1
Q
The insured’s home is insured under an HO-3 with a $100,000 Coverage A limit. A tornado destroys the home and uproots a tree valued at $5,000. How much would the insurance company pay for the loss to the insured’s home and tree? Ignore any deductible that would apply.
A
$100,000
2
Q
An insurer who receives a written notice of complaint regarding an unfair claim settlement practice must provide all of the following information in a written report EXCEPT:
A
a listing of litigation attorneys located within the specific geographic area
3
Q
Which one of the following is NOT a supplementary payment provided in the commercial general liability policy?
A
Medical payments
4
Q
After a fire damages a home, how much is the insured entitled to recover for buying materials to board up the windows under the homeowners policy?
A
Whatever it will reasonably cost
5
Q
The basic extended reporting period included in the commercial general liability (CGL) form covers claims made up to 5 years after the end of the policy period, as long as an occurrence is reported within how long after the end of the policy period?
A
60 days
6
Q
Yacht policies provide physical damages and liability coverage. What is the liability section called?
A
Protection and indemnity insurance
7
Q
Which of the following limits does NOT apply to Workers’ Compensation Part Two—Employers Liability?
A
Per property damage
8
Q
Which one of the following would be classified as a general damage?
A
Pain and suffering
9
Q
Which one of the following auto policy coverages would pay for damage to the insured’s car that the insured motorist caused by hitting a farmer’s cattle while driving through the country?
A
Other than Collision
10
Q
Robert wants open perils coverage on his dwelling and named perils coverage for his personal property. Which homeowners form should he choose?
A
HO-3
11
Q
When a personal automobile policy is canceled by the insurer for nonpayment of premium, how much notice is the insurer required to provide to the named insured?
A
At least 10 days’ advance notice.
12
Q
Doreen’s printing shop delivers finished items to local customers. Doreen usually makes the deliveries herself, but when she is too busy, one of her employees will use his own car to drop off products with her customers. What type of an endorsement would cover Doreen’s liability?
A
Hired auto and nonowned auto liability endorsement
13
Q
Workers’ compensation pays
A
without regard to fault
14
Q
All of the following are homeowners Section II additional coverages EXCEPT
A
first aid provided to the insured
15
Q
An insured has an $80,000 dwelling policy with a $500 deductible. In addition to the house, the property includes a detached garage, storage shed, and an artist’s studio. During a thunderstorm, the garage and storage shed are damaged by lightning. The loss is $3,000 to the garage and $1,000 to the shed. What amount is covered by the policy?
A
$3,500
16
Q
Losses to the dwelling and other structures are paid at replacement cost as long as the insured carries an amount of insurance equal to or greater than
A
80% of the building’s replacement cost
17
Q
After a hearing, the Commissioner can issue a cease and desist order, if he believes the person charged has engaged in any unfair method of competition or unfair trade practice. A person that violates this order
A
may be fined up to $25,000 for each violation, as well as have his license or certificate of authority suspended or revoked.
18
Q
All of the following are exclusions under a liability policy EXCEPT
A
injuries or damages caused unintentionally by the insured
19
Q
What is the most coverage available for a single-family dwelling covered under the regular flood program?
A
Building—$250,000, and contents—$100,000
20
Q
Individuals that represent only one company, are independent contractors, and are not employees of the insurer are known as
A
captive (exclusive) agents
21
Q
John’s dog bites a friend who is visiting John’s house. Which part of John’s homeowners policy, if any, would cover the visitor’s ensuing medical expenses?
A
Either Coverage E or Coverage F
22
Q
Under the CGL form, insured contracts include all of the following EXCEPT
A
assumption of an architect’s liability for any injury or damage arising out of the insured’s rendering or failure to render professional services
23
Q
Which of the following is NOT a type of surety bond?
A
Collateral
24
Q
The agent has many responsibilities to the applicant. One involves a trust relationship between the agent and the insured regarding the insured’s finances and confidentiality. In this case, the agent acts in what capacity?
A
Fiduciary
25
Dustin accidentally locked his keys in his car, so his neighbor Alana allows him to borrow her car to run an errand. Under the physical damage section of Dustin’s personal auto policy, Alana’s vehicle would be defined as
a nonowned auto
26
Workers' compensation laws cover employees in the course of employment. Some classes of workers, such as domestic servants, are exempt but may be covered by a voluntary compensation endorsement. This endorsement agrees to pay benefits
to employees not covered or exempt
27
An insured speeds through a residential neighborhood, almost striking several children. Under the insurance definition of negligence, such an insured would be held
not legally liable
28
A self-insured retention (SIR) in a personal umbrella policy functions like
a deductible
29
The insured has a named peril policy that covers hail, fire, wind, and lightning. Which one of the following events would be covered?
A roof that is damaged in an electrical storm
30
Which marine policy would an owner of goods most likely purchase to insure a single shipment of property from Chicago to Los Angeles?
Trip transit insurance
31
All of the following items are covered under Coverage A of a businessowners policy EXCEPT
computers and photocopiers
32
Four separate property coverages are provided by the homeowners policy under Section 1. Coverage A covers:
dwelling and structures attached to the dwelling
33
The duties of the Commissioner include each of the following EXCEPT:
determining rates to be used for personal automobile insurance
34
An auto is sold for salvage value following payment of a loss. Who receives the proceeds?
Insurance company
35
Rajeen has a $1 million personal umbrella policy with a self-insured retention of $10,000. The umbrella requires underlying homeowners and auto insurance limits of $300,000. Rajeen has a $500,000 loss that is excluded by his homeowners policy, but is covered by the umbrella. How much would the umbrella policy pay for this loss?
$490,000
36
All of the following workers are exempt from the requirements of the workers' compensation law in Indiana EXCEPT:
clerical workers
37
All of the following are basic ways in which underwriters assign rates EXCEPT:
Application rating
38
An insurance company issued a homeowners policy that included ambiguous language regarding how a loss was settled. The insured sued the insurance company and won. The judge stated that due to the ambiguous language in the contract, the decision must be made in favor of the insured. The judge was basing this decision on which of the following types of insurance contract?
Contract of adhesion
39
Which one of the following acts involves visible signs of forced entry or exit?
Burglary
40
Which one of the following is NOT an appurtenant structure for purposes of a homeowners policy?
Tree
41
What kind of insurance company is an insurance company owned by its policyowners (insureds)?
Mutual
42
Ralph is a conductor employed by American Cross-Country Railway System. He routinely travels from Chicago to Los Angeles, and was injured falling from a train platform while helping passengers. Which of the following provides bodily injury coverage for Ralph?
The Federal Employers’ Liability Act
43
Workers' compensation laws vary from state to state. The categories of coverage are elective or compulsory. In compulsory states, the basic methods of providing coverage are monopolistic or competitive. The monopolistic method is when the insurance
must be purchased from the state-run insurer
44
Which department within an insurance company organization is typically responsible for helping to cover the insurer's exposure to loss?
Reinsurance department
45
Which one of the following components of an insurance contract contains information about the risk, the effective date of coverage, deductible, premium amounts, coinsurance percentage, and location of the insured property?
Declarations page
46
XYZ Insurance Company gives its agents authority that was not formally expressed or communicated. The authority given to the agents by XYZ can be called
implied authority
47
What type of coverage is typically found in a professional liability policy?
Wrongful acts, errors, or omissions the insured commits, and in some cases, bodily injury
48
Part Two, employers liability insurance, of a workers' compensation insurance policy includes all of the following limits of liability EXCEPT
for all compensation paid under benefits required by workers’ compensation law
49
An insured owns an office building valued at $200,000. He carries a deductible of $1,000. The building sustains a loss of $40,000. If the insurance policy carries an 80% coinsurance clause, how much coverage must the insured carry to ensure that the loss is paid in full?
$160,000
50
Which of the following is NOT a requirement of a dwelling policy?
Required to be owner occupied
51
What is the purpose of MCS-90, the endorsement for motor carrier policies of insurance for public liability?
It provides proof that the company carries an amount of insurance required by law
52
Bill and Marge suffer the following losses as the result of a severe storm: $3,900 wind damage to their roof; $1,000 loss of income because a boarder in their house had to move; $1,250 in repair costs to prevent further loss to covered property; and $500 in medical expenses when Marge was hit by part of the falling roof. How much will their HO-3 policy pay for these losses, assuming all losses are within the applicable policy limits and ignoring any deductible that may apply?
$6,150
53
The insured has an auto policy with liability limits of 30/60/10. He negligently runs off the road and causes $70,000 damage to an apartment building. How much will the policy pay for the damage to the building?
$10,000
54
Premiums for workers' compensation are based on the amount of payroll and rates established for various occupational classifications set by the
National Council on Compensation Insurance
55
Each member company of the Indiana Property and Casualty Insurance Guaranty Association may be assessed an amount no greater than what percentage of its annual direct written premiums?
One
56
Producers are required to notify the Insurance Commissioner of any change of address within:
30 days
57
Under the CGL form, a bulldozer is defined as
mobile equipment
58
Robert and Carolyn live in a busy city and decide that the solution to not getting into a car accident is to avoid riding in or owning a car. Which of the following methods describes this philosophy?
Avoidance
59
If a licensed producer dies, the Commissioner may issue a temporary producer license to the surviving spouse for a maximum period of how many days?
180
60
Which one of the following bonds is purchased to protect an employer from the actions of dishonest employees?
Fidelity
61
Who are the 3 parties to a surety bond?
Principal, obligee, and surety
62
Which of the following statements about commercial umbrella liability insurance is NOT true?
They exclude catastrophic liability coverage for business risks
63
An insured bank has a commercial crime coverage form with all 7 coverage parts. During a particularly busy day, an employee is given false account information and electronically transfers a large sum of money to another account in another bank. The amount of this improper funds transfer is
covered under the Funds Transfer Fraud insuring agreement
64
Vandalism or malicious mischief losses to property on the residence premises are not covered if the dwelling has been vacant for
60 or more consecutive days
65
Tamika is an appointed agent for ABC Insurance Company. Her agency agreement specifically states that she is authorized to place auto insurance business with ABC. Although Tamika’s agency agreement does not say that she is also authorized to collect premiums for these policies, she believes this is part of her duties as an agent. Tamika’s belief that she is authorized to collect premiums on behalf of ABC Insurance Company is an example of what type of authority?
Implied
66
Which of the following occurrences would be included under the definition of a personal injury?
A tenant is evicted by his landlord and sues the landlord for invasion of privacy and wrongful eviction
67
The purpose of the extended reporting period in a commercial general liability policy is to provide
coverage for claims made after the policy expires
68
Damage caused by burglars is excluded under which of the Dwelling Forms?
Basic Form
69
Which of the following events is NOT considered an occurrence for insurance purposes?
Wearing out clothing
70
Payments for losses that cannot be precisely measured, such as the loss of companionship of spouse from another, are called
general damages
71
Paul's bicycle shop is covered by a businessowners policy. Pete, a customer, is injured when he slips on the wet floor. Where would Paul find coverage in his policy?
Medical expenses
72
The greatest difference between the Dwelling Basic Form (DP-1) and the Broad Form (DP-2) is that the DP-2 automatically includes coverage for
vandalism and malicious mischief (VMM)
73
Symbol 4 of the business automobile policy applies to only those autos owned by the business that are
not private passenger autos
74
If an insurer does not advise an insured of his options with regard to body parts used in the repair of a vehicles, the insurer is guilty of a:
violation of the unfair claims practices act
75
Howard borrows his neighbor's car because his car is in the body shop after his oldest son had an accident on a trip home from college. Under Howard's automobile policy, his neighbor's car is considered
a temporary substitute automobile
76
The minimum limit for which underinsured motorists coverage may be offered is:
$50,000.00
77
Which one of the following statements regarding cancelling commercial policies that have been in effect for less than 90 days is CORRECT?
Policies in effect less than 90 days may be cancelled for any reason
78
Which one of the following coverages is NOT available under the commercial package policy?
Workers’ compensation
79
Boone’s Manufacturing has several long-term contracts with customers. These contracts run for 5 years and uniformly provide that they are automatically canceled if Boone is unable to meet supply dates. Therefore, it is important for Boone to keep operating and avoid a shutdown. If Boone’s building is destroyed, it can be rebuilt in 9 months. What form of Time Element Coverage is best suited to protect Boone’s against the potential loss of income from the long-term contracts?
Extra expense coverage
80
An all-risk or open perils policy protects against
any peril except those that are specifically excluded
81
Which of the following statements regarding the Indiana Workers’ Compensation Act is NOT correct?
