PROPERTY AND CASUALTY INSURANCE EXAM QUESTIONS AND CORRECT ANSWERS PART ONE

PROPERTY AND CASUALTY INSURANCE EXAM QUESTIONS AND CORRECT ANSWERS PART ONE "If an insured bakery is sued because its marketing states that the products of another bakery may not be safe, which coverage of a commercial general liability policy will defend the suit? - CORRECT ANSWER Personal and advertising injury liability" "Any licensed person whose activities affect interstate commerce and who knowingly makes false material statements related to the business of insurance may be imprisoned for up to - CORRECT ANSWER 10 years." "According to the principles of ocean marine insurance, an actual total loss may occur in all of the following situations EXCEPT - CORRECT ANSWER When cargo is misplaced." "Which of the following statements regarding coverage for the flood and earthquake perils is true? - CORRECT ANSWER Both flood and earthquake are excluded perils in all property policies." "A premium discount is the term that describes when an insured owes a total standard premium greater than - CORRECT ANSWER $5,000." "In order to reject uninsured motorist coverage, the first named insured must make the rejection - CORRECT ANSWER In writing at the time of application." "What is the minimum age for obtaining an insurance producer's license in this state? - CORRECT ANSWER 18" "Individuals in the business of selling construction equipment and mobile equipment should insure with a/an - CORRECT ANSWER Equipment dealers coverage form." "Which of the following insurance options would be considered a risk-sharing arrangement? - CORRECT ANSWER Reciprocal" "If a person is using an auto with the belief that he is entitled to do so, subrogation rights under a personal auto policy would apply to all coverages EXCEPT - CORRECT ANSWER Physical damage." "Loss of yield from which of the following causes would be covered under a Federal Crop Insurance policy? - CORRECT ANSWER Any of the above" "Which of the following best describes a misrepresentation? - CORRECT ANSWER Issuing sales material with exaggerated statements about policy benefits" "A builder's risk form is most often written as which of the following? - CORRECT ANSWER Completed value form" "Under the Fair Credit Reporting Act, if the consumer challenges the accuracy of the information contained in his or her report, the reporting agency must - CORRECT ANSWER Respond to the consumer's complaint." "All of the following are found in the declarations section of a policy EXCEPT the - CORRECT ANSWER Exclusions." "The cost of restoring farm records is an additional coverage offered under a farm policy. How much will the policy pay to restore the records? - CORRECT ANSWER Up to $2,000" "All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT - CORRECT ANSWER Dividends from a mutual insurer." "Which of the following may be covered by electronic data processing coverage form under an inland marine policy? - CORRECT ANSWER a) Computer hardware that is specifically scheduled. b) Extra expense the insured incurs to continue the business following a loss. c) Data processing media, including magnetic tapes or paper tapes, punch cards and discs" "The party to a surety or fidelity bond who promises to fulfill the obligation is the - CORRECT ANSWER Principal" "The transfer of money from inside a banking premises to a person other than a messenger outside those premises or to a place outside those premises is covered under which commercial crime coverage? - CORRECT ANSWER Computer fraud" "Which of the following would NOT be covered under the liability section of a personal auto policy? - CORRECT ANSWER Bodily injury is caused by the insured's negligence while driving a three-wheel all-terrain vehicle." "When a producer holding a certificate or a broker's license has a change in his/her residence or business address, he/she must notify the Department of Insurance and any company for which the producer holds an appointment within - CORRECT ANSWER 30 days." "Which of the following entities must approve all continuing education courses in this state? - CORRECT ANSWER The Commissioner" "An applicant knowingly fails to communicate information that would help an underwriter make a sound decision regarding coverage. This is an example of - CORRECT ANSWER Concealment" "A common exclusion found under physical damage to your auto includes - CORRECT ANSWER Mechanical breakdown." "If a licensee wants to transact insurance under a different name than that listed on his or her producer's license, which of the following must occur? - CORRECT ANSWER The change must be reported to the Commissioner." "If more than one person has an insurable interest in the property covered under a dwelling policy, - CORRECT ANSWER The insurer will be liable for only the insured's interest in the damaged property." "Bob's home is insured for $100,000 under a dwelling policy. Yesterday his home suffered $20,000 damage from a fire. Today the home was struck by lightning, starting another fire that completely destroyed the structure. Bob's policy will pay - CORRECT ANSWER $100,000." "An automobile that is owned by a nontraditional household, not consisting of a husband and wife, may be insured under a personal auto policy if - CORRECT ANSWER A joint ownership coverage endorsement is added." "Which of the following is defined as a covered cause of loss in businessowners property coverage? - CORRECT ANSWER Leakage from fire-extinguishing equipment" "The insured's mother-in-law broke her leg falling down the front steps of the insured's premises. The insured's homeowners medical payments coverage will - CORRECT ANSWER Apply to injuries of any guests or visitors." "All of the following are exclusions under farm property coverage EXCEPT - CORRECT ANSWER Loss of use." "Coverage for medical payments under a personal