There are two main sectors of insurance in the United States: property-casualty insurance and life-health insurance. Life-health insurance covers the financial consequences of death, injury, or sickness, while property-casualty insurance covers the financial consequences of damage to people’s and businesses’ property and/or their legal liability to others. Everyone who works in insurance (as well as those who purchase it) should understand the basic types of coverage. While life-health insurance is a large and important industry, this discussion focuses on the types of property-casualty policies that are available.

Property-casualty insurance can be broken down into two categories: personal (for individuals and families) and commercial (for businesses). Both people and businesses purchase coverage based on their loss exposures. Because situations and loss exposures vary, a variety of policies are available to meet customers’ needs.

What Are the Types of Personal Insurance Policies?

Let’s walk through the most common types of personal insurance policies. Remember, under an insurance policy, the insurer reimburses the insured for covered losses. For personal insurance policies, the insured is a person:

Homeowners

A homeowners policy provides coverage for both property and legal liability. The property portion of the policy gives people protection for when their homes and/or belongings are damaged (for example, by fire) or stolen. The liability portion provides coverage for situations such as the family dog biting a guest.

Personal auto

A personal auto policy, or PAP, also covers property damage and liability. Most people are familiar with the concept of auto insurance, because most auto owners are legally required to have it. If the insured is at fault in an accident, a PAP can provide coverage for bodily injury to another person or damage to another person’s auto. It also provides coverage for damage to the insured auto from a collision, fire, theft, or similar cause of loss (not wear and tear).

Personal watercraft

If a person owns a boat, he or she may need a personal watercraft policy, which covers legal liability arising from accidents involving the boat and physical damage to the boat.

Personal umbrella

Sometimes, people need higher limits of liability insurance than they can purchase through a homeowners policy or a PAP. In these situations, personal umbrella coverage can provide additional protection. This is most appropriate for individuals or families with a high potential for large liability losses, and policy limits are usually in the millions.

What Are the Types of Commercial Insurance Policies?

Now, let’s turn our attention to commercial policies—those purchased by a business to cover its loss exposures. Many businesses purchase a combination policy, such as a commercial package policy (CPP) or a businessowners policy (BOP), but we’ll look at each type of policy separately (although this is not a definitive list):

Commercial property

Commercial property insurance covers damage to buildings or their contents that results from fire, vandalism, and other causes of loss.

Commercial crime

Commercial crime insurance protects against losses from theft of business property and money. This coverage can include employee theft as well as theft by others during a robbery or burglary.

Commercial general liability (CGL)

CGL insurance protects a business against its legal liability to others for bodily injury and property damage. This coverage can apply to damage or injury that takes place at a business’s location or because of one of its products. For example, a customer could slip and fall on a store’s wet floor and be injured, and a customer could also be injured by using a defective product.

Commercial auto

Commercial auto is similar to personal auto insurance except that it applies to a business rather than to an individual. It covers liability for bodily injury and property damage caused by the use of the business’s autos and also damage to the business’s own autos when they are in an accident.

Workers compensation

Most business organizations are required to pay certain benefits to their employees for job-related injuries and illnesses. Workers compensation insurance covers these benefits.

Commercial umbrella

A commercial umbrella policy provides additional liability limits beyond those provided by the CGL, commercial auto, and other policies—protecting a business in the event of a large liability loss.

Summary

Insurers provide coverage for individuals’ and businesses’ loss exposures through a variety of policies. It’s important to understand the basic types of coverage and how personal and commercial policies can be used to meet different needs.

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Select one:
A. A claim.
B. A loss.
C. An accident.
D. An event.

Correct. An occurrence is an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

Angela has a five-year-old pickup truck which she uses to commute from her ranch to her job at a feed store. She recently had a collision with another vehicle, after which both drivers required minor medical treatment. Angela lives in a modified no-fault state. Which one of the following is a primary rating factor in determining the premium for Angela’s automobile insurance?

Select one:
A. The commuting use of the vehicle
B. The accident
C. The vehicle is a truck
D. The modified no-fault state

Correct. The primary rating factor in determining the premium for Angela’s automobile insurance would be the commuting use of the vehicle.

Jim and Sue, a young married couple, are under contract to purchase a condominium unit. Which one of the following ISO policy forms is best designed to meet their homeowners insurance needs?

Select one:
A. HO-2 policy
B. HO-4 policy
C. HO-6 policy
D. HO-8 policy

Correct. The HO-6 policy is the best ISO policy form designed to meet homeowners insurance needs.

Which one of the following is the main component used in determining adequate insurance rates?

Select one:
A. Profit goal
B. Underwriting expenses
C. Incurred losses
D. Investment income

Correct. Incurred losses is the main component used in determining adequate insurance rates.

Which one of the following is charged per exposure unit by estimating the value of projected losses associated with a line of business on past claim data and current trends?

Select one:
A. Rate relativity factors
B. Base premium
C. Pure premium
D. Base rate

Correct. The pure premium is based solely on the value of projected loss costs based on past claim data and current trends. A rate relativity factor is the number by which a base rate may be multiplied to reflect the relatively higher or lower loss exposure of one homogeneous group compared to another.

Bo was injured in an auto accident while using his car as a taxicab. Bo’s car is covered by a Personal Auto Policy (PAP) that included medical payments coverage. Which one of the following statements about Bo’s coverage for the accident is correct?

Select one:
A. Bo will receive medical payments under the PAP under the Public or Livery Conveyance coverage provision.
B. Bo will receive medical payments under the PAP under the Vehicles Used in the Business of an Insured coverage provision.
C. Bo will not receive medical payments under the PAP because of the Public or Livery Conveyance exclusion.
D. Bo will not receive medical payments under the PAP because of the Taxi and Omnibus exclusion.

Correct. An insured injured while occupying a covered auto that is being used as a public or livery conveyance such as a taxi or public bus, or who is logged into a “transportation network platform” as a driver, will not receive medical payments. (The exclusion does not apply to share-the-expense car pools.)

During the last five years, Insurance Company has increased its total policies in force at substantially higher rates than originally anticipated. Which one of the following best describes how Insurance Company should react to this?

Select one:
A. Increase its new business as quickly as possible since this trend demonstrates an opportunity
B. Reduce its writing of new business right away, because this trend demonstrates a threat
C. Analyze this trend carefully, because it could indicate a threat or an opportunity
D. No reaction since it is neither a threat nor an opportunity

Correct. Insurance Company must evaluate this development carefully, to decide if it indicates a threat or an opportunity. This trend could indicate that Insurance Company’s policies are priced too low or that its underwriting guidelines are too broad. Or, it could indicate that Insurance Company has excellent products that are priced very well or that Insurance Company’s service is excellent. Insurance needs to be cautious and evaluate this trend carefully to see what it may reveal about Insurance Company’s business.

The Broadened Home-sharing Host Activities Coverage Endorsement affects liability coverage under the homeowners form by

Select one:
A. Covering incidental exposures associated with occasional rental activities.
B. Providing for losses from theft when a home-sharing occupant has rented the premises.
C. Amending the “business” definition to provide coverage for bodily injury or property damage arising from home-sharing activities.
D. Allowing the insured to select a higher limit for damage to property of others.

Correct. The Broadened Home-sharing Host Activities Coverage Endorsement affects liability coverage under the homeowners form by amending the “business” definition to provide coverage for bodily injury or property damage arising from home-sharing activities.

A claim for money damages because of injury to another party or damage to another party’s property best describes

Select one:
A. A tort.
B. Errors and omissions.
C. A liability loss.
D. A property loss exposure.

Correct. A liability loss is a claim for money damages because of injury to another party or damage to another party’s property.

Sammy is the named insured on an HO-3 policy covering his family’s home. Sammy and his wife, Sally, have a young daughter, Suzie, and a grown-up son, Steve, who lives with them, and they own a cocker spaniel puppy. While a neighboring couple and their five-year-old son, Jay, were visiting, the puppy bit Jay. Jay suffered a serious wound and his parents sued Sammy and Sally. All of the following are insureds under the HO-3, EXCEPT:

Select one:
A. Suzie
B. Jay
C. Sally
D. Steve

Correct. Jay does not qualify as an insured. Sally is an insured because she is the spouse of the named insured residing in the same household as her spouse. Steve and Suzie are insureds because they are relatives of the named insured residing in the same household as the named insured.

Elin had a Personal Auto Policy (PAP) with Etchley Insurance Company with a $100,000 combined single limit. Elin had an auto accident with Roy, for which Elin was completely at fault. Roy sued Elin and recovered $100,000 against her. The attorney defending Elin in this lawsuit submitted a fee bill to Etchley totaling $50,000. Which one of the following correctly states the amount properly payable under Elin’s PAP?

Select one:
A. $100,000
B. $0
C. $150,000
D. $50,000

Correct. Etchley must pay $150,000–the defense costs are paid in addition to the combined single limit.

The Dwelling Property 3—Special Form (DP-3) offers coverages for a dwelling and its contents similar to the coverages under Section I of the HO-3—Special Form (HO-3). Which one of the following is a difference in the coverage between these two forms?

Select one:
A. Coverage B is optional and limits are selected under the DP-3 policy.
B. Fair rental value coverage must be separately endorsed onto the DP-3.
C. The DP-3 form is written on a named perils basis rather than all perils.
D. The DP-3 has lower special limits on theft losses to jewelry, furs, and firearms.

Correct. Coverage B is optional and limits are selected under the DP-3 policy.

Which one of the following is true of specialty crop and livestock insurance?

Select one:
A. Animal mortality insurance is limited to loss from accident, injury, sickness, or disease.
B. Crop-hail insurance can be extended to cover additional perils.
C. Feedlot insurance is limited to the bailee liability exposure of the feedlot operator.
D. Livestock policies exclude coverage for loss of gross margin or price increases.

Correct. Crop-hail insurance can be extended to cover additional perils.

Inland marine floaters are flexible and can be used to cover both common and unusual exposures. Inland marine floaters provide the producer with the opportunity to address and sell coverage for

Select one:
A. Increased building values on the homeowners policy.
B. Low-valued personal property.
C. Increased liability limits on the homeowners policy.
D. Property not adequately covered by the homeowners policy.

Correct. Property not adequately covered by the homeowners policy.

Which one of the following is considered real property?

