide this important coverage: a. Wear and Tear b. Gradual Deterioration c. Mechanical and Electrical Breakdown d. Latent Defect - Answerc. Mechanical and Electrical breakdown The builders risk - Broad Form can be used to insure all of the following items, except one. Pick the exception: a. All materials and supplies entering into the completed project b. Value of landscaping c. Temporary building on project site d. Contractors tools and equipment - Answerd. Contractors tools and equipment The basic principle behind business interruption insurance is: a. To restore the building to the condition it was in before the loss b. To find a place for the employees to work during the period that the business is out of operation c. Restore the income that would have been earned had the loss not occurred d. To maintain a higher level of operation during the period of repair than exsisted prior to the loss - Answerc. Restore the income that would have been earned had the loss not occurred Payment is made for as long as the business results are affected by the interruption, subject to specified limits. This statement is a characteristic of: a. Earnings form b. Profits form c. Extra Expense Insurance d. Broad Form - Answerb. Profits form Liability policies are concerned with matters of civil liability. Civil Law: a. Deals with wrongs against society b. Uses fines, penalties, probation or imprisonment as a means of enforcing its many rules c. Focuses on compensating the victim for the financial loss or damage suffered d. Deals primarily with settling disputes on contractual matters - Answerc. Focuses on compensating the victim of the financial loss or damage suffered All of the following "elements" must be present if your clients legal liability for a tort is to be established, except one. Pick the exception: a. The plaintiff was owed a legal duty b. The duty owed to the plaintiff was breached by the defendant c. The defendant's actions was the proximate cause of all damages d. The results of the defendants actions were unforeseeable - Answerd. The results of the defendants actions were unforeseeable "Negligence" is the most important tort in the study of liability insurance. Negligence is: a. Failing to use that degree of care which a reasonable person would use under the given circumstances b. Acting prudently, having regard to the circumstances c. Any deliberate violation of the law d. Aiding and abetting another person in the commission of felony - Answera. Failing to use that degree of care which a reasonable person would use under the given circumstances The occupier of a property owes the greatest duty to care to: a. Children b. Invitees c. Trespassers d. Licenses - Answera. Children Generally, Employers cannot be sued for bodily injuries sustained by their employees in the course of their employment. This is because: a. Employers cannot be expected to provide for continuous supervision of their employees b. Employees are responsible to obtain their own coverage under a separate accident and sickness policy c. Workers compensation plans provide employees with "no fault" insurance benefits and remove their right to sue their employers for injuries received on the job d. employees are fully insured through contributions made to the federal employment insurance plan - Answerc. Workers compensation plans provide employees with "no fault" insurance benefits and remove their right to sue their employers for injuries received on the job Your client is considered hiring a contractor to preform renovations to a building. She would share in any liability for injury or damage caused by such contractor in all of the following instances, except one. Pick the exception. a. When the work being contracted in inherently dangerous b. When she supplied "blue prints" and leaves the contractor to his own resources to arrive at the desired result c. When she supplies effective machinery or equipment from which injury or damage arises d. When she provides an on-site direction and on-going supervision of work - Answerb. When she supplied "blue prints" and leaves the contractor to his own resources to arrive at the desired result Parents will be requires to respond financially for injury or damage caused by their children in all of the following instances, except one. Pick the exception: a. When child shoots farmers cow while hunting with father b. When child swerves to avoid a pot-hole in the road and runs over a toddler with her bicycle c. When child damages neighbour's fence will assist her farther in landscaping their yard d. When child employed part-time in the family business closes the door on customers hand - Answerb. When child swerves to avoid a pot-hole in the road and runs over a toddler with her bicycle The following statements respecting liability insurance are all true except one. Pick the exception: a. Insure bodily injury and property damage caused to a third party b. Are not intended to insure injury or damage intentionally caused c. Provided for payment only when the insured is deemed to be legally liable d. Provide for the payment of compensatory punitive and exemplary damages - Answerd. Provide for the payment of compensatory punitive and exemplary damages Liability insurance policies provide coverage on an "occurrence" basis. An occurrence basis policy: a. Provides coverage only for a sudden and usual event b. Provides coverage for accidents including injury or damage caused by continuous and repeated exposure to substantially the same harmful conditions c. Provides excess insurance over the existing liability policies d. Provides coverage for bodily injury and property damage caused intentionally - Answerb. Provides coverage for accidents including injury or damage caused by continuous and repeated exposure to substantially the same harmful conditions The only expense that insured is entitled to incur on behalf of the insurer in respect to potential claim under a liability policy that is related to: a. First aid b. Legal Fees c. Interest payments from the date the judgement is rendered d. Amount of the judgement - Answera. First Aid Supplementary payments include all of the following costs, except one. Pick the exception: a. Cost of establishing the insureds defense b. Court costs c. Transportation d. Meals and accommodations - Answerd. Meals and accommodations The liability coverage provided by homeowners form insure all of the following premises owned or used by the insured, except on. Pick the exception: a. Vacant farm land b. Family cemetery plot