Since Indiana is a non-competitive state, this insurance may not be sold by a private insurer
82
Which of the following is NOT a basic way in which underwriters assign rates?
Expense rating
83
The electrical system on Ebony's 100-year-old home hasn't been upgraded since the home was built. Ebony's homeowners insurer never inspected the home before it issued the policy or asked for information about the wiring. When the outdated wiring causes a fire, the insurance company refuses to pay the claim, stating it would not have issued the policy if it had known about the outdated wiring. What legal doctrine might Ebony rely on to have the claim covered?
Estoppel
84
What is the term for an individual who occupies a position of trust when handling the financial affairs of another?
Fiduciary
85
Which of the following statements about the businessowners policy (BOP) is NOT correct?
Tenants improvements are not covered under a BOP
86
An insurance company that sells insurance only to people who meet specific membership requirements is known as what kind of insurance company?
Fraternal
87
Which one of the following determines the amount of a workers’ compensation claim?
State law
88
In order for a claim to be covered by the Indiana Property and Casualty Insurance Guaranty Association, which one of the following conditions must be met?
The property must be permanently located in Indiana
89
Of the Dwelling Forms, which one of the following provides the broadest coverage?
Special
90
The personal auto policy offers physical damage coverage. One of the coverages is comprehensive. All of the following causes of loss are specifically covered under comprehensive EXCEPT
freezing
91
A policy may be amended only with
an endorsement
92
Which of the following businesses would be eligible for a businessowners policy?
Business with revenue of $6 million or less
93
Extensions of coverage are available under the business and personal property form if the
policy indicates that 80% or higher coinsurance applies or the insured has purchased a reporting form
94
To obtain a license to sell insurance in Indiana, an individual must comply with all of the following licensing requirements EXCEPT
be at least 21 years old
95
Coverage D in homeowners insurance is for what type of loss?
Loss of use
96
John and Mary are a hardworking married couple. They own a sole proprietorship that sells farm produce. John also owns a partnership with his brother, James, in which they make custom furniture. Which of these people is an insured under John's commercial general liability (CGL) policy that applies to the produce store?
John and Mary
97
An applicant for insurance intentionally told the insurance producer she did not have any driving violations. The producer sent the application to the insurer. The insurer ordered a motor vehicle record and discovered the applicant had a driving while intoxicated conviction three months ago. The insurer terminated the policy because her statement was a
material misrepresentation
98
All of the following are characteristics of Lloyd’s Associations EXCEPT
it is an insurance company
99
Dishonesty on the part of an insured is an example of a
moral hazard
100
An insurance company takes possession of a damaged auto it has covered. When the company becomes the legal owner of the auto, it is exercising the right of
salvage
101
Which of the following HO-3 endorsements will change coverage on specifically identified personal property from named peril to open peril?
Scheduled personal property
102
Under the medical payments coverage of a personal auto policy, the insurer pays for medical expenses and funeral services incurred within how many years from the date of an accident?
3
103
All of the following statements regarding Part D- coverage for damage to your auto are correct EXCEPT
This coverage covers all personal property in the vehicle
104
The difference between Coverage E and Coverage F in the farm personal property coverage form is
insurance is scheduled under Coverage E but a blanket limit applies to Coverage F
105
While backing her car into a parking space on a neighborhood street, Melanie struck a fire hydrant with her bumper. Which coverage under Melanie's personal auto policy (PAP) will cover the damage to the bumper?
Collision
106
In describing the concept of subrogation, the insurer claims the right to
collect from a negligent third party
107
In automobile insurance, the term supplementary payments refers to payments
covering reasonable expenses incurred at the insurer’s request and other specified expenses that are not subject to the policy limit
108
Jim borrows a company van to take his son to college. As the trip takes more than 10 hours, he would like to share the drive with Julia, his wife. What endorsement should Jim add to the company commercial auto policy to make sure he has the proper coverage?
Individual named insured
109
What is the name of the service for producers that provides Web-based license applications, license renewals, letters or certification, name, and address changes?
SIRCON
110
An insurance company requires an insured to attend and testify during a 5-day trial. As a result, the insured is not paid his standard $4,000 per week salary. What total amount will the supplementary payments section of the commercial general liability coverage form reimburse the insured for lost earnings?
$1,250
111
Of the following occupations, which would NOT use an errors and omissions policy to provide coverage for professional losses?
Doctor
112
Jeffrey bought a car yesterday for his daughter to drive to school and her job. Under Jeffrey’s automobile policy, this car is considered
an owned automobile
113
Part A of the personal auto policy would apply in which of the following situations?
Insured's 13-year-old son who, while playing with the car, starts it and lets it roll into the street, damaging other parked cars
114
A person who stands in a special relationship of trust to another person is
a fiduciary
115
Which of the following is an example of adverse selection?
An 18-year-old male buys a sports car, and the bank requires automobile insurance.
116
An insured purchases a commercial property policy with a Causes of Loss—Special Form that covers risks of direct physical loss. The policy has a $5,000 deductible. An earthquake causes $150,000 in damages to the property. What amount will the policy pay?
$0
117
The insured is looking for the amount of coverage in a property and casualty policy. This information would be found in the
declarations
118
Comprehensive coverage pays for all of the following damages EXCEPT
overturning of the auto
119
How does the dwelling policy provide theft coverage?
It must be added by endorsement
120
Which of the following coverages is NOT included in a boatowners/watercraft package policy?
Longshore and harbor workers’ compensation insurance
121
Joan and Steven have applied for automobile insurance with ABC Auto Insurers. The ABC agent asked Joan and Steven if their resident 18-year-old son, Henry, has had any moving traffic violations in the past 2 years. Both answer no. The fact is that Henry had 4 speeding tickets, but never told his parents. What legal concept does this scenario describe?
Representation
122
When an auto policy has been in effect for more than 60 days, which of the following reasons may be used for an insurer to cancel the policy?
The insured's driver's license is suspended
123
Which of the following terms is used to describe an empty building that is not being used?
Vacant
124
Which of the following terms describes an insured's oral or written statement that becomes part of an insurance contract and can void a policy if they are breached?
Warranty
125
If a policy providing coverage for residential property does not insure the peril of flood, the insured must be notified of their possible eligibility for coverage through
The National Flood Insurance Program
126
The Indiana Property and Casualty Insurance Guaranty Association applies all of the following types of insurance EXCEPT
life insurance
127
Faulty wiring causes a fire that destroys a building. The faulty wiring is considered to be
a hazard
128
Which of the following statements regarding flood coverage is TRUE?
The amount of the deductible for building coverage varies depending on the type of coverage, flood program, and amount of insurance on the building
129
Which one of the following situations would most likely be covered by a commercial general liability (CGL) policy?
A surfboard falls off a shelf and injures a shopper
130
It is the duty of the Indiana Insurance Commissioner and the Department of Insurance to examine all insurance companies licensed in Indiana:
every five years, or more frequently if deemed necessary
131
In a claims-made liability policy, the specific date shown in the declarations indicating the first date events are covered by the policy is called its
retroactive date
132
A parking valet at a hotel uses a guest's car to do a personal errand and damages the car in a collision. The guest has a personal auto policy (PAP). The insurance company will pay the claim and
subrogate against the parking valet
133
Which one of the following individuals would NOT be entitled to receive workers’ compensation?
Nathan, while intoxicated at work, fell and broke his collarbone
134
Personal auto liability insurance provides coverage in all of the following situations EXCEPT
when the insured uses the auto as a taxi
135
Which of the following statements about the Dwelling Basic Form (DP-1) is CORRECT?
The DP-1 provides coverage for appurtenant structures
136
Controlled business refers to insurance:
on a producer's own property
137
Emily, an insurance producer, is sued by a client who claims Emily failed to recommend appropriate insurance coverages for the client's business. What type of insurance coverage would defend Emily against this suit?
Errors and omissions coverage
138
Under the HO-6, the loss assessment additional coverage would apply to assessments made by
a corporation of property owners and a homeowners association
139
Mary and Sue are customers in Paul's bicycle shop. Mary and Sue are both injured when a stack of bicycles fall on them because they were trying to get a bike off the top shelf. Which of the following statements best describes how Paul's standard businessowners policy would provide coverage in regards to Mary and Sue's injuries?
Mary and Sue would receive payments for up to the policy limits under the medical expenses coverage, whether or not Paul is found to be legally liable
140
A warranty is a statement made by the applicant regarding the risk to be insured. Which of the following statements is NOT true about warranties?
A warranty must refer to a material fact
140
All of the following coverages are typically included in the supplementary payments of a liability policy EXCEPT
property damages the insured is found legally liable for
141
Bob has a workers' compensation policy with the ABC Insurance Company. One of his employees is injured in the course of employment. All of the following are duties of Bob EXCEPT
paying for the medical bill of the injured employee
141
Which of the following is a contract bond?
Performance bond
142
Which of the following is NOT a source of information important to an underwriter?
Employer reference
143
All of the following vehicles are eligible for coverage under the PAP EXCEPT
a pickup with a gross vehicle weight of 15,000 pounds
143
A dwelling policy can be used to insure all of the following EXCEPT
an apartment building with 6 units
143
If an agent is unable to place business with an admitted insurer or a company licensed to do business in the state, where would he look to place this type of risk?
Surplus lines market
144
Which of the following is NOT an eligibility requirement for a homeowners policy?
Named insured lives on a farm
144
In an insurance transaction, who does a licensed agent legally represent?
Insurer
144
To renew their license, producers are required to complete at least how many hours of continuing education?
24
145
An insured has an unendorsed $50,000 special form (DP-3) dwelling policy. The insured's dog bites a child, and the parents sue the insured for $500 for the child's medical bills, $1,000 for rabies shots, and $5,000 for pain and suffering. How much will the policy pay?
$0
145
A person is injured after slipping on a wet floor in a grocery store. Insurance against which of the following exposures would provide coverage?
Premises
145
Why do insurance policies usually define who is considered an insured under the policy?
To specify who is covered in addition to the named insured
145
In order to renew an insurance license, a producer needs 24 hours of continuing education every
2 years
146
Richard and his wife own 2 family cars. In addition, Richard is given a company car to make sales calls. He occasionally uses the company car for personal use and is concerned that he may not have sufficient company coverage. Which of the following is the best advice his agent can give him?
Richard can add the extended nonowned coverage for named individual endorsement to his policy
146
Which one of the following is NOT a benefit of workers’ compensation insurance?
Pain and suffering
146
Which one of the following principles is used to describe liability for the actions of another person?
Vicarious liability
147
In the Dwelling Forms, damage from vandalism is not covered if the building has been vacant for more than
60 consecutive days
147
In Indiana, if uninsured motorists coverage is written, the minimum required coverage limit per accident is
$50,000
148
Commercial property insurance covers outdoor signs attached to the building and has a per sign payout limit. Which form would a business purchase if it wanted to less restriction on coverage?
Sign coverage form
148
If the shrubs in front of a house burn when the house catches fire, how much is the insured entitled to recover for the shrubs under his HO-3?
5% of the limit on Coverage A with a maximum of $500 for any 1 shrub
149
When a loss occurs, the Causes of Loss—Special Form requires the insurance company to
pay for all losses not specifically excluded or limited by the policy
150
John and Gina met with their insurance agent who asked a series of questions that identified what they owned, what coverage they needed, how much money they wanted to spend on this coverage, and all possible sources of paying for this coverage. What analysis is the insurance agent completing?
Needs
150
The replacement cost of Arjun’s home is $200,000. He carries $100,000 of insurance on the home with a $1,000 deductible. The policy has an 80% coinsurance requirement. If a $40,000 covered loss occurs, how much would Arjun’s insurance company pay for the loss?
$24,000
150
Under a Business Income Coverage form, business income is
net income plus continuing expenses, including payroll
150
How long does coverage apply for the civil authority additional coverage?
72 hours after the action and for 4 consecutive weeks
151
If the insured hits a deer while driving his own vehicle, which part of the personal auto policy will pay to repair the vehicle?
Other than Collision
151
What is the maximum daily amount paid under the CGL's Supplementary Payments provision for the insured's loss of earnings?
$250
151
Which one of the following requires that insurance applicants be advised that a consumer report may be requested on them and the scope of any investigation resulting from the application?
Fair Credit Reporting Act
152
All of the following are considered bailees EXCEPT
a barber shop
153
What part of the personal auto policy covers losses caused by malicious mischief, vandalism, hail, or floods?
