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PERSONAL LINES INSURANCE
PRACTICE EXAM
Bobby, 00 age 00 16, 00 borrows 00 his 00 parents' 00 car 00 without 00 their 00 permission 00 and 00 gets 00 i nto 00 an 00 accident. 00 Which 00 of 00 the 00 following 00 statements 00 about 00 coverage 00 under 00 th e 00 parents' 00 personal 00 auto 00 policy 00 is 00 CORRECT? A) 00 Bobby 00 is 00 covered 00 by 00 his 00 parents' 00 policy 00 because 00 he 00 is 00 included 00 in 00 the 00 d efinition 00 of 00 named 00 insured. 00 B) 00 Bobby 00 is 00 not 00 covered 00 for 00 this 00 accident 00 because 00 he 00 used 00 the 00 car 00 without 0 0 permission. 00 C) 00 Bobby 00 is 00 not 00 covered 00 because 00 it 00 was 00 not 00 his 00 car. 00 D) 00 Bobby 00 is 00 covered 00 by 00 his 00 parents' 00 policy 00 because 00 he 00 is 00 a 00 family 00 member. 00 - 00 ans-- ✔✔D) 00 Bobby 00 is 00 covered 00 by 00 his 00 parents' 00 policy 00 because 00 he 00 is 00 a 00 family 00 mem ber. Explanation: 00 Bobby 00 is 00 a 00 family 00 member 00 and 00 thus 00 automatically 00 is 00 covered 00 un der 00 the 00 family's 00 PAP 00 policy. 00 Even 00 though 00 Bobby 00 is 00 using 00 the 00 car 00 without 00 pe rmission, 00 the 00 exclusion 00 pertaining 00 to 00 nonpermissive 00 users 00 does 00 not 00 apply 00 to 00 use 00 of 00 an 00 owned 00 auto 00 policy 00 by 00 resident 00 family 00 members. Reference: 00 8.7.2 00 in 00 License 00 Exam 00 Manual A 00 parking 00 valet 00 at 00 a 00 hotel 00 uses 00 a 00 guest's 00 car 00 to 00 do 00 a 00 personal 00 errand 00 and 00 damages 00 the 00 car 00 in 00 a 00 collision. 00 The 00 guest 00 has 00 a 00 personal 00 auto 00 policy 00 (PA P). 00 The 00 insurance 00 company 00 will 00 pay 00 the 00 claim 00 and 00 ____. A) 00 relieve 00 the 00 parking 00 valet 00 of 00 legal 00 liability 00 for 00 the 00 loss B) 00 subrogate 00 against 00 the 00 named 00 insured C) 00 subrogate 00 against 00 the 00 parking 00 valet D) 00 recover 00 any 00 additional 00 loss 00 from 00 the 00 lienholder 00 - 00 ans-- ✔✔C) 00 subrogate 00 against 00 the 00 parking 00 valet
Explanation: 00 Part- D 00 coverage 00 for 00 Damage 00 to 00 Your 00 Auto 00 of 00 the 00 PAP 00 contains 00 a 00 no 00 benefit 00 to 0 0 bailee 00 provision. 00 This 00 provision 00 states 00 that 00 a 00 carrier 00 or 00 other 00 bailee 00 for 00 hire, 00 such 00 as 00 a 00 parking 00 gar5age, 00 service 00 station, 00 or 00 moving 00 company 00 will 00 not 00 di rectly 00 or 00 indirectly 00 benefit 00 from 00 the 00 PAP's 00 insurance. 00 A 00 bailee 00 is 00 an 00 individua l 00 or 00 entity 00 that 00 assumes 00 possession 00 of 00 goods 00 owned 00 by 00 another 00 for 00 the 00 pur pose 00 of 00 transporting, 00 servicing, 00 or 00 storing 00 them. 00 When 00 temporary 00 custody 00 is 00 assumed, 00 the 00 bailee 00 becomes 00 legally 00 liable 00 for 00 the 00 goods. Reference: 00 8.7.2 00 in 00 the 00 License 00 Exam 00 Manual Who 00 of 00 the 00 following 00 are 00 required 00 to 00 be 00 members 00 of 00 the 00 Arizona 00 Property 00 a nd 00 Casualty 00 Insurance 00 Guaranty 00 Fund? A) 00 All 00 insurers 00 that 00 write 00 the 00 types 00 of 00 insurance 00 that 00 are 00 protected 00 by 00 the 00 f und 00 in 00 Arizona B) 00 Foreign 00 property 00 and 00 casualty 00 insurers 00 only C) 00 lien 00 property 00 and 00 casualty 00 insurers 00 only D) 00 All 00 insurers 00 that 00 write 00 insurance 00 in 00 Arizona, 00 including 00 life 00 and 00 health 00 insur ers 00 - 00 ans-- ✔✔A) 00 All 00 insurers 00 that 00 write 00 the 00 types 00 of 00 insurance 00 that 00 are 00 protected 00 by 00 th e 00 fund 00 in 00 Arizona Explanation: 00 All 00 insurers 00 that 00 write 00 types 00 of 00 insurance 00 that 00 are 00 protected 00 by 00 the 00 fund 00 are 00 required 00 to 00 be 00 member 00 insurers 00 of 00 the 00 fund. 00 Reference: 00 State 00 Supplement 00 in 00 the 00 License 00 Exam 00 Manual. Reference: 00 4.4.16.3 00 in 00 the 00 License 00 Exam 00 Manual Which 00 one 00 of 00 the 00 following 00 dwellings 00 would 00 a 00 HO- 300 Homeowners 00 Form 00 cover? A) 00 Condominium B) 00 Office 00 building C) 00 Single-family 00 home D) 00 Apartment 00 building 00 - 00 ans--✔✔C) 00 Single-family 00 home Explanation: 00 HO-3 00 Homeowners 00 Form 00 covers 00 owner- occupied 00 single 00 family 00 dwellings. 00 Condominiums 00 are 00 covered 00 by 00 the 00 HO-
- 00 Office 00 and 00 apartment 00 buildings 00 would 00 be 00 covered 00 by 00 a 00 commercial 00 policy. Reference: 00 7.4.1 00 in 00 the 00 License 00 Exam 00 Manual Which 00 on 00 of 00 the 00 following 00 would 00 be 00 classified 00 as 00 a 00 general 00 damage?