Select one:
A. An automobile
B. A brick storage shed
C. Household appliances
D. A motorhome

Correct. Real property includes tangible property consisting of land and all structures permanently attached to the land, such as storage sheds. Motor vehicles and household appliances are examples of personal property.

The HO-3 policy

Select one:
A. Is assignable only with the insurer’s written consent.
B. May be assigned when the insured makes a written request within 60 days of the assignment.
C. Cannot be assigned to another party.
D. Is fully assignable without the insurer’s consent.

Correct. The HO-3 is assignable only with the insurer’s written consent.

Jacob lives in a rural farmhouse which he insures under an unendorsed DP-3 policy because the lack of public fire protection makes it ineligible for homeowners coverage from his insurer. The dwelling policy includes the following limits and coverages:

 Limit

Coverage A
$125,000
Coverage C
$10,000

Jacob recently took an extended tour of Europe, and while he was traveling on a train, luggage with all his clothing, personal effects, and souvenirs was destroyed in a baggage car fire. Jacob values the lost property at $2,000. Ignoring any deductible that may apply, how much of Jacob’s loss will be covered by his DP-3 policy?
Select one:
A. $0
B. $200
C. $1,000
D. $2,000

Correct. $1,000

The conditions under which the insurer can nonrenew a Personal Auto Policy (PAP) vary according to the length of the policy period. If the policy period is less than six months, the insurer

Select one:
A. Has the right to nonrenew every six months, beginning six months after the policy’s original effective date.
B. Has the right to nonrenew every year, beginning twelve months after the policy’s original effective date.
C. Has the right to nonrenew every 60 days.
D. Does not have the right to nonrenew.

Correct. Has the right to nonrenew every six months, beginning six months after the policy’s original effective date.

A statement of facts about a loss for which the insured is making a claim is known as a

Select one:
A. Fact sheet.
B. Proof of loss.
C. Deposition.
D. Appraisal.

Correct. Proof of loss.

Extended Theft Coverage for Residence Premises Occasionally Rented to Others (HO 05 41) amends the wording of the theft peril in certain homeowners forms to extend coverage to which one of the following?

Select one:
A. Landlord’s personal property from theft by an occasional tenant
B. Personal property of the tenant’s guest while at the rented premises
C. An occasional tenant’s personal property while in the rented premises
D. A continuous tenant’s personal property away from the rented premises

Correct. Landlord’s personal property from theft by an occasional tenant

Rosa’s sedan is covered by a Personal Auto Policy (PAP) with split limits for liability coverage of $100/$300/$50. Rosa’s friend, Lamont, owns a sports car that is covered by a PAP with split limits for liability coverage of $25/$50/$10. Rosa borrowed Lamont’s sports car and caused an accident with another vehicle driven by James. James and his passenger, Fred, were injured and they filed suit against Rosa. A court awarded $35,000 to James for his bodily injuries and $110,000 to Fred for his bodily injuries. Which one of the following will be paid under each policy?

Select one:
A. $29,000 under Lamont’s policy and $116,000 under Rosa’s policy
B. $35,000 under Lamont’s policy and $110,00 under Rosa’s policy
C. $50,000 under Lamont’s policy and $95,000 under Rosa’s policy
D. $95,000 under Lamont’s policy and $50,000 under Rosa’s policy

Correct. $50,000 under Lamont’s policy and $95,000 under Rosa’s policy

Johanna owns a large travel trailer, which is equipped with cooking facilities and an awning. Johanna wants to obtain collision and other than collision coverage for her travel trailer. Which one of the following is the best option for Johanna to secure this coverage?

Select one:
A. Personal Auto Policy (PAP)
B. Miscellaneous Type Vehicle Endorsement
C. Trailer/Camper Body Coverage Endorsement
D. Incidental Low Power Recreational Motor Vehicle Endorsement

Correct. Trailer/Camper Body Coverage Endorsement

Which one of the following statements is true regarding Coverage A—Dwelling as it applies to the dwelling on the “residence premises” listed on the HO-3 policy declarations page?

Select one:
A. When buying insurance, a homeowner should determine the Coverage A limit based on the cost to replace the dwelling including the cost of the land.
B. The HO-3 could cover the entire building for a policyholder who owns a four-family home, lives in one unit, and rents the other units to tenants.
C. Coverage A does not apply to structures attached to the dwelling, such as a garage or deck.
D. The land at the residence premises is specifically included in the property coverage.

Correct. The HO-3 could cover the entire building for a policyholder who owns a four-family home, lives in one unit, and rents the other units to tenants.

Which one of the following types of modeling includes a science, engineering, and insurance component?

Select one:
A. Catastrophe
B. Price optimization
C. Variable
D. Predictive

Correct. Catastrophe

Which one of the following is usually excluded under a personal umbrella policy?

Select one:
A. Slander
B. Defense costs
C. False arrest
D. Professional liability

Correct. Professional liability

Which one of the following is an advantage of using credit-based insurance scores in underwriting?

Select one:
A. Its use is encouraged by regulators for underwriting insurance policies.
B. It allows insurers to project future loss levels.
C. It is easy for consumers to understand.
D. It allows insurers to develop premiums commensurate with loss levels.

Correct. It allows insurers to develop premiums commensurate with loss levels.

Jack and Linda are meeting with their insurance agent to review their homeowners and auto policies. The agent has suggested that they add an umbrella policy. Which one of the following is the best reason the agent will likely provide for purchasing this coverage?

Select one:
A. To provide an increased limits policy with no exclusions
B. To avoid any retained limits for the broader coverage
C. To offset the deductibles on their other policies
D. To provide increased limits for large jury awards

Correct. To provide increased limits for large jury awards

An insurer can grow

Select one:
A. By lowering expenses.
B. Either by raising rates to generate additional premium or by lowering rates to attract more business.
C. By decreasing the frequency or severity of losses through underwriting action.
D. Only by lowering rates to attract more business.

Correct. Either by raising rates to generate additional premium or by lowering rates to attract more business.

Dane has an unendorsed HO-3 policy to insure his single-family home. He started a small Internet business. Dane publicizes stamp and coin dealers and their inventories over the Internet and keeps the web site inventories and values current for his customers.

As a storm passed over, lightning struck Dane’s house. Dane’s computer was damaged, destroying half the records of his customers’ inventories. He estimates that it will cost $2,000 to reestablish his inventory records. Disregarding any deductible that may apply, what amount, if any, will Dane’s insurer pay for these losses?

Select one:
A. $0
B. $500
C. $1,000
D. $2,000

Correct. $0

The major advantage of the Limited Mexico Coverage endorsement to the Personal Auto Policy (PAP) is that it provides

Select one:
A. Primary liability insurance within twenty-five miles of the United States border.
B. Additional liability insurance as well as providing physical damage coverage.
C. Liability and physical damage coverage for trips to Mexico of more than ten days.
D. All auto insurance coverages required by Mexican law.

Correct. Additional liability insurance as well as providing physical damage coverage.

Executives of Insurance Company (IC) want to review IC’s financial performance. In particular, they want to examine the insurer’s overall underwriting performance, comparing the inflow and outflow of money from insurance operations. Based on the above, IC executives want to review the

Select one:
A. Expense ratio.
B. Loss ratio.
C. Written premium.
D. Combined ratio.

Correct. Combined ratio.

Jill and Tom have a home with a $300,000 replacement cost and an HO-3 policy with a Coverage A limit of $270,000. Lightning strikes the central air conditioning unit and destroys it beyond repair. The unit has a replacement cost of $5,000, is five years old, and has a useful life of 10 years. Ignoring any deductible that might apply, how much will the insurer pay to replace the air conditioning unit?

Select one:
A. $2,500
B. $3,000
C. $4,500
D. $5,000

Correct. $5,000

Which one of the following statements is true regarding watercraft liability coverage under the HO-3 policy?

Select one:
A. Watercraft owned by the insured that is stored at a marina is not covered.
B. Sailboats longer than 26 feet not owned by or rented to an insured are not covered.
C. Sailboats shorter than 26 feet owned by the insured are covered.
D. Inboard watercraft with 50 horsepower engines owned by the insured are covered.

Correct. Sailboats shorter than 26 feet owned by the insured are covered.

Which one of the following statements regarding property exposed to loss is true?

Select one:
A. Real property includes intangible property.
B. Earthquake damage to a swimming pool is an example of a personal property exposure.
C. Personal property includes only tangible property.
D. Lightning damage to a tree is an example of a real property loss exposure.

Correct. Lightning damage to a tree is an example of a real property loss exposure.

Following an auto accident, Jim’s vehicle was towed to a body shop, and it remained there for five days for repairs. The damage was covered under the collision coverage of Jim’s Personal Auto Policy (PAP). During those five days, Jim used public transportation at a cost of $5.00 per day. What amount will Jim’s insurer pay under his PAP for his transportation expenses while his vehicle was being repaired?

Select one:
A. $0
B. $15
C. $20
D. $25

Correct. $20

The HO-5 policy is designed to meet the risk management needs of

Select one:
A. Owner-occupants of dwellings who would like the broadest coverage available among ISO’s forms for their property.
B. Owners of condominium units.
C. Owner-occupants of dwellings who may not meet insurer underwriting standards required for other policy forms.
D. Tenants of apartments or dwellings.

Correct. Owner-occupants of dwellings who would like the broadest coverage available among ISO’s forms for their property.

Which one of the following is an example of an ensuing loss?

Select one:
A. A gas leak following an earthquake caused a fire that damaged a house.
B. An explosion at a chemical plant cracked the foundation of a house.
C. The insured’s cat chewed through the electrical cord to a lamp which damaged the lamp and caused a hazardous condition in the house.
D. The insured improperly stacked wood in the fireplace and failed to open the damper in the chimney. The house was damaged by smoke, and a log that rolled out of the fireplace burned the wood floor.

A gas leak following an earthquake caused a fire that damaged a house.

Benjamin visited his insurance agent, Lily, about his insurance coverage limits under the ISO Mobilehome Endorsement. Benjamin was particularly concerned about having adequate coverage for various items of property that were built into his mobile home, including floor coverings, appliances, dressers, and cabinets. Which one of the following coverages should Lily review in order to assist Benjamin in determining adequate limits for these mobile home property items?

Select one:
A. Coverage D—Loss of Use
B. Coverage B—Other Structures
C. Coverage A—Dwelling
D. Coverage C—Personal Property

Correct. Coverage A—Dwelling

Which one of the following is correct regarding the Insurance Services Office (ISO) mobilehome policy?

