Union Plastics is a large manufacturing company, and they handle all their own insurance claims. If Stan was hired by Union Plastics to investigate suspicious claims and determine if the claim needs to be paid, Stan would be considered

A) an insurance commissioner
B) an insurance counselor
C) an insurance adjuster
D) an insurance agent

Ace Property and Casualty of Texas has had several catastrophic losses on the coast because of some major storms, and the company’s claim division does not have the staff to meet state claim handling deadlines. On a temporary basis, Ace would most likely hire

A) public adjusters
B) insurance agents
C) staff adjusters
D) contractors

Susan had a large fire that caused some damage to her home, and she is not certain as to the proper settlement amount. If Susan needs a person to represent her in the settlement of her claim, Susan would need

A) a public adjuster
B) a staff adjuster
C) an independent adjuster
D) an insurance commissioner

Sure Bet Insurance Company, a large P&C carrier, has a claims backlog because of flooding in the area. If Sure Bet wanted to hire some additional staff adjusters but have them start assisting with the flood claims immediately for training purposes, they could request temporary licenses for the new hires by providing the Commissioner with at least

A) 45 days notice
B) 5 days notice
C) 10 days notice
D) 30 days notice

Doug is licensed as a property and casualty adjuster and works for Allied Insurance Company. Doug could work all the following claims for Allied EXCEPT

A) windstorm damage to an insured’s home
B) theft of personal property from an insured’s residence
C) injury to Sam, an employee of an insured, while Sam is at work
D) physical damage to an insured’s vehicle

A company licensed in Texas to provide homeowners and automobile insurance would be regulated by

A) the company
B) the county commissioner
C) the governor
D) the Department of Insurance

ABC Insurance Company has offices around the world, and its corporate office is located in Maine. If ABC is providing coverage to residents of New York, in New York, they would be considered

A) domestic
B) illegal
C) alien
D) foreign

ABC Insurance Company has offices around the world, and its corporate office is located in Maine. If ABC is providing coverage to residents of Maine, they would be considered

A) domestic
B) foreign
C) alien
D) local

An insurance company is considering opening an office in a state, and it is concerned with the current laws in that state and how they might be different than its state of domicile. Who is responsible for writing the laws in a given state?

A) The state legislature
B) The company
C) The clients
D) The Commissioner

Risky Business Insurance Company writes business in Texas as a Surplus Lines Insurer. Risky Business is most likely operating as:

A) an admitted company
B) an authorized company
C) a nonadmitted company
D) an illegal company

In order for a person to be licensed as an adjuster, the person must comply with all of the following EXCEPT

A) be at least 18 years of age
B) pass the state exam
C) have 10 years experience
D) be trustworthy

All of the following people would be exempt from taking the state adjuster license exam EXCEPT

A) a person who is licensed as an agent
B) a person whose license has expired in the past year
C) a person holding a CPCU® designation
D) a person holding an AIC designation

Steve, a licensed adjuster, has moved his family across town into a new home. How long does Steve have to notify the state of his new address?

A) 10 days
B) 60 days
C) 30 days
D) 45 days

An adjuster license will remain in effect for how many years?

A) 5 years
B) 10 years
C) 2 years
D) 3 years

Unless a company is newly admitted, how often is the Commissioner required to examine (i.e., audit) all admitted insurance companies?

A) Every five years
B) Once a year
C) Never
D) Every three years

A person that markets and sells insurance policies to the public is known as

A) the agent
B) the Commissioner
C) the adjuster
D) the governor

In order for the adjusters to perform their job functions, they are required to know all of the following EXCEPT

A) case law derived from judicial decisions
B) policy language
C) established company methods and procedures
D) how much money the insured makes

What level of fiduciary responsibility do adjusters have to adhere to?

A) Expert
B) Normal
C) Legal
D) Extraordinary

All of the following would be considered an illegal incentive received by an adjuster EXCEPT

A) free car washes for one year
B) reimbursement of expenses by an insurance company
C) an all expense paid trip
D) tickets to upcoming football game from customer

All of the following would be considered a breach of the Statement of Principles EXCEPT

A) explaining the policy provisions to a claimant
B) advising claimants as to their legal rights
C) communicating with a claimant who is represented by an attorney
D) advising a claimant against seeking legal advice

Who must see that the contractual promises that have been made to policyholders are honored promptly, fairly, and accurately?

A) Agents
B) The customer
C) The adjuster
D) The insurance company

All of the following are unfair claims practices EXCEPT

A) responding to a claimant in 20 days after receiving notice of claim
B) attempting to settle a claim by underpaying what is actually due to the claimant
C) after receiving the appraisal of damaged property, paying loss to the claimant
D) denying the claim before conducting proper investigation

Who is responsible for submitting records, including claim records, to the state to verify proper handling?

A) The agent
B) The insurance company
C) The adjuster
D) The claimants

When can an insurance company require the claimant to produce tax or financial records?

A) When requested by the adjuster
B) Following a total loss by fire
C) At any time
D) Never

When would a deceptive trade practice occur in any commercial transaction?

A) Seller causes provable mental anguish
B) Adjuster is licensed in the state
C) Company has Certificate of Authority
D) Adjuster follows all laws and settles the claim

All insurance contracts have several parties; the party known as the second party would be

A) the insurance company
B) the insured
C) the agent
D) the Department of Insurance

Losses paid to others that were caused by the insured are paid to

A) 3rd parties
B) agents
C) policyholders
D) 1st parties

When an adjuster is adjusting a loss for a claimant, does the adjuster have to comply with the policy that the claimant has?

A) No, the adjuster has no contractual obligations to the claimant.
B) Yes, the state mandates this compliance.
C) No, unless the adjuster’s company gives them permission.
D) Yes, the adjuster must always adhere to the claimant policy

If Joe is an insured with Sure Bet Insurance Company and he is found liable for damages that he caused to Larry’s vehicle, Larry would be considered

A) damaged
B) claimant
C) liable
D) 1st party

A contractual requirement for disclosure to all parties is called

A) legal disclosure
B) explanation
C) utmost good faith
D) representation

If an insurance company suspects that the loss was caused by arson, how many days does the insurer have to notify the insured in writing of the acceptance or rejection of the claim?

A) 15 days
B) 20 days
C) 30 days
D) 10 days

A major hurricane has damaged many homes along the coast. If the storm caused damage and the insured notified the insurer of damage, how long does the insurer have to acknowledge receipt of the claim?

A) 10 days
B) 30 days
C) 15 days
D) 20 days

Once the insurer has received all needed information to settle a claim that it is liable for, how long does the insurer have to send the payment to the insured?

A) 10 days
B) 20 days
C) 5 business days
D) 30 days

By state claims settlement guidelines, how long does the company have to investigate a claim that they think might be fraudulent after they receive the proof of loss from the insured?

A) 60 days
B) 30 days
C) 45 days
D) 10 days

If the insurer does not make payment on the claim after 60 days of receiving the proof of loss from the insured, they are required to

A) pay damages, including 25% interest on the amount of the claim
B) serve 6 months in jail
C) pay a fine to the state
D) pay damages, including 18% interest on the amount of the claim

Which of the following would be considered a competent person?

A) A woman at least 18 years of age who is sane and sober
B) A customer at a bar that is intoxicated
C) A person that is not found to be mentally competent
D) A college student that is 17 years old

All of the following are required for a contract to be in force EXCEPT

A) legal purpose
B) a valid offer must be followed by an acceptance
C) exchange of value between parties
D) be in force for at least 5 years

What is the type of contract, written by an insurer, where the insured has no negotiation or input in its writing and must either take it or leave it?

