Homeowners and Auto Insurance Coverage, Exams of Insurance Economics

Download Homeowners and Auto Insurance Coverage and more Exams Insurance Economics in PDF only on Docsity! Louisiana Property and Casualty Insurance Exam| ACCURATE QUESTIONS AND DETAILED ANSWERS | GUARANTEED PASS | GRADED A | LATEST UPDATE 2024-2025 WITH 100 QUESTIONS The premises liability exposure exists when there is use of the premises. Operations liability exposure relates to activities in addition to use. Product liability exposure is the possibility that the public might be injured by the product. Completed operations liability refers to liability for work already performed or completed. For a boutique retail store, the only possible liability would arise from customer injury while on the premises. All of the following are true of Coverage B - Other Structures EXCEPT a) It must be added by endorsement to a homeowners policy. b) This coverage is not applicable on the HO-4 policy form. c) The amount of coverage provided by Coverage B is an amount equal to 10% of Coverage A. d) Land where the other structures are located is not covered. - ANSWER a) It must be added by endorsement to a homeowners policy. Homeowners policies automatically provide an amount of insurance in Coverage B that is equal to 10% of the amount written as Coverage A. This amount may be increased by endorsement. All of the following are supplemental payments included in the liability section of a personal auto policy EXCEPT a) Up to $100 for the cost to secure the release of a vehicle from an impoundment lot following a covered accident. b) Up to $200 a day for loss of earnings due to attendance at hearings or trials. c) Premiums on appeal bonds in any suit the insurer defends. d) Up to $250 for bail bonds required because of a covered accident. - ANSWER a) Up to $100 for the cost to secure the release of a vehicle from an impoundment lot following a covered accident. A personal auto policy does not pay the cost of the release of a vehicle impounded by a law enforcement agency. A large antenna is damaged when a tree branch hits an insured farm dwelling during a storm. Coverage A of a farm property coverage form would insure damages for this occurrence up to a) $1,000. b) $2,000. c) $3,000. d) $4,000. Antennas, towers, and satellite dishes attached to the dwelling are covered under Coverage A, but have a special limit of insurance of $1,000 in any 1 occurrence. - ANSWER a) $1,000. The purpose of a license is to primarily write non-controlled business. A claim is considered to have been made a) When notice is received and recorded by the insurer. b) When notice is received and recorded by any insured or the insurer, whichever comes first. c) When received in writing or telephonically by the insurer. d) When notice is received by any insured. - ANSWER b) When notice is received and recorded by any insured or the insurer, whichever comes first. This is a standard claims-made condition. When Commercial Crime Coverage Form M - Safe Depository Liability is written, what must be attached to the policy? a) The Robbery and Safe Burglary Provisions b) The General Provisions c) The Safe Depository General Provisions d) The Safe Depository Direct Loss Provisions - ANSWER c) The Safe Depository General Provisions When this coverage is written, the Safe Depository General Provisions must be attached to the policy instead of the general provisions. Which of the following is NOT a goal of risk retention? a) To increase control of claim reserving and claims settlements b) To fund losses that cannot be insured c) To minimize the insured's level of liability in the event of loss d) To reduce expenses and improve cash flow - ANSWER c) To minimize the insured's level of liability in the event of loss Retention usually results from three basic desires of the insured: to reduce expenses and improve cash flow, to increase control of claim reserving and claims settlements, and to fund losses that cannot be insured. Workers compensation statutes require employers to meet capital reserves requirements sufficient to pay any claims that might arise. Employers can meet such obligations through all of the following EXCEPT a) Self-insurance plans. b) Assigned risk plans. c) Competitive state funds. d) Second injury funds programs. - ANSWER d) Second injury funds programs. Second injury funds are a method by which employers manage the risks associated with the hiring of previously injured potential employees. What is a definition of a unilateral contract? a) Two or more parties go into a contract understanding there may be an unequal exchange of value. b) One author: the company wrote the contract; the insured must accept it as written. c) If one party makes a condition, the other party can counteroffer. d) One-sided: only one party makes an enforceable promise. - ANSWER d) One-sided: only one party makes an enforceable promise. An insurance contract is unilateral in that only one of the parties to the contract is legally bound to do anything. If a guest's property is lost or damaged while on the insured's premises or in their control, Crime Coverage Form L - Liability for Guests' Property - Premises covers the insured's a) General liability. b) Crime liability. c) Employee liability. d) Legal liability. - ANSWER d) Legal liability. This coverage is similar to Coverage K, except that it covers the insured's legal liability for loss or damage to guest's property while on the insured's premises or in their control. d) Basic coverage for the dwelling and broad form coverage for personal property. - ANSWER b) Open peril coverage on the dwelling and broad form coverage on personal property. The open peril coverage applies to property insured under Coverages A and B only. The Gramm-Leach-Bliley Act was passed to a) Protect private customer information filed with a financial institution. b) Define insurance as interstate commerce. c) Allow consumers access to credit and private consumer reports. d) Allow insurance companies access to medical information for underwriting purposes. - ANSWER a) Protect private customer information filed with a financial institution. The Gramm-Leach-Bliley Act