Select one:
A. It is a special ISO stand-alone policy.
B. It provides broader liability coverage than an ISO homeowners policy.
C. It usually has a higher Coverage C—Personal Property limit than an ISO homeowners policy.
D. It is created by attaching the Mobilehome Endorsement to an ISO homeowners policy.

Correct. It is created by attaching the Mobilehome Endorsement to an ISO homeowners policy.

Actuary Smith has been reviewing the data below that he has received regarding the loss frequency of his company’s homeowners portfolio.

Losses House -Years
Freq./ 100 House -Years

Year 1
401

10,000

4.01%

Year 2
487

10,500

4.64%

Year 3
529

11,000

4.80%

Which one of the following is a conclusion that Smith is likely to come to regarding this data and the affect it will have for Year 4?
Select one:
A. Losses will begin to go down in year 4.
B. Frequency/House-Years will remain flat for year 4.
C. Year 4 is likely to have a higher loss frequency.
D. Year 4 will likely have 12,000 House-Years.

Correct. Year 4 is likely to have a higher loss frequency.

The calculation of a base rate for an insurance class or product assumes certain things. Which one of the following explains how class relativity factors apply to these base rates?

Select one:
A. Class relativity reduces the severity variations in the pure premium calculation.
B. Class relativity adjusts the frequency of loss to match that in other classes.
C. Class relativity pools loss cost data to provide additional experience to the insurer.
D. Class relativity adjusts pricing to respond to levels of risk within the portfolio.

Correct. Class relativity adjusts pricing to respond to levels of risk within the portfolio.

The Coverage for Damage to Your Auto (Maximum Limit of Liability endorsement) covers each described vehicle for

Select one:
A. A specified limit for bodily injury and property damage liability coverage.
B. A specified limit for medical payments and uninsured motorists coverage.
C. A stated amount of insurance that applies to collision but not to other than collision losses.
D. A stated amount of insurance that applies to collision and other than collision losses.

Correct. A stated amount of insurance that applies to collision and other than collision losses.

Under the HO-3 policy Section I—Conditions, the Appraisal condition

Select one:
A. Outlines a method for resolving disagreements between the insured and the insurer.
B. Provides that if the insured abandons the property after it is damaged, the insurer need not take over responsibility for it.
C. States that the insurer will adjust all losses with the insured or the insured’s spouse, if a resident in same household.
D. Bars an insured from bringing legal action against the insurer unless the insured has complied with all policy provisions.

Correct. Outlines a method for resolving disagreements between the insured and the insurer.

Which one of the following is a disadvantage of the automation changes being made by insurers?

Select one:
A. Development costs
B. Automated insure-producer interface
C. Enormous amounts of data to analyze
D. Regulatory requirements

Correct. Development costs

Harry is the named insured shown on the Declarations page of a Personal Auto Policy (PAP). Harry is married to Ida. Ida received a 60-day job assignment in the next town so one month ago, Ida moved out of their mutual home, to a new temporary residence. Neither Harry nor Ida are named on any other PAPs. Which one of the following correctly states who falls within the policy definition of “you and your” under Harry’s PAP?

Select one:
A. Harry, Ida, and any other residents of their household
B. Harry only
C. Harry and Ida
D. Neither Harry nor Ida

Correct. Harry and Ida

Lori has a company car with insurance coverage provided by her employer and she does not own a car. On occasion, Lori helps her elderly grandmother, Nell. Lori occasionally drives Nell’s car to pick up prescriptions. Lori knows that Nell has low limits of liability and is afraid that Nell might allow the insurance on her car to lapse. What coverage can Lori purchase to provide insurance for herself when she drives Nell’s car?

Select one:
A. A Personal Auto Policy (PAP) covering her company car
B. Miscellaneous Type Vehicle endorsement attached to a PAP
C. Extended Non-Owned Coverage for Named Individual endorsement attached to a PAP
D. Named Non-Owner Coverage endorsement attached to a PAP

Correct. Named Non-Owner Coverage endorsement attached to a PAP

Last year, Insurance Company had 460 hail losses and total paid hail losses of $2 million on a book of business comprised of 5,000 homes. The components of Insurance Company’s hail loss severity are

Select one:
A. The total paid losses ($2 million) and the number of years under review (1).
B. The total paid losses ($2 million) and the number of homes ($5,000).
C. The number of losses (460) and the total paid losses ($2 million).
D. The number of homes ($5,000) and the number of losses (460).

Correct. The number of losses (460) and the total paid losses ($2 million).

Which one of the following is a common provision in boatowners and yacht policies that provides that the insured promises not to operate the boat during a specified period?

Select one:
A. Protection and indemnity warranty
B. Navigational limits warranty
C. Lay-up period warranty
D. Seaworthiness warranty

Correct. Lay-up period warranty

The Richleys have an HO-3 policy. A deliveryman cut across the grass, rather than using the walk to the Richleys’ front door, and twisted his ankle on the unlevel surface. He had to go to the emergency room and incurred medical expenses of $750. Which one of the following coverages, if any, would pay for the $750 in expenses?

Select one:
A. Coverage F—Medical Payments to Others
B. No coverage
C. Section II—Additional Coverages
D. Coverage E—Personal Liability

Correct. Coverage F—Medical Payments to Others

A named insured owns two cars, one covered by a Personal Auto Policy (PAP) and one with no insurance at all. Which one of the following is a correct statement regarding the medical payments coverage provided by the PAP if the insured is injured in a collision while driving the uninsured auto?

Select one:
A. The exclusion of other vehicles owned by the insured or available for insured’s regular use applies.
B. The exclusion of vehicles owned by or available for family member’s regular use applies.
C. The PAP will provide medical payments coverage for medical care for the injuries under the insuring agreement.
D. The PAP will provide medical payments coverage for medical care for the injuries because the insured was driving a vehicle other than a covered auto.

Correct. The exclusion of other vehicles owned by the insured or available for insured’s regular use applies.

Is collapse a peril insured against under Coverages A and B of the HO-3 policy?

Select one:
A. No, but coverage for collapse that results from some other causes of loss is provided under the Section I—Property Coverages.
B. No, collapse is not covered even if it results from some other cause of loss.
C. Yes, it is a covered peril.
D. Yes, it is a covered peril but it is subject to special sublimits.

Correct. No, but coverage for collapse that results from some other causes of loss is provided under the Section I—Property Coverages.

Which one of the following statements is true regarding no-fault automobile insurance?

Select one:
A. Under a no-fault system, an injured person does not need to establish fault, but must prove negligence in order to collect payment for damages.
B. Most no-fault laws apply only to bodily injury and not to property damage.
C. No-fault laws typically provide no benefits for loss of earnings for an injured person.
D. An injured party must sue to obtain medical expenses above a particular monetary threshold in all no-fault plans.

Correct. Most no-fault laws apply only to bodily injury and not to property damage.

Although rate regulatory systems vary by state, rates in all states must meet specific criteria. When a rate charged for a particular rating class is not sufficient to cover all anticipated losses and expenses associated with that class, the specific criteria that needs to be met would be that

Select one:
A. The rate is unaffordable.
B. The rate is unfairly discriminatory.
C. The rate is excessive.
D. The rate is inadequate.

Correct. The rate is inadequate.

Multiple Peril Crop Insurance (MPCI) which insures farmers against unexpected production losses as measured against the farmer’s production history

Select one:
A. Covers perils such as vandalism to crops.
B. Provides pollution damage coverage to crops.
C. Is offered by the federal government.
D. Provides coverage for loss of livestock.

Correct. Is offered by the federal government.

Inland marine floaters typically share which one of the following characteristics?

Select one:
A. They are written for docks, watercraft, and related marine structures.
B. They usually cover unique perils not addressed by “traditional” insurance policies. Examples include wear and tear, insect damage, and mechanical breakdown.
C. They generally provide special form (open perils) coverage on a worldwide basis.
D. They are always written with a deductible.

Correct. They generally provide special form (open perils) coverage on a worldwide basis.

An insured has an HO-3 policy covering his home. While he was away during a special athletic tournament in his town, he rented his home for a week to one of the athletes. During that week, the mail carrier was injured on a loose floorboard on the porch of the home. A claim was made against the insured. Does the Coverage E business exclusion apply?

Select one:
A. Yes, because renting property to others qualifies as a business as defined by the policy.
B. It depends on whether a dollar threshold for the amount of rent charged is met.
C. No, because home rental is not considered a business activity.
D. No, because rental of an insured location on an occasional basis is a covered loss exposure if the location is used only as a residence.

Correct. No, because rental of an insured location on an occasional basis is a covered loss exposure if the location is used only as a residence.

John was driving his owned vehicle that was insured under a Personal Auto Policy (PAP). John had stopped for a red light and was rearended by Bob who was driving his own vehicle, also insured under a PAP. Each of the PAP policy coverages is shown below. Which one of the following statements regarding coverage under the two PAP’s is true?

John’s PAP

Bob’s PAP

Part A
$100,000/person

 $300,000/person

Liability $300,000/accident $500,000/accident
Part B
Med Pay $1000/person $1000/person
Part D $500 deductible OTC $500 deductible OTC
Damage to your auto $1000 deductible Collision No Collision Coverage
Underinsured Motorist $100,000 No Coverage
Select one:
A. Bob’s Part D coverage will cover the full amount of the damage to John’s vehicle.
B. John’s Part D coverage will respond to damages to his vehicle less his $1000 deductible
C. John’s Part A $300,000 limit will respond for his damage to his own vehicle.
D. Bob’s Part D $500 deductible will apply to the damage to John’s vehicle.

Correct. John’s Part D coverage will respond to damages to his vehicle less his $1000 deductible

Bert and Maggie insure their house with an unendorsed HO-3 policy with a Coverage A—Dwelling limit of $300,000, which is the replacement cost of the house. A fire destroys their detached garage. The cost to replace the garage is $35,000. How much will Bert and Maggie’s insurer pay to replace the detached garage?

Select one:
A. $20,000
B. $25,000
C. $30,000
D. $35,000

Correect. $30,000

The Muller family owns a house with a current replacement cost of $250,000. They purchased the house for $275,000. The Mullers have an unendorsed HO-3 policy with a Coverage A limit of $180,000. A fire totally destroys their home. Ignoring any deductible that may apply, how much will the Muller’s insurer pay for their destroyed house under the policy?