0 open 00 peril 00 basis. 00 Longshore 00 and 00 harbor 00 workers' 00 compensation 00 insurance 00 is 00 found 00 in 00 personal 00 yacht 00 policies, 00 which 00 are 00 used 00 to 00 insure 00 larger 00 vessels 00 th an 00 those 00 covered 00 under 00 boatowners 00 policies. Reference: 00 9.8.1 00 in 00 the 00 License 00 Exam 00 Manual An 00 insured 00 owns 00 a 00 pet 00 lion 00 that 00 is 00 caged 00 on 00 the 00 homeowner's 00 property. 00 Th e 00 owner 00 takes 00 great 00 care 00 to 00 warn 00 neighbors 00 of 00 the 00 possible 00 danger 00 by 00 post ing 00 signs, 00 fencing 00 the 00 yard, 00 and 00 locking 00 the 00 cage 00 at 00 all 00 times. 00 When 00 a 00 nei ghbor's 00 child 00 manages 00 to 00 open 00 the 00 cage 00 and 00 is 00 bitten, 00 what 00 type 00 of 00 liability 0 0 would 00 apply 00 to 00 the 00 lion 00 owner? A) 00 Absolute 00 liability B) 00 Contractual 00 liability C) 00 Premises 00 liability D) 00 Vicarious 00 liability 00 - 00 ans--✔✔A) 00 Absolute 00 liability Explanation: 00 The 00 law 00 imposes 00 strict 00 or 00 absolute 00 liability 00 for 00 specific 00 situations 0 0 or 00 activities 00 that 00 pose 00 threats 00 to 00 the 00 safety 00 of 00 others. 00 People 00 who 00 own 00 dan gerous 00 animals 00 are 00 held 00 to 00 a 00 higher 00 standard 00 of 00 care. 00 Absolute 00 liability 00 appli es 00 when 00 a 00 person 00 is 00 liable 00 for 00 a 00 dangerous 00 condition, 00 regardless 00 of 00 the 00 am ount 00 of 00 care 00 taken. Reference: 00 5.3.4 00 in 00 the 00 License 00 Exam 00 Manual Which 00 of 00 the 00 following 00 terms 00 is 00 used 00 to 00 describe 00 an 00 empty 00 building 00 that 00 is 00 not 00 being 00 used? A) 00 Vacated B) 00 Absent C) 00 Unoccupied D) 00 Vacant 00 - 00 ans--✔✔D) 00 Vacant Explanation: 00 A 00 building 00 that 00 is 00 not 00 currently 00 in 00 use 00 and 00 does 00 not 00 have 00 enou gh 00 furnishings 00 to 00 function 00 in 00 its 00 normal 00 capacity 00 is 00 considered 00 vacant. 00 A 00 buil ding 00 is 00 unoccupied 00 if 00 no 00 one 00 is 00 currently 00 in 00 it, 00 but 00 furnishings 00 are 00 present 00 and 00 the 00 occupants 00 intended 00 to 00 return, 00 as 00 is 00 the 00 case 00 when 00 the 00 residents 00 ar e 00 out 00 of 00 town 00 on 00 vacation. Reference: 00 4.4.15 00 in 00 the 00 License 00 Exam 00 Manual Which 00 of 00 the 00 following 00 statements 00 about 00 umbrella 00 policies 00 is 00 NOT 00 correct? A) 00 They 00 provide 00 coverage 00 above 00 the 00 limits 00 of 00 underlying 00 policies. B) 00 They 00 are 00 written 00 only 00 for 00 commercial 00 risks.
C) 00 Losses 00 that 00 are 00 excluded 00 by 00 the 00 underlying 00 policy 00 but 00 covered 00 by 00 the 00 u mbrella 00 are 00 subject 00 to 00 the 00 umbrella's 00 retention 00 limit. D) 00 If 00 the 00 insured 00 fails 00 to 00 keep 00 the 00 underlying 00 coverage 00 in 00 force, 00 the 00 umbrell a 00 policy 00 will 00 not 00 cover 00 the 00 amount 00 of 00 loss 00 that 00 would 00 have 00 been 00 paid 00 by 00 t he 00 underlying 00 policy. 00 - 00 ans-- ✔✔B) 00 They 00 are 00 written 00 only 00 for 00 commercial 00 risks. Explanation: 00 Umbrella 00 liability 00 policies 00 may 00 be 00 written 00 for 00 both 00 personal 00 and 00 commercial 00 risks. Reference: 00 9.9.1 00 in 00 the 00 License 00 Exam 00 Manual The 00 agent 00 has 00 many 00 responsibilities 00 to 00 the 00 applicant. 00 One 00 involves 00 a 00 trust 00 r elationship 00 between 00 the 00 agent 00 and 00 the 00 insured 00 regarding 00 the 00 insured's 00 financ es 00 and 00 confidentiality. 00 In 00 this 00 case, 00 the 00 agent 00 acts 00 in 00 what 00 capacity? A) 00 Fiduciary B) 00 Consultant C) 00 Attorney-in-fact D) 00 Special 00 agent 00 - 00 ans--✔✔A) 00 Fiduciary Explanation: 00 Agents 00 have 00 the 00 duty 00 to 00 act 00 in 00 a 00 fiduciary 00 capacity 00 that 00 require s 00 a 00 high 00 degree 00 of 00 trust 00 and 00 confidence. 00 This 00 duty 00 deals 00 with 00 the 00 agent's 00 dealings 00 with 00 both 00 the 00 insured 00 and 00 the 00 insurer. 