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In the context of insurance, which term refers to the possibility of an event occurring that results in financial or other negative consequences?
Risk, The correct answer for this question is Risk because it accurately represents the uncertainty surrounding potential losses
When a client believes a broker has the power to make decisions on behalf of their company, this is referred to as which type of authority?
apparent authority, The public assumes a producing agent has apparent authority, meaning they believe the agent has the power to make decisions and take actions on behalf of their company, even if it's not explicitly stated in their agency agreement.because it simplifies the relationship between the parties involved.
As an insurance agent, you issue a binder to a client. What is a binder?
A binder is a permanent insurance contract. and is NOT guaranteed
Which construction type is subject to functional replacement cost basis when estimating replacement costs?
antique, ornate, or custom buildings are subject to this method due to their unique features and difficulty in accurately estimating future losses or replacement costs.
How is market value utilized in loss valuation?
Considering price a willing buyer would pay for a property in its current condition, reflecting both its physical state and current market conditions.
In property insurance, which valuation method takes depreciation into account when determining the property's value?
Actual Cash Value (ACV) , calculates the property's value by subtracting depreciation from the replacement cost of the property.
During a policy period, a homeowner's roof is damaged when an airplane unexpectedly loses a wheel. How would you classify this event?
Accident and occurrence. This event is both an accident and an occurrence. It is an accident because it is an unforeseen and unintended happening at a known place and time. Additionally, all accidents are considered occurrences, which are events that result in damage or injury during the policy period.
What does the Life Contingency Option in Annuity Payment mean?
the annuity payment continues for the life of the annuitant and then continues to a survivor for their life.
What is the primary purpose of a Standard Mortgage Clause in property insurance?
It protects the rights of the mortgagee even if the policyholder violates terms of the policy
As an insurance agent, which type of boat can you include in a Dwelling policy's Coverage C for personal property?
Rowboat
What does the Businessowners Section II — Liability cover in a Businessowners Policy?
It covers bodily injury, property damage, personal and advertising injury liability.
What is the 'Life Contingency Option' in an annuity?
It is an option that ensures annuity payments for as long as the annuitant lives
What is the Life Contingency Option in the context of Annuity Benefit Payment Options?
An option that provides income for as long as the annuitant lives
What is the main difference in coverage when upgrading from an HO-2 to an HO-3 homeowners policy?
Open Perils for building coverage
what is The standard Coverage E - Liability limit for an HO-3 policy
$100,000. This is the maximum amount the insurance company will pay for the damages awarded by the judge.
As an insurance agent, you want to recommend the policy option with the most comprehensive coverage for a client's personal property. Which option should you suggest?
Personal Articles Floater, To ensure the broadest coverage for personal property, opt for a Personal Articles Floater as it offers more comprehensive protection with fewer exclusions than the other options.
What is covered under the Liability section of a Businessowners Policy?
Bodily injury and property damage for which the business is legally liable
Which annuity benefit payment option provides income for as long as either the annuitant or a designated beneficiary is alive?
Life contingency option
When you, as an agent, handle a claim for a client who had an accident while driving a borrowed nonowned temporary substitute vehicle, how does their personal automobile policy address the physical damage?
Provides broadest coverage available
As an insurance agent, which coverage option will you recommend to a client for financial protection against medical expenses, lost wages, and damages caused by an accident, but not property damage?
Bodily Injury Coverage, it provides financial protection in the event of an injury or death caused by an accident. It covers medical expenses, lost wages, and other damages caused by an injury, but does not include property damage.
Collision Coverage
it primarily covers property damage resulting from a collision with another vehicle or object. While it may provide some protection for medical expenses, it does not specifically focus on bodily injury coverage.
Comprehensive Coverage
it covers damage to a person's property, such as their car or home, due to a variety of causes, such as theft, fire, and vandalism. It does not provide coverage for medical expenses, lost wages, and other damages caused by an injury, which are covered by bodily injury coverage.
Uninsured Motorist Coverage
it provides protection for the policyholder when they are involved in an accident with an uninsured or underinsured driver. While it may cover some medical expenses and lost wages, it is not specifically designed for bodily injury coverage.