Select one:
A. $130,000
B. $162,000
C. $180,000
D. $225,000

Correct. $180,000

Which one of the following is an exception to the Coverage E and F Business exclusion to the HO-3 policy?

Select one:
A. A plumbing business operated from the home
B. Activities generating income of $10,000 or less during the year preceding the policy period
C. Volunteer activities
D. Home daycare services performed for neighbors for a fee

Correct. Volunteer activities

Small boat policies are designed to cover boats up to a certain size. Most of these policies

Select one:
A. Provide coverage for small personal watercraft such as jet skis.
B. Are written on an actual cash value basis.
C. Are written on a named perils basis only.
D. Exclude coverage for equipment and trailers.

Correct. Are written on an actual cash value basis.

The Subrogation condition in the HO-3 policy allows the insured to waive all rights to recover against any person provided the

Select one:
A. Waiver is in writing and made before a loss.
B. Insured acts in its best interests.
C. Insured acts in good faith.
D. Waiver is in writing and made after a loss.

Correct. Waiver is in writing and made before a loss.

The Dwelling Policy Form is issued to provide flood insurance for which one of the following properties?

Select one:
A. Nursing home
B. Apartment building
C. Residential cooperative building
D. Manufactured mobile homes

Correct. Manufactured mobile homes

Which one of the following sections of the Personal Auto Policy (PAP) would provide coverage for medical costs and loss of wages when the insured is injured by a hit-and-run driver?

Select one:
A. Part C—Uninsured Motorists Coverage
B. Part D—Coverage for Damage to Your Auto
C. Part B—Medical Payments Coverage
D. Part A—Liability Coverage

Correct. Part C—Uninsured Motorists Coverage

Martin has a Personal Auto Policy (PAP) and an unendorsed HO-3 policy. Martin is an avid golfer who frequently uses golf carts at various golf facilities. Martin’s HO-3

Select one:
A. Provides coverage for his legal liability while using a golf cart within the legal boundaries of a golfing facility.
B. Does not provide coverage for liability arising out of a golf cart on a golf course unless he purchases the Golf Cart Liability Endorsement for his HO-3 policy.
C. Does not provide coverage for liability arising out of a golf cart on a golf course unless he purchases the Miscellaneous Type Vehicle Endorsement for his PAP.
D. Provides coverage for all uses of a golf cart.

Correct. Provides coverage for his legal liability while using a golf cart within the legal boundaries of a golfing facility.

An insured under a personal auto policy with liability limits of $100,000/$300,000/$25,000 is responsible for an auto accident that resulted in $90,000 in damages for bodily injury. The costs incurred by the insurer to defend the insured were $20,000. What amount did the insurer pay as a result of the accident?

Select one:
A. $20,000
B. $90,000
C. $100,000
D. $110,000

Correct. $110,000

Joe keeps a tiger cub as a pet in his fenced-in backyard. The tiger escapes and bites a neighbor’s child who requires stitches. Joe argues that keeping the tiger violated no law and that he took every precaution to restrain the tiger. Even if Joe is correct, he might face a claim for damages based upon which one of the following?

Select one:
A. Absolute liability
B. Negligence
C. Statutory liability
D. Trespass

Correct. Absolute liability

According to Part D—Coverage for Damage to Your Auto of a Personal Auto Policy (PAP), the insurer’s limit of liability for a physical damage loss to a covered auto is

Select one:
A. The lower of the actual cash value or the amount necessary to repair or replace the property with other property of like kind and quality.
B. The estimated value as established by at least two auto appraisers.
C. The lower of the cost to repair the vehicle or the total loss value.
D. The “blue book” value of the vehicle, taking into consideration the odometer reading and the vehicle condition.

Correct. The lower of the actual cash value or the amount necessary to repair or replace the property with other property of like kind and quality.

The post Personal Insurance – Simulated exam appeared first on Exam Reviewer.

Select one:
A. Is excluded if the suit against the insured is groundless.
B. Has a liability limit separate from the personal liability limit.
C. Is included in the personal liability limit.
D. Is supplemental to the liability limit.

Correct. This Coverage is supplemental to the liability limit. (The insurer provides the defense costs in addition to any coverage for damages.)

All of the following are included as insureds for the Section II—Liability Coverages of a homeowners policy, EXCEPT:

Select one:
A. The 19-year-old exchange student who temporarily lives with and under the care of the named insured and his spouse
B. The homeowners association that sends a loss assessment bill to the named insured
C. The named insured’s 17-year-old foster child
D. The named insured’s neighbor while caring for the insured’s dog if the dog causes injury while in the neighbor’s care

Correct. All are insureds under the policy except for the homeowners association. The Loss Assessment additional coverage provides up to $1,000 for an insured’s share of a loss assessment charged to the insured by a corporation or association of property owners for certain types of losses, but the entity does not become an insured.

Under Coverage E—Personal Liability of the HO-3 policy, the insurer’s obligation to defend ends

Select one:
A. When the costs of defense limits are exhausted.
B. When the cost of defense exceeds the personal liability limits.
C. When the liability limit for the occurrence is exhausted by payment of a settlement or judgment.
D. When policy limits are exhausted by the claim expenses.

Correct. Under Coverage E—Personal Liability of the HO-3 policy, the insurer’s obligation to defend ends when the liability limit for the occurrence is exhausted by payment of a settlement or judgment.

All of the following are included as insureds for the Section II—Liability Coverages of a homeowners policy, EXCEPT:

Select one:
A. The named insured’s spouse who lives with the named insured but is away on business most Mondays through Fridays
B. The 19-year-old exchange student who temporarily lives with and under the care of the named insured and his spouse
C. The named insured’s 30-year-old best friend who is not related but becomes a temporary resident of the named insured’s household
D. The named insured’s neighbor while caring for the insured’s dog if the dog causes injury while in the neighbor’s care

Correct. All of the people identified in the answer choices are insureds under the policy except for the named insured’s best friend. He does not qualify as a relative or fall into any of the categories granting insured status to young people or students.

The HO-3 policy excludes coverage for liability assumed under contract or agreement. However, exceptions apply, provided the loss exposures do not involve coverage excluded elsewhere in the policy. Which one of the following describes an exception?

Select one:
A. Written contracts relating to the ownership of an insured location
B. First-party liability
C. Agreements intending to injure a third party
D. Liability assumed after an accident occurs

Correct. Written contracts relating to the ownership, maintenance, or use of an insured location are exceptions to this exclusion.

Which one of the following would be an exception to the Coverages E and F Business exclusion to the liability coverage provided by the HO-3 policy?

Select one:
A. Teenage son of named insured painting neighbor’s fence in exchange for a few dollars
B. Full-time landscaping business
C. Full-time beauty salon in the home
D. Charging neighborhood families for home daycare services

Correct. Teen painting neighbor’s fence. The Coverages E and F Business exclusion is designed to exclude coverage for bodily injury or property damage arising out of the business activities of any insured while providing coverage for occasional or part-time activities.

The HO-3 policy excludes liability coverage for

Select one:
A. Any motor vehicle that is rented to others.
B. A motorized golf cart owned by an insured and used on a golf course.
C. A motorized vehicle not requiring registration that is designed for recreational use off public roads and owned by an insured, and used on an insured location.
D. A motor vehicle in dead storage on an insured location.

Correct. Any motor vehicle that is rented to others would typically be insured under an auto liability policy.

Which one of the following statements is true regarding “aircraft liability” coverage under the HO-3 policy?

Select one:
A. If the insured flies her radio-controlled model airplane through a neighbor’s picture window, the resulting liability claim would not be covered.
B. Hobby aircraft that do not carry people or cargo are considered to be “aircraft” in the HO-3 policy.
C. Model airplanes that do not carry people or cargo are considered to be “aircraft” in the HO-3 policy.
D. The homeowners policy excludes all aircraft liability.

Correct. The homeowners policy excludes all aircraft liability. Model airplanes or hobby aircraft that do not carry people or cargo are excluded in the policy’s aircraft definition, however, and therefore are covered.

Under which one of the following conditions of a homeowners policy is each insured seeking protection treated as if he or she has separate liability coverage under the policy?

Select one:
A. Severability of Insurance condition
B. Singularity of Coverage condition
C. Limits of Liability condition
D. Voluntary Payment condition

Correct. Under the Severability of Insurance condition, each insured seeking protection is treated as if he or she has separate coverage under the policy.

The Section II Limit of Liability provision of the HO-3 policy stipulates that the limit of Coverage E—Personal Liability appearing on the declarations page is the total limit of coverage for

Select one:
A. Any one occurrence.
B. Each insured separately.
C. Each claim made relative to an occurrence.
D. Each person injured in a claim.

Correct. The Coverage E limit is the total limit of coverage for any one occurrence. This limit does not increase regardless of the number of insureds, claims made, or people injured.

The Section II Limit of Liability provision in the HO-3 policy states that for Coverage E, all bodily injury and property damage that result from continuous or repeated exposure to the same harmful conditions are considered

Select one:
A. Multiple occurrences, depending on how many events caused the bodily injury and property damage.
B. One occurrence, even if the occurrence that caused the bodily injury or property damage was not a single event.
C. Two occurrences, namely, the bodily injury and the property damage.
D. Three occurrences, namely, the bodily injury, the property damage, and the combination of bodily injury and property damage.

Correct. Even if the occurrence that caused the bodily injury or property damage was not a single event, but took place over many months, the injury or damage is considered one occurrence.

Under the cancellation condition in the HO-3 policy,

Select one:
A. Neither the policyholder nor the insurer can cancel the policy during the policy term.
B. The policyholder may cancel the policy for any reason but the insurer can cancel the policy only for certain reasons set forth in state regulations.
C. Either the policyholder or the insurer can cancel the policy for any reason.
D. The policy can only be cancelled by mutual consent of the insured and the insurer.

Correct. Under the cancellation condition in the HO-3 policy, the policyholder may cancel the policy for any reason but the insurer can cancel the policy only for certain reasons set forth in state regulations.

John has purchased a home but will not be able to move in until three months after he purchases it, and needs insurance coverage. Which endorsement for miscellaneous exposures would most appropriately apply in John’s situation?

