Module 2 Property & Casualty Insurance

Question 1

Which of the following items are covered without a dollar limit under the personal property provision of a homeowners policy?

Jewelry
Furs
Coins
All of the above
None of the above

Answer 1

None of the above.

To simply increase the coverage of these items under HO insurance, add endorsements.

Question 2

The replacement cost of personal property minus depreciation is the property’s

Actual cash value
Appraised value
Amortized value
Coinsurance value

Answer 2

Actual cash value

Weak on this one

Question 3

Which is true about HO Forms?

Clients may still add the HO-15 to an HO-3 form to essentially have the same open-peril coverages as an HO-5
The broad form of coverage covers the seven basic perils plus three more
The basic form covers just the seven basic perils
Open perils forms covers all perils unless specifically excluded

Answer 3

Open perils forms cover all perils unless specifically excluded.

The basic form covers the 12 basic perils.
The broad form covers the 12 basic plus 7 additional perils.
HO15 plus HO3 covers the same as an HO5 BUT they are no longer available for purchase - look at the answer choice “May still add”. They were removed as an option as part of the ISA HO-2000 program.

Question 4

Which professions would likely need malpractice insurance?

Financial advisor
Accountant
Chiropractor
Doctor
Attorney
Nurse

Answer 4

Chiropractor, Doctor, Nurse

Malpractice is for Health related professions.
Errors and omissions (E&O) is for financial related professions.

Question 5

Kristen has a personal auto policy, and the liability coverage is displayed as 250/500/100. How much bodily injury liability coverage per accident does Kristen have?

$500,000
$250,000
$100,000
$750,000

Answer 5

$500,000.

250/500/100. It means this:
Coverage per person / Coverage per accident / Property damage coverage.
And it’s in thousands of dollars.
Easy way to remember, second number is usually (and I’m pretty sure always) higher. You know one of the two is going to cover bodily harm per person, and another number will be bodily harm per accident. The accident can harm multiple people, so it would make sense that the bodily harm per accident would be higher than bodily harm per person.

Question 6

Inland marine insurance for business

Is designed primarily to cover personal watercraft
Covers domestic goods in transit
Includes the liability of the prop owner
Is designed to cover personal autos

Answer 6

Covers domestic goods in transit

Fun fact: Inland marine insurance is often part of a Commercial package policy (CPP)

Question 7

Which about inland marine policies is true? Pick one

It’s available only as an endorsement to a homeowners policy
It’s used for protection of property that’s in transit
It’s usually written without open-perils coverage
It’s used for low value personal property

Answer 7

It’s used for protection of property that’s in transit.

Question 8

Which about inland marine policies is true? Multiple answers.

It’s available as an endorsement to a homeowners policy
It’s used for protection of property that’s in transit
It’s usually written with open perils coverage
It’s used for high value personal property

Answer 8

All

Question 9

Your clients have a home in NY where they spend several months per year, as well as a home in Virginia where they typically spend the winter. They regularly have their butler move their favorite art and collectibles between houses. In addition, they frequently travel for business overseas. Part of the business includes entertaining international guests, and hosting formal events and yacht parties. The wife carries her expensive jewelry when they travel. While at hotels, they keep the jewelry in the hotel safe. Which combination of coverages should they consider that would best meet their needs?

HO coverage on both homes, watercraft coverage, an inland marine policy, and a large umbrella policy (PLUP!!), at a minimum.
HO and an umbrella policy with a personal property rider to protect their jewelry
An inland marine policy to protect the yacht and homeowners coverage for both homes, with high personal property limits to protect their property
Homeowners on both homes and large umbrella policy

Answer 9

HO coverage on both homes, watercraft coverage, an inland marine policy, and a large umbrella policy (PLUP!!), at a minimum.

Their answer:
The answer is homeowners coverage on both homes, watercraft coverage, an inland marine policy, and a large umbrella policy, at a minimum. Based on business activities and where they travel, other insurance they could consider is business liability, personal liability coverage, kidnap insurance, and a host of other types of coverages. Many wealthy clients carry special medical insurance that ensures they will be taken to a high-quality hospital and accompanied by doctors from such prestigious medical facilities as the Cleveland Clinic. Having a butler also indicates a need for specific coverage. Working with an agent who is familiar with supporting high net worth clients would be critical.

Question 10

Which of the following statements regarding the replacement cost coverage of the standard homeowners form is correct? Multiple.

The standard homeowners form will provide cost coverage for a partial loss up to the policy limit, minus any deductible if the home is insured for at least 80% of the purchase price.
The standard homeowners form will cover the cost of required repairs for a partial loss up to the policy limit, minus any deductible without any deduction for depreciation if the home is insured for at least 80% of the replacement cost of the dwelling.
Fin planners should recommend at least 100% of the replacement cost of the home with regard to homeowners insurance coverage recommendations

Answer 10

II and III

I would have gotten this one wrong but I and III wasn’t an option on Kaplan, so keep this one in check.

Question 11

Which about CPP is true?

CPP will be offered at a discount from a collection of monoline forms
Customization is allowed in order to modify the standard CPP
Standard CPP includes building, contents, and liability coverage
CPP is designed for larger businesses

Answer 11

All

CPP is a standard package of what used to be a bunch of monoline forms offered at a discount. (This pretty much means, instead of shopping for individual insurances, they’d bundle them and give a discount).
CPP you can get additional coverage for things like commercial autos, glass, and unique-to-the-business causes of loss. Because of these facts, CPP is highly customizable to accommodate businesses.
It’s good for larger businesses, while the BOP is good for smaller businesses.

Question 12

Which are covered under PAP?

Any vehicle listed in the policy
Any trailer owned by the insured
A company car provided by the insured’s employer
Any private passenger auto that the insured acquired during the policy period, provided the insured requested coverage within 14 days (30 days in some states)

Answer 12

I II IV

I specifically left out the part of the question that mentioned “PERSONAL auto policy”, bc otherwise III is always out of the answers. Employer provided car would be on some form of business auto policy.

It’s worth noting that “Any trailer owned by the insured” would be covered UNLESS the trailer is used in the course of business.

Question 13

Which demonstrates vicarious liability?

Adam gets three years for burglary
Joe must pay Frank for hitting him during an argument
Alice must pay damages for hitting someone while driving
Dunder Mifflin must pay damages because their driver hit someone

Answer 13

Dunder mifflin must pay damages because their driver hit someone.