auto policy applies to expenses following a covered accident that are incurred and services rendered within what maximum time period? - CORRECT ANSWER 3 years" "Under the workers compensation system, who is responsible for the expenses resulting from work-related injuries and occupational diseases? - CORRECT ANSWER The employer, regardless of whether it was at fault for the injury or disease" "A person applying for a manager or exclusive general agent license must meet all of the following criteria EXCEPT - CORRECT ANSWER Be responsible for at least 25% of total commissions collected by the office that he or she manages." "When a vehicle travels from one state to another, what happens to the limits of policy liability in a personal auto policy? - CORRECT ANSWER They do not change." "If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, and if a notice of insurance information practices has been provided, the report may contain all of the following information EXCEPT the applicant's - CORRECT ANSWER Ancestry" "Which of the following would NOT be classified as personal property for insurance purposes? - CORRECT ANSWER A house" "Under the "limited tort insurance" option, an insured may not seek recovery for pain and suffering or other nonmonetary damages UNLESS - CORRECT ANSWER The injuries fall within the definition of "serious injury."" "Which of the following statements is true regarding the commercial general liability policy's Coverage C - Medical Payments? - CORRECT ANSWER The coverage is considered good will because payments are made without regard to fault." "Homeowners policies provide coverage for - CORRECT ANSWER Business property while on the residence premises." "Who will transport the property of anyone who hires them? - CORRECT ANSWER Common carriers" "Which insurers are required to participate in the Pennsylvania Automobile Insurance Plan (Assigned Risk Plan)? - CORRECT ANSWER All insurers authorized to write auto liability insurance in the state" "A licensee serving in the military is unable to fulfill her continuing education requirement. What would the licensee have to do to renew the license? - CORRECT ANSWER The licensee may submit a request to the department to have requirements and fees waived. The department will then determine if the request is permissible." "Which of the following is NOT true regarding a Certificate of Authority? - CORRECT ANSWER It is issued to group insurance participants." "What is the required limit of insurance in the coinsurance clause for Coverage F - Unscheduled Farm Personal Property? - CORRECT ANSWER 80% (note-Coverage F - Unscheduled Farm Personal Property insures all farm personal property on a blanket basis. Coverage F is subject to an 80% coinsurance clause. )" "Which of the following would be considered an unfair claims settlement practice? - CORRECT ANSWER A claims adjuster advises the insured that if the claim goes to arbitration, the insured would probably receive less than what is currently being offered" "Which of the following policies must contain, at a minimum, policy language equal to the Standard Fire Policy? - CORRECT ANSWER All of the above" "Under the dwelling policy, Coverage C - Personal Property is - CORRECT ANSWER Limited to covering a servant's property while at the insured location." "Which of the following criminal activities would be sufficient violation to warrant rejection, revocation, or suspension of an insurance producer's license? - CORRECT ANSWER Forgery" "In dwelling policies, automatic increase in insurance is - CORRECT ANSWER Coverage by endorsement." "How soon after the due date should the insurer pay the agent appointment fees? - CORRECT ANSWER Within 30 days" "Which of the following is the federal body that regulates truckers who travel across state lines? - CORRECT ANSWER Federal Motor Carrier Safety Administration" "What is not a consideration when paying an inland marine claim? - CORRECT ANSWER Market value when the property was first purchased" "A commercial property special form covers property in transit up to - CORRECT ANSWER $5,000." "Bulk carriers are used to transport - CORRECT ANSWER Loose cargo." "According to the loss payment condition in HO policies, losses must be paid within how many days of the insurer receiving proof of loss? - CORRECT ANSWER 60 days" "In which of the following situations would punishment include imprisonment? - CORRECT ANSWER Omission of a material fact with intent to embezzle funds" "A producer licensed in Pennsylvania must notify the Insurance Department of any change of address in his or her residence or business address within how many days? - CORRECT ANSWER 30" "If an insured lives in a high-risk area and can't find an insurer that will cover his/her property, which of the following would most likely provide coverage? - CORRECT ANSWER The FAIR Plan" "If an insurer changes a form that it uses to transact insurance, it must do which of the following? - CORRECT ANSWER File the form with the Commissioner for approval" "Which of the following is NOT a duty of the employer/insured if an injury occurs at the workplace? - CORRECT ANSWER Make voluntary payments for treatment of the worker's injury" "A meteorite hits the insured's car, causing damage. Under which of the following coverages in a personal auto policy would this loss be paid? - CORRECT ANSWER Other-than-collision" "If an insurer terminates a producer's appointment, the Commissioner must be notified within how many days? - CORRECT ANSWER 30" "The other insurances clause of an ocean marine policy allows coverage for which reasons? - CORRECT ANSWER To obtain coverage for war, strikes, and related risks not covered by the policy" "Which of the following terms refers to other insurance that is written on the same risk, but not on the same coverage basis? - CORRECT ANSWER