Select one:
A. Personal Injury Coverage – Extends Coverage E – Personal Liability
B. Coverage B – Other Structures Away From the Residence Premises
C. Specific Structures Away Form the Residence Premises
D. Broadened Residence Premises Definition Endorsement

Correct. John will need the Broadened Residence Premises Definition Endorsement.

Unit-Owners Rental to Others may be used to extend coverage under which one of the following homeowners forms?

Select one:
A. HO-2
B. HO-3
C. HO-5
D. HO-6

Correct. Unit Owners Rental to Others extends Coverage C—Personal Property and Section II—Liability Coverages under HO-6 for the insured’s regular rental of an insured unit to others.

The Additional Insured—Vendors (HO 07 51) endorsement to a homeowners policy extends the definition of insured to include

Select one:
A. The property manager of the insured premises.
B. Independent contractors or agents named in the schedule.
C. Lessor(s) of the insured’s premises.
D. Mortgageholder(s) of the insured premises.

Correct. Additional Insured—Vendors extends the definition of insured to agents or independent contractors (called vendors) named in the schedule, but only with respect to bodily injury or property damage arising out of the insured’s products.

Which one of the following reinforces that homeowners property coverage does not apply to the personal property of home-sharing occupants, or any person occupying the residence because of home-sharing, kept in space rented to a home-sharing occupant, or used primarily for home-sharing host activities?

Select one:
A. Home-sharing Host Activities Amendatory Endorsement
B. Broadened Home-sharing Host Activities Coverage Endorsement
C. Home-sharing Host Activities Damage to Property of Others provision
D. Damage to Property of Others—Increased Limits endorsement

Correct. The Home-sharing Host Activities Amendatory Endorsement reinforces that homeowners property coverage does not apply to the personal property of home-sharing occupants, or any person occupying the residence because of home-sharing, kept in space rented to a home-sharing occupant, or used primarily for home-sharing host activities.

Bob and Diane Rothwell’s rural home is insured with an HO-3 policy. During spring clean up, the Rothwells hired a college student to help clean up and burn the brush that had accumulated over the prior season. As the brush pile was burning, an unexpected wind carried the fire across the Rothwells’ pasture. Bob and Diane, their 15-year-old son Jeff, Diane’s father who was visiting, the college student, and a neighbor all worked together to put out the fire before it spread to the neighbor’s yard. They all suffered some burns. All of the parties listed below will be able to collect compensation for their medical bills to treat their burns from the Medical Payments to Others coverage from the Rothwells’ HO-3, EXCEPT:

Select one:
A. The college student
B. Diane’s father
C. The neighbor
D. Jeff

Correct. Jeff’s medical bills will not be covered, because Jeff is an insured. Medical Payments to Others covers medical payments incurred by others, not insureds or regular household residents.

Josef left the garage door of his home open one night and a homeless person sneaked in and fell asleep. During the night, a shovel that was hanging on the wall fell down, hitting the person in the head, causing him to seek emergency medical treatment at a nearby hospital. Which one of the following statements is true about Josef’s coverage under his HO-3 policy?

Select one:
A. The injured person is entitled to benefits under Coverage F—Medical Payments to Others.
B. The injured person is entitled to benefits under Coverage F—Medical Payments to Others because there is no evidence that he caused the shovel to fall.
C. Coverage F—Medical Payments to Others is not available for persons on the insured location without permission.
D. Only Josef and his relatives are entitled to benefits under Coverage F—Medical Payments to Others.

Correct. Coverage F—Medical Payments to Others is not available for persons on the insured location without permission.

Juan lives on a large property insured with an HO-3 policy. His home is heated by fuel oil that is stored in an underground tank in his backyard. Juan did not realize that there has been a small leak in the tank and that for several years fuel has slowly trickled out of it, making its way into a neighbor’s well. The neighbor has made a claim against Juan, who turned the claim over to his insurer. Under Juan’s HO-3 policy, this is

Select one:
A. Not considered an occurrence because it did not cause bodily injury.
B. Considered an occurrence because it was a continuous condition and it was fortuitous.
C. Considered an occurrence because it destroyed tangible property.
D. Not considered an occurrence because it was not sudden.

Correct. An occurrence is an accident, and can be a sudden event, a gradual series of incidents, or a continuous condition, as long as it is fortuitous.

Dominic and Amy are a married couple who insure their home, which sits on a large property, with an HO-3 policy. It has a Coverage E—Personal Liability limit of $300,000. They were riding their snowmobiles on their own property when they saw a man crouching behind the shrubs, so they assumed he was a burglar. They drove their snowmobiles directly at the man, seriously injuring him. Then they discovered the man was a technician installing cable for their television. The cable technician sued Dominic and Amy and was awarded $300,000 against Dominic and $100,000 against Amy. The defense costs were $30,000. The court ruled that the insurer could not deny coverage for an intentional or expected injury because the couple was using force reasonably believed necessary to protect their home. As a result of the lawsuit, Dominic and Amy’s insurer will pay

Select one:
A. $0.
B. $300,000.
C. $330,000.
D. $400,000.

Correct. The insurer is responsible for the $300,000 Coverage E limit, plus defense costs of $30,000, for a total of $330,000. (The use of the snowmobile fits an exception to the Motor Vehicle Liability exclusion.)

The post Personal Insurance – Practice exam 5 appeared first on Exam Reviewer.

Select one:
A. Personal property that is owned.
B. Structures attached to the dwelling.
C. Structures separated by a clear space.
D. Additional living expense.

Correct. Coverage A—Dwelling coverage applies to structures attached to the dwelling.

The HO-3 policy Coverage D—Loss of Use limit

Select one:
A. Applies separately for Additional Living Expenses and Fair Rental Value.
B. Includes a time frame limit of 30 days.
C. Is 10% of the Coverage A limit.
D. Applies in addition to Coverage A limits.

Correct. The Loss of Use limit applies in addition to Coverage A limits.

Which one of the following Additional Coverages under the HO-3 policy provides defense coverage for the insured if needed?

Select one:
A. Credit Card, Electronic Fund Transfer Card or Access Device, Forgery, and Counterfeit Money
B. Ordinance or Law
C. Fire Department Service Charge
D. Loss Assessment

Correct. Credit Card, Electronic Fund Transfer Card or Access Device, Forgery, and Counterfeit Money provides defense coverage for the insured if needed.

Cristal owns a residential premises insured under an HO-3 policy. The property includes Cristal’s residence and four other structures that are separated from the dwelling by clear space. Cristal’s Coverage B limit

Select one:
A. Applies to all the other structures collectively, not to each structure individually.
B. Applies separately to each structure. Each structure is separately insured up to the Coverage B limit.
C. Does not apply to the other structures.
D. Applies separately for a maximum of two detached structures. Additional structures need to be covered separately by endorsement.

Correct. Coverage B essentially resembles blanket insurance. The Coverage B limit applies to all covered detached structures collectively, not to each structure individually.

Under the HO-3 policy, a structure that is attached to the dwelling on the insured’s residence premises, but only by a fence, utility line, or similar connection is

Select one:
A. Not considered to be covered property.
B. Considered personal property.
C. Considered part of the dwelling.
D. Not considered part of the dwelling, but is a separate structure.

Correct. Structures that are attached to the dwelling but only by a fence, utility line, or similar connection are not considered part of the dwelling, but are “other structures.” They are not considered personal property. They are covered by Coverage B—Other Structures.

Steve owns a home insured under the HO-3 policy. While Steve was painting his living room, he accidentally dropped an open paint can from his ladder which spilled onto his wall-to-wall carpet and sofa. The carpet and sofa were damaged beyond repair and needed to be replaced. What damage to Steve’s property is covered under his HO-3?

Select one:
A. None of the damage is covered.
B. The damage to the carpet is covered; the damage to the sofa is not covered.
C. Damage to the carpet and sofa are both covered.
D. The damage to the sofa is covered; the damage to the carpet is not covered.

Correct. The HO-3 provides special form coverage to the dwelling, and wall-to-wall carpet is considered part of the dwelling. The carpet damage was due to “direct physical loss to property described in Coverages A and B” and thus is covered. The sofa is not covered because Coverage C—Personal Property provides named perils coverage and a paint spill by the insured does not come within any Coverage C named peril.

Under the HO-3 policy, property losses that result from war, including the discharge of nuclear weapons, are

Select one:
A. Covered in excess of a large deductible.
B. Excluded.
C. Covered, but subject to a special sublimit.
D. Covered.

Correct. Under the HO-3 policy, property losses that result from war, including the discharge of nuclear weapons, are excluded.

Which one of the following is an excluded peril under Section I—Coverages A and B of the HO-3 policy?

Select one:
A. Settling of the dwelling
B. Accidental leak of water from plumbing
C. Hail
D. Unintentional loss

Correct. An excluded peril under Section I of the HO-3 policy is settling of the dwelling.

The water damage exclusion in the HO-3 policy eliminates coverage for losses caused by

Select one:
A. Flood caused by heavy rains, but not waves or tidal flooding.
B. Flood, surface water, waves, and water or water-borne material such as sewage that backs up through sewers and drains.
C. Flood, surface water, and waves, but not water-borne material such as sewage that backs up through sewers and drains.
D. Waves and tidal flooding, but not flood caused by heavy rains.

Correct. Flood, surface water, waves, and water or water-borne material such as sewage that backs up through sewers and drains.

In Section I—Exclusions of the HO-3 policy, three perils are excluded for Coverages A and B only. The three perils that are excluded for these coverages are

Select one:
A. War, neglect, and power failure.
B. Weather, acts or decisions, and faulty workmanship.
C. Water damage, earth movement, and ordinance or law.
D. Government action, intentional loss, and nuclear hazard.

Correct. The three perils that are excluded for these coverages are weather, acts or decisions, and faulty workmanship.

Jim purchased an HO-3 policy with a $270,000 Coverage A—Dwelling limit. Unaware that Jim had purchased a policy, his wife Sue Ellen also purchased an HO-3, with a $330,000 Coverage A—Dwelling limit. A fire destroys the couple’s home, which has a $300,000 replacement cost. How will the two insurers share the loss?

