Terms in this set (125)
Who elects the governing body of a mutual insurance company?policy holdersWhich type of insurance company allows their policyowners to elect a governing body?Mutual (Correct.) Policyholders elect the governing bodies of mutual insurance companies.In Virginia, an insurer domiciled and incorporated in Virginia is called a(n)domestic insurerAn insurer's company incorporated under the laws of the state in which its home office is located is called a(n)________ insurer.domesticWhich of the following requires insurers to disclose when an applicant's consumer or credit history is being investigated:1970 - Fair Credit Reporting ActAn insurance applicant MUST be informed of an investigation regarding his/her reputation and character according to theFair Credit Reporting ActWho is a mutual insurance company owned by?Its policyholdersWhich of these is NOT a type of agent authority? A. Express B. Implied C. Apparent D. PrincipalprincipalWhich of these describe a participating insurance policy? A. Policy owners pay assessments for company losses B. Policy owners are not entitled to vote for members of the board of directors C. Policy owners are entitled to receive dividends D. Stock companies allow their policyowners to share in any company earningsPolicy owners are entitled to receive dividendsWhat is the name of the law that requires insurers to disclose information gathering practices and where the information was obtained?Fair Credit Reporting ActWhat type of reinsurance contract involves two companies automatically sharing their risk exposure?treatyDuring the application process, the agent's primary responsibility is toinsurance companyA stock insurance company that issues both participating and nonparticipating policies is doing business ona mixed planA stock Insurance Companyis owned exclusively by its shareholdersAt what point must an insurance applicant be informed of their rights that fall under the Fair Credit Reporting Act?Upon completion of the applicationHow do insurers predict the increase of individual risks?law of large numbersAmbiguities in insurance contracts are typically interpreted in favor of the insured. This rule is referred to asReasonable expectationsIn what way are insurance policies said to be aleatory?Involves the potential for the unequal exchange of valueThe courts will normally interpret a policy in favor of the insured when the meaning of the policy is not clear. This is because an insurance policy is a(n)contract of adhesionWhich element of a contract constitutes a definite and unqualified proposal by one party to another?offerWhich of these is true regarding the exchange of consideration among parties involved in an insurance contract? A. Can be unequal B. Must be certified by the state where transaction takes place C. Must be equal D. Required to be in currencycan be unequalGiving up a known right on a voluntary basis is called a(n)waiverAn insurance application requires an applicant to make a full, accurate disclosure of the risk factor involved. Using this criteria, an insurance policy is considered what type of contract?Contract of utmost good faithWhat happens when an initial offer is answered with a counteroffer?initial offer is voidWhich of the following would NOT have a restricted ability to enter into a contract? A. person under the influence of alcohol B. minor C. small employer D. mentally ill personsmall employerWhich of the following situations would an insurance agent need to guard against liability for professional errors and omissions? A. Conducting a sales meeting with other agents B. Making a recommendation to a potential insured to replace existing coverage C. Remitting premiums to an insurer D. Setting a sales appointment with a potential clientMaking a recommendation to a potential insured to replace existing coverageAll of these statements correctly describe an aleatory contract EXCEPT A. Element of chance is involved B. A legal wager is considered an aleatory contract C. Only one party makes any kind of legally enforceable offer D. Potential unequal exchange of value for both partiesOnly one party makes any kind of legally enforceable offerAn individual who removes the risk of losing money in the stock market by never purchasing stocks is said to be engaging inrisk avoidanceAn insurance company's failure to enforce a contract's provision is called a(n)waiverThe insurer's obligation to pay a claim depends on whether the insured or beneficiary has complied with all policy conditions. This makes the policy a(n)conditional contractActual Cash Value (ACV) takes usage of property into consideration when an insurer pays a claim so that the insured becomes whole again after a loss. To restore an insured in this manner is known as:IndemnityExclusions: A. Limit the scope of benefits B. limits the wording of the insuring agreements C. List which types of perils are not covered by the contract D. All of the answers listedAll of the answers listedIn 1980, G had a custom home built and purchased an HO-5 policy. In 2005, G sold his house to X, who decided to purchase an HO-3 policy. In 2006, a electrical fire caused the home to suffer a total loss. Which of the following is correct about the loss? A. The loss will not