Nonconcurrency" "Damage to insured property caused by earth movement or earthquake is covered under which of the following homeowners forms? - CORRECT ANSWER None" "What is the limit for the forgery or alteration coverage in the businessowners policy? - CORRECT ANSWER $2,500" "The type of professional liability coverage a medical doctor needs is - CORRECT ANSWER Malpractice coverage." "An insured hits a deer and crashes his car into a tree. The total damage to the vehicle is $6,000. How will this loss be covered? - CORRECT ANSWER $6,000 would be paid under other-than-collision coverage." "In the computer fraud crime coverage form, what limit is placed on each occurrence of the loss of manuscripts, drawings, or records? - CORRECT ANSWER $5,000" "What was created to keep telemarketers from calling consumers who do not wish contacted? - CORRECT ANSWER National Do Not Call Registry" "In which of the following situations would the jewelers block extension cover a loss? - CORRECT ANSWER A jeweler fixes a necklace and sends it by registered mail to the owner. When the necklace arrives, it has been damaged." "Valuable papers and records form provides coverage for the reconstruction of all of the following types of records EXCEPT - CORRECT ANSWER Prepackaged software." "The provision in Pennsylvania workers compensation that requires an employer to pay compensation, without regard to negligence, according to a compensation schedule set by law, and for the injured employee to agree to limit the employer's responsibility to the amount of workers compensation to which he or she is entitled, is called - CORRECT ANSWER Exclusive remedy." "If a licensed person is moving to Pennsylvania, he or she may become licensed as a resident if they submit a completed application within how many days of establishing residence in Pennsylvania with proof of licensing from their prior home state? - CORRECT ANSWER 90" "Which of the following is the type of property NOT covered by the homeowners policy? - CORRECT ANSWER Land on which the property is located" "Robbery is - CORRECT ANSWER Taking of property by use of force, violence, or fear." "Which of the following commercial crime coverages would cover a loss resulting from theft of the company's money and securities from the armored vehicle making a delivery? - CORRECT ANSWER Outside the premises" "Which of the following would be covered under the crime coverage inside the premises - theft of money and securities? - CORRECT ANSWER Loss or damage to a locked safe, vault, or cash register" "One of the primary benefits to the insured in selecting the "full tort option" under their auto insurance coverage is - CORRECT ANSWER Unrestricted ability to sue for pain and suffering." "All of the following are true regarding physical damage coverage EXCEPT - CORRECT ANSWER The limit of liability is the greater of the actual cash value of the vehicle at the time of loss or the amount necessary to repair or replace the vehicle." "What are common carriers required to issue to every shipper that it transports goods for? - CORRECT ANSWER A uniform bill of lading" "A ranchowners policy is most similar to which of the following? - CORRECT ANSWER Homeowners" "When transacting business in this state an insurer formed under the laws of another country is known as a/an - CORRECT ANSWER Alien insurer." "All of the following are other coverages under the dwelling policy EXCEPT - CORRECT ANSWER Earth movement." "Which of the following regulatory authorities participated in creating the National Do Not Call Registry? - CORRECT ANSWER FTC" "Installing deadbolt locks on the doors of a home is an example of which method of handling risk? - CORRECT ANSWER Reduction" "In property insurance, actual cash value is defined as which of the following? - CORRECT ANSWER Replacement cost at the time of the loss, less depreciation" "Under a personal auto policy, in which of the following locations would a vehicle primarily garaged in California be covered? - CORRECT ANSWER Any other state" "An insured couple owns a pontoon boat. Which situation would NOT be covered by their watercraft endorsement under their homeowners policy? - CORRECT ANSWER A friend rents their boat and runs it into a neighbor's dock." "A person who is not named as an insured on the declarations page of a policy but is protected by the policy is known as the - CORRECT ANSWER Additional insured." "Which of the following is NOT an optional coverage available in a businessowners policy? - CORRECT ANSWER Workers compensation" "All of the following statements describe the concept of strict liability EXCEPT - CORRECT ANSWER It is imposed on defendants engaged in hazardous activities." "What is the purpose of increased value and excess liability (IVEL) clauses? - CORRECT ANSWER To provide extra coverage for the same losses covered by an underlining policy" "Which of the following would NOT be considered an unfair and deceptive practice? - CORRECT ANSWER Controlled business" "Losses caused by vandalism and malicious mischief are excluded under a homeowners policy if the dwelling had been vacant for more than - CORRECT ANSWER 60 days." "If an insurer appoints a producer, which authority must be notified? - CORRECT ANSWER Department of Insurance" "What term best describes the act of withholding material information that would be crucial to an underwriting decision? - CORRECT ANSWER Concealment" "What is a Certificate of Insurance? - CORRECT ANSWER A written document showing the types and amounts of insurance that have been issued to the insured" "All of the following are conditions commonly found in the insurance policy EXCEPT - CORRECT ANSWER Insuring agreement." "If an insured has an umbrella liability policy in addition to his personal auto policy, which would be considered the underlying policy? - CORRECT ANSWER Auto policy" "All of