Select one:
A. Jim’s insurer will pay $270,000; Sue Ellen’s insurer will pay $30,000
B. Jim’s insurer will pay $150,000; Sue Ellen’s insurer will pay $150,000
C. Jim’s insurer will pay $135,000; Sue Ellen’s insurer will pay $165,000
D. Jim’s insurer will pay $165,000; Sue Ellen’s insurer will pay $135,000

Correct. The loss will be shared proportionately by both policies. 270,000 + 330,000 = 600,000; Jim’s policy will pay 270,000 ÷ 600,000, or 45%, and Sue Ellen’s policy will pay 330,000 ÷ 600,000, or 55%. Jim’s insurer will pay 45% X 300,000 or $135,000; Sue Ellen’s insurer will pay 55% X 300,000 or $165,000.

Under the HO-3 policy Section I—Conditions, the Abandonment of Property Condition

Select one:
A. Outlines a method for resolving disagreements between the insured and the insurer.
B. Provides that if the insured abandons the property after it is damaged, the insurer need not take over responsibility for it.
C. Establishes how the amount to be paid for a property loss will be determined.
D. States that the insurer will adjust all losses with the insured or the insured’s spouse, if a resident in same household.

Correct. Under the HO-3 Section I—Conditions, the Abandonment of Property Condition provides that if the insured abandons the property after it is damaged, the insurer need not take over responsibility for it.

Adam and his insurer disagree on the amount of a loss covered by his homeowners policy. Adam wants the insurer to pay $10,000 toward the loss. The insurer’s representative feels that the loss should be valued at $5,000. How could the appraisal process resolve this situation?

Select one:
A. Adam is forced to litigate the loss since agreement cannot be reached.
B. Adam’s loss will be valued at $7,500 which is an equitable compromise.
C. Both Adam and the insurer will jointly select an acceptable appraiser to set the value.
D. Adam and the insurer will each select an appraiser, and the two appraisers will submit their differences to an impartial umpire who will reach a resolution.

Correct. Adam and the insurer will each select an appraiser, and the two appraisers will submit their differences to an impartial umpire who will reach a resolution.

Under the HO-3 policy Section I—Conditions, the Loss Settlement condition

Select one:
A. Outlines a method for resolving disagreements between the insured and the insurer.
B. Establishes the process for determining the amount to be paid for a property loss.
C. Provides that if the insured abandons the property after it is damaged, the insurer need not take over responsibility for it.
D. States that the insurer will adjust all losses with the insured or the insured’s spouse, if a resident in the same household.

Correct. Under the HO-3 policy Section I—Conditions, the Loss Settlement condition establishes the process for determining the amount to be paid for a property loss.

The deductible, which appears on the declarations pages of a homeowners policy, is deducted from

Select one:
A. All loss payments.
B. The total of all losses during the policy period.
C. Section I (property) losses.
D. Section II (liability) losses.

Correct. The deductible, which appears on the declaration pages of a homeowners policy, is deducted from Section I (property) losses.

Martina is the named insured under an HO-3 policy. Martina’s residence sustained damage due to a fire and she moved into a local hotel for one month while her residence was uninhabitable and being repaired. Martina’s hotel bill for the month was $2,500. Martina normally spent $500 on meals monthly, but eating out at local restaurants for the month, Martina spent $1,500. How much will Martina receive from her HO-3 insurer under Coverage D—Loss of Use?

Select one:
A. $0
B. $2,500
C. $3,500
D. $4,000

Correct. Martina will receive her full hotel bill ($2,500) and the extra cost of her meals ($1,500 – $500). Martina is entitled to costs for lodging and the extra cost of meals during the time her house was uninhabitable due to a covered loss.

Nicholas and Laura own property in the country which is insured under an HO-3 policy. There is a cottage, where they reside, and several detached structures on the property including a greenhouse, a pool house, and a storage shed. Under the HO-3, Coverage A—Dwelling applies to

Select one:
A. All of the structures.
B. The cottage, which is the structure that is their residence premises and is listed as such on the policy’s declarations.
C. Any of the structures used by Nicholas, Laura, or any family member as a residential dwelling.
D. None of the structures.

Correct. Coverage A—Dwelling applies to the insured’s residence premises and is listed as such in the declarations.

Tom and Martha insure their house with an unendorsed HO-3 policy with a Coverage A—Dwelling limit of $300,000, which is the replacement cost of the house. A thief breaks into the house while Tom and Martha are on vacation and steals the following items:

$500 cash
$50,000 stock certificates
Ignoring any deductible that may apply, how much, if any, will Tom and Martha’s insurer pay for the loss of the items?

Select one:
A. $0
B. $200
C. $1,700
D. $50,500

Correct. The insurer will pay $200 for the cash and $1,500 for the stock certificates. The HO-3 policy has special sublimits within Coverage C that apply to money ($200) and securities ($1,500). The sublimits for these items apply to all named perils.

Bert and Maggie insure their house with an unendorsed HO-3 policy with a Coverage A—Dwelling limit of $300,000, which is the replacement cost of the house. A fire destroys their detached garage. The cost to replace the garage is $35,000. Ignoring any deductible that may apply, how much will Bert and Maggie’s insurer pay to replace the detached garage?

Select one:
A. $20,000
B. $25,000
C. $30,000
D. $35,000

Correct. The insurer will pay $30,000. Coverage for other structures is automatically provided under the HO-3 with a limit that is 10% of the limit for Coverage A. This 10% limit applies collectively to all “other structures” at the residence premises.

Sarah’s home is covered with an unendorsed HO-3 policy with a $500 deductible. Sarah suffered a kitchen fire causing $35,750 in damage to her home. In addition to the damage to the home various items in the home were also destroyed. Damaged items included various kitchen utensils and goods, her fish in an aquarium, clothing belonging to a roomer in the home, and a stamp collection that Sarah owned. Which one of the following is true regarding the property lost in the home?

Select one:
A. There would be no coverage for the stamps.
B. There would be no coverage for the fish.
C. The deductible would apply separately to the dwelling and contents.
D. The roomers clothing would be covered.

Correct. There would be no coverage for the fish.

The post Personal Insurance – Practice exam 4 appeared first on Exam Reviewer.

Select one:
A. Miscellaneous Type Vehicle Endorsement
B. Named Non-Owner Coverage Endorsement
C. Coverage for Damage to Your Auto (Maximum Limit of Liability) Endorsement
D. Auto Loan/Lease Coverage Endorsement

Correct. The Miscellaneous Type Vehicle Endorsement should be attached to the Snyder’s PAP to provide liability coverage for the ATV.

Dirk has a restored 1968 Mustang. Dirk has spent a lot of money and time bringing the car back to a like-new condition. Dirk insures the Mustang under his Personal Auto Policy (PAP) with collision and other than collision coverages. Dirk can best establish the value of the Mustang with his insurer by attaching which one of the following endorsements to his PAP?

Select one:
A. Named Non-Owner Coverage
B. Extended Non-Owned Coverage—Vehicles Furnished or Available for Regular Use
C. Miscellaneous Type Vehicle
D. Coverage for Damage to Your Auto (maximum limit of liability)

Correct. Dirk can best establish the value of the Mustang with his insurer by attaching a Coverage for Damage to Your Auto (maximum limit of liability) endorsement to his PAP, which allows him to include a stated amount of insurance in the policy.

The Transportation Network Driver Coverage (No Passenger) endorsement uses the wording of the Public or Livery Conveyance Exclusion and includes an exception that

Select one:
A. Specifies that coverage does not apply to Part C—Uninsured Motorists Coverage.
B. Provides coverage when the insured is logged into a transportation network platform until the driver accepts a passenger’s request.
C. Covers share-the-expense carpooling and operation of an auto without passengers while the driver is logged into a transportation network platform.
D. Adds a transportation network platform definition.

Correct. The Transportation Network Driver Coverage (No Passenger) endorsement uses the wording of the Public or Livery Conveyance Exclusion and includes an exception that covers share-the-expense carpooling and operation of an auto without passengers while the driver is logged in to a transportation network platform.

Which one of the following is correct regarding the Transportation Network Driver Coverage (No Passenger) endorsement and the Limited Transportation Network Driver Coverage (No Passenger) Endorsement to the personal auto policy?

Select one:
A. They both exclude coverage when a passenger is occupying the vehicle.
B. They cost the same amount of additional premium.
C. They both end coverage when an insured accepts a passenger’s request.
D. They both provide coverage until a passenger enters the vehicle.

Correct. Both the Transportation Network Driver Coverage (No Passenger) endorsement and the Limited Transportation Network Driver Coverage (No Passenger) Endorsement to the personal auto policy exclude coverage when a passenger is occupying the vehicle.

Which one of the following best describes what is included in a loss payment under the Auto Loan/Lease Coverage endorsement to the Personal Auto Policy (PAP)?
Select one:
A. The balance of the loan or lease amount for the vehicle
B. Balances transferred from previous loans or leases
C. Overdue lease or loan payments
D. Penalties imposed under a lease

Correct. The balance of the loan or lease amount for the vehicle is included in a loss payment under the Auto Loan/Lease Coverage endorsement to the PAP.

A company that uses a mobile application or website to connect riders with drivers and arrange transportation in a personal auto for a fee is called a

Select one:
A. Transportation network company.
B. Limited transportation network.
C. Livery conveyance.
D. Personal auto company.

Correct. A company that uses a mobile application or website to connect riders with drivers and arrange transportation in a personal auto for a fee is called a transportation network company.

Marge and her husband Jack have a Personal Auto Policy (PAP) to cover their two automobiles. Marge also has a company car provided by her employer. Which one of the following endorsements would best provide Marge with liability and medical payments coverage for her company car?

Select one:
A. Named Non-Owner Coverage endorsement
B. Extended Non-Owner Coverage—Vehicles Furnished or Available for Regular Use endorsement
C. Miscellaneous Type Vehicle endorsement
D. Auto Loan/Lease Coverage endorsement

Correct. The Extended Non-Owner Coverage—Vehicles Furnished or Available for Regular Use endorsement would provide excess over any other applicable insurance on the company car.

The Public or Livery Conveyance Exclusion Endorsement is designed to be attached to all personal auto policies (PAPs)

Select one:
A. Unless one of the Insurance Services Office, Inc. (ISO) transportation network driver endorsements is attached.
B. With insureds who are drivers for a transportation network company (TNC) but not to PAPs with insureds who are not TNC drivers.
C. And applies to only Part A—Liability Coverage.
D. In combination with the Transportation Network Driver Coverage (No Passenger) Endorsement.

Correct. The Public or Livery Conveyance Exclusion Endorsement is designed to be attached to all PAPs unless one of the ISO transportation network driver endorsements is attached.