was passed to protect private customer information that is filed with a financial institution. Customers must be given two disclosure notices (one at the onset of business and one before information is disclosed), as well as a yearly updated disclosure notice. An insured carries a property policy on her home in the amount of $250,000. A bank is shown as the mortgagor in the policy. Last month the insured made her final mortgage payment, but did not remove the bank from the policy. In the event of a covered loss to her home, how much will the bank receive? a) The standard minimum of 10% that is paid to lenders b) All of the payment would be made to the mortgagor shown in the policy. c) Nothing d) Up to the amount of debt that the insured has with the bank - ANSWER c) Nothing Because the bank does not have a financial interest in the house at the time of loss, they will receive nothing. A building insured with commercial property insurance has been vacant 90 days. Which of the following is NOT true? a) Payment for unnamed perils is reduced by 15%. b) Payment for unnamed perils is reduced by 25%. c) The insured has no coverage for losses caused by theft. d) The insured has no coverage for losses caused by glass breakage. - ANSWER b) Payment for unnamed perils is reduced by 25%. If the building has been vacant for more than 60 consecutive days before the loss, the insurer will not pay for damage caused by vandalism, sprinkler leakage, glass breakage, water damage, theft, or attempted theft. If the loss is caused by any other peril, the insurer will reduce the amount they would have otherwise paid by 15%. Personal property coverage under a homeowners policy would cover a) Property moved to a newly acquired residence after 60 days. b) A pet that the insured is temporarily keeping for a friend. c) The insured's camera if it is stolen while the insured is on vacation. d) A neighbor's fence if damaged by the insured. - ANSWER c) The insured's camera if it is stolen while the insured is on vacation. Coverage C is provided on a worldwide basis. Coverage for medical payments under a personal auto policy applies to expenses following a covered accident that are incurred and services rendered within what maximum time period? a) 90 days b) 1 year c) 3 years d) 5 years - ANSWER c) 3 years A coverage requirement in the policy states that medical expenses must be incurred within three years of the accident. The services also must be rendered within that time period. The Residential Condominium Building Association Policy (RCBAP) is used for residential condominium building associations to cover the entire building under one policy. Which of the following statements about RCBAP is true? a) It does not protect the individual owner from loss to personal property owned exclusively by the unit owner. b) It provides limited coverage for personal property owned exclusively by the unit owner. a) $100,000. b) $80,000. c) $20,000. d) $120,000. - ANSWER a) $100,000. Bob's policy will pay $100,000. If the repairs had been made ($20,000) and then the home destroyed, the policy would have paid $120,000 as two separate losses. Due to the unrepaired damage, the total amount of coverage is only the face amount of the policy. How much coverage is provided under a homeowners policy for theft or unauthorized use of a credit card? a) $100 b) $500 c) $1,000 d) $5,000 - ANSWER b) $500 $500 is provided automatically, and may be increased by endorsement. Under Coverage C of a homeowners policy, the amount of insurance provided to cover personal property of the insured is - ANSWER 50% of the amount provided as Coverage A Who is not considered an employee in a CGL? a) Full-time worker b) Part-time worker c) Temporary worker d) Leased worker - ANSWER c) Temporary worker By definition in a CGL, a temporary worker is not considered an employee. Which of the following types of agent authority is also called "perceived authority"? A. Implied B. Fiduciary C. Apparent D. Express - ANSWER C. Apparent Apparent authority (also known as perceived authority) is the appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created. An insured stated on her application for life insurance that she had never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. Which of the following will explain the reason a death benefit claim is denied? A. Material misrepresentation B. Waiver C. Utmost Good Faith D. Estoppel - ANSWER A. Material misrepresentation A material misrepresentation will affect whether or not a policy is issued. If the insured had been truthful, it is very likely that the policy would not be issued. On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are A. Paid at a fixed rate every year. B. Taxable as ordinary income. C. Guaranteed. D. Not taxable since the IRS treats them as a return of a portion of the premium paid. - ANSWER D. Not taxable since the IRS treats them as a return of a portion of the premium paid. With participating policies, policyowners are entitled to dividends, which, in the case of mutual companies, are nontaxable because they are considered a return of excess premiums. In what way can an agent demonstrate a high standard of ethics? A. Recommending qualified retirement plans to each client B. Putting the client's best interests before their own C. Making enough commissions to cover personal expenses A. Indemnity B. Reasonable expectations C. Cease and desist D. Nonforfeiture - ANSWER B. Reasonable expectations If, because of advertising or sales literature or statements by an agent, an insured could reasonably expect the coverage, the courts have held that the insurer must provide that coverage. Following a career change, an insured is no longer required to perform many physical activities, so he has implemented a program where he walks and jogs for 45 minutes each morning. The insured has also eliminated most fatty foods from his diet. Which method of dealing with risk does this scenario describe? A. Reduction B. Transfer C. Avoidance D. Retention - ANSWER A. Reduction The insured's change in lifestyle and habits would likely reduce the chances of health problems. Which of the following does the term proximate cause