Other than Collision
153
The Terrorism Risk Insurance Program Reauthorization Act of 2019 addresses only a defined category of terrorism losses. To come within the new federal program, an act of terrorism must have all the following characteristics EXCEPT
it must produce property and casualty insurance losses in excess of $500 million
154
Bailee's customers insurance is purchased by businesses that
have customer's property in their possession
154
Which of the following losses would be covered under the Broad Form dwelling policy (DP-2)?
Janae’s dishwasher malfunctions and pours water all over her brand-new hardwood floors
154
The federal law that requires regulated institutions to establish safeguards to protect consumers' financial information is
the Gramm-Leach Bliley Act
154
Stephanie is an agent in a local insurance agency. While visiting a client in his home, Stephanie accidentally leaves a coffee cup on an antique coffee table, damaging the wood surface. She asks her sales manager whether she has coverage under her homeowners policy. Which of the following is the best advice given to Stephanie?
The business pursuits endorsement should be added to your homeowners policy to protect you if you personally damage property while conducting business
155
Bobby, age 16, borrows his parents' car without their permission and gets into an accident. Which of the following statements about coverage under the parents' personal auto policy is CORRECT?
Bobby is covered by his parents' policy because he is a family member
156
Which of the following amounts is the maximum that an insurer will pay in case of a loss?
Limit of liability
156
Occupational diseases are covered under workers' compensation. All of the following are occupational diseases EXCEPT
chicken pox that is contracted at work
157
An insured has a $70,000 dwelling policy (DP-1 basic) with a $500 deductible. While the insured is on vacation, burglars enter the house and steal several items. The total loss is estimated to be $5,000. How much of that loss will be paid under the policy?
$0
157
When a residential property policy has been in effect for more than 60 days, the policy may be cancelled by the insurer for any of the following reasons EXCEPT:
nonpayment of property taxes for the past year
157
An errors and omissions policy could be issued to cover the following occupations EXCEPT
veterinarians
157
Assume that a toy store has a fairly stable inventory except in November and December, when its inventory triples. What is the best way to insure the increase in the amount of coverage needed?
Peak season endorsement
158
Which one of the following is an example of a peril?
Earthquake
159
A house has a replacement cost of $150,000. To make sure that the replacement cost provision of a homeowners policy applies, the minimum policy amount for the dwelling should be
$120,000
159
The Indiana Insurance Guaranty Association will pay covered claims when a member insurer becomes insolvent, but the association's obligation for any individual covered claim is subject to a statutory limitation of:
$100,000.00
159
Liability policies provide certain supplementary payments that are
paid in addition to the policy's regular limit of liability
159
Section II of a homeowners policy covers all of the following EXCEPT
bodily injury to one of the insured's resident family members
159
Who would use a HO-6 homeowners form?
Owner of a condominium
160
Credit card fraud is covered under a homeowners policy to a maximum of what amount?
$500
161
Under the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) the federal government's share of compensation that exceeds the insurer's TRIPRA deductible is
80%
161
Which of the following is NOT one of the requirements for a building to be eligible for coverage under a flood insurance policy?
Building is owner-occupied
161
The Building and Personal Property Coverage Form can be used to insure each of the following types of property EXCEPT
money
162
Ted's TV shop employees are installing a TV at Mandy's home. While doing so, they drop the TV, causing damage to the TV in the amount of $250. They also damage the floor and wall in the amount of $700. What will Ted's BOP policy pay, assuming his limits are adequate?
$700
163
A commercial property policy with the Causes of Loss—Basic Form covers all of the following perils EXCEPT
earthquake
163
Sandy and Stewart had a fire loss, and the insurance company reimbursed them for their damaged personal property. They believed that they did not get enough for this property because the settlement was based on actual cash value. Which endorsement would have provided a better loss settlement?
Personal property replacement cost endorsement
163
A flood insurance policy issued by the NFIP would NOT cover
personal property in a basement
164
After business hours, someone breaks into the insured's lot behind his car dealership and steals a customer's auto. Which of the following coverages would apply to this loss?
Garagekeepers coverage in the garage coverage form
165
Mary was involved in an accident with a hit-and-run driver. The car was damaged. Mary must comply with all of the following duties EXCEPT
following the hit-and-run driver to get a valid identification
165
Helene owns an exclusive dress shop catering to wealthy clients. Helene observes a shopper walking out of the store with a dress that had not been paid for. She stops the customer and calls the police. The customer claims that she was only taking the dress out to the sidewalk to show her husband. The customer sues Helene for personal injury. Helene's businessowners policy will
defend Helene and pay any judgments against her
166
Fire would be an example of a
peril
166
All of the following vehicles can be insured under an unendorsed personal auto policy EXCEPT
motorcycles
167
In legal terms, voluntary relinquishment of a known right is called a
waiver
167
All of the following are optional property coverages under the businessowners policy EXCEPT
personal property off premises
167
Premium credits for all of the following will lower the insurance premiums for the owner of a mobile home EXCEPT:
reducing Coverage C limit to 40% of Coverage A
167
Which policy provides coverage for professional liability?
Errors and omissions policy
168
The garage coverage form is designed specifically for all of the following EXCEPT
rental car companies
169
Which of the following statements is TRUE regarding the termination provision?
The insurer must provide written notice to the insured for policy cancellation or nonrenewal
169
Adam’s Appliances sustains a fire loss and has the following losses: damage to the building is $15,000, damage to contents is $7,000, debris removal is $5,000, and damage to valuable papers and records is $15,000. What will his businessowners policy pay, assuming his limits are adequate?
$37,000
169
The property coverage in the unendorsed Businessowners policy is written on
an open perils basis
170
The personal auto policy coverage applies to losses, accidents, or occurrences that take place during the policy period in all the following locations EXCEPT
Phillipsburg, St. Martin
170
Violation of a cease and desist order issued by the Commissioner may result in suspension of a person's license or certificate of authority and a civil penalty of:
up to $25,000 per act or violation
170
The insurer retains certain rights under the conditions section of a workers' compensation policy. Which of the following is one of those conditions?
The insurer retains the right to inspect the insured's workplace for insurability at any time
170
Which one of the following exposures to loss is NOT covered by the equipment breakdown protection coverage form?
Fire or combustion explosion
170
The liability coverage in the Business Auto Coverage Form covers all of the following EXCEPT
damage to the covered auto
171
Which of the following bonds guarantees that bills for labor and materials will be paid to the contractor as they are due?
Payment
171
Ashley is hit by a car while riding her bike through her neighborhood. Which of the following damages arising out of this accident would be classified as general damages?
Pain and suffering
171
What is the primary purpose of workers’ compensation?
Provide compensation to employees for injuries arising out of their employment
171
Barbara is demonstrating a floor model of her company's product in its showroom when something goes wrong with the demonstration and the customer is injured. This is an example of what type of loss?
Premises liability
172
License and permit bonds are required by government entities, including states, cities, and towns, from individuals requesting permission or license to take certain actions that may affect the public. What do these bonds do?
They guarantee that the principal will perform the described activity in conformance with the specifications, terms, and codes governing such activities
172
Which one of the following losses would be covered under the Inside the Premises—Robbery or Safe Burglary of Other Property insuring agreement in the commercial crime policy?
The safe at a furniture store is taken after the store is burglarized
172
How would a loss be adjusted under a homeowners policy with an insurance-to-value clause if a homeowner failed to carry coverage of at least 80% of the replacement cost of the home?
Payment of the actual cash value or a proportional share of the loss, whichever is greater
172
Which of the following insuring agreements of the commercial crime coverage form would best protect an insured from losses caused by an employee's deceit?
Employee theft
173
Which of the following is NOT an element of an insurable risk?
The loss must be catastrophic
174
Insurance producers receive a license to do business in Indiana. What does an insurance company receive?
A certificate of authority
174
The list of perils covered under a policy is found in which part of the policy?
Insuring agreement
174
If a dispute arises over whether an insured is entitled to uninsured motorists coverage, what process is used to settle the dispute?
Arbitration
174
Dennis purchased a small manufacturing firm and wants to purchase coverage for the premises-operations and products-completed operations exposures. Which of the following types of insurance should he purchase?
Commercial general liability
175
The bailee policy pays
the bailor
176
Frank's house has a replacement cost of $250,000. His HO-3 policy has a Coverage A limit of $180,000 and a $500 deductible. A fire causes a loss of $10,000. What is the most Frank can collect for his loss?
$8,500
176
When an employer has employees use their own autos in connection with the employer's business, the employer should purchase
nonowned auto liability
176
All of the following statements about the notice to applicant in the Fair Credit Reporting Act are true EXCEPT
This notice must be given to the consumer no later than ten days after a report is requested
177
An auto policy would provide coverage for an auto driven in all of the following places EXCEPT
Mexico City, Mexico
177
Ann and her agent meet to discuss automobile insurance. The agent completes an application for coverage, takes Ann's check for $200, and mails the application to the insurance company. Two weeks later, Ann receives the policy in the mail. When did the consideration take place?
When Ann wrote the premium check
178
The Special Form (DP-3) covers the dwelling and other structures for
open perils
178
How much will the personal auto policy pay for a rental car if the insured vehicle is stolen?
$30 per day, up to $900 maximum
178
The nationwide marine definition provides insurance underwriters with
definitions for which type of property were eligible for inland marine insurance coverage
179
Cecil sells his car and buys another one to replace it. How does the liability coverage in his personal auto policy apply to the replacement vehicle?
It is automatically covered. However, he must notify the insurer within 14 days after becoming the owner
179
Physical damage losses under the personal auto policy are reimbursed on what basis?
Actual cash value or cost to repair or replace, whichever is less
179
In insurance, a waiver is best considered as
the voluntary surrender of a known right
180
When a commercial policy has been in effect for less than 90 days, an insurer may cancel for any reason by giving which of the following advance notices of cancellation?
10 days for nonpayment of premium
180
The furniture Harold purchased 10 years ago was destroyed in a fire. The furniture cost $9,000 when new and has depreciated by $5,000. It would cost $12,000 to replace this furniture today. What is the actual cash value of Harold's destroyed furniture?
$7,000
181
Which one of the following terms indicates that an insurance contract contains the enforceable promises of only one party?
Unilateral
181
All of the following factors must be involved to establish negligence EXCEPT
approximate cause
182
What is one of the major differences between the application of commercial blanket bond's policy limit versus a blanket position bond's policy limit?
A commercial blanket bond's policy limit applies separately to each loss. A blanket position bond's policy limit applies separately to each employee involved in a loss
182
Under reinsurance agreements with the Insurance Commissioner, the Mine Subsidence Insurance Fund will reimburse insurers for all amounts paid to policyholders for mine subsidence insurance claims subject to a maximum limit of:
$500,000 per structure insured
183
Aircraft hull insurance will provide coverage for which of the following?
Damage to or loss of the aircraft hull, engines, electronic navigation, and communication equipment
183
Paul purchases a small bicycle shop and wants to buy insurance to cover his business exposures. Which of the following contracts would provide Paul with the best protection?
Businessowners policy
183
The liberalization provision will do which of the following?
Automatically broaden coverage without additional premium if there is a revision to the policy
183
Guides to insurance companies’ financial integrity and claims-paying ability are published regularly by rating services. All of the following are rating services EXCEPT
Lloyd's of London
184
The Commissioner must conduct an examination of insurance companies doing business in the state once every how many years?
Five
184
Which one of the following is NOT an element of a valid contract?
Intent
184
Which business auto coverage symbol allows coverage of all vehicles, including owned, nonowned, and hired autos?
Symbol 1
185
Which of the following policy provisions restricts certain risks from coverage?
Exclusions
185
Knowingly lying on an application to obtain coverage would be an example of
fraud
186
Cathy is going to open up her own hair salon. She wants to be certain her policy will provide business liability coverage. Cathy may open her salon in any of the following places EXCEPT
Seville, Spain
186
Which of the following is NOT one of the requirements for a loss to be paid under the uninsured motorists coverage of the personal auto policy?
Loss involves property damage to insured's auto
186
All of the following items are excluded from coverage under a Building and Personal Property Coverage Form EXCEPT
outdoor furniture
186
The risk that involves the chance of both loss and gain is
speculative risk
187
Which one of the following statements pertaining to risk is NOT correct?
A stock market venture is an example of a pure risk
188
For a loss to be covered under the TRIA, the cause of the loss must
be certified as an act of terrorism
188
Items of property that are difficult to value after a loss has occurred, such as antique furniture or fine arts, may be insured on
an agreed value basis
188
Liability insurance covers
third-party losses
189
Jane insures her car with ABC Insurers. Which of the following individuals best describes a family member on Jane's policy?