It’s when you’re liable for the actions of someone else.

Question 14

Sam has a homeowners policy. Her dog bites the mailman, and he incurs emergency room expenses of $600. What’s the consequence of the event?

Medical payments to others coverage is applicable, and liability coverage is applicable if Sam is held legally liable.
There is no coverage under this policy because pets are excluded.
Samantha needed a personal liability umbrella policy for coverage of this type of risk.
Only medical payments coverage applies, not liability coverage.

Answer 14

‘Medical payments to others’ coverage is applicable, and liability coverage is applicable if Sam is held legally liable.

Section II (Contains E and F I think) applies no matter who is liable. Personal liability only applies if the insured is legally liable.

Question 15

Which of the following professionals would likely need E&O?

Dentist
Financial planner
Optician
Psychiatrist

Answer 15

Fin planner

Malpractice insurance would be needed by the other three

Question 16

A homeowners insurance policy can (could) be endorsed with an HO15 to:

Provide open peril coverage for personal property owned, used, or worn by the insured
Covered the homeowners automobiles
Absorb the deductible
Provide flood insurance

Answer 16

Provide open peril coverage for personal property owned, used, or worn by the insured

Reminder: after ISA HO2000 update, HO15 is no longer available for purchase an addition to HO3 policies.

Question 17

Which of the following persons are NOT insured under section II of homeowners policies?

The friends of the insured who are not in the care of the insured
The named insured and spouse
A family member residing in the household
Other persons under 21 years of age in the care of an insured

Answer 17

Friends of the insured who are not in the care of the insured

Question 18

James is a delivery driver for ABC Pizza. He gets into an accident and is ticketed for speeding while delivering one of the orders. Why is ABC pizza liable for this?

Comparative negligence
Contributory negligence
Strict liability
Vicarious liability

Answer 18

Vicarious liability

Their answer:
The answer is vicarious liability. Vicarious liability results from when a person is liable for torts committed by someone else. For example, parents may be liable for the torts committed by their children, and employers can be liable for the torts committed by their employees. The principle of strict liability holds tortfeasors—parties who commit a tort—liable for damages sustained by their actions or from their products, whether or not they were deemed at fault. Under the contributory negligence rule, a person cannot recover damages if his own negligence contributed in any way to his injuries. Under comparative negligence, damages are adjusted to reflect the extent to which the injured party’s own negligence contributed to his injuries.

Question 19

Which is used for condominium owners?

HO6
HO8
HO3
HO2

Answer 19

HO6

Got it wrong too, thought it was 8

Question 20

Stewart owns a home with a replacement cost of $300k. He purchased $200k of property insurance on the house with a $1k deductible for all losses. The house caught on fire and sustained $100k worth of damage. The ACV of the damaged portion of the property was $80k.
How much will the reimbursement be?

$83.33k
$82.33k
$86.66k
$80k

Answer 20

$82.33k

It will pay the GREATER OF the ACV $80k or the coinsurance amount.
Coinsurance amount calculation:
Current Coverage $ / Required Insurance $ * Loss amount - Deductible

( $200k / $240k ) * $100k - $1k = $82.33k

Do it this way too:
Property insurance coverage / Replacement cost
-This tells you if the property is covered at 80% coinsurance amount.
If it’s less than 0.8, then we got a problem.
Get 80% of the replacement cost.
Figure out what percentage of that amount is insured.
That percentage is the amount of the partial loss that is covered.

Question 21

Which of these are exclusions that apply to all of the standard homeowners forms?

War
Earthquake
Flood
Power Failure

Answer 21

All

Question 22

Which of the following professionals need E&O?

Certified nurse
Physicians assistant
Orthopedic Surgeon
Insurance Agent

Answer 22

Insurance agent

Question 23

A client is shopping for homeowners insurance. He wants a policy that will provide open perils coverage on both the dwelling and his personal property. Which of the following without an endorsement will meet his needs?

HO2
HO3
HO5
HO15

Answer 23

HO5

HO2 is named perils for both dwelling and personal property
HO3 is open perils for dwelling and named perils for personal property
HO5 is open perils for both dwelling and personal property

Question 24

A policy designed to provide protection against a lawsuit or judgement in excess of the limits and basic liability insurance is

An excess benefit plan
A personal liability umbrella policy
A casualty insurance policy
A self insurance policy

Answer 24

PLUP

Fun fact: ranges from $1mil coverage up to $10mil

Question 25

Marcel has been working for a large broker-dealer as a financial advisor and recently left to start his own practice. Which should he purchase to protect himself from business-related liability risks?

Malpractice insurance
E&O insurance
BOP
PLUP

Answer 25

II and III

PLUP may be useful for his liability in his personal life, but the question asks for “business-related” risks.
Malpractice is for doctors and health workers.

Question 26

Which of the following types of employees would most likely require Malpractice insurance? Select all that apply.

A) Graphic designers

B) Architects

C) Dental hygienists

D) Massage therapists

E) IT consultants

F) Pharmacists

G) Veterinarians

H) Journalists

I) Physical therapists

J) Chefs

Answer 26

Dental Hygienists, Massage therapists, Pharmacists, Vets, Physical therapists

Question 27

Which is a common prop coverage that can be included in a BOP?

Workers Comp
General Liability
Auto
Employment practices liability

Answer 27

Auto

The others can also be included in a BOP but would provide liability coverage instead of property coverage.

Question 28

Cherice has the standard amount of coverage for her PLUP. Based on this information, how much additional liability protection does Cherice have on top of her other liability coverage?

You don’t get answer choices for this, you should know it without them.

Answer 28

$1 Million

Question 29

Which is/are true?

BOP includes liability only
BOPs have six parts
BOPs are specific, standard package of coverage
BOPs can be customized to a specific business

Answer 29

BOPs can be customized to a specific business

BOPs can have property coverage as well as liability.
BOPs have 4 parts: common policy conditions, property coverage, causes of loss and exclusions, and liability coverage.

Question 30

Which of the following is covered under Coverage B for HO2,HO3, HO8 type forms?

Structures attached to the building
Garages and other structures that are detached from the building
Land
Structures for business purposes or those that are rented to anyone other than a tenant of the residence

Answer 30

Garages and other structures that are detached from the building.

