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Louisiana Property & Casualty Insurance
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1. Which of the following coverages is included in the Homeowners Policy but is NOT included in an unendorsed Dwelling Policy? A. Medical Payments B. Other Structures C. Liability D. Loss of Use ✅ Correct Answer: C. Liability Rationale: Liability coverage is standard in homeowners policies but is not included in a standard (unendorsed) dwelling policy. 2. Open peril coverage for both the dwelling and personal property is provided by the ________ A. HO- 2 B. HO- 3 C. HO- 5 D. HO- 4 ✅ Correct Answer: C. HO- 5 Rationale: The HO-5 policy offers open peril (all-risk) coverage for both the dwelling and personal property, unlike other forms which limit coverage for personal property to named perils. 3. The insured’s home is covered by a DP-3. Two years ago, the home was purchased for $58,000. Today, its replacement value is $60,000. How much
Coverage A does the insured need to qualify for replacement cost coverage? A. $60, B. $46, C. $58, D. $48, ✅ Correct Answer: D. $48, Rationale: To qualify for replacement cost under a DP-3, the insured must carry at least 80% of the replacement cost. 80% of $60,000 = $48,000.
4. If an HO-3 policy has a dwelling coverage limit of $100,000, how much automatically applies to cover the insured's personal property under Coverage C? A. $20, B. $25, C. $50, D. $100, ✅ Correct Answer: C. $50, Rationale: Coverage C (Personal Property) under HO-3 is typically 50% of the Coverage A (Dwelling) limit. 5. Which of the following insurance principles permits a policyholder to be reimbursed for losses experienced? A. Subrogation B. Indemnification C. Adhesion D. Insurability ✅ Correct Answer: B. Indemnification Rationale: Indemnification ensures that the insured is restored to the same financial condition as before the loss. 6. Uncertainty concerning financial loss best describes the concept of ________ A. Hazard B. Risk C. Peril
10. A condition creating or increasing the chance for loss is known as a: A. Risk B. Peril C. Hazard D. Loss ✅ Correct Answer: C. Hazard Rationale: A hazard increases the likelihood or severity of a loss. 11. Aviation insurance provides an insured with liability protection while an insured is: A. Driving to the airport B. Loading baggage C. In the air or on the ground D. Flying only internationally ✅ Correct Answer: C. In the air or on the ground Rationale: Aviation insurance covers liability both during flight and while on the ground. 12. Replacement cost less depreciation defines: A. Market Value B. Agreed Value C. Actual Cash Value D. Functional Replacement Cost ✅ Correct Answer: C. Actual Cash Value Rationale: Actual Cash Value (ACV) = Replacement Cost - Depreciation. 13. All of the following statements are correct regarding the duties of an insured following a loss EXCEPT the insured must: A. Notify the insurer promptly B. Cooperate in the investigation C. Protect the property from further damage D. Reimburse the mortgagee for its interest in the damaged property ✅ Correct Answer: D. Reimburse the mortgagee for its interest in the damaged
property Rationale: The insurer, not the insured, pays the mortgagee for its interest after a covered loss.
14. Personal business property out in the open is covered under a commercial property policy only while: A. Inside the building B. On the loading dock C. Within 100 feet of the described premises D. Stored in an employee's car ✅ Correct Answer: C. Within 100 feet of the described premises Rationale: The commercial property policy provides coverage within 100 feet of the described location. 15. A short-term proof of insurance coverage provided to an applicant until a policy can be produced is known as a(n): A. Endorsement B. Binder C. Certificate D. Declarations page ✅ Correct Answer: B. Binder Rationale: A binder is temporary insurance coverage until the formal policy is issued. 16. What is the primary difference between a claims-made and occurrence form of a CGL policy? A. Premium costs B. The type of businesses covered C. When coverage is triggered D. The policy limits ✅ Correct Answer: C. When coverage is triggered Rationale: Claims-made policies respond when a claim is filed during the policy period; occurrence policies cover losses occurring during the policy period, regardless of when reported.
