Questions From The Practice Exam

Front 1

Which of the following is considered to be a guarantee of truth throughout the duration of the policy?

Back 1

Your answer: Representation is incorrect. The correct answer is: Warranty.

EXPLANATION:A warranty is something that becomes part of the contract and is a statement that is considered to be a guarantee of truth for the entire term of the policy.

Front 2

Which of the following is not considered to be a residual market in Georgia?

Back 2

Your answer: Workers Compensation Plan is incorrect. The correct answer is: Georgia Insurance Guaranty Fund.

EXPLANATION:The Georgia Insurance Guaranty Fund is not a residual market. It was formed to pay the covered claims of insolvent insurers. Residual markets are created to fill a void in the market place where an insured is unable to obtain coverage in the standard markets.

Front 3

If the Insurance Commissioner calls for a hearing, how many days notice is sent to those affected?

Back 3

There is a 10-day notice sent to those to be required to attend the hearing. If all persons to be affected are unknown, the Commissioner may give notice by publication in a newspaper of general circulation in Georgia at least 10-days in advance of the hearing.

Front 4

If an insured takes precautionary measures to protect property from flood damage such as creating a retaining wall of sand bags, how much coverage if any, will be provided by a flood policy?

Back 4

The policy will provide additional coverage up to $1,000 for preventative measures taken to prevent the property from an imminent flood loss. This $1,000 however will be subtracted from the policy limit covering any property that may be damaged by the imminent flood.

Front 5

If building coverage is provided under the BOP, the coverage will automatically increase each renewal by what percentage?

Back 5

The building limit automatic increase is 8% unless a different percentage amount is shown on the declarations page.

Front 6

The term bailment as used in property insurance means:

Back 6

The owner’s property is temporarily in the custody of another.

Front 7

Which of the following is not a type of rate approval by the insurance regulators of the various states?

Back 7

State departments of insurance approve policy forms, endorsements and rates using four broad methods. They are: prior approval; file and use; use and file; and, open competition.

Front 8

How is the property causes of loss changed from risks of "direct physical loss" to "named perils" coverage under the BOP?

Back 8

The named peril endorsement must be attached to the policy.

Front 9

Under Coverage C of the homeowners program all of the following categories of property are limited, EXCEPT:

Back 9

All of the HO forms contain a list of property subject to limitations. Recreational furniture is not included within this list.

Front 10

The pollution exclusion of the commercial general liability policy would rule out coverage in which of the following situations?

Back 10

The policy provides a very broad exclusion for pollution events.

Front 11

All of the following are excluded under the commercial crime "Inside the Premises - Theft of Money and Securities" insuring agreement, except:

Back 11

Fire, vandalism, and accounting errors are specifically excluded in this insuring agreement.

Front 12

An unendorsed homeowner form provides no coverage for liability arising out of business related exposures, other than for permitted incidental occupancies. Which of the following provides liability coverage for a business conducted away from the residence premise?

Back 12

The “home business insurance endorsement" should be added to the homeowner policy to cover "off premises" liability exposures as permitted by the insurance carrier.

Front 13

How long must an agent maintain records of all insurance transactions?

Back 13

All records as to a particular transaction must be kept for a minimum period of at least five years from the date of completion of the transaction or termination of the contract-whichever period is greater.

Front 14

Which of the following events, arising out of the use of a covered auto, is covered under the Personal Auto Policy?

Back 14

PAP liability coverage excludes property damage to property owned or being transported by that insured, or to property rented to, used by, or in the care of that insured. The exclusion does not apply, however, to property damage to a residence or private garage. Intentional acts are always excluded.

Front 15

Which of the following is not a named insured?

Back 15

A lien holder is not a named insured. They are considered to be an additional insured.

Front 16

Flood insurance can be purchased from:

Back 16

Your answer: Any insurance agent. is incorrect. The correct answer is: Any licensed property agent. .

In order to sell flood insurance, an agent must hold a property insurance license.

Front 17

The requirements of the Employment Retirement Income Security Act compel employers to cover their professional liability exposure for honest errors and omissions regarding employee benefit plans by purchasing:

Back 17

The ERISA laws would compel an employer to purchase Fiduciary Liability coverage for honest errors and omissions when administering employee benefit plans.

Front 18

What is the purpose of the Georgia Insurance Guaranty Association?

Back 18

Your answer: Cover claims of insolvent insurers is correct.

Front 19

Under the BOP program, apartment buildings are eligible, including residential condominium associations, along with offices, mercantile, service or processing agencies or contractors as long as they do not exceed:

Back 19

Your answer: 35,000 sq. feet is correct.

Front 20

A Commercial Property Policy includes a protective safeguard endorsement indicating there are protective safeguards installed in the risk such as a sprinkler system. Should the system become inoperative, how long does the insured have to report this fact to the insurer?

Back 20

Your answer: 48 hours is correct.