Coverage A: Dwelling
Coverage B: Detached structures
Coverage C and D not sure

Question 31

Which of the following is true for property coverage in a CPP

CPP will be offered at a discount from a collection of monoline forms.
Customization is allowed in order to modify the standard CPP.
The standard CPP includes building, contents, and commercial automobile coverage.
CPP is designed for smaller businesses.

Answer 31

I, II

The answer is I and II. A CPP is a standard package of what used to be monoline forms offered at a discount. The standard CPP includes coverage for buildings, contents, and liability coverage. Additional coverage is available for things like commercial autos, glass, and specific, unique-to-the-business causes of loss. Thus, a CPP is customizable so it can accommodate many different businesses. The CPP is designed for larger businesses, while the businessowner policy is designed for smaller businesses.

Question 32

Which of the following statements concerning the need for homeowners insurance policy endorsements or additional policies is correct?

Policy endorsements or separate policies are available to compensate for policy shortcomings or to accommodate special needs.
Examples of types of property with limited coverage under a typical homeowners policy are jewelry, silverware, and collections of coins, stamps, and firearms.

Answer 32

Both

Their answer:
All personal property of any significance should be scheduled and valued in preparation of any future claims that may occur as because of a covered peril. Items like jewelry, silverware, collections of coins or stamps, and firearms have stringent limitations within a standard homeowners insurance policy. Endorsements or separate policies are available to accommodate shortcomings and should be added to any property whose value exceeds the normal coverage limit.

Question 33

Which of the following statements regarding Coverage C: Personal Property within a standard HO-3 homeowners insurance policy are CORRECT?

The limit on Coverage C is 50% of the Coverage A limit, and items are covered at replacement cost value.
Furs, stamp collections, jewelry, and coin collections are examples of types of personal property that have only limited coverage.
Animals, birds, fish, credit cards, motorized land vehicles used off the premises, property of roomers or boarders not related to the insured, and articles specifically described and insured by other policies such as a boat are all excluded items.
The actual cash value is the depreciated value of personal property per an internal insurance company table and not the value of the property after depreciation for income tax purposes.

Answer 33

II III IV

Coverage C is 50% of Coverage A limit BUT the standard homeowners policy provides only ACV coverage on personal property. The insured may choose (thereby making it a non-standard policy) to increase the coverage on personal property by electing the replacement cost.

Very insightful bit of information

Question 34

GPT question. Why would electing the replacement cost coverage on personal property, thereby enhancing a standard homeowners policy, be beneficial? This would increase the coverage above the standard Actual Cash Value coverage of personal property.

A) It decreases the overall premium of the homeowners policy.

B) It allows the insured to replace damaged or stolen items with new items of like kind and quality without deduction for depreciation.

C) It increases the Coverage C limit to more than 50% of Coverage A automatically.

D) It provides coverage for personal property only while it is located within the insured premises.

E) It extends the coverage to include items not typically covered under a standard homeowners policy.

Answer 34

B

Under ACV coverage, the insurance company would pay the cost to repair or replace the damaged or stolen property minus depreciation. This exposes older (and therefore more depreciated items) to significantly more risk of theft as the payout, after the insurance company accounts for depreciation, would be unlikely to match the cost to replace the item.

So ACV on personal property is exposed to the risk of depreciation.

Question 35

What is the difference between Actual Cash Value (ACV) and Replacement Cost?

Answer 35

ACV is simply the replacement cost minus any depreciation.

Example: let’s say you get into a car accident with a really old (and therefore depreciated) car and have ACV coverage on your PAP. Because it’s been depreciated to a significant degree, it’s likely that the insurance will pay out very little.. The replacement cost of the car is low because it’s older and it’s been depreciated over a very long time. Low replacement cost - high depreciation = very low ACV paid to you.

Question 36

Which are the types of auto insurance coverage under a PAP?

Uninsured motorists
Liability insurance
Medical Payments
Property Damage

Answer 36

All four

Question 37

Your clients found the home they want to buy. It’s 80 y/o and is beautiful. To build the house now would cost more than twice what they will be paying to buy it.
Which of the following forms of property insurance will your clients likely be purchasing to cover this home?

HO2
HO3
HO4
HO5
HO6
HO8

Answer 37

HO8

HO8 is designed for homes that would cost more to replace than to purchase! Coverage will provide for a functional replacement, but it will NOT cover the custom craftsmanship that would be required to restore the home to its former glory.
It IS indeed possible to get better coverage for these types of homes but it’s only provided by a few insurers on a customized basis.

So, it sounds like to me HO8 is mostly a scam.

Question 38

Which of these are correct?

Malpractice insurance is generally used where the deficient conduct of the insured may result in bodily harm
E&O is coverage that provides protection against deficient acts of a pro who handles money
Malpractice insurance allows the insurance company to settle claims out of court on behalf of the pro
Most financial services pros, including fin planners, will have E&O at either the individual or group level

Answer 38

All

Question 39

These perils are excluded from coverage under most homeowners policies except:

Power failure
Earthquake
Volcanic eruption
Flood

Answer 39

Volcanic eruption.

Think about it, most places don’t have volcanic eruptions so they tack it on to most policies to cover more perils, and volcanic eruptions are generally localized to the area directly surrounding the volcano.

Power failures are somewhat common and extremely costly, Earthquakes are pretty common in plenty of areas and covering them would be catastrophic. Floods have their own type of insurance.

Question 40

There are two types of auto physical damage coverage: damage by collision and comprehensive. All of these would be considered comprehensive except:

Hail damage
Hitting a wall in a garage
Getting smacked by a rock from a passing truck
Branch falling on your car

Answer 40

Hitting a wall in a garage.

It’s the only one you’re at fault for.

Question 41

John has been working for a large med practice as a family practice physician and recently left to start his own practice. Which of these should he get for business liability risks?

Malpractice insurance
E&O insurance
BOP
PLUP

Answer 41

Malpractice and BOP

Their answer:
The answer is I and III. As a medical professional, John would need malpractice insurance rather than errors and omissions insurance. A businessowners policy is also necessary, as he will be a businessowner and will have business-related liability risks typical to any other business, such as people falling on the premises. A PLUP specifically excludes business-related liability, as it is a personal policy rather than a business policy. John could probably benefit from a PLUP’s protection, but it is not for business-related risks as the question asks.