00 The 00 agent 00 is 00 expected 00 to 00 b e 00 trustworthy, 00 act 00 in 00 good 00 faith, 00 and 00 preserve 00 confidential 00 information. 00 Reference: 00 1.9.2 00 in 00 the 00 License 00 Exam 00 Manual Thomas 00 had 00 a 00 forklift 00 injury 00 at 00 work 00 that 00 caused 00 his 00 death. 00 How 00 much 00 mon ey 00 will 00 his 00 surviving 00 spouse 00 receive 00 for 00 burial 00 expenses? A) 00 Up 00 to 00 $10, B) 00 Up 00 to 00 $1, C) 00 Up 00 to 00 $2, D) 00 Up 00 to 00 $5,000 00 - 00 ans--✔✔D) 00 Up 00 to 00 $5, Explanation: 00 Burial 00 expenses, 00 not 00 to 00 exceed 00 $5,000, 00 are 00 in 00 addition 00 to 00 the 00 c ompensation. Reference: 00 See 00 State 00 Supplement With 00 a 00 few 00 exceptions, 00 most 00 personal 00 insurance 00 policies 00 exclude 00 losses 00 arisin g 00 out 00 of 00 all 00 of 00 the 00 following 00 EXCEPT: A) 00 business 00 activities
ed 00 by 00 a 00 resident, 00 theft, 00 and 00 vandalism 00 or 00 malicious 00 mischief. 00 Coverage 00 is 00 li mited 00 to 00 5% 00 of 00 the 00 Coverage 00 A 00 limit 00 and 00 a 00 maximum 00 of 00 $500 00 for 00 any 00 one 00 tree, 00 shrub, 00 or 00 plant. Reference: 00 7.5.3 00 in 00 the 00 License 00 Exam 00 Manual An 00 insured 00 has 00 a 00 $60,000 00 Special 00 Form 00 (DP- 3). 00 When 00 a 00 covered 00 loss 00 in 00 the 00 amount 00 of 00 $10,000 00 damages 00 the 00 attached 00 garage, 00 how 00 much 00 of 00 that 00 amount 00 is 00 paid 00 under 00 the 00 Coverage 00 B- Other 00 Structures? A) 00 $ B) 00 $10, C) 00 $1, D) 00 $6,000 00 - 00 ans--✔✔A) 00 $ Explanation: 00 The 00 attached 00 garage 00 is 00 considered 00 part 00 of 00 the 00 dwelling, 00 so 00 the 00 $10,000 00 is 00 paid 00 under 00 Coverage 00 A- Dwelling. 00 Real 00 property 00 located 00 on 00 the 00 described 00 property 00 and 00 separated 00 fro m 00 the 00 dwelling 00 by 00 clear 00 space 00 is 00 covered 00 by 00 Coverage 00 B-Other 00 Structures. Reference: 00 6.4.3 00 in 00 the 00 License 00 Exam 00 Manual Section 00 II 00 of 00 the 00 homeowners 00 policy 00 provides 00 liability 00 coverage 00 for 00 all 00 of 00 the 0 0 following 00 EXCEPT A) 00 use 00 of 00 a 00 17-foot 00 sailboat B) 00 renting 00 the 00 garage 00 to 00 a 00 jewelry 00 maker C) 00 actions 00 of 00 a 00 domestic 00 animal 00 in 00 the 00 care 00 of 00 the 00 insured D) 00 actions 00 of 00 a 00 residence 00 employee 00 - 00 ans-- ✔✔B) 00 renting 00 the 00 garage 00 to 00 a 00 jewelry 00 maker Explanation: 00 The 00 homeowners 00 policy 00 excludes 00 liability 00 arising 00 out 00 of 00 the 00 rental 00 of 00 any 00 part 00 of 00 the 00 premises, 00 except 00 for 00 the 00 rental 00 part 00 of 00 an 00 insured 00 locat ion 00 as 00 a 00 residence. Reference: 00 7.6.4 00 in 00 the 00 License 00 Exam 00 Manual Which 00 of 00 the 00 following 00 is 00 NOT 00 an 00 eligibility 00 requirement 00 for 00 a 00 homeowners 00 p olicy? A) 00 Named 00 insured 00 is 00 the 00 owner-occupant 00 of 00 dwelling B) 00 Dwelling 00 is 00 a 00 seasonal 00 residence C) 00 No 00 more 00 than 00400 families 00 occupy 00 the 00 home
D) 00 Named 00 insured 00 lives 00 on 00 a 00 farm 00 - 00 ans-- ✔✔D) 00 Named 00 insured 00 lives 00 on 00 a 00 farm Explanation: 00 Farms 00 are 00 not 00 covered 00 under 00 homeowners 00 policies. 00 They 00 have 00 t heir 00 own 00 specific 00 farm 00 policy. 00 A 00 homeowners 00 policy 00 requires 00 that 00 the 00 named 0 0 insured 00 in 00 the 00 owner- occupant 00 and 00 there 00 are 00 no 00 more 00 than 00400 families 00 in 00 the 00 home. 00 A 00 seasonal 00 residence 00 may 00 also 00 be 00 covered 00 under 00 a 00 homeowners 00 policy. Reference: 00 7.3.2 00 in 00 the 00 License 00 Exam 00 Manual The 00 provisions 00 of 00 the 00 Terrorism 00 Risk 00 Insurance 00 Act 00 of 00200200 apply 00 to 00 which 00 of 00 the 00 following 00 lines 00 of 00 insurance? A) 00 Homeowners B) 00 Commercial 00 property C) 00 Automobile D) 00 Dwelling 00 - 00 ans--✔✔B) 00 Commercial 00 property Explanation: 00 The 00 Terrorism 00 Risk 00 Insurance 00 Act 00 of 00200200 established 00 a 00 federal 0 0 program 00 to 00 provide 00 compensation 00 for 00 insured 00 losses 00 resulting 00 from 00 terrorism 00 acts. 00 Most 00 commercial 00 property 00 and 00 casualty 00 policies 00 are 00 required 00 to 00 offer 00 co verage 00 for 00 certified 00 acts 00 of 00 terrorism. 