be covered because an HO-3 does not cover loss due to a fire B. G can still collect on the loss because he originally owned the home C. X is the only person that can collect loss because they were the insured at the time of loss D. G and X have to file for an appraisal and possibly have to appeal to an umpireX is the only person that can collect loss because they were the insured at the time of lossA change made by an insurer on an auto policy that deletes benefits after a policy has been issued is known as a(n):endorsementP was in an accident that was caused by another driver. P's injuries were so serious that they have cause him much pain and suffering. Which type of damages can P collect for the mental pain and suffering he has incurred?generalD just purchased a warehouse at an auction. When D receives the keys and documents, he arrives at the building to find it completely empty with no people or contents. The warehouse has a:vacancyB has a property policy and would like to know perils are covered. B should read the:insuring clauseAn event or mindset that greatly increases the change that a peril will actually occur is known as:hazardA certificate of insurance:is proof that a policy was issuedY has a policy of split limits of 50/100/50. If Y causes loss, what is the maximum amount that each person would receive?$50,000Which of the following would be an example of a physical hazard? A. A person who decided to buy a home just to burn it down to collect the benefits B. A person leaves their tools all over the house after completing a home improvement job C. A person leaving their car running, unlocked, while they run into the post office to mail a letter D. An insured who knowingly lies on a claim formA person leaves their tools all over the house after completing a home improvement jobWhich of the following reinforces the concept of indemnity? A. replacement cost B. speculative risk C. hazard D. pure riskpure riskAn insured buys a used car from a local dealer. Upon purchase, the insured calls her agent immediately in which the producer tells the insured that she is covered against loss until the policy is issued or declined. The agent gave:a binderB owns a home with a Basic Dwelling policy (DP1) and rents it out to a family. One day, a burglar tries to break into the house causing $2,000 of damage. After submitting the claim, B is informed that since burglar damage is not covered under the policy, the damage will not be paid by the policy. B's policy is a:named peril policyB has a HO-5 policy and has acted negligently causing an intentional injury to another individual. Which of the following would best describe how B's insurer will pay for the other party's losses due to B's negligence? A. The policy will pay for all of the damages less the deductible B. The policy will pay for none of the damages C. The policy will pay for all of the damages D. None of the answers listedthe policy will pay for none of the damagesY and Z are a recently married couple and have just closed on their first home. Upon closing the home, their agent told them that even though it will take a few weeks for the insurer to officially underwrite and issue coverage, that if a loss were to occur while the insurer was deciding on coverage, that they would be covered. Y and Z's agent issued a:binderWhich of the following is a term for money awarded to an individual when a negligent party is liable for loss? A. damages B. compensation to insured C. legal actions of insurer D. claimsdamagesAn unbroken chain of events that begin with negligence and leads to loss is known as:proximate causeV buys a home and has an idea to purposely set it on fire, but will make the loss look like an accident to collect the benefits from the policy. This is an example of a(an):moral hazardY has not paid his mortgage for a few months and is planning on leaving the home and remaining debt to the insurance company, who is not accepting of such ownership. Which contract clause will prevent Y from such behavior?abandonmentK has a property policy and would like to know which type of property is not protected against loss under the policy. The part of the contract that K should read is the:exclusionsB has a HO-5 policy on his home with a $1,000 deductible and is covered under replacement cost for $100,000. If B's home were to suffer a total loss, how much will the insurer pay for a new home to be built?$99,000D purchased an antique muscle car in November with the intent to restore it in the summer. Upon inspection, D decides that the car is in good enough shape to store it in the garage until the weather gets warmer. Although D knows how to fix cars, he misses a very small hole in the gas tank. If the gas were to accumulate over time and cause the car and garage to explode, the event would be defined as a(an):Occurrence is a repeated exposure to conditions over time that results in a loss. An accident is a sudden, unexpected event that causes property damage or injury. Every accident is an occurrence, but not every occurrence is an accident.in a property policy, the mortgagee is defined as the:lendera contractual term for a person who is responsible for unintentional acts that may cause death or harm to a person or property is known