Question 42

Which is designed for owners of condos and apartments?

HO2
HO3
HO4
HO5
HO6
HO8
HO15

Answer 42

HO6

Yeah you need to rememorize these

Question 43

Which of these is ordinarily covered in an open perils HO3 policy?

Ice damage
Lightning
Flood
Earthquake

Answer 43

Ice damage and Lightning

Flood has its own insurance type.
Earthquakes can have catastrophic consequences and won’t be covered in open perils.

Question 44

All of these are property risks covered by a BOP or CPP except:

Commercial auto
E&O
Accidental damage
Crime

Answer 44

E&O

It’s sold separately.

Question 45

Differences between malpractice and e&o insurance?

Only malpractice insurance is considered a professional liability contract.
Malpractice insurance is generally used when conduct may result in bodily harm.
E&O insurance provides protection against the deficient acts of a professional who handles money.
The insurance company is not permitted to settle claims out of court on behalf of the professional with regard to malpractice insurance.

Answer 45

Malpractice insurance is generally used when conduct may result in bodily harm.
E&O insurance provides protection against the deficient acts of a professional who handles money.

The insurance company IS allowed to settle claims out of court on behalf of the professional with regards to malpractice insurance.
Malpractice and E&O are both considered professional liability contracts.

Question 46

What’s the standard amount covered under a PLUP?

Answer 46

$1 mil

Question 47

Which is a common property coverage that can be included in a CPP?

Commercial liability
Workers comp
General liability
Boiler and machinery

Answer 47

Boiler and Machinery

First thing, it’s the only type of property coverage listed.
Second thing, the others can be covered, but they’re liability coverages not property coverages.

Question 48

What types of coverage are considered pro liability insurance?

I’m not going to list answer choices, you should know this after having typed it 400 times.

Answer 48

Malpractice, E&O

Question 49

PLUP is structured to provide a catastrophic (to individual) level of liability coverage. Which of these are exclusions found in a PLUP?

Any act committed with the intent to cause bodily harm to another
Liability arising out of any personal activity
Directors and officers liability
Workers’ compensation obligation

Answer 49

I III IV
Intentional acts of violence are not covered. Directors and officers liability and workers compensation obligations are both employment based liability not personal liability (PL in PLUP),

Question 50

PLUP is structured to provide a catastrophic (to individual) level of liability coverage. Which of these are coverages found in a PLUP?

Any act committed with the intent to cause bodily harm to another
Liability arising out of any personal activity
Directors and officers liability
You’re found to be liable for the actions of your kids
Workers’ compensation obligation

Answer 50

II IV
PLUPs cover liability for personal activities and they also cover vicarious liability.

Intentional acts are not covered under liability insurance, and the remaining two (Directors/Officers and Workers comp) are employment based not personal based.
Remember PLUP, the first two letters stand for Personal Liability

Question 51

Which best defines open perils coverage?

Coverage is for perils only listed in the policy
Coverage is for the repair or replacement of an intentionally damaged structure or attachment
The coverage is designed to protect against all perils without exclusion
The coverage is designed to protect against all perils except those specifically excluded from coverage

Answer 51

The coverage is designed to protect against all perils except those specifically excluded from coverage

Question 52

Kevin and Nancy have brought their homeowners insurance policy in for your review. The residence is insured for $430,000 under an HO-3 policy. Since taking ownership, they have made many improvements to the property. The market value of the residence is $776,000, and their 40-acre lot is valued at $150,000. Costs to rebuild the house now would be approximately $600,000. Last year, they added a barn, which cost $60,000, to supplement the loafing sheds, tack shed, and pole barn, with a total estimated replacement cost of $50,000. This is where they store the hay for their four horses, miniature donkey, and the other horses boarding there. They have created a collection of western memorabilia, which they lend to a local museum every couple of years. When it is lent, the museum takes out a special insurance policy for $150,000 to protect against damage or theft.

Which of the following statements regarding their risk and coverage is true?

Coverage A is underinsured by $170,000. In case of a partial loss, the residence is under the 80% coverage requirement, so the coinsurance provision would apply.
Coverage C is adequate because 50% of the $430,000 will cover their memorabilia.
The horses and miniature donkey should be disclosed to the company and they have added liability due to the friends keeping horses and riding on their property that should be addressed.
Kevin and Nancy need an agent familiar with horse property and high-value collectibles.

Answer 52

I III IV

Barn is probably unattached, which would mean that would be under Coverage B rather than being aggregated under Coverage A. The lot value is a red herring. The barn’s replacement cost would be added to B rather than its cost to build.

Coverage A is under by 170k
Horses and donkey should be disclosed to the company because it can add liability if one of the friends gets injured.
They need an agent who’s familiar with horse property and high value collectibles.

We don’t know their value of personal property so it’s impossible for us to say whether 50% of $430,000 is adequate.

Question 53

Which would need E&O insurance?

Lawyer
Registered nurse
Anesthetist
Family practice physician

Answer 53

Lawyer

Question 54

PLUP: (multiple)

Is written only for persons with substantial underlying liability insurance.
Provides additional coverage to the underlying policies.
Has a drop down limitation that will apply in most cases.

Answer 54

All

Question 55

Which about Coverage E and F within a standard homeowners insurance policy is correct?

Med payments coverage (F: Med payments to others) will automatically pay for bodily injuries regardless of fault, typically up to $1,000 per occurrence on or off the premises.
Personal liability coverage (E: Personal liability) protects the insured homeowner and all resident family members against personal liability for bodily injury and property damage that may occur on or off the premises due to negligence, up to $300k per occurrence.
Coverage E may cover the insured for injuries or property damage caused while playing golf.

Answer 55

I and III

Personal liability coverage (E: Personal liability) protects the insured homeowner and all resident family members against personal liability for bodily injury and property damage that may occur on or off the premises due to negligence, up to $100k.

Question 56

Which of the following statements regarding the basis for policy premiums on a personal automobile policy PAP is not correct?

Young male drivers have the highest rate of auto accidents
Multicar discount is generally available for insureds who own more than one vehicle
Farm use vehicles generally have higher premiums
Automobile that is driven only for pleasure costs less to insure than one that is driven to work daily

Answer 56

Farm use vehicles generally have Lower premiums.

