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AINS 102 PT 3 Questions & Answers 2023- 2024
Patrick's car is 12 years-old and has been driven for over 100,000 miles. He has decided that instead of continuing to pay insurance premium for coverage for property damage to his car, he will put the money aside to save for a new car. Which one of the following risk management techniques is Patrick using?
Select one:
A. Diversification
B. Retention
C. Avoidance
D. Loss reduction - ANS-B
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. - ANS-D
Which one of the following is a form of compensatory damages?
Select one:
A. Punitive damages
B. Special damages
C. Exemplary damages
D. Real damages - ANS-B
All of the following could lead to a liability loss for a family, EXCEPT:
Select one:
A. A guest slips on an icy sidewalk in front of the family's home and breaks his leg.
B. The son, who is 13 years old, throws a rock at a classmate who requires stitches for an injury to his head.
C. The father trips on a broom he left lying in the driveway and breaks his arm.
D. The daughter, who is 16 years old, sideswipes a neighbor's car and dents its fender while driving her own car. - ANS-C
States A, B, C, and D have addressed the problem of compensating auto accident victims differently. Which one of the following most accurately describes the way that states are handling this issue?
Select one:
A. State B has enacted a financial responsibility law that requires auto owners to carry auto liability insurance at least equal to certain minimum limits.
B. State A, unlike most states, has enacted a compulsory auto insurance law, requiring motorists to provide proof they have some means to pay for auto accident damages.
C. State D, a no-fault state, has enacted auto insurance covering accident victims on a first-party basis, usually applying to bodily injury and not to property damage.
D. State C, a no-fault state, has enacted auto insurance covering accident victims on a first-party basis, usually applying both to bodily injury and to property damage. - ANS-C
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. - ANS-C
Which one of the following is true regarding the use of technology in home risk management?
Select one:
Luke recently purchased a Personal Auto Policy (PAP). During the application process he advised the agent that he owned two private passenger vehicles and a snow mobile. The agent assured Luke that the proposal included coverage for the snowmobile. Luke has received his PAP policy and wants to confirm that it shows coverage for the snowmobile. Which one of the following sections of the PAP will indicate the coverage for the snowmobile?
Select one:
A. The snowmobile will be included in the description of "your covered auto" in the Definitions section.
B. The snowmobile will be shown in the Insured Vehicles and Schedule of Coverages section of the Declarations page.
C. The snowmobile endorsement will be listed under the Policy Form and Endorsements section of the Declarations page.
D. The snowmobile coverage will be detailed in Part F—General Provisions. - ANS-C
Joel is a delivery driver for XYZ Auto Supply. He usually drives the company van, but one day, since he only had to deliver a small part, Joel used his own car that is insured with a Personal Auto Policy (PAP). While doing so, Joel was involved in a two-vehicle accident and a liability claim was made against Joel and XYZ Auto Supply. Which one of the following is an insured(s) under Joel's PAP in this situation?
Select one:
A. None
B. Joel and XYZ Auto Supply
C. Joel only
D. XYZ Auto Supply only - ANS-B
The Part B—Medical Payments Coverage of the Personal Auto Policy (PAP) contains an Other Insurance provision. If two automobile policies from different insurers cover the same owned vehicle,
Select one:
A. The courts will decide how to assess the payment amounts.
B. The Other Insurance provision will address how to address the particular situation.
C. The insurer issuing the policy with the higher limits of liability will make the determination.
D. The first insurer to receive notice of the claim becomes primarily liable. - ANS-B
The medical payments coverage in the Personal Auto Policy (PAP) applies to
Select one:
A. Anyone injured in an accident involving an insured.
B. Any person occupying a covered auto.
C. Any insured who is also covered by workers compensation for the same accident.
D. Anyone occupying a car not owned by any insured but driven by an insured. - ANS-B
Larry drove his car and was involved in a two-car accident caused by the other driver, who was uninsured. The at-fault driver offered Larry a substantial amount of money in satisfaction of his damages. Larry accepted the money in settlement of his losses and released the other driver from further liability. Larry later submitted an uninsured motorists claim under his Personal Auto Policy (PAP). The uninsured motorists claim would be
Select one:
A. Paid for damages accruing after the settlement with the at-fault driver.
B. Denied because coverage under these circumstances is excluded.
C. Denied because the at-fault driver can be considered self-insured under the circumstances.
D. Paid in addition to the money paid by the at-fault driver. - ANS-B
Li has a Personal Auto Policy (PAP) for his car with a $100,000 limit for uninsured motorists (UM) coverage. He was injured in an accident with a legally intoxicated uninsured motorist. Li submitted a UM claim to his insurer. The case went to trial and Li was awarded $50,000 for medical bills, $10,000 for rehabilitation expenses, $5,000 for lost wages, and $10,000 for punitive damages. How much can Li collect under the UM coverage of his PAP?