A) Aleatory contract
B) Personal contract
C) Unilateral contract
D) Contract of adhesion

Joan lives in a $200,000 home and has the coverage written through Safety Insurance Company with an annual premium of $725 a year. This would be an example of

A) a conditions contract
B) an illegal contract
C) an unfair contract
D) an aleatory contract

The exchange of value between the parties to a contract is called

A) fraud
B) consideration
C) concealment
D) gifts

Steve is a customer of National Property and Casualty, and his policy has a requirement that the burglar alarm system be turned on and maintained at times. This requirement is written into the policy and is considered

A) a waiver
B) a warranty
C) a concealment
D) a representation

If an applicant deliberately withholds material information from the insurer, this will void the coverage and is considered

A) misrepresentation
B) concealment
C) fraud
D) material misrepresentation

Jeff is an agent with ABC Insurance Company, and he has sold many homeowners contracts in the past year. It has been discovered that Jeff has been telling all his customers that flood is covered under the policy when, in fact, the policy does not include this coverage. Assuming that one of Jeff’s clients has a flood loss, the insurer would be liable for the loss and would have recovery rights against Jeff. This would be an example of

A) legal purpose
B) waiver
C) aleatory contract
D) estoppel

If an adjuster forgoes policy provisions and gives the insured more time than the policy allows to submit information to the insured, the adjuster has

A) issued a binder.
B) broken state laws.
C) created a legal situation.
D) granted a waiver

Answers on the application for insurance by the applicant are considered to be

A) misrepresentation
B) warranties
C) representations
D) absolute truth

Representations are statements made by the prospective insured on an application for insurance that are believed to be entirely true.

Amanda owns a home, and it is insured by Prosper Insurance Company. If her home were to be damaged by a fire, the home has suffered

A) a liability loss
B) a direct loss
C) a consequential loss
D) an indirect loss

Direct loss is immediate actual physical damage to tangible property; example: Amanda’s house suffers damage from a fire.

Amanda owns a home insured by Prosper Insurance Company. Her home is damaged by a fire and Amanda cannot live in her home during the period of restoration. Her company offers to pay her expenses to live in a hotel. This would be considered

A) a direct loss
B) an indirect loss
C) a consequential loss
D) a liability loss

Indirect loss is the inability to use property as a result of a direct loss; example: Amanda cannot live in her house and must rent a hotel room due to the fire damage to her house.

Hank has a homeowner policy with the We Care Insurance Company. If Hank was out playing golf and one of Hank’s errant shots struck another golfer, this would be an example of

A) a liability loss
B) an indirect loss
C) a consequential loss
D) a direct loss

Liability loss is a damage/injury claim that arises out of actions that cause loss to a 3rd party.

James is an avid investor, and he has been losing money lately. He approaches Stan, his insurance agent, about insuring his investments in case he loses more money. Stan tells James that his risk is not insurable because he could make or lose money. James’s risk is considered to be

A) a pure risk
B) a speculative risk
C) a strange risk
D) an impossible risk

Speculative risk involves the chance of gain/loss and is not insurable (e.g., gambling, stock market).

Kendra is walking and slips on some wet leaves on a sidewalk; she falls and breaks her arm when she strikes the ground. In this example, what is the peril?

A) Wet leaves on the sidewalk
B) Contact with the ground
C) Walking
D) Rain that caused the wet leaves

The peril is the actual cause of loss. In this example, the wet leaves would be the hazard that increased Kendra’s chance of loss, but the peril and cause of loss would be the contact with the ground.

All of the following are parts to an insurance contract EXCEPT

A) the exclusions
B) conditions
C) the policy folder
D) an insuring agreement

The four parts of an insurance contract include the following (memory aid: DICE):

• Declarations
• Insuring agreement
• Conditions
• Exclusions

Which of the following would NOT be found on the declarations page?

A) The total premium for the policy
B) Effective date of the policy
C) The named insured
D) The perils covered by the policy

The declarations page contains the following:

• Property that is covered
• Policy period
• Premium
• Parties involved
• Policy coverage limits

The insured has a loss, and his policy requires him to pay an amount before the policy limits can be paid. This is called

A) the deductible
B) the limit of liability
C) the scheduled payments
D) the coverage amount

Deductibles are amount of loss the insured agrees to assume before the policy limits are paid. Deductibles are usually found only on a property policy.

Where would the insured find the maximum amount that the policy would pay for a covered loss?

A) Conditions
B) Exclusions
C) Insuring agreement
D) Declarations page

Policy limits set the amount of protection for an insured. The limit of liability is the dollar amount stated on the insurance contract representing the maximum amount that can be paid for a covered loss; this information is found on the declarations page.

All insurance contracts require that an exchange of value take place between the insured and the insurer. The value added by the insured is the premium that is paid. The value added by the insurer is

A) found in the declarations page
B) the promise to pay found in the insuring agreement
C) found in the conditions section
D) perils not covered

The insurance company’s promise to pay will be included in the insuring agreement. This also describes the covered perils.

All of the following perils are covered in the original SFP EXCEPT

A) removal

B) lightning

C) fire

D) wind

The original SFP only covered fire, lightning, and removal. Wind was added later.

An insured has gone on vacation. The insured’s house is

A) vacant

B) unoccupied

C) empty

D) uninsured

A building is considered vacant only when empty of people and contents.

Which of the following statements about property insurance is CORRECT?

A) Both real and personal property can be insured.

B) It is used to insure only personal property and contents.

C) Only real property can be insured.

D) Only a business buys real property insurance.

Property insurance insures real and personal property for individuals and businesses.

Which of the following is a package policy?

A) A policy that insures property only

B) A policy that insures property and liability

C) A policy that insures liability only

D) A policy that insures real property and personal property

Package policies insure both property and liability. A policy that insures only one line is called a monoline policy.

Mr. John Empty has filed a claim for damage to his previous home caused by vandalism. He has told you that the house has been for sale 6 months because he bought another home and moved. You will probably deny his claim. Why?

A) All property policies do not cover vandalism.

B) The house had been unoccupied for 6 months.

C) The house had been vacant for 6 months.

D) The house was for sale.

Most policies do cover certain perils such as vandalism after a house has been vacant for more than 60 consecutive days.

Which of the following is a Correct statement?

A) Class #1 fire rates are less than class #6.

B) Class # 4 fire rates are the lowest rates.

C) Class #3 fire rates are the lowest rates.

D) Class #6 fire rates are less than class #1

Construction class #6 (fire resistive) has lower fire rates than class #1 (frame).

You have been assigned to pay a claim where a home has been completely destroyed by fire. The estimated replacement cost is $ 100,000. The insured has purchased $80,000 of insurance to comply with the 80% coinsurance requirement. The policy has a $500 deductible. How much will you pay?

A) $79,500

B) $100,000

C) $80,000

D) $85,000

In the case of a total loss, the coinsurance requirement is ignored. The insured receives his policy limits.

Mr. Chang owns a building and purchases $80,000 of insurance with a $1,000 deductible. A small fire loss occurs and causes $20,000 of damage. The policy has an 80% coinsurance requirement. You have been assigned the claim. You estimate the replacement cost of the building to be $200,000. How much will you pay Mr. Chang?

A) $9,000

B) $20,000

C) $10,000

D) $19,000

The penalty formula for being underinsured is insurance carried divided by the insurance required ($80,000 ÷ $160,000) times the loss ($20,000). Then subtract the deductible ($1,000). This equals $9,000.

Why would an insured purchase automatic increase coverage?

A) To avoid the coinsurance penalty

B) To protect against increase building costs

C) To help with maintenance of the building

D) To keep from having to pay a deductible

The limits of insurance are raised at certain intervals to protect against the increased cost of replacing a building.

An insured has purchased $50,000 of blanket jewelry coverage. One specific piece of jewelry has been stolen. You have been assigned the claim. How much will you pay?

A) The estimated value of the missing piece up to $50,000

B) The full $50,000

C) Nothing, unless the piece is specifically listed

D) The reciprocal portion of the loss

A blanket limit of insurance insures multiple pieces of the same type property using a single limit of insurance. The entire limit can be used to pay for a single item.

Your son has been injured while playing quarterback for the high school football team. If you sue the school, what defense would the school’s insurer most likely use?

A) Assumption of risk

B) Last clear chance

C) Comparative negligence

D) Contributory negligence

You knew of the risk of injury in the game of football, so you, as the parent, assumed the risk.

An insured of Forum Insurance Company has run a stop sign and hit another car. As an adjuster for Forum Insurance, you are handling the claim made against the insured. Of the following, which will you most likely pay?

A) Damages to the insured’s car.

B) The insured’s medical bills.

C) The insured’s lost income because of injury.

D) Damages to the other person’s car.

Liability is not to the insured, but to the other party.

All of the following are elements of negligence EXCEPT

A) proximate cause

B) duty accepted

C) actual loss

D) duty breached

The four elements of negligence are duty owed, duty breached, actual loss, and proximate cause.

What is the definition of proximate cause?

A) The last cause in an unbroken chain

B) The only cause

C) The first cause in an unbroken chain

D) The first cause

Proximate cause is the first cause in an unbroken chain of events.