Question 57

Which need malpractice insurance?

Attorney
Accountant
Nurse
Fin advisor

Answer 57

Nurse

Question 58

Open perils coverage in a homeowners policy includes coverage for

Only the named perils in the policy
Windstorm and hail only
All perils except those excluded in the policy
Only the perils occurring outside the home’s physical structure

Answer 58

All perils except those excluded in the policy

Question 59

Which is true for prop coverage in a CPP

A CPP provides broader coverage but is a bit more expensive than a collection of monoline forms
Customization is allowed in order to modify the standard CPP
The standard CPP includes building, contents, and liability coverage
The CPP is designed for larger businesses

Answer 59

II, III, IV

A CPP provides broader coverage and is simply a collection (bundle) of monoline forms offered at a discount.

Question 59

Which is true for property coverage in a CPP

Standard CPP includes building, contents, and commercial auto coverage
CPP provides liability coverage, and any property coverage needs to be added by endorsement
CPP is designed for larger businesses and is offered at a discount from a collection of monoline forms
No customization is needed, as all potential risks are covered in the standard CPP

Answer 59

CPP is designed for larger businesses and is offered at a discount from a collection of monoline forms.

Reminder: monoline forms is a fancy way of saying individual insurance coverage.

Standard CPP includes building, contents and liability coverages.

Question 60

Which provides benefits to employees who are injured on the job?

Errors & Omissions Insurance
Workers’ compensation insurance
Unemployment insurance
Malpractice insurance

Answer 60

Workers’ compensation insurance

Benefits are funded through premiums paid by the employer. The insurer is the state, and the benefits that are paid are usually a percentage of the employees average weekly pay (subject to maximum amounts)

Question 61

Which about liability coverage under a PAP is correct?

Insureds under Part A: Liability Coverage include the named insured, spouse, resident relatives, and any other person using a covered auto with permission.
Coverage does not include legal expenses incurred in defending the insured against a claim of liability.

Answer 61

I only

Legal defense expenses incurred while defending against a liability claim are paid in addition to the limit of liability.

Question 61

Which traits of inland marine coverage are explained correctly?

Personal property floater risks are not eligible for coverage under inland marine policies
Many of the same items may be covered under an inland marine policy or as an endorsement to a homeowners policy.
If a fishing boat is too large to be covered under a homeowners policy, it can be covered under an inland marine form called a boatowners policy
Silverware and golfing equipment may be covered under an inland marine policy

Answer 61

II and IV

Personal property floater risks are absolutely eligible for coverage under inland marine policies
Boatowners policies are not a type of inland marine policy

Question 62

Which statements about professional liability insurances is/are correct?

Professional liability insurance covers a wide variety of insurance policies for many occupations and protects against liability for failing to use the degree of skill expected of a person in a particular occupation.
Professional liability insurance includes both medical malpractice insurance and errors and omissions insurance.

Answer 62

Both

Question 63

Umbrella policies cover liability and are generally in addition to homeowners and auto coverage. Which one of the following statements about umbrella policies is correct?

The umbrella policy covers the claims first, and if there are excess claims, the underlying homeowners or auto insurance will cover the balance
If an item such as watercraft is not covered by an underlying policy, it may not be covered under the umbrella for liability issues
Comprehensive liability is broader than umbrella policies
Policies will cover injuries to family members intentionally committed by a welcome guest while in the residence if there is a basic homeowners policy

Answer 63

If an item is not covered by an underlying policy, it likely won’t be covered by the PLUP for liability purposes.

Question 64

Which of the following pros would likely need malpractice insurance?

Accountant
Fin advisor
Attorney
Oncologist

Answer 64

Oncologist

Question 65

Which are true about BOP?

BOP includes property coverage only
BOPs have four parts
BOPs are a specific, standard package of coverage
BOPs can be customized to a specific business

Answer 65

II, IV

Question 66

Rebecca owns a gift shop and a home. She takes the bus everywhere she goes. In her spare time, she occasionally engages in activities that could possibly result in bodily injury to innocent bystanders if anything accidentally went wrong. Which of the following forms of insurance should Rebecca consider to avoid risk exposures from potential tort liability?

Homeowners policy
Personal auto policy
Umbrella liability policy
Commercial liability policy

Answer 66

I III IV

Personal auto policy is pointless in her case bc she takes the bus everywhere.

Question 67

Which auto insurance would apply if you backed into a tree?

General provision
Liability coverage
Collision
Comprehensive

Answer 67

Collision

Their answer:
Collision is defined under Part D of a personal auto policy as “the upset of your covered auto or its impact with another vehicle or object.” Therefore, this provision covers damages incurred in an accident involving other vehicles or when an automobile runs into a tree.

Question 68

Bro has a HO policy. Three streets away from bros house, his dog bites a mailman. What are the consequences of this event?

Both medical payments and personal liability coverage may apply
Only personal liability coverage applies
There is no coverage under the policy because pets are excluded
Only medical payments coverage applies

Answer 68

Both medical payments and personal liability coverage may apply

Medical payments (F) will apply even if bro is not at fault, while her personal liability (E) will only apply if she is found to be negligent or legally liable.

Question 69

Which of the following statements regarding malpractice insurance is right

Malpractice insurance policies exclude intentional acts of the professional from coverage
Only a limited number of companies issue pro liability insurance policies
Pro liability insurance is a good alternative to an umbrella liability policy
There is generally one standard form that is used for most pros who need E&O insurance .

Answer 69

Only a limited number of companies issue professional liability insurance policies.

Malpractice insurance policies do not exclude intentional acts, because you have to be intentionally acting in order to provide the professional service. Now it’s not like you could intentionally stab the guy with scissors under coverage, but it’s within limits.

Their answer
The answer is only a limited number of companies issue professional liability insurance policies. Relatively few companies sell this product due to its highly specialized nature. The act for which a physician or dentist might be sued might well be the exact act the provider intended. The result may not be what the patient wanted, leading to a lawsuit. Thus, intentional acts are not excluded from malpractice insurance. There are generally different forms used for each type of professional under all forms of professional liability insurance. An umbrella policy may extend the limits of an underlying professional liability policy, but professional liability insurance does not replace an umbrella policy.

Question 70

Which HO policy forms provides the highest level of building and personal property coverage?