Maggie, her older sister, who lives with Jane
189
The type of authority that is not written in an agency contract, but is assumed to be granted to an agent in accordance with general business practices, is called
implied authority
190
All of the following are covered as business personal property EXCEPT
accounts receivable
190
Automobile comprehensive coverage insures all of the following perils EXCEPT
collision
190
Jordan is attending the NBA playoffs and has front row seats. One of the players attempts to make a basket and the ball bounces off the court, hitting Jordan in the face. The defense that will most probably used is
assumption of risk
190
Agency is a relationship in which one person is authorized to represent and act for another person, or for a corporation. The person authorized to act on behalf of the other is called an
Agent
191
All of the following properties can be insured under an unendorsed homeowners policy EXCEPT
a mobile home that is owner-occupied
192
The businessowners policy will pay reasonable expenses for
1 year from date of accident
192
Which of the following statements regarding bond agreements is CORRECT?
A surety bond serves as a guarantee of performance
192
The powers and duties of the Insurance Commissioner in Indiana consist of all of the following EXCEPT:
making new insurance statutes
192
Which of the following statements about dwelling policies is CORRECT?
They may be used to insure rental homes
193
The scheduled personal property endorsement provides a separate schedule of insurance for all of the following categories EXCEPT
snowboarding equipment
193
An insurance company owned by its policyholders, who receive a return of unused premiums in the form of policy dividends, is a
mutual company
193
Which of the following losses could be covered under a crime insurance policy?
Theft committed by a hotel maid
193
The procedure for resolving a disagreement between an insured and an insurance company about a loss is described in which of the following parts of an insurance policy?
Conditions
194
Which one of the following homeowners forms is used to cover tenants or renters?
HO-4
194
All of the following are benefits specified by workers’ compensation laws EXCEPT
retirement plan contributions
194
Bob is employed as the ship's navigator on an American flagged ship in Duluth, Minnesota, and is injured as a result of the owner's negligence. Under which law would Bob find coverage?
The Jones Act
194
The garage policy covers all of the following EXCEPT
insured's medical bills
195
All of the following additional coverages are included in homeowners forms EXCEPT
pollution removal
195
Steve meets with his agent to apply for an automobile insurance policy on his 2 personal cars. In reviewing the policy, Steve finds he is not willing to accept the duties listed in the conditions section. He signs the application but adds a note deleting the duties to the insurer. Is this acceptable to the company?
No—a written endorsement by the insurer is the only way to change the policy.
195
Kelly is a sophomore in high school and just got her driver’s license. Rand is a freshman. They verbally agree that Rand will pay her two dollars a day for her to drive him to and from school. Which statement below could cause this to NOT be a valid contract?
A valid contract must be between competent parties.
195
All of the following are considered additional coverages in the Businessowners Policy EXCEPT
mechanical breakdown
196
While on a tour of a toy manufacturer's warehouse, a child severely cuts her finger. The toy manufacturer's insurer will cover the claim if the manufacturer carried which one of the following types of insurance?
Commercial general liability
197
All of the following are excluded under collision or Other than Collision coverages EXCEPT
flood damage
197
Adding the personal injury endorsement to the homeowners policy protects the insured against all of the following EXCEPT
contractual liability
197
A business loses money because it was forced to close after a fire on the premises. This loss is described as
an indirect loss
197
An insured's claims-made CGL policy just expired after having been in effect for 1 year. The policy included a supplemental extended reporting period endorsement to cover claims filed after the end of the 60-day basic extended reporting period. When a $5,000 claim is filed 3 years later for a loss that occurred during the 60-day basic extended reporting period, how much will the policy pay?
$0
198
When a small restaurant is damaged by a tornado, the owners are forced to close for 1 month while the property is repaired. The building suffers damages of $20,000. The owners estimate they will lose $50,000 in business receipts. To keep their staff, the owners must continue to pay salaries totaling $5,000. Ignoring any deductible, how much of the direct loss will the businessowners policy (BOP) pay?
$20,000
198
The insured’s car collides with a deer. The damage to the insured’s car arising out of this accident would be covered under the personal auto policy’s
comprehensive/other than collision coverage
198
Which of the following information is found on the declarations page of a policy?
Address of premises insured under the policy
198
The garage coverage form is designed to cover vehicle dealers, including dealers that have repair facilities on the premises. The form includes all of the following EXCEPT
personal damage
198
A personal auto policy provides coverage for all for the following drivers of an insured car EXCEPT
a thief who steals the car
198
Janet, an employee of Carla’s Computer Repair, is injured while playing baseball for the company-sponsored softball team. Under which policy would Janet find coverage for her injuries?
Health insurance
199
Bob's Trucking Company contracts with boat companies to haul its boats and boat parts. The trailers are left at an interchange for pickup. What physical damage coverage is important for Bob to have to cover this exposure?
Trailer interchange coverage
199
Which one of the following is NOT an exclusion found in Section I of the homeowners policies?
Failure of the insured to care for the property before the loss
199
Harold owns a sports bar. As a promotion, he offers customers tastings of new German beers. One customer, after several samples, drives off and injures another person. The injured party sues the driver and Harold. Harold's commercial general liability policy will
not cover the loss because of the liquor liability exclusion
199
When the insurer and the insured cannot agree on the value of a loss, the matter is submitted to disinterested parties for resolution. Under a standard appraisal clause, how many parties are involved in determining the value of the loss?
3
199
The attempt to restore the policyholder to the same financial condition enjoyed before a loss is called
indemnification
200
What type of bond is used by a contractor to guarantee that work will be completed to specifications?
Performance
200
A contractor built a home for a family. Four months after the family moved into the home, the kitchen sink fell on a family member's foot and broke it. This is an example of what type of loss?
Completed operations
200
Common exclusions with a liability policy would typically include all of the following EXCEPT
injuries or damages caused unintentionally by the insured
200
The federal government is not obligated under the TRIA to make payments for any portion of losses that exceed how much annually?
$100 billion
201
Matt has just been nonrenewed by his auto insurance company because he had 3 speeding tickets and 2 at-fault accidents in the last 9 months. Matt will most likely need to obtain insurance from
an assigned risk plan
202
In homeowners policies, what does Coverage A insure?
Dwelling
202
Which of the following is the most accurate statement regarding risk?
Risk is the uncertainty of a loss occurring
202
What is the minimum Bodily Injury per accident limit an automobile insurance policy may be issued for in Indiana?
$50,000
202
An insured has a CGL policy and hires a contractor to complete some work on a building. Which of the following is the best way to protect the insured from having to personally pay for damages as a result of the contractor's operations?
Purchase an owners and contractors protective (OCP) liability policy.
203
A DP-2 policy would cover losses from all of the following perils EXCEPT
infestation of insects
203
Which one of the following dwellings would a HO-3—Homeowners Form cover?
Single-family home
203
A difference in conditions contract is
a policy issued to cover what is normally excluded in other property insurance contracts
204
Advising a policyholder that a commercial insurance policy provides benefits that it does not is an example of:
false advertising
204
Two personal auto policies cover 1 vehicle. Company A's limit of liability is $100,000 and Company B's limit of liability is $300,000. How much will Company A pay for a liability loss in the event of an accident when the damages total $100,000?
$25,000
205
Which of the following unendorsed policies provides open perils coverage on Coverage C—Personal Property?
HO-5
205
Bridgepoint Accounting Services is a limited liability company. Who are the insureds?
The named insured, managers, and the named insured’s employees
205
An insurance policy contains the following statement: “We will pay damages an insured becomes legally liable to pay because of bodily injury to others.” This statement is an example of
an insuring agreement
206
Other additional coverages in the businessowners policy include all of the following EXCEPT:
Trees and detached signs
206
In a flood policy issued by the NFIP, all of the following would be considered a flood EXCEPT
mudslide
207
Jonathan and Mary have 2 sons. Steve lives at home and the other son, Stan, lives in an apartment across town. Jonathan wants to buy a car for Stan so he can get a job after his college classes. Jonathan titles the car in both his name and Stan's name and wants to add the car to his automobile policy. Which endorsement will provide this coverage?
Joint ownership coverage
207
Which of the following is an example of property that might be insured on a valued basis?
Rare painting
207
Luis just purchased a new home. As a homeowner, there is a possibility that visitors to his home may be injured on the premises and sue Luis to recover damages for medical expenses. The uncertainty that Luis will be held legally responsible for accidents that occur at his home is an example of
a risk
208
When an insurer wishes to cancel a commercial policy for a reason other than nonpayment or fraud, what is the minimum number of days' advance notice that must be given to the policyholder?
45
208
Tammy was struck by a hit-and-run driver and suffered injuries to her neck. Which part of her personal auto policy, if any, will cover this loss?
Her uninsured motorists coverage pays her medical bills
209
Both the homeowners policy and the personal auto policy include medical payments coverage. What is the key difference between these coverages?
Medical payments coverage in the homeowners policy does not apply to expenses incurred by the insured and family members; the personal auto policy does
210
Tim purchased an auto policy for his new car. There are no other insureds listed on the declarations. Tim is considered the
named insured
210
At the national level, the federal government provides all of the following types of insurance EXCEPT
unemployment insurance
210
All of the following losses or damages would be covered under the commercial property Causes of Loss—Broad Form EXCEPT
earth movement
210
When calculating premiums for a workers’ compensation policy, the insurer will multiply the job classification rate by
the number of $100 payroll units paid to employees in each job classification
211
Which one of the following is NOT a benefit provided under a workers compensation policy?
Elective surgery
211
For an insurance contract to be legally binding, both parties to the contract must be considered competent. Which of the following would NOT be used to determine competency?
Individual is over age 80
211
The insured has an accounts receivable coverage form added to the commercial inland marine coverage form. When a fire destroys the insured's records, coverage is provided for all of the following EXCEPT
bad debts
211
Which one of the following is part of the formula for calculating the actual cash value of a dwelling?
Replacement cost
211
Which term correctly describes an insurance company that has been organized outside the United States or its possessions?
Alien
212
Which of the following items may be covered under Coverage C—Personal Property of a homeowners policy?
Personal property of the insured located anywhere in the world
212
The property coverage in the businessowners policy would cover losses due to all of the following perils EXCEPT
off-site power failure
212
Which one of the following statements regarding auto policies issued to disabled persons in Indiana is CORRECT?
The policy issued to a disabled person must be no less favorable than those issued to nondisabled persons
212
Which of the following individuals is NOT an insured under Section I of the homeowners policies?
Person hired by the insured to perform work on the insured premises
213
Ace Insurance Company and Acme Insurance Company each insure the same building for the same amount. Both policies contain a pro rata other insurance clause. In the event of a partial loss, how much of the loss will Acme pay?
50%—each insurer will pay half the amount of the loss.
214
The insuring agreement section of a policy describes
perils insured against
214
In most cases, an injured employee receives payments under workers’ compensation insurance from whom?
Insurance company
214
All of the following could create an employers' liability loss EXCEPT
personal injury
215
Joan is a music teacher who teaches piano to 20 students who come to her home for weekly lessons. Which endorsement does Joan need to add to her homeowners policy to make sure she is covered if a student is injured on her property?
Permitted incidental occupancy
216
Both parties rely on statements made to each other when writing a contract. This contract is known as a
contract of utmost good faith
217
Coverage C in the Commercial General Liability policy covers
Medical payments
217
Mary's purse was stolen from her as she walked down the sidewalk. She has an HO-2 policy. Will Mary's policy cover this loss subject to the deductible?
Yes—theft is a covered peril under all of the homeowners forms.
217
Which of the following statements about umbrella policies is NOT correct?
They are written only for commercial risks
217
Actual loss of business income payments by an insurer may include the following EXCEPT
amount required to repair property damage that caused suspension of business
218
The insured is in a hurry to get to work, fails to halt at a stop sign, speeds through an intersection, and strikes another vehicle. That vehicle hits another car that then jumps a curb and injures a pedestrian. What is the proximate cause of the accident?
Failing to stop at a stop sign
218
The purpose of employers' liability insurance is to provide
liability protection where workers’ compensation does not apply
218
An insured has a $60,000 Special Form (DP-3). When a covered loss in the amount of $10,000 damages the attached garage, how much of that amount is paid under the Coverage B—Other Structures?
$0
218
An insured buys a business income policy with a maximum policy limit of $100,000 and a 25% monthly limit of indemnity. How much can the insured collect if the lost income is $40,000 in the 1st month and $10,000 in the 2nd month?