the following are true regarding rebates EXCEPT - CORRECT ANSWER Rebates are allowed if it's in the best interest of the client." "Termination of an in-force insurance policy prior to the expiration date shown in the policy is known as - CORRECT ANSWER Cancellation." "A municipality can protect itself against the construction or repair of properties that do not conform to the building codes established by ordinance by requiring the contractors to obtain - CORRECT ANSWER License and permit bonds." "Farm policy Coverage B - Structures would pay how much for loss of an outside antenna, tower, or satellite dish? - CORRECT ANSWER Up to $1,000" "Which of the following is NOT a goal of risk retention? - CORRECT ANSWER To minimize the insured's level of liability in the event of loss" "For how long must a company maintain a complete file of all advertisements used? - CORRECT ANSWER At least 4 years" "Replacement cost coverage is provided in both the broad and special form dwelling policies when - CORRECT ANSWER The amount of insurance on the dwelling is at least 80% of its replacement cost at the time of loss." "The Federal Fair Credit Reporting Act - CORRECT ANSWER Regulates consumer reports." "Which of the following risks would NOT be eligible for coverage under a homeowners policy? - CORRECT ANSWER An applicant who owns and lives on a commercial farm" "Within the first 60 days of coverage under a dwelling policy, how much notice is required for the cancellation of a policy? - CORRECT ANSWER 10 days" "Which of the following terms describes making false statements about the financial condition of any insurer that are intended to injure any person engaged in the business of insurance? - CORRECT ANSWER Defamation" "Which of the following is NOT considered a misrepresentation as it pertains to unfair trade practices? - CORRECT ANSWER Making comparisons between different policies" "In addition to the common policy conditions, all of the following conditions apply to liability coverage EXCEPT - CORRECT ANSWER Employers liability." "In accordance with American Institute Hull Clauses, a pro rata return of premium will be given for all the following reasons EXCEPT - CORRECT ANSWER If the policy is cancelled by the insured." "A banker is ready to close on a customer's loan. The bank is prepared to offer the loan but only if the customer purchases a life insurance policy from the bank in the amount of the loan. This is an example of - CORRECT ANSWER Coercion." "In the event of a claim under a commercial general liability policy, the insured has all of the following duties to the insurer EXCEPT - CORRECT ANSWER Submitting to a medical exam when requested." "Which of the following dwelling policy forms primarily insures a structure on an actual cash value basis? - CORRECT ANSWER DP-1" "For the purpose of examination by the department, insurers must keep a record of all financial files for at least - CORRECT ANSWER 5 years." "When an individual purchases insurance, what risk management technique is he or she practicing? - CORRECT ANSWER Transfer" "Which of the following would NOT be considered an exception to the National Do Not Call List? - CORRECT ANSWER Calls based from outside of the United States" "The standard property deductible per occurrence on a commercial package policy is - CORRECT ANSWER $500." "What is the deductible of a personal liability umbrella policy called? - CORRECT ANSWER The SIR" "In order to satisfy the Pennsylvania Motor Vehicle Financial Responsibility Law, an auto liability policy issued for delivery in the state must have bodily injury and property damage limits not less than - CORRECT ANSWER $15,000/$30,000/$5,000. (comment -The Financial Responsibility Law requires minimum limits of $15,000 of bodily injury liability for one person injured in an accident; $30,000 of bodily injury liability for two or more people injured in a single accident; and $5,000 of liability for damage to property of others in a single accident.)" "All of the following are factors in the determination of actual cash value EXCEPT - CORRECT ANSWER Insurance premium paid." "While an insured was towing a utility trailer with his auto, the trailer came loose and ran into a store front. What part of the insured's auto policy would pay for the damage to the store? - CORRECT ANSWER Property damage liability" "Under the provisions of the business income coverage form, all of the following are true EXCEPT - CORRECT ANSWER The insured is reimbursed for the loss from the date of loss to the date of restoration or policy expiration date, whichever comes first." "How long is the waiting period after the application has been accepted before flood coverage goes into effect? - CORRECT ANSWER 30 days" "Coverage J under farm coverage agrees to pay reasonable medical expenses, regardless of fault, caused by an accident if the expenses are incurred and reported to the insurer within how many years of the accident date? - CORRECT ANSWER 3 years" "An insured has a special form dwelling policy written for $100,000 on a dwelling. The dwelling's replacement cost is $115,000. Fire causes $75,000 in damage to the dwelling, $15,000 damage to a separate garage, and kills 10 trees valued at $600 each. How much will the policy pay for the trees? - CORRECT ANSWER $5,000" "Which of the following losses would be covered by an unendorsed homeowners policy? - CORRECT ANSWER Fire or lightning" "Which of the following would NOT be compensable under Workers Compensation insurance? - CORRECT ANSWER While working in his office, Bill suffers a heart attack." "If the ocean marine contract pays the ACV of the property just prior to the loss, it is - CORRECT ANSWER An indemnity contract." "The designation symbols used in commercial auto policies can be found in which policy section? - CORRECT ANSWER Covered Auto" "Under a