Term
| Which one of the following businesses may be covered under a businessowners policy (BOP)? |
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Definition
A)
West Richfield Bank and Trust.
C)
Ziegfeld and Son's Foreign Auto Repair.
D)
Circle C Convenience Store.
The BOP is a package policy providing most of the property (both direct and indirect), crime, and liability coverages that small and medium-sized businesses require. The BOP does not cover businesses related to autos, bars, and banks. |
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Term
| If an agent is unable to place business with an admitted insurer or a company licensed to do business in the state, where would he look to place this type of risk? |
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Definition
C)
State assigned risk market for nonadmitted carriers.
Insurance companies that are nonadmitted insurers write policies in the surplus lines market. The agent will deal with a nonadmitted insurer when he is unable to obtain the insurance through an admitted insurer or a company licensed to business in the state.
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Term
| Which one of the following acts constitutes an unfair practice involving false advertising? |
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Definition
A)
Quoting the high school football coach's statements about his new car in your agency's advertisement.
B)
Hinting that a competing insurer is suffering a financial crisis.
C)
Using statistics about vehicle accidents in an advertisement for car insurance.
D)
Accepting an applicant's signed application without collecting an initial premium.
The Insurance Code prohibits an agent or insurer from making disparaging remarks about any insurer, including false or critical statements regarding the financial condition or business method of any other insurer.
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Term
| Max and Sam are neighbors who get into an argument over the placement of their common property line. The argument becomes a fight in which Sam's nose is broken. Sam sues Max for his medical expenses. How will Max's homeowners policy respond to this loss? |
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Definition
A)
The insurer will deny the claim because of the intentional injury exclusion.
B)
It will pay Sam's medical bills under Part F--Medical Payments to Others.
C)
It will pay Sam's medical bills under the first aid expenses additional coverage.
D)
It will pay Sam's medical bills under Part E--Personal Liability.
Explanation
Loss arising out of acts the insured expects or intends is excluded under both Coverage E and Coverage F.
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Term
| To be defined as a burglary, an event must include which of the following conditions? |
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Definition
B)
Visible signs of forced entry or exit.
C)
Mysterious disappearance.
D)
Fear or threat of violence.
Explanation
Burglary is the forcible entry into or out of an insured's premises with the intent to carry off property belonging to the insured. Visible signs of forcible entry or exit must be present. The forcible entry may be made by tools, explosives, electricity, chemicals, or physical damage to the premises.
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Term
| Which of the following is NOT an exclusion in the commercial auto policy liability section? |
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Definition
B)
Care, custody, and control.
D)
Contractual liability.
Explanation
A coverage extension in the commercial auto policy allows up to $2,000 for bail bonds as a supplementary payment. It also pays for the cost of bonds to release attachments in any suit the insurer defends.
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Term
| Medical payments coverage in the commercial general liability policy covers: |
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Definition
A)
injuries to the insured's employees.
B)
injuries to third parties for which the insured is legally liable.
C)
injuries to third parties regardless of liability.
D)
injuries to the insured.
Medical payment is no-fault coverage but it applies only to third parties, not to the insured or to employees of the insured. The insurance pays medical expenses for bodily injury to a third party caused by an accident on the premises that the insured owns or rents, on passageways next to the premises the insured owns or rents, or because of the insured's business operations. |
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Term
| Ralph asks his insurance agent to explain how the homeowners policy covers stolen jewelry. The agent spends some time explaining how, when, where, and what jewelry theft coverage exists in the policy. As a result, Ralph believes that his $5,000 watch is covered in full under the basic policy. After the watch is stolen, Ralph is surprised to learn that he has only limited coverage. What legal doctrine might Ralph rely upon to get full coverage for his loss? |
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Definition
D)
Reasonable expectation
Explanation
Ralph may use the legal doctrine of estoppel. Ralph relied on his agent to provide an honest and detailed EXPLANATION of his homeowner's coverage. The agent overstated the coverage and gave Ralph a false sense of what was covered. The insurance company will be responsible for covering the full loss, since Ralph believed he did have the appropriate amount.
