AD Banker Practice

Question 1

All of the following are risk management techniques, except:

Transfer

Retention

Enhancement

Avoidance

Answer 1

Enhancement.

Enhancement is not a risk management technique.

Question 2

Which of the following is NOT a residence premises in the Homeowners Policy?

A 3-family dwelling where the named insured resides

Premises rented occasionally to the named insured for nonbusiness purposes

A 1-family residence where the named insured resides

Other structures on the Declarations if shown as the residence premises

Answer 2

Premises rented occasionally to the named insured for nonbusiness purposes.

Question 3

Which of the following work-related injuries might not be covered by Workers’ Compensation insurance?

An employee is injured despite the extensive safety measures taken by the employer

An employee is injured when a fellow employee pushes him/her into heavy machinery

An employee suffers his/her second injury in the same year

An employee from accounting is injured while assisting an assembly line worker

Answer 3

An employee from accounting is injured while assisting an assembly line worker.

An covered injury does not include an injury to an employee performing duties he/she was not hired or trained to do.

Question 4

Rates are referred to as which of the following when the insurance company files for approval and then implements the rates?

File and Use

Prior Approval

Mandatory

Open Competition

Answer 4

File and Use.

Question 5

Under the Broad Form Dwelling Policy (DP-2), which peril is not included for coverage without an endorsement?

Theft

Damage to appliances by artificially generated electricity

Volcanic Eruption

Falling Objects

Answer 5

Theft.

only through endorsement

Question 6

Which of the following is not one of the limits of liability provided by the CGL?

Personal and advertising injury limit

Bodily injury limit

General aggregate limit

Medical expense limit

Answer 6

Bodily injury limit

There is no unique limit for bodily injury losses, though payment for such losses would be subject to other policy limits, such as the per occurrence limit, the general aggregate limit, the products-completed operations aggregate limit, or the medical expenses limit.

Question 7

Which of the following is true regarding the Medical Payments coverage under the Business Auto Policy?

Coverage is limited to medical expenses incurred in the first year after the accident

Medical Payments coverage pays loss of income during disability arising from a covered accident

Medical Payments coverage is designed to provide medical payments coverage for employees

The BAP does not automatically include Medical Payments coverage

Answer 7

The BAP does not automatically include Medical Payments Coverage

Question 8

All of the following coverage forms may be added to the Commercial Property Coverage Part, except:

The Businessowners Policy

Legal Liability Coverage Form

Commercial Builders Risk Coverage Form

Building and Personal Property Coverage Form

Answer 8

The Business-owners Policy

The BOP is designed as an alternative to the CPP, and cannot be added to it as a coverage part.

Question 9

Which of the following is true concerning monopolistic states regarding Workers’ Compensation insurance?

In Monopolistic states, Workers’ Compensation is only available through a state fund

In Monopolistic states, all coverage is written through a pool of insurance companies

Monopolistic states do not have Workers’ Compensation statutes

In Monopolistic states, only one insurance company, chosen by the state, is allowed to provide coverage

Answer 9

In Monopolistic states, Worker’s Compensation is only available through a state fund.

Question 10

Which of the following describes the person that has care and custody of insured property outside the insured premises?

Custodian

Employee

Messenger

Watchperson

Answer 10

Messenger.

The term Messenger is used to describe a person who has custody of the property outside the premises.

Question 11

Which insurance company department determines the probability of loss and sets the premium rates?

Claims

Underwriting

Sales

Actuarial

Answer 11

Actuarial.

The Actuarial Department interprets the statistical information used in rate making, whereas the Underwriting Department is responsible for risk selection.

Question 12

During an inventory check, Company RST discovers a shortage of product and materials. No evidence of a crime is found either at the warehouse or in the electronic record. Which of the following describes Company RST’s likely course of action?

It files a claim with its insurance company seeking coverage under the mysterious disappearance clause of their burglary coverage

It files a computer fraud claim on the assumption that the computer system was flawed

It has to absorb the loss, since no evidence of a crime existed

It files a claim under the employee theft insuring agreement

Answer 12

It has to absorb the loss, since no evidence of a crime existed.

Mysterious disappearance is not covered by any of the standard crime coverage forms.

Question 13

If other insurance also applies to a loss covered by a policy, which of the following will establish the method for determining how the insurance companies will pay the loss?

Limit of Liability

Pro rata liability

Claim Settlement

Subrogation

Answer 13

Pro rata liability

Question 14

All of the following are true about extended reporting periods, except:

The basic extended reporting period allows a claim to be reported after the policy period for a specified number of days

The supplemental tail requires an annual premium

Under the supplemental tail, the insured must request coverage within 60 days after the end of the policy term

The basic extended reporting period does not increase the policy limits

Answer 14

The supplemental tail requires an annual premium.