The Named Non-Owner Coverage endorsement of the Personal Auto Policy (PAP) automatically covers

Select one:
A. Only a person who is named in the endorsement and the named insured’s spouse.
B. The named insured and all resident family members.
C. All persons who drive the vehicle specified in the endorsement.
D. Only a person who is named in the endorsement.

Correct. The Named Non-Owner Coverage endorsement of the Personal Auto Policy (PAP) automatically covers only a person who is named in the endorsement.

The Auto Loan/Lease coverage endorsement of the Personal Auto Policy (PAP) amends physical damage coverage for leased vehicles or vehicles with outstanding loan amounts to include

Select one:
A. An unpaid amount due on the lease or loan.
B. Penalties imposed under a lease for high mileage.
C. Costs for extended warranties.
D. Penalties imposed under a lease for excessive use.

Correct. The Auto Loan/Lease coverage endorsement of the Personal Auto Policy (PAP) amends physical damage coverage for leased vehicles or vehicles with outstanding loan amounts to include an unpaid amount due on the lease or loan.

People who do not regularly own an auto or who occasionally drive another person’s vehicle or a rental vehicle can secure coverage for the loss exposures arising out of their use of a nonowned auto by purchasing a Personal Auto Policy (PAP) with the

Select one:
A. Auto Loan/Lease Coverage endorsement.
B. Named Non-Owner Coverage endorsement.
C. Extended Non-Owned Coverage—Vehicles Furnished or Available for Regular Use endorsement.
D. Miscellaneous Type Vehicle endorsement.

Correct. People who do not regularly own an auto or who occasionally drive another person’s vehicle or a rental vehicle can secure coverage for the loss exposures arising out of their use of a nonowned auto by purchasing a Personal Auto Policy (PAP) with the named Non-Owner Coverage endorsement.

Katie was on vacation visiting her friend Emily. One day Katie borrowed Emily’s car and collided with a deer, resulting in $3,000 damage to Emily’s car. Emily and Katie each have a Personal Auto Policy (PAP) with collision and other than collision (OTC) coverages. Which one of the following would be the primary source of recovery for the damage to Emily’s car?

Select one:
A. Emily’s OTC coverage
B. Emily’s collision coverage
C. Katie’s OTC coverage
D. Katie’s collision coverage

Correct. Emily’s OTC coverage is the primary source of recovery for the damage to Emily’s car.

While backing a family car out of the driveway, Harry’s 18-year-old son accidentally collides with Harry’s car, which is parked on the street. Each car has $3,500 in damages. Both cars are insured on the same Personal Auto Policy (PAP), but Harry’s car has a $500 collision deductible and the other car has a $1,000 collision deductible. What is the total deductible amount that Harry’s PAP insurer will apply for the two vehicles?

Select one:
A. $500
B. $1,000
C. $1,500
D. $2,000

Correct. $1,000; If two or more autos that have collision coverage under the same policy are damage in the same collision, only the highest deductible applies. In this case, the highest deductible is $1,000.

The post Personal Insurance – Practice exam 3 appeared first on Exam Reviewer.

Select one:
A. “Occupying”
B. “Property damage”
C. “We,” “us,” and “our”
D. “Your covered auto”

Correct. It is found as part of “Your covered auto”

The Agreement and Definitions page of the Personal Auto Policy (PAP) includes

Select one:
A. A general agreement stating the insurer’s duty to pay damages and defense costs subject to the terms of the policy.
B. A general agreement stating that the insurer is providing the coverage subject to payment of premium and to the terms of the policy.
C. The name and mailing address of the insured.
D. The name of the insurer issuing the policy.

Correct. The Agreement and Definitions page of the Personal Auto Policy (PAP) includes a general agreement stating that the insurer is providing the coverage subject to payment of premium and to the terms of the policy.

The Personal Auto Policy (PAP) contains definitions of words and phrases that must be understood. Which one of the following is true regarding these policy definitions?

Select one:
A. The definition section of the PAP is found at the end of the policy to avoid conflicting with coverages.
B. Definitions are written in simple language to be easily understood by average individuals.
C. All coverage limits are included in the definitions section of the PAP.
D. Definitions have clarified the policy so that lawsuits are barred over policy language.

Correct. Definitions are written in simple language to be easily understood by average individuals.

Certain words and phrases defined in the Personal Auto Policy (PAP) weigh heavily on whether or not coverage is provided. The words “you” and “your” refer to

Select one:
A. The named insured and the insurer.
B. The named insured and family members.
C. The named insurer and family members.
D. The named insured and an unnamed spouse.

Correct. It refers to the named insured and an unnamed spouse.

Li insured his car with a Personal Auto Policy (PAP) that has split limits for liability coverage of $50/$100/$25. He was found by a court to be at fault for an accident that injured the other driver and ordered to pay a judgment of $45,000, plus $5,000 in prejudgment interest. How much will Li’s insurer pay under his PAP?

Select one:
A. $25,000
B. $30,000
C. $45,000
D. $50,000

Correct. $50,000. The damages covered also include any prejudgment interest awarded against the insured. (Note that because prejudgment interest is part of the award for damages, it is subject to the applicable limit of liability.)

Donna owns a car insured by a Personal Auto Policy (PAP) with the minimum liability limits required by her state, $10/$20/$5. While on vacation in another state where the minimum liability limits are $15/$30/$5, she causes an accident. For purposes of that loss, her liability limits under her PAP are

Select one:
A. $10/$20/$5.
B. $15/$30/$5.
C. $15/$30/$10.
D. $25/$50/$15.

Correct. $15/$30/$5. The Out of State Coverage provision applies when an auto accident occurs in a state other than the one in which the covered auto is principally garaged. If an accident occurs in a state that has a law that requires higher liability limits than the limits shown in the declarations, the PAP automatically provides the higher required limits for the accident.

Liability split limits for a Personal Auto Policy (PAP) expressed as $300/$500/$100 mean limits of

Select one:
A. $300 per person for bodily injury, $500 per accident for bodily injury, and $100 per accident for property damage.
B. $300,000 per accident for bodily injury, $500,000 for property damage and bodily injury, and a $100,000 deductible.
C. $300,000 per person for bodily injury, $500,000 per accident for bodily injury, and $100,000 per accident for property damage.
D. $900,000 for all damages combined.

Correct. Liability split limits for a PAP expressed as $300/$500/$100 mean limits of $300,000 per person for bodily injury, $500,000 per accident for bodily injury, and $100,000 per accident for property damage.

Liana insured her car with a Personal Auto Policy (PAP) that has split limits for liability coverage of $100/$300/$75. She was found by a court to be at fault for an accident that injured the other driver and ordered to pay a judgment of $98,000, plus $6,000 in prejudgment interest. How much will Liana’s insurer pay under her PAP?

Select one:
A. $92,000
B. $98,000
C. $100,000
D. $104,000

Correct. $100,000. Because prejudgment interest is part of the award for damages, it is subject to the applicable limit of liability for Part A.

An owner of a car insured with a Personal Auto Policy (PAP) for which an insured selected and paid a premium for medical payments coverage
Select one:
A. Would not be eligible for medical payments under the PAP if injured while occupying a motorcycle on a public highway.
B. Would be eligible for medical payments under the PAP if injured while occupying a motorcycle on a public highway.
C. Would be eligible for medical payments under the PAP if injured while occupying a motorcycle on the insured’s own property.
D. Would not be eligible for medical payments under the PAP if injured while driving a motorcycle but would be eligible for such coverage while riding as a passenger on a motorcycle.

Correct. A medical payments coverage exclusion applies if the insured is injured while occupying a motorized vehicle with fewer than four wheels.

Under the uninsured motorists (UM) coverage in the Personal Auto Policy (PAP), the insurer agrees to pay damages that the insured is legally entitled to recover from the owner or operator of an uninsured motor vehicle. These damages are best identified as which one of the following?
Select one:
A. Rehabilitation expenses
B. Medical expenses
C. Lost wages
D. Compensatory damages

Correct. These damages are compensatory damages.

With respect to a vehicle used as a temporary substitute for the insured’s covered auto, medical payments coverage under a Personal Auto Policy (PAP)

Select one:
A. Are specifically excluded from coverage.
B. Is excess over other collectible auto insurance that pays medical expenses.
C. Is primary for medical and funeral expenses.
D. Is shared on a pro rata basis.

Correct. With respect to a nonowned vehicle or a vehicle while used as a temporary substitute for the insured’s covered auto, medical payments coverage under a PAP is excess over any other collectible auto insurance that pays medical or funeral expenses.

An insured has a Personal Auto Policy (PAP) that includes uninsured motorist (UM) coverage for his own car. The insured is injured while riding on a private tour bus that is hit by an at-fault uninsured motorist. Which one of the following statements is true?

Select one:
A. The insured is entitled to UM coverage under his PAP under the share-the-expense car pool exception.
B. The insured is entitled to UM coverage from the bus company’s policy but not from his own PAP.
C. The insured is entitled to UM coverage under his or her PAP.
D. The insured is not entitled to UM coverage because of the public or livery conveyance exclusion.

Correct. Because the public or livery conveyance exclusion applies only to “your covered auto,” the insured and family members would be covered for UM while occupying a public or livery conveyance that is not “your covered auto.”

Which one of the following causes of loss is covered under the other than collision (OTC) section of the Personal Auto Policy (PAP)?

Select one:
A. Hitting a tree
B. Missiles or falling objects
C. Overturn from the driver losing control
D. Hitting another car

Correct. Missiles or falling objects are listed as covered causes of loss under the OTC section of the PAP.

Collision coverage under the Personal Auto Policy (PAP)

Select one:
A. Applies only to damage to a vehicle for which the owner of the vehicle is responsible.
B. Applies to damage to a vehicle resulting from explosion or earthquake.
C. Applies to damage to a parked insured vehicle resulting from a passenger in another parked vehicle opening its door.
D. Is less expensive than other than collision (OTC) coverage.

Correct. Collision coverage under the Personal Auto Policy (PAP) applies to damage to a parked insured vehicle resulting from a passenger in another parked vehicle opening its door.

Jamal flew from his home in New York to California for a vacation. While there, he rented a car. Jamal declined all of the optional coverages that were offered to him at the rental agency. While driving the rental car, Jamal was at fault in a collision with a truck. The repairs to the rental car will cost $2,000. Jamal’s Personal Auto Policy (PAP) has a $250 other than collision deductible and a $500 collision deductible. What amount will Jamal’s insurer pay for the loss?

