Property & Casualty Ultimate Study Guide

Which of the following is an available coverage option under the equipment breakdown protection coverage form?

Utility interruption

Which of these losses would be covered under the personal auto policy’s liability coverage?

Will falls asleep at the wheel of his car and strikes and injures a pedestrian.

Which of the elements of a legal contract does an insurance premium payment represent?

Consideration

What kind of insurance company is owned by its policyowners?

Mutual

The condition that provides a means to settle the amount of a loss when the insured and the insurance company cannot agree is

the appraisal condition

In fidelity bonds, the party to whom the promise is made and for whose protection the bond is written is

the obligee

The named insured on a commercial general liability policy is Sassy Department Store. Which of the following losses would be paid under the policy’s medical payments coverage?

A maanequin tips over and injures a customer.

Most flood insurance coverage is provided by

federal government program

Which one of the following types of benefits is generally not provided by a state’s workers’ compensation law?

Pain and suffering

An insured needs liability, property, and medical payments coverage for a 30-foot speedboat with a 75 hp engine. This boat could be covered under

a boatowners or watercraft package policy.

Which of the following is covered under a businessowners policy?

A small business

The personal auto policy’s medical payments coverage would NOT provide protection for which one of the following?

Occupants of a car that was struck by the insured

Which of the following forms is used to insure private passenger and commercial auto exposures?

Bussiness auto coverage form

The businessowners policy

provides a prepackaged policy of property and liability coverages for certain types of small businesses

Additional living expense coverage that is included under the broad and special dwelling forms protects the insured against

extra living costs incurred when the home becomes uninhabitable due to damage by a peril insured against.

Garagekeepers coverage insures against

autos of others that are in the care, custody, or control of the insured.

The insured’s home is covered by a DP-3. Two years ago, the insured bought the home for $88,000. Today, its replacement value is $100,000. How much Coverage A does the insured need to qualify for replacement cost coverage?

$80,000

Which of the following is NOT covered by a dwelling policy?

War

It will cost Gary $5,000 to put a new roof on his home to replace a roof destroyed in a windstorm. Assume that the original roof, which Gary paid $3,500 for 10 years ago, depreciated $300 per year. What was the actual cash value of the roof that was destroyed?

$2,000

Under the commercial package policy, who may cancel the policy in writing and make changes to the policy with the consent of the insurer?

First-named insurer

Assume the following items were stolen from the insured’s home. Which one of these losses would be fully covered under Coverage C of the homeowners policy, assuming the loss was for the full value of the property described?

A $2,000 laptop computer the insured uses for her in-home accounting business.

All of the following are included under Section I of the homeowneres policy EXCEPT

personal property

In liability loss, the person to whom the insured caused damage is referred to as

the third party

An insured is driving her car to work, swerves into the next lane, and causes an accident. The accident occurred because of the insured’s negligence while driving. This cause of the accident is known as

the proximate cause

What is the difference between the loss sustained and discovery versions of the commercial crime coverage forms?

Coverage trigger

All of the following can be included in a commercial property policy (CPP) EXCEPT

health and disability insurance

Which personal auto coverage reimburses the insured for reasonable expenses incurred within three years of the date of injury without regard to fault?

Medical payments coverage

An insurance agent who needs liability coverage for her professional liability exposure can obtain it by purchasing

errors and omissions insurance

What is a common name for Part D of the personal auto policy?

Physical damage coverage

Which of the following is a liability loss?

A fire that was caused by the insured’s negligence burns a neighboring building. The owner of the building sues the insured.

Which of the following is NOT an element of a legal contract?

Premium payment

An additional loss that results from a direct loss to property is called

an indirect/consequential loss

Each of the following business occupancies would be permitted in a dwelling insured under a dwelling form EXCEPT

a farm

Each of the following is a primary coverage provided under the commercial general liability policy EXCEPT

intentional injury

Which type of insurance covers exposures that involve property and merchandise while in transit or “floating”?