00 The 00 program 00 does 00 not 00 apply 00 to 00 person al 00 lines 00 coverage. Reference: 00 3.8.2 00 in 00 the 00 License 00 Exam 00 Manual Trees, 00 shrubs, 00 and 00 other 00 plants 00 are 00 covered 00 as 00 additional 00 coverages 00 for 00 Cov erages 00 A- The 00 coverage 00 is 00 limited 00 to 00 certain 00 perils, 00 however. 00 All 00 of 00 the 00 following 00 perils 0 0 are 00 covered 00 when 00 causing 00 damage 00 to 00 a 00 tree 00 or 00 shrub 00 EXCEPT A) 00 riot B) 00 explosion C) 00 theft D) 00 wind 00 - 00 ans--✔✔D) 00 wind Explanation: 00 The 00 insurer 00 will 00 cover 00 trees, 00 shrubs, 00 plants 00 or 00 lawns 00 at 00 the 00 resi dence 00 premises 00 for 00 loss 00 caused 00 by 00 fire, 00 lightning, 00 explosion, 00 riot, 00 civil 00 commo tion, 00 aircraft, 00 nonowned 00 vehicles, 00 vandalism 00 and 00 malicious 00 mischief, 00 and 00 theft. 0 0 Wind, 00 a 00 common 00 peril 00 causing 00 damages 00 to 00 trees, 00 is 00 not 00 covered. Reference: 00 7.5.3 00 in 00 the 00 License 00 Exam 00 Manual Which 00 one 00 of 00 the 00 following 00 is 00 an 00 example 00 of 00 a 00 peril?
Reference: 00 4.4.16.3 00 in 00 the 00 License 00 Exam 00 Manual Which 00 of 00 the 00 following 00 is 00 an 00 example 00 of 00 property 00 that 00 might 00 be 00 insured 00 on 0 0 an 00 agreed 00 value 00 basis? A) 00 Rare 00 painting B) 00 Car C) 00 House D) 00 Apartment 00 building 00 - 00 ans--✔✔A) 00 Rare 00 painting Explanation: 00 Some 00 items 00 of 00 property 00 are 00 very 00 difficult 00 to 00 value 00 after 00 a 00 loss 00 has 00 occurred. 00 In 00 this 00 situation, 00 the 00 insured 00 and 00 insurer 00 will 00 agree 00 on 00 a 00 valu e 00 before 00 the 00 policy 00 is 00 issued. 00 Antique 00 furniture 00 or 00 fine 00 arts 00 will 00 most 00 likely 00 have 00 agreed 00 values. 00 If 00 a 00 loss 00 occurs, 00 the 00 agreed 00 value 00 will 00 be 00 the 00 amount 0 0 the 00 insured 00 is 00 guaranteed 00 to 00 receive. 00 Reference: 00 4.4.10 00 in 00 the 00 License 00 Exam 00 Manual Jim 00 and 00 his 00 family 00 are 00 considering 00 a 00 move 00 to 00 the 00 West 00 Coast 00 but 00 are 00 very 00 concerned 00 about 00 earthquakes. 00 Jim 00 called 00 an 00 insurance 00 agent 00 for 00 advice. 00 W hat 00 is 00 the 00 best 00 advice 00 the 00 agent 00 could 00 give 00 Jim 00 about 00 adequately 00 covering 00 his 00 new 00 home 00 for 00 possible 00 earthquake 00 damage? A) 00 A 00 separate 00 earthquake 00 policy 00 should 00 be 00 purchased 00 to 00 provide 00 full 00 coverag e 00 for 00 earth 00 movement. 00 B) 00 Adding 00 the 00 earthquake 00 endorsement 00 will 00 provide 00 the 00 coverage 00 needed. 00 C) 00 The 00 homeowners 00 policy 00 automatically 00 provides 00 earthquake 00 coverage. 00 D) 00 A 00 state 00 insurance 00 fund 00 will 00 cover 00 any 00 damage 00 that 00 occurs. 00 - 00 ans-- ✔✔B) 00 Adding 00 the 00 earthquake 00 endorsement 00 will 00 provide 00 the 00 coverage 00 needed. 0 0 Explanation: 00 The 00 basic 00 homeowners 00 policy 00 specifically 00 excludes 00 earthquakes, 00 i ncluding 00 the 00 land 00 shock 00 waves 00 or 00 earth 00 movement 00 caused 00 by 00 a 00 volcanic 00 er uption; 00 landslide; 00 mine 00 subsidence; 00 mudflow; 00 and 00 earth 00 sinking, 00 rising, 00 or 00 shift ing. 00 The 00 earthquake 00 endorsement 00 must 00 be 00 added 00 to 00 the 00 homeowners 00 policy 00 to 00 provide 00 coverage 00 for 00 damage 00 caused 00 by 00 earth 00 movement. Reference: 00 7.5.7 00 in 00 the 00 License 00 Exam 00 Manual In 00 legal 00 terms, 00 voluntary 00 relinquishment 00 of 00 a 00 known 00 right 00 is 00 called 00 a A) 00 Waiver B) 00 Concealment C) 00 Warranty