C. Risk of loss is a speculative risk D. Loss must cause economic hardship ✅ Correct Answer: C. Risk of loss is a speculative risk Rationale: Insurance covers only pure risks, not speculative risks (e.g., gambling or investing).
21. What part of an insurance policy personalizes the policy as to whom and what are insured? A. Conditions B. Exclusions C. Declarations D. Insuring Agreement ✅ Correct Answer: C. Declarations Rationale: The declarations page lists the insured’s name, address, coverage amounts, and other policy-specific information. 22. Which of the following is TRUE about a binder? A. It is issued only after underwriting approval. B. It provides coverage only for life insurance. C. It guarantees indefinite insurance coverage. D. It serves as temporary proof of insurance until the policy is issued. ✅ Correct Answer: D. It serves as temporary proof of insurance until the policy is issued. Rationale: A binder provides immediate, temporary insurance coverage until the formal policy is issued by the insurer. 23. Which part of an insurance contract outlines the obligations of the insured and the insurer in the event of a loss? A. Exclusions B. Declarations C. Conditions D. Endorsements ✅ Correct Answer: C. Conditions Rationale: The conditions section specifies the duties of both the insurer and the insured, especially following a loss.
24. What is typically found in the insuring agreement of an insurance policy? A. Details of the premium payment schedule B. Limitations and exclusions C. The insurer’s promise to pay covered claims D. Personal details of the policyholder ✅ Correct Answer: C. The insurer’s promise to pay covered claims Rationale: The insuring agreement outlines the scope of coverage and the insurer’s obligation to provide coverage for covered losses. 25. Which of the following would be considered a named peril under a standard property policy? A. Wear and tear B. Fire C. Inherent vice D. Neglect ✅ Correct Answer: B. Fire Rationale: Fire is a standard named peril in property policies. The others are excluded causes of loss. 26. What is the primary purpose of coinsurance in property insurance policies? A. To allow for policy cancellation B. To encourage insureds to carry insurance close to full value C. To reduce policy premiums D. To increase deductibles ✅ Correct Answer: B. To encourage insureds to carry insurance close to full value Rationale: Coinsurance clauses require policyholders to insure their property to a certain percentage (typically 80%) of its value to receive full payment for partial losses. 27. Which of the following is NOT typically covered under a personal auto policy? A. Liability for damage caused to others
✅ Correct Answer: C. Business pursuits endorsement Rationale: A business pursuits endorsement expands coverage to include certain home-based business operations. An Insured Purchased New Furniture For $6,000. At The Time Of A Fire Loss, It Had Depreciated $2,000. The Same Furniture Will Cost $7,000 To Replace. What Is The Actual Cash Value Of The Destroyed Furniture? A. $4, B. $8, C. $6, D. $5,
- ANSWER $5, The Primary Purpose Of The Business Income Coverage Forms Is To Reimburse The Insured For __________.
- ANSWER Loss Of Income Resulting From Property Damage At The Insured's Property The Homeowners Form That Provides Open Peril Coverage On The Dwelling And Broad Coverage On Personal Property Is The_______ A. HO- 3 B. HO- 4 C HO- 2 D. HO- 6
- ANSWER HO- 3
Which Of The Following Losses To Covered Equipment Would Be Covered Under The Equipment Breakdown Protection Coverage Form?