If repairs cannot be completed within 48 hours, the insurer must be notified in order to comply with the conditions of the form.

Front 21

Which of the following would NOT be covered under the HO-2 form?

Back 21

The HO-2 policy is a named peril form and does not provide coverage for the insured damaging his own fence with his car. If someone else, who is not a resident of the household, strikes the fence with their vehicle there is coverage under the HO forms. The HO-3 and HO-5 would cover this loss because it is not excluded.

Front 22

What does an employer's non-ownership coverage under the BAP cover?

Back 22

The purpose of the coverage is to protect the employer and not the employee when the employee uses his or her vehicle on company business and is involved in an at-fault accident that may bring the employer into a claim with the claimant.

Front 23

What does the Leasehold Interest Endorsement provide?

Back 23

Leasehold interest insurance protects against financial loss suffered by a building tenant, when a favorable lease is cancelled before expiration because of loss or damage to the building by an insured cause of loss.

Front 24

How many days does the liberalization clause provide for under the BOP prior to or during the policy?

Back 24

The policy reads, “If we adopt any revision that would broaden the coverage under this policy without additional premium within forty-five days prior to or during the policy period, the broadened coverage will immediately apply to this policy.”

Front 25

In a contract, something of value exchanged between the parties is referred to as:

Back 25

Consideration is something of value exchanged between the parties. The insured pays a premium (consideration) and the insurer promises a larger amount in the event of a claim.

Front 26

A partner in a firm authorized to have custody of the insured property outside the premises would be called a:

Back 26

A messenger is one who has custody of the insured’s property outside the premises. An example is a person going to the bank to make a night deposit.

Front 27

If legal duty owed is proven and breach of legal duty owed is also present, this would be a definition of:

Back 27

This would be the definition of “negligence”. This is also the definition of a tort which is also a breach of a legal duty that is owed and causes damages to a third party.

Front 28

The Commercial Articles Coverage Form is designed to cover:

Back 28

The Commercial Articles Form covers cameras, projection machines, musical instruments and their related equipment.

Front 29

A professional liability policy can be:

Back 29

The professional liability policy is a “stand alone” separate policy that can be purchased for an additional premium.

Front 30

Which of the following statements about workers compensation laws is correct?

Back 30

Workers compensation laws in the various states differ, although not materially. Not every state provides extraterritorial benefits. Benefits are restricted to economic damages such as medical costs and loss-of-income. In each state, the benefits provided by the law are the exclusive remedy for the employee in most cases – and the employee is barred from suing the employer for damages arising from a work-related injury.

Front 31

Evergreen Lawn Care has two lawn maintenance crews on separate job sites. Coverage for the lawn maintenance equipment on the way to the site, while at the site and in transit back to the shop can be covered by which of the following forms?

Back 31

The Contractors equipment Floater will cover the lawn maintenance equipment usually on an open peril basis. The covered territory is the US, its possessions, Puerto Rico and Canada.

Front 32

A bailment is:

Back 32

Bailment is a temporary entrustment of property (by loan or for storage or repair) to another. It is not a transfer of title.

Front 33

A newspaper company is interested in protecting against the additional costs of continuing to print the newspaper at a temporary location in the event its buildings were destroyed. Which of the following coverages should the newspaper company purchase?

Back 33

The purpose of extra expense coverage is to cover any increase in expenses incurred by the insured (after a direct property loss which interrupts the business) to decrease the amount of time the business is idle or interrupted.

Front 34

Under the "Inside the Premises - Theft of Money and Securities" insuring agreement of a crime policy, which of the following situations would NOT be covered:

Back 34

This insuring agreement covers loss of "money" and "securities" (as defined in the form) resulting from theft, disappearance, or destruction. Theft by the insured and/or its partners, members, employees, managers, directors, and trustees is excluded.

Front 35

An insurance company can audit the named insured’s books and records:

Back 35

Normally an audit is performed at the end of each policy year. However, the policy provides that the insurer can perform an audit up to three years after the policy’s termination date.

Front 36

The basic limit for medical payments under coverage F of the HO forms is normally:

Back 36

Coverage F normally has a limit of $1,000 per accident per individual.

Front 37

If an insured desires additional amounts of coverage above the "special limits" under the homeowners program for jewelry or firearms it can be obtained through the use of:

Back 37

Standard homeowner policies have "special limits" on certain types of property such as jewelry, firearms, gold and silverware, etc. These special limits are relatively low. If an insured seeks higher limits than the "special limits" he can purchase a separate policy OR attach the scheduled personal property endorsement to his homeowner policy.

Front 38

Which of the following statements is correct?I. Unendorsed DP-2 and DP-3 settle all losses to personal property at actual cash value.II. Unendorsed DP-2 and DP-3 settle all partial losses to dwellings at replacement cost if insured 80% to value.

Back 38

Your answer: Both I and II is correct.

