AINS 103: Practice Quiz-All Chapters Questions and Correct Answers
1. For most businesses, which peril poses the greatest risk of a large or total
property loss? ANSWER -For most businesses, fire poses the greatest risk of a large or total property
loss.
2. Extra expenses are expenses, in addition to ordinary expenses, that an orga-
nization incurs to mitigate the effects of a business interruption. Which one of
the following is an example of an extra expense? ANSWER -Cost to rent temporary oflce
space.
3. An electrical contractor was hired to install a new 100-amp fuse box in the
Smith's home. During installation, the contractor inadvertently left a small
screwdriver in a duct space behind the panel. Three weeks later, the screwdriver
caused an electrical short which led to a fire. Which one of the following loss
exposures best categorizes the electrical contractor's legal liability exposure
for the fire damages? ANSWER -Completed operations liability.
4. Upon entering a restaurant, a customer grasped a handrail that broke off,
causing the customer to fall and break his wrist. This is an example of which
one of the following types of commercial general liability loss? ANSWER -Premises
and operations liability.
5. Inland marine insurance is insurance that covers: ANSWER -Many ditterent classes of
property that
typically involve an element of transportation on land.
6. Workers compensation benefits include which one of the following? ANSWER -
Rehabilita- tion benefits.
7. Bio-Pharma was a highly-regarded pharmaceutical company. That changed
last year when it was revealed that Bio-Pharma researchers had fabricated test
results of the company's new hypertension drug, and a company official bribed
a key regulator to get the drug approved. These revelations led to a sharp
decline in sales of all of Bio-Pharma's drugs, a sharp decline in net income, and
a decline in Bio-Pharma's stock price. This scenario clearly indicates the value
of a corporation's...? ANSWER -Reputation.
8. When a clothing manufacturer decides to expand the sale of its clothing line
by offering internet purchases, it creates new exposures not otherwise covered,
or not fully covered, by a traditional policy. These include: ANSWER -Loss or
, AINS 103: Practice Quiz-All Chapters Questions and Correct Answers
damage caused by computer viruses.
9. Sally is a commercial property claims adjuster. When she is first assigned a
claim, she reviews the commercial property part of the policy to make sure
, AINS 103: Practice Quiz-All Chapters Questions and Correct Answers
that the property that suffered the loss matches the description of the property
insured. She also reviews the kinds and amount of coverage provided. Which
one of the following components of the commercial property part will provide
Sally with this information? ANSWER -The commercial property declarations page contains
information such as a description of the property insured, the kinds and amounts of coverage provided, and any
optional coverages, among other information.
10. Billy owns a baseball souvenir store in Cooperstown, NY. He insured his store
under a Building and Personal Property Coverage Form (BPP) with a $275,000
limit and a $1,500 deductible. A large fire in the store caused significant
damage amounting to $310,000 in covered damages. How much would Billy's
insurer pay under his BPP? ANSWER -$275,000. $310,000 - $1,500 = $308,500, which exceeds the BPP
limit. The insurer will pay $275,000. The deductible is subtracted from the loss, not the limit.
11. Which one of the following is one of the covered causes of loss in the
commercial property policy Causes of Loss—Basic form? ANSWER -Explosion is a
covered cause of loss under the basic form. All the others are additional causes of loss covered by the broad
form (and they are also covered under the special form).
12. Which one of the following is correct with respect to the Increased Cost
of Construction additional coverage of the Building and Personal Property
Coverage Form (BPP)? ANSWER -It provides a small amount of insurance to cover the increased cost to
comply with ordinances or laws regulating the repair, rebuilding, or replacement of covered buildings.
13. Which one of the following would be considered an extra expense under
the Business Income (and Extra Expense) Coverage Form of the commercial
package policy? ANSWER -The increased cost of rent at a temporary location.
14. Dooley's Restaurant is insured under a commercial package policy (CPP)
with the Business Income (with Extra Expense) Coverage Form. The business
suffered a $400,000 loss of business income when it was forced to suspend
operations after flood waters damaged the basement and first floor of the
restaurant. Which one of the following is an acceptable reason for the CPP
insurer to deny the business income claim? ANSWER -The policy's covered causes of loss did
not include flood.