219
An insured owns a small neighborhood grocery store. During a storm, a piece of the roof falls on the sidewalk. Several people are in the store at the time, but no one is injured. Under the insurance definition of negligence, such an insured would be held
not legally liable
219
The limit of liability under the dwelling under construction endorsement is provisional. If a loss occurs, the amount paid will be based on the
value of the partially completed home
220
Under an HO-2 policy with a coverage limit of $50,000 on the dwelling, what is the amount of personal property coverage that would be available?
$25,000
221
ABC Home Improvement Stores is a nationwide retailer with multiple stores and warehouses located across the country. The value of the property in its stores fluctuates frequently, and merchandise is frequently moved between warehouses. ABC Home Improvement Stores would benefit by adding which of the following endorsements to its commercial property coverage?
Value reporting form
221
Abby's beauty parlor suffers a loss caused by lightning. Her parlor sustains $10,000 of building damage and $5,000 personal property loss. Her fire department also charged her $1,000. To meet current building codes, her cost to repair her building was an additional $2,000. What will her BOP pay, assuming that her limits are adequate?
$18,000
221
An insured has a homeowners policy for $60,000 on the dwelling. Lightning completely destroys the home, which has a replacement cost of $40,000. How much will the insured receive?
$40,000
221
If John's father transfers ownership of a house to John, which one of the following statements regarding insurance on the house is CORRECT?
John can buy insurance because he has an insurable interest
221
Which of the following information is NOT found on the declarations page of a policy?
Meanings of certain terms used in the policy
222
Which of the following losses would be excluded under the liability section of the personal auto policy?
Ricardo loses control of his car while backing out of his driveway and strikes the fence surrounding his home
222
Which of the following methods of canceling a policy is used when a policyholder cancels her policy before it reaches its natural expiration?
Short-rate
222
The insured has a homeowners policy (HO-3) with a $100,000 liability limit and a $1 million personal umbrella policy with a self-insured retention of $1,000. When a child is seriously injured on the insured's property, a jury awards the plaintiff $2 million. Given only these facts, for what amount is the insured personally responsible?
$900,000
222
While driving down the street, an insured swerves to avoid a pedestrian, goes over a curb, and damages a neighbor's fence. Which of the following will pay for the repairs to the fence?
The driver's automobile policy under the property damage liability provisions
222
Which of the following is NOT a peril covered under the personal property coverage in the HO-3—Special Form?
Water damage
223
Uncertainty regarding financial loss is also known as
risk
224
Trees, shrubs, and other plants are covered as additional coverages for Coverages A–The coverage is limited to certain perils, however. All of the following perils are covered when causing damage to a tree or shrub EXCEPT
wind
224
Nonresidents may be licensed to sell insurance in Indiana under which one of the following circumstances?
They hold a valid license in their state of residence
224
What is the maximum amount that the businessowners policy will pay for property damage to an outdoor sign NOT attached to a building?
$2,500
224
Which of the following statements regarding cancellation of property insurance in Indiana is NOT correct?
The insurer is not required to notify independent agents when a cancellation notice is sent to the policyholder
224
A contract in which one insurer cedes all or part of a risk to another insurer is known as
reinsurance
225
Mrs. Hanks leaves her company-owned truck at a garage for some routine maintenance work. While the mechanic is backing Mrs. Hanks' truck out of the service bay, the truck hits and injures someone. Who of the following would be considered an insured under Mrs. Hanks' business auto coverage form?
Mrs. Hanks
225
When a policy is written on a reporting basis, a premium is paid at the beginning of the policy period that is based on an estimate of what the final premium will be. This is called
a deposit premium
225
An insured owns a pet lion that is caged on the homeowner's property. The owner takes great care to warn neighbors of the possible danger by posting signs, fencing the yard, and locking the cage at all times. When a neighbor's child manages to open the cage and is bitten, what type of liability would apply to the lion owner?
Absolute liability
225
Max and Sam are neighbors who get into an argument over the placement of their common property line. The argument becomes a fight in which Sam's nose is broken. Sam sues Max for his medical expenses. How will Max's homeowners policy respond to this loss?
The insurer will deny the claim because of the intentional injury exclusion
226
Jennifer and David signed a homeowners insurance application for coverage on their home. They did not divulge that last year their garage burned down after their 16-year-old son left a cigarette burning. The agent sent in the application and a policy was issued. When another fire occurred 2 months after the policy was issued, the company voided the policy because the agent would not have sent in the application if he had known of the prior loss. Which contract principle does this situation describe?
Utmost good faith
227
What is meant by aggregate limit of liability?
The maximum amount the policy will pay per policy period, regardless of the number of claims
227
The Insurance Commissioner is:
appointed by the Governor
227
The obligation of the Property and Casualty Guaranty Association to pay covered claims applies only to the portion that is less than
$300,000
227
Insurance companies that are nonadmitted insurers fall into 2 categories. They are either an authorized nonadmitted carrier or an unauthorized nonadmitted insurer. What type of license would a person need to sell for an authorized nonadmitted insurer?
A surplus lines license
228
Certain transactions that may be legally conducted by nonadmitted insurers without requiring a certificate of authority are known as
surplus lines coverage
229
The commercial crime policy covers loss to money and securities outside the insured's premises while money or securities are in the care and custody of a
messenger
229
Transferring is a method of handling risk. Which of the following best describes the concept of transfer?
Purchasing insurance
229
Which of the following is NOT an exclusion in the commercial auto policy liability section?
Bail bonds
230
What type of endorsement would be used to insure a recreational vehicle under the personal auto policy?
Miscellaneous type vehicle endorsement
230
The definition of actual cash value is
replacement cost minus depreciation
231
The following perils may be insured against under a basic dwelling policy EXCEPT
flood
232
When does flood insurance take effect?
30 days after the date of application and payment of premium
232
An insured who owns a convenience store arrives at the store one morning and finds the door unlocked. There is no sign of forced entry, but several items—including money in the cash register—are missing. Based only on this information, the insured has suffered a
theft
232
Which of the following coverages would protect a policyholder for assumed liability under a construction contract to install water lines for a city?
Contractual liability
232
Which of the following statements about workers' compensation is NOT correct?
An employee who is eligible for workers' compensation coverage may sue a negligent employer.
233
Which of the following items could be insured under Coverage C of a homeowners policy?
Personal property usually located in a secondary residence
233
Which of the following describes a personal contract?
The contract protects the individual who owns the property
233
Jim and his family are considering a move to the West Coast but are very concerned about earthquakes. Jim called an insurance agent for advice. What is the best advice the agent could give Jim about adequately covering his new home for possible earthquake damage?
Adding the earthquake endorsement will provide the coverage needed
233
What is the actual cause of a loss?
Peril
234
Which one of the following could be insured under Coverage B of a homeowners policy?
A detached garage rented to a neighbor to store his sports car during the winter
234
Which of the following damages is covered Under Part D—Coverage for Damage to the Insured's Auto?
Flood
234
If an insurance company is organized in Detroit, where it maintains its home office, the company is classified in Michigan as what kind of company?
Domestic
235
Bill's construction company had an experience modification factor added to his workers' compensation policy. How might this affect his premium?
An experience modification factor is applied as a method of rewarding those employers with better-than-average loss experience and penalizing those with poorer experience
235
To be defined as a robbery , an event must include which of the following conditions?
Fear or threat of violence
235
Which of the following transit policies protects the shipper or receiver of goods against loss of goods in transit incoming and outgoing all year long?
Annual transit policy
235
Paul purchased Utility Services—Time Element Coverage for his bicycle shop. Of the following, which statement best describes the type of coverage Paul purchased with this endorsement?
Payment for loss of business income due to a covered loss involving certain utility services
236
Which of the following statements about risk retention groups is NOT true?
An RRG typically writes workers’ compensation insurance for its members
236
Who does a surety bond protect?
Obligee
236
Which of these situations would be covered under the homeowners policy?
The insured is playing golf (away from the premises described on the declarations page) and on his back swing accidentally hits a person in the head. The other person incurs $5,000 of medical expenses.
236
Depending on the circumstances, a passenger injured in an automobile accident may be able to recover under all of the following coverages EXCEPT
collision
237
The Early Warning System aids in the detection and prevention of insurer insolvencies. In order to get insurers financial information, each member of the Guaranty Association is required to file an annual financial statement with
the National Association of Insurance Commissioners (NAIC)
237
Which one of the following is NOT a factor in determining eligibility for coverage under a particular homeowners form?
Square footage
237
How many sections are there in a workers’ compensation policy?
6
237
Which of the following types of insurance covers exposures that involve property and merchandise while in transit or “floating”?
Inland marine insurance
237
When business is placed with a nonadmitted insurer, all of the following are correct EXCEPT
an agent can place business directly with a surplus lines company
237
What is the purpose of the coinsurance clause?
Ensure that property is insured to a certain value
237
If a California resident with a personal auto policy with the minimum liability limits has an accident in a state that requires higher limits, which of the following will occur?
The policy will automatically provide the required higher limits at no extra charge
238
Mary was involved in an accident with another driver. The car was damaged. Her insurance company reimburses her for the damage and seeks recovery from the negligent driver. What is this process called?
Subrogation
238
When an employer attempts to place mandatory workers compensation coverage but is unable to do so in the voluntary market, coverage may be offered by which one of the following?
Indiana Assigned Risk Plan
238
Mary is a customer at Bob's Bait Shop, which is covered by a businessowners policy. Bob's auto strikes her when she is leaving the store parking lot. Mary has medical payments expenses of $450. Bob will find coverage
never because the businessowners policy does not cover this type of loss
239
Which of the following is considered a uninsured/underinsured motor vehicle?
Car insured for less than the limits required by the state
239
In the insurance business, the insurance company is also known as the
principal
240
The Motor Carrier Act of 1980 mandated that trucking operators file proof of pollution liability. Vehicles with a gross vehicle weight of 10,000 lbs. or more must carry specific limits of liability. Which of the following is NOT required by the Motor Carrier Act?
$750,000 for intrastate transportation of nonhazardous property
241
Which one of the following statements about workers’ compensation insurance is NOT correct?
Every type of employment is subject to workers’ compensation laws.
241
Joan and Steven have applied for automobile insurance with ABC Auto Insurers. The ABC agent asked Joan and Steven if their resident 18-year-old son, Henry, has had any moving traffic violations in the past 2 years. Both answer no. The fact is that Henry had 4 speeding tickets, but never told his parents. Once the company found out about Henry's record, they declined the application citing misrepresentation as the reason. Did Joan and Steve misrepresent Henry's driving record?
Yes. Though not fraudulent, the misstatement was material.
242
Andre’s spouse is killed in an accident caused by a drunk driver. The negligent driver’s insurance company pays $5,000 for funeral expenses arising out of the accident. The funeral expenses are an example of
special damages
242
Which one of the following perils is normally excluded in a difference in conditions (DIC) policy?
Fire
242
If an insured has a claims-made commercial general liability policy with the basic extended reporting period, the insurer will pay for losses after the policy has been canceled as long as the occurrence is reported within 60 days of cancellation and the claim is filed within how many years?
5
243
The amounts of coverage and limits of liability are found in which of the following sections of a policy?
Declarations
243
Administration of workers’ compensation is through
the Workers’ Compensation Board
244
In order to effect cancellation of property insurance in Indiana, an insurer must provide each of the following EXCEPT:
notification of possible eligibility for coverage from the FAIR plan
244
All of the following can be designated as an insured under a commercial general liability policy EXCEPT
family members of the insured for their personal activities
244
A tavern owner has a CGL policy. A patron who claims he was injured when the bartender forcibly removed him from the premises sues both the tavern owner and the bartender. Under the CGL's duty to defend provision, the policy would
have no duty to defend because the damages are not covered
244
Which of the following legal principles allows insurance companies to collect from a negligent third party damages it paid to an insured?
Subrogation
245
Which of the following restrictions does NOT apply to claims covered by the Indiana Property and Casualty Insurance Guaranty Association?
All claims must be settled within one year of the date of liquidation
245
All property policies contain exclusions. An insured may be interested in covering these gaps. A difference in conditions policy bridges these gaps by covering events
commercial property policies otherwise exclude and excluding coverages normally found in a commercial property policy
245
The cancellation and nonrenewal restrictions for automobile insurance apply to which one of the following?
Personal auto policies
245
Joe's Plumbing has leased a fleet of vans to be used by his plumbers while going from job to job. Which of the following endorsements is especially important in this situation?