You are the adjuster assigned to a claim made against your insured. Your insured was intoxicated and became involved in a brawl at a bar. Is you making payment regarding this claim a possibility, and if so, what circumstances could contribute to this possibility?

A) No, because your insured was intoxicated.

B) No, your insured said he did not start the brawl.

C) Yes, simply because your insured was intoxicated

D) Yes, if your insured was the proximate cause.

If the proximate cause of the claim was your insured starting the brawl, it is possible that you may have to make payment.

You are the tortfeasor. What does that mean?

A) You have committed a wrongful act.

B) You should hire an attorney.

C) You are going to jail.

D) You have been sued

A tortfeasor is the party who commits a wrongful act and causes injury or damage to another.

An insured runs a red light while texting on his cell phone and causes injury to another. What is the insured’s liability?

A) Direct

B) Absolute

C) Vicarious

D) Strict

The party who is the tortfeasor has direct liability.

An aggregate liability limit applies to

A) all claims combined

B) only bodily injury

C) one claim

D) each person

Aggregate limits limit the total number of claims that will be covered and are usually found only in commercial policies.

What is an accident?

A) 2 cars colliding at a red light

B) Repeated exposure to radiation

C) Continuously drinking contaminated water

D) Taking medicine for 5 years that causes a stroke

An accident is a sudden and unforeseen event.

A child drowns in a swimming pool. Your insured owns the home. There is, however, a 10-foot high fence around the pool with a locked gate. Will you, as the adjuster, pay a claim made by the child’s parents?

A) No, because your insured is not negligent.

B) Yes, due to absolute liability.

C) Yes, because the gate lock was broken.

D) No, because your insured had a tall fence and a locked gate.

The insured has absolute liability. Proof of negligence is not required.

A claim may be denied for all of the following EXCEPT

A) if there have been no damages sustained

B) if there is no applicable policy in force

C) when the insured does not feel she is liable

D) when the insured has no legal liability for the loss suffered by a third-party claimant

The absence of any one of three elements—coverage, damages, or legal liability—can result in the denial of a claim

In claim handling, investigation means

A) reaching a settlement with the person who made a claim

B) preparing a claim for litigation

C) determining the dollar value of a claim

D) gathering the facts pertaining to a loss

An adjuster cannot settle, litigate, or determine the value of a claim without first gathering the facts.

Which of the following is NOT 1 of 3 initial steps of claim handling?

A) verify information

B) establish coverage

C) compare information

D) calculate value

The 3 steps are establish coverage, obtain information, and verify and compare information. Calculating value is not an initial step in claims handling.

Which of the following is a denial of liability?

A) The wrong policy is involved.

B) Insured did not admit guilt.

C) All the facts of the case reveal the insured is not the liable party.

D) There are no damages.

Once coverage for the loss in question has been confirmed under the applicable policy, a denial of liability will occur when the claims investigation of all the facts and circumstances of the case reveals that the insured is not the liable party.

When verifying insurance coverage on a 1st party claim, the claim representative would consider all of the following factors except one. Which one of the following is NOT relevant in determining whether a first party claim is covered?

A) The insured was legally liable for the loss.

B) The loss occurred in the coverage territory.

C) The loss was caused by a covered peril.

D) The loss occurred during the policy period.

Legal liability is only relevant in 3rd party claims.

Tom purchases a house from John. He borrows $75,000 from First City Bank, which along with his $25,000 down payment, equals the $100,000 purchase price of the home. Who has an insurable interest in this house?

A) Tom’s son, who would like to inherit the house someday

B) Tom

C) Tom and First City Bank

D) First City Bank

Insurable interest exists when there is an actual economic interest in the subject of the insurance from loss. Tom has an insurable interest in the home because he owns it. First City Bank has an insurable interest as long as it carries a mortgage on the home.

A policy that covers any loss that is not specifically excluded by the policy is

A) a broad peril policy

B) an open peril policy

C) a named peril policy

D) a specific named perils policy

An open peril policy covers any loss that is not specifically excluded by the policy.

Which of the following would normally be excluded under a property contract?

A) Losses that are uncontrollable by the insured

B) Losses to personal property

C) Catastrophic losses (war, flood, earthquake, and ordinance or law)

D) Accidental losses

Catastrophic losses are losses that may be insured by a separate policy specifically for the type of risk involved.

The open peril/special policy form part insures structures against

A) all risks of direct physical loss unless specifically excluded

B) earthquake only

C) a list of basic named perils only

D) all risks of loss to the insured building

An open peril/special policy covers structures against all risks of direct physical loss except those risks that are specifically excluded in the policy.

Which of these statements regarding claim payments is CORRECT?

A) Settlement checks for first party claims can only be made out to the named insured.

B) State laws do not address when claim payments must be made.

C) After a claim is settled, the insurer normally pays the claim immediately or within a very short time.

D) Claim handlers usually have no limit on their authority to issue claim checks.

A first-party settlement check may also be made out to a loss payee, such as a mortgage company. All states have unfair claim settlement practices laws that require payments to be made within a specified period of time.

In Texas, the signed and sworn proof of loss statement must be sent to the insured claimant within how many days of their insured’s claim notification to the insurance carrier?

A) 30 days

B) 10 days

C) 90 days

D) 15 days

The time limit set by Texas is 15 days.

In Texas, the signed and sworn proof of loss statement must be returned to the insurance company by the insured within how many days?

A) 10 days

B) 30 days

C) 91 days

D) 15 days

The time limit set by Texas is 91 days.

Duties of the insured after a loss include all of the following EXCEPT

A) cooperate with the insurance company

B) submit to questions under oath

C) provide an inventory of the damaged property to the company

D) not protect property from further damage

The insured has a duty to protect their property from further loss.

Abandonment is a loss provision that clarifies that the insured may NOT do which of the following?

A) The insured may not upgrade to a more expensive vehicle once her claim is settled.

B) The insured may not change insurance carriers during the claim settlement process.

C) The insured may not abandon her property in the event of a claim to obtain a total loss settlement.

D) The insured may not move to another state until her claim is settled.

Abandonment is a loss provision that clarified that the insured, including a mortgagee or other lien holder, may not abandon property in the event of a claim to obtain a total loss settlement.

What determines a total loss?

A) The insured does not want his property repaired.

B) The insurer did not get all the information needed to settle the claim.

C) The cost to repair is greater than the value of the property pre-loss value.

D) Parts to repair the property are difficult to locate and purchase.

The cost to repair is greater than the value of the property.

An adjuster is evaluating a claim involving damage to property that has depreciated $2,000 since the time it was purchased new for $10,000. The replacement cost of this item is $15,000. What is the actual cash value of this property?

A) $2,000

B) $15,000

C) $8,000

D) $13,000

Actual cash value is usually calculated by subtracting depreciation from replacement cost. In this case, $15,000 – $2,000 = $13,000.

A drop-draft settlement is used for which of the following?

A) No release is required

B) Claims that require litigation

C) Less complicated claims

D) The amount of the settlement is in question

Drop-draft settlements are used for less complicated claims where an adjuster would not expect the claimant to return for a supplemental claim settlement.

Replacement cost provides a settlement to the insured to replace property without subtracting

A) depreciation

B) agreed value

C) labor costs

D) appraised value

The settlement is paid without subtracting depreciation.

Valued policies are commonly written on all of the following items EXCEPT

A) decorative plant

B) antiques

C) collectors’ items

D) classic automobiles

This loss settlement is commonly used with items of a high value.

An insured purchased new furniture for $6,000. At the time of a fire loss, it had depreciated $2,000. The same furniture will cost $7,000 to replace. What is the actual cash value of the destroyed furniture?

A) $6,000

B) $7,000

C) $5,000

D) $8,000

Actual cash value is replacement cost minus depreciation: $7,000 – $2,000 = $5,000.

Texas regulations require the insurance company to notify the named insured in writing within

A) 10 days after the date of the initial settlement offer, and within 30 days after the claim is settled

B) 15 days after the date of the initial settlement offer, and within 30 days after the claim is settled

C) 20 days after the date of the initial settlement offer, and within 45 days after the claim is settled

D) 5 days after the date of the initial settlement offer, and within 20 days after the claim is settled

Texas regulations require the insurance company to notify the named insured in writing within 10 days after the date of the initial settlement offer and 30 days after the claim is settled.

Which of the following processes that adjusters use when they have difficulty verifying coverage is not used in Texas?

