Exam Prep Answers 53 Chapter 3 Insurance Law.55 Agency Law 56 Agency Law Principles 56 Formation of a Life and Health Insurance Contract 60 Contract Elements 60 Parts of the Insurance Contract 62 Legal Requirements 63 Contract Construction 63 Contract Characteristics 64.
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It’s an unfortunate truth that many people don’t think they needinsurance until it’s way too late. In reality, you can never predict what might happen to you, your belongings or the place you live, and so it’s important to take preliminary measures so you aren’t left up a creek without a panel when tragedy strikes! Insurance is the way to do that, and today we’ll be testing your knowledge on property and casualty insurance licenses!
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- A.
Terry places a bet on the outcome of a basketball game.
Margaret's dog is temperamental. She's afraid that it will bite a neighbor someday and she will be held responsible.
Sam transfers all of his retirement funds into a stock that he expects to rise in value.
Cindy, along with 32 others, puts $100 into an Indy 500 race pool at work. The person holding the name of the winning driver will win the entire $3,300.
- A.
- B.
- C.
LaTonya's son, who would like to inherit the home some day
First City Bank
- Highpoint Industries has an automatic sprinkler system installed in its office building. This is an example of which risk management method?
Avoidance
Reduction
Retention
Transfer
- A.
- B.
- C.
- D.
- 5.The tread on Alan's automobile tires is very thin. This is an example of what type of hazard?
Physical
Moral
Morale
Obvious
- Which of the following is a hazard as opposed to a peril?
Fire
Lightning
Wet pavement
Flood
- A.
Both parties are required to provide services for the other.
One party draws up the contract provisions, and the other party adheres to the terms.
The contract can be revoked by any party at any time for any reason.
A contract that is formed without any consideration by either party.
- Which of the following describes the principle of indemnity?
After a loss, an insured should be restored to approximately the same condition that existed before the loss.
Every insured will receive full compensation for all losses in all cases.
When property is damaged or destroyed, the insurance company must pay the full replacement cost.
In the case of bodily injuries, liability coverage must be available without regard to any policy exclusions.
- A.
- B.
- C.
- D.
- 10.
- A.
Stated benefits and the dates on which they are to be paid
The premium
A promise to pay for certain losses if they occur
A promise to be conscientious about the customer's situation
- Under an insurance contract, the uncertainty of events can lead to unequal financial results for the two parties. This means that insurance is what kind of contract?
Ffx ign guide. Unilateral
Aleatory
Conditional
Utmost good faith
- The 'ground rules' are described in which part of an insurance policy?
Definitions
Exclusions
Insuring agreement
Conditions
- A.
- B.
- C.
- D.
Is a voluntary association of individuals that shares in writing insurance contracts for a variety of risks.
- A.
- B.
- C.
- D.
- 15.
- A.
- B.
- C.
- D.
- 16.
- A.
- B.
- C.
- D.
- 17.Which insurance company department is responsible for accepting and rejecting applications based on company standards?
Underwriting
Loss Control
Claims
Agency
- A.
- B.
- C.
- D.
- 19.
- A.
- B.
- C.
- D.
- 20.
- A.
- B.
- C.
- D.
- 21.
- A.
- B.
- C.
- D.
- 22.
- A.
The insurance industry is regulated exclusively by the federal government.
The insurance industry is very loosely regulated.
The state insurance department is responsible for controlling insurance matters within the state.
The state insurance department serves only the interests of the insurance industry.
- A.
Making appropriate coverage recommendations to prospective customers
Writing the provisions of a customer's policy
Helping prospective customers complete the application
Assuring that customers understand the coverage they are purchasing
- A.
- B.
- C.
- D.
- 25.
- A.
- B.
- C.
- D.
- 26.
- A.
No, that would be a violation of the principle of open competition.
No, they can only require that forms and rates be subject to prior approval.
No, insurers can always begin using forms and rates as soon as they are properly filed with the state.
Yes, some states have mandatory forms or rates for certain coverages.