Additional insured—lessor
246
Which of the following is covered by the jewelers block coverage form?
Property that is sold but not delivered
246
Which one of the following statements regarding uninsured and underinsured motorists coverage in Indiana is CORRECT?
Either or both coverages may be rejected by the insured in writing
246
A claims-made policy covers claims that are
first reported during the policy period, provided the event occurred after the retroactive date (if any) stated in the policy
247
Which of the following is covered by ocean marine insurance?
Imports
247
A violation of the unfair trade practices act or the unfair claims settlement practices act may result in a fine of up to what amount for each act or violation?
$10,000.00
247
A condition or situation that presents a possibility of loss is
an exposure
247
When an automobile policy is cancelled for a reason other than nonpayment of premium, how many days' notice must be provided to the insured?
20
247
Isabella’s application for auto insurance is declined by the insurance company on the basis of information in her credit report. When Isabella reviews this report, she discovers information that she believes is incorrect. Isabella asks the credit reporting agency to investigate this information. If it is determined that this information is incorrect, who is responsible for fixing it?
The credit reporting agency
248
A therapist owns office space in a commercial office building that is legally organized as a condominium. Which of the following best protects the therapist's business personal property?
Condominium commercial unit owners form
248
All of the following activities constitute unfair or deceptive trade practices EXCEPT
paying bonuses to all participating policyholders out of surplus when doing so is in the best interests of the policyholders and the company
249
If the policy limits of the Building and Personal Property Coverage Form have been exhausted, how much additional coverage is available for debris removal?
$25,000
249
The type of professional liability policy that provides coverage for insurance agents, as well as certain other types of professionals, is typically referred to as
an errors and omissions policy
249
How is burglary defined?
Taking of property from inside the premises by a person unlawfully entering or leaving the premises as evidenced by marks of forcible entry or exit
249
Which one of the following statements regarding personal liability coverage is CORRECT?
It is added by endorsement to the dwelling policy, but automatically included in the homeowners policy
250
Which one of the following statements regarding workers’ compensation laws is CORRECT?
Benefits are paid to workers injured on the job, regardless of who is at fault
250
Which of the following categories is NOT covered by inland marine insurance?
Stationary property
251
One of Susan’s jobs as the office manager for Acme Insurance is to drop off the daily deposits at the bank on her way home from the office. If Susan is robbed one night while making the deposit, what crime form will provide coverage to Acme Insurance for the loss?
Outside the Premises
251
Which of the following is the act of forcing a person to buy insurance from a specific producer or insurer?
Coercion
251
A fire destroys the new clothes an employee has brought in to work to show her friends. Coverage applies under the insured's Building and Personal Property Coverage Form because the clothes are an employee's personal property. When the insurance company settles, who will receive the payment?
Employee
251
What happens if a consumer notifies a credit reporting agency that information in the consumer’s credit report is incorrect?
The credit reporting agency is required to investigate the complaint and, if it is justified, correct or delete the information
251
A person who needs coverage for her professional liability exposure can obtain it by purchasing
a professional liability policy tailored to the specific occupational need
252
While driving to work one morning, Joe is hit from behind by a car driven by Sam. Joe is injured and taken to the hospital where he is admitted with a broken shoulder and other internal injuries. During the police investigation, it is determined that Sam was 100% negligent and did not have automobile insurance. What coverage will indemnify Joe for his injuries?
Joe’s uninsured motorist bodily injury coverage
252
All of the following statements about surplus lines insurance are true EXCEPT
agents can place directly with surplus lines companies
252
Bill is hurt while he is a customer at Sue's flower shop, which is covered by a businessowners policy. He is awarded $50,000 for bodily injury. He also has incurred $2,000 for medical expenses for the 1st year after the injury and another $1,000 reported in the 2nd year. How much will Sue's businessowners policy pay assuming she has enough insurance?
$52,000
252
If an insurance producer allows a license to lapse, what is the maximum length of time for having the license reinstated without having to take the license examination?
12 months
252
Which one of the following hazards can be described as a careless attitude or general indifference on the part of the insured toward the occurrence of loss?
Morale
253
If the monthly limit of indemnity option has been selected under the Business Income Coverage Form, how much will an insurer pay for loss of business income for each month of loss (assume the declarations page shows a limit of insurance of $150,000 and a fraction of 1/3)?
Lesser of $50,000 or the actual loss for each month
254
Agents have certain responsibilities when dealing with applicants and insureds. All of the following are agent responsibilities EXCEPT
collecting the commission from the applicant
254
The Business Auto Coverage Form uses symbols to denote the vehicles to which each of the policy's coverages applies. Which symbol is the most restrictive?
Symbol 7
254
Coverage C of the commercial general liability policy will cover reasonable medical expenses incurred within how many years of the accident?
1
254
Statements made on an application that are guaranteed to be true are
warranties
254
Monica uses her car for her skin-care business. One night, she drives the car to meet a friend at a restaurant. While driving home, Monica loses control of the car, hits a parked car, and rolls the car over. Monica is severely injured and taken to the hospital. Will medical payments coverage reimburse Monica for her medical bills?
No, there is no coverage for injuries while occupying a vehicle used for the insured’s business
254
The insured rear-ends another vehicle that is stopped at a red light. The driver of the car struck by the insured is badly injured. The insured, his daughter, and her friend were in the car and were also injured. Part B of the insured's personal auto policy will pay medical expenses for all of the following EXCEPT
the occupant of the car struck by the insured
255
The retroactive date of a claims-made professional liability policy is which of the following?
The earliest date an event or loss may occur and be eligible for coverage under the policy
255
Henry is a pilot who just purchased his first Cessna Skyhawk single-engine airplane. He asks his insurance agent about aviation liability insurance and learns that this type of insurance is part of a special line of insurance business requiring a different agent. To which special line of insurance business is the agent referring?
Surplus lines
255
Which one of the following risks is insurable?
Pure
255
An insured purchased a dwelling policy with $40,000 of coverage. The insured also purchased an automatic increase in insurance endorsement that increases the face amount of the policy by 4% each year. What will the coverage amount be when the insured pays the renewal premium for the 3rd year the policy is in effect?
$43,264
255
Coverage E in the dwelling policy provides coverage for
additional living expense
255
What is the definition of a fiduciary?
A person in a position of trust and confidence who handles the affairs and funds of others
256
Mary was involved in an accident with a hit-and-run driver. Her car was damaged. Which of the following items would be covered under the collision coverage in the personal auto policy?
The front windshield is shattered
257
Joan and Steven have applied for automobile insurance with ABC Auto Insurers. When the agent asks if anyone else drives the car, they lie and do not tell him that their neighbor, George, who lost his driver's license due to drunk driving, uses one of their cars on a regular basis to drive to work. Once the company found out about George after he had an accident, they denied the claim, citing what legal concept as the reason?
Fraud
257
In which of the following areas would PAP coverage typically NOT extend?
Mexico
257
The standard deductible for property losses on a BOP is
$500
257
Which one of the following best defines a hazard?
Condition that increases the chance of a loss
258
Which policy would provide coverage for a surgeon when his patient is injured because of the doctor's failure to correctly perform a heart operation?
Medical malpractice
258
In states that use the workers' compensation competitive state funds method, all of the following would typically be viable options available to an employer EXCEPT
purchasing coverage from the state fund only
258
The insured forgets to set her parking brake on a steep hill, and the car rolls backward and strikes a tree. The damage to the insured’s car would be covered under the personal auto policy’s
collision coverage
259
Towing and labor coverage covers all the following EXCEPT
the cost of a fan belt replaced at the scene of a breakdown
259
Which of the following is an example of property that might be insured on an agreed value basis?
Rare painting
259
Building coverage of the Building and Personal Property Coverage Form insures all of the following things EXCEPT
desks and office equipment
260
The condominium association coverage form may include all of the following property EXCEPT
unit owners' personal property
260
The Insurance Commissioner is required to post a bond in the amount of at least:
$50,000.00
260
Which type of return premium computation is used when the policyholder cancels a policy?
Short-rate
261
Driving too fast and not wearing a seat belt are examples of
morale hazards
261
The dwelling policy will provide how much additional coverage for a fire department service charge?
$500
261
Which one of the following commercial auto coverages covers automobiles in the insured's care?
Garagekeepers
262
Sue, an employee of Paul's Bicycle Shop, was on a service call repairing some bicycles at Bill's home. On her way back to the shop, she was involved in an automobile accident and injured. Where would Sue find coverage?
Paul's workers' compensation policy
262
A dwelling policy can insure all of the following types of personal property EXCEPT
sailboats
263
Under the commercial articles coverage form additional acquired property is automatically covered for up to
30 days if it is a type of property already covered by the form
263
Which of the following classes of property are NOT specifically excluded from coverage C—personal property?
Property away from the residence
263
An insured has a commercial property policy with a Causes of Loss—Broad Form with a $250 deductible. During a snowstorm, a $750 rooftop sign is destroyed. How much will the policy pay for the sign?
$500
263
An insured suffers a covered loss to some rental property that forces the tenant to move to another location. Under which section of the dwelling policy would the insured receive payment during the time the property is being repaired?
Coverage D—Fair Rental Value
263
Medical payments coverage in the commercial general liability policy covers injuries to
third parties regardless of liability
263
Which of the following statements regarding an insurance consultant is NOT correct?
An insurance consultant may not charge a fee for service
264
Barney’s Breads and Bakery store needs workers' compensation coverage for his 7 employees. He could purchase coverage from all of the following sources EXCEPT
an assigned risk plan
264
Under Coverage C—Personal Property, the homeowners policy (HO-3) covers property owned or used by an insured. When jewelry valued at $5,000 is stolen from the residence, the policy will pay
$1,500
264
Bob's Trucking Company contracts with boat companies to haul its boats. This contract involves hauling boats on trailers that are owned by the boat company. What coverage should he add to his truckers coverage form to provide this coverage?
Trailers in insured's possession
264
Wilson owns a 4-family apartment building. Which Dwelling Form(s) would provide coverage against building damage caused by the freezing of plumbing, heating, air conditioning, and sprinkler systems?
DP-2 and DP-3
264
When an insurance company cancels a policy, what is the method used to determine the premium due?
Pro rata
265
All of the following are basic parts of an insurance contract EXCEPT
binders
266
A home has $150,000 of building coverage under the regular flood insurance program. What is the minimum deductible for building coverage?
$1,250
266
All of the following are property coverage forms EXCEPT
base
266
Roberta shares carpool expenses with co-workers. During her turn driving to work, she is involved in an accident in which one of her passengers is injured and her car is damaged. How does her personal auto policy respond?
The insurance company will cover the auto repairs and injuries
267
The Broad Form/HO-2 policy provides which type of coverage?
Named perils coverage for dwelling and personal property coverage
268
Brian, the owner of a small boutique, is covered by an unendorsed businessowners policy. He detains Susan, a customer, for shoplifting. The police come, and Susan is not charged with any crime. Susan is very upset with Brian and sues his store for damages. Where might Brian find coverage for this loss?
This coverage is included in the businessowners policy under personal injury
268
All of the following coverages may be part of a commercial package policy EXCEPT
personal auto
268
All of the following may be issued a temporary license to service insurance business withoutâ¯an examination EXCEPT
the personal representative named by the spouse of a licensed insurance producer who becomes mentally disabled
268
Which of the following is NOT a common requirement for a business to be eligible for a businessowners policy (BOP)?
Less than 25 employees
268
Recently the local utility company's main power supply depot was damaged by high winds. Mike, who owns a TV store, wants to make sure he has coverage for damage to all the TV components demonstrated in his store if the power goes out. What does Mike need to purchase?
Utility Services—Direct Damage Coverage
268
The coverages offered by an insurance policy are described in the
insuring agreement
268
To determine if an applicant or licensee has violated the controlled business provision, the Commissioner will determine if the commission earned is more than what percent of all business written during the same period?
25%
268
An insurance binder is best described as
temporary, short-term evidence of coverage
269
Which one of the following statements describes a major difference between surety bonds and insurance?
Bonds guarantee something will happen. Insurance protects if something happens.
270
Coverage for workers' compensation may be obtained from all of the following EXCEPT
a commercial general liability policy
270
The common policy declarations of the commercial package policy would provide which of the following information?
Insured's business description
270
The insured must send a signed statement of loss to the insurance company within how many days?
60
270
Which one of the following would NOT be paid as supplementary payments under Part A of the personal auto policy?