as:liabilityAll of the following losses to the dwelling of an insured are covered under an HO-5 Homeowners policy, EXCEPT: A. An alien spaceship lands on the insured's home. B. The insured notices wood shaving in the basement for several years before part of the structure collapses due to termite damage. C. The insured's house explodes from the accumulation of fumes from an unknown source. D. A large bear destroyed the rear section of the insured's house.The insured notices wood shaving in the basement for several years before part of the structure collapses due to termite damageHomeowners coverage that provides for loss when the insured dwelling is not habitable due to a covered loss is found in what coveragecoverage DAll of the following are extended coverage perils u see an HO-2, EXCEPT: A. burglar damage B. vandalism C. windstorm D. civil commotionburglar damageWhich of the following perils are covered by HO-3 & HO-5 policies? A. war B. an earthquake C. earth movement caused by an explosion D. intentional lossearth movement cause by an explosionWhat of the following personal property is covered under coverage C in a homeowners policy? A. A diamond broach owned by the inured and covered under a personal article floater. B. The fish contained in the extensive aquarium owned by the inured. C. $180 in pennies owned by the insured that were melted in a fire that struck the covered dwelling. D. The insured's prize winning pedigree dog worth over $10,000.$180 in pennies owned by the insured that were melted in a fire that struck the covered dwelling.Under the terms of an HO-2 policy, the peril of Freezing of Pipes:D13:H13 A. will pay for loss if the insured property was vacant, unoccupied or under construction at the time of loss regardless of taking any other steps or meeting any otter conditions. B. requires that the insured must take reasonable steps to heat the building and shut off the water supply or drain any systems of water. C. does not cover fire protective sprinkler systems. D. only apples coverage to air conditioning systems.requires that the insured must take reasonable steps to heat the building and shut off the water supply or drain any systems of water.In a homeowner policy the Vandalism and Malicious Mischief peril will not cover loss if the residence dwelling is: A. vacant for 60 or more consecutive days, B. damaged intentionally. C. unoccupied for 60 or more consecutive days. D. vacant or unoccupied for 60 or more consecutive days.vacant for 60 or more consecutive daysAll of the following homeowners forms offer replacement cost coverage for a detached garage, EXCEPT: A. HO-4 B. HO-2 C. HO-5 D. HO-3HO-4In an HO-8 modified form, what percentage of the coverage A amount is available for coverage D, loss of use? A. 10% B. 30% C. 20% D. 40%10%J has rented a room in his home to a tenant and has helped furnish the rented room with a carpet, refrigerator and sofa costing him $4,000. Less than one month later these furnishing were destroyed in a small fire. How much will | collect from his HO-2 policy for this loss? A. $2,500 B. $1,000 C. $0 D. $4,000 less depreciation$2,500A married couple owns a single family dwelling with Special Form coverage with replacement cost coverage equaling $150,000. If their home and garage are total loses, how much will the homeowners policy pay? A. The policy will pay whatever amount is needed to rebuild the home and the garage. B. $165.000 C. $150,000 D. $135,000$165,000Which of the following homeowner forms pays for loss in a functional replacement cost basis? A. HO-2 B. HO-5 C. HO-3 D. HO-8HO-8Section 2 of a homeowners policy provides:both personal liability and medical payments to others coveragesWhat is the fire department service charge amount paid by a homeowners policy? A. $500, subject to the policy deductible. B. $500 with no deductible required. C. $1,000 with no deductible required. D. $1,000 subject to the policy deductible.$500 with no deductible requiredWhich of the following falling objects causing loss would be covered by a homeowners Broad form policy (HO-2)? A. The propeller of a helicopter falls from the sky, crashes through the roof of the insured's home and destroys his dining room set. B. Part of an old satellite flies through the Earth's atmosphere and lands on the insured wooden fence, damaging it. C. A plane part drops from the sky and crushes the insured outdoor patio furniture. D. A meteorite hits the outside ham radio antennae of the insured, destroying it.The propeller of a helicopter falls from the sky, crashes through the roof of the insured's home and destroys his dining room set.A Homeowners policy is considered a multi-line policy because it consists of both: A. property and liability coverage B. property and commercial coverage C. liability and home health care coverage D. home and auto coverageproperty and liability coverageThe homeowner policy will pay up to what maximum amount, without deductible, for credit card, forgery and counterfeit money loss? A. $2,500 B. $500 C. $0 D. $1,000$500Which of the following statements concerning landscape coverage in a homeowners policy is NOT ACCURATE? A. An HO-2 and an HO-3 both offer up to $500 per plant, tree or shrub up to 5% of the Coverage A amount. B. HO-6 