Comprehensive Exam

Question 1

Homeowners policies would cover all of the following theft losses, except:

A
The insured’s trailer stolen from their detached garage

B
A 19-year-old insured’s personal property stolen from their dorm room

C
The insured’s camper stolen from an off-premises campsite

D
Electronics stolen from the dwelling by a burglar

Answer 1

C
The insured’s camper stolen from an off-premises campsite

(Theft coverage offered by Homeowners policies has certain limitations. Coverage is not provided for off-premises theft of trailers, campers, watercraft and their equipment, or property at another residence occupied on a non-temporary basis. However, if the insured is a student who lives off the insured premises, the policy will provide theft coverage for their off-premises property.)

Question 2

Which of the following is true regarding Coverage A under a Dwelling policy?

A
Coverage is not included for wind loss to television antennas

B
Coverage A would protect a detached carport

C
Outdoor equipment is not covered

D
Coverage for land is restricted to the land upon which the dwelling is sitting

Answer 2

A
Coverage is not included for wind loss to television antennas

(Wind loss of television antennas is so common that the coverage is excluded on unendorsed Dwelling forms. Coverage A does not provide coverage for land, including land upon which the dwelling is sitting.)

Question 3

Dwelling policies consider one volcanic eruption to be all eruptions that occur within what time period?

A
48 hours

B
168 hours

C
24 hours

D
72 hours

Answer 3

D
72 hours

(The Volcanic Eruption condition states that all volcanic eruptions that occur within a 72-hour period will be considered one volcanic eruption.)

Question 4

Section II of a Homeowners policy may cover which of the following incidents?

A
Bodily injury to a stranger, caused by an insured’s activities while picnicking at a city park

B
The homeowner’s family dog bites their 2-year-old son

C
An insured’s guest damages the stair railing during a visit

D
The insured hits and injures a swimmer while enjoying a ride in an owned inboard motorboat

Answer 4

A
Bodily injury to a stranger, caused by an insured’s activities while picnicking at a city park

(Liability coverage applies when the insured’s premises or activities result in bodily injury or property damage to others, including activities of an insured that occur off the insured location. Section II would not provide any coverage for bodily injury to an insured or property damage to the insured’s property. The Watercraft Liability exclusion excludes coverage for the insured’s liability arising out of an inboard motorboat owned by an insured.

Relevant Content: Homeowners Policy)

Question 5

An insured has a pair of pearl earrings insured by a property policy. One of the earrings is lost, and the loss is covered by the policy. The claim payment from the insured will equal:

A
The individual value of the single lost earring

B
The total value of the pair of earrings

C
Exactly half the value of the earrings as a pair

D
The lost value of the single earring, plus the lost value of the earrings as a pair

Answer 5

D
The lost value of the single earring, plus the lost value of the earrings as a pair

(The Pair and Sets clause of a property policy states that, in the event of a loss to a pair or set, the insurer will pay the difference between the actual cash value of the property before and after the loss. This valuation recognizes that the total value of the pair of earrings is worth more than just the sum of each earring’s individual value. The claim payment will reflect both the lost value of the single earring and the lost value of the earrings working as a pair.

Relevant Content: Property Insurance Basics)

Question 6

An insurance agent licensed in Texas owes a fiduciary duty to all of the following, except:

A
Insureds

B
The Insurance Commissioner

C
Insurers

D
Insurance applicants

Answer 6

B
The Insurance Commissioner

(An agent owes a fiduciary responsibility to its insurer, insurance applicants, and insureds, but not to the Insurance Commissioner (or other agents).

Relevant Content: State Laws)

Question 7

An insured protects a small fishing boat under a Boatowners policy. Which of the following coverages is not provided?

A
Bodily injury liability coverage

B
Medical payments coverage for passengers

C
Personal injury liability coverage

D
Physical damage coverage for the hull, motor, and trailer

Answer 7

C
Personal injury liability coverage

(Personal injury liability coverage is not provided by Boatowners policies. Coverage is provided for the insured’s bodily injury and property damage liability, medical payments coverage for passengers, and physical damage coverage for the hull, motor, trailer, equipment, and accessories.

Relevant Content: Miscellaneous Personal Lines Coverage)

Question 8

The Terrorism Risk Insurance Act applies to all of the following types of commercial insurance, except:

A
Workers’ Compensation insurance

B
Commercial Excess and Umbrella Liability insurance

C
Commercial Property insurance

D
Commercial Auto insurance

Answer 8

D
Commercial Auto insurance

(TRIA applies to most commercial property and casualty insurance, such as standard commercial property coverages, commercial general liability coverage, types of commercial excess coverages, and Workers’ Compensation. Commercial Auto insurance is excluded from TRIA applicability, as well as federal crop and flood coverages, surety insurance, and other specialized policies.

Relevant Content: Introduction to Insurance)

Question 9

K left their expensive watch in their car overnight. In the morning, K finds that someone broke into the car and stole the watch. Which policy would cover the loss of the watch?

A
HO-3

B
DP-2

C
DP-1

D
PAP

Answer 9

A
HO-3

(Theft of watches, jewelry, and furs is covered by the special limits of liability provided by Coverage C of a Homeowners Policy. Theft is not covered by the DP-1, and theft of property is not covered by the DP-2.

Relevant Content: Homeowners Policy)

Question 10

Under Homeowners policies, a worker whose duties are related to the maintenance or use of the residence premises is defined as:

A
A contract employee

B
A boarder

C
A residence employee

D
A maintenance employee

Answer 10

C
A residence employee

(Residence employee means any employee of an insured whose duties are related to the maintenance or use of the residence premises. These duties include household and domestic services, such as those of a gardener or nanny.

Relevant Content: Homeowners Policy)

Question 11

The concept that the insured should not profit from an insurance transaction is called:

A
The principle of subrogation

B
The principle of utmost good faith

C
The principle of indemnity

D
The principle of personal aspect

Answer 11

C
The principle of indemnity

(Indemnity is the restoration of the insured to the same financial condition as before the loss.

Relevant Content: Insurance Contracts)

Question 12

A dwelling insured on an HO-3 policy suffers a partial fire loss. Before actual repair or replacement is complete, the insurer will pay up to:

A
The actual cash value of the damaged portion of the dwelling

B
The replacement cost of the damaged portion of the dwelling

C
The functional replacement cost of the damaged portion of the dwelling

D
The actual cash value of the entire dwelling

Answer 12

A
The actual cash value of the damaged portion of the dwelling

(For dwellings and structures valued at their replacement cost, the insurer will pay no more than the actual cash value of the damaged part of the building or structure until actual repair or replacement is complete. This is stated in the Loss Settlement condition of Section I.

