Download ARKANSAS P&C EXAM. 103 QUESTIONS WITH 100% CORRECT ANSWERS and more Exams Insurance law in PDF only on Docsity!
ARKANSAS P&C EXAM. 103 QUESTIONS
WITH 100% CORRECT ANSWERS | VERIFIED |
UPDATED 2024.
“The major portion of the premium for an equipment breakdown policy pays -For repairs after a loss. -For coverage for bodily injury and property damage of others. -For replacement parts.
-For inspections and examinations. - CORRECT ANSWER For inspections and examinations."
The party to a surety or fidelity bond who promises to fulfill the obligation is the a) Principal. b) Custodian. c) Surety. d)
Obligee. - CORRECT ANSWER Principal"
The requirement that producers must account for all insurance funds collected, and without the expressed consent of the insurance company(ies) are not permitted to commingle those funds with their own funds, is known as a) Accepted accounting principal. b) Fiduciary responsibility. c) Premium accountability. d)
Fiscal responsibility. - CORRECT ANSWER Discrimination."
A commercial property special form covers property in transit up to a) Full replacement cost. b) $5,000. c) ACV. d)
$500. - CORRECT ANSWER $5,000."
The mechanism used to pay covered claims and prevent financial losses to claimants and policyowners when an insurance company becomes insolvent is a a) Hold harmless agreement. b) Guaranty Association. c) Insurance pool. d)
None of the above - CORRECT ANSWER Guaranty Association."
An individual's construction company leaves mobile equipment and construction machinery on the job site until the project is completed. What could this individual use to insure it? a) Bailee's customers form b) Builders risk form c) General property form d)
Contractors equipment floater - CORRECT ANSWER Contractors equipment floater"
All of the following statements describe the concept of strict liability EXCEPT a) It is imposed on defendants engaged in hazardous activities. b) Claimants may need to provide proof that a product defect caused an injury. c) It is imposed regardless of fault. d)
It is applied in product liability cases. - CORRECT ANSWER It is imposed on defendants engaged in hazardous
activities." "#22. The business income coverage form covers consequential loss of business income that occurs when a business must suspend operations because of a direct loss. Which of the following terms best describes the nature of this type of coverage? a) Occurrence b) Direct damage c) Time element d)
Claims made - CORRECT ANSWER Time element"
c) $32, d)
80% of the property's replacement cost or more - CORRECT ANSWER 80% of the property's replacement cost
or more" "#40. Which would NOT be covered by the inside the premises - robbery or safe burglary of other property coverage? a) An employee is caught stealing cash from the register. b) Two men break a window during an attempted robbery. c) Someone breaks in after business hours, pries open a wall vault and steals several valuable paintings. d)
A store clerk is forced into the storage room and locked in while the intruder steals high-value merchandise. -
CORRECT ANSWER An employee is caught stealing cash from the register."
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated? a) Adhesion b) Consideration c) Good faith d)
Representation - CORRECT ANSWER Consideration"
How long is the licensing period in Arkansas? a) 3 years b) 4 years c) 1 year d)
2 years - CORRECT ANSWER 2 years"
For reasons other than nonpayment of premium, how many days' notice must an insurer give a policyowner before canceling a homeowners policy? a) 10 days b) 20 days c) 30 days d)
60 days - CORRECT ANSWER 20 days"
An employee sustained a temporary injury while at work. Her average weekly wage at the time of the accident was $900 a week. The statewide average weekly wage at the time was $600. What is the most that the employee can recover from Workers Compensation benefits for her lost wages? a) $400/week b) $450/week c) $510/week d)
$600/week - CORRECT ANSWER $510/week"
Directors and officers liability insurance defends actions against a corporation or its officers and directors alleging wrongful acts. With regard to the coverage provided, wrongful acts include any of the following EXCEPT a) Breach of duty. b) Embezzlement. c) Misstatements. d)
Neglect. - CORRECT ANSWER Embezzlement"
Which of the following homeowners forms is designed for individuals that own and reside in a condominium? a) HO- b) HO- c) HO- d)
HO-2 - CORRECT ANSWER HO-6"
A policy condition that states if a policy is broadened with no additional premium, then the expanded coverage will be automatically applied to all policies of the same type is known as a) Limit of insurance clause. b) Liberalization clause. c) Maximum indemnity clause. d)
Loss control clause. - CORRECT ANSWER Liberalization clause."