1. For most businesses, which peril poses the greatest risk of a large or total
property loss? ANSWER -For most businesses, fire poses the greatest risk of a large or total property
loss.
2. Extra expenses are expenses, in addition to ordinary expenses, that an orga-
nization incurs to mitigate the effects of a business interruption. Which one of
the following is an example of an extra expense? ANSWER -Cost to rent temporary oflce
space.
3. An electrical contractor was hired to install a new 100-amp fuse box in the
Smith's home. During installation, the contractor inadvertently left a small
screwdriver in a duct space behind the panel. Three weeks later, the screwdriver
caused an electrical short which led to a fire. Which one of the following loss
exposures best categorizes the electrical contractor's legal liability exposure
for the fire damages? ANSWER -Completed operations liability.
4. Upon entering a restaurant, a customer grasped a handrail that broke off,
causing the customer to fall and break his wrist. This is an example of which
one of the following types of commercial general liability loss? ANSWER -Premises
and operations liability.
5. Inland marine insurance is insurance that covers: ANSWER -Many ditterent classes of
property that
typically involve an element of transportation on land.
6. Workers compensation benefits include which one of the following? ANSWER -
Rehabilita- tion benefits.
7. Bio-Pharma was a highly-regarded pharmaceutical company. That changed
last year when it was revealed that Bio-Pharma researchers had fabricated test
results of the company's new hypertension drug, and a company official bribed
a key regulator to get the drug approved. These revelations led to a sharp
decline in sales of all of Bio-Pharma's drugs, a sharp decline in net income, and
a decline in Bio-Pharma's stock price. This scenario clearly indicates the value
of a corporation's...? ANSWER -Reputation.
8. When a clothing manufacturer decides to expand the sale of its clothing line
by offering internet purchases, it creates new exposures not otherwise covered,
or not fully covered, by a traditional policy. These include: ANSWER -Loss or
, AINS 103: Practice Quiz-All Chapters Questions and Correct Answers
damage caused by computer viruses.
9. Sally is a commercial property claims adjuster. When she is first assigned a
claim, she reviews the commercial property part of the policy to make sure
, AINS 103: Practice Quiz-All Chapters Questions and Correct Answers
that the property that suffered the loss matches the description of the property
insured. She also reviews the kinds and amount of coverage provided. Which
one of the following components of the commercial property part will provide
Sally with this information? ANSWER -The commercial property declarations page contains
information such as a description of the property insured, the kinds and amounts of coverage provided, and any
optional coverages, among other information.
10. Billy owns a baseball souvenir store in Cooperstown, NY. He insured his store
under a Building and Personal Property Coverage Form (BPP) with a $275,000
limit and a $1,500 deductible. A large fire in the store caused significant
damage amounting to $310,000 in covered damages. How much would Billy's
insurer pay under his BPP? ANSWER -$275,000. $310,000 - $1,500 = $308,500, which exceeds the BPP
limit. The insurer will pay $275,000. The deductible is subtracted from the loss, not the limit.
11. Which one of the following is one of the covered causes of loss in the
commercial property policy Causes of Loss—Basic form? ANSWER -Explosion is a
covered cause of loss under the basic form. All the others are additional causes of loss covered by the broad
form (and they are also covered under the special form).
12. Which one of the following is correct with respect to the Increased Cost
of Construction additional coverage of the Building and Personal Property
Coverage Form (BPP)? ANSWER -It provides a small amount of insurance to cover the increased cost to
comply with ordinances or laws regulating the repair, rebuilding, or replacement of covered buildings.
13. Which one of the following would be considered an extra expense under
the Business Income (and Extra Expense) Coverage Form of the commercial
package policy? ANSWER -The increased cost of rent at a temporary location.
14. Dooley's Restaurant is insured under a commercial package policy (CPP)
with the Business Income (with Extra Expense) Coverage Form. The business
suffered a $400,000 loss of business income when it was forced to suspend
operations after flood waters damaged the basement and first floor of the
restaurant. Which one of the following is an acceptable reason for the CPP
insurer to deny the business income claim? ANSWER -The policy's covered causes of loss did
not include flood.