The supplemental extended reporting period has a one-time period.

Question 15

T’s office condominium is covered under a Condominium Commercial Unit-Owners Coverage Form. Which of the following is not covered on a primary basis?

Fixtures owned by the Association

Business personal property

Furniture

Improvements

Answer 15

Fixtures owned by the Association.

In the event both the unit-owner’s policy and the association’s policy cover the fixtures, the unit-owner’s coverage will be excess.

Question 16

Policyholder L has a DP-1 with a Coverage A amount of $300,000. Following a severe storm, L suffers a covered loss to the dwelling of $275,000 and a covered loss to a detached swimming pool of $30,000. How much will L’s policy pay?

$250,000

$305,000

$275,000

$300,000

Answer 16

$300,000

The pool is covered under Coverage B, which pays up to 10% of Coverage A, or $30,000. However, because L’s policy is written on the DP-1 form, the Coverage B limit is included in, not additional to, Coverage A limit. Therefore, the most the policy will pay is $300,000.

Question 17

The insurer may cancel a BOP when an insured building has been vacant or unoccupied for how many days?

120

90

60

30

Answer 17

60.

Question 18

The HO-8 form settles losses to the building on what valuation method?

Functional Replacement Value

Replacement value

Aggregate value

Agreed value

Answer 18

Functional Replacement Value

Question 19

Within how many days must a producer notify the Director that the address of their business office has changed?

Answer 19

30

Question 20

Which of the following is stated in the Insuring Agreement?

The perils excluded by the policy

The Other Insurance provision

The perils insured against

The location of insured property and the named insured’s mailing address

Answer 20

The perils insured against.

The Insuring Agreement states the insurance company’s promise to pay the insured, including the exact perils insured against by the policy.

Question 21

Which of the following claims would be excluded under the Business Auto Policy?

Bail bonds required after a covered accident

Damage to property in the insured’s care, custody, or control

Bodily injury after a person is struck by a mechanical device attached to a covered truck

Injury to another motorist

Answer 21

Damage to property in the insured’s care, custody, or control.

Question 22

Which form would cover a business owner who operates out of a temporary location during restoration?

Expediting Expenses

Extra Expense

Contingent Business Interruption

Business Income

Answer 22

Extra Expense

This provides coverage for extra expenses, such as operating out of a temporary location for up to 12 months after the date of physical loss or damage.

Question 23

Which statement is true regarding the Personal Liability Supplement to the Dwelling policy?

The supplement covers damage to the insured’s personal autos

The supplement covers professional services rendered by the insured

The Limit of Liability is the same as the Coverage A amount

The supplement provides coverage for claim expenses

Answer 23

The supplement provides coverage for claim expenses.

The liability supplement provides coverage for claim expenses, first aid expenses, and damage to the property of others/

Question 24

Endorsements that coordinate CPP coverages to avoid duplication are called:

Panel

Coordinating

Interline

Special

Answer 24

Interline.

These endorsement coordinate coverage contained in one coverage part of the policy with another coverage part.

Question 25

Choose the false statement regarding the application of coverage under the Products Exposure Liability Coverage.

Coverage applies to property damage the product causes

Coverage applies to bodily injury the product causes

Coverage applies to bodily injury occurring away from premises the insured owns or rents

Coverage applies to damage to the product itself

Answer 25

Coverage applies to damage to the product itself.

Said to chose FALSE statement

Question 26

Mobile Home Insurance includes all of the following, except:

Coverage B with a limit of 10% of Coverage A

Property Removal up to $500

Coverage A Dwelling coverage

Coverage C with a limit of 50% of Coverage A

Answer 26

Coverage C with a limit of 50% of Coverage A.

The Personal Property coverage limit is written at 40% of Coverage A for the Mobile Home policy, instead of at 50%.

Question 27

Under a BOP, the insurer may examine and audit the insured’s books and records at any time during the policy period and up to what duration after policy expiration?

3 years

7 years

5 years

1 year

Answer 27

3 years.

Question 28

J has a personal auto policy with Liability limits of 50/100/25, UM/UIM limits of 50/100, a Medical Payment limit of $5,000 and Comprehensive and Collision deductibles of $500. J’s vehicle slides on ice and hits a guardrail causing $9,500 in damage to the vehicle and $11,000 damage to the guardrail. J also sustains $1,000 in injuries. How much will the policy pay for all damages?