Relevant Content: Homeowners Policy)

Question 13

The formal statement an insured provides to an insurer, including all the details an insurer needs to assess its liability following a loss, is known as a:

A
Binder

B
Certificate of insurance

C
Proof of loss

D
Notice of loss

Answer 13

C
Proof of loss

(A proof of loss is a formal statement made by the insured and provided to the insurer that provides necessary details for the insurer to determine its liability under a policy.

Relevant Content: Insurance Contracts)

Question 14

In Texas, a temporary agent license may be issued to which of the following persons?

A
A surviving spouse of a deceased agent to wrap up the decedent’s remaining business

B
A nonresident looking to solicit insurance in the state

C
An applicant being considered for appointment as a full-time agent

D
A licensing candidate who is unable to pass the licensing exam

Answer 14

C
An applicant being considered for appointment as a full-time agent

(In Texas, a temporary license is intended for licensing candidates who are being considered for full-time appointment as a properly licensed agent. A temporary license is only valid for 180 days while the candidate completes supervised training and works to satisfy qualifications for an agent license. Nonresidents would need to obtain a nonresident license, not a temporary license.

Relevant Content: State Laws)

Question 15

Which of the following clauses protects the interests of the loss payee?

A
Mortgagee clause

B
Loss Settlement clause

C
Abandonment clause

D
Loss Payable clause

Answer 15

D
Loss Payable clause

(The Loss Payable clause protects the interests of a person or business with insurable interest in the insured’s property, known as a loss payee, such as a financial institution who finances an auto loan.

Relevant Content: Property Insurance Basics)

Question 16

When a claimant can prove that a product caused an injury, the fact that the manufacturer will be held liable regardless of whether the product was defective or not is an example of:

A
Strict liability

B
Direct liability

C
Vicarious liability

D
Contingent liability

Answer 16

A
Strict liability

(The doctrine of strict liability applies to products and their manufacturers. It holds that the manufacturer can be held responsible for an injury caused by a product, even if the product is not defective.

Relevant Content: Casualty (Liability) Insurance Basics)

Question 17

All of the following are insured’s duties after a loss under a property policy, except:

A
Giving prompt notice of loss

B
Furnishing an inventory of damaged property

C
Abandoning the property to the insurer

D
Submitting to the insurer’s examination

Answer 17

C
Abandoning the property to the insurer]

(The insured may not abandon property to the insurer.

Relevant Content: Property Insurance Basics)

Question 18

The DP-3 would exclude coverage for partial damage to the dwelling resulting from all of the following perils, except:

A
Termite infestation

B
Deterioration

C
Falling objects

D
Settling foundation

Answer 18

C
Falling objects

(The Special Form provides open perils coverage for the dwelling and other structures, meaning all perils are covered except for those that are specifically excluded. Deterioration, insects, and settling foundations are all named exclusions. Falling objects is not an excluded peril, so coverage would be provided.

Relevant Content: Dwelling Policy)

Question 19

Personal Umbrella Liability policies may provide coverage for losses occurring within what policy territory?

A
The United States and other locations, only if they are scheduled

B
Worldwide

C
The policy territory applicable to underlying insurance policies

D
The United States, its territories and possessions, Puerto Rico, and Canada

Answer 19

B
Worldwide

(Umbrella Liability policies provide worldwide coverage, even for auto losses.

Relevant Content: Miscellaneous Personal Lines Coverage)

Question 20

When a property policy values property on a stated value basis, how would the insurer settle a total loss?

A
The insurer pays the lesser the insured’s reported value of the property and the property’s actual cash value

B
The insurer pays the amount a buyer would pay to purchase the property

C
The insurer pays an amount that the insurer and insured agree upon and indicate on the policy

D
The insurer pays either a stated amount or the property’s replacement cost, whichever is less

Answer 20

A
The insurer pays the lesser the insured’s reported value of the property and the property’s actual cash value

(When losses are valued on a stated value basis, the insured gives a statement of the property’s value, and the insurer will pay the lesser of the stated amount and the actual cash value. This is different from an agreed value basis, where the insurer and insured agree on a value, and that amount is paid to the insured in the event of a total loss.

Relevant Content: Property Insurance Basics)

Question 21

Property damage covered by a liability policy includes which of the following?

A
Damage to the insured’s products arising out of the products

B
Damage to property of others in the insured’s care, custody, or control that results from a criminal wrong

C
Damage to tangible property belonging to a third party, including loss of use of that property, caused by the insured’s negligence

D
Damage to property owned by, or leased to, the insured

Answer 21

C
Damage to tangible property belonging to a third party, including loss of use of that property, caused by the insured’s negligence

(Liability policies cover legal liability arising from physical damage to tangible property of others, including loss of use of that property, caused by the unintentional acts of an insured.

Relevant Content: Casualty (Liability) Insurance Basics)

Question 22

Insureds who have flood insurance through the NFIP may qualify for Coverage D, which provides up to $30,000 for:

A
Debris removal

B
Costs that result from compliance with local floodplain management laws or ordinances

C
Indirect financial loss

D
Costs that result from loss to a single-family building in the Emergency Program

Answer 22

B
Costs that result from compliance with local floodplain management laws or ordinances

(Coverage D - Increased Cost of Compliance provides up to $30,000 for costs to comply with local floodplain management laws or ordinances. NFIP policies do not provide coverage for indirect loss. The maximum building coverage limit for a single-family dwelling in the Emergency Program is $35,000, and debris removal is included in the limit.

Relevant Content: Miscellaneous Personal Lines Coverage)

Question 23

Under physical damage coverage provided by a Personal Auto policy, all of the following statements are incorrect, except:

A
The limit of liability is the greater of the vehicle’s actual cash value or the cost to repair

B
If repairs result in materials that are better than the previous kind or quality, the policy covers the amount of betterment

C
A sublimit of liability applies for losses to portable electrical equipment

D
In the event of total loss, adjustment will be made for the physical condition of the vehicle

Answer 23

D
In the event of total loss, adjustment will be made for the physical condition of the vehicle

(The physical condition of the vehicle and depreciation are considered in the event of a total loss when calculating the actual cash value. The limit pays the lesser of the ACV of the damaged property or the actual cost to repair or replace it, but coverage is not provided for betterment. Portable electrical equipment is not covered by Part D, but a sublimit of liability exists for damage to permanently installed electrical equipment.