A) None of these can be used in Texas

B) Nonwaiver Agreement

C) Reservation of Rights Letter

D) Declaratory Judgement Action

The non-waiver agreement is a letter similar to the reservation of rights letter; however, it must be approved and signed by the claimant. These are not used in Texas.

Which of the following is an example of oral evidence?

A) Photographs taken at the scene of the accident

B) Testimony given by a witness to an accident

C) Charts that diagram the events leading up to an accident

D) A police report taken at the scene

Oral evidence is a verbal description of what happened before, during, or after an incident.

Which of the following determines whether an insured is liable?

A) Insured

B) Claims adjuster

C) Courts of competent jurisdiction

D) Insurance company

Only courts of competent jurisdiction and legal fact finders can make legal determinations about the liability of one part to another for damages on the basis of the totality of the circumstances being litigated.

A document that provides notice to the claimant that a particular claim may not be covered and that the insurer is not giving up its right to deny coverage by investigating the claim is

A) a denial of claim notice

B) a reservation of right to refuse to investigate the claim

C) a reservation of rights letter

D) a reservation of denial letter

The reservation of rights letter allows the insurance company to continue investigating a claim without giving up its right to deny coverage.

Which of the following best defines an adjuster’s draft authority?

A) Draft authority is the authorization to contact the insured.

B) Draft authority is the authorization to review the claimant’s file.

C) Draft authority is the authorization to work with an attorney.

D) Draft authority is the size of a claim check an adjuster is allowed to authorize without another person’s approval.

An adjuster’s draft authority is the size of a claim check the adjuster has the authority to draft without another person’s approval. The adjuster’s draft authority usually increases with the amount of the adjuster’s training and experience.

Which of these statements about arbitration is CORRECT?

A) In some states, a claim must be arbitrated before it can be litigated in court.

B) It is not used to resolve disputes between insurance companies.

C) Arbitration is voluntary in all states.

D) The parties to the arbitration are not allowed to be represented by an attorney.

Mediation is always voluntary, but in some states, a claim must be arbitrated before it can be litigated in court.

What is the most common way for an insurance company to pursue subrogation?

A) File a claim with the responsible party’s insurance company

B) File a lawsuit against the responsible party

C) File a lawsuit against the responsible party’s insurance company

D) Have the claim arbitrated

While a subrogation claim can be litigated or arbitrated, the most common method of pursuing subrogation is to file a claim with the responsible party’s insurance company.

What type of alternative dispute resolution is specifically designed to settle disagreements between the insured and the insurer on the amount that should be paid for a 1st party property damage claim?

A) Negotiation

B) Appraisal

C) Mediation

D) Arbitration

Most property insurance policies contain an appraisal condition as a means to resolve payment disputes on 1st party property damage claims.

Negotiation is an alternative to dispute resolution. In order to maintain good-faith negotiation the adjuster should do all of the following EXCEPT:

A) exaggerate the weaknesses of the opposing case

B) maintain professionalism

C) evaluate the claim fairly

D) remain objective

In order to maintain good-faith negotiation, the adjuster should:

• maintain courtesy and professionalism at all times;
• evaluate the claim fairly and ensure that the offers are consistent with evidence and file documentation;
• remain objective to ensure proper settlement of the claim; and
• emphasize the strengths of the insurer’s case and reduce the strengths of the opposing case.

Personal auto insurance was created for

A) company vehicles that were owned and primarily used for business use

B) used vehicles that were owned and primarily used for vacation use

C) private passenger vehicles that were owned and primarily used for personal use

D) private passenger vehicles that were owned and primarily used for any use

The personal auto policy covers the vehicles that are individually owned and used for the personal use of the insured.

Personal auto insurance provides all the following types of coverage EXCEPT

A) medical coverage to protect the insured for injuries that she has while using her vehicle

B) the insured’s personal liability if she causes damage to another’s body or property while playing golf

C) physical damage coverage to repair the insured’s vehicle

D) liability to protect the insured for damages that the insured causes to others

This insurance provides coverage for:

• liability to protect the insured for their legal obligations to others;
• medical coverage’s for the insured and their passengers; and
• physical damage to the insured’s damaged auto.

The policy to cover the insured’s personal automobiles has changed names through the years. All of the following are names for this type of coverage EXCEPT

A) state mandated policy

B) family auto policy

C) basic auto policy

D) personal auto policy

Although most states use the personal auto policy, the coverage has been called the family auto policy and the basic auto policy through the years.

Jeff, an insured with Sure Bet Insurance Company, has heard that a person can satisfy his financial responsibility to the state in several ways. Which of the following is NOT an approved way to meet this requirement?

A) Carrying auto liability coverage

B) Deposit $85,000 with the state

C) Deposit $85,000 with the federal government

D) Post a bond with the state

All owners and operators of automobiles are required to be financially responsible for any damages or injuries they cause another with an automobile. This requirement is for individuals as well as businesses. There are four ways that this requirement can be met:

• Posting a bond payable in the amount of $85,000
• Depositing money or securities with the Texas Secretary of State in the amount of $85,000
• Using self-insurance; this method may be used only by a business setting up its own insurance company just to insure themselves
• Carrying auto liability insurance

What is an SR-22?

A) A sports car

B) Proof of auto ownership

C) Endorsement added to cover DVD players

D) A proof of financial responsibility form

An SR-22 is a proof of financial responsibility form filed by the insurance company with the Texas Department of Public Safety (DPS). This verifies that a person carries the insurance meeting the minimum financial responsibility, and if the policy is ever cancelled then the insurer must notify the Texas DPS.

Under the personal auto policy, all the following vehicles would be examples of insured EXCEPT

A) trailers attached to covered vehicle

B) a leased vehicle

C) a vehicle listed in the declarations

D) the neighbor’s car

Other than owned or newly acquired vehicles, the following are other vehicles that have automatic coverage under the personal auto policy:

• A vehicle used as a temporary substitute for any other covered vehicle that is out of use because of breakdown, repair, servicing, loss, or destruction is automatically covered for liability
• Vehicles rented by the insured are covered automatically for liability coverage
• Trailers attached to an insured vehicle are covered and need not be listed or endorsed to the auto policy for liability coverage.

Steve and Sally are adding an additional vehicle to their household, and they carry 50/100/50 limits of liability with $500 deductibles on the physical damage section of their policy. How many days of automatic coverage do they have for the new car?

A) 14

B) 10

C) 4

D) 30

If the newly acquired vehicle is an additional vehicle to be added to the policy, the newly acquired vehicles are automatically covered for 14 days with the broadest physical damage coverage currently available to any vehicle in the household.

Steve and Sally are adding an additional vehicle to their household. They do not carry physical damage coverage for any of the vehicles in the household. They only carry 50/100/50 limits of liability coverage. How many days will the new vehicle have temporary physical damage coverage?

A) 30

B) 4

C) 14

D) 10

If the current policy does not include physical damage coverage for any of the vehicles in the household, the newly acquired vehicle is extended temporary physical damage coverage for 4 days. This temporary coverage is subject to a $500 deductible, and the insured must request physical damage coverage within the four-day period in order for physical damage coverage to apply.

Susan and Tom are replacing one of their current vehicles; they carry 100/300/100 limits of liability with $250 deductibles on the physical damage section of their policy. Susan forgets to call their agent to add the new vehicle. On the 17th day, Tom runs a red light and strikes a vehicle. Will their policy respond to this accident?

A) No, the vehicle was not added; therefore, no coverage exists.

B) Yes, all the damage would be covered.

C) Yes, the damage caused to the 3rd party would be covered but not the damage to their vehicle.

D) Yes, the damage to the 3rd party would not be paid but the damage to their vehicle would be covered.

If the newly acquired vehicle is a replacement vehicle for another vehicle currently on the policy, the replacement vehicle will have liability coverage continues until the end of the policy term.