Select one:
A. $50,
B. $55,
C. $65,
Steve and Amy were about to purchase their first home. During the process, they were advised that they needed to purchase a HO-3 insurance policy. The HO-3 policy would provide Steve and Amy with coverage for all of the following, EXCEPT:
Select one:
A. Their cars
B. Personal Liability
C. The house
D. The contents of the house - ANS-A
The insuring agreement of a homeowners policy specifies that
Select one:
A. The insurer will provide policy coverage in return for the premium and compliance with policy provisions.
B. Endorsements are available to modify the contract.
C. Five property coverages are provided by the policy.
D. Defined words have special meanings when they are used within the policy. - ANS-A
The HO-3 policy Coverage D provides coverage for
Select one:
A. Loss of Use.
B. Other Structures.
C. The dwelling.
D. Personal property. - ANS-A
The HO-3 policy provides open perils coverage rather than named perils coverage for which one of the following?
Select one:
A. Coverage A—Dwelling only
B. Coverage A—Dwelling and Coverage B—Other Structures
C. Coverage C—Personal Property
D. Coverage D—Loss of Use - ANS-B
Tomas has an HO-3 policy covering his home. A neighbor jumped Tomas's fence to use his yard as a shortcut to a store, tripped over a small shovel left on the lawn, and was injured. The neighbor sued Tomas. Tomas's insurer defended and won the lawsuit on the theory that the neighbor was a trespasser to whom no duty was owed by Tomas. The insurer's defense included $20,000 in legal fees. Who is responsible for these fees?
Select one:
A. The insurer is responsible for the legal fees only if Tomas is not able to pay them.
B. Tomas is, because liability coverage is not triggered absent a finding of liability.
C. Tomas and the insurer share responsibility for the legal fees.
D. Tomas's HO-3 insurer is responsible for the legal fees. - ANS-D
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. - ANS-C
The medical payments coverage in a homeowners policy covers certain medical expenses incurred by
Select one:
A. A person uninvited to the insured's home.
B. Insureds.
D. The DP-3 excludes coverage for theft of property that isn't part of the covered structure. - ANS-D
Westgrove is in the initial phase of its community's participation in the National Flood Insurance Program (NFIP), during which property owners are allowed to purchase limited amounts of insurance at subsidized rates. This is known as
Select one:
A. The regular program.
B. The emergency program.
C. The "Write-Your-Own" flood insurance program.
D. A beachfront or windstorm plan. - ANS-B
The "Write Your Own" (WYO) flood insurance program allows
Select one:
A. Insureds to carry flood coverage regardless of the property's location.
B. Insureds to purchase flood coverage without an agent or representative.
C. Insureds to tailor flood coverage to their own specific needs.
D. Participating Insurers write flood insurance using National Flood Insurance Program guidelines. - ANS- D
Roger and Sarah sold their house and plan to travel around the world for one year. They placed their furniture and appliances in storage and will take luggage and cameras on their trip. Sarah will travel with her diamond engagement ring. Jeff, their insurance agent, canceled their homeowners policy soon after the house was sold.
Which one of the following types of personal inland marine forms should Jeff recommend to Roger and Sarah to protect the items they placed in the storage facility?
Select one:
A. A Personal Articles Standard Loss Settlement Form
B. A Personal Property Form
C. A Personal Effects Form
D. A Tenant Homeowners Form - ANS-B
Roger and Sarah sold their house and plan to travel around the world for one year. They placed their furniture and appliances in storage and will take luggage and cameras on their trip. Sarah will travel with her diamond engagement ring. Jeff, their insurance agent, canceled their homeowners policy soon after the house was sold.
Which one of the following types of personal inland marine forms should Jeff recommend to Roger and Sarah to protect their luggage on the trip?
Select one:
A. Personal Articles Standard Loss Settlement Form
B. Personal Property Form
C. Personal Effects Form
D. Tenant Homeowners Form - ANS-C
Which one of the following is a warranty that is likely to be required by an insurer that underwrites a boatowners or yacht policy?
Select one:
A. Uninsured boaters
B. Contractual liability
C. Seaworthiness
D. Transportation - ANS-C
The ownership and use of watercraft create various unique categories of loss exposures. Which one of the following is true regarding small boat policies used to cover many of these exposures?
Select one:
A. Coverage is included for Jet Skis and WaveRunners.
B. They cover boats up to 36 feet in length.
C. Startups do best when they quickly break into a new market and exclusively focus on established customers.
D. Providing smart devices to insured homeowners will not prevent losses, but rather lower claim payments. - ANS-B
Christina and Carlos Thomas have decided to place their auto insurance needs with the Windspring Group, a type of insurance arrangement called peer-to-peer insurance. Which one of