provides up to $500 per plant up to a maximum of 10% of the Coverage C amount. C. An HO-5 and an HO-8 both offer up to $500 per plant, tree or shrub up to 5% of the Coverage A amount. D. HO-4 provides up to $500 per tree up to a maximum of 10% of the Coverage C amount.An HO-5 and an HO-8 both offer up to $500 per plant, tree or shrub up to 5% of the Coverage A amount.Which of the following incidents would be covered under the Vehicles peril under a HO policy? A. An insured's foot accidentally slips off the brake when turning into their driveway and the car takes out half of the home's living room B. An insured's foot accidentally slips off the brake when turning into a gym's parking lot and hits two parked cars C. An insured's car is stolen from a supermarket parking lot. D. An insured's vehicle strikes a pedestrian at a busy public intersection.An insured's foot accidentally slips off the brake when turning into their driveway and the car takes out half of the home's living roomB has a live-in maid who gets hurt while shopping at the grocery store after driving there in one of B's autos. The maid can collect for her bodily injury: A. from no source since domestic employees assume all risks of injury according to federal law. B. through B's auto insurance policy. C. through B's personal liability coverage under his homeowners policy if B lives in a state that does not require workers compensation for domestic employees. D. only through worker's compensation insuranceWhich of the optional coverages limits the monthly amount of coverage an insured can receive based on a fraction of the maximum benefit A. extended business income B. agreed value C. monthly limit of indemnity D. maximum period of indemnitymonthly limit of indemnitywhich of the following perils is specifically designated a broad form peril in a commercial property policy? A. sprinkler leakage B. hail C. smoke D. water damageWater damageThe coverage extension "non-owned detached trailers" provides A. up to $5000 coverage on a non-owned trailer and other outdoor property from fire, lightning, explosion, riot, and aircraft B. up to $5000 coverage on a non-owned trailer when the insured uses it for his or her business C. up to $5,000 coverage for property carried on a non-owned trailer D. up to $10,000 for property carried on a trailer for up to 90 daysup to $5000 coverage on a non-owned trailer when the insured uses it for his or her businessF has just opened a clock repair shop in his hometown. While F has his clients clocks in his care, custody, and control creates a legal relationship called a:bailmentwhich of the following commercial building and business personal property form perils is covered by the broad form but not by the basic form? A. Weight of snow, ice or sleet B. sprinkler leakage C. volcanic action D. sinkhole collapseWeight of snow, ice or sleetThe local police refused to let a business owner gain access to his business due to safety concerns for a couple of weeks, the owner is entitled to business income because of which additional expense coverage? A. civil authority B. ordinance in law C. extra expense D. extended business incomeCivil authoritywhich of the following statements is correct about business income insurance and extra expense insurance? A. these coverages can be purchased together, singly, or not at all B. both coverages apply whenever a business loses income C. not every business needs a business income coverage D. every business needs extra expense insurancethese coverages can be purchased together, singly, or not at allextended business Insurance indemnifies the insurance company A. when the restoration period is longer than expected for up to 60 additional days B. for lost income due to poor business conditions when operations resume C. when the policy limit has been exhausted before the restoration. Complete D. for lost income during the time lag for when operations resume and operations return to normalfor lost income during the time lag for when operations resume and operations return to normalwhat is the maximum reimbursement for a fire department service charge? A. $2,500 B. $1,000 C. $250 D. $500$1,000all of the following losses are excluded under business personal property coverage form, EXCEPT A. bridges B. crops C. inventory D. underground pipesinventoryall of the following are common conditions of a commercial package policy, EXCEPT A. assignment of insured rights is not allowed without written consent of the insurer B. cancellation is allowed by both parties C. premiums are the responsibility of the first name insured D. insurer may audit the insured's books during the entire policy. And then up to five years after coverage expiresinsurer may audit the insured's books during the entire policy. And then up to five years after coverage expirespreservation of property, an additional coverage charge of the commercial building and business personal property form, protect property removed to protect it for further loss up to how many days? A. 30 B. 5 C. 10 D. 6030all commercial package policy to have the same A. common policy conditions B. exclusions C. declarations listed D. common policy insuring clausecommon policy conditionsif the building in which a business operates