- A.
- B.
They can be issued by insurance companies, but not agents.
They expire on the effective date of the policy to which they apply, or on the expiration date of the binder if the policy is not issued.
They show an intent to consider issuing insurance, but do not include any commitment to provide coverage.
- A.
- B.
- C.
- D.
- 29.
- A.
- B.
- C.
- D.
- 30.
- A.
- B.
- C.
- D.
- 31.
- A.
Prenotification is required for both regular and investigative reports.
Postnotification is required when insurance coverage is denied because of adverse information in a credit report.
An agent who obtains information from a reporting agency under false pretenses can be sent to jail and fined.
Consumers have the right to challenge information in investigative reports and to have incorrect information removed.
- The insured's policy is nearing the expiration date. The insurance company doesn't want to continue the insured's coverage, so it sends the insured a notice that the policy will not continue beyond the expiration date of the policy. This is considered which of the following?
Flat cancellation
Nonrenewal
Pro rata cancellation
Unearned renewal
- A.
- B.
- C.
- D.
- 34.
- A.
- B.
- C.
- D.
- 35.A heavy snowfall causes the roof over Amaya's living room to collapse. The insurance company asks her to move her belongings out of the living room to protect them from further damage and put a tarp over the roof until it can be repaired. It also asks her to complete a proof of loss form listing the items that were damaged. This is an example of the application of what policy condition?
Appraisal
Arbitration
Duties after loss
Subrogation
- A.
- B.
- C.
- D.
- 37.
- A.
- B.
- C.
- D.
- 38.
- A.
- B.
- C.
- D.
- 39.
- A.
- B.
- C.
- D.
- 40.
- A.
The mortgagee might have to pay the premium if the insured doesn't.
The mortgagee can file a proof of loss when the insured fails to do so to protect its rights under the policy.
The mortgagee might have coverage under the policy even if something the insured does causes a claim to be denied.
The mortgagee has no insurable interest in the covered property.
- A.
- B.
- C.
- D.
- 42.
- A.
- B.
- C.
- D.
- 43.Failure to use the care that is required to protect others from the unreasonable chance of harm is called what?
Proximate cause
Negligence
A criminal act
An intervening cause
- A.
- B.
- C.
- D.
- 45.
- A.
- B.
- C.
- D.
- 46.
- A.
- B.
- C.
- D.
- 47.
- A.
- B.
- C.
- D.
- 48.Theresa, a spectator at a baseball game, is injured when an errant ball hits her in the head. She sues the stadium owners for negligence. Which one of the following defenses against negligence would the owners probably use?
Assumption of risk
Comparative negligence
Contributory negligence
Statute of limitations
- A.
. Martin buys a tanning bed for his home. Although he follows the manufacturer's directions to the letter, he is severely burned after spending five minutes in the bed.
Jane goes to a hair salon to have her hair colored. The hairdresser mixes the color improperly and dyes Jane's hair purple.
Rosa is injured when her car is struck from behind while she is stopped at a red light.
Ben turns a corner too fast and strikes Reba's car, which was illegally parked in a fire lane.
- A.
- B.
Lee's damages will be reduced to the extent of her own liability for the loss.
Lee can recover the full amount of the loss from Pat.
Lee might only recover 50% of the damages she claims regardless of her degree of negligence.
- A.
- B.
- C.
- D.
- 52.
- A.
- B.
The damage to Elaine's car and Elaine's medical bills only
The damage to George's and Elaine's cars only
The damage to George's and Elaine's cars, and Elaine's medical bills
- A.
- B.
- C.
- D.
- 54.
- A.
- B.
- C.
- D.
- 55.
- A.
- B.
- C.
- D.
- 56.
- A.
Basic coverage for the dwelling and broad coverage for personal property
Broad coverage for the dwelling and basic coverage for personal property
Open peril coverage for the dwelling and broad coverage for personal property
Open peril coverage for both the dwelling and personal property
- A.
- B.
- C.
- D.