Relevant Content: Personal Auto Policy)

Question 24

When an insured sustains bodily injury caused by an uninsured motorist, uninsured motorists coverage on a Personal Auto policy will pay:

A
Compensatory, punitive, and exemplary damages

B
Punitive and exemplary damages only

C
Compensatory damages only

D
Compensatory and punitive damages only

Answer 24

C
Compensatory damages only

(When the insured is legally entitled to recover compensatory damages for bodily injury caused by an uninsured motorist, Part C of the PAP will pay those damages. Punitive and exemplary damages awarded against the uninsured motorist are not covered by the policy.

Relevant Content: Personal Auto Policy)

Question 25

An agent has a fiduciary responsibility, meaning the agent: A Handles the insurer's funds in a position of trust B Is responsible for investigating claims to determine the insurer’s liability C Is obligated to recommend policies to consumers only if they meet the consumer’s needs D Must comply with state and federal insurance regulations

Answer 25

A Handles the insurer's funds in a position of trust (Fiduciary duty refers to an agent who holds the insurer’s funds in a trust capacity, such as keeping premium funds in a separate trust account and promptly forwarding payments to the insurer. It is true that agents must recommend policies that best protect applicants, and agents must comply with insurance regulations, but those obligations do not fall under their fiduciary duty. Relevant Content: Introduction to Insurance)

Question 26

Fraud is an intentional act of any of the following, except: A Concealment B Deceit C Warranty D Misrepresentation used to induce someone to part with something of value

Answer 26

C Warranty (A warranty is a statement in the application guaranteed true in all respects. Relevant Content: Insurance Contracts)

Question 27

When filing a property insurance claim, the insured is required to do all of the following, except: A Protect property from further damage B Hire an appraiser C Give notice of loss as soon as possible D Submit to an examination under oath at the insurer's request

Answer 27

B Hire an appraiser (An appraisal is only necessary when the insured and insurer disagree on the amount of a property loss, and it is not one of the insured’s obligations in the event of a loss. Relevant Content: Property Insurance Basics)

Question 28

T owns firearms and flammable chemicals. If injury results from either of these, T would: A Be guilty of negligence B Assume vicarious liability for the injuries C Be required to pay punitive damages D Assume absolute liability for the injuries

Answer 28

D Assume absolute liability for the injuries (Storing weapons and possessing explosive or highly flammable materials result in the owner assuming absolute liability for any injuries that result from them, even if the owner did not commit any negligent act. Relevant Content: Casualty (Liability) Insurance Basics)

Question 29

The purpose of the Fair Credit Reporting Act is to do all of the following, except: A Protect the consumer’s right to privacy B Ensure information is accurate and used for a specific purpose C Allow insurers to use consumer credit reports as the only rating factor D Protect the consumer from overly intrusive information collection practices

Answer 29

C Allow insurers to use consumer credit reports as the only rating factor (The FCRA protects the consumer’s right to privacy; protects consumers from overly intrusive information collection practices; and ensures that information is confidential, accurate, relevant, and property used. Though the FCRA allows insurers to obtain consumer reports for legitimate purposes, the information in the report will not be the only factor used in rating. Relevant Content: Introduction to Insurance)

Question 30

Which statement about property insurance terminology is correct? A Arbitration is when a disputed claim is decided by the insurer B Most property policies include inherent vice as a covered peril C A spark that jumps from a fireplace and ignites a nearby rug would be deemed a hostile fire D Loss of profits resulting from a fire is a direct loss

Answer 30

C A spark that jumps from a fireplace and ignites a nearby rug would be deemed a hostile fire (A hostile fire is one that leaves the area in which it was intended to be kept. Loss of profits that results from a fire loss is an example of an indirect loss, and the direct loss would be the physical loss the fire caused, such as loss to a building. Relevant Content: Property Insurance Basics)

Question 31

The Additional Coverages part of a property insurance policy provides: A The insured the right to request that extra coverage be provided by endorsement B Coverage automatically included in the policy to supplement the basic coverages in the Insuring Agreement without an additional premium C The insured the right to request additional coverage to supplement the policy after paying an additional premium D The company the right to voluntarily waive the deductible

Answer 31

B Coverage automatically included in the policy to supplement the basic coverages in the Insuring Agreement without an additional premium (Additional Coverages are automatically included in property policies without an additional premium. They provide further coverages that supplement the coverage provided by the Insuring Agreement, and they often have their own limit of insurance. Examples of Additional Coverages include debris removal and fire department service charges. Though insureds are able to request extra coverage by purchasing an endorsement, this right is not granted by any Additional Coverage. Relevant Content: Insurance Contracts)

Question 32

A producer in Texas whose license has been revoked may not reapply for: A 3 years B 90 days C 5 years D 1 year

Answer 32

C 5 years (An individual who was denied a license, or whose license was revoked, must wait 5 years before applying for an agent license. Relevant Content: State Laws)

Question 33

Policyholder B has a PAP with limits of 100/300/50. In an accident for which B was liable, there were bodily injury claims in the amounts of $80,000, $100,000, and $125,000; and property damage claims of $20,000 and $35,000. How much will B's policy pay? A $280,000 for bodily injury and $50,000 for property damage B $305,000 for bodily injury and $50,000 for property damage C $305,000 for bodily injury and $55,000 for property damage D $300,000 for bodily injury and $50,000 for property damage

Answer 33

A $280,000 for bodily injury and $50,000 for property damage (B’s limits are $100,000 per person for bodily injury, $300,000 per accident for bodily injury, and $50,000 per accident for property damage. The bodily injury claims of $80,000 and $100,000 will be paid in full. The $125,000 claim exceeds the per person limit and will only be paid up to $100,000, resulting in total bodily injury payments of $280,000. The property damage payments will be capped at the policy limit of $50,000 per accident. Relevant Content: Personal Auto Policy)

Question 34

After unintentionally running a red light, L causes an accident with T. T's sedan is badly damaged, and T's arm is broken. A few months after the accident, T brings a suit against L, asking for damages for medical costs incurred for the broken arm and other injuries sustained in the accident. Under Part A of L's Personal Auto policy, supplementary payments in connection with the insurer's defense will: A Reduce the policy’s liability limits B Reduce the policy’s supplementary payment limit C Be paid as supplementary benefits only after the policy’s liability limits are exhausted D Be paid in addition to the policy’s liability limits

Answer 34

D Be paid in addition to the policy’s liability limits (Supplementary payments are payments for expenses associated with the defense for a claim or suit made against the insured, as provided by the insurer. All defense costs, including supplementary payments, are paid in addition to the limits of liability. Though some payments may be subject to maximum amounts payable, there is no separate limit for supplementary payments as a whole. The insurer’s duty to defend ends when the Part A limit is exhausted by the payment of damages for which the insured is legally liable. Relevant Content: Personal Auto Policy)