is a total loss, which of the following expenses would not be covered under business income coverage? A. net income B. rent C. utility bills D. payrollutility billsThe coverages and premiums included in the commercial package policy are found in the A. Enterline endorsements B. coverage parts C. insuring clause D. common declarationscommon declarationswater damage, the broad foreign peril found in commercial property policies covers A. water damage due to a sewer back up B. leakage from an automatic sprinkler system C. leakage resulting from the breaking or cracking of any part of a steam or water system D. leaking from water pipes, which occurs overtimeleakage resulting from the breaking or cracking of any part of a steam or water systemaccording to commercial building and business personal property form, which of the following could be covered under "buildings" rather than "buildings personal property" when located within 100 feet of the described premises? A. building materials within 100 feet of the insured used for making repairs, or creating additions B. retaining wall not a part of the building C. furniture and fixtures D. machinery and equipmentbuilding materials within 100 feet of the insured used for making repairs, or creating additionswhich of the following is not found in the insuring agreement in a commercial package policy? A. The insurer must be fair in underwriting B. The first named insured C. whether coverage is open peril or named peril D. The promised that the insured must pay timely premiumsThe first named insuredwhen Alfred purchased his commercial policy package, several coverage parts excluded the same group of certain computer-related losses. The insurer simplified the policy form by using A. an interline endorsement B. commercial property conditions C. The common exclusions D. Common policy conditionsan interline endorsementall of the following coverages can be added to a commercial package policy, EXCEPT A. business owners policy B. farm insurance package C. professional liability coverage D. commercial property coverageBusiness owners policyAfter flashing a maintenance warning for 10 days, the company's commercial boiler explodes and started a fire which caused extensive damage. What did the company's equipment breakdown policy cover after it investigated the claim? A. It covered all of the damage B. It only covered the damage caused by the explosion C. It only covered the damage caused by the explosion and the cost to repair the equipment D. It declined to cover any of the damageit declined to cover any of the damageAn uncontrolled, inland marine, property form is A. Not subject to review by the Director of Insurance B. not written by an authorized insurer C. not standardized by a rating bureau D. Another name for a "difference in condition policynot standardized by a rating bureauAll of the following may be covered by an inland marine insurance policy, EXCEPT: A. The props and scenario for the touring company of a regional ballet company B. A warehouse storing goods being readied for shipment C. Customers' clothing being laundered by a dry cleaner D. Transmission towers owned by a radio networkA warehouse storing goods being readied for shipmentWhich of the following items was excluded when Oscar, a general contractor, filed a claim against his Builders Risk Policy? A. A portable toilet used by workers and location less than 100 feet from the building under construction B. Oscar's pick-up truck parked on the premises C. Trees, shrubs, and plants stored outside D. The satellite dish attached to the building under constructionThe satellite dish attached to the building under constructionWhen a fire damaged the building they were close to completing, Carl's construction company moved much of the furniture they were installing into a storage unit. When he filed a claim through his builder's risk policy Carl was told A. The removed property was covered on an open-peril basis for 10 days B. The removed property was covered as long as it was moved to another location listed as an insured premises C. The removed property was covered on an open-peril basis for 30 days D. The removed property was covered under his inland marine policyThe removed property was covered on an open-peril basis for 30 daysK owns a factory and has an Equipment Breakdown Policy on his business. Which of the following would be covered as a "pure accident" contract language? A. An insured piece of equipment used to apply commercial fails because of damage to a vacuum tube B. Fire damage caused by an exploding turbine C. An employee, K should be maintaining the machine, but takes extra lunchtime instead, never taking care of the machine and it fails D. A boiler malfunctions and blows upA boiler malfunctions and blows upFor which of the following causes of loss would a common carrier be liable for the property loss of goods they are transporting that are owned by another party? A. The driver for the carrier takes a dinner break and does not lock the truck door allowing thieves to steal the property during the driver's dinner break B. The goods are taken by the government in a seizure by the Center for Disease Control C. The goods are destroyed while on a truck of a common carrier