Funeral expenses for the insured
270
Julia purchases a new car for her daughter. How many days does she have to add it to her policy?
14
270
All of the following losses of cattle would be covered under a Broad Form farm policy EXCEPT
loss due to disease
271
Which homeowners policy would be written to cover personal property only?
HO-4
271
An insured rents a car while on vacation in Canada and causes an accident. What coverage is provided for this loss under the personal auto policy?
The loss is covered under an unendorsed policy
271
Which of the following forms is NOT eligible to be written as part of a commercial package policy?
Dwelling property coverage forms
271
With a few exceptions, most personal lines insurance policies exclude losses arising out of all of the following EXCEPT
personal activities conducted away from the insured premises
272
Which one of the following statements about workers' compensation insurance is CORRECT?
Workers' compensation benefits apply without regard to the employer's negligence
273
A document than an insured provides to a third party evidencing proof of coverage for specific lines of insurance and the associated limits of liability is called a
certificate of insurance
273
An agent in the XYZ Insurance Company, equipped with business cards, sample XYZ policies, and an XYZ rate book, informs a prospect that XYZ has given him unlimited binding authority. The prospect assumes this is true. Given the prospect's assumption, which of the following correctly defines the agent's authority in this case?
Apparent
273
In regards to workers’ compensation, no compensation is allowed for an injury or death due to the employee’s knowingly self-inflicted injury or intoxication. The burden of proof is on
the defendant
274
Section II of the homeowners policy provides liability coverage for all of the following EXCEPT
renting the garage to a jewelry maker
274
Which type of authority does an insurer give to its agents by means of the agent's contract?
Express
274
Which one of the following is NOT a commercial general liability exposure?
Operation of automobiles
275
Bill and Marge have a HO-2 policy insuring their main residence for $150,000. How much coverage do they have for personal property kept at their summer cottage?
$7,500
275
Thomas has expanded his restaurant to include a parking lot next door with valet service. His insurance agent is recommending that Thomas buy garagekeepers coverage. He advises Thomas that all of the following exposures would be covered by this coverage EXCEPT
if a car stored in the parking lot is stolen by a restaurant employee
275
The commercial property conditions form contains circumstances that apply to all commercial property coverage forms, unless a coverage form contains a condition to the contrary. Commercial endorsements that apply to more than one part of a commercial package policy (CPP) are called
interline
275
Medical Payments Coverage is Part B in the personal automobile policy. All of the following statements about medical payments coverage are correct EXCEPT
Part B covers reasonable expenses for services incurred within 5 years of the date of injury
275
A property owner wants to insure both the rental property and any of the tenant's belongings if they are stolen. Which policy would you recommend and why?
DP-3 Special Form and a separate tenants policy to cover personal property
276
Which of the following terms is the process of evaluating the risk and exposures to potential clients?
Underwriting
277
Bob has a liability policy in the amount of 300/500/100. How much coverage does he have per occurrence for property damage liability?
$100,000
277
All states have laws that require each driver to prove that he can pay for bodily injury or property damage liability losses arising out of auto accidents. These are known as
Financial responsibility laws
277
Doug, who is 7 years old, accidently throws a baseball through the neighbor’s kitchen window. Which part of the homeowners policy will pay for the damages to the window?
Part E
277
A businessowner purchases a commercial general liability (CGL) policy that includes a supplemental extended reporting period. The effective dates of the policy are December 31, 2007–December 31, 2008. The businessowner is sued over an incident that occurs on April 15, 2008, but is not discovered or reported until June 30, 2009. What coverage, if any, will the policy provide?
Coverage is granted because the reporting period has not expired.
277
Ted's TV shop has a fire, and the shop must be closed for repairs for several months. Ted cannot generate an income while his shop is not open for business. Which additional coverage will pay for the revenue loss while the shop is closed?
Business Income
277
Businessowners liability coverage will cover losses due to which of the following occurrences?
A suit brought by a competitor for libel
278
What is a no-stacking rule?
Prevents the insured or injured person from collecting medical payments from more than 1 policy or coverage, such as uninsured motorist
278
All of the following risk exposures are covered by the liability section of the businessowners policy EXCEPT
employers liability
279
A policy under which the insured and insurer agree on the property value and list the value in the policy is known as
an agreed value policy
280
The Federal Employers’ Liability Act (FELA) covers which of the following types of workers?
Railroad employees
281
A corporation located in Chicago has added an extortion-commercial entities endorsement to its commercial crime coverage form. One of the directors of the corporation is captured and held for a $3 million ransom in La Paz, Bolivia. The policy
pays only if Bolivia is listed on the endorsement schedule as a covered territory
282
Jane's sister, Maggie, who lives with Jane and just sold her car, drives Jane's sports car to a party. On the way home, Maggie loses control of the car, hits a parked car, and rolls the car. Maggie dies as a result of her injuries. What coverage will reimburse Jane for Maggie's funeral expenses?
Medical payments coverage
283
Who is the administrator of the Mine Subsidence Insurance Fund?
The Commissioner
284
Making oral or written statements that are false, maliciously critical, or derogatory of the financial condition of an insurer or are intended to injure anyone in the insurance business is known as
defamation
285
John is thinking about buying a new bicycle. While test-driving a 10-speed bicycle at Paul's bike shop, John was thrown from the bike after the front wheel came off. He is awarded $55,000 for bodily injury, as the court found Paul's shop negligent for not closing the quick-release lever. Paul has $600 in lost earnings for the 2 days he had to be in court. What would his policy pay, assuming he has enough insurance?
$55,500
286
With regard to insurance, risk can be defined as
uncertainty of financial loss
287
Which of the following statements about Transportation Network Company (TNC) vehicle insurance requirements is INCORRECT?
The insurance policy must cover the TNC driver when the driver is logged on to, or logs off of the TNC's digital network or is engaged in a prearranged ride
288
Who represents the insurance company and is a direct link between the company and the insureds?
An insurance agent
289
All of the following statements are TRUE regarding an insured's duties to the insurer after a loss to an insured dwelling EXCEPT
the damaged property must be appraised
290
Which one of the following homeowners forms provides open perils coverage?
HO-3
291
Which one of the following is NOT an agent responsibility?
Prepaying the initial premium
292
Mark wants to purchase a policy for his manufacturing company to include premises liability, products liability, and completed operations. Which policy would cover all of these losses?
Commercial general liability
293
In workers' compensation insurance, the experience modification factor
is applied as a method of rewarding those employers with better-than-average loss experience
294
An insurance company organized in Pennsylvania, with its home office in Philadelphia, is licensed to conduct business in New York. In New York, this company is classified as
a foreign company
295
If a policyholder seeks reimbursement of unearned premiums from a carrier that has been determined to be insolvent, the maximum amount payable by the association is:
80% of the unearned premium
296
The purpose of insurance is to
transfer risk
296
A property that is vacant is described as having an absence of
people and property
297
A bailee is a person or organization who
has temporary possession of someone else's personal property
297
Which of the following statements pertaining to insurance companies is CORRECT?
The primary purpose of a stock company is to earn a profit for its stockholders
297
What is the primary purpose of workers' compensation laws?
Providing compensation to employees who have sustained injury, illness, or death during the course of employment
298
The unendorsed businessowners liability coverage excludes
auto liability
299
Greg is a truck driver with Home Furnishings, Inc., and delivers furniture to customers. Jeff is a salesman with Home Furnishings and accompanies Greg on a delivery run to an important customer. On the way, Greg runs a red light, hits a bus, and rolls the delivery truck. Jeff is seriously injured. Which coverage under the unendorsed commercial auto policy will pay for Jeff's injuries?
No coverage available under the commercial auto policy for this loss
299
A group of individuals who agree to share each other’s losses is known as a
reciprocal company
299
Which of the following statements about flood insurance is NOT correct?
Personal property in a basement or outside in the yard is covered.
299
Which of the following coverages in the homeowners policy is used to protect Sam when a friend files suit after falling down basement stairs that Sam is repairing?
Coverage E—Personal Liability
299
The insurer of an insurance company is known as a
reinsurer
299
Bryce owns a $50,000 lake cabin that he has insured for $40,000. He sustains a $5,000 covered loss. According to the principle of indemnity, how much will his insurer pay?
$5,000
299
In commercial crime insurance, shoplifting is classified as
theft
299
Which homeowners endorsement is used to insure high-value items of personal property?
Scheduled personal property
299
Two insurance policies apply to Monica's home. The limit for Policy A is $100,000, and the limit for Policy B is $50,000. Both policies have a pro rata other insurance clause. If she suffers a $9,000 covered loss to her home, how much will Policy A pay?
$6,000
299
The standard workers’ compensation policy imposes all of the following duties on the employer EXCEPT
make voluntary payments to an injured employee
299
An employee is delivering packages for her employer but is using her own vehicle. The employee hits a pedestrian. The employer may be held liable because of the doctrine of
vicarious liability
299
Who is responsible for making the premium payments due under a commercial package policy?
First named insured
300
All of the following are requirements to obtain a resident producer's license EXCEPT:
obtaining a professional designation
300
Section II of the homeowners policy contains two coverages: Coverage E—personal liability and Coverage F—medical payments. The primary difference between these coverages is
the insured must be legally liable for a loss for it to be paid under Coverage E
300
Which of the following is not specifically excluded from the personal effects floater?
Souvenirs
301
For personal property coverage, who is NOT insured by a homeowners policy?
A nonresident uncle
302
While driving to work, Leonard is eating his breakfast, reviewing his appointment book, and talking on his cell phone. He runs a red light and collides with a commuter van. The van's occupants are hospitalized. Which part of Leonard's personal auto policy covers the occupants' injuries and damage to the van?
Part A
303
Howard borrows his neighbor's car because his son took his car to college for a week while moving into the dorm. Under Howard's automobile policy, his neighbor's car is considered
a nonowned automobile
303
Which one of the following statements about the standard mortgage clause is CORRECT?
The mortgagee may have to pay the premium if the insured fails to do so
303
An insured fails to pay his homeowners insurance premium. The mortgagee becomes aware of this fact and remits the premium to the insurance company. Shortly thereafter, the insured sets fire to his home in an attempt to receive payment for the loss. Any loss payment settlement would be made to
the mortgagee
304
The amount of payment that comes into play when an insured fails to carry the sufficient amount of insurance is sometimes referred to as the
coinsurance penalty
304
ABC State Insurance Company has agents who are under a contract that allows them to sell only ABC State Insurance Company policies. Which distribution system describes ABC State Insurance Company's organization?
Captive
304
Sue has a personal articles floater with $20,000 worth of jewelry coverage. She purchases a ring worth $6,000. The ring is stolen from her the following week. How much can she collect from her insurance carrier?
$5,000
305
Which one of the following types of property is NOT covered under the Building and Personal Property Coverage Form?
Patios and walkways
306
Pete owns a business that sells alcoholic beverages. A person Pete sold alcohol to injures a third party, and this third party sues Pete. What coverage would apply to this loss?
Liquor liability/dram shop liability
306
The principle that restores someone to the condition he enjoyed before a loss is
indemnity
306
When a policy providing coverage on residential property is canceled by the insurer for a reason other than nonpayment of premium, what is the minimum number of days' notice that must be provided to the policyholder?
20 days if the policy has been in force more than 60 days
306
The law of large numbers states that the
larger the number of risks combined into one group, the less uncertainty there will be as to the amount of loss that will be incurred
306
Which one of the following is NOT an additional coverage found in homeowners policies?
Market valuation
306
Which one of the following is NOT a use of auto symbols in the commercial auto policy?
To determine which rating territory applies to the covered autos
306
A hotel has added a guest's property endorsement to its commercial crime coverage form. A guest at the hotel removes her jewelry and leaves it wrapped in a towel at the front desk while she uses some exercise equipment. When she finishes her workout, the jewelry is gone. The policy provides
coverage for the guest’s jewelry in the amount shown on the declarations page
306
Heena is the named insured under an auto liability policy that has a supplementary payments section providing up to $250 per day for lost wages. Heena is liable for an auto accident in which another driver, Nusrut, is injured. Nusrut files suit against Heena, which means they both miss work to appear in court for the lawsuit. The supplementary payments portion of Heena’s auto policy would pay lost wages for
Heena
307
Purchasing insurance is an example of what type of risk management?
Transfer
307
The boatowners policy provides liability and physical damage coverage. What is the value and size of a boat eligible for the boatowners policy?
The value is less than $25,000, the watercraft is less than 26' in length, or both
307
Which of the following phrases best describes actual cash value?