All of the following could be an insured covered by the policy EXCEPT

A) the next door neighbor driving the vehicle without permission

B) the next door neighbor driving the vehicle with permission

C) resident relatives—those living with the named insured and related by blood, marriage, or adoption

D) the named insured

The following are considered to be insureds under a personal auto policy (PAP):

• Named insured—found on the declarations page; includes resident spouse and nonresident estranged spouse
• Resident relatives—those living with the named insured and related by blood, marriage, or adoption (includes wards and foster children)
• Any person driving an insured car with permission

The automobile insurance on the owner of the car involved in a claim is primary—insurance follows the car

The personal auto policy can provide coverage for all the following EXCEPT

A) damage caused by the insured

B) injuries to passengers in the insured’s vehicle

C) property damage caused by the insured

D) injuries to the insured’s neighbor during a football game

A personal auto policy can be looked at as a menu of 5 coverages that may be selected by the insured based upon the insured’s coverage needs. The insured may purchase one or all of the following:

• Liability
• Medical payments
• Personal injury protection
• Uninsured/underinsured motorists
• Physical damage

If the insured’s policy is represented as 100/300/100, this is known as

A) excellent coverage

B) split limits

C) poor coverage

D) combined single limits

If Hank carried split limits of 50/100/50 on his auto policy and caused the following damages, how much would Hank’s policy pay for liability losses?

Injured driver $39,000

Injured passenger $72,000

Injured passenger $65,000

Damaged caused to the injured party’s vehicle $93,000

A) $150,000

B) $269,000

C) $211,000

D) $189,000

Injured driver $39,000
Injured passenger $50,000
Injured passenger $11,000
Damage caused to the injured party’s vehicle $50,000

In the previous question, if Hank carried combined single limits of 300,000, how much would the policy pay for liability losses?

A) $269,000

B) $211,000

C) $150,000

D) $232,000

In a combined single limits policy, all damages caused by the insured would be paid up to the policy limit.

All of the following would be considered supplementary payments under the personal auto policy EXCEPT

A) defense cost

B) lost wages of the insured

C) first aid provided at the scene

D) interest on a judgment against the insured

Defense costs are technically not a supplementary payment; however, the cost of defending the insured (e.g., courts costs and attorney’s fees) will also be paid in addition to the liability limits.

What is the minimum personal injury protection coverage limit?

A) $2,500

B) $1,000

C) $500

D) $2,000

Minimum limit is $2,500 per person; maximum limit available is $100,000 per person. This limit may be distributed in the form of medical, lost wages, essential services, or death benefit (i.e., funeral) as needed.

What is the maximum limit for personal injury protection?

A) $75,000

B) $100,000

C) $2,500

D) $50,000

Minimum limit is $2,500 per person; maximum limit available is $100,000 per person. This limit may be distributed in the form of medical, lost wages, essential services, or death benefit (i.e., funeral) as needed.

Both medical and personal injury protection are provided if

A) they are endorsed onto the policy

B) the insured has a qualifying loss

C) the loss is less than $500,000

D) the injuries are caused by a negligent 3rd party

The medical and the personal injury protection coverages are not included in the base policy and would have to be added by endorsement to provide coverage.

All of the following would be covered under the medical payments coverage EXCEPT

A) injuries sustained by the insured

B) injuries caused to the insured while he is occupying the vehicle

C) the insured’s lost wages because of his injuries

D) injuries to the insured’s guest passengers

This coverage provides payment of medical or funeral expenses (but no loss of income) incurred within 3 years of the accident date without regard to fault.

If the insured was injured in an accident that was caused by a negligent 3rd party, would the insured’s medical coverage provide for the insured’s medical bills?

A) Yes, if the negligent 3rd party agreed to let the insured’s policy pay.

B) No, since the insured was not at fault, no coverage would be provided.

C) No, the insured’s injuries would have to be paid by the 3rd party.

D) Yes, the insurer would then subrogate the losses from the 3rd party

Once a claim has been paid, there is subrogation potential against a negligent 3rd party that caused the accident.

Under the personal auto policy, coverage C provides the insured with

A) physical damage

B) theft

C) liability

D) uninsured/underinsured motorist

Part A Liability
Part B Medical/PIP
Part C Underinsured Motorist/underinsured motorist
Part D Physical damage

What is the standard deductible for property damage under the uninsured motorist coverage in the personal auto policy?

A) $250

B) $1,000

C) $500

D) $100

The property damage portion of the UM/UIM has a mandatory $250 deductible. It also pays for a rental vehicle.

What coverage would the insured need to provide her coverage for damage to her vehicle that was caused by a hit and run driver?

A) Uninsured motorist

B) Collision

C) Liability

D) Comprehensive

Physical contact with the at-fault vehicle is required; therefore, a hit-and-run driver falls under the definition of an uninsured motorist.

Janis has a personal auto policy and strikes a bridge because she was avoiding contact with a drunk driver that was about to hit her vehicle. Could Janis cover this loss under uninsured motorist coverage?

A) Yes, because she was trying to avoid a serious accident.

B) No, physical contact must occur; otherwise, the car would be a phantom.

C) No, the at-fault 3rd party would need to pay.

D) Yes, the damage to her vehicle would always be covered under UM/UIM.

A vehicle that runs the insured off the road is not considered to be an uninsured motorist as there is no physical contact with the at-fault vehicle. Instead, this is referred to as a phantom vehicle.

What is the maximum coverage that the insured can buy in UM/UIM coverage?

A) There is no maximum

B) 100/300/100

C) The liability limit carried by the insured

D) 250/500/250

The maximum limits are up to what the insured carries under Coverage A (liability).

All the following types of damage to the insured’s vehicle would be covered under collision EXCEPT

A) if the insured swerved to miss a dog and struck a tree

B) if the insured ran off the road and his vehicle rolled 3 times

C) if the insured struck a fence

D) if the insured’s vehicle is stolen

Collision includes the upset of the insured’s vehicle or its impact with another vehicle or object. This covers the insured’s vehicle only and is always written with a deductible.

If the insured has OTC (Other Than Collision) coverage on his policy with a $250 deductible and he calls his agent to inquire about what types of losses would be covered by this coverage, his agent would tell him that all the following would be covered EXCEPT

A) if the insured feel asleep while driving, left the road, and struck a bridge

B) if the insured’s windshield is shattered by a piece of flying debris

C) if the insured’s vehicle is flooded by water

D) if the insured strikes a deer while driving

Other Than Collision (often referred to as comprehensive) is also written with a deductible and provides protection for losses not covered by collision such as fire, wind, hail, theft, glass, flood, vandalism and malicious mischief, contact with birds or other animals, and so forth.

If the insured wishes to have damage to his vehicle covered, he would include which of the following coverages?

A) Uninsured motorist

B) Personal injury protection

C) Physical damage

D) Liability

Physical damage coverage is purchased by the insured to indemnify for physical losses that have occurred to an insured’s car.

If Ken has 100/300/100 limits of liability on his auto policy, carries a $500 deductible on his physical damage coverage, and causes the following damages, how much will Ken’s policy pay?

$22,000 to the injured driver

$118,000 to the injured passenger

$37,000 to an injured bystander

$37,550 damage to the injured party’s vehicle

$27,500 damage to Ken’s vehicle

A) $223,550

B) $241,550

C) $223,050

D) $242,050

Injured driver $22,000
Injured passenger $100,000
Injured bystander $37,000
Damage to injured party’s vehicle $37,550
Damage to Ken’s vehicle $27,000

An insured was driving to work and struck a deer running across the street; what part of the personal

policy would cover this?

A) UM/UIM motorist

B) Liability

C) OTC (comprehensive)

D) Medical payments

Other than collision (often referred to as comprehensive) is also written with a deductible and provides protection for losses not covered by collision such as fire, wind, hail, theft, glass, flood, vandalism and malicious mischief, contact with birds or other animals, and so forth.

If the insurer wishes to non-renew the insured’s policy, how many days notice is the company required to give the insured?

A) 60

B) 45

C) 30

D) 10

The insurer is required to give 10 days for notice of cancellation and 30 days for notice of non-renewal to the insured

If the insurer wishes to cancel the insured’s policy during the first 60 days of a new policy, how many days notice is the company required to give the insured?

A) 10

B) 30

C) 60

D) 45

The insurer is required to give 10 days for notice of cancellation and 30 days for notice of non-renewal to the insured.

All of the following statements are true regarding TAIPA policies EXCEPT

A) policies are written on an annual basis only.

B) the company receiving the assignment must insure the risk for one year.

C) agents receive 10% commission on the business.

D) the only way to get off an assignment is by cancelling for nonpayment of premium or if a driver's

license or vehicle registration is revoked or suspended.

The company receiving the assignment must insure the risk for THREE years.