Both DP-2 and DP-3 settle all personal property losses on an ACV basis. They settle partial dwelling losses at replacement value ONLY if adequate limits are carried. That is, the dwelling limit must be at least 80% of a dwelling's replacement value in order to receive a replacement cost settlement for a partial dwelling loss.

Front 39

What is the definition of a non-resident agent?

Back 39

Your answer: Someone licensed in their state and obtains a license in another state to solicit insurance business in that state. is correct.

Front 40

An injured employee’s choice of physician is selected in what manner?

Back 40

The employee’s choice of physician is by selection from a list maintained by the employer.

Front 41

Uninsured Motorist coverage includes the named insured's:

I. Medical bills and pain and suffering.II. Lost wages.

Back 41

I. Medical bills and pain and suffering.II. Lost wages.Your answer: Both I and II is correct.EXPLANATION:Coverage C (Uninsured Motorists) provides for payments to or on behalf of the named insured for injuries sustained through the negligence of an uninsured driver.

Front 42

A Pro Rata Liability clause is included in an insurance policy to deal with the problem of:

Back 42

The purpose of this clause is to provide a method to determine each insurer's liability in case of a loss. Each insurer pays its fair share determined by the percentage that the carrier's limit bears to the total coverage carried.

Front 43

How do eligibility requirements of homeowner and dwelling policies differ?

Back 43

Your answer: Homeowner policies require that the named insured reside at the described premises while dwelling policies do not. is correct.EXPLANATION:The named insured must be a resident of the insured premises under the HO program.

Front 44

Which of the following is an ideal form of protection for the frequent shipper of goods?

Back 44

The annual transit policy is written to cover the goods shipped by the insured on a regular basis throughout the year. A trip transit policy is designed to cover only a single shipment of goods.

Front 45

A surety which provides a bid bond to a contractor might also provide another bond if the contractor is awarded the contract. This bond is a:

Back 45

Your answer: Completion bond is incorrect. The correct answer is: Performance bond. .

The purpose of the bid bond is to guaranty to the obligee that the contractor will enter into a contract for the bid price and provide a performance bond. The performance bond, issued by the surety, guarantees the obligee that the work will be completed per the terms of the contract with the contractor.

Front 46

Which of the following would be covered under employee dishonesty?

Back 46

Your answer: Embezzlement is correct.EXPLANATION:Embezzlement is a dishonest act by an employee, and thus would be covered by Employee dishonesty. The other answer choices are excluded or are not dishonest acts of an employee

Front 47

Under a Personal Auto Policy newly acquired additional vehicles are covered automatically for a limited period of time. This automatic coverage:

Back 47

Your answer: Only includes liability and uninsured motorists coverage. is incorrect. The correct answer is: Is as broad as the broadest coverage for any vehicle shown in the declarations. .EXPLANATION:Liability coverage is continuous until the end of the policy period. To continue physical damage coverage certain restrictions and limitations apply as to the number of days the insured has in the reporting of the vehicle to the insurer. In NC it is 30-days. For most other states it is 14-days.

Front 48

Under the insuring agreements relevant to Equipment Breakdown, coverage is provided for:

Back 48

An Equipment Breakdown Policy provides, in essence, loss or breakdown coverage for electrical, mechanical, heating/air conditioning and business equipment systems. This coverage is most noteworthy because it covers certain perils that are excluded by other policies. And, it's not just the physical damage caused by the explosion or breakdown that's of importance. Valuable time and profits which might normally be lost because the cause of loss was an excluded peril can, under this coverage, be reimbursed under Business Interruption and Extra Expenses coverage until repair of the damaged or broken boiler or machinery is completed. Damage to the personal property of others is also included.

Front 49

In the case of the death of an injured worker, what percentage of the employee’s average weekly wage is paid to the surviving spouse?

Back 49

The spouse is entitled to receive benefits equal to 66 2/3% the employee’s average weekly wage subject to the states maximum amount until they remarry or openly cohabits with a person of the opposite sex.

Front 50

The minimum liability amount per occurrence that is available on the BOP is:

Back 50

$300,000 of liability per occurrence are automatically included on the BOP. Higher limits are available at the discretion of the company.

Front 51

Tom Newman is the sole owner of his small corporation. He purchases an auto in the company name but also has to sign for the loan on the car personally. He does not have a personal auto policy. Which of the following would be necessary to cover Tom personally if sued in a lawsuit while driving the company car?

Back 51

Endorsement CA 99 17 Individual Named Insured would be needed to cover Tom personally in a lawsuit brought by the injured party when Tom was driving the company car.

Front 52

How are losses usually settled under a scheduled inland marine policy?

Back 52

Losses are paid on the basis of actual cash value. Antiques that are scheduled are usually paid on the basis of market value. Some are paid on a "valued basis" when an appraisal or an agreed amount of insurance has been put in place.