Adjust Practice Exam Questions and
Answers.
Which of the following would be considered a physical hazard?
a. Candice doesn't lock her front door when she leaves the house.
b. Patrice doesn't wear her seatbelt in the car.
c. Hank pushes his car into a lake and reports it stolen.
d. Brad's pool in his backyard. - Correct Answers d. Brad's pool in his
backyard.
The pool in Brad's backyard is a physical hazard, because it is a physical
condition that increases the chance of a loss.
Skip's Convenience Store must agree to install and maintain an emergency
shutoff system for its gas pumps in order to qualify for insurance coverage.
Which of the following statements is true?
a. This requirement is a binder found in the conditions section of the policy.
b. This requirement is a warranty found in the conditions section of the
policy.
c. This requirement is a warranty found in the declarations section of the
policy.
d. This requirement is a representation found in the declarations section of
the policy. - Correct Answers b. This requirement is a warranty found in
the conditions section of the policy.
Darnell is applying for auto insurance with his agent. Currently, he only
wants to get a minimal amount of coverage to keep his premiums as low as
possible, so he decides not to include uninsured motorist coverage on his
policy. His agent has him sign a document giving up his right to this
coverage. What is this called?
a. A warranty
b. An express waiver
c. A binder
d. An implied waiver - Correct Answers b. An express waiver
Which of the following is NOT one of the criteria that makes acceptance of
an offer to contract legally enforceable?
a. The offeree must communicate his intent to enter into the contract.
,b. The person to whom the offer was made must be the one to accept.
c. Acceptance of the offered terms must be unconditional.
d. The offeree must have no more than one stipulation. - Correct Answers
d. The offeree must have no more than one stipulation.
Acceptance is not legally enforceable if it is made with any stipulations. The
originally offeree must unconditionally accept the terms of the offer and
must communicate his intent to enter into the contract.
There is a severe hailstorm headed in David's direction. He sees this as an
opportunity to get his car repainted, so he backs his car out of the garage
and parks it in the driveway. After the storm passes, and David's car is
covered in hail damage, he calls his insurer and files a claim. David's
actions constitute:
a. a morale hazard.
b. a physical hazard.
c. an occurrence.
d. a moral hazard. - Correct Answers d. a moral hazard.
David's actions constitute a moral hazard. A moral hazard occurs when an
insured person consciously and deliberately acts in a way that is more
likely to result in a loss.
In an insurance contract, the policyholder gives the insurer _____, and the
insurer gives the policyholder ______.
a. covered property; a risk pool
b. premium payments; peace of mind
c. peace of mind; risk
d. a surety; premium payments - Correct Answers b. premium payments;
peace of mind
In an insurance policy, where might one find the following statement? "The
insured must make reasonable effort to protect the covered property from
further damage."
a. Conditions
b. Exclusions
c. Declarations
d. Endorsements - Correct Answers a. Conditions
How is concealment distinct from misrepresentation?
a. Concealment is deliberately withholding information, while
misrepresentation is accidentally withholding information.
,b. Concealment and misrepresentation are not distinct; they mean the
same thing.
c. Concealment is stating a falsehood, while misrepresentation is
accidentally withholding information.
d. Concealment is deliberately withholding information, while
misrepresentation is stating a falsehood. - Correct Answers d.
Concealment is deliberately withholding information, while
misrepresentation is stating a falsehood.
Which of the following best defines "insured"?
a. Transfer of the risk of financial loss from one party to another
b. A legally binding contract in which the insurance company agrees to pay
for specified losses in exchange for premiums
c. An individual or organization that pays premiums in exchange for
financial protection
d. A company, group, or government agency offering financial protection -
Correct Answers c. An individual or organization that pays premiums in
exchange for financial protection
If Brigitta applies for insurance, the insurer will probably issue her a
temporary policy so she can be covered while they come to a decision
about her application. This is called:
a. a binder.
b. an estoppel.
c. a warranty.
d. a guarantee. - Correct Answers a. a binder.