Which of the following is excluded loss under Part D - Damage to an Auto of a personal auto policy?
Nonessential accessories, confiscation by authorities, regualr vehicle maintenance.
What is the life contingency option in annuity payments?
An option where payments continue for as long as the annuitant is alive
What is a Life Contingency Option in an annuity?
An option that provides annuity payments for as long as the annuitant lives
What is a common dividend option in a life insurance policy?
Reinvestment into the policy to increase the death benefit
In what year was the National Flood Insurance Program (NFIP) established by the United States Congress to provide flood insurance coverage in flood-prone areas?
1968
As an insurance broker, you are advising a client who wants to purchase a policy from an insurer that is owned by its policyholders. Which type of insurer should they choose?
Mutual company
The insured who has the right to change, cancel or renew a Commercial Lines policy is known as the
first named insured.
To be paid a claim under a Property and Casualty contract, when must insurable interest exist?
at the time of loss
The six limits of liability on a commercial general liability policy are listed where?
declarations page
Which of the following is an example of a financial loss caused by a home being damaged in a windstorm?
direct loss
A house is on fire and ignites the neighbor’s house. Damage to the neighbor’s house would be considered
direct loss
Which of the following describes market value?
It is what property can be sold for.
How does a Liberalization Clause affect a Commercial Property policy?
expands coverage
All of the following activities would warrant absolute liability EXCEPT
risky transportation.
All of the following establish a defense against negligence EXCEPT
a denial of the validity of the claim in a court of law.
There can be no coinsurance penalty on which kind of loss?
total loss
Which valuation method uses the concept of depreciation?
ACV actual cash value
What is defined by the Policy Conditions section of a Property and Casualty policy?
the duties of the insured
Which term means a legal obligation for injury caused by the failure to perform a duty?
liability
Where are the Rules of Conduct which govern the actions of the parties to an insurance contract found?
Conditions
A company has liability insurance from two policies written for different amounts. If the company sustains a covered loss, how will the loss be paid?
ro rata benefits equal to the proportion of the policy limits of each policy will be paid.
All of the following are listed in the duties of the insured following a loss EXCEPT
contracting for restoration.
Which of the following does a binder of coverage guarantee?
coverage is in place immediately
What is NOT necessary to establish negligence?
intent
All of the following are true regarding torts
torts involve private relationships, a tort is a civil wrong that violates the rights of another, another term for tort is negligence
Which insurance term refers to continuous or repeated exposure to conditions that may result in bodily injury or property damage which is neither expected not intended?
an occurrence
Which situation is an example of vicarious liability?
The insured's employee causes an injury while on the job.
Which statement about a binder is FALSE?
It assures that a policy will be issued.
The purpose of coinsurance is to motivate the insured to do what?
insure to value
One of the criteria to determine an insurable risk is
calculable loss.
What is a required element to legally establish negligence?
duty
Which of the following is an example of replacement cost valuation?
cost new without depreciation at the time of loss
Property coverage that does not require a specific limit of insurance for each item to be insured is called
blanket.
Concerning the cancellation of a Commercial Lines policy, which statement is TRUE?
The insurance company may cancel for specified reasons with proper notice.
In a Commercial Line policy, the individuals allowed to alter coverage, settle claims, and pay premiums are known as the
first named insureds.
Which of the following gives a mortgagee rights at the time of loss?
insurable interest in the property
What are written changes to Property and Casualty policies called?
endorsements
All of the following demonstrate insurable interest EXCEPT
insuring an engagement ring given to fiancée.
Which of the following presents a basis for holding an insured responsible due to vicarious liability?
Insured's child injures a friend in a sports accident.
With Property and Casualty insurance, insurable interest is the extent of your financial interest at the time of
loss.
Open Perils coverage is also called
Special Peril coverage.
All of the following are methods of limiting liability EXCEPT
collective limit.
The limits of liability are found in which part of a Casualty policy?
declarations
As a broker, you must identify which element is crucial in connecting an individual's negligent act to the damage incurred in order to establish negligence.
proximate cause
As a broker, you are assessing activities for absolute liability coverage. Which of these activities would most likely NOT require absolute liability coverage?