HO5
HO2
HO3
HO15

Answer 70

HO5 - open perils on both dwelling and personal property.

HO15 with HO3 = HO5 but HO15 is an endorsement not a policy on its own, and is no longer sold after ISA HO2000 update.

The answer is the HO-5. The HO-5 policy form provides open-perils coverage on buildings and personal property. The HO-2 policy form only provides broad form coverage on buildings and personal property. The HO-3 policy form provides open form coverage on buildings and broad form coverage on personal property. The HO-15 is technically an endorsement and not a form, and provides open-peril coverage to personal property. A combination of the HO-3 form and the HO-15 personal property endorsement is the equivalent of the HO-5.

Question 71

Which of the following vehicles is NOT eligible to be covered under a PAP?

Automobile owned by an S-Corp
A motorcycle
Pick up truck
Snowmobile

Answer 71

Automobile owned by an S-Corp

PERSONAL Auto Policy covers PERSONAL vehicles not business vehicles.

Motorcycles and snowmobiles are nonstandard vehicles in the eyes of auto insurance companies, and can be added to a PAP via an endorsement.

Question 72

Which statement about Coverage B of a homeowners policy is correct?

Coverage B provides coverage for small detached structures on the dwelling property
The limit on Coverage B is typically a percentage of the Coverage A limit
Coverage B provides coverage for motorized land vehicles used off the premises.

Answer 72

I and II

Motorized land vehicles used off the premises is an exclusion to Coverage C: personal property.

Question 73

How much HO insurance coverage should financial planners encourage their clients to maintain?

80% of the actual cash value of the home
100% of the replacement value of the home
80% of the replacement value of the home
90% of the replacement cost of the home

Answer 73

100% of the replacement value of the home

Their answer:
The answer is 100% of the replacement value of the home. Unless a financial planner is a licensed property and casualty agent, the planner cannot discuss a client’s coverages. However, the planner can and should encourage clients to maintain at least 100% of the replacement value of the home. Many insurance companies offer additional riders to increase that amount, and the client can discuss that with an insurance agent.

You can take a P&C test to become a licensed property and casualty agent. They’re done by the states, and Texas’s is apparently pretty straightforward.

Question 74

Comprehensive personal liability coverage can be acquired in which of the following ways?

As an endorsement to a PAP
As an individual CPL policy
As part of a HO policy

Answer 74

II and III

CPL Coverage is not available through PAPs

Question 75

PAP provides coverage under the liability section for: (1)

the owner of an auto being used by the named insured and not owned by the named insured
Any four wheeled, off road, sport all terrain vehicle
Pleasure use of non owned motorcycles by the named insured
Nonresidents operating the owned auto with permission

Answer 75

Nonresidents operating the owned auto with permission.

“Any individual operating an insured’s automobile with the insured’s permission is covered under a PAP”

Question 76

Which of the following is the main reason there are only a few insurance companies that provide coverage for very high value homes?

Most insurance companies couldn’t afford the loss of a very high value home
Insuring high value homes could be catastrophic to an insurance company
Most owners of very high value homes self insure
The law of large numbers is necessary to make losses reasonably predictable, and there aren’t that many homes of very high value

Answer 76

The law of large numbers is necessary to make losses reasonably predictable, and there aren’t that many homes of very high value

Their answer
The answer is the law of large numbers in necessary to make losses reasonably predictable, and there aren’t that many homes of very high value. The problem with very high-value homes is that there are not enough homogenous units for the law of large numbers to apply well enough to gain predictability. Fewer homes means fewer homogeneous exposure units over which to spread the risk, and this means that there are fewer insurers willing to consider providing coverage on very high-value properties. Given that a typical insurance company insures a vast number of homes, losses on a few high-value homes wouldn’t become catastrophic to the company.

Question 77

Steven is covered by HO3. His dog bites a mailman 3 blocks away from his house. Which are/is true?

Steven will not have any coverage because the bit did not take place at his personal residence
Coverage E of Steven’s policy may apply or provide coverage if he is found to be legally liable
Coverage F of his policy may be applied to any medical bills, typically up to $1000

Answer 77

II and III

Question 78

Steven is covered by HO3. His dog bites a mailman 3 blocks away from his house. Which are/is true?

Steven will not have any coverage because the bit did not take place at his personal residence
Coverage E of Steven’s policy may apply or provide coverage if he is found to be legally liable. Liability coverage would be up to $300k.
Coverage F of his policy may be applied to any medical bills, typically up to $1000

Answer 78

III only

II is close but the limit for Coverage E is $100,000.

Question 79

Steven is covered by HO3. His dog bites a mailman 3 blocks away from his house. Which are/is true?

Steven will not have any coverage because the bit did not take place at his personal residence
Coverage E of Steven’s policy may apply or provide coverage if he is found to be legally liable. Liability coverage would be up to $100k.
Coverage F of his policy may be applied to any medical bills, typically up to $1000

Answer 79

II and III

Steven will be covered if his dog bites the mailman on or off his property. Coverage E will apply only if he is found to be legally liable, and Coverage F will apply to any medical bills typically up to $1,000. Coverage F does not require Steven to be at fault to provide coverage.

Question 80

Which regarding PAP Part B Medical payments is correct?

Part B of the PAP provides payment for the reasonable and necessary medical expenses of an insured as a result of an automobile accident.
The insureds under Part B include the named insured, spouse, and any family members while they are occupying a motor vehicle, or when, as a pedestrian, they are struck by a vehicle.

Answer 80

?

The answer is both I and II. Part B: Medical Payments coverage provides payment for the reasonable and necessary medical expenses of the insured as a result of an automobile accident. Expenses must be incurred within three years of the incident, and limits are provided on a per-person, per-occurrence basis. Individuals covered by Part B include the named insured, spouse, and any family member while they are occupying a motor vehicle, or when, as a pedestrian, they are struck by a vehicle.

Question 81

Which of the following individuals are not insured under section II of Ho policies?

A)
The friends of the insured who are not in the care of the insured
B)
A family member residing in the household
C)
The named insured and spouse
D)
Other persons under 21 years of age in the care of an insured

Answer 81

A

The answer is the friends of the insured who are not in the care of the insured. The insured persons include the named insured and spouse, family members residing in the household, and other persons under age 21 in the care of an insured.

