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Flashcards in IA Test 10 Deck (100)
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1

Under a commercial property policy, once the insured has submitted a properly executed proof of loss within 60 days of a loss as required by the policy, how long does the company have to pay the claim?

Answer Choices: Select the Correct Answer
45 days
60 days
30 days
10 days

Question 1 of 100

Your answer: 30 days is correct.

EXPLANATION:
The insurer is required to pay the claim within 30 days. Note: This clause is in the form but the number of days may vary per state based on their laws.


Question 1 of 100

2

Under the comprehensive coverage of a business auto policy, which of the following would not be a covered loss?

Answer Choices: Select the Correct Answer
After sliding on an icy pavement, a driver hits a guardrail.
Electrical wiring in the vehicle catches fire when the ignition is turned on.
All four tires are removed and a truck is put on blocks while it is parked over the weekend, even though there is no evidence of forcible entry into the company parking lot.
A vehicle has its tires slashed by an undetermined person.

Question 2 of 100

Your answer: Electrical wiring in the vehicle catches fire when the ignition is turned on. is incorrect. The correct answer is: After sliding on an icy pavement, a driver hits a guardrail..

EXPLANATION:
Since the vehicle sustained damage by hitting the guard rail, it is considered a collision claim. This is because the definition of collision includes the upset of a vehicle, its impact with another vehicle or object; anything else would be other than collision and thus be covered by comprehensive coverage.


Question 2 of 100

3

The insured is covered under a standard BOP for $200,000 on his building. The risk is completely destroyed by fire. It will cost $225,000 to replace the building. The cost to remove the debris is $25,000. How much, if any, will the company pay in total for this loss?

Answer Choices: Select the Correct Answer
$200,000
$225,000
$210,000
$190,000

Question 3 of 100

Your answer: $190,000 is incorrect. The correct answer is: $225,000.

EXPLANATION:
The company will pay the $200,000 policy limit, although the loss was more than that, plus another $25,000 for the debris removal. The policy provides a maximum payout of $25,000 for debris removal when the cost to rebuild or replace the building exhausts the limits of coverage.


Question 3 of 100

4

A covered auto requires $700 in repairs because of damage done by a limb from a dead tree that fell on it. The auto's BAP coverage has a $100 comprehensive deducible and a $250 collision deductible. Assuming that the ACV and replacement cost of the vehicle is $700, the insurer will pay:

Answer Choices: Select the Correct Answer
-0-
$450
$600
$700

Question 4 of 100

Your answer: $600 is correct.

EXPLANATION:
Falling objects is a comprehensive loss and the deductible of $100.00 would apply.


Question 4 of 100

5

Personal Excess Liability coverage provides all of the following, EXCEPT:

Answer Choices: Select the Correct Answer
Injuries sustained by a third party on the insured's property.
Personal injury or property damage sustained by a third party due to an at-fault accident by the insured.
Damage to an insured's property due to fire.
Injuries to a neighbor while riding in the insured's covered boat.

Question 5 of 100

Your answer: Damage to an insured's property due to fire. is correct.

EXPLANATION:
Personal Excess Liability provides higher limits, but does not broaden coverage like an umbrella policy would.


Question 5 of 100

6

An insured has ONE limit of insurance covering all buildings and contents at three different locations. Coverage written in this manner is referred to as:

Answer Choices: Select the Correct Answer
Blanket coverage.
Specific coverage.
Scheduled coverage.
Extended coverage.

Question 6 of 100

Your answer: Blanket coverage. is correct.

EXPLANATION:
This approach can be used to cover all buildings and their contents under one single limit of coverage. It can also be used to cover either buildings or contents at different locations. Often times, this helps to avoid underinsurance at a particular location.


Question 6 of 100

7

If an employee becomes injured due to serious and willful misconduct on his or her behalf, what level of workers compensation benefits is he or she entitled to?

Answer Choices: Select the Correct Answer
A level reduced by his or degree of misconduct
None
A maximum of 25% of the normal benefits
50% of the normal benefits

Question 7 of 100

Your answer: 50% of the normal benefits is correct.

EXPLANATION:
Employees who are injured as a result of their own serious and willful misconduct will have any workers compensation benefits reduced by 50%.


Question 7 of 100

8

The limit of liability for business auto coverage may be paid:

Answer Choices: Select the Correct Answer
For each separate accident.
Only once during the policy term.
Until the aggregate limit is exhausted.
Only once for each involved automobile.

Question 8 of 100

Your answer: For each separate accident. is correct.