businessowners policy, the inspections and surveys condition specifies all of the following EXCEPT - CORRECT ANSWER The insurer does not have the right to inspect the insured's property and operations." "A trucking business swaps trailers with other carriers. What coverage is necessary to cover loss to the other's trailer while in the borrower's possession? - CORRECT ANSWER Trailer interchange coverage" "Which coverage form would provide coverage for all incoming and outgoing shipments? - CORRECT ANSWER Annual transit" "A person who does not lock the doors or does not repair leaks shows an indifferent attitude. This person presents what type of hazard? - CORRECT ANSWER Morale" "What other term is used to refer to unintentional torts? - CORRECT ANSWER Negligence" "Which of the following statements is true concerning the special form dwelling policy? - CORRECT ANSWER Coverage A is for all-risk perils, and Coverage C is for the broad form perils." "An apartment occupant's personal property would be insured under which homeowners form? - CORRECT ANSWER Tenant broad form (HO-4)" "What type of insurance policy insures against all risks of loss that are not specifically excluded by the policy? - CORRECT ANSWER Open peril policy" "Which inland marine coverage condition says that an insurer will settle with the actual owners of property involved in a loss? - CORRECT ANSWER Privilege to adjust with the owner" "After a hearing, if the Commissioner finds that a licensee is in violation of the state insurance laws, the Commissioner can do any of the following EXCEPT - CORRECT ANSWER Imprison the licensee." "Agents who persuade insureds to cancel a policy in favor of another one when it might not be in the insured's best interest are guilty of - CORRECT ANSWER Twisting." "Insurable interest in the property covered in a policy must be proven - CORRECT ANSWER At time of loss." "Which of the following risks is eligible for coverage under a businessowners policy? - CORRECT ANSWER Condominiums" "Pete wants to have separate insurance coverage for separate acreages. What kind of insurance should Pete get? - CORRECT ANSWER Unit Insurance" "Professional photographers and musicians may insure their equipment with - CORRECT ANSWER A commercial articles floater." "In the split limit coverage in personal auto policies, which limit indicates the maximum amount the policy will pay for bodily injury per person? - CORRECT ANSWER 1st limit" "An advertising company has its annual holiday party for employees and customers, after which a customer who had too much to drink is involved in an automobile accident. Occupants of the other car involved in the accident sue the company for serving the customer too much alcohol. Will the company's businessowners policy provide coverage? - CORRECT ANSWER Yes, none of the exclusions will apply." "Which of the following homeowners policies covers those who rent their dwelling? - CORRECT ANSWER HO-4" "All of the following actions by a person could be described as risk avoidance EXCEPT - CORRECT ANSWER Investing in the stock market." "State law specifically prohibits using illegal inducements in the marketing of insurance. All of the following would be considered illegal inducements EXCEPT - CORRECT ANSWER Inviting prospective clients to the grand opening of the company's new office." "Coverage A - Bodily Injury and Property Damage in the commercial general liability policy will cover - CORRECT ANSWER Losses due to the insured's negligence." "Which of the following would provide coverage for loss of income when an insured rental dwelling is rendered uninhabitable because of a covered loss? - CORRECT ANSWER Coverage D" "Rates that are established based on the similarities of the risk with other risks are known as - CORRECT ANSWER Manual rates." "In personal auto policies, the term "you" refers to - CORRECT ANSWER The named insured." "Which rating method provides an insurer with that portion of a rate that does not include provisions of expenses (other than adjusting expense) or profit and is based on historical aggregate loss and loss adjustment expenses projected through development to their ultimate value and through trending to a future point in time? - CORRECT ANSWER Loss costs rating" "In which type of commercial crime policy coverage is triggered by a loss that happens during the policy period but is not necessarily discovered during the policy period? - CORRECT ANSWER Loss sustained form" "An insured is driving above the posted speed limit. As he rounds a curve, he crashes into an illegally parked car. This is an example of - CORRECT ANSWER Contributory negligence." "Under the commercial crime coverage inside the premises - robbery or safe burglary of other property, what is the special per occurrence limit that applies to loss or damage to precious metals, precious and semiprecious stones, pearls, furs, manuscripts, drawings, or records? - CORRECT ANSWER $5,000" "What documentation grants express authority to an agent? - CORRECT ANSWER Agent's contract with the principal" "All of the following are essential elements of a commercial package policy (CPP) EXCEPT - CORRECT ANSWER Valuations and/or settlement provisions" "Personal property coverage under a homeowners policy would cover - CORRECT ANSWER The insured's camera if it is stolen while the insured is on vacation." "Which of the following would the livestock coverage form NOT insure against? - CORRECT ANSWER The euthanasia of livestock after being hit by a vehicle" "In the personal auto policy, owned trailers being towed by an insured auto are automatically covered for - CORRECT ANSWER Uninsured motorist coverage." "ABC Trucking hauls products for Acme, Inc. as a contract carrier. On one shipment, the driver stopped at a truck stop for lunch. Leaving the truck in the parking lot, he made certain that the