Oswald can't afford to take his car to a shop, even though it is falling into
disrepair. The windshield has been cracked for some time, and two of the
lights are broken, not to mention the oil leak he noticed last week. While he
is driving on icy roads one day, he loses control and slides into a guardrail,
damaging the front bumper. He is upset by the accident, but then sees an
opportunity. He files a claim for the accident, stating that the windshield,
lights, and oil tank were damaged by the collision. Oswald's actions
constitute:
a. soft fraud.
b. a physical hazard.
c. hard fraud.
d. a morale hazard. - Correct Answers a. soft fraud.
, Soft fraud occurs when a policyholder deliberately exaggerates covered
damages in the hopes of getting a larger indemnity.
Which of the following statements about a Standard Fire Policy is TRUE?
a. Endorsements either add or change coverage.
b. In order to cover damage for lightning, an endorsement would have to be
added to the Standard Fire Policy.
c. Endorsements may not be added after the policy period has begun.
d. Endorsements are also known as binders. - Correct Answers a.
Endorsements either add or change coverage.
During a storm, lightning strikes a tree in Harry's yard and starts a fire that
spreads to his shed where he keeps all the equipment for his landscaping
business. In addition to the shed, Harry has to purchase all new equipment
to stay in business. What is the proximate cause of the damage to Harry's
equipment?
a. The tree catching fire
b. The shed burning
c. The fire burning the equipment
d. The lightning striking the tree - Correct Answers d. The lightning striking
the tree
When filling out an application for homeowners insurance, Janice has to
answer questions about whether or not she has certain safety systems in
place like fire detectors and alarm systems. Why would the insurance
company want to know this information?
a. They are trying to determine the number of perils for which to provide
coverage.
b. They are trying to determine the amount of the loss.
c. They are trying to determine the value of her home.
d. They are trying to determine the level of exposure to loss. - Correct
Answers d. They are trying to determine the level of exposure to loss.
Monica's home is located in a flood zone. In insurance terms, the location
of Monica's home is considered:
a. a risk.
b. a hazard.
c. a proximate cause.
d. a peril. - Correct Answers b. a hazard.
Answers.
Which of the following would be considered a physical hazard?
a. Candice doesn't lock her front door when she leaves the house.
b. Patrice doesn't wear her seatbelt in the car.
c. Hank pushes his car into a lake and reports it stolen.
d. Brad's pool in his backyard. - Correct Answers d. Brad's pool in his
backyard.
The pool in Brad's backyard is a physical hazard, because it is a physical
condition that increases the chance of a loss.
Skip's Convenience Store must agree to install and maintain an emergency
shutoff system for its gas pumps in order to qualify for insurance coverage.
Which of the following statements is true?
a. This requirement is a binder found in the conditions section of the policy.
b. This requirement is a warranty found in the conditions section of the
policy.
c. This requirement is a warranty found in the declarations section of the
policy.
d. This requirement is a representation found in the declarations section of
the policy. - Correct Answers b. This requirement is a warranty found in
the conditions section of the policy.
Darnell is applying for auto insurance with his agent. Currently, he only
wants to get a minimal amount of coverage to keep his premiums as low as
possible, so he decides not to include uninsured motorist coverage on his
policy. His agent has him sign a document giving up his right to this
coverage. What is this called?
a. A warranty
b. An express waiver
c. A binder
d. An implied waiver - Correct Answers b. An express waiver
Which of the following is NOT one of the criteria that makes acceptance of
an offer to contract legally enforceable?
a. The offeree must communicate his intent to enter into the contract.
,b. The person to whom the offer was made must be the one to accept.
c. Acceptance of the offered terms must be unconditional.
d. The offeree must have no more than one stipulation. - Correct Answers
d. The offeree must have no more than one stipulation.
Acceptance is not legally enforceable if it is made with any stipulations. The
originally offeree must unconditionally accept the terms of the offer and
must communicate his intent to enter into the contract.
There is a severe hailstorm headed in David's direction. He sees this as an
opportunity to get his car repainted, so he backs his car out of the garage
and parks it in the driveway. After the storm passes, and David's car is
covered in hail damage, he calls his insurer and files a claim. David's
actions constitute:
a. a morale hazard.
b. a physical hazard.
c. an occurrence.
d. a moral hazard. - Correct Answers d. a moral hazard.