Replacement cost minus depreciation
307
Of the following statements regarding employment practices liability (EPL) insurance, which is NOT correct?
Retaliation is not covered in an EPL policy
307
All of the following statements about a loss sustained crime insurance form are true EXCEPT
losses that occur after the policy expiration are covered
307
The Guaranty Association divides its assets into three different accounts which are:
auto, workers compensation, and all other
307
Which of the following individuals would be eligible for workers' compensation benefits?
Employee who falls on a wet factory floor
308
An insurance consultant is a person who
offers advice, counsel, or opinion to policyholders for a fee
308
What are the two flood insurance programs that are available?
Emergency program and the regular program
308
Under the Building and Personal Property Coverage Form, how much will an insurer pay for fire department service charges?
Up to $1,000
308
A bailee is
someone who has taken temporary custody of another person's property for a special purpose
308
Which of the following would NOT be covered by Coverage A in the HO-6?
A garage-like building the condominium complex provides for common storage, in which the insured keeps the family’s bicycles
308
Jennifer owns a house valued at $500,000. She purchases a policy insuring it for $300,000 with an 80% coinsurance clause and a $1,000 deductible. Faulty wiring causes a fire that results in a loss of $100,000. How much will the policy pay?
$74,000
308
Brenda’s Bakery, which is covered by a businessowners policy, sustains a fire loss of $50,000 to the building, and $25,000 in content damages is incurred. In addition, a customer and an employee are injured in the fire. Medical payments for their injuries amount to $2,000 for the injured customer and $3,000 for the injured worker. Brenda’s business income is $5,000 per month, but she is unable to conduct any business for 60 days as a result of the fire. Assuming Brenda has adequate limits to cover this loss, how much will her policy pay?
$87,000
309
A chance, possibility, or uncertainty of loss is known as a
risk
310
The Inside the Premises—Robbery or Safe Burglary of Other Property insuring agreement in the commercial crime policy covers which one of the following perils?
Safe burglary by a security guard while a store is closed
310
All of the following perils are covered under the DP-2 Broad Form EXCEPT
earthquake
310
Which one of the following best describes a short-rate cancellation?
Upon cancellation, the insurer keeps all earned premium plus overhead expenses incurred
311
Bernie has a life, health, property, and casualty insurance license. How many hours of continuing education does he need to complete every 2 years?
24
311
All of the following are the insured’s duties following a loss EXCEPT
assisting the investigator during the claim investigation procedure
311
Aviation insurance provides coverage for liability arising from the operation of an aircraft. All the following statements are true EXCEPT
coverage is provided only for the owner
312
An ex-employee files suit against her former employer. She believes she was dismissed for missing work to perform jury duty. Which one of the following policies would cover damages paid to the employee if she proves her case?
Employment practices liability (EPL)
313
Which of the following is an example of control (reduction) as a method of handling risk?
Installing a burglar alarm
313
An insurance company may measure its underwriting profitability by using which of the following ratios?
Loss ratio
314
All of the following coverages can be found in the businessowners policy EXCEPT
workers’ compensation
315
The purpose of the conditions section of an insurance policy is to
list the obligations of the insured and the insurance company
316
Premiums for workers' compensation policies are based upon the
work classification, number of employees, and the total payroll
316
Insurance companies are prohibited from discriminating against people by cancelling their insurance based solely on which one of the following reasons?
Age of the insured
316
George just returned from Europe with a beautiful Swiss watch valued at $10,000. He is concerned that his homeowners policy will not provide enough coverage. His insurance agent suggests that he add which endorsement to adequately cover his watch?
Scheduled personal property endorsement
316
Which one of the following parties is the principal in a surety bond?
A contractor who has signed a contract to build an addition to a residence
316
Which one of the following statements about occurrence liability policies is CORRECT?
Occurrence policies cover events that happen after the policy is in effect, but before it expires
316
An occurrence is best described as something that
may take place over time
316
When an employee has been injured on the job and is temporarily disabled, benefits begin following a waiting period of how many days?
7
316
Self-insurance is an example of what type of risk management?
Retention
316
After a commercial property and casualty insurance policy has been in effect for at least 90 days in Indiana, if the insurer cancels the policy for any reason other than nonpayment of premium, fraud, or material misrepresentation, it must provide written notice of cancellation to the insured at least:
45 days in advance
317
Marcus, an employee at the Beautiful Home Gift Store, dropped and broke a customer's purchase while carrying it to the customer's car. The resulting loss would be considered which of the following under the store's commercial general liability policy?
Premises-operations
317
Aviation physical damage coverage, also known as aircraft hull insurance, covers all of the following EXCEPT:
personal effects
317
In Indiana, insurers must offer to provide coverage for uninsured motorists property damage (UMPD). This coverage may be provided with a deductible less than
$300
317
An insured has a $40,000 Dwelling Special Form (DP-3) policy. After hosting an afternoon party, the insured discovers that the family's credit cards and ATM cards are missing. If the cards are used, what coverage is provided under Coverage C—Personal Property, and why?
$0. Coverage C excludes coverage for credit cards.
317
What does the liberalization clause do to a property policy?
Broadens coverage
317
Workers compensation benefits are not payable to a person who is:
intoxicated and injured on the job
317
A person becomes seriously ill after eating unrefrigerated raw oysters from a street vendor. When the vendor is sued for negligence, what defense might best be used?
Assumption of risk
318
Which one of the following individuals is likely to have a valid workers’ compensation claim?
Employee injured while performing a task for which he had not yet been trained
318
Which one of the following situations is covered under a commercial general liability (CGL) policy?
A shopper is injured when a shelf of merchandise collapses
318
Which one of the following would NOT be covered under an employment practices liability insurance policy?
Mass layoffs of employees
318
Bob's construction company, based in Wisconsin, is doing a job in Illinois. Bob's declaration page for his workers' compensation policy lists Minnesota, Iowa, Illinois, and Wisconsin as states where he will do work. Pete, an employee working in Illinois, is injured on the job. How would Bob’s policy respond?
It will pay benefits based on Illinois workers' compensation laws.
318
The insured has a building with a replacement cost of $200,000 but has insured it for only $100,000. An 80% coinsurance provision is present in the policy. When an $80,000 loss occurs, the policy will pay
$50,000
318
Bart keeps a dog that is known in the neighborhood to be vicious. One day the dog attacks a neighbor while she is working in her own yard. The court orders that the animal be put to sleep. Bart's homeowners policy will cover all of the following expenses related to this incident EXCEPT
the cost to have the dog put to sleep
318
Which one of the following conditions is NOT required when nonrenewing a residential property insurance policy?
The notice must be sent at least 45 days in advance
318
All commercial package policies must include
the common policy declarations and the common policy conditions
318
Marita’s car was damaged in an accident, so she rents a car to drive while hers is in the shop. Under the liability section of Marita’s personal auto policy, the rental car is defined as
a covered auto
318
In the commercial crime forms, the definition of theft does NOT include
mysterious disappearance
319
An insured lives in a house covered by an $80,000 Special Form (DP-3) policy. While the insured is on vacation, someone breaks into the house and steals $5,000 in electronic equipment. The damage to the door is estimated at $800. What coverage is provided by the DP-3 policy?
$800
319
Joan and Steven have applied for automobile insurance with ABC Auto Insurers. They were NOT asked and did NOT tell the agent that their neighbor, George, who lost his driver's license due to drunk driving, uses one of their cars on a regular basis to drive to work. Once the company found out about George after he had an accident, they denied the claim, citing what legal concept as the reason?
Concealment
319
Under an auto policy, Other than Collision coverage would apply to which of the following situations?
All of a car's tires are stolen
319
Which one of the following types of property is NOT covered by a dwelling policy?
Farm dwellings
319
For a homeowners policy, which one of the following statements about insuring personal property normally kept at a residence other than the residence premises is CORRECT?
It is covered for up to 10% of the Coverage C limit
319
Which of the following individuals would NOT be considered “controlled business” in Indiana?
Applicant’s neighbor
319
Which one of the following would be considered a temporary substitute vehicle under the terms of the personal auto policy?
Loaner vehicle provided by an auto repair shop
320
Which of the following types of business would be better covered by a CGL than a BOP?
An oil refinery
320
Which one of the following forms would be most appropriate to protect against a suspension of business operations for an insured that cannot afford to have its operations interrupted?
Extra expense insurance
320
After Acme Construction wins a bid to build an office complex, the owner demands that Acme purchase a payment bond to cover electrical and heating subcontractors. What guarantee is the owner seeking from Acme Construction by demanding the payment bond?
The principal will complete and deliver the work free of any liens or encumbrances
320
Which one of the following is considered a hazard?
Trash
320
If a building has been vacant for more than 60 consecutive days before a loss occurs, which one of the following types of damages will be covered under a Building and Personal Property Coverage Form?
Weight of snow, ice, or sleet
320
Every state requires that each person be able to prove he is financially prepared if involved in an accident. Suppose your state requires minimum liability limits of 25/50/10. What is the name of that law?
Financial responsibility law
320
Which of the following property may be insured under a flood policy issued by the NFIP?
Silo
320
The covered auto is defined in the policy as all of the following EXCEPT
any additional auto acquired in the past 30 days
320
Builders risk coverage that is written with the Causes of Loss—Basic Form will cover loss caused by
hail
320
An insured owns a personal auto policy and a homeowners policy. He purchases a new TV and puts it in the trunk of his car. On the way home he hits another car, and the crash totally destroys the TV. The damage to the TV is covered by which insurance policy?
Homeowners
320
What is the benefit for the employee covered by either the Federal Employers’ Liability Act or the U.S. Longshoremen's and Harbor Workers' Compensation Act?
The benefits are broader than workers' compensation coverage
320
Patrick's Widget Company has a small fleet of owned cars used by local salespeople. Most of the salespeople, however, travel to other cities and rent cars to make sales calls. Which coverage should Patrick include on his commercial auto policy to cover this exposure?
Symbol 8—hired autos only
320
Which one of the following statements regarding an insurance producer's license is CORRECT?
The license remains in effect until revoked or suspended, with fees paid and continuing education completed every two years.
320
If the insured's car is struck by a boulder that falls from the side of a mountain, what coverage would pay for the damage?
Other than Collision
321
Which of the following is NOT an example of an insurable interest?
A woman’s interest in property that she hopes her uncle will leave to her in his will
321
Which one of the following is an optional coverage under the businessowners policy?
Employee dishonesty
321
Which of the following categories is covered by ocean marine insurance?
Imports and exports
322
Craig was driving his family in his owned station wagon on vacation in Wisconsin when a deer ran out in the road and collided with the front end of the wagon. Craig had the car towed to the nearest town, where the only car repair shop told him that it would take at least a week to get the parts to repair the engine. Craig's automobile policy provides coverage for transportation expenses. All of the following statements about transportation expenses are correct EXCEPT
coverage starts 48 hours after a car is damaged by an Other than Collision loss
322
An insured owns 4 stores. As inventory is sold, the insured transfers new inventory from the other locations to the store making the sales. Which type of policy would best fit this insured's needs?
Blanket policy
322
Bob's Auto Repair stores its customers' autos inside its building overnight. A fire destroys the building and everything in it. Bob's commercial general liability policy will pay for which of the following?
Neither the damage to the customers' autos nor the value of Bob's work
322
Emily owns a two-bedroom home that she rents to another family. She wants both property and liability insurance on this rental property. Emily should purchase
a dwelling policy and the personal liability supplement
322
Which of the following endorsements is used to provide coverage based on actual values at certain locations at specific times?
Value reporting endorsement
322
The insured is a tenant in a shopping mall. A fire starts in the insured's store, resulting in the following damages: business personal property, $15,000; damage to fixtures installed by the insured, $2,000; damage to property belonging to customers, $1,000; and smoke damage to the ceiling and walls, $8,000. How much will the insured's Building and Personal Property Coverage Form pay for this loss?
$18,000
322
An insured who needs coverage against the breakdown of boilers and other machinery and equipment should purchase
equipment breakdown coverage
322
An individual or corporation who, for a fee, is held out to the public as being engaged in the business of offering advice, counsel, opinion, or service with respect to the benefits, advantages, or disadvantages promised under any insurance policy is:
an insurance consultant
322
Which of the following terms describes a building in which no one is present but to which the occupants intend to return?
Unoccupied
322
In Indiana, if uninsured motorists coverage is written, the minimum required coverage limit per person is:
$25,000
322
Which of the following is NOT a determining factor in work-related injuries?
Pay grade
P&C License
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