Question 35

Coverage provided by a standard property policy contains all of the following policy terms, except: A Coverage is provided for indirect losses that follow a direct physical loss B Coverage is provided for losses resulting from a quality of the property that causes it to destroy itself C If an earthquake starts a fire that causes a loss, the fire damage is covered D When other property insurance applies to the same covered loss, the policies assume pro rata liability for claim payments

Answer 35

B Coverage is provided for losses resulting from a quality of the property that causes it to destroy itself (Property policies do not cover losses resulting from inherent vice, which is a quality within property that causes it to damage or destroy itself, like rusting or wear and tear. Relevant Content: Property Insurance Basics)

Question 36

Which of the following statements concerning commissions earned on insurance transactions in Texas is correct? A If an agent earns a commission on a sale to a client, the agent can charge additional fees not stated in the policy for other services provided B If an agent makes a sale after an unlicensed person referred a client, the agent may share commissions from the sale with that person C An agent may pay deferred commissions to an unlicensed person who was properly licensed at the time of the initial transaction D An agent may accept shared commissions related to a type of policy the agent is not duly licensed to transact

Answer 36

C An agent may pay deferred commissions to an unlicensed person who was properly licensed at the time of the initial transaction (In most cases, commissions may only be paid to persons properly licensed for the line of authority applicable to the relevant policy. However, a currently unlicensed person may receive renewal or deferred commissions if they originally sold the policy while properly licensed. Texas law does not prohibit compensating consumers for referrals, but if the payment is sharing commissions, the terms of that compensation would require a sale to be generated from the referral first, and that would be considered unfair rebating. Relevant Content: State Laws)

Question 37

Under Texas law, which of the following is considered false information and advertising? A An insurance applicant misrepresents material information on an application for a license B An insurer exaggerates its dividends in statements published in a newspaper C An agent misrepresents a policy provision relating to coverage at the time of issue D An agent uses physical force to induce the sale of an insurance policy

Answer 37

B An insurer exaggerates its dividends in statements published in a newspaper (False information and advertising refers to untrue, deceptive, or misleading statements regarding the business of insurance or a person’s conduct in the insurance business that are placed before the public, such as being published in a newspaper or TV show. Relevant Content: State Laws)

Question 38

Q's liability policy has the following limits: $25,000 per person, $100,000 per occurrence, and $2,000,000 aggregate. This year, five separate claimants each file $25,000 for injuries suffered in a single accident. How much will the policy pay? A $125,000 B $50,000 C $25,000 D $100,000

Answer 38

D $100,000 (Because all five injuries arose from a single accident, the per occurrence limit will cap the compensation at $100,000. Relevant Content: Casualty (Liability) Insurance Basics)

Question 39

P is an agent for ABC Insurer, which has just issued an insurance policy to M. In this transaction, who is known as the principal? A M's beneficiary B ABC Insurer C M, the insured D P, the agent

Answer 39

B ABC Insurer (This is referring to the Law of Agency, which is about the relationship between two parties: the principal and the agent. The agent, also referred to as the producer, represents and acts on behalf of the principal, which is the insurance company. The insured is not part of the Law of Agency. Relevant Content: Introduction to Insurance)

Question 40

Under the Duties in the Event of Loss condition, if a fire burns the home and property of an insured, what must the insured provide? A Receipt for the fire extinguisher in the garage B An official policy report C An inventory of the damaged property D Proof that they called the fire department

Answer 40

C An inventory of the damaged property (Preparing an inventory of the damaged property is one of the required duties included in the Duties in the Event of Loss condition of a property policy. Relevant Content: Insurance Contracts)

Question 41

The purpose of the Texas FAIR Plan Association is to do which of the following? A Provide coverage to those who were cancelled by previous insurers B Handle insurance complaints C Review the homeowner insurance rates in Texas to evaluate discrimination D Mediate claim disagreements between the insurer and insured

Answer 41

A Provide coverage to those who were cancelled by previous insurers (The FAIR Plan is available to applicants whose property is insurable using reasonable underwriting standards but who have been declined by at least 2 insurers that are licensed to write residential property insurance in Texas. Relevant Content: State Laws)

Question 42

While giving a ride to a customer, a driver for a transportation network company is involved in an accident. According to Texas law, the minimum liability limits applicable to the accident are: A 30/60/25 B $2 million for death, bodily injury, and property damage C 50/100/25 D $1 million for death, bodily injury, and property damage

Answer 42

D $1 million for death, bodily injury, and property damage (When the driver is engaged in a prearranged ride, an aggregate limit of $1 million for death, bodily injury, and property damage must apply. When the driver is on the network but not engaged in a prearranged ride, at least 50/100/25 limits must apply. In both cases, UM/UIM coverage and PIP coverage must also be provided as required by law. Relevant Content: State Laws)

Question 43

While negotiating an insurance policy with a prospective purchaser, an agent provides misleading information regarding the policy’s guaranteed dividends, terms, advantages, and disadvantages. The agent is engaged in which prohibited trade practice? A Defamation B Rebating C Misrepresentation D False advertising

Answer 43

C Misrepresentation (Misrepresentation involves untrue or misleading statements, including omissions, about elements of policies or an insurer. Misrepresentation typically applies to direct interactions between insurance professionals and consumers, while false advertising refers to untrue, deceptive, or misleading statements published as an advertisement or similar statement. Relevant Content: State Laws)

Question 44

Part A of a Personal Auto policy would consider all of the following to be insureds, except: A A tenant of the dwelling using the named insured’s auto without permission B The named insured’s child, who is practicing for their driving test C A family member without a license who uses the auto without the named insured’s permission D The named insured’s coworker, who is borrowing the car for personal use with the named insured’s permission

Answer 44

A A tenant of the dwelling using the named insured’s auto without permission (Part A considers insureds to include the named insured or any family member who owns, maintains, or uses any auto or trailer, as well as any person who uses a covered auto with the named insured’s permission. As understood for insurance purposes, family members are always considered to have reasonable belief of entitlement to use the auto, even if they do not get the named insured’s actual permission. Relevant Content: Personal Auto Policy)

Question 45

C insures two owned autos on a Personal Auto policy. The first auto has liability coverage, plus collision coverage under Part D. The second auto has liability coverage, plus comprehensive coverage under Part D. C decides to replace the first auto with a new auto. Without notifying the insurer, what coverage is automatically provided for C's newly acquired auto? A No coverage is provided until the insurer is notified B Liability coverage and comprehensive coverage C Liability coverage and collision coverage D Liability coverage only