b) Loss experience. c) Job classification. d)
Sales. - CORRECT ANSWER sales"
An insurance producer fails to obtain automobile insurance for a client after agreeing to do so. The client is involved in an automobile accident after running a red light and is found to be at fault. The damage to the other vehicle totals $5,000. Which statement regarding the producer's errors and omissions liability policy is true? a) It will not provide coverage because the property damage resulted from the client breaking the law. b) It will provide coverage because punitive damages have been awarded. c) It will provide coverage because the damage to the client resulted from the producer's negligence. d)
It will not provide coverage; such physical damage to property is not covered. - CORRECT ANSWER It will
provide coverage because the damage to the client resulted from the producer's negligence." "#33. When an umbrella policy is broader than underlying insurance and it pays a loss that is not covered by the underlying policy, it usually only pays a) The amount specified in the policy under the additional coverage provisions. b) The amount in excess of the underlying policy deductible. c) A percentage of the loss as described on the declarations. d)
The excess over the self-insured retention. - CORRECT ANSWER The excess over the self-insured retention."
Which policy consists of the declarations and conditions, endorsements, and other attachments applicable to a single line of insurance? a) Insurance b) Casualty c) Commercial package d)
Monoline - CORRECT ANSWER Monoline"
Which program was designed to provide an additional source of earthquake insurance? a) Modified Insurance Plan b) Assigned Risk Program c)
Market Assistant Program d)
Joint Earthquake Insurance Board - CORRECT ANSWER Market Assistant Program"
Which of the following conditions is NOT necessary for becoming a non-resident producer in this state? a) Being a resident producer in good standing in the home state b) Being licensed as a resident producer c) Paying appropriate fees d)
Passing the licensing examination - CORRECT ANSWER Passing the licensing examination"
Which of the following insurers must be members of the Rural Risk Underwriting Association in this state? a) All authorized insurers b) All insurers that write property insurance c) Insurers who want to secure protection by the Association d)
Insurers that only write farm insurance - CORRECT ANSWER All insurers that write property insurance"
Which of the following only provides professional advice regarding insurance policies? a) Nonresident producer b) Consultant c) Producer d)
Broker - CORRECT ANSWER Consultant"
In order to get a non-resident license is this state, producers must a) Apply and pay a fee to a non-resident state that reciprocates. b) Pass the non-resident state exam and satisfy their continuing education requirements. c) Represent an agency located is this state. d)
Surrender their license in their state of residence. - CORRECT ANSWER Apply and pay a fee to a non-resident
state that reciprocates." "#44. The purpose of insurance regulation is to a)
Additional insureds. d)
Insureds. - CORRECT ANSWER Insureds."
Payment for medical expenses, loss of wages, funeral expenses, or the cost to repair or replace damaged property are known as what type of compensatory damages? a) Normal b) General c) Special d)
Tort - CORRECT ANSWER Special"
If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered a) A required disclosure. b) A legal representation of the Association. c) An unfair trade practice. d)
A misrepresentation. - CORRECT ANSWER An unfair trade practice."
The Federal Fair Credit Reporting Act a) Regulates telemarketing. b) Prevents money laundering. c) Regulates consumer reports. d)
Protects customer privacy. - CORRECT ANSWER Regulates consumer reports."
The inspections and surveys condition in a businessowners policy a) Allows the insurer the right to inspect the insured's premises. b) Validates that the insured is in compliance with state and federal guidelines. c) Obligates the insurer to make annual safety inspections. d)
Guarantees that all working conditions are safe and healthful. - CORRECT ANSWER Allows the insurer the right
to inspect the insured's premises." "#19.