that is destroyed in a flash flood from a river D. The shipper of the goods has not packaged them properly and when they arrive they are broken and worthlessThe driver for the carrier takes a dinner break and does not lock the truck door allowing thieves to steal the property during the driver's dinner breakBob's Frozen Pizza delivers a thousand pizzas a day to local grocery stores for retail sale and ships them in a refrigerated truck that Bob owns. Bob's Frozen Pizza: A. needs to purchase a specialized Shipper's Form B. needs to purchase an Owner's Goods on Owner's Trucks transportation floater C. needs to purchase a Motor Truck Merchandise Floater transportation floater D. is covered for this by an additional coverage found in their Business Owner Policyneeds to purchase an Owner's Goods on Owner's Trucks transportation floaterIn an Equipment Breakdown policy, the Period of Restoration begins A. At the time of the Breakdown B. 72 hours after the breakdown C. 5 days after the breakdown D. 24 hours after the insurer receives notice of "BreakdownAt the time of the BreakdownWhich additional benefit in a builders risk policy will provide up to an additional $25,000 per location per occurrence under certain conditions? A. Outdoor Signs B. Debris removal C. Equipment breakdown D. Pollutant Clean Updebris removalWhich of the following is found under the definition of a "Breakdown" under an Equipment Breakdown Policy? A. Malfunction due to cleaning B. Leaking of a valve C. Mechanical failure including rupture or bursting caused by centrifugal force D. Damage to any structure or foundations supporting the "Covered Equipment"Mechanical failure including rupture or bursting caused by centrifugal forceA fire destroyed Milo's work computer while a new hard drive was being installed at the local technology store. Luckily the store owner was covered by A. Electronic Data Processing Floater B. An Installation Floater C. A Bailee Customers Policy D. A Commercial Articles FloaterA Bailee Customers PolicyWhat kind of inland marine policy can consumers purchase to cover a single shipment while being transported by a common carrier? A. Commercial Articles Floater B. Motor Truck Cargo Form C. Common Carrier Cargo Liability Form D. Transit Coverage Formtransit coverage formBuilders Risk Insurance covers building materials" A. Insurance B. other than scaffolding C. stored in the building under construction or within 100 feet of the building in which it will be used D. that are stored inside the structure being builtstored in the building under construction or within 100 feet of the building in which it will be usedWhich of the following personal articles is best insured utilizing a stated value basis for loss payment? A. An original oil painting by a prominent artist B. A rare coin collection C. Vintage and rare camera equipment D. Family-owned sterling silverware which has been handed down for six generations in a familyAn original oil painting by a prominent artistWhich of the following personal property items would not need to be scheduled to be covered? A. A $20,000 mink stole B. A $5,000 custom made leather golf bag C. A family heirloom brooch valued at over $50,000 D. A very nice leather chair costing $1,500A very nice leather chair costing $1,500When Ellen's commercial refrigerator failed due to a loss of compression, she had to rent temporary replacements while the equipment was repaired. Luckily, her equipment breakdown policy. A. covered it a business income loss B. covered it under spoilage damage C. covered it as an extra expense D. covered it as an expediting expensecovered it as an extra expenseWhen a tornado struck Carl's construction site, the damage includes 10 trees Carl recently planted as part of the landscaping, which were uprooted. When he submitted his claim to the insurer carrying his builder's risk policy. A. The insurance company denied the claim because tornadoes were not a covered peril B. The insurance company paid $250 per tree C. The insurance company paid a total of $1,000 for all of the damaged trees D. The insurer denied the claim because planted trees and shrubs are always excludedThe insurance company denied the claim because tornadoes were not a covered perilThe Nationwide definition of property eligible for coverage under Inland Marine includes all of the following, EXCEPT: A. Instrumentalities of transportation like a bridge or tunnel B. Personal property such as jewelry or furs C. Property in the care, custody, and control of a bailee D. BuildingsbuildingsWhich condition on the Commercial Inland Marine Conditions Form requires full compliance with the policy terms as a prerequisite for taking action? A. Duties In The Event Of Loss B. Legal action against the insurer C. Recovered Property D. Concealment, misrepresentation or fraudlegal action against the insurer
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Sort the items into four groups: those that change the production function, those that change the demand for labor, those that change the supply of labor, and those that do not change the production function, the demand for labor, or the supply of labor. Say in which direction each change occurs.
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