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Term
| In the dwelling forms, damage from vandalism is not covered if the building has been vacant for more than: |
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Definition
Explanation
Vandalism damage to a building that has been vacant for more than 60 consecutive days is excluded.
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Term
| Which one of the following auto policy coverages would pay for damage to the insured's car that the insured motorist caused by hitting a farmer's cattle while driving through the country? |
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Definition
Explanation
Other than collision coverage, also known as comprehensive coverage, protects against almost all accidental damage, with the exception of coverage provided under collision. Coverage includes losses due to fire, theft, explosion, earthquake, windstorm, missiles, falling objects, hail, water, flood, vandalism and malicious mischief, riot and civil commotion, glass breakage, and collision with birds or animals, wild or domestic.
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Term
| All of the following losses or damages would be covered under the commercial property broad causes of loss form EXCEPT: |
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Definition
Explanation
The broad form cause of loss includes all the perils the basic form contains plus others including falling objects, water damage, and weight of snow, ice, or sleet. Earth movement is not a covered peril.
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Term
| Joe is the general contractor building a new shopping center. He has hired subcontractors to do some of the work for him. What will cover the employees of the subcontractor if the subcontractor does not take out workers' compensation coverage? |
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Definition
A)
Joe's workers' compensation policy.
B)
They must sue their employer for coverage.
D)
The Federal Employer's Liability Act.
Explanation
They would be covered under Joe's policy. To ensure that the subcontractors have coverage, Joe should require them to provide a certificate of insurance.
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Term
| An all-risk or open-perils policy protects against: |
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Definition
B)
named perils unless otherwise excluded.
D)
any peril except those that are specifically excluded.
Explanation
An open-perils, or all-risk, policy provides coverage for all physical damage except those perils, conditions, or property specifically excluded. If a peril is not specifically excluded, it is covered.
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Term
| An occurrence is best described as something that: |
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Definition
A)
may take place over time.
C)
happens when no one is present.
Explanation
An occurrence can refer to an accident or to continuous or repeated exposure to the same conditions, resulting in injury to persons or damage to property that is neither expected nor intended.
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Term
| Which one of the following commercial auto coverages covers automobiles in the insured's care? |
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Definition
Explanation
Garagekeepers insurance covers customers' automobiles while in the care of the insured. Garagekeepers coverage is a special type of insurance necessary because the auto is entrusted to the business.
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Term
| In a crime policy, all of the following are acceptable ways to value covered property EXCEPT: |
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Definition
Explanation
Valuations clauses in crime insurance policies are different from those in property insurance policies. Specific valuation clauses cover such items as money, which is valued at its face value, and securities, which are valued at their market value as of the close of business on the day the loss is discovered. Losses to other types of property are paid at replacement cost, repair cost, or the limit of insurance. Estimations are not acceptable means of establishing the value of a loss.
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Term
How does the dwelling policy provide theft coverage?
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Definition
A)
It is included in the DP-3 only.
B)
It is only included in the DP-2 and DP-3.
C)
It is automatically included in the policy.
D)
It must be added by endorsement.
Explanation
Coverage for theft is provided by adding an endorsement to the policy.
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Term
| An insurance company takes possession of a damaged auto it has covered. When the company becomes the legal owner of the auto, it is exercising the right of: |
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Definition
Explanation
The insurance company has the right to any salvage when it settles a loss. The company may take possession of the damaged property and pay the insured the value of the loss. It then can sell or otherwise dispose of this salvaged property to reduce the claim's overall cost.
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Term
The business auto coverage form uses symbols to denote the vehicles to which each of the policy's coverages applies. Which symbol is the most restrictive?
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Definition
Explanation
Symbol 7 is the most restrictive because it applies only to autos specifically listed in the policy. Symbol 1 is the least restrictive as it covers any auto. Symbol 2 covers owned autos only. Symbol 9 covers nonowned autos, those owned by employees or partners of the insured.
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Term
| Which of the following actions would NOT be considered an unfair claim settlement practice in Texas? |
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Definition
A)
Failing to affirm or deny coverage of claims within 10 days.