Inland marine insurance

Medical benefits under the workers’ comopensation policy are

generally unlimited and do not contain deductibles

What covers a carrier’s liability for loss or damage of cargo while it is being transported in a truck?

Motor truck cargo policy

Furniture that is destroyed when a building burns down is an example of what kind of loss?

Direct

In the business auto coverage form, employers that want to cover employees’ use of their own cars in the employer’s business should opt to have liability coverage apply to which of the following groups of autos?

Nonowned

Which of the following is NOT a type of inland marine coverage form?

Personal items coverage form

A hardware store is insured under a business income coverage form with the basic causes of loss form. Which of the following perils would NOT be covered?

Damage from the weight of ice, sleet, or snow

Which one of the following accidents would NOT be covered under the uninsured motorists coverage of the personal auto policy?

An accident with a motorist who has less liability insurance than required by the state’s financial responsibility law

The principle that states that an insured should be restored to approximately the same financial position after a loss as before is known as

indemnity

Under the business auto coverage form, the insured’s liability arising from which of the following situations would be covered?

injury to an employee of the insured while the employee is working for the insured

Which of the following would NOT generally be included in the supplementary payments portion of a liability policy?

Damage to property owned by the insured

Which commercial property coverage form covers damage to the property of otheres in the insured’s care, custody, or control, but only if the insured is legally liable?

Legal liability coverage form

In a monopolistic state, an employer purchases workers’ compensation insurance from

a state fund

Widget Enterprises wants property insurance for a new warehouse it is building. Widget also wants the policy’s limit of insurance to gradually increase as the value of the building under construction increases. Which commercial property coverage form would best fit Widget’s needs?

Building and personal property coverage form

The party to a surety bond who promises to do or not do a specific thing is

the obligee

Which of the following is an example of adverse selection?

An individual with a terminal illness purchases health insurance.

The extra expense coverage form provides

reimbursement for additional costs an insured incurs to avoid or minimize suspending business operations after a covered loss.

Crime insurance that is written on a loss sustained form covers losses discoverd either during the policy period or

up to one year after the policy expires.

The authority specifically given to an agent in a written agency agreement by the principal is called

express authority

In a commercial liability policy, coverage under a claims-made form is triggered when

the claim is first made against the insured

According to the cancellation condition in the common policy conditions form, if the insurance company is canceling a homeowners policy for any reason, the insurance company must give 10 days’ written notice to the insured during the first

60 days of the policy term.

Which of the following would be covered under the building coverage of the building and personal property coverage form?

Fixtures

A company that frequently rents autos and trucks for use in the business should include which symbol in the business auto policy declarations?

8

The builders risk reporting form insurers a building under construction for

an amount that increases at intervals to correspond with the increasing value of the building.

The insured has $20,000 insurance with Company A and $40,000 with Company B. Assume both policies contain another insurance clause specifying pro rata. What would Company A pay if there was a $24,000 loss?

$8,000

Coverage L provides coverage for damages that the insured becomes legally obligated to pay because an occurrence caused bodily injury or property damage. This coverage is also known as

personal liability supplement

Which of the following is NOT eligible for commercial inland marine insurance?

Imports and exports

What type of ocean marine insurance provides physical damage coverage for the ship while it is in transit?

Cargo

Statements made on an application that are guaranteed to be true are

warranties

Which one of the following is NOT one of the required elements of a legal contract?

Equal risk for all parties

The homeowners form that provides special peril coverage on the dwelling and broad coverage on personal property is

the HO-6

Of the four coverages provided under Section I of the homeowners policy, which one provides coverage against loss of use, an indirect loss?

Coverage D

The businessowners policy

provides a prepackaged policy of property and liability coverages for certain types of small businesses.

An insurance policy has a $25,000 per occurrence limit. If the insured has a $5,000 covered loss during the policy period, how much coverage is available for other covered losses that occur during the remainder of the policy period?