refer to? A. Duty of the defendant to act B. Reason for filing a lawsuit C. Negligence that leads to an injury D. Injury that leads to monetary compensation - ANSWER C. Negligence that leads to an injury Proximate cause is the reasonably foreseeable act or event that results in an injury or damage. Negligence may often be the proximate cause of the damage; without it, the accident would not have happened. This is also called direct liability. The policy conditions define A. The amount of coverage. B. How parties to the contract must act following a loss. C. The basic underwriting information. D. The excluded perils. - ANSWER B. How parties to the contract must act following a loss. Conditions is an essential part of a policy structure. Conditions define what each party to the policy is required to do contractually in the event of a loss. All of the following are considered parts of the policy structure EXCEPT A. Conditions. B. Provisions. C. Exclusions. D. Insuring clause. - ANSWER B. Provisions. Provisions is a broad term used to refer to the sections or clauses of an insurance policy that communicate the policy's benefits, conditions, etc. The essential parts of the policy are declarations, insuring clause, conditions and exclusions. What are the two types of compensatory damages? A. Special and general B. Pure and speculative C. Tort and general D. Normal and punitive - ANSWER A. Special and general Compensatory damages are intended to compensate someone for both tangible and intangible elements of a loss. Special damages are for the actual measurable losses, such as value of property or medical bills. General damages cannot be specifically measured in dollars, such as pain and suffering. An insured's business is damaged because of a fire, and he is forced to close the business temporarily for repairs. As a result, the insured lost income. What type of loss is this? A. Additional B. Consequential C. Direct D. Special - ANSWER B. Consequential Consequential loss, also known as indirect loss, is a second financial loss caused by a covered direct loss. a) Flood insurance is usually provided in property policies, but earthquake coverage is available by endorsement only. b) Both flood and earthquake are excluded perils in all property policies. c) Flood and earthquake coverage is available in all policies. d) Flood and earthquake coverage is available only through government insurance - ANSWER b) Both flood and earthquake are excluded perils in all property policies. Flood and earthquake are both excluded perils in all property policies. However, coverage for both or either one usually can be purchased separately for an additional premium (by endorsement). Supplementary payments on a CGL provide all of the following EXCEPT (Choose from the following options) 1. Pre-judgment and post-judgment interest. 2. The cost of bonds to release attachment. 3. Up to $500 a day for lost earnings and $2,000 for the cost of bail bonds. 4. $100 in gasoline costs by the insured driving a witness to and from court. - ANSWER 3. Up to $500 a day for lost earnings and $2,000 for the cost of bail bonds. Under the business auto coverage form, mobile equipment is covered for liability insurance (Choose from the following options) 1. When listed on the declarations. 2. When coverage is written as Symbol 1. 3. When being carried or towed by a covered auto. 4. On an excess basis. - ANSWER 3. When being carried or towed by a covered auto. In which of the following situations would off-premises coverage in a broad theft endorsement apply? (Choose from the following options) 1. The insured's live-in maid's quarters are burglarized. 2. The insured's jewelry is stolen from her vacation home after she returns home. 3. The insured's vacuum cleaner is stolen from her apartment. 4. The insured's camera is stolen from his vacation home while he is there. - ANSWER 4. The insured's camera is stolen from his vacation home while he is there Which of the following coverages will respond if a claim is made or a suit is brought against an insured for damages due to bodily injury or property damage caused by an occurrence to which the coverage applies? (Choose from the following options) 1. Coverage C - Personal Property 2. Coverage D - Loss of Use 3. Coverage E - Personal Liability 4. Coverage F - Medical Payments to Others - ANSWER 3. Coverage E - Personal Liability Unless the insured has rejected Uninsured Motorist Coverage, the insurer must provide coverage for damage to the insured auto caused by an uninsured auto in the amount of (Choose from the following options) 1. The actual cash value of the insured auto or $10,000, whichever is less. 2. A stated amount determined by the insured. 3. The replacement cost of the insured auto. 4. The market value of the insured auto. - ANSWER 1. The actual cash value of the insured auto or $10,000, whichever is less. All of the following statements concerning coinsurance are true EXCEPT a) It is used to help adequacy and equity in rates. b) The insured agrees to maintain insurance equal to some specified percentage of the value of the property. c) If the insurance carried is less than required, the insurance may not cover the whole loss. 3. $75 4. $100 - ANSWER 2. $60 When is liability coverage included in a homeowners policy? (Choose from the following options) 1. If the insured has form HO-4 2. If there is an endorsement 3. It is included automatically. 4. If the insured has forms HO-2 or HO-3 - ANSWER 3. It is included automatically An applicant is denied insurance because of information found on a consumer report. Which of the following requires that the insurance company supply the applicant with the name and address of the consumer reporting company? (Choose from the following options) 1. Disclosure rule 2. Fair Credit Reporting Act 3. Consumer Privacy Act 4. Conditional receipt - ANSWER 2. Fair Credit Reporting Act The Association is obligated to pay up to $10,000 for claims seeking return of unearned premium on (Choose from the following options) 1. Property insurance policies. 2. Casualty insurance policies. 3. Workers Compensation policies. 4. All of the above. - ANSWER 4. All of the above