B)
Requiring insureds to provide federal income tax statements as part of the investigation of workers' compensation claims.
C)
Failing to implement guidelines for claim investigations.
D)
Failing to provide an explanation of the basis in the policy for denying a claim.
Explanation
Insurers are required to affirm or deny coverage within a reasonable time. There is no specific period indicated in the law.
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Term
Which one of the following homeowners forms provides open perils coverage?
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Definition
Explanation
The HO-2, HO-4, and HO-8 are all named perils policies. HO-3 provide open perils coverage on the dwelling (Coverage A) and named perils coverage on personal property.
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Term
| When a loss occurs, the Causes of Loss special form requires the insurance company to: |
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Definition
A)
pay for decay or deterioration losses.
B)
pay for all losses not specifically excluded or limited by the policy.
C)
prove that the insured used defective materials if a collapse occurs during construction.
D)
pay for all losses to the insured property.
Explanation
Instead of listing the perils covered under the form, the Causes of Loss special form covers risks of direct physical loss, subject to the exclusions and limitations expressed in the form.
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Term
| Which of the following unendorsed policies provides open peril coverage on Coverage C--Personal Property? |
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Definition
Explanation
The comprehensive HO-5 policy is an open peril contract on personal property. Dwelling and other structures are also covered on an open peril basis. Open peril coverage provides coverage for all risks except those specifically excluded in the contract.
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Term
| What is the maximum daily amount paid under the CGL's Supplementary Payments section for the insured's loss of earnings? |
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Definition
Explanation
The CGL's Supplementary Payments section covers reasonable expenses incurred by the insured to assist in the investigation and defense of a claim, including up to $250 per day for loss of earnings.
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Term
| Mark wants to purchase a policy for his manufacturing company to include premises liability, products liability, and completed operations. Which policy would cover all of these losses? |
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Definition
A)
Contractual liability.
B)
Products and completed operations liability.
C)
Commercial general liability.
D)
Personal injury liability.
Explanation
Section A of the CGL policy covers bodily injury and property damage arising from the premises, operations, products, and completed operations.
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Term
| How many hours of continuing education is an agent responsible to complete in any 2-year license period? |
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Definition
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Term
| The purpose of employers' liability insurance is to provide |
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Definition
A)
liability protection where workers compensation does not apply.
B)
insurance for high-risk employers.
C)
excess workers compensation benefits.
D)
voluntary workers compensation benefits.
Explanation
Where workers compensation laws do not apply, injured workers are still entitled to sue their employer. Employers' liability insurance is available for those situations.
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Term
| Symbol 4 of the Business Auto policy applies to only those autos owned by the business: |
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Definition
A)
that are over one ton.
B)
that are not private passenger autos.
C)
that are specified in the policy.
Explanation
Symbol 4 refers to a category of autos that are owned by the insured but are not private passenger vehicles.
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Term
| A DP-2 policy would cover losses from all of the following perils EXCEPT |
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Definition
B)
weight of ice, snow or sleet.
D)
infestation of insects.
Explanation
The DP-2 is a named-perils policy, meaning that only those perils specifically listed are covered. Infestation of insects is not a listed peril.
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Term
| In commercial crime insurance, shoplifting is classified as: |
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Definition
Explanation
Shoplifting is a type of theft. Although robbery and burglary are also types of theft, they involve the use of or threat of force and the forcible entry into a premises to steal property. Shoplifting involves neither force nor a forcible entry. Malicious mischief, or vandalism, is the act of willfully and maliciously damaging or destroying property.
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Term
| All of the following items are excluded from coverage under a building and personal property coverage form EXCEPT: |
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Definition
B)
automobiles held for sale.
C)
currency or securities.
D)
patios or other paved surfaces.
Explanation
Under a building and personal property coverage form, outdoor furniture is covered under the form's building coverage. Accounts, bills, currency, deeds, evidences of debt, money, notes or securities, automobiles held for sale, and bridges, roadways, walks, patios, or other paved surfaces are some of the items excluded from coverage.
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