truck was locked before leaving it. Upon returning to the truck, he discovered that someone had broken into the truck and stolen the cargo. Is ABC legally liable for this loss? - CORRECT ANSWER No, the driver had taken reasonable measures to protect the property by locking the truck." "A recent college graduate bought a new car and is trying to get automobile insurance on it as required by the lienholder. After being rejected by several insurance companies due to his driving record, he finally talked to an agent who can get him coverage. His agent called him a residual market risk. From which type of automobile insurance plan can the applicant purchase insurance? - CORRECT ANSWER Assigned risk" "An insured who has coverage for all his personal property has his TV stolen from the shop of the repairman. The owner of the repair shop filed a claim under the insured's policy, but it paid nothing to the owner of the store. Which provision does the policy have? - CORRECT ANSWER No benefit to bailee clause" "Which of the following perils is covered by the HO-2 and HO-3? - CORRECT ANSWER Sudden and accidental rupture of a heating system" "Frank's Steaks furnishes meat to steakhouses. An accident on the premises causes the building to lose refrigeration for 32 hours. The state inspectors will not allow the meat in the refrigerating units to be sold for human consumption, and Frank loses $18,500 in disposing of the meat. What coverage under Frank's BOP policy will cover the loss? - CORRECT ANSWER Utility service - direct damage" "Professional liability coverage protects the insured against legal liability resulting from - CORRECT ANSWER Errors and omissions." "The abandonment provision in property insurance policies states that - CORRECT ANSWER The insured may not relinquish ownership of damaged property to claim a total loss, but must protect damaged property from further loss." "A business using its own trucks to move its own cargo would insure the cargo using - CORRECT ANSWER Motor truck cargo - owners form." "Which of the following is NOT a duty of the employer/insured if an injury occurs at the workplace? - CORRECT ANSWER Make voluntary payments for treatment of the worker's injury" “Which of the following are the authorities that an agent can hold? - CORRECT ANSWER Express and implied" "Which of the following terms refers to such disabilities the loss of a limb, hearing , or eye sight? - CORRECT ANSWER Permanent partial disability" "Who is NOT considered an employee in an commercial general liability (CGL) policy? - CORRECT ANSWER Temporary worker" "The major portion of the premium of an equipment breakdown policy pays? - CORRECT ANSWER For inspections and examinations" "An insured owns a building valued at $400,000. To comply with the 80% coinsurance provision of his insurance policy, how , much should he insure the property for? - CORRECT ANSWER 80% of the property's replacement cost or more" "What will happen if a house covered by a standard mortgage clause is a total loss? - CORRECT ANSWER The insurer pays the mortgagee according to the mortgagee's interest in the property." "What is the civil penalty for violating a cease and desist order of the Commissioner? - CORRECT ANSWER $10,000" "The Business Pursuits endorsement under Section II of a homeowners policy will cover all of the following EXCEPT - CORRECT ANSWER Business liability." "If a property is covered by Company A for $20,000 and Company B covers the same property for $40,000, how much will Company A pay on a $24,000 loss? - CORRECT ANSWER $8,000" "The risk management technique that is used to prevent a specific loss by not exposing oneself to that activity is called - CORRECT ANSWER Avoidance." "In a farm policy, any cost incurred by the insurer for the investigation or defense of a claim will be paid by - CORRECT ANSWER The insurer." "Which of the following is true regarding a risk retention group? - CORRECT ANSWER It is a liability insurance company owned by its members." "An insured has a liability policy that sets the amount for all claims that arise from a single incident at $50,000. Which type of limit of liability does this insured's policy have? - CORRECT ANSWER Per occurrence" "Which of the following is an example of a protective safeguard in a businessowners policy? - CORRECT ANSWER Automatic sprinkler system" "Which of the following is an example of an unfair claims settlement practice? - CORRECT ANSWER Failure to promptly settle a claim when liability has been clearly established" "Which of the following definitions best defines the term "accident"? - CORRECT ANSWER A sudden, unplanned and unexpected event, not under the control of the insured, resulting in injury or damage neither expected nor intended" "An insured's accounts receivable records have been damaged. The loss may be covered with - CORRECT ANSWER The accounts receivable coverage form." "In a personal umbrella policy, the amount paid by the insured for certain losses not covered under the primary coverage is called - CORRECT ANSWER Self-insured retention." "Which of the following circumstances would be EXCLUDED under medical payments coverage of a personal auto policy? - CORRECT ANSWER The insured is injured while driving his motorcycle on his resident premises." "Which of the following is NOT an essential element of an insurance contract? - CORRECT ANSWER Counteroffer" "Which of the following persons is required to hold a producer license? - CORRECT ANSWER A person who negotiates insurance contracts" "In property and casualty insurance, what is the term for the amount of a loss that the insured must cover out of pocket, and the insurer will only pay for the additional amount of the loss above this limit? - CORRECT ANSWER Deductible" "A restaurant is out of business for 3 days after an insured's automobile hits an electrical pole. The