Answer 45

D Liability coverage only (When a newly acquired auto is replacing a covered auto, the broadest liability coverage already provided to an auto on the policy will apply to the new auto. This liability coverage is applied automatically, without ever needing to notify the insurer. Physical damage coverage, however, does not apply automatically. No physical damage coverage is provided until the insurer receives notice of the insured’s intent to have the new auto covered under Part D. If notice is provided within a certain time frame, Part D coverage can apply from the date of ownership of the new auto. After that time period, Part D coverage will apply from the date of notice. Relevant Content: Personal Auto Policy)

Question 46

Which type of insurer in Texas may return profits to its policyholders in the form of a dividend? A Reciprocal insurer B Mutual insurer C Stock insurer D Domestic insurer

Answer 46

B Mutual insurer (A mutual insurer are owned by policyholders, and if dividends are issued, they are paid to the policyholders as a return of profit. Mutual insurers issue participating policies because their policyholders participate in the surplus. Stock insurers, on the other hand, may pay dividends to its stockholders, who own the company, and dividends are not paid to policyholders. Relevant Content: State Laws)

Question 47

In Texas, publishing or circulating information that is maliciously derogatory to the financial condition of an insurance company with the intent to injure is known as: A Defamation B False advertising C Boycott, coercion, and intimidation D Misrepresentation

Answer 47

A Defamation (Defamation is the publication or circulation of a statement that is false, maliciously critical of, or derogatory to the financial condition of an insurance company if it is intended to injure any individual or organization engaged in the business of insurance. Relevant Content: State Laws)

Question 48

Under a Personal Auto policy, Part A would provide coverage to all of the following people as insureds, except: A A mechanic servicing the auto B A neighbor borrowing the auto to deliver food to a relative C A nonresident relative using the named insured’s auto with permission D The named insured’s unlicensed child

Answer 48

A A mechanic servicing the auto (Generally, Part A - Liability Coverage will exclude coverage for those who are employed or engaged in the business of selling, repairing, servicing, storing, road testing, or parking motor vehicles. Relevant Content: Personal Auto Policy)

Question 49

An agent licensed in Texas is negotiating an insurance policy with a client. All of the following acts are considered prohibited rebating, except: A Giving dividends to the client in exchange for a policy purchase even though the policy does not offer dividends B Offering to return the initial premium payment if the client buys the policy, despite the policy not providing for that return C Giving the client a gift valued at $25 as part of the insurer’s promotional advertising strategy D Compensating the client’s friend for referring the client only if the client purchases the policy

Answer 49

C Giving the client a gift valued at $25 as part of the insurer’s promotional advertising strategy (Agents are allowed to give items valued at $25 or less if they are used as promotional advertising, educational materials, or common courtesy extended to consumers. Agents are also allowed to provide compensation for referrals, but the compensation would be considered prohibited rebating if payment is dependent on the customer actually buying a policy. Relevant Content: State Laws)

Question 50

Which private passenger auto is not eligible for coverage under a Personal Auto policy? A An auto driven over 25,000 miles annually B A sedan used for carpooling C A pickup truck used to transport furniture for a neighbor, who is moving to a new home D A van used to deliver shipments from a warehouse

Answer 50

D A van used to deliver shipments from a warehouse (Commercial uses, such as certain business deliveries, of private passenger autos are excluded from coverage under a Personal Auto policy and would need commercial auto insurance. Incidental business uses, like transporting farming or ranching materials, is typically allowed. Relevant Content: Personal Auto Policy)

Question 51

Property insurance policies that apply coverage only to perils that are stated in the policy are considered to be written on: A A named peril basis B A replacement cost basis C An actual cash value basis D An open perils basis

Answer 51

A A named peril basis (A named perils form stipulates the perils that are insured against. A broader approach is provided by an open perils form, which insures against all perils except those specifically excluded under the policy. Relevant Content: Property Insurance Basics)

Question 52

The minimum property damage limit for personal auto coverage in Texas is: A $25,000 B $10,000 C $15,000 D $50,000

Answer 52

A $25,000 (The minimum limits of auto liability insurance required to establish financial responsibility in Texas include $25,000 for damage to, or destruction of, property to others sustained in any one accident. Relevant Content: State Laws)

Question 53

An insured recently purchased a Homeowners insurance policy issued in Texas. The insured knowingly failed to disclose all material hazards on the insurance application. If the insurer discovered this information before a claim about the hazard is submitted, the insurer may cancel the policy if it has been in force for less than: A 90 days B 10 days C 30 days D 60 days

Answer 53

D 60 days (An insurer may cancel a Homeowners policy if the policy has been in effect for less than 60 days and the insurer identifies a condition that creates an increased risk or is a material hazard that was not disclosed on the application and is not the subject of a prior claim. Relevant Content: State Laws)

Question 54

If the Texas Department of Insurance addresses a reasonable inquiry made to an insurer, the insurer must respond in writing no later than how many days after receipt? A 10 B 15 C 30 D 20

Answer 54

B 15 (Any person receiving such an inquiry must respond to it in writing no later than 15 days after receipt, unless the person submits a written notice to the Department requesting additional time to respond. Relevant Content: State Laws)

Question 55

T is building a new home and works with a trusted company, CBA Electric, to install the home's electrical system. After the install, a sudden electrical short causes a fire that damages the building and demands major repairs to the structure. This is best described as a(n): A Indirect loss B Intentional loss C Accident D Hazard

Answer 55

C Accident (This loss is best described as an accident because a sudden and unintentional event led to a direct physical loss to the structure. Relevant Content: Insurance Contracts)

Question 56

Which of the following statements is incorrect regarding the Texas Automobile Insurance Plan Association? A An applicant must be rejected by at least 2 licensed, authorized, and active insurers B The TAIPA provides automobile liability insurance when an insurer becomes insolvent C The TAIPA provides automobile liability insurance for individuals who have been unable to obtain auto insurance through normal markets D Each auto insurer must be a member of the Association to transact insurance business in the state

Answer 56

B The TAIPA provides automobile liability insurance when an insurer becomes insolvent (The Insurance Guaranty Association provides a specified amount automobile liability insurance when an insurer becomes insolvent, not the TAIPA. Relevant Content: State Laws)

Question 57

S obtains motor vehicle liability and physical damage coverage for their pickup truck through a Personal Auto policy. S is injured when another motorist runs a red light and hits S's car, causing bodily injuries. Following the accident, how long does S have to submit a medical payments claim under Part B of their policy? A Medical payments are only provided to others B 1 year C 3 years D 48 hours

Answer 57

C 3 years (Under Part B - Medical Payments Coverage of a Personal Auto policy, the insurer will pay reasonable expenses incurred for necessary medical and funeral services incurred within 3 years of the date of the accident. This coverage is provided to insureds, not to others. Relevant Content: Personal Auto Policy)