David's actions constitute a moral hazard. A moral hazard occurs when an
insured person consciously and deliberately acts in a way that is more
likely to result in a loss.
In an insurance contract, the policyholder gives the insurer _____, and the
insurer gives the policyholder ______.
a. covered property; a risk pool
b. premium payments; peace of mind
c. peace of mind; risk
d. a surety; premium payments - Correct Answers b. premium payments;
peace of mind
In an insurance policy, where might one find the following statement? "The
insured must make reasonable effort to protect the covered property from
further damage."
a. Conditions
b. Exclusions
c. Declarations
d. Endorsements - Correct Answers a. Conditions
How is concealment distinct from misrepresentation?
a. Concealment is deliberately withholding information, while
misrepresentation is accidentally withholding information.
,b. Concealment and misrepresentation are not distinct; they mean the
same thing.
c. Concealment is stating a falsehood, while misrepresentation is
accidentally withholding information.
d. Concealment is deliberately withholding information, while
misrepresentation is stating a falsehood. - Correct Answers d.
Concealment is deliberately withholding information, while
misrepresentation is stating a falsehood.
Which of the following best defines "insured"?
a. Transfer of the risk of financial loss from one party to another
b. A legally binding contract in which the insurance company agrees to pay
for specified losses in exchange for premiums
c. An individual or organization that pays premiums in exchange for
financial protection
d. A company, group, or government agency offering financial protection -
Correct Answers c. An individual or organization that pays premiums in
exchange for financial protection
If Brigitta applies for insurance, the insurer will probably issue her a
temporary policy so she can be covered while they come to a decision
about her application. This is called:
a. a binder.
b. an estoppel.
c. a warranty.
d. a guarantee. - Correct Answers a. a binder.
Oswald can't afford to take his car to a shop, even though it is falling into
disrepair. The windshield has been cracked for some time, and two of the
lights are broken, not to mention the oil leak he noticed last week. While he
is driving on icy roads one day, he loses control and slides into a guardrail,
damaging the front bumper. He is upset by the accident, but then sees an
opportunity. He files a claim for the accident, stating that the windshield,
lights, and oil tank were damaged by the collision. Oswald's actions
constitute:
a. soft fraud.
b. a physical hazard.
c. hard fraud.
d. a morale hazard. - Correct Answers a. soft fraud.
, Soft fraud occurs when a policyholder deliberately exaggerates covered
damages in the hopes of getting a larger indemnity.
Which of the following statements about a Standard Fire Policy is TRUE?
a. Endorsements either add or change coverage.
b. In order to cover damage for lightning, an endorsement would have to be
added to the Standard Fire Policy.
c. Endorsements may not be added after the policy period has begun.
d. Endorsements are also known as binders. - Correct Answers a.
Endorsements either add or change coverage.
During a storm, lightning strikes a tree in Harry's yard and starts a fire that
spreads to his shed where he keeps all the equipment for his landscaping
business. In addition to the shed, Harry has to purchase all new equipment
to stay in business. What is the proximate cause of the damage to Harry's
equipment?
a. The tree catching fire
b. The shed burning
c. The fire burning the equipment
d. The lightning striking the tree - Correct Answers d. The lightning striking
the tree
When filling out an application for homeowners insurance, Janice has to
answer questions about whether or not she has certain safety systems in
place like fire detectors and alarm systems. Why would the insurance
company want to know this information?
a. They are trying to determine the number of perils for which to provide
coverage.
b. They are trying to determine the amount of the loss.
c. They are trying to determine the value of her home.
d. They are trying to determine the level of exposure to loss. - Correct
Answers d. They are trying to determine the level of exposure to loss.
Monica's home is located in a flood zone. In insurance terms, the location
of Monica's home is considered:
a. a risk.
b. a hazard.
c. a proximate cause.
d. a peril. - Correct Answers b. a hazard.