Transporting construction materials.
As an agent, you have a client who has insured their commercial building with two different companies, each providing different types of coverage: one with a Basic Cause of Loss form and another with a Broad Cause of Loss form. The building experiences a $30,000 loss due to the weight of ice and snow. What term describes this situation?
Nonconcurrency
Which of the following is NOT a valid defense against negligence for an insurance agent?
Denying claim validity
In which scenario would an insured be held responsible due to vicarious liability?
Child's sports injury to friend.
In which type of loss will coinsurance penalties not apply?
Total loss
As an insurance agent, you are valuing a one-of-a-kind antique painting for a client's policy. Which valuation method should you use to establish coverage?
Agreed Value
Which of the following scenarios does NOT display insurable interest?
Insuring a neighbor's valuable artwork
Assume Terrance purchases a one-year BOP in January which provides $1,000 to cover any Fire Department Service charges he might incur. Further assume that in March, the company changes its BOP to limit Fire Department Service charges to $500. If he has a Fire Department Service charge claim of $800 in June, the company pays $800. Which policy provision dictated this outcome?
liberalization
An insured is involved in an automobile accident. The adjuster declares the insured's car to be a total loss and authorizes payment to the insured for the actual cash value of the car. The salvage belongs to the
insurer.
All of the following are listed in the duties of the insured following a loss EXCEPT
contracting for restoration.
In which scenario is an insurer NOT permitted to cancel or rescind a policy under policy conditions and state laws?
Simple representations
In Property and Casualty insurance, when is insurable interest determined?
Occurrence of loss.
In a property insurance scenario, which valuation method provides payment for the full policy amount indicated on the declarations page during a total loss, regardless of the property's actual value or depreciation?
Valued policy
What does replacement cost valuation determine in property insurance?
Cost new without depreciation
In the context of negligence, which element must be proven to establish a legal case?
duty present
In the context of insurance, what term describes a situation where harm or damage results from ongoing or repeated exposure to harmful conditions, rather than a single, sudden event?
an occurrence
As a broker, which part of an insurance policy contains the insurance company's commitment to providing coverage for the insured?
insuring agreement
In a scenario where two insurance policies cover the same property, which policy is responsible for paying first?
primary
Which of the following is NOT a recognized method of limiting liability in insurance policies?
Collective limit
As an insurance broker, the maximum amount your client's policy will cover for all losses resulting from a single incident, regardless of other policy limits, is known as the:
per occurrence limit.
A small business owner is found guilty of committing arson on their bar in an attempt to claim insurance money. Which third-party provision allows the insurer to settle the loss by paying the mortgage lender in this situation?
Standard mortgage clause
As a broker, you are asked to recommend an insurance policy specifically designed for tenant-occupied homes, vacation properties, or permanently located mobile homes. You suggest a:
dwelling policy.
What does a DP-2 policy cover?
bursting pipes due to freezing, theft. causing property damage, accidental plumbing steam discharge.
Which of the following is NOT an exclusion in dwelling policies?
Damage caused during a burglary.
which of the following is an exclusion in a dwelling policy?
water damage from a sump pump, damage caused by law enforcement and insureds failiure to save property after a loss
what time does a homeowners policy begin at?
12:01AM in the middle of the night
What is the primary goal of a homeowners policy?
Comprehensive package policy
As an agent, you recently upgraded a client from an HO-2 policy to an HO-3 policy. What is the primary change to their coverage?
Expansion of Coverage A perils
which are covered causes of loss under the HO-2 broad form policy.
accidental damage from electrical current, freezing of plumbing or related systems, and weight of ice, snow, or sleet
As a broker, which peril would typically be covered under a Broad (HO-2) Homeowners Policy?
theft
As a broker, which perils would NOT typically be covered under a Broad (HO-2) Homeowners Policy?
nuclear hazard ☢ , flood damage and earth quake damage.
Under Homeowners Coverage C, what is the dollar limit on losses of money, gold, or silver?
$200
In an HO-3 homeowners policy, when does coverage begin for theft of construction materials for a home under construction?
When the dwelling is completed and occupied.