Question 58

If it has been determined that an agent violated an order issued by the Commissioner, all the following penalties can be imposed, except: A License suspension B Administrative fine C Imprisonment D License revocation

Answer 58

C Imprisonment (Upon determining that an agent is in violation of a law or an order, the Commissioner may suspend or revoke their license and/or issue an administrative fine. Relevant Content: State Laws)

Question 59

The part of an insurance contract that varies with each individual policy, but is still a mandatory part of the policy, is the: A Conditions B Insuring Agreement C Exclusions D Declarations

Answer 59

D Declarations (The Declarations section of the policy contains specific information about the insured, and thus will vary by policy, even when the type of coverage provided is the same. The other policy sections will not change for each individual policy. For example, although there are multiple policy form options for Homeowners insurance, all forms through the same insurer will likely have the same Conditions and Exclusions sections. Insureds with policies based on the same policy form used by an insurer will have the same Insuring Agreement. Relevant Content: Insurance Contracts)

Question 60

Liability coverage under Part A of a Personal Auto policy would be excluded for all of the following, except: A Damage caused by a snowmobile B A vehicle driven by an unlicensed driver C Intentional damage caused by the insured D Use of a non-owned vehicle without permission

Answer 60

B A vehicle driven by an unlicensed driver (Part A will not provide coverage for intentional damage caused by the insured, damage caused by an insured who is using a vehicle without reasonable belief of entitlement, or damage caused by vehicles designed for use off public roads, such as ATVs. As long as the unlicensed driver is using a covered auto with permission, the driver’s liability is covered. For example, property damage caused by a student driver using the named insured’s car would be covered. Relevant Content: Personal Auto Policy)

Question 61

The owner of an antique store leaves valuable, breakable items on display while heavy construction is taking place, believing that the items would likely be fine, and if any pieces fall and break, they will be covered by insurance. This demonstrates which hazard? A Morale hazard B Physical hazard C Moral hazard D Speculative hazard

Answer 61

A Morale hazard (The store owner has an attitude of carelessness about protecting the store's stock, which increases the probability of a loss. This is a morale hazard. Relevant Content: Introduction to Insurance)

Question 62

The part of an insurance policy that states where the risk is located is the: A Conditions B Insuring Agreement C Definitions D Declarations

Answer 62

D Declarations (The function of the Declarations page is to apply the common policy to a specific insured and property. The risk location, therefore, is found in the Declarations. Relevant Content: Insurance Contracts)

Question 63

A resident insurance agent license issued to an individual in Texas expires: A At the end of the individual’s birth month every 2 years B On the license’s second anniversary date C On the individual’s birthday every year D On June 30 every two years

Answer 63

A At the end of the individual’s birth month every 2 years (An insurance license will expire 2 years after the date it was issued at the end of the agent’s birth month. Relevant Content: State Laws)

Question 64

After a Personal Auto policy is in effect for 60 days, which of the following is not a valid reason to cancel the policy? A Material misrepresentation B Nonpayment of premium C Claims history D Revocation of driver's license

Answer 64

C Claims history (Claims history is often a reason for nonrenewal of an auto policy, but not for a mid-term cancellation. Relevant Content: Personal Auto Policy)

Question 65

Reinsurance is useful for insurers because it does all of the following, except: A Builds confidence with consumers and investors B Stabilizes the insurer's profits C Increases the number of risks the insurer is able to underwrite D Increases premiums for average risks

Answer 65

D Increases premiums for average risks (Reinsurance helps insurers to manage the risk of large claims or catastrophic losses, and in doing so, it stabilizes profits, increases the insurer’s underwriting ability, and builds consumer confidence. Relevant Content: Introduction to Insurance)

Question 66

Underwriters are responsible for all of the following, except: A Ensuring that premium rates are not excessive B Balancing the number of insureds in each risk classification C Selecting risks that fall into the normal range of expected losses D Determining the premium rates for the insurer's rating manuals

Answer 66

D Determining the premium rates for the insurer's rating manuals (Premium rates are determined by actuaries. Underwriters will select rates to determine a specific applicant’s premium, and they must make sure those rates are not inadequate, excessive, or unfairly discriminatory. Relevant Content: Introduction to Insurance)

Question 67

The document that legally permits an insurance company to transact business in Texas is called a: A Certificate of Licensure B Certificate of Incorporation C Certificate of Compliance D Certificate of Authority

Answer 67

D Certificate of Authority (A certificate of authority is the legal form that permits an insurance company to transact business in Texas. Relevant Content: State Laws)

Question 68

Policyholder A's insurer is providing coverage on too many homes subject to wind losses. As a result, the company decides to reinsure those policies to share the high risk of wind loss. The reinsurance contract can best be described as which of the following? A An agreement between A's agent and the insurance company B An agreement between A and the reinsurance company C An agreement between A, the insurance company, and the reinsurer D An agreement between the insurance company and the reinsurer

Answer 68

D An agreement between the insurance company and the reinsurer (A reinsurance contract is between the insuring company and the reinsurer, and does not involve the insured. Relevant Content: Introduction to Insurance)

Question 69

Which of the following most accurately describes the Abandonment condition? A Abandoned property must be protected from further damage B The insured must cooperate with the company in the investigation of a claim C The insured cannot abandon damaged property to the insurer D The insured must make reasonable and necessary repairs to protect the property

Answer 69

C The insured cannot abandon damaged property to the insurer (The Abandonment condition provides that the insurer will not accept property abandoned by an insured, such as the insured surrendering property to the insurer for disposal. Relevant Content: Property Insurance Basics)

Question 70

According to Texas law, what is the purpose of a certificate of authority? A It authorizes an agent to sell surplus lines insurance B It authorizes an agent to sell insurance C It authorizes an insurer to transact insurance business D It authorizes an insurer to pay claims

Answer 70

C It authorizes an insurer to transact insurance business (A certificate of authority is the authorization that allows an insurance company to do business in Texas. Agents obtain an authorization to transact insurance in the state, but their authorization is known as a license. Relevant Content: State Laws)

Question 71

Which of the following is stated in the Insuring Agreement? A The Other Insurance provision B The perils insured against C The perils excluded by the policy D The location of insured property and the named insured's mailing address

Answer 71

B 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. Relevant Content: Insurance Contracts)

Question 72

An insured has auto insurance with both Company A and Company B. How much will Company B have to pay for a covered liability loss of $3,000 if Company A's limit of liability is $50,000 and Company B's is $100,000? A $1,500 B $3,000 C $2,000 D $1,000

Answer 72

C $2,000 (If other auto liability insurance applies, each policy will pay its proportionate share of the loss. Company B's limit is 2/3 of the total coverage provided by both policies ($100,000 of the total $150,000 of insurance). 2/3 of the $3,000 loss = $2,000. Relevant Content: Personal Auto Policy)