Question 82

Which homeowners policy covers the tenant’s personal property against loss or damage and also provides personal liability insurance?

A)
HO-2
B)
HO-4
C)
HO-6
D)
HO-3

Answer 82

B

The answer is under HO-4: Contents Broad Form (for Tenants or Renters). Personal property is covered under the same named perils that are listed in the HO-2 policy. Up to 10% of the insurance on personal property can be applied to cover any additions or alterations to the building made by the insured.

Question 83

Which of the following is true for property coverage in a commercial package policy (CPP)?

A CPP will be offered at a discount from a collection of monoline forms.
Customization is allowed in order to modify the standard CPP.
The standard CPP includes building, contents, and commercial automobile coverage.
The CPP is designed for smaller businesses.
A)
IV only
B)
I and II
C)
I, II, and IV
D)
I and III

Answer 83

B

The answer is I and II. A CPP is a standard package of what used to be monoline forms offered at a discount. The standard CPP includes coverage for buildings, contents, and liability coverage. Additional coverage is available for things like commercial autos, glass, and specific, unique-to-the-business causes of loss. Thus, a CPP is customizable so it can accommodate many different businesses. The CPP is designed for larger businesses, while the business owner policy is designed for smaller businesses.

Question 84

Which of the following homeowners policies is designed for the owners of condominium units and cooperative apartments?

A)
HO-4
B)
HO-2
C)
HO-8
D)
HO-6

Answer 84

HO6

I KEEP GETTING THIS ONE WRONG FUCKING GODDAMNIT

The answer is HO-6. HO-6: Unit Owner Form (for Condominium Owners) covers the personal property of the insured for the same named perils listed in a HO-2 policy, except HO-6 insurance is for people residing in a condominium or cooperative apartment. This type of policy also provides liability protection.

Question 85

Which of the following homeowners insurance forms is used for condominium owners?

A)
HO-8
B)
HO-3
C)
HO-2
D)
HO-6

Answer 85

HO6

Question 86

Which of the following is the main reason there are only a few insurance companies that provide coverage for very high-value homes?

A)
The law of large numbers is necessary to make losses reasonably predictable, and there aren’t that many homes of very high value.
B)
Most insurance companies couldn’t afford the loss of a very high-value home.
C)
Insuring high-value homes could be catastrophic to an insurance company.
D)
Most owners of very high-value homes self-insure.

Answer 86

A

The answer is the law of large numbers in necessary to make losses reasonably predictable, and there aren’t that many homes of very high value. The problem with very high-value homes is that there are not enough homogenous units for the law of large numbers to apply well enough to gain predictability. Fewer homes means fewer homogeneous exposure units over which to spread the risk, and this means that there are fewer insurers willing to consider providing coverage on very high-value properties. Given that a typical insurance company insures a vast number of homes, losses on a few high-value homes wouldn’t become catastrophic to the company.

Question 87

Augusto and Celena have an HO-3 homeowners policy on their home. The dwelling is insured for $150,000. As the result of a kitchen fire, their home suffers extensive structural and smoke damage and is made uninhabitable for nine months. They rent a hotel room while the damage is repaired, incurring expenses of $13,500. It also costs them $4,000 for meals during their hotel stay, for a total of $17,500. Which of the following statements regarding the couple’s coverage under their HO-3 policy is CORRECT?

A)
The HO-3 policy covers only the first $15,000 of the $17,500 in expenses.
B)
The HO-3 policy does not cover any of their living expenses while their house is uninhabitable.
C)
The HO-3 policy covers the full $13,500 in rental expenses but does not cover the $4,000 for meals.
D)
The HO-3 policy covers the entire $17,500 in expenses.

Answer 87

The answer is the HO-3 policy covers the entire $17,500 in expenses. Coverage D of a homeowners policy pays living expenses, including lodging costs and meals, incurred when the house is made uninhabitable by a covered peril. Under an HO-3 policy, Coverage D is limited to 20% of the Coverage A limit on the dwelling. In Augusto and Celena’s case, coverage under Coverage D is $30,000 ($150,000 × 20%), so their lodging expenses and meals are fully covered.

Question 88

Which of the following can provide property coverage for a small businessowner’s business property?

A)
A businessowner’s policy (BOP)
B)
A personal auto policy (PAP)
C)
A commercial general liability (CGL) policy
D)
An employment practices liability policy

Answer 88

A

The answer is a businessowner’s policy (BOP). As a packaged product, a BOP provides both property and liability coverage. While a PAP provides property coverage, business use is excluded by the base policy. A CGL and an employment practices liability policy provide only liability coverage.

Question 89

Which of the following statements regarding Coverage E and Coverage F within a standard homeowners insurance policy is CORRECT?

Medical payments coverage (Coverage F: Medical Payments to Others) will automatically pay for bodily injuries, regardless of fault, typically up to $1,000 per occurrence on or off the premises.
Personal liability coverage (Coverage E: Personal Liability) protects the insured homeowner and all resident family members against personal liability for bodily injury and property damage that may occur on or off the premises due to negligence, up to $300,000 per occurrence.
Coverage E may cover the insured for injuries or property damage caused while playing golf.
A)
I and III
B)
I, II, and III
C)
II only
D)
I only

Answer 89

The answer is I and III. Coverage F is protection that will automatically pay for bodily injuries regardless of fault. In contrast, Coverage E only pays for bodily injury and property damage for which the insured is legally liable. If the insured causes damage to property or others while golfing, Coverage E will cover the insured up to the policy limit of $100,000. Also, Coverage E may cover the insured for injuries or property damage resulting from negligence while on the golf course.

Question 90

Which of the following HO policy forms provides the highest level of building and personal property coverage?

A)
HO-15
B)
HO-3
C)
HO-5
D)
HO-2

Answer 90

HO5

Open perils on both dwelling and personal property coverages.

The answer is the HO-5. The HO-5 policy form provides open-perils coverage on buildings and personal property. The HO-2 policy form only provides broad form coverage on buildings and personal property. The HO-3 policy form provides open form coverage on buildings and broad form coverage on personal property. The HO-15 is technically an endorsement and not a form, and provides open-peril coverage to personal property. A combination of the HO-3 form and the HO-15 personal property endorsement is the equivalent of the HO-5.