- 58.
- A.
- B.
- C.
- D.
- 59.An insured has a DP-3 covering a home that has a replacementvalue of $100,000. The insured carries $60,000 of insurance. Following a loss,the determined is made that it would cost $12,000 to replace the damaged portionof the home. How much could the insured collect, assuming the ACV of the loss is$6,000?
$12,000
$9,000
$6,000
Nothing
- A.
A storage shed 100 feet in back of the insured's dwelling where she keeps various yard tools
A detached garage that has been altered to house a manufacturing operation
A stack of lumber placed at the edge of the insured's property that will be used to construct a storage shed
A water heater located in the insured's attached garage
- A.
While the insured is on vacation, a power failure that occurs away from the insured's home causes the electricity to go off in the insured's neighborhood for 10 hours. As a result, large amounts of food stored in a freezer are ruined.
When Languid Lake overflows, the first floor of the insured's home is flooded, causing extensive damage.
Following a fire, the insured suffers an additional loss because a city ordinance requires that he replace his frame dwelling with more expensive fire-resistant materials.
An earthquake causes a fire that destroys the insured's home.
- The Johnsons' home is covered by a Special Dwelling policy. When a fire damagesthe home, the family is forced to stay at a motel for a month while repairs aremade. What coverage might reimburse them for these expenses?
Dwelling coverage
Additional living expenses
Personal property coverage
Fair rental value coverage
- A.
- B.
Theft of personal property owned by a boarder who rents a room in Myrtle's home
Two credit cards taken from her desk in her home
A tape player removed from the dashboard of her car that was parked in her garage
- A homeowner who wants the maximum protection for her home andpersonal property should purchase the
HO-4.
HO-2.
HO-3.
HO-5.
- A.
- B.
- C.
- D.
- 66.Which homeowners form provides broad coverage for both thedwelling and its contents?
HO-3
HO-2
HO-6
HO-8
- A.
- B.
- C.
- D.
- 68.
- A.
- B.
- C.
- D.
- 69.
- A.
- B.
- C.
- D.
- 70.
- A.
- B.
- C.
- D.
- 71.
- A.
- B.
- C.
- D.
- 72.
- A.
- B.
The insured does not have to be legally liable for coverage to be available.
Injuries that occur off the insured location are never covered.
Medical payments are covered only if the expenses are reported within six months of the occurrence.
- A.
It covers damages that the insured becomes legally obligated to pay because of bodily injury or property damage.
The insurer will not defend liability claims brought against the insured that are groundless or false.
It applies to the insured's personal, nonbusiness activities that occur anywhere.
It covers damages resulting from intentional acts of an insured.
- A.
It only covers the insured's personal property while it is at the residence premises.
At the insured's request, coverage applies to a guest's property while the guest is in the insured's residence.
Property normally kept at a residence other than the residence premises is covered for 10% of the Coverage C limit or $1,000, whichever is greater.
There is no coverage for property being moved from the residence premises to a new principal residence.
- A.
The company must wait until the policy has been in force for 60 days before it may cancel.
The company must give the insured 30 days written notice of cancellation.
The company must give the insured 10 days written notice of cancellation.
Under no circumstances; a policy cannot be cancelled because of material misrepresentation by the insured.
- What is the limit on coverage for grave markers under thehomeowners policy?
$1,000
$2,000
$2,500
$5,000
- A.
A 30-foot boat powered by a 25 horsepower outboard engine
A 28-foot sailboat
A 28-foot inboard motorboat
A 25-foot boat powered by a 30 horsepower outboard engine
- A.
Collision Coverage of Part DCoverage for Damage to Your Auto
Other Than Collision Coverage of Part DCoverage for Damage to Your Auto
Part ALiability Coverage
Part CUninsured Motorists Coverage
- A.
- B.
States that there must be a narrow spread of risk for insurance to be effective.
States that the more examples used to develop a statistic, the more reliable the statistic will be.
Requires all members of society with insurance exposures to purchase insurance.