D) 00 Withdrawal 00 - 00 ans--✔✔A) 00 Waiver Explanation: 00 A 00 waiver 00 is 00 a 00 voluntary 00 relinquishment 00 of 00 a 00 known 00 right. 00 If 00 an 00 i nsurer 00 wives 00 a 00 legal 00 right 00 under 00 an 00 insurance 00 policy, 00 it 00 cannot 00 deny 00 a 00 futur e 00 claim 00 on 00 the 00 basis 00 of 00 a 00 violation 00 of 00 that 00 right. 00 This 00 is 00 known 00 as 00 estoppel , 00 because 00 the 00 insurer 00 is 00 estopped 00 from 00 denying 00 the 00 claim. Reference: 00 2.3.2.11 00 in 00 the 00 License 00 Exam 00 Manual Effective 00 June 00 30, 00 2020, 00 the 00 minimum 00 requirements 00 in 00 Arizona 00 for 00 uninsured 0 0 motorists 00 coverage 00 for 00 bodily 00 injuries 00 are A) 00 $20,000 00 per 00 person 00 in 00 all 00 cases B) 00 $50,000 00 per 00 accident 00 regardless 00 of 00 the 00 number 00 of 00 persons 00 involved C) 00 $50,000 00 per 00 person 00 and 00 $100,000 00 per 00 accident D) 00 $25,000 00 per 00 person 00 and 00 $50,000 00 per 00 accident 00 - 00 ans-- ✔✔D) 00 $25,000 00 per 00 person 00 and 00 $50,000 00 per 00 accident Explanation: 00 An 00 insured 00 must 00 purchase 00 uninsured 00 motorists 00 coverage 00 with 00 bod ily 00 injury 00 limits 00 of 00 at 00 least 00 $25,000 00 per 00 person 00 and 00 $50,000 00 per 00 accident. Reference: 00 See 00 State 00 Supplement The 00 insured 00 rear- ends 00 another 00 vehicle 00 that 00 is 00 stopped 00 at 00 a 00 red 00 light. 00 The 00 driver 00 of 00 the 00 car 00 struck 00 by 00 the 00 insured 00 is 00 badly 00 injured. 00 The 00 insured, 00 his 00 daughter 00 and 00 her 00 fri end 00 were 00 in 00 the 00 car 00 and 00 were 00 also 00 injured. 00 Part 00 B 00 of 00 the 00 insured's 00 person al 00 auto 00 policy 00 will 00 pay 00 medical 00 expenses 00 for 00 all 00 of 00 the 00 following 00 EXCEPT: A) 00 the 00 insured. 00 B) 00 the 00 occupant 00 of 00 the 00 car 00 struck 00 by 00 the 00 insured. 00 C) 00 the 00 insured's 00 daughter's 00 friend. 00 D) 00 the 00 insured's 00 daughter. 00 - 00 ans-- ✔✔B) 00 the 00 occupant 00 of 00 the 00 car 00 struck 00 by 00 the 00 insured. 00 Explanation: 00 Part 00 B 00 of 00 the 00 personal 00 automobile 00 policy 00 (PAP) 00 provides 00 coverag e 00 for 00 medical 00 payments 00 incurred 00 in 00 an 00 auto 00 accident 00 without 00 regard 00 to 00 fault. 00 Covered 00 persons 00 include 00 the 00 insured, 00 family 00 members, 00 and 00 any 00 passengers 0 0 in 00 the 00 insured's 00 vehicle. 00 It 00 does 00 not 00 provide 00 liability 00 coverage 00 for 00 injuries 00 su stained 00 by 00 passengers 00 in 00 another 00 auto 00 involved 00 in 00 an 00 incident 00 with 00 the 00 insur ed. Reference: 00 8.8.1 00 in 00 the 00 License 00 Exam 00 Manual
D) 00 admittance 00 - 00 ans--✔✔C) 00 authority Explanation: 00 Insurers 00 must 00 hold 00 a 00 certificate 00 of 00 authority 00 from 00 the 00 Director 00 be fore 00 they 00 can 00 transact 00 insurance 00 business 00 in 00 Arizona. 00 A 00 certificate 00 of 00 authorit y 00 indicates 00 that 00 a 00 company 00 meets 00 the 00 state's 00 standards 00 to 00 operate 00 as 00 an 00 in surer 00 and 00 to 00 transact 00 insurance. Reference: 00 See 00 State 00 Supplement If 00 a 00 vehicle 00 collides 00 with 00 a 00 boulder 00 that 00 came 00 tumbling 00 down 00 the 00 side 00 of 00 a 0 0 mountain, 00 what 00 coverage 00 would 00 pay 00 for 00 the 00 damage? A) 00 Collision B) 00 Uninsured 00 motorist C) 00 Other 00 than 00 Collision D) 00 Supplemental 00 payments 00 - 00 ans--✔✔C) 00 Other 00 than 00 Collision Explanation: 00 Other 00 than 00 collision 00 coverage 00 pays 00 for 00 direct 00 and 00 accidental 00 loss es 00 to 00 a 00 vehicle 00 including 00 colliding 00 with 00 falling 00 objects 00 such 00 as 00 a 00 boulder. Reference: 00 8.12.1 00 in 00 the 00 License 00 Exam 00 Manual If 00 death 00 results 00 from 00 a 00 compensable 00 injury, 00 the 00 maximum 00 amount 00 of 00 coverag e 00 paid 00 under 00 workers 00 compensation 00 for 00 burial 00 expenses 00 is: A) 00 $1, B) 00 $4, C) 00 $5, D) 00 $2,000 00 - 00 ans--✔✔C) 00 $5, Explanation: 00 If 00 death 00 results 00 from 00 a 00 compensable 00 injury, 00 the 00 maximum 00 amoun t 00 of 00 coverage 00 paid 00 under 00 workers' 00 compensation 00 for 00 burial 00 expenses 00 is 00 $5,