$11,000

$21,500

$9,500

$21,000

Answer 28

$21,500

The policy will pay $11,000 in Property damage under liability, $1,000 for injuries under medical payments, and $9,000 for physical damage after the deductible is met, totaling $21,000.

Question 29

Which of the following is not a coverage extension under the Building and Personal Property Coverage Form?

Newly acquired or constructed property

Outdoor property

Inflation guard

Personal effects and property of others

Answer 29

Inflation Guard.

Inflation Guard is an optional coverage, not a coverage extension.

Question 30

Which of the following is false about Livestock Coverage Form?

Mules are considered livestock

Classes of animals may be subject to a sublimit

Livestock are covered while in transit by common carrier

Poultry is not considered a type of livestock

Answer 30

Livestock are covered while in transit by common carrier.

Livestock are not covered when being transported by common carrier.

Question 31

All of the following are true, except:

A Homeowners Policy will not cover theft of a boat away from premises

Coverage D of a Homeowners Policy includes loss of income from an incidental business

Coverage D of a Homeowners Policy covers additional living expenses

Home schooling is permitted under a Homeowners Policy

Answer 31

Coverage D of a Homeowners Policy includes loss of income from an incidental business.

Coverage D does not cover loss of income from an incidental business.

Question 32

Choose the item that is not covered under the BOP.

Insured’s property located in common areas

Satellite dish located on the premises

Customer’s property in the insured’s control

Leased property

Answer 32

Satellite dish located on the premises.

Outdoor fences, radio or television antennas, satellite dishes, and its lead-in-wiring, masts or towers are excluded under the BOP.

Question 33

Inland Marine Insurance is not typically used to insure which type of property?

Jewelry

Autos

Stamps

Cameras

Answer 33

Autos

Autos are not a covered class of property

Question 34

Policyholder M insures an owner-occupied, single-family residence under a Special Form Dwelling Policy (DP-3) with a limit of $100,000. If the dwelling is damaged in a fire, what policy coverage will pay for M’s extra costs to stay in a motel and board M’s pets while the fire damage is being repaired?

Coverage B

Coverage E

Coverage C

Coverage D

Answer 34

Coverage E.

Coverage E pays for the necessary increase in living expense incurred by the insured if the building is rendered unfit for its normal use.

Question 35

Which of the following claims would be covered under the DP-3?

Damage by vandalism to a dwelling vacant for 30 days before the loss

Theft to a dwelling under construction

Wind damage to TV antennas

Damage to a fence due to freezing and thawing of ice due to a winter storm

Answer 35

Damage by vandalism to a dwelling vacant for 30 days before the loss.

60 days is the amount.

Question 36

Which of the following conditions would not be found in a CGL policy written on the occurrence form?

Duties in the Event of Occurrence, Claim, or Suit

Severability

Representations

The Insured’s Right to Claim Information

Answer 36

The insured’s right to claim information.

the condition is found in the claims-made form only.

Question 37

The National Flood Policy defines all of the following as floods, except:

Leakage of underground water systems

Unusual and rapid accumulation or runoff of surface water

Overflow of inland or tidal waters

Mudflow caused by accumulation of water

Answer 37

Leakage of underground water systems

NOT a definition of flood.

Question 38

Inland Marine Policies are primarily designed to insure:

Exclusively for property being transported on inland waters

Property that is mobile in nature and may be away from insured’s premises

Overseas shipments

Buildings and contents used for manufacturing

Answer 38

Property that is mobile in nature and may be away from insured’s premises.

Inland Marine insurance is designed for property that is portable, or that is being shipped from place to place. Generally, fixed property is not eligible.

Question 39

Which of the following is not an additional coverage under the BOP?

Forgery or alteration

Personal effects

Collapse

Business income

Answer 39

Personal Effects

Personal effects is a coverage extension, not an additional coverage.

Question 40

In which of the following circumstances would the insured be required to pay a self-insured retention on an umbrella policy?

There is a substantial change in the risk

The limits of the underlying policy have been exhausted

The umbrella drops down to act as the primary policy

The insurance carrier is declared insolvent

Answer 40

The umbrella drops down to act as the primary policy.

This happens when the underlying policy doesn’t cover a loss.

Question 41

Construction material having a fire-resistance rating between 1 and 2 hours for walls, floors, and roofs is classified as:

Modified Fire Resistive

Joisted Masonry

Noncombustible

Fire Resistive

Answer 41

Modified fire-resistive.