Select one:
A. $0
B. $1,500
C. $1,750
D. $2,000

Correct. $2,000 – $500 deductible = $1,500. Part D coverages apply to a “non-owned auto” unless it is one that the insured regularly drives.

John has a Personal Auto Policy (PAP) with both collision and other than collision coverages. While John was working out at the gym, his car was stolen from the parking lot. The police recovered John’s car five days later, but it had been damaged. John’s car was in the shop 10 days for repairs. For what number of days will John’s insurer pay him for transportation expenses?

Select one:
A. 5
B. 10
C. 13
D. 15

Correct. 5 + 10 – 2 = 13. A 48-hour waiting period applies to total theft losses under OTC coverage.

Which one of the following statements is true regarding cancellation of the Personal Auto Policy (PAP)?

Select one:
A. An insurer cannot cancel a policy for nonpayment of premium.
B. Insurers can usually cancel a new policy that has been in force for less than a certain number of days (such as sixty days).
C. In most states a verbal notice of cancellation is sufficient, provided notice is given 90 days prior to the cancellation.
D. Whenever state laws and policy cancellation provisions conflict, the policy provisions supersede the state law.

Correct. Insurers can usually cancel a new policy that has been in force for less than a certain number of days (such as sixty days).

Bob has a Personal Auto Policy (PAP) with physical damage coverages. Bob got up early one morning to go to work and found vandals had broken the rear window of his car during the night. Two nights later it rained heavily, which ruined the back seat upholstery. After a few days, Bob submitted a claim to his insurer. Which one of the Duties After an Accident or Loss in the PAP has Bob failed to comply with?

Select one:
A. Prevent further loss
B. Proof of loss
C. Cooperation with the insurer
D. Permit inspection and appraisal

Correct. Bob has failed to comply with the Duties After an Accident or Loss in the PAP to prevent further loss.

Under the Personal Auto Policy (PAP), the named insured’s rights and duties under the policy

Select one:
A. Cannot be assigned to another party without the insurer’s written consent.
B. Can be transferred if the insured sells an auto.
C. Can be transferred by a verbal agreement.
D. Can be assigned to another party without the insurer’s written consent.

Correct. Under the Personal Auto Policy (PAP), the named insured’s rights and duties under the policy cannot be assigned to another party without the insurer’s written consent.

In addition to general duties under a Personal Auto Policy (PAP), a person seeking coverage under Part D—Coverage for Damage to Your Auto must perform additional duties. Which one of the following is one of these additional duties?

Select one:
A. Submit a proof of loss when required by the insurer
B. Submit to a physical examination conducted by a doctor chosen by the insurer
C. Promptly notify police if a hit-and-run driver was involved in the accident
D. Promptly notify police if a covered auto is stolen

Correct. This is a general duty. In addition to general duties under a Personal Auto Policy (PAP), a person seeking coverage under Part D—Coverage for Damage to Your Auto must promptly notify police if a covered auto is stolen. This may increase the possibility that the vehicle will be recovered.

The post Personal Insurance – Practice exam 2 appeared first on Exam Reviewer.

Select one:
A. An automobile
B. A house
C. Furniture
D. A motorhome

Correct. Real property includes tangible property consisting of land and all structures permanently attached to the land, such as a family’s home (house). Motor vehicles and furniture are examples of personal property.

John is a recent homeowner and is considering the insurance coverages he needs for his home and contents. If damaged by a peril covered by a homeowners policy, which one of the following would be considered part of John’s real property?

Select one:
A. The desk top computer
B. The detached garage
C. The boat in the driveway
D. The hockey net and equipment

Correct. The detached garage would be considered part of John’s real property.

Which one of the following statements regarding assets exposed to loss is true?

Select one:
A. Real property includes intangible property.
B. Earthquake damage to a swimming pool is an example of a personal property exposure.
C. Personal property includes only tangible property.
D. Lightning damage to a tree is an example of a real property loss exposure.

Correct. Lightning damage to a tree is an example of a real property loss exposure.

A family rents its vacation home to others for several months each year. A fire caused extensive damage to the home just before the rental season began one year, and the family was unable to collect any rent on the property until it was repaired. This inability to collect rent is an example of which one of the following outcomes of loss?

Select one:
A. Lost income
B. Increased expenses
C. Reduction in value of property
D. Special damages

Correct. Lost income refers to loss of income that results if property is damaged and the owner is unable to collect any rent on the property until it is repaired.

Which one of the following statements regarding assets exposed to loss is true?

Select one:
A. Real property includes only tangible property.
B. Earthquake damage to a swimming pool is an example of a personal property loss exposure.
C. Personal property includes only tangible property.
D. Hail damage to a motor vehicle is an example of a real property loss exposure.

Correct. All real property is tangible property having a physical form that can be seen or touched. Personal property can include intangible property such as patents or copyrights.

A family suffered extensive fire damage to its home and was temporarily unable to inhabit it. The family was forced to rent a hotel room while its home was under repair. The cost incurred to rent the hotel room is referred to as which one of the following outcomes of loss?

Select one:
A. Lost income
B. Increased expenses
C. Reduction in value of property
D. Special damages

Correct. Increased expenses are expenses in addition to normal living expenses that are necessary because of a loss.

All of the following items are examples of personal property, EXCEPT:

Select one:
A. Sports equipment
B. Silverware
C. A fishing boat
D. Underground pipes

Correct. Personal property includes all tangible or intangible property that is not real property. Real property includes tangible property consisting of land and all structures permanently attached to the land, and anything embedded in the land.

In general, a loss prevention measure is implemented to
Select one:
A. Eliminate any possibility of loss.
B. Reduce loss severity.
C. Break the sequence of events that leads to a loss.
D. Keep backup information and assets in reserve.

Correct. In general, a loss prevention measure is implemented to break the sequence of events that leads to a loss.

All of the following could lead to a liability loss for a family, EXCEPT:

Select one:
A. The daughter, who is 16 years old, sideswipes a neighbor’s car and dents its fender while driving her own car.
B. The father trips on a broom he left lying in the driveway and breaks his arm.
C. A guest slips on an icy sidewalk in front of the family’s home and breaks his leg.
D. The son, who is 13 years old, throws a rock at a classmate who requires stitches for an injury to his head.

Correct. The only example listed that is not a liability loss exposure for a family is the injury to the father.

An individual’s liability losses

Select one:
A. May not exceed the value of all of his or her assets, including both personal and real property.
B. May consume most of his or her present assets and future income.
C. May not exceed the value of his or her real property.
D. May not exceed the amount of his or her current income.

Correct. An individual’s liability losses may consume most of his or her present assets and future income.

Which one of the following is a form of compensatory damages?

Select one:
A. Real damages
B. Punitive damages
C. Special damages
D. Exemplary damages

Correct. Special damages are a form of compensatory damages.

All of the following are true of the HO-3 Special Form, EXCEPT:

Select one:
A. The HO-3 can be modified for special needs through available endorsements.
B. The HO-3 meets the property and liability coverage needs of most families.
C. The HO-3 is designed for owners who occupy their dwelling or choose to rent it.
D. The HO-3 is typically used as a basis for understanding other HO coverage forms.

Correct. All answers are correct except for: The HO-3 is designed for owners who occupy their dwelling or choose to rent it.

Green Insurance Group offers new literature that addresses special considerations for homeowners’ growing use of smart products, interconnected devices, and the Internet of Things. Green makes sure its customers understand that one drawback to these new smart products is

Select one:
A. Data generated from the IoT creates exposures to data security and privacy issues.
B. Past claims data is still the only reliable way to assess risk and set prices.
C. Smart contracts will still require adjuster involvement in a claim.
D. Sensors in home appliances and cooling systems are too cost prohibitive.

Correct. Data generated from the IoT creates exposures to data security and privacy issues.

The primary factors that most states and companies use for determining the cost of personal auto insurance include all of the following, EXCEPT:

Select one:
A. Territory
B. Driver age
C. Use of the auto
D. Vehicle horsepower

Correct. Driver age is a primary rating factor.

Insurers and other organizations that make insurance available to those who are unable to obtain coverage from the standard market are collectively called

Select one:
A. A reinsurance facility.
B. The residual market.
C. The secondary market.
D. An automobile insurance plan.

Correct. Insurers and other organizations that make insurance available to those who cannot obtain coverage from the standard market are called the residual market.

Which one of the following is the most commonly used method of compensating auto accident victims?

Select one:
A. Financial responsibility laws
B. Tort liability system
C. Uninsured motorist coverage
D. Unsatisfied judgment funds

Correct. The tort liability system is the most commonly used method of compensating auto accident victims.

Under the tort liability system, injured accident victims must prove that

Select one:
A. Another party was at fault before they can collect damages.
B. They are unable to purchase insurance from another source before they can collect damages.
C. The insurance limits they have purchased are equal to or greater than the state minimum limits before they can collect damages.
D. They have met the financial responsibility laws of the state before they can collect damages.

Correct. Under the tort liability system, injured accident victims must prove that another party at fault before they can collect damages.

A plan for insuring high-risk drivers, in which all auto insurers doing business in the state are assigned their proportionate share of high-risk drivers based on the total volume of automobile insurance written in a state, is

Select one:
A. A joint underwriting association.
B. A reinsurance facility.
C. Excess and surplus lines.
D. An automobile insurance plan.

Correct. A plan for insuring high-risk drivers in which all auto insurers doing business in the state are assigned their proportionate share of high-risk drivers based on the total volume of automobile insurance written in a state is an automobile insurance plan.

Insurance score as a rating factor for an individual auto insurance applicant is based on which one of the following?

Select one:
A. Loss history
B. Financial history
C. Territory demographics
D. Income data

Correct. Insurance score as a rating factor for an individual auto insurance applicant is based on the individual’s financial history.

Which one of the following statements is true regarding automobile insurance rating?

Select one:
A. State regulators require that all insurers offer discounts on auto rates for passive restraints.
B. Most insurers base automobile rates on primary rating factors and do not consider any other factors in establishing rates.
C. State regulators require that rates be adequate, reasonable, and not unfairly discriminatory.
D. Drivers with lower-than-average loss exposure are charged higher rates.

Correct. State regulators require that rates be adequate, reasonable and not unfairly discriminatory.

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