All of the following would be considered duties after a loss EXCEPT

A) report the loss as soon as reasonable

B) notifying the police if the insured has been involved in an accident

C) notifying the police if the vehicle is stolen

D) allowing the insurer to appraise damage before the repairs are completed

The following are duties of the insured after an auto-related loss:

• Notifying insurer promptly of how, when, and where the loss occurred
• Cooperating with the insurer
• Immediately forwarding notice of legal action (i.e., lawsuits) against insured to the insuring company
• Agreeing to a physical examination
• Agreeing to an examination under oath
• Authorizing the insurer to obtain medical reports and records
• Submitting a proof of loss to the insurer within 91 days when required
• Protecting the auto from further loss
• Notifying police if covered auto is stolen or is damaged in a hit-and-run accident
• Permitting inspection and appraisal of damaged auto before it is repaired

The extended non-owned endorsement would be added to a policy to provide for the named insured‘s

use of which of the following vehicles?

A) Tractor

B) Tow truck

C) Taxi

D) Company car

The extended nonowned auto coverage for a named individual broadens coverage to include nonowned autos that are available for the regular use of the insured (e.g., a company car). This endorsement provides excess coverage over the vehicle owner’s insurance.

Which of the following cannot be covered under a dwelling policy?

A) A home under construction

B) A mobile home not permanently located

C) A four-unit apartment

D) A home rented to another person

A mobile home must be permanently located to be eligible.

A dwelling property policy can be used to insure all of the following EXCEPT

A) duplexes

B) rental homes

C) farms

D) lake cabins

Farms are not eligible for a dwelling policy.

A dwelling policy is considered to be a monoline policy since it has one major type of insurance, which is

A) casualty

B) flood

C) property

D) earthquake

An unendorsed dwelling policy has property coverage only.

Coverage A on a dwelling policy is

A) dwelling

B) fair rental value

C) personal property

D) other structures

Coverage A coverage is for the residential structure and anything that is attached to the dwelling.

Which one of the following items of personal property would be covered under Coverage C of a dwelling policy?

A) A chair in the family room

B) A prize show dog

C) a storage shed in the backyard

D) A shade tree in the front yard

Coverage C coverage includes the household personal property of the insured.

Which one of the following perils is NOT covered by the DP-1 with extended coverage?

A) Aircraft

B) Hail

C) Vandalism and malicious mischief

D) Fire

Vandalism and malicious mischief may be added for an additional premium.

Basic form named perils always include all of the following EXCEPT

A) lightning

B) fire

C) collapse

D) internal explosion

Collapse is a broad form named peril.

If an insured has purchased vandalism and malicious mischief coverage, he risks losing this coverage if his dwelling is vacant for a period of how many consecutive days?

A) 90

B) 60

C) 30

D) 10

An insured loses coverage for vandalism and malicious mischief if the dwelling is vacant for a period of 60 consecutive days

Which dwelling policies cover loss caused by weight of ice, snow, or sleet?

A) DP-1, DP-2, and DP3

B) DP-2 and DP-3

C) DP-1 and DP-3

D) DP-1 and DP-2

Broad form and special form perils include coverage for damage caused by weight of ice, snow, or sleet.

DP-3 Special Form policy is an open peril policy, which means that it provides coverage for which of the following?

A) Earthquake

B) Flood

C) All perils

D) All risks of direct physical loss except those specifically excluded

Special form policies are open perils, which means they provide coverage for all risks of direct physical loss except those specifically excluded in the policy.

Coverage L of the personal liability and medical payments to others endorsement provides coverage when

A) the insured is found to be legally liable for bodily injury and or property damage to others

B) the neighbor cuts down a tree that damages the insured’s home

C) damage to property owned by the insured

D) the insured is sued due to an automobile accident

Coverage L is third party liability coverage that does not provide coverage for the insured.

Which of the following statements regarding the dwelling policy is CORRECT?

A) Removal is automatically included for 30 days at no additional premium.

B) Liability is included on all dwelling policies.

C) Debris removal may be added to the policy for an additional charge.

D) The dwelling policy is written for owner occupied residential structures only.

Removal is automatically included in the dwelling policy.

Supplementary payments are always included in liability coverage. Which of the following is NOT a supplementary coverage?

A) Defense and expenses for the investigation of the claim

B) Interest on a judgment

C) First aid coverage to the insured in the event the insured is injured

D) Loss of the insured’s earnings if the insured misses work to attend a hearing

Supplementary payments are 3rd party coverage. First aid is for the party injured by the insured.

The dwelling under construction endorsement is for which of the following?

A) When the insured is building the dwelling for a client

B) When the insured is renting a construction site to build a dwelling

C) When the intended occupant of the dwelling under construction is not the named insured

D) When the intended occupant of a dwelling under construction is the named insured

The dwelling under construction is an endorsement when the intended occupant of the dwelling is the named insured.

The inflation guard endorsement is designed to protect the insured against

A) the stock market decline.

B) not being successful selling your dwelling.

C) the market value of property

D) the increased cost of construction due to inflation.

This endorsement is added to protect the insured from the increased cost of construction due to inflation.

The HO policy combines property and liability coverages; where can the property coverage be found?

A) Section 4

B) Section 5

C) Section 2

D) Section 1

The homeowners policy is considered to be a package policy since it has two major types of insurance: property (Section I) and liability (Section II) coverage

The eligibility for the homeowner’s policy states that the dwelling must be occupied by

A) the owner

B) the company

C) the agent

D) the tenant

The eligibility requirements for a homeowners policy require the insured to live on the premises (i.e., the residence location).

All of the following types of property could be covered under the standard HO policy EXCEPT

A) a 2-family residence

B) a mobile home added by endorsement

C) a single family residence

D) a farm

In order to be eligible for a homeowners policy, the risk must meet the following criteria.

• The structure must be used for residential purposes.
• The dwelling may consist of one to four family units (e.g., single family dwelling, duplex, triplex, or quadplex).
• The insured must live on the residential premises that are covered.
• Homes under construction are eligible and may be added by endorsement; however, the policy must be written in the name of the future owner-occupant.
• Farms are not eligible as this is considered a business exposure.

All of the following would be considered an insured under the HO policy EXCEPT

A) the named insured

B) the insured’s brother living out of state

C) the spouse of the insured

D) the insured’s son who is 16 years old

As you consider who is an insured under the homeowners policy, remember this is not only from a property coverage standpoint but also from a liability coverage standpoint.

All of the following locations could be covered under the standard HO policy EXCEPT

A) cemetery plots or burial vaults

B) residences newly acquired during the policy period

C) the insured’s workplace

D) residence listed in the declarations page

Unless specified otherwise below, these are insured locations for both property and liability coverage.

• The premises described (i.e., the physical address of the home) in the declarations
• Residences newly acquired during the policy period
• Temporary residences of the insured or premises rented by the insured for non-business uses
• Vacant land owned or rented by the insured (for liability only)
• Land owned by the insured on which a residence is being built (for liability only)
• Cemetery plots or burial vaults

The basic homeowners form would include all of the following perils of coverage EXCEPT

A) lightning

B) accidental discharge of water

C) smoke damage

D) fire damage

Basic perils include the following:

• Fire and lightning
• Windstorm
• Civil commotion
• Smoke
• Hail
• Aircraft
• Vehicles
• Volcanic eruption
• Explosion
• Riot
• Vandalism and malicious mischief
• Theft

The broad form adds all of the following perils to the basic form EXCEPT

A) burglar damage

B) accidental discharge of water

C) injuries caused by the insured

D) falling objects

Broad perils include all of the basic perils plus the following:

• Falling objects (e.g., tree limb falls on house and damages roof)
• Weight of snow, ice, or sleet (i.e., causes the collapse of the roof)
• Accidental discharge or overflow of water or steam
• Sudden and accidental rupture of heating, air conditioning, sprinkler, or water heater
• Freezing of plumbing
• Artificially generated electrical current

All of the following would be excluded from the special form EXCEPT

A) flood damage

B) earthquake

C) power interruption off premises

D) theft of building fixtures

All real property (i.e., structures) is written as open perils on the special form, subject to the following exclusions:

• Flood
• Earthquake
• Power interruption off premises
• Ordinance or law

Which of the following covers flood damage?

A) None of these

B) Broad

C) Basic

D) Special

None of the homeowners policies cover the peril of flood.

If the police department breaks down the insured’s front door and confiscates personal property owned by the insured, would this be a covered loss under the special form?

A) No, if the insured has not added the governmental endorsement.