Reference: 00 See 00 State 00 Supplement Jeffrey 00 bought 00 a 00 car 00 yesterday 00 for 00 his 00 daughter 00 to 00 drive 00 to 00 school 00 and 00 her 00 job. 00 Under 00 Jeffrey's 00 automobile 00 policy, 00 this 00 car 00 is 00 considered A) 00 a 00 nonowned 00 automobile B) 00 an 00 uninsured 00 automobile C) 00 a 00 temporary 00 substitute 00 automobile D) 00 an 00 owned 00 automobile 00 - 00 ans--✔✔D) 00 an 00 owned 00 automobile
Explanation: 00 A 00 newly 00 acquired 00 automobile 00 is 00 an 00 owned 00 automobile 00 that 00 must 0 0 be 00 an 00 eligible 00 vehicle. 00 For 00 any 00 coverage 00 except 00 Coverage 00 for 00 Damage 00 to 00 Y our 00 Auto, 00 this 00 car 00 will 00 have 00 the 00 broadest 00 coverage 00 provided 00 for 00 any 00 of 00 the 00 cars 00 listed 00 on 00 the 00 declarations 00 until 00 it 00 is 00 added 00 to 00 the 00 policy. 00 It 00 must 00 be 00 in sured 00 within 001400 days 00 after 00 the 00 insured 00 becomes 00 the 00 owner. Reference: 00 8.4 00 in 00 the 00 License 00 Exam 00 Manual A 00 contract 00 in 00 which 00 one 00 insurer 00 cedes 00 all 00 or 00 part 00 of 00 a 00 risk 00 to 00 another 00 insu rer 00 is 00 known 00 as: A) 00 assuming 00 insurance B) 00 retro 00 insurance C) 00 reinsurance D) 00 a 00 participating 00 policy 00 - 00 ans--✔✔C) 00 reinsurance Explanation: 00 In 00 a 00 reinsurance 00 contract, 00 an 00 insurer 00 protects 00 itself 00 from 00 loss 00 or 0 0 liability 00 arising 00 from 00 an 00 original 00 contract 00 of 00 insurance 00 by 00 insuring 00 itself 00 throug h 00 another 00 insurer. 00 Reinsurance 00 is 00 the 00 spreading 00 or 00 sharing 00 of 00 a 00 risk 00 too 00 lar ge 00 for 00 one 00 insurer 00 by 00 ceding 00 part 00 of 00 the 00 risk 00 to 00 another 00 company 00 or 00 reinsu rer. Reference: 00 1.5.4 00 in 00 the 00 License 00 Exam 00 Manual A 00 dwelling 00 policy 00 can 00 be 00 used 00 to 00 insure 00 all 00 of 00 the 00 following 00 EXCEPT A) 00 an 00 apartment 00 building 00 with 00600 units B) 00 rental 00 homes C) 00 lake 00 cabins D) 00 duplexes 00 - 00 ans--✔✔A) 00 an 00 apartment 00 building 00 with 00600 units Explanation: 00 A 00 dwelling 00 policy 00 may 00 be 00 used 00 to 00 insure 00 a 00 building 00 with 00 up 00 to 0 0400 units. Reference: 00 6.3.2 00 in 00 the 00 License 00 Exam 00 Manual Medical 00 Payments 00 Coverage 00 is 00 Part 00 B 00 in 00 the 00 personal 00 automobile 00 policy. 00 All 0 0 of 00 the 00 following 00 statements 00 about 00 medical 00 payments 00 coverage 00 are 00 correct 00 E XCEPT A) 00 coverage 00 is 00 provided 00 for 00 the 00 named 00 insured 00 if 00 hit 00 by 00 a 00 car 00 while 00 walkin g 00 a 00 road B) 00 Part 00 B 00 covers 00 reasonable 00 expenses 00 for 00 services 00 incurred 00 within 00500 years 00 of 00 the 00 date 00 of 00 injury C) 00 no 00 coverage 00 is 00 available 00 if 00 the 00 vehicle 00 is 00 being 00 used 00 as 00 a 00 residence
B) 00 Short-rate C) 00 Premature D) 00 Flat 00 - 00 ans--✔✔A) 00 Pro 00 rate Explanation: 00 When 00 the 00 insurer 00 cancels 00 a 00 policy, 00 the 00 premium 00 refund 00 is 00 deter mined 00 on 00 a 00 pro 00 rata 00 basis. 00 Under 00 this 00 method, 00 the 00 premium 00 refund 00 equals 00 the 00 premium 00 paid 00 for 00 the 00 unexpired 00 term 00 of 00 the 00 policy. 00 A 00 short- rate 00 method 00 is 00 used 00 when 00 the 00 insured 00 cancels 00 the 00 policy. 00 A 00 policy 00 terminate d 00 by 00 either 00 the 00 insured 00 or 00 insurer 00 on 00 its 00 effective 00 date 00 results 00 in 00 a 00 flat 00 can cellation. 00 The 00 entire 00 premium 00 is 00 returned 00 to 00 the 00 policy 00 holder. 00 There 00 is 00 no 00 p remature 00 method 00 of 00 determining 00 how 00 much 00 premium 00 is 00 due. Reference: 00 3.4.3 00 in 00 the 00 License 00 Exam 00 Manual The 00 following 00 perils 00 may 00 be 00 insured 00 against 00 under 00 a 00 basic 00 dwelling 00 policy 00 E XCEPT: A) 00 lightning. 00 B) 00 vandalism 00 and 00 malicious 00 mischief. 00 C) 00 flood. 00 D) 00 fire. 00 - 00 ans--✔✔C) 00 flood. 