- ANSWER Damage From An Explosion Caused By The Centrifugal Force Of Moving Parts According To The Cancellation Condition In The Common Policy Conditions Form, If The Insurance Company Is Cancelling A Commercial Package Policy For Nonpayment Of Premium, The Insured Must Be Given At Least How Many Days Notice Of Cancellation? A. 30 B. 60 C. 14 D. 10
- ANSWER 10 Each Of The Following Is Covered Under A Commercial Property Policy EXCEPT A. Merchandise B. Outdoor Curbside Signs C. Fixtures D. Furniture
- ANSWER Outdoor Curbside Signs The Owner Of A Laundromat Who Dry-Cleans Clothing Belongs To Others Would
An Auto Repairman Forgets To Replace The Oil Plug In A Customers Engine That Results In A Loss Of Oil During The Next Several Days. The Loss Of Oil Causes The Engine To Seize. Which Of The Following Coverages Would Protect The Repairman In The Situation? - ANSWER Completed Operations Liability A Portion Of An Insurance Contract That Informs Who And What Is Covered, In Addition To When Coverage Is Effective, Is Known As The____________ - ANSWER Declarations Page All Of The Following Are Supplemental Payments Found In Liability Policies EXCEPT
- ANSWER Costs The Insured Incurs In Hiring Their Own Attorney A List Of The Insured's Duties Following A Loss Can Be Found In Which Of The Following Policy Sections - ANSWER Conditions The Dishonest Taking Of Property While Placing Another Person In Fear Of Physical Violence Best Describes - ANSWER Robbery If A Driver Loses Control Of His Auto And Damages The Fence Of A Neighbor, The Damages Will Be Paid For By The Drivers________ - ANSWER Property Damage Liability Tony Has A Liability Policy That Covers His Business. Sometimes During The Policy Period A Loss Occurs, But Tony Does NOT Become Aware Of The Loss Until Several Years After His Policy Expires. Which Of The Following Types Of Policies Would Cover The Loss? - ANSWER Occurrence Policy To Pay A Claim, Insurable Interest With Casualty Insurance Must Exist - ANSWER At The Time Of Loss
All Of The Following Losses Are Covered By A Personal Auto Policy EXCPET - ANSWER Liability For Damage To The Insured's Property Which Of The Following Losses Is Covered By The Inside The Premises-Robbery Or Safe Burglary Of Other Property Crime Coverage Form - ANSWER Merchandise Stolen From A Custodian For A Contract To Be Valid, The Parties Involved Must Be Competent To Contract. - ANSWER Someone Who Is Not Sane A Diamond Ring That Is Shoplifted From A Jewelry Store Display Is Considered The Subject Of - ANSWER Theft All Of Following Are Considered Duties Of A Producer EXCEPT To - ANSWER Advance Premiums To A Client A Surety Bond Pays Which Of The Following Parties - ANSWER Obligee A Loss That Occurs When An Individual Breaks Into A Safe And Leaves Visible Signs Of Forcible Entry Best Describes - ANSWER Burglary Malik Is Successfully Sued For Negligence. The Jury Awards The Injured Party $175,000. The Limits Under Maliks Liability Policy Provide Coverage Up To $100,000 Per Occurrence. In Addition, His Insurance Carrier Is Charged $17, For Defending The Suit. How Much Will Malik's Carrier Pay The Injured Party? A. $100,
If An Insured And Insurer Disagree As To Whether There Is Coverage Under A Policy Which Of The Following Processes Will Be Utilized - ANSWER Arbitration Which Of The Following Is NOT considered An Insurable Peril? - ANSWER Losses That Result From Gambling If Scott And Wendy File Bankruptcy, Which Of The Following Is TRUE Regarding Their Insurance Policy - ANSWER The Insurer's Responsibilities Are Not Eliminated All Of The Following Statements Are Correct About Risk Retention Groups EXCEPT