B) No, this type of damage is never covered.

C) Yes, if the police gave the insurer notice of the damage.

D) Yes, the policy does cover this type of damage.

All real property (i.e., structures) is written as open perils, subject to the following exclusions:

• Flood
• Earthquake
• Power interruption off premises
• Ordinance or law
• War
• Nuclear hazard
• Government seizure                               All personal property is written with broad perils.

Under Coverage C in the homeowner’s policy, which of the following would be covered in full after the loss is reported?

A) A trailer that was stolen, valued at $3,000

B) $500 in cash

C) A diamond ring that was stolen, valued at $5,000

D) A gun that was stolen, valued $2,000

Some of these property limitations apply only to the peril of theft:

• Money, gold, and silver $200
• Securities, tickets, stamps, and deeds $1,500
• Watercraft, trailers, motors, and equipment $1,500
• Other trailers $1,500
• Theft of jewelry and/or furs $1,500
• Theft of guns $2,500
• Theft of silverware or goldware $2,500
• Business property on premises $2,500
• Business property off premises $500

All of the following would be covered under Coverage A of the HO policy EXCEPT

A) the dwelling

B) the attached garage

C) the swimming pool

D) materials and supplies on the premises that are for repair or construction of the dwelling

Dwelling coverage (Coverage A) includes:

• attached structures (e.g., attached garage, porch); and
• materials and supplies on the premises that are for repair or construction of the dwelling.

Coverage A is written to adhere to a valued policy or liquidated demand. This would cover

A) the insured’s personal property

B) the insured’s vehicles in the garage

C) total loss of the dwelling by fire, covering the structure only

D) the insured’s art work

Coverage is written to adhere to the valued policy (i.e., liquidated demand) law.

In the event of a total loss to the insured’s premises by fire, the insured can make a liquidated demand against the insurer for the face amount of the policy for the building coverage.

This clause applies only to real property (i.e., structures).

The liquidated demand law does not apply to personal property. In the event of claim for personal property, the insured must submit a proof of loss with an inventory of the damaged property before the adjuster will pay the claim.

All of the following would be covered under coverage B in the HO policy EXCEPT

A) an air conditioning system

B) a detached garage

C) a fence

D) an in ground swimming pool

This coverage includes structures located on the same premises as the covered dwelling that are set apart by clear space (e.g., a detached garage, in-ground swimming pool, storage shed, and fence).

Steve needs coverage for his stamp collection; what section of the HO policy provides this coverage?

A) Coverage D

B) Coverage B

C) Coverage C

D) Coverage A

Coverage C under the homeowners policy provides coverage for the insured’s personal property at and away from the premises.

How much coverage does the insured have for trees located on his residence premises?

A) $750 per tree

B) $100 per tree

C) $1,000 per tree

D) $500 per tree

Coverage is provided for up to $500 per tree, shrub, or plant, subject to a maximum of 5% of Coverage A per loss.

The insured’s home is being threatened by a severe windstorm that is sure to hit the home. The policy will provide coverage for the insured to take his personal property out of the house to protect the property from damage. This coverage is called

A) protection clause

B) smart thinking

C) reasonable actions

D) removal

This automatic coverage is for the saving of property from a sure and certain loss for 30 days. If property is removed to protect against loss caused by a covered peril, the insured will have coverage for this property for losses against any covered perils for a period of 30 days.

George sold a set of golf clubs, and when he went to his bank to deposit the money, he was informed that the money was counterfeit. How much does George’s policy cover in this situation?

A) $500

B) $1,500

C) $1,000

D) None

The homeowner’s policy will pay up to $500 for receiving counterfeit money or the theft or unauthorized use of a credit or debit card.

Under the homeowner’s policy, what is the standard deductible?

A) $500

B) 1% of Coverage A

C) $1,000

D) $250

The standard deductible on a homeowners policy is $250 per occurrence, and it applies to Coverage A, B, and C.

What coverage would allow the insured to have his damaged property cleaned up and removed following a covered loss?

A) Emergency repairs

B) Removal

C) Additional living expenses

D) Debris removal

The cost of cleanup after a covered loss is included automatically. If the limit of liability for the property has been exhausted, an additional 5% of applicable coverage (A, B, or C) is available.

Under the homeowners policy, Coverage E provides what type of coverage for the insured?

A) Separate structures

B) Medical payments

C) Liability

D) Dwelling

Liability coverage is in Section II of the homeowners policy and is Coverage E with the medical coverage covered as Coverage F.

How much is the deductible for Coverage E in the homeowners policy?

A) $250

B) $0

C) $1,000

D) $500

The liability coverage provided by Coverage E pays for damages to a 3rd party, and there is not a deductible applied to these types of losses.

In what section of the homeowners policy would the insured find protection for damages the insured might cause to a neighbor?

A) Section V

B) Section II

C) Section I

D) Section III

Liability coverage is in Section II of the homeowners policy and is Coverage E with the Medical coverage covered as Coverage F.

What is the minimum limit for liability coverage in the homeowners policy?

A) $250,000

B) $100,000

C) $150,000

D) $200,000

The limit for liability included is $100,000 but can be raised by the insured.

All of the following losses would be excluded from homeowners liability coverage EXCEPT

A) if the insured hit his neighbor in the face during a fight

B) if the insured struck another golfer at the course with an errant shot

C) if the insured’s business pursuits caused injury to a 3rd party

D) if the insured crashed his airplane into a building

The following are some of the more common liability exposures that are not covered:

• Intentional acts
• Business pursuits—separate policy
• Aircraft or motor vehicles

All of the following statements about the watercraft endorsement are true EXCEPT

A) it extends watercraft liability coverage beyond the size limits in the policy

B) it covers business use of professional operators of watercraft

C) it extends watercraft liability coverage beyond the horsepower limits in the policy

D) it does not cover business use of professional operators of watercraft

This endorsement extends watercraft liability coverage beyond the size and horsepower limits permitted in the policy. It does not cover business use of professional operators of watercraft.

The scheduled personal property endorsement provides a separate schedule of insurance for all of the following categories of valuable property EXCEPT

A) show dogs

B) cameras

C) fine arts

D) golf equipment

Domestic animal coverage cannot be endorsed on the homeowners policy.

Which of the following is NOT a correct statement regarding the Special Provision for Texas?

A) The fungi or black mold exclusion is removed.

B) The policy provisions dealing with catastrophe claims, adjuster deadlines, and the proof of loss are amended.

C) The residential community property clause is added to allow for adequate coverage of the insurable

interest of both spouses during marriage and a separation.

D) The policy is amended to settle jewelry losses on a replacement cost basis.

This endorsement is mandatory for all Texas homeowners policies and brings the policy into compliance with any laws and regulations specific to this state. This changes the policy as follows:

• The fungi or microbes (i.e., black mold) exclusion is added.
• The liquidated demand clause is added to apply to total losses to the structures by the peril of fire.
• The policy is amended to settle jewelry losses on a replacement cost basis.
• The residential community property clause is added to allow for adequate coverage of the insurable interest of both spouses during marriage and a separation.
• The policy provisions dealing with catastrophe claims, adjuster deadlines, and the proof of loss are amended.

Which of the following coverages must be added by endorsement in order to be covered on the homeowners policy?

A) Property

B) Trees

C) Earthquake

D) Liability

Earth movement is excluded from coverage under all homeowners forms. However, an endorsement for earthquake coverage may be purchased.

A homeowners policy provides no coverage for liability arising out of business-related perils, other than for permitted incidental occupancies. Which of the following endorsements provides liability coverage for a business conducted away from the resident premises?

A) Business pursuits endorsement

B) Personal property replacement cost endorsement

C) Permitted incidental occupancies endorsement

D) Personal injury endorsement

This endorsement provides liability protection for business activities for employees engaged in sales, teaching, or clerical work activities.

A policy that insures only one type of insurance (e.g., just property insurance) on a policy is called

A) a monoline policy

B) a single policy

C) a package policy

D) a multi-line policy

A policy with just one type of insurance is called a monoline policy.

Under the building and personal property coverage form, Coverage A includes the building and all of the following EXCEPT

A) completed additions and additions under construction

B) stock and inventory

C) personal properties owned and used in the service and maintenance of the building, such as fire extinguishing equipment and lawn mowers

D) permanently installed fixtures, machinery, and equipment

Coverage A (building) typically includes the structure and anything that is permanently attached to the structure. It is also extended to cover property used to service and maintain the premises (e.g., fire extinguishing equipment, appliances used for cooking, ventilating, dish washing, laundering, and lawn mowers). It would not cover stock or inventory.