Modified Fire Resistive construction has a fire-resistance rating of at least 1 hour, but less than 2 hours. To be considered Fire Resistive, the building and roof must be constructed of reinforced concrete and steel and have a fire-resistance rating of at least 2 hours. Joisted Masonry construction includes exterior walls of masonry or fire-resistive construction rated for no less than 1 hour and with combustible floors and roofs.

Question 42

Choose the false statement about a newly acquired additional vehicle under the PAP:

It may be used on a farm

It may be used to transport goods for hire if receipts are less than $10,000

Coverage will be as broad as the broadest coverage on any insured vehicle in the household

It must be reported to the insurer within a specified period

Answer 42

It may be used to transport goods for hire if receipts are less than $10,000

Vehicles used to carry goods for hire cannot be insured under a Personal Auto Policy

Question 43

A producer may share commissions with another producer:

After permission is granted by the insured

Only if they represent the same insurer

As long as there is a contract between the producers

Only if they are both licensed in the same line of insurance

Answer 43

Only if they are both licensed in the same line of insurance.

Question 44

Which of the following is true about the Builders Risk Floater?

Fixtures that will become part of the building are not covered until they are installed

The floater covers the building for named perils

Coverage can be provided for farms

Scaffolding is excluded from coverage

Answer 44

Coverage can be provided for farms.

The Builders Risk floater covers commercial, residential, and farm buildings, fixtures are covered until installed, and the coverage is open peril with some limits for theft and vandalism coverage.

Question 45

Which of the following is correct regarding coverage under the Farm Property Coverage Form?

Coverage B - Other Private Structures includes farm buildings and silos

The limit for Coverage G is the same as the limit of Coverage A

Coverage G includes loss of use

For coverage to apply, there must be a limit shown in the Declarations

Answer 45

For coverage to apply, there must be a limit shown in the Declarations.

For coverage to apply to Coverage A through G, there must be a limit of insurance shown in the Declarations for each of these coverages.

Question 46

Which Ocean Marine insurance provision protects against direct damage caused by bursting of boilers?

Mechanical Failure Clause

Running Down Clause

Boiler & Machinery Clause

Inchmaree Clause

Answer 46

Inchmaree Clause

The Inchmaree Clause covers direct damage caused by the bursting of boilers breaking of propeller shafts, or loss due to faults or errors in navigation by the crew.

Question 47

The implied warranty of seaworthiness is understood to mean which of the following?

The ship has a full complement of emergency navigation equipment

The crewmembers are all certified

The ship must be seaworthy and have a competent crew

The ship must have undergone a comprehensive inspection by the insurer

Answer 47

The ship must be seaworthy and have a competent crew.

Question 48

The Farm Liability Coverage Form provides all of the following coverages, except:

Bodily injury

Advertising injury

Contractual liability

Property damage

Answer 48

Contractual liability.

Contractual liability is specifically excluded.

Question 49

Livestock does not include which of the following animals?

Poultry

Goats

Donkeys

Horses

Answer 49

Poultry.

Livestock includes cattle, horses, goats, sheep, swine, donkeys, and mules

Question 50

An employer that is self-insured for Workers’ Compensation insurance must purchase a guaranty bond in the amount of ___________.

$250,000

$100,000

$50,000

$500,000

Answer 50

$100,000

Question 51

Choose the false statement about paying and sharing commissions:

An unlicensed person cannot accept a commission for negotiating insurance

An insurer must pay commissions for selling insurance to only licensed persons

Commissions paid to producers are negotiated with the insurers that they represent

Renewal commissions cannot be paid to a person who is no longer licensed on the renewal date

Answer 51

Renewal commissions cannot be paid to a person who is no longer licensed on the renewal date.

Renewal or other deferred commissions can be paid to a person for selling, soliciting, or negotiating insurance in Arizona if the person was properly licensed at the time of sale, solicitation, or negotiation of insurance occurred.

Question 52

Which of the following is true about the Dwelling Policy Special Provisions – Arizona endorsement?

The insurer can subrogate against the person who caused domestic violence

Fire department service charges are covered

Intentional loss to property applies to a loss caused by domestic violence

The insurer has 60 days to pay a covered property loss

Answer 52

The insurer can subrogate against the person who caused domestic violence.

An insured receiving payment for a loss caused by domestic violence cannot waive the insurer’s right to subrogation against the perpetrator of the violence.

Question 53

Under the AZ Miscellaneous Type Vehicle endorsements, all of the following coverages can be added by endorsement, except:

Motorhomes

Dune buggies

Golf carts

Motor boats

Answer 53

Motor boats.

Provides for coverages of golf carts, motorcycles, motorhomes, and recreational vehicles to be added as endorsements to the PAP. This does not include motor boats.