Question 73

In Texas, a domestic insurance company is: A Authorized to do business in Texas B Organized or incorporated in Texas C Headquartered in New Mexico with a local office in Texas D Licensed to write multiple lines of insurance within the United States

Answer 73

B Organized or incorporated in Texas (In Texas, a domestic insurer is a company that is organized or incorporated under the laws of Texas. This refers to domicile, not admittance, and incorporation in the state is not enough for the insurer to be authorized to do business in the state. It will need a certificate of authority to become an authorized insurer. Relevant Content: State Laws)

Question 74

The principle of indemnity helps avoid which of the following? A Loss exposure B Underinsurance C Overpayment of a claim D Adverse selection

Answer 74

C Overpayment of a claim (The principle of indemnity restores the insured to the same financial status as before the loss, protecting against overpayment and making a profit from a loss. Relevant Content: Insurance Contracts)

Question 75

The standard policy structure for property and casualty insurance policies includes all of the following sections, except: A Insuring Agreement B Duties C Exclusions D Conditions

Answer 75

B Duties (The duties of the insured and the insurer are found in the policy’s Conditions section. The core components of a property or casualty policy can be remembered with the acronym DICE: Declarations, Insuring Agreement, Conditions, and Exclusions. Relevant Content: Insurance Contracts)

Question 76

When the insurance company and insured cannot agree on the amount of a property loss, the person selected to help the two hired appraisers is called a(n): A Umpire B Adjuster C Agent D Claim representative

Answer 76

A Umpire (Both the insurance company and insured's representatives (usually appraisers) will select a third person to serve as an umpire. If the two appraisers fail to agree on the appraisal, they will submit their differences to the umpire, and an agreement of any two of the three will set the amount of the loss. Relevant Content: Property Insurance Basics)

Question 77

All of the following must be filed with the Commissioner of Insurance in Texas, except: A Rate schedules B Policy forms C Commission schedules D Endorsements

Answer 77

C Commission schedules (Insurance-related documents that must be filed with the Commissioner include policy forms, endorsements, rate schedules, and annual statements. Relevant Content: State Laws)

Question 78

The authority of a producer to perform duties that are directly stated in their agency contract is said to be: A Assumed powers B Express powers C Apparent powers D Implied powers

Answer 78

B Express powers (The powers granted to the producer that are explicitly, directly stated in the agency contract make up the agent’s express authority. Implied authority refers to the duties that are reasonable and necessary to performing certain obligations, but that are not explicitly stated in the contract. Relevant Content: Introduction to Insurance)

Question 79

What is the term for continuous exposure to the same harmful conditions? A Proximate cause B Risk C Accident D Occurrence

Answer 79

D Occurrence (An occurrence is an accident that includes continuous or repeated exposure to the same general harmful conditions. Relevant Content: Insurance Contracts)

Question 80

All of the following are methods of loss valuation, except: A Blanket value B Stated amount C Actual cash value D Replacement cost

Answer 80

A Blanket value (There is no valuation basis called blanket value. A blanket limit is a method of writing insurance limits. Relevant Content: Property Insurance Basics)

Question 81

Texas law requires resident agent licensees to complete what percentage of continuing education hours in a classroom or classroom-equivalent setting? A 25% B 50% C 10% D 75%

Answer 81

B 50% (At least 50% of CE hours must be completed in a classroom or classroom-equivalent setting. Failure to meet the required number of hours before the license ends will result in an automatic fine of $50 per credit hour not completed. Relevant Content: State Laws)

Question 82

All of the following statements about liability are true, except: A Liability policies pay costs incurred by an insured to sue negligent third parties B An insured may be liable for damages to an injured party, even if they are not deemed negligent C The burden of proof is on the injured party to prove that the other party was negligent D Breach of contract is not considered an act of negligence

Answer 82

A Liability policies pay costs incurred by an insured to sue negligent third parties (Liability policies pay the cost to defend the insured against suits by third parties. They do not cover the costs of lawsuits initiated by the insured against negligent third parties. When a claim of negligence is brought, the injured party must prove that all four elements of negligence were present. In some circumstances, a party may be liable for damages to an injured party without having to be found negligent, such as when the insured has absolute liability. Relevant Content: Casualty (Liability) Insurance Basics)

Question 83

A corporation intends to act as an insurance agency in Texas and seeks an agency license. An agency license may be issued as long as all of the following qualifications are met, except: A The agency intends to be actively engaged in soliciting or writing insurance with the general public B Each of the agency’s business locations are registered separately with the Department C All officers, partners, and employees are individually licensed as insurance agents D The corporation is organized under the laws of a state

Answer 83

C All officers, partners, and employees are individually licensed as insurance agents (Business entities needing an agency license are not required to have all its officers, partners, and employees obtain an individual license. An individual license is not always necessary, as there are some persons who will be exempt from licensure, like an administrative employee who does not transact insurance or earn commission on insurance sales. However, the Department will require that the entity have at least 1 officer, active partner, or principal employee who is individually licensed for the same or greater line of authority as the agency. Relevant Content: State Laws)

Question 84

Self-insurance is an example of which of the following types of risk management? A Avoiding the risk B Pooling the risk C Retaining the risk D Eliminating the risk

Answer 84

C Retaining the risk (Self-insurance is an example of retaining the risk. Relevant Content: Introduction to Insurance)

Question 85

M holds a resident general lines license to transact insurance in Texas. To renew the license, M must meet all of the following minimum continuing education requirements, except: A M must complete at least 24 CE hours B M must obtain all necessary CE hours before the license’s expiration date C M must complete at least 6 additional CE hours on ethics training D M must complete at least 12 CE hours in a classroom or classroom-equivalent setting

Answer 85

C M must complete at least 6 additional CE hours on ethics training (Relevant Content: State Laws)

Question 86

The Other Insurance condition on a casualty insurance policy specifies: A The process of settling disputes about the amount payable for a covered claim B The process of paying claims when the insured has two policies apply to the same loss C The process of submitting claims when the insured has two policies with the same insurer that would cover the same loss D The process of terminating a policy when the insured replaces it with a new policy from a different insurer

Answer 86

B The process of paying claims when the insured has two policies apply to the same loss (The Other Insurance condition specifies if the policy provides primary or excess insurance and states how the insurer will coordinate coverage with another insurer in the event that the insured has multiple policies that apply to the same covered loss, such as two primary policies or two excess policies. Relevant Content: Insurance Contracts)

Question 87

Driving while under the influence of alcohol is an example of: A Gross negligence B Contributory negligence C Assumption of risk D Vicarious Liability