00 Explanation: 00 Water 00 damage, 00 including 00 flooding, 00 is 00 not 00 a 00 covered 00 peril 00 under 00 a 00 dwelling 00 policy. 00 Fire 00 and 00 lightning 00 are 00 covered 00 perils 00 on 00 the 00 Basic 00 Form, 00 and 00 vandalism 00 and 00 malicious 00 mischief 00 is 00 available 00 for 00 an 00 additional 00 premium. Reference: 00 6.4.1.1 00 in 00 the 00 License 00 Exam 00 Manual Which 00 of 00 the 00 following 00 types 00 of 00 property 00 is 00 NOT 00 covered 00 by 00 a 00 dwelling 00 poli cy? A) 00300 apartment 00 dwellings B) 00 Row 00 houses C) 00 Farm 00 dwellings D) 00 Mobile 00 homes 00 on 00 permanent 00 foundations 00 - 00 ans--✔✔C) 00 Farm 00 dwellings Explanation: 00 Properties 00 eligible 00 for 00 dwelling 00 policies 00 include 00 mobile 00 homes 00 on 00 permanent 00 foundations, 00 townhouses, 00 row 00 houses, 00 and 00 dwellings 00 containing 00 up 0 0 to 00400 apartments. 00 Farm 00 dwellings 00 are 00 not 00 covered 00 by 00 dwelling 00 or 00 homeowner s 00 policies. 00 They 00 must 00 be 00 insured 00 under 00 the 00 farm 00 program 00 policy. Reference: 00 6.3.2 00 in 00 the 00 License 00 Exam 00 Manual All 00 of 00 the 00 following 00 are 00 excluded 00 under 00 collision 00 or 00 Other 00 than 00 Collision 00 cove rages 00 EXCEPT
A) 00 damages 00 to 00 awnings, 00 cabanas, 00 or 00 other 00 equipment B) 00 damage 00 due 00 to 00 wear 00 and 00 tear C) 00 road 00 damages 00 to 00 tires D) 00 flood 00 damage 00 - 00 ans--✔✔D) 00 flood 00 damage Explanation: 00 Flood 00 damage 00 to 00 a 00 vehicle 00 is 00 not 00 excluded 00 under 00 the 00 Other 00 tha n 00 Collisions 00 coverage. Reference: 00 8.12.1 00 in 00 the 00 License 00 Exam 00 Manual Under 00 an 00 auto 00 policy, 00 Other 00 than 00 Collision 00 coverage 00 would 00 apply 00 to 00 which 00 o f 00 the 00 following 00 situations? A) 00 All 00 of 00 the 00 car's 00 tires 00 are 00 stolen. 00 B) 00 An 00 insured 00 has 00 her 00 car 00 parked 00 at 00 an 00 airport, 00 and 00 a 00 suitcase 00 is 00 stolen 00 f rom 00 the 00 car. 00 C) 00 The 00 car 00 rolls 00 over 00 after 00 hitting 00 a 00 patch 00 of 00 ice. 00 D) 00 An 00 insured 00 breaks 00 a 00 window 00 to 00 gain 00 access 00 because 00 the 00 keys 00 were 00 left 00 inside. 00 - 00 ans--✔✔A) 00 All 00 of 00 the 00 car's 00 tires 00 are 00 stolen. 00 Explanation: 00 Other 00 than 00 Collision 00 coverage 00 protects 00 against 00 all 00 accidental 00 dam age 00 not 00 due 00 to 00 collision, 00 upset, 00 and 00 other 00 specified 00 exclusions. 00 Therefore, 00 th e 00 car 00 rolling 00 over 00 on 00 the 00 icy 00 road 00 would 00 not 00 be 00 covered, 00 nor 00 would 00 the 00 lo ss 00 of 00 personal 00 property, 00 such 00 as 00 a 00 suitcase. 00 Breakage 00 of 00 glass 00 would 00 be 00 c overed 00 only 00 if 00 the 00 breakage 00 were 00 due 00 to 00 a 00 collision 00 and 00 not 00 intentionally 00 ca used 00 by 00 the 00 insured. Reference: 00 8.12.1 00 in 00 the 00 License 00 Exam 00 Manual Section 00 II 00 of 00 a 00 homeowners 00 policy 00 covers 00 all 00 of 00 the 00 following 00 EXCEPT A) 00 bodily 00 injury 00 to 00 one 00 of 00 the 00 insured's 00 resident 00 family 00 members B) 00 property 00 damage 00 of 00 another 00 caused 00 by 00 the 00 insured C) 00 bodily 00 injury 00 to 00 others D) 00 liability 00 for 00 loss 00 of 00 use 00 of 00 another's 00 property 00 - 00 ans-- ✔✔A) 00 bodily 00 injury 00 to 00 one 00 of 00 the 00 insured's 00 resident 00 family 00 members Explanation: 00 Section 00 II 00 coverages 00 are 00 the 00 same 00 in 00 all 00600 forms. 00 They 00 cover 00 personal 00 liability 00 of 00 the 00 insured 00 and 00 medical 00 expenses 00 of 00 a 00 person 00 injured 00 o n 00 the 00 insured's 00 premises 00 (with 00 permission), 00 injured 00 as 00 a 00 result 00 of 00 the 00 activiti es 00 of 00 the 00 insured, 00 or 00 during 00 the 00 course 00 of 00 employment 00 for 00 the 00 insured 00 or 00 b y 00 an 00 animal 00 owned 00 by 00 the 00 insured. 00 Section 00 II 00 does 00 not 00 cover 00 injuries 00 to 00 th e 00 insured 00 or 00 to 00 resident 00 family 00 memb4ers.
