5 Written Questions

1. Apparent authority is a doctrine that holds an agent may have whatever authority a reasonable person would assume he or she has. An agent acting under apparent authority may bind an insurer as fully as one acting under expressed or implied authority.
2. The special form is the only causes of loss form for commercial property coverage that provides theft coverage. However for certain classes of property, various limitations apply and coverage for theft of furs and fur garments is limited to $2,500.
3. To establish that one person's actions toward another were negligent and caused injury or damage, the negligent act and the damage must be tied together. If there was no intervening cause and the negligent act led directly to the loss in an unbroken sequencing of events, the negligent act was the proximate cause of loss.
4. The principle of indemnity states that when a loss occurs, an individual should be restored to approximately the same financial position he or she was in before the loss. Insurable interest is a requirement for the insurance to apply. Salvage and subrogation, which are related to claim settlements, help the insurer recover its losses and to not indemnify the insured.
5. Coverage is provided for personal property moved from the described location to a new principal residence. This coverage applies only for 30 days and not beyond the policy period.

5 Matching Questions

1. Which dwelling forms can provide replacement cost coverage for buildings.
   
   The broad and special forms only.
2. Under the commercial property conditions, the coverage territory includes all of the following:
   
   United States, Puerto Rico, and Canada.
3. The following is true about commercial crime coverage written on a DISCOVERY POLICY FORM:
   
   A loss discovered during the policy period will be covered even if it was sustained years earlier.
4. Various types of domestic shipments may be covered under a number of inland marine forms. Which of the following is not one of the nonfiled marine forms used to insure domestic shipments.
   
   Mail Coverage Form, only covers postage
5. What is meant by the term "Adverse Selection"?
   
   The Tendency of people with greater than average exposure to loss to purchase insurance.

1. a Although all dwelling forms settle personal property losses at actual cash value, under the broad and special forms (DP2 and DP3), replacement cost coverage for buildings is provided if the insured carries insurance equal to at least 80% of the full replacement cost at the time of loss.
2. b Adverse selection means the tendency of people with a greater than average exposure to loss to purchase insurance coverage. For example, if insurers only sold earthquake coverage to applicants in earthquake prone areas, or flood insurance only to those in food prone areas, the situation known as adverse selections would exist. Insurers and underwriters guard against adverse selection by trying to sell bread ranges of coverage to large cross section of the population in order to increase the premium base and spread the risk of loss.
3. c COMMERCIAL CRIME COVERAGE written on a DISCOVERY POLICY FORM will cover a loss discovered during the policy period even if it was sustained months or years earlier. It will also cover a loss discovered up to 60 days after the policy expires. Exclusions do apply to this coverage.
4. d Annual transit policies, trip transit policies, and motor truck cargo policies are all examples of nonfiled inland Marie forms used to cover domestic shipments. Although some some types of property may be covered in transit by the mail coverage form, it is a filed form that is part of the ISA package policy program.
5. e Mexico is not a covered territory.

5 Multiple Choice Questions

1. The policy territory typically includes the united states, its territories, and possessions. and Canada. Mexico and Europe are not included.
   1. Under the commercial property conditions, the coverage territory includes all of the following:
      
      United States, Puerto Rico, and Canada.
   2. The primary purpose of insurance is to do what?
      
      Transfer Risk.
   3. Which COMMERCIAL PROPERTY CAUSES OF LOSS FORMS provide theft coverage?
      
      The special form only.
   4. Under most property insurance policies, the policy territory includes:
      
      All but mexico and Europe.
2. The coinsurance requirement is for the insured to carry 80% of the $300K building value. or %240K of coverage. Because the insured only has 200K of coverage, a penalty applies. The formula is that the amount actually carried (200K) is divided by the amount required (240K) to produce a fraction hat will be multiplied by the loss. In this case, the fraction is 5/6 and the loss was 60K, so the result is a 50K covered loss. The standard deductible is $500 per occurrence, so the net amount paid will be $49,500.
   1. Under the loss sustained version of COMMERCIAL CRIME COVERAGE FORMS, the policy will cover losses sustained during the policy period and discovered either during the policy term or no later than:
      
      One year after the policy expiration.
   2. A commercial building valued at $300,000 is insured for $200,000. If the policy is written with an 80% coinsurance percentage and a standard deductible, how much would be paid for a $60,000 loss?
      