- ANSWER It Is Federally Regulated Which Of The Following Commercial Liability Policy Versions Covers Injuries Sustained During The Policy Period Even If The Claim Is Not Actually Filed Years After The Policy Has Been Cancelled? - ANSWER Occurrence Form All Of The Following Statements Are Correct Concerning Personal Liability Coverage Provided By Homeowners Policy EXCEPT - ANSWER An Insurer Will Not Defend A Liability Suit That Is Obviously Groundless The Turners Are Concerned About The Burglaries That Have Been Occurring Frequently In Their Apartment Complex. They Decided Its Time To Buy Renters Insurance. This Describes Which Of The Following? - ANSWER Exposure Which Of The Following Is Closely Related To The Concept Of Insurable Interest? - ANSWER The Principle Of Indemnity
Each Of The Following Is A Producers's Responsibility To The Insurer EXCEPT To_______ - ANSWER Perform All Duties Regardless Of The Degree Of Care A Commercial General Liability Policy Provides Coverage For______ - ANSWER Liability For Slander All Of The Following Statements Are Correct Concerning An Umbrella Liability Policy EXCEPT it? - ANSWER Is The Only Liability Contract An Individual Or Business Needs A Coverage Form Added To The Commercial Package Policy That Provides Protection Against The Direct Loss To Buildings Under Construction Is Known As______ - ANSWER Builder's Risk Coverage A Building Owner Purchases A Fire Policy Providing $60,000 Worth Of Coverage With An 80% Coinsurance Clause For His $100,000 Building. He Suffers A $10, Loss. How Much Of The Loss Will The Company Pay? A. $1, B. $7, C. $8, D. $10,000 - ANSWER $7, The Phrase Robbery Or Holdup, As Used In Burglary And Robbery Insurance, Means The Felonious Taking Of Property In Which Of The Following Ways: - ANSWER By Use Of Or Threat Of The Use Of Violence With The Means To Carry It Out
Which Of The Following Would NOT Be Covered Under The Liability Section Of Personal Auto Policy - ANSWER Bodily Injury Caused By The Insureds Negligence While Driving A Three-Wheel All-Terrain Vehicle Which Of The Following Would NOT Be Covered Under A Policy Providing Coverage For Farm Property - ANSWER Livestock Being Transported By A Contract Carrier J Owns A Building That Is Insured For $90,000. Company A Insures The Structure For $40,000, Company B Provides Coverage For $30,000 And Company C Covers The Building For $20,000. A Fire Causes A $10,000 Loss. How Much Will Company C Pay On This Claim? - ANSWER $2, Which Of The Following Statements Is CORRECT Concerning The Principle Of Indemnity? - ANSWER The Insured Is Placed In The Same Financial Condition Following A Loss As That Which Existed Prior To The Loss The Commercial Property Policy Condition That Automatically Provides Broader Coverage When An Insurer Makes Revisions To A Current Policy Edition Without Charging The Insured Additional Premium Is Called The - ANSWER Liberalization Clause A Fire Causes Extensive Damage To The Interior Of A Small Delicatessen. The Building Was Covered By A Commercial Package Policy With A Building And Personal Property Form. Which Of The Following Losses Were Covered By This Contract? - ANSWER Tables And Chairs Destroyed By The Fire
Summer Owns A Home With A Replacement Cost Of $150,000. For The Replacement Cost Provisions Of A Homeowners Contract To Apply, Summer Must Carry How Much Minimum Coverage? A. $90, B. $105, C. $120, D. $135,000 - ANSWER $120, An Employee Of An Insured Is Injured On The Job. Coverage Would Be Provided Under Which Of The Following Products? - ANSWER Workers Compensation A Farmer's Crops Being Damaged By Toxic Fumes That Have Been Escaping Continuously From A Factory Is An Example Of A(n) - ANSWER Occurrence Which Of The Following Lines Of Insurance CANNOT Be Included In The Commercial Package Policy? - ANSWER Ocean Marine The Extra Expense Coverage Form Provides - ANSWER Coverage That Will Permit The Insured To Continue In Business Without Interruption Following Property Damage Loss What Type Of Ocean Marine Insurance Provides Physical Damage Coverage For The Ship While It Is In Transit? - ANSWER Hull Which Of The Following Is A Liability Loss? - ANSWER A Fire That Was Caused By The Insureds Negligence Burns A Neighboring Building. The Owner Of The Building Sues The Insured.