pole falls and hits the building, knocking out all electrical power supply. Which of the following is NOT covered under the insured driver's auto policy? - CORRECT ANSWER Lost revenues from the restaurant" "How much is the premium for the dwelling under construction endorsement under the dwelling policy? - CORRECT ANSWER The average amount of insurance during construction" "With regards to the personal auto policy, in the event of a claim or loss, the insured is required to do all of the following EXCEPT - CORRECT ANSWER Immediately report to an emergency room for medical examination." "What is the maximum amount of protection available to insureds under the Pennsylvania Property and Casualty Insurance Guaranty Association? - CORRECT ANSWER The amount of loss up to the amount of coverage in the original policy, not to exceed $300,000 (per claimant)" "A mortgage company is named as a loss payee on the insured's homeowners policy, under the standard mortgage clause. If the insured suffers a loss due to a fire, which of the following is true? - CORRECT ANSWER The loss is payable to the insured and the mortgagee." "With regards to a homeowners policy, which coverage provides for indirect or consequential losses? - CORRECT ANSWER Coverage D" "To be eligible for businessowners policy (BOP) coverage, an office building CANNOT be higher than - CORRECT ANSWER 6 stories." "The legal liability coverage form provides coverage for damages for which the insured is legally liable arising from - CORRECT ANSWER Direct physical damage to property of others in the insured's care." "Which of the following symbols is available to an insured with vehicles subject to no-fault coverage? - CORRECT ANSWER Symbol 5" "A type of policy that is used to provide a specific amount of replacement cost for a given risk after it has been destroyed is called a(n) - CORRECT ANSWER Valued policy." "In terms of parties to a contract, which of the following does NOT describe a competent party? - CORRECT ANSWER The person must have at least completed secondary education." "An individual's construction company leaves mobile equipment and construction machinery on the job site until the project is completed. What could this individual use to insure it? - CORRECT ANSWER Contractors equipment floater" "An insured has a personal property replacement cost endorsement under her homeowners policy. If an expensive painting and an antique chair are stolen from the insured's home, what will the insured receive on the claim under that endorsement? - CORRECT ANSWER Nothing" "Which inland marine form would provide the best protection for a dry cleaning company against loss or damage to their customer's property while in the care, custody, and control of the dry cleaners? - CORRECT ANSWER Bailee's customer policy" "The medical payments coverage in a personal auto policy will pay reasonable medical expenses for all of the following EXCEPT - CORRECT ANSWER The insured is injured while exiting a friend's mobile home." "Under the Motor Vehicle Financial Responsibility Law, First Party Benefits would NOT be denied for which of the following injuries? - CORRECT ANSWER Injury incurred while the person was under the influence of drugs or alcohol" "According to the privacy of consumer financial information regulation, if a consumer decides to opt out, this means - CORRECT ANSWER The consumer directs the licensee not to disclose the consumer's nonpublic personal financial information to a third party." "The insured with a homeowners policy has had damage to his property caused by a volcano. Which of the following is true? - CORRECT ANSWER All volcanic eruptions within a 72-hour period will be considered one occurrence." "A trucking company owns a large fleet of trucks that transport oil across state lines. According to the financial responsibility requirements set by the Motor Carrier Act of 1980, what is the minimum amount of insurance the company must carry on vehicles that transport oil? - CORRECT ANSWER $1 million" "Which of the following would be included in the farm liability coverage forms? - CORRECT ANSWER Bodily injury to a residence employee" "When a regular bill of lading is issued, who will be responsible for the invoice cost of any damaged property? - CORRECT ANSWER The carrier" "Which of the following is defined as the cost to replace damaged property with less expensive and more modern construction or equipment? - CORRECT ANSWER Functional replacement cost" "To avoid violations of unfair claims settlement regulations, insurers are required to acknowledge the receipt of a claim within how many days? - CORRECT ANSWER 10 days" "Tom's Truck Service's vehicle is stolen. The policyholder may obtain coverage for transportation expenses subject to which of the following limits? - CORRECT ANSWER $20 per day; $600 maximum" "The members of a limited liability company are insureds under a businessowners policy (BOP) if - CORRECT ANSWER The limited liability company is designated as the named insured." "What fundamental principle in property insurance holds that when there is an unbroken connection between an occurrence and damage that grows out of the occurrence, then the resultant damage is all a part of the occurrence? - CORRECT ANSWER Proximate cause" "How much coverage is provided under a homeowners policy for theft or unauthorized use of a credit card? - CORRECT ANSWER $500" "When the Commissioner suspects that a person is violating an insurance law or other regulation, what can be issued that would order the person to stop committing the act of violation? - CORRECT ANSWER Cease and Desist Order" "An employee is injured while visiting the employer's out-of-state site. How will the workers compensation benefits be determined? - CORRECT ANSWER Benefits will be provided if the state was listed on the policy information