The business income coverage form covers consequential loss of business income that occurs when a business must suspend operations because of a direct loss. Which of the following terms best describes the nature of this type of coverage? a) Occurrence b) Direct damage c) Time element d)
Claims made - CORRECT ANSWER Time element"
All of the following statements describe the concept of strict liability EXCEPT a) It is applied in product liability cases. b) It is imposed on defendants engaged in hazardous activities. c) Claimants may need to provide proof that a product defect caused an injury. d)
It is imposed regardless of fault. - CORRECT ANSWER It is imposed on defendants engaged in hazardous
activities." "#27. Additional coverages in the liability section of a homeowners policy cover all of the following EXCEPT a) Damage to a third-party property for which the insured is legally liable. b) Claims expense. c)
Expenses the insured incurs rendering first aid for bodily injury to third parties. - CORRECT ANSWER Damage
to a third-party property for which the insured is legally liable." "#28. In a personal umbrella policy, the amount paid by the insured for certain losses not covered under the primary coverage is called a) Self-insured retention. b) Stop-loss. c) Coinsurance. d)
Participation requirement. - CORRECT ANSWER Self-insured retention."
A company has a businessowners policy on a building with an estimated replacement cost of $300,000. The company carries $150,000 of insurance. If a loss occurs, how much will the insured company be paid? a) Up to $300,000 for the loss b)
Up to $ d)
Up to $1,000 - CORRECT ANSWER Up to $1,000"
For reasons other than nonpayment of premium, how many days' notice must an insurer give a policyowner before canceling a homeowners policy? a) 10 days b) 20 days c) 30 days d)
60 days - CORRECT ANSWER 10 days."
Which of the following is an example of a producer's fiduciary responsibilities? a) A producer promptly forwarding premiums to the insurance company b) A producer helping clients to file claims c) A producer doing a review of his/her client's coverage d)
A producer offering additional coverage to his client - CORRECT ANSWER A producer promptly forwarding
premiums to the insurance company" "#48. The requirement that producers must account for all insurance funds collected, and without the expressed consent of the insurance company(ies) are not permitted to commingle those funds with their own funds, is known as a) Fiscal responsibility. b) Accepted accounting principal. c) Fiduciary responsibility. d)
Premium accountability. - CORRECT ANSWER Fiduciary responsibility."
In addition to the coverages built into the property coverage form, insurers may offer other endorsements that can further expand the coverage provided in the policy a) For free. b) Automatically. c) As a rebate. d)
For an additional premium. - CORRECT ANSWER For an additional premium."
A commercial package policy (CPP) allows the insured to select the coverage needed and customize the policy to meet the needs of the insured's business. In a CPP, the business owner may select from all of the following types of coverage EXCEPT a) Boiler and machinery coverage b) General liability coverage c) Workers compensation coverage d)
Crime coverage - CORRECT ANSWER Workers compensation coverage"
The policy conditions define a) The excluded perils. b) The amount of coverage. c) How parties to the contract must act following a loss. d)
The basic underwriting information. - CORRECT ANSWER How parties to the contract must act following a
loss." "#10. Which of the following is a common exclusion found in Part D: Coverage for Damage to Your Auto of a PAP? a) Riot or civil commotion b) Towing and labor c) Mechanical breakdown d)
Glass breakage - CORRECT ANSWER Mechanical breakdown"
A producer moves to another state and terminates her residency in Arkansas. The Arkansas producer's license must be returned to the Commissioner within how many days? a) 3 days b) 10 days c) 30 days d)
45 days - CORRECT ANSWER 10 days"
Which of the following examples of losses paid under an HO-3 also would be paid under an HO-2 homeowners policy? a)
Concealment. c) Misrepresentation. d)
Fraud. - CORRECT ANSWER Concealment."