$20,000

In most states, workers’ compensation laws are

compulsory

Special (open) peril coverage for both the dwelling and personal property is provided by

the HO-5

The purpose of insurance is to

transfer risk from a person, business, or organization to an insurance company that agrees to pay for losses in exchange for a premium.

Which of the following broad perils is covered by the HO-2 and HO-3?

Sudden and accidental rupture of a heating system

The insured has a personal auto policy with all cars insured by one company. He sells one of the cars and buys a new one to replace it. Must the insured take any action for the liability portion of his current policy to apply to the replacement vehicle?

No, the insured does not have to do anything; liability coverage for a replacement vehicle is automatic.

Which of the following losses would be covered by a flood policy?

Heavy rains cause a lake to overflow and flood the basement and first floor of a house.

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

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

An individual who owns and lives in a condominium can obtain broad coverage for personal property in the condo under which Homeowners form?

HO-6

The cause of a loss is called

a peril

Which of the following describes an insurance company doing business in a state other than the one where it is incorporated?

Domestic

The insured has a $1 million personal umbrella policy with a retention limit of $1,000. The insured suffers a $15,000 loss that is excluded by the underlying policy, but not the umbrella. How much of this loss would be paid under the umbrella?

$14,000

A morale hazard

arises through an individual’s carelessness or irresponsible actions

Insurance arising out of rendering or failing to render services of a professional nature that was developed for physicians, surgeons, dentists, lawyers, insurance agents, directors, and accountants is known as

Professional liability insurance

The physical damage section of the personal auto policy excludes

mechanical breakdown

Coverage for sums an employer becomes legally obligated to pay under common law as a result of a work-related injury to an employee is provided by

Part Two - Employers Liability section of the workers’ compensation policy

Which of the following personal property items is covered in Coverage C of the dwelling policy?

A 72-inch flat-screen television

Trailer interchange coverage is a part of

the truckers coverage form

Nicole has a personal auto policy with limits of 10/20/10 for liability coverage. She causes an accident that results in $12,000 bodily injury damages to the other driver and $5,000 in property damage to the other driver’s car. How much would Nicole’s policy pay for both the BI and PD losses?

$15,000

Which one of the following is NOT one of the common policy conditions in a commercial package policy?

The refund of premium condition

Which one of the following lists all the required elements for establishing a charge of negligence?

Legal duty owed, breach of legal duty owed, proximate cause, damages

Susan and George have applied for automobile insurance for their family with ABC Auto Insurers. They do not tell the agent that their son, who lost his drivers license due to drunk driving, uses one of their cars on a regular basis to drive to work. The company found out about their son after he had an accident, and they denied the claim. What legal concept could be cited as the reason for claim denial?

Concealment

A business can obtain coverage for liability arising out of discrimination and sexual harassment by purchasing

commercial general liabiliy insurance

Under the claims-made commercial general liability coverage form, the first date that a loss may occur and still be covered under the policy is

the retroactive date

Each of the following kinds of property may be covered under a building and personal property coverage form EXCEPT

autos for sale

Who of the following would be considered an insured for liability coverage under the personal auto policy?

The named insured’s son, who lives with the insured, while driving a neighbor’s car with permission.

Under the Commercial General Liability policy, a separate Aggregate Limit applies to

the products-completed operations.

If a building insured under the building and personal property coverage form was vacant for 90 days

a vandalism loss would not be covered.

The purpose of a binder is to

provide temporary protection for the insured between the time the application is made and the policy is issued or the binder expires.

Which of the following is NOT covered in the inland marine sign coverage form?

A sign that breaks during installation

The type of insurance company in which the policyholder is considered an owner and also shares in the profits, is

a mutual company

According to the nationwide definition, imports and exports are

eligible for ocean marine insurance.

Which of the following can be covered as business personal proeprty under the businessowners policy?

Exterior building glass