      $49,500
   3. The COMMERCIAL BUILDING and PERSONAL PROPERTY COVERAGE FORM provides a number of coverage extensions but only if...
      
      AN 80% or higher coinsurance percentage or a value reporting symbol is sown in the declarations.
   4. Office buildings are eligible for coverage under a BUSINESS OWNERS POLICY if the do not contain more than 100,000 square feet of space and do not exceed:
      
      6 Stories in height.
3. Insurance is only used to manage pure risks that involve only the possibility of loss and no opportunity for gain.
   1. An insurer's loss ratio is determined by dividing what?
      
      Underwriting losses by total premiums.
   2. Insurance is a mechanism used to manage which type of risk?
      
      Pure risks.
   3. The primary purpose of insurance is to do what?
      
      Transfer Risk.
   4. On a COMMERCIAL PACKAGE policy, interline endorsements can?
      
      Apply t more than one line of insurance.
4. Family cemetery plots, newly acquired premises, and premises used as a temporary residence by an insured are all included in the policy definition of "insured location." Farm exposures are specifically excluded by the homeowner eligibility rules.
   1. On Homeowners policies, "insured location" is a broad term describing where liability coverage apply.
      
      Family cemetery plots
      Any newly acquired premises
      A non owned premises used as a temporary residence by an insured.
   2. What is meant by the term "Adverse Selection"?
      
      The Tendency of people with greater than average exposure to loss to purchase insurance.
   3. Under the NCCI workers compensation and employers liability policy form, the employers liability coverage excludes any claim for:
      
      Liability assumed under contract.
   4. On HOMEOWNERS POLICIES, personal property used for business purposes is:
      
      Covered up to $2,500 on the premises and up to $500 off the premises.
5. The Federal insurance Administration sets rates, eligibility requirements, and coverage limitations fro flood insurance. Maximum limits do apply to the amount of coverage available. coverage may be written by private insurance carriers, and the FIA reimburses insurance companies for losses that exceed premiums collected.
   1. National flood insurance is available for Residential and nonresidential buildings and contents.
   2. The National Flood Insurance Program.
      
      There are maximum limits on the amount of coverage available.
      Coverage may be written by private insurance carriers.
      The federal government reimburses insurance companies for losses that exceed premiums collected.
   3. ...What is not true about insurance binders?
      
      Binders are only valid when issued in writing.
   4. Apparent authority of an insurance agent is the authority
      
      that members of the public can reasonably assume that the agent has.

5 True/False Questions

1. Office buildings are eligible for coverage under a BUSINESS OWNERS POLICY if the do not contain more than 100,000 square feet of space and do not exceed:
   
   6 Stories in height. → All homeowner policies provide some coverage for loss of use. The others listed are all optional.

   True        False

2. Under a Personal Umbrella policy, a self insured retention is an amount that is in effect a deductible for insured losses. → A personal Umbrella may cover losses that are excluded by underlying insurance- in which case, a self insured retention limit applies. This operates similar to a deductible because it is the out of pocket amount the insured must absorb before the umbrella coverage applies.

   True        False

3. Which losses are excluded under the physical damage coverage of a personal auto policy?
   
   Loss of custom furnishings in a customized van
   loss caused by freezing of the cooling system
   Damage to equipment designed for the detection of Radar. → Damage to a covered auto while being used as apart of a car pool is not excluded.

   True        False

4. Tom Baxter has an automobile insured by a personal auto policy. He trades in his car and purchases a new private passenger auto as a replacement vehicle. If he does not notify the insurance company, the liability coverage for his replacement vehicle will apply automatically for
   
   Until the end of the policy period. → Generally, four-wheel private passenger autos, pickups, and vans owned by an individual or married couple are eligible if used for pleasure or general transportation. Pickups and vans used in a business, other than farming or ranching, are not eligible.

   True        False

5. After a homeowners policy has been in effect for at least 60 days, when the insurer cancels for any reason other than nonpayment of premium, it must give the insured advance written notice of at least how many days?
   
   30 Days → Coverage for medical payments to others under a homeowners policy applies to necessary medical expenses incurred within three years of an accident that causes bodily injury.

   True        False