Reference: 00 7.5.2.3 00 in 00 the 00 License 00 Exam 00 Manual In 00 homeowners 00 policies, 00 what 00 does 00 Coverage 00 A 00 insure? A) 00 Dwelling B) 00 Personal 00 property C) 00 Other 00 structures D) 00 Extra 00 expenses 00 - 00 ans--✔✔A) 00 Dwelling Explanation: 00 Coverage 00 A 00 provides 00 dwelling 00 coverage, 00 Coverage 00 B 00 covers 00 othe r 00 structures, 00 Coverage 00 C 00 insurers 00 personal 00 property, 00 and 00 Coverage 00 D 00 covers 0 0 loss 00 of 00 use. Reference: 00 7.5.1 00 in 00 the 00 License 00 Exam 00 Manual For 00 an 00 insurance 00 contract 00 to 00 be 00 legally 00 binding, 00 both 00 parties 00 to 00 the 00 contract 0 0 must 00 be 00 considered 00 competent. 00 Which 00 of 00 the 00 following 00 would 00 NOT 00 be 00 used 0 0 to 00 determine 00 competency? A) 00 Individual 00 is 00 not 00 under 00 the 00 influence 00 of 00 drugs 00 or 00 alcohol B) 00 Individual 00 is 00 over 00 age 0080 C) 00 Individual 00 is 00 of 00 legal 00 age D) 00 Individual 00 is 00 mentally 00 competent 00 - 00 ans--✔✔B) 00 Individual 00 is 00 over 00 age 0080 Explanation: 00 For 00 a 00 contract 00 to 00 be 00 legally 00 binding, 00 both 00 parties 00 must 00 have 00 the 00 legal 00 capacity 00 to 00 make 00 a 00 contract. 00 The 00 insured 00 must 00 be 00 of 00 legal 00 age 00 (usu ally 00 18) 00 and 00 be 00 mentally 00 competent 00 (sane 00 and 00 sober) 00 to 00 make 00 an 00 insurance 00 contract. 00 The 00 fact 00 that 00 an 00 individual 00 is 00 over 00 age 006500 would 00 not 00 make 00 that 00 person 00 mentally 00 incompetent. Reference: 00 2.3.1.4 00 on 00 the 00 License 00 Exam 00 Manual Both 00 parties 00 rely 00 on 00 statements 00 made 00 to 00 each 00 other 00 when 00 writing 00 a 00 contract
. 00 This 00 is 00 known 00 as 00 a 00 A) 00 unilateral 00 contract B) 00 speculative 00 contract C) 00 contract 00 of 00 utmost 00 good 00 faith D) 00 conditional 00 contract 00 - 00 ans--✔✔C) 00 contract 00 of 00 utmost 00 good 00 faith Explanation: 00 The 00 principle 00 of 00 utmost 00 good 00 faith 00 imposes 00 a 00 higher 00 degree 00 of 00 honesty 00 on 00 parties 00 to 00 an 00 insurance 00 contract. 00 The 00 insurer 00 relies 00 on 00 the 00 truthf ulness 00 on 00 the 00 application, 00 and 00 the 00 insured 00 relies 00 on 00 the 00 company's 00 promise 00 and 00 ability 00 to 00 provide 00 coverage 00 and 00 pay 00 claims. 00 Both 00 parties 00 must 00 know 00 all 0
0 material 00 facts 00 and 00 relevant 00 information, 00 neither 00 may 00 attempt 00 to 00 conceal 00 facts 0 0 or 00 deceive 00 the 00 other 00 party. 00 A 00 unilateral 00 contract 00 is 00 one 00 in 00 which 00 only 00 one 00 party 00 makes 00 a 00 legally 00 enforceable 00 promise. 00 In 00 a 00 conditional 00 contract, 00 the 00 ins urer's 00 consideration 00 is 00 a 00 promise 00 to 00 pay 00 only 00 if 00 a 00 certain 00 condition 00 is 00 met. 00 I f 00 the 00 condition 00 is 00 not 00 met, 00 the 00 insurer 00 does 00 not 00 have 00 to 00 pay. Reference: 00 2.3.2.3 00 on 00 the 00 License 00 Exam 00 Manual Jonathan 00 and 00 Mary 00 have 00200 sons. 00 Steve 00 lives 00 at 00 home 00 and 00 the 00 other 00 son, 00 Stan, 00 lives 00 in 00 an 00 apartment 00 across 00 town. 00 Jonathan 00 wants 00 to 00 buy 00 a 00 car 00 for 00 Stan 00 so 00 he 00 can 00 get 00 a 00 job 00 after 00 his 00 college 00 classes. 00 Jonathan 00 titles 00 the 00 car 0 0 in 00 both 00 his 00 name 00 and 00 Stan's 00 name 00 and 00 wants 00 to 00 add 00 the 00 car 00 to 00 his 00 auto mobile 00 policy. 00 Which 00 endorsement 00 will 00 provide 00 this 00 coverage? A) 00 Extended, 00 nonowned 00 coverage 00 for 00 named 00 individual B) 00 Drive 00 other 00 car C) 00 Miscellaneous 00 type 00 vehicle D) 00 Joint 00 ownership 00 coverage 00 - 00 ans--✔✔D) 00 Joint 00 ownership 00 coverage Explanation: 00 This 00 endorsement 00 provides 00 coverage 00 for 00 the 00 interests 00 of 00 each 00 o wner 00 of 00 a 00 covered 00 auto, 00 including 00 a 00 son 00 living 00 out 00 of 00 the 00 household. Reference: 00 8.13 00 on 00 the 00 License 00 Exam 00 Manual If 00 a 00 producer 00 moves, 00 he 00 must 00 report 00 his 00 new 00 address 00 to 00 the 00 director 00 within 0 0 how 00 many 00 days 00 after 00 moving? A) 0090 B) 00120 C) 0060 D) 003000 - 00 ans--✔✔D) 0030 Explanation: 00 If 00 a 00 producer 00 changes 00 his 00 address 00 (business 00 or 00 residential) 00 or 00 n ame, 00 the 00 producer 00 must 00 notify 00 the 00 director 00 within 003000 days 00 of 00 the 00 date 00 of 00 th e 00 change. Reference: 00 See 00 State 00 Supplement The 00 furniture 00 Harold 00 purchased 001000 years 00 ago 00 was 00 destroyed 00 in 00 a 00 fire. 00 The 00 furniture 00 cost 00 $9,000 00 when 00 new 00 and 00 has 00 depreciated 00 by 00 $5,000. 00 It 00 would 00 co st 00 $12,000 00 to 00 replace 00 this 00 furniture 00 today. 00 What 00 is 00 the 00 actual 00 cash 00 value 00 of 0 0 Harold's 00 destroyed 00 furniture? A) 00 $5, B) 00 $9,