EXPLANATION:
The entire liability limit applies per accident. The commercial auto policy does not have an aggregate limit so no matter how many claims occur during the policy period the entire per accident limit applies per accident.


Question 8 of 100

9

An insured carries a Personal Property Replacement Cost endorsement attached to his Homeowners policy. He has suffered a loss to his personal property. He submits a claim for actual cash value (ACV) at the time of the loss, but notifies the insurer that he intends to make a claim for replacement cost later. The insurer will honor the insured's request, but only if the cost to repair or replace the property is:

Answer Choices: Select the Correct Answer
More than $500.
Less than $500.
More than $1,000.
Less than $5,000.

Question 9 of 100

Your answer: More than $1,000. is incorrect. The correct answer is: More than $500..

EXPLANATION:
If the cost to repair or replace the property is more than $500, the insurer will pay the actual cash value for the loss, until the actual repair or replacement is made.


Question 9 of 100

10

A sandblaster becomes very sick after working for his current employer for 6 months. The employer did not know that the employee was suffering from a respiratory disease caused by similar work done over the past 20 years. How much responsibility, if any, would the current employer have for workers compensation?

Answer Choices: Select the Correct Answer
None, since this is a pre-existing condition
A portion of the responsibility, to be shared will all employers within the past year.
Maximum 50% responsibility
Full responsibility

Question 10 of 100

Your answer: A portion of the responsibility, to be shared will all employers within the past year. is correct.

EXPLANATION:
Responsibility for workers compensation benefits for occupational diseases is apportioned to all of a worker's employers during the last year which exposed the worker to the hazards associated with the occupational disease. Employers beyond one year in the past are absolved of responsibility to pay workers compensation benefits.


Question 10 of 100

11

Collin suffered a work-related injury on the morning of February 5th and was off work completely until he returned to work on full duty on February 19th. Collin had worked for his employer for four years and was paid $42,125 per year. Collin's state sets the TTD rate at 66 2/3rd percent of the average weekly wage. The state sets the maximum compensation rate at $420 per week and the waiting period at 3 days retroactive after 10 days. Collin was not paid for working on February 5th. Collin's average weekly wage is approximately:

Answer Choices: Select the Correct Answer
$810.
$770.
$534.
$420.

Question 11 of 100

retroactive after 10 days. Collin was not paid for working on February 5th. Collin's average weekly wage is approximately:

Your answer: $420. is incorrect. The correct answer is: $810..

EXPLANATION:
Collins average weekly wage is approximately $810. We arrive at this number by dividing Collin's annual salary of $42,125 by 52 weeks.


Question 11 of 100

12

How is personal property of a dwelling covered under a farm policy?

Your answer: Replacement Cost Basis is incorrect. The correct answer is: Actual Cash Value Basis.

EXPLANATION:
The property is covered on an actual cash value basis. Like a homeowner policy, the replacement cost endorsement may be attached for an additional premium.


Question 12 of 100

13

Under the discovery clause in a loss sustained bond, which of the following is covered?

Answer Choices: Select the Correct Answer
A loss discovered up to one year after the policy expired but that occurred during the policy period.
A loss that is discovered after the policy has expired.
A loss that occurred prior to the inception date of the policy.
A loss that occurred during the policy period but was not discovered until five years after the expiration date.

Question 13 of 100

Under the discovery clause in a loss sustained bond, which of the following is covered?

Your answer: A loss that occurred prior to the inception date of the policy. is incorrect. The correct answer is: A loss discovered up to one year after the policy expired but that occurred during the policy period. .

EXPLANATION:
The discovery clause in a loss sustained form states that losses that occur during the policy period, but are not discovered for up to one year after the bond has expired, can be covered under the expired bond. The discovery clause in the discovery form provides coverage during the policy period or within 60 days after the bond expires for coverage to apply.


Question 13 of 100

14

Under a Commercial Property policy, which of the following is not a covered peril under the Basic Cause of Loss form?

Answer Choices: Select the Correct Answer
Water damage
Explosion
Sinkhole collapse
Smoke

Question 14 of 100

Your answer: Sinkhole collapse is incorrect. The correct answer is: Water damage.

EXPLANATION:
Water damage to extinquish a fire and the accidental leakage of water from a sprinker system would be covered. Other types of water damage would be excluded.


Question 14 of 100

15

A tornado blows over a wall of a barn which, in turn, knocks over a lamp and starts a fire. What is the proximate cause of loss?

Answer Choices: Select the Correct Answer
Tornado
Smoke
Fire
Water Damage

Question 15 of 100

Your answer: Tornado is correct.

EXPLANATION:
The proximate cause of loss would be the tornado (wind).


Question 15 of 100

16

Miranda's home is covered under a Homeowners policy with an Earthquake Endorsement attached. She has selected the base deductible of 5% and her limit of liability under Coverage C is greater than Coverage A. Her Coverage C limit of liability is $1,000. What is the deductible that Miranda will have to pay?

Answer Choices: Select the Correct Answer
$50
$5
$5,000
$500

Question 16 of 100

Your answer: $5 is incorrect. The correct answer is: $500.

EXPLANATION:
Although 5% multiplied by $1,000 is $50, the endorsement states that the deductible will never be less than $500.


Question 16 of 100

17

Which of the following are covered under the Homeowners "Additional Residence Rented to Others" endorsement?

I. Personal Liability (Injury)
II. Medical Payment to Others
III. Dwelling
IV. Personal Property

Answer Choices: Select the Correct Answer
I and II only.
I, II, III and IV.
I and IV only.
III and IV only.

Question 17 of 100

Your answer: I, II, III and IV. is incorrect. The correct answer is: I and II only..

EXPLANATION:
The "Additional Residence Rented to Others" endorsement provides personal liability (injury) and medical payments to others coverage to cover the insured's liability arising out of the ownership of a residence regularly rented to others.


Question 17 of 100

18

Under workers compensation rules, for an employee to receive temporary disability compensation for the first three days of his disability, his disability period must extend:

Answer Choices: Select the Correct Answer
14 days.
30 days.
45 days.
60 days.

Question 18 of 100

Your answer: 14 days. is correct.

EXPLANATION:
Benefits are retroactive to the day of the injury if the disability lasts 14 days.


Question 18 of 100

19

When the insured or the insurance company disputes the amount of a loss settlement, either may resolve their differences through the:

Answer Choices: Select the Correct Answer
Appraisal Clause
Arbitration Clause
Subrogation Clause
Liberalization Clause

Question 19 of 100

Your answer: Arbitration Clause is incorrect. The correct answer is: Appraisal Clause.

EXPLANATION:
When the insured and the insurer disagree on the value of the damaged property, either can demand an appraisal of the property.


Question 19 of 100

Submit

20

If a building insured under a BOP has been vacant or unoccupied beyond _____ the insurer can send the insured a notice of cancellation.

Answer Choices: Select the Correct Answer
60 days
30 days
45 days
90 days

Question 20 of 100

Your answer: 60 days is correct.

EXPLANATION:
If the risk has been vacant or unoccupied beyond 60 consecutive days, the insurer can send the insured a notice of cancellation. Buildings that have 65% or more of their rental units or floor area vacant or unoccupied, are considered vacant under this provision. For the tenant, the rented space is considered vacant if there is not enough contents in the space to conduct normal operations.


Question 20 of 100

21

The Section I - Property conditions of the California Homeowners Special Provisions form states that if loss or damage relates to a state of emergency under California law, the insured has an extended amount of time after the insurer's payment of actual cash value, to notify the insurer of the intent to make a replacement cost claim under the HO-2, HO-3, and HO-5 forms. How long is this extended period of time?

Answer Choices: Select the Correct Answer
12 months.
24 months.
36 months.
9 months.

Question 21 of 100

Your answer: 24 months. is correct.

EXPLANATION:
When the loss or damage related to a state of emergency under California law, the insured has 24 months following the insurer's payment of actual cash value, to make a claim for replacement cost settlement. If the loss or damage results from a cause other than a declared state of emergency, the California Special Provisions form requires that the insured make the replacement cost claim within 12 months.


Question 21 of 100

22

The aggregate limit on a liability policy can be expressed as:

Answer Choices: Select the Correct Answer
Per occurrence
Premises/operations
Products and Completed Operations
Both Premises/operations and products/completed operations

Question 22 of 100

Your answer: Per occurrence is incorrect. The correct answer is: Both Premises/operations and products/completed operations.

EXPLANATION:
The aggregate is the most the policy will pay for all claims submitted during the policy period. The policy will establish a general aggregate for all claims submitted in the policy period and a separate aggregate for products and completed operations type of claims for the entire year.


Question 22 of 100

23

The limit under the ISO Standardized Homeowners policy, the additional coverage for "credit card, electronic fund transfer card or access device, forgery and counterfeit money" is:

Answer Choices: Select the Correct Answer
$250
$500
$1,000
$1,500

Question 23 of 100

Your answer: $500 is correct.

EXPLANATION:
The standardized ISO Homeowners policies provide $500 of additional coverage for "credit card, electronic fund transfer card or access device, forgery and counterfeit money". Some states' statutory forms may increase this coverage, but you are required to know the limits of coverage for both standardized and statutory forms for your state licensing exam.


Question 23 of 100

24

The California Code states that standard fire policies must be written on the standard form with very limited omissions. Which of the following modifications are permitted to be made under a Standard Fire policy in California?

Answer Choices: Select the Correct Answer
The coverage can be substantially equivalent to or more favorable to the insured.
The insured can sign a waiver and accept lesser coverage.
The Commissioner can approve any variance in coverage.
The insurer can offer lesser coverage at a lower premium.

Question 24 of 100

Your answer: The coverage can be substantially equivalent to or more favorable to the insured. is correct.

EXPLANATION:
According to the California Insurance Code (CIC 2070), the coverage can be substantially equivalent to or more favorable to the insured than that contained in the Standard Fire insurance policy.


Question 24 of 100

25

Personal property that is covered under the Personal Property Replacement Cost Endorsement is damaged and a claim has been filed. The replacement cost of the property at the time of the loss is $2,500. The full cost to repair the property is $2,000. The Coverage C limit of the Homeowners policy is $8,000. No special limits apply to this property and there is no limit applied to the type of property being claimed. Which of the following is the amount that will be paid under the endorsement?

Answer Choices: Select the Correct Answer
$2,500.
$2,000.
$8,000.
$500.

Question 25 of 100

Your answer: $2,500. is incorrect. The correct answer is: $2,000..

EXPLANATION:
The endorsement will pay the smallest amount of the replacement cost at the time of the loss, the full repair cost, the Coverage C limit, any applicable special limits, or the limit that applies to the type of property being claimed.


Question 25 of 100

26

All of the following would be covered under a Builders Risk Policy, EXCEPT:

Answer Choices: Select the Correct Answer
Prospective buyer.
Contractor.
Owner.
Sub-contractor.

Question 26 of 100

Your answer: Contractor. is incorrect. The correct answer is: Prospective buyer..

EXPLANATION:
A prospective buyer could not be added to the policy as an insured. They would not have an insurable interest in the property.


Question 26 of 100

27

The insured has several locations and desires to insure his contents coverage. His agent advises him to complete a statement of values form and issues a policy with one limit to cover all locations. This is an example of:

Answer Choices: Select the Correct Answer
Specific coverage.
Reporting form coverage.
Blanket coverage.
Location basis.

Question 27 of 100

Your answer: Blanket coverage. is correct.

EXPLANATION:
This is an example of "blanket" coverage where all locations are covered under one limit.


Question 27 of 100

28

What insurers must participate in accepting business under the California FAIR Plan?

Answer Choices: Select the Correct Answer
All insurers licensed to write basic property insurance or any component of property insurance in multi-peril policies.
Companies who specialize in difficult or hard to place property insurance.
Only those property insurers holding a certificate of authority for 5 years or less in California.
Only those insurers wanting to enter California and have received approval from their board of directors.

Question 28 of 100

Your answer: All insurers licensed to write basic property insurance or any component of property insurance in multi-peril policies. is correct.

EXPLANATION:
The purpose of the FAIR Plan is designed to provide a market for those property owners who are unable to obtain insurance through the normal market. Therefore, the California legislature enacted legislation requiring the participation of admitted insurers licensed to write property insurance to participate.


Question 28 of 100

29

The claimant relinquishes his or her right to sue by settling the claim under which of the following?

Answer Choices: Select the Correct Answer
Scheduled Payment Release
Advance Payment
Full Release Settlement
Structured Settlement

Question 29 of 100

Your answer: Full Release Settlement is correct.

EXPLANATION:
After a claimant signs a Full Release Settlement, he or she waives the right to sue.


Question 29 of 100

30

Which of the following dwelling forms provides broad perils coverage for personal property?

Answer Choices: Select the Correct Answer
DP-2 and DP-3 only
DP-1, DP-2, and DP-3
DP-3 only
DP-2 only

Question 30 of 100

Your answer: DP-2 only is incorrect. The correct answer is: DP-2 and DP-3 only.

EXPLANATION:
The DP-1 includes only the perils of fire, lightning, and internal explosion. A DP-1 policyholder can add the extended coverage and vandalism perils by indicating this choice on the declarations page, but the broad perils (damage by burglars, etc) is NOT available. Both the DP-2 and the DP-3 forms automatically provide fire, lightning, EC, vandalism, and the broad perils for personal property.


Question 30 of 100