Under the building and personal property coverage form, all of the following could be included under the definition of business personal property for Coverage B EXCEPT

A) stock including inventory, raw materials, or finished products

B) tenant improvements and betterments

C) structures

D) furniture, fixtures, machinery, and equipment

Coverage B (business personal property) typically includes everything that is not a structure or permanently attached to the structure like stock, inventory, furniture, fixtures, machinery, and equipment. If the insured is a tenant, it may also extend to tenant improvements and betterments (e.g., ceiling fans, flooring, and paint).

Under the building and personal property coverage form, business personal property overage under Coverage B is extended to properties located in, on, or within how many feet of the business premises?

A) 500

B) 100

C) 1,000

D) 2,500

Coverage B (business personal property) is extended to properties located in, on, or within 100 feet of the business premises.

Under the building and personal property coverage form, which of the following could be covered under Coverage C (personal property of others)?

A) A dry cleaner has customers’ clothes in her possession for cleaning.

B) A computer repair shop is repairing a computer for a customer.

C) A florist made an arrangement for a customer, and it is awaiting delivery.

D) An accountant borrows 2 additional computers for the office during tax season.

Coverage C (personal property of others) does not include:

• bailee customers property as that is covered under an inland marine type policy; or
• property that is sold, but not delivered as that is as part of business personal property (Coverage B).

Which one of the following is covered property under the building and personal property coverage form?

A) Money

B) Stock

C) Underground pipes

D) Land on which covered property is located

Money, land, underground pipes, and drains are excluded under the commercial building and personal property policy. Stock would be covered as personal property.

If the insured meets a coinsurance requirement of 80% or more under the commercial building and personal property policy, all of the following coverages are automatically extended EXCEPT

A) personal property temporarily off premises is covered for $10,000

B) newly acquired buildings and personal property is covered for 30 days

C) trees, shrubs, and plants are covered for specified perils up to $250 each, subject to a maximum of $1,000 per occurrence

D) detached outdoor signs are covered for $1,000

Signs that are not attached to the building have no coverage under this policy. Attached signs would be covered up to $1,000 under the outdoor property coverage extension.

The commercial building and personal property coverage form automatically includes up to what amount for the restoration of electronic data made necessary due to a covered loss?

A) $1,000 per year

B) $2,500 per year

C) $2,500 per loss

D) $1,000 per loss

Up to $2,500 per year for restoration of electronic data is automatically covered under this policy.

Debris removal is automatically built into the commercial building and personal property policy as an additional coverage. It automatically gives the insured up to 25% of the actual loss. If that is not enough, then what additional amount is available?

A) $1,000

B) $25,000

C) $10,000

D) $5,000

This policy provides up to 25% of the actual loss sustained for debris removal related to the covered loss. If that is not adequate, an additional $10,000 is available.

All of the following are additional coverages that are included automatically without any coinsurance required EXCEPT

A) replacement cost coverage is covered for the building and business personal property

B) fire department service charges are covered up to $1,000, with no deductible applicable

C) pollution cleanup and removal are covered up to a maximum of $10,000 if loss occurs as a result of covered peril

D) coverage for the increased cost of construction to comply with building codes or ordinances due to a covered loss is covered; it pays the lesser of 5% of Coverage A or $10,000

Fire department service charges, pollution cleanup, and building code/ordinance coverage are automatically included under this policy. If the insured wants replacement cost coverage on the building and business personal property, this must be purchased by an endorsement.

Which of the following is not covered on a builders risk coverage form?

A) liability

B) dwellings under construction

C) scaffolding, cribbing, and other temporary structures

D) building supplies of other contractors

Liability is not covered and should be included on another policy.

Any building supplies that are in, on, or within how many feet of the premises are covered under the builder’s risk policy?

A) 500 feet

B) 250 feet

C) 1,000 feet

D) 100 feet

Any building supplies that are in, on, or within 100 feet of the premises are covered under the builder’s risk policy.

On a builder’s risk value reporting form, the insured must send in a report on

A) a monthly basis

B) a quarterly basis

C) a weekly basis

D) a yearly basis

On a builder’s risk value reporting form, the insured must send in a report on a monthly basis.

All of the following are correct about the duration of the builder’s risk policy EXCEPT

A) this is considered temporary insurance, so if the building is finished or becomes occupied, then permanent insurance should be purchased

B) the insured has only 90 days after construction is complete to secure permanent insurance

C) once the contractor’s insurable interest has ceased, the policy may be assigned automatically to the new owner of the property

D) the policy is written for a policy term of one year

Once a contractor’s insurable interest in the construction project has ceased, the builder’s risk policy is terminated and the new owner of the project needs to secure permanent insurance. Also, insurance contracts are considered to be personal contracts, meaning policy assignment is normally prohibited on all contracts without an insurer’s approval.

All of the following statements are correct about a builder’s risk policy EXCEPT

A) in addition to the property coverage, it also covers liability

B) a builders risk may be written on a value reporting form or a completed value form

C) the policy is written for one year

D) 100% coinsurance is required

A builder’s risk policy is a property policy and contains no liability coverage. A contractor would need to purchase a commercial general liability policy.

Which of the following statements is NOT correct about the covered property on the condominium association master policy?

A) The association’s master policy covers the personal property of the unit owners.

B) The association’s bylaws help define coverage under the policies.

C) The association’s master policy covers buildings and personal property owned by the association itself or that the unit owners have an indivisible ownership interest in.

D) If there is overlap with a unit owner’s policy, the association’s master policy is primary and the unit owner’s policy is excess.

The personal property of the unit owners will not be covered under the association’s master policy; that will be covered under a unit owner’s policy.

Which of the following would be covered under the condominium commercial unit owners policy?

A) The outer walls and roof of the condominiums

B) The unit owner’s business personal property

C) The unit owner’s liability

D) The parking structures

The business personal property of the unit owners will be covered under the condominium commercial unit owners policy.

What coverage does a tenant of a leased building space purchase to cover his legal liability due to direct physical loss or damage, including loss of use, to the landlord’s building?

A) Business income coverage

B) Extra expense coverage

C) Legal liability insurance

D) Commercial building and personal property coverage form

Legal liability insurance is bought by a tenant of a leased building space purchase to cover their legal liability due to direct physical loss or damage, including loss of use, to the landlord’s building.

The primary purpose of the business income coverage forms is to reimburse the insured for

A) loss resulting from employees’ work-related injuries

B) damage to accounts receivable records

C) loss of income resulting from property damage at the insured’s premises

D) the cost of debris removal following loss from a covered peril

The primary purpose of the business income coverage form is to reimburse the insured for loss of income resulting from property damage at the insured’s premises.

The extra expense coverage form provides

A) payment for unforeseen expenses an insured may incur while the business is shut down following a property loss

B) additional money to pay for property damage losses at a covered location

C) coverage that will permit the insured to continue in business without interruption following a property damage loss to avoid a permanent loss of customers

D) extra money for an insured whose accounts receivable records have been damaged

The extra expense coverage provides for the payment of any extra expenses (not just unforeseen expenses) that permit the insured to continue in business without interruption following a property damage loss to avoid a permanent loss of customers.

Which one of the following causes of loss is NOT included in the basic form?

A) Falling objects

B) Sprinkler leakage

C) Vandalism

D) Sinkhole collapse

All of the following are covered under the broad cause of loss form EXCEPT

A) the weight of ice, sleet, or snow causes the collapse of the roof at a restaurant

B) a tree limb breaks, falls, and causes damage to the restaurant’s roof

C) a dishwasher at the restaurant accidentally discharges and causes water damage to business personal property

D) the creek behind the restaurant overflows due to heavy rain and causes flood damage to the building

Falling objects is a broad peril, not a basic peril.

All of the following are correct about the special cause of loss form EXCEPT

A) all of the perils covered in the basic and the broad forms are also covered in the special form

B) the special form is an open peril form that covers all perils unless they are excluded

C) out of the three causes of loss forms, the special form is the best and the most expensive

D) some of the perils covered under the special form are flood, earthquake, mechanical breakdown,

explosion of steam boilers, and employee theft

The perils of flood, earthquake, mechanical breakdown, explosion of steam boilers, and employee theft are excluded in the special form.