page." "All of the following people would be considered insureds under the liability section of a homeowners policy EXCEPT - CORRECT ANSWER The 22-year-old niece of the insured who is visiting." "An individual was just caught acting as an exclusive general agent - even though he is not properly licensed. Assuming that this occurred in a single day, what is the maximum penalty he faces? - CORRECT ANSWER A third degree misdemeanor and a $1,000 fine" "Under which of the following circumstances can financial institutions share insurance coverage information with third parties, for the purpose of soliciting the purchase of insurance? - CORRECT ANSWER If a consumer does not sign and return the notice of disclosure within 30 days" "What is a wrongful act or the violation of someone's rights that leads to legal liability called? - CORRECT ANSWER Tort" "Which of the following is NOT covered under Coverage E - Scheduled Farm Personal Property? - CORRECT ANSWER Turkeys" "Limited fungi, wet or dry rot, or bacteria endorsement in HO policies applies to - CORRECT ANSWER Property and liability losses" "Events in which a person has both the chance of winning or losing are classified as - CORRECT ANSWER Speculative risk." "In which of the following types of property valuation will the policy pay the full value as specified on the policy schedule, regardless of the insured property's appreciation or depreciation? - CORRECT ANSWER Agreed value" "In addition to income benefits, how much will a dependent survivor receive as a funeral benefit for a deceased employee covered under Workers Compensation? - CORRECT ANSWER $3,000" "An insured's building has an actual cash value of $200,000, and he has insured the property for $120,000 with an 80% coinsurance clause. A $40,000 loss occurs. How much will the policy pay? - CORRECT ANSWER $30,000" "Two individuals are in the same risk and age class; yet, they are charged different rates for their insurance policies due to an insignificant factor. What is this called? - CORRECT ANSWER Discrimination" "The other insurance provision that limits the liability of the insurer to a portion of the loss no greater than the amount the insurer bears to all the insurance covering the property is called - CORRECT ANSWER Pro rata liability." "Which of the following best describes liberalization clause in a policy? - CORRECT ANSWER Changes adopted by the insurer that broaden coverage automatically apply to the policy at no additional premium." "Which of the following would be considered false advertising? - CORRECT ANSWER Implying that the agent is the insurer" "If an employer in a state with elective workers compensation laws chooses not be to subject to those laws, what does the employer lose? - CORRECT ANSWER Its common law defenses against liability suits" "A commercial package policy (CPP) allows the insured to select the coverage needed and customize the policy to meet the needs of the insured's business. In a CPP, the business owner may select from all of the following types of coverage EXCEPT - CORRECT ANSWER Workers compensation coverage" "Which of the following licensees is classified as a representative of the insurance company and not allowed to represent an insured or claimant? - CORRECT ANSWER Producer" "All of the following are true of Coverage B - Other Structures EXCEPT - CORRECT ANSWER It must be added by endorsement to a homeowners policy." "A building is insured, but no one has lived or worked in it for 10 years. The building is completely empty of any furniture or personal belongings. From an insurance standpoint, the building is considered - CORRECT ANSWER Vacant." "In a commercial package policy, who may cancel the policy in writing and make changes to the policy with the consent of the insurer? - CORRECT ANSWER First named insured" "A participating insurance policy may do which of the following? - CORRECT ANSWER Pay dividends to the policyowner" "Which of the following endorsements is used by individual business owners who use company vehicles for personal use rather than purchasing a personal vehicle? - CORRECT ANSWER Individual named insured" "Which of the following is NOT found in a commercial package policy? - CORRECT ANSWER Certificate of authority" "According to the standard workers compensation and employer liability policy form, a state should be listed in Part Three - other states' insurance of the workers compensation and employers liability policy when - CORRECT ANSWER The insured expects to extend operations to that state." "When twin brothers applied for life insurance from Company A, the company found that while neither of them smoked and both had a very similar lifestyle, one of the twins was in a much stronger financial position than the other. Because of this, the company charged him a higher rate for his insurance. This practice is considered - CORRECT ANSWER Discrimination." "All of the following actions can be described as twisting EXCEPT - CORRECT ANSWER Explaining to client the advantages of permanent insurance over term and suggesting changing policies" "An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy? - CORRECT ANSWER Mutual" "Which of the following personal auto coverages would pay for the insured's travel expenses and loss of earnings while involved in the settlement process of a covered loss? - CORRECT ANSWER Liability coverage" "In the event of a loss covered by the policy, if the insurer requests a signed sworn proof of loss, the named insured is required to submit it within - CORRECT ANSWER A specified time." "The regular National Flood Insurance Program would insure an eligible single-family dwelling for up to - CORRECT ANSWER $250,000." "During a sales presentation a producer intentionally makes a statement which may mislead the insurance applicant. This describes - CORRECT ANSWER Misrepresentation."