Which of the following liability policies is usually written on a "claims-made" form? a) Automobile liability b) Personal liability c) Umbrella liability d)
Professional liability insurance - CORRECT ANSWER Professional liability insurance"
With respect to commercial auto policies, the Garage Coverage Form provides liability protection for all of the following EXCEPT a) The insured's business products and work performed. b) The insured's business income losses due to personal injury. c) The insured's business premises. d)
The insured's business autos. - CORRECT ANSWER The insured's business income losses due to personal
injury." "#26. An insured is involved in an auto accident in another state. The state has a financial responsibility law that specifies limits of liability higher than the limits shown in the declarations. What amount will the insured's policy pay? a) Only the limits specified in the policy b) Higher limits c) Lower limits d)
The insurer will not pay for out-of-state accidents - CORRECT ANSWER Higher limits"
What type of coverage is Coverage E in homeowners policies? a) Loss of use b) Personal property c) Personal liability d)
Additional coverage - CORRECT ANSWER Personal liability"
Which of the following is NOT covered under the Utility Services - Time Element endorsement? a) Damage to the insured's property caused by utility service disruption b) Loss of business income arising from loss of utility service caused by an insured peril c) Extra expense incurred to remain open for business following the loss of utility service caused by a covered peril d)
None of the above would be covered. - CORRECT ANSWER Damage to the insured's property caused by utility
service disruption" "#31. Both the broad theft and limited theft endorsements on the dwelling program exclude all of the following types of property EXCEPT a) Credit cards. b) Motor vehicles licensed for the road. c) Aircraft. d)
Watercraft. - CORRECT ANSWER Watercraft."
What is the purpose of the coinsurance clause found in property insurance policies? a) Encourage higher standards of care by requiring the insured to pay a portion of every loss b) Ensure that insureds do not overinsure their property c) Prevent insureds from profiting from a loss d)
Encourage the insured to insure the property closer to its full value - CORRECT ANSWER Encourage the insured
to insure the property closer to its full value" "#38. While an insured was towing a utility trailer with his auto, the trailer came loose and ran into a store front. What part of the insured's auto policy would pay for the damage to the store? a) Property damage liability b) Collision coverage c) Other-than-collision coverage d)
This loss would not be covered. - CORRECT ANSWER Property damage liability"
All of the following statements describe the concept of strict liability EXCEPT a)
b) Provided by the insured's policy on a primary basis. c) Provided by the insured's policy on an excess basis. d)
Not covered. - CORRECT ANSWER Provided by the insured's policy on an excess basis."
On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. The company is guilty of a) Unfair claim practice. b) Rebating. c) Misrepresentation. d)
Concealment. - CORRECT ANSWER Misrepresentation."
With respect to auto insurance, the term owned autos includes all of the following EXCEPT a) A pickup or van acquired by the named insured during the policy period. b) Any private passenger auto leased to the named insured for a period of more than 6 months. c) A pickup or van titled to and used in the named insured's business. d)
Any private passenger auto titled to the named insured. - CORRECT ANSWER A pickup or van titled to and used
in the named insured's business." "#63. Which of the following risks would NOT be eligible for coverage under a homeowners policy? a) An applicant who owns and lives in a single-family dwelling that also contains incidental business activities b) An applicant who owns and lives on a commercial farm c) An applicant who lives in a duplex that she does not own d)
An applicant who owns and lives in a duplex - CORRECT ANSWER An applicant who owns and lives on a
commercial farm" "#64. Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPT a) Conditions. b) Consideration. c) Legal purpose.
d)
Offer and acceptance. - CORRECT ANSWER Conditions."
If a person is using an auto with the belief that he is entitled to do so, subrogation rights under a personal auto policy would apply to all coverages EXCEPT a) No-fault medical payments. b) Liability. c) Physical damage. d)
Uninsured motorist. - CORRECT ANSWER Physical damage."
All of the following would be covered under the medical expense coverage of a businessowners policy EXCEPT a) X-ray services. b) First aid when the accident occurred. c) Mental health counseling. d)
Ambulance services. - CORRECT ANSWER Mental health counseling."
Who will transport the property of anyone who hires them? a) Common carriers b) Private carriers c) Motor truck carriers d)
Commercial carriers - CORRECT ANSWER Common carriers"
When an umbrella policy is broader than underlying insurance and it pays a loss that is not covered by the underlying policy, it usually only pays a) A percentage of the loss as described on the declarations. b) The excess over the self-insured retention. c) The amount specified in the policy under the additional coverage provisions. d)
The amount in excess of the underlying policy deductible. - CORRECT ANSWER The excess over the self-insured
retention." "#87.