Answer 87

A Gross negligence (Gross negligence exhibits a lack of care through recklessness or deliberate indifference to the well-being of others. Relevant Content: Casualty (Liability) Insurance Basics)

Question 88

Which of the following statements about medical payments coverage is true? A They apply to all expenses incurred within 5 years of the accident B Payments are made to all persons, including the insured on the premises for any reason C They apply to members of amateur athletic teams sponsored by the insured D Payments are made regardless of fault or negligence

Answer 88

D Payments are made regardless of fault or negligence (Medical payments coverage provides payment of medical expenses on a voluntary basis, without regard to negligence or fault on the part of the insured. Though the coverage sometimes applies to non-insureds and sometimes to insureds, depending on the policy, a single policy’s medical payments coverage never applies to both insureds and non-insureds. Relevant Content: Casualty (Liability) Insurance Basics)

Question 89

Applicants for an agent license in Texas must intend to engage in business in which at least what percentage of the total premium volume in any calendar year comes from sources other than the applicant or property they control? A 50% B 25% C 15% D 10%

Answer 89

B 25% (Applicants must intend to engage in insurance business such that at least 25% of their total premium volume in any calendar year comes from persons other than themselves or property they control through ownership, mortgage, sale, family relationship, or employment. This type of business is referred to as controlled business, and it is prohibited to license applicants who intend to principally engage in controlled business. Relevant Content: State Laws)

Question 90

Which of the following is not essential in determining if an action is due to negligence? A The injured party must prove the actual injuries or damages were foreseeable B The injured party must prove the wrongdoer committed a criminal act C The injured party must prove the wrongdoer failed to act in a reasonable and prudent manner D The injured party must prove the alleged wrongdoer owed a duty to the injured party or to the public

Answer 90

B The injured party must prove the wrongdoer committed a criminal act (Negligence is the commission of a civil or private wrong, not a criminal wrong. Relevant Content: Casualty (Liability) Insurance Basics)

Question 91

All of the following statements regarding liability losses are correct, except: A Advertising injury includes defamation and copyright infringement B Loss of consortium means the loss of companionship of a spouse C Property damage includes physical damage to tangible property, including loss of use of that property D Bodily injury includes personal injury, sickness, and disease

Answer 91

D Bodily injury includes personal injury, sickness, and disease (Bodily injury does not include personal injury, which are injuries that affect a person’s reputation or emotional well-being. Relevant Content: Casualty (Liability) Insurance Basics)

Question 92

The Severability condition of a casualty insurance policy states: A The procedures for transferring policy ownership rights to another person or organization B That policy coverage considers each insured separately, except for the limit of liability C That the insured transfers its rights of recovery to the insurer D Policy termination procedures

Answer 92

B That policy coverage considers each insured separately, except for the limit of liability (The Severability condition states that coverage considers each insured separately (severally), except for the limits of liability. For example, each named insured is treated as the only named insured when it comes to fulfilling policy conditions. Relevant Content: Casualty (Liability) Insurance Basics)

Question 93

Which of the following types of liability limits represents the maximum amount payable for a single occurrence, without regard for the number of claimants? A Split limits B Per person limit C Combined single limit D Comprehensive limits

Answer 93

C Combined single limit (Under a combined single limit policy, the policy will pay both bodily injury and property damage claims without regard to the number of claimants. A limit that indicates the maximum amount payable for each claimant is a per person limit. Relevant Content: Casualty (Liability) Insurance Basics)

Question 94

Which of the following defenses against negligence reduces damages in proportion to the degree of negligence? A Assumption of risk B Comparative negligence C Statute of limitations D Contributory negligence

Answer 94

B Comparative negligence (Comparative negligence provides that the damages recoverable by each party to the suit be reduced in proportion to that party's degree of negligence. Relevant Content: Casualty (Liability) Insurance Basics)

Question 95

Driver D slid into another car, causing an accident in which three people in the other car were injured. Two injured parties claimed $15,000 in medical expenses, and the third person claimed $25,000. How much will D's insurance company pay if D's policy has 25/50 limits for bodily injury? A $55,000 B $75,000 C $50,000 D $45,000

Answer 95

C $50,000 (The policy pays up to $25,000 for each person injured, but no more than $50,000 per occurrence, regardless of the number of persons injured. Therefore, the limit for this accident is $50,000. Relevant Content: Casualty (Liability) Insurance Basics)

Question 96

The Other Insurance condition on the standard fire policy will use which basis to coordinate claim payments with other insurance that applies to a covered loss? A Short-rate basis B Pro rata basis C Proximate basis D Contribution by equal shares

Answer 96

B Pro rata basis (The most common method of coordinating other insurance applicable to a covered loss, as set by the standard fire policy, is using a pro rata basis. If two primary insurance policies apply to the loss, each policy will pay a proportion of the loss, equal to the amount of insurance the policy provides compared to the total insurance covering the loss. Relevant Content: Property Insurance Basics)

Question 97

When a building has physical contents but no occupants, the building is said to be: A Deserted B Unoccupied C Uninhabited D Vacant

Answer 97

B Unoccupied (An unoccupied building is a building that contains furnishings or equipment, but has no occupants. A vacant building is a building that contains neither contents nor occupants. Relevant Content: Property Insurance Basics)

Question 98

Which insurance policy condition prevents the insured from collecting twice for the same loss? A Liberalization B Subrogation C Appraisal D Arbitration

Answer 98

B Subrogation (Subrogation may take place when a negligent third party causes a loss. Once the insurance company has paid the loss, it receives the insured's right of recovery from the third party, preventing the insured from collecting from both the insurer and the culpable party. Relevant Content: Insurance Contracts)

Question 99

Which is the best description of punitive damages? A Punitive damages are so limited as to be punitive toward the plaintiff B Punitive damages are assessed as a punishment for extremely objectionable conduct by a negligent party C Punitive damages are limited to disfigurement and mental anguish D Punitive damages are assessed in addition to specific damages and are typically covered by insurance policies

Answer 99

B Punitive damages are assessed as a punishment for extremely objectionable conduct by a negligent party (Punitive damages are an award to an injured party, in addition to compensatory damages, intended to discourage a wrongdoer from repeating negligent acts or omissions. Relevant Content: Casualty (Liability) Insurance Basics)

Question 100

The means by which insurers can encourage insureds to maintain insurance to value is known as: A Coinsurance B Subrogation C Deductible D Agreed valuation

Answer 100

A Coinsurance (Coinsurance is the condition on a property policy that encourages insureds to maintain insurance to value, at least to a specified percentage of the building’s full replacement cost. Relevant Content: Property Insurance Basics)