Question 91

Which of the following statements regarding personal auto policy (PAP) Part B Medical Payments coverage is CORRECT?

Part B of the PAP provides payment for the reasonable and necessary medical expenses of an insured as a result of an automobile accident.
The insureds under Part B include the named insured, spouse, and any family members while they are occupying a motor vehicle, or when, as a pedestrian, they are struck by a vehicle.
A)
I only

B)
II only

C)
Neither I nor II

D)
Both I and II

Answer 91

Both I and II

The answer is both I and II. Part B: Medical Payments coverage provides payment for the reasonable and necessary medical expenses of the insured as a result of an automobile accident. Expenses must be incurred within three years of the incident, and limits are provided on a per-person, per-occurrence basis. Individuals covered by Part B include the named insured, spouse, and any family member while they are occupying a motor vehicle, or when, as a pedestrian, they are struck by a vehicle.

Question 92

Which of the following statements regarding Coverage C: Personal Property within a standard HO-3 homeowners insurance policy are CORRECT?

The limit on Coverage C is 50% of the Coverage A limit, and items are covered at replacement cost value.
Furs, stamp collections, jewelry, and coin collections are examples of types of personal property that have only limited coverage.
Animals, birds, fish, credit cards, motorized land vehicles used off the premises, property of roomers or boarders not related to the insured, and articles specifically described and insured by other policies such as a boat are all excluded items.
The actual cash value is the depreciated value of personal property per an internal insurance company table and not the value of the property after depreciation for income tax purposes.
A)
I, II, III, and IV
B)
I, II, and III
C)
I, II, and IV
D)
II, III, and IV

Answer 92

The answer is II, III, and IV. The limit on Coverage C is 50% of the Coverage A limit, and the standard homeowners policy provides only actual cash value coverage on personal property. The insured may choose to increase the coverage on personal property by electing the replacement cost.

LO 2.1.2

Wrong

Question 93

Your clients have a penthouse in New York where they spend several months per year, as well as a home in Virginia where they typically spend the winter. They regularly have their butler move their favorite art and collectibles between houses. In addition, they frequently travel for business overseas. Part of the business includes entertaining international guests and hosting formal events and yacht parties. The wife carries her expensive jewelry when they travel. While at hotels, they keep the jewelry in the hotel safe. Which combination of coverages should they consider that would best meet their needs?

A)
Homeowners and an umbrella policy with a personal property rider to protect their jewelry
B)
Homeowners coverage on both homes, watercraft coverage, an inland marine policy, and a large umbrella policy, at a minimum
C)
Homeowners on both homes and a large umbrella policy
D)
An inland marine policy to protect the yacht and homeowners coverage for both homes, with high personal property limits to protect their property

Answer 93

B

The answer is homeowners coverage on both homes, watercraft coverage, an inland marine policy, and a large umbrella policy, at a minimum. Based on business activities and where they travel, other insurance they could consider is business liability, personal liability coverage, kidnap insurance, and a host of other types of coverages. Many wealthy clients carry special medical insurance that ensures they will be taken to a high-quality hospital and accompanied by doctors from such prestigious medical facilities as the Cleveland Clinic. Having a butler also indicates a need for specific coverage. Working with an agent who is familiar with supporting high net worth clients would be critical.

This would the type of question asked on the CPWA exam, I’d imagine

Question 94

Which of the following statements regarding malpractice and errors and omissions (E&O) insurance is CORRECT?

Malpractice insurance is generally used where the deficient conduct of the insured may result in bodily harm (e.g., a physician, surgeon, or dentist).
E&O insurance is coverage that provides protection against deficient acts of a professional who handles money.
Malpractice insurance allows the insurance company to settle claims out of court on behalf of the professional.
Most financial services professionals, including financial planners, will have E&O insurance at either the individual or group level.
A)
II and III
B)
I, II, and III
C)
I, II, III, and IV
D)
II, III, and IV

Answer 94

All

Question 95

Which of the following statements regarding malpractice insurance is CORRECT?

A)
Malpractice insurance policies exclude intentional acts of the professional from coverage.
B)
There is generally one standard form that is used for most professionals who need errors and omissions insurance.
C)
Professional liability insurance is a good alternative to an umbrella liability policy.
D)
Only a limited number of companies issue professional liability insurance policies.

Answer 95

D

The answer is only a limited number of companies issue professional liability insurance policies. Relatively few companies sell this product due to its highly specialized nature. The act for which a physician or dentist might be sued might well be the exact act the provider intended. The result may not be what the patient wanted, leading to a lawsuit. Thus, intentional acts are not excluded from malpractice insurance. There are generally different forms used for each type of professional under all forms of professional liability insurance. An umbrella policy may extend the limits of an underlying professional liability policy, but professional liability insurance does not replace an umbrella policy.

LO 2.4.1

Question 96

Which of the following are exclusions that apply to all of the standard homeowners forms?

War or nuclear hazard
Earthquake
Flood
Power failure
A)
I and IV
B)
II, III, and IV
C)
I, II, III, and IV
D)
I and II

Answer 96

The answer is I, II, III, and IV. Other exclusions that apply to all of the standard homeowners forms include neglect and intentional loss.

The reason why these are excluded is because they’re all catastrophic and widespread.

LO 2.1.1

Question 97

Comprehensive personal liability coverage (CPL) can be acquired in which of the following ways?

As an endorsement to a personal auto policy (PAP)
As an individual CPL policy.
As part of a homeowners policy.
A)
I and III
B)
III only
C)
I, II, and III
D)
II and III

Answer 97

II III

Question 98

John has been working for a large medical practice as a family practice physician and recently left to start his own practice. Which of the following should he purchase to protect himself from business-related liability risks?

Malpractice insurance
Errors and omissions insurance
A businessowners policy (BOP)
A personal liability umbrella policy (PLUP)
A)
II and IV
B)
I and III
C)
I, II, and III
D)
I, II, III, and IV

Answer 98

I III

The answer is I and III. As a medical professional, John would need malpractice insurance rather than errors and omissions insurance. A businessowners policy is also necessary, as he will be a businessowner and will have business-related liability risks typical to any other business, such as people falling on the premises. A PLUP specifically excludes business-related liability, as it is a personal policy rather than a business policy. John could probably benefit from a PLUP’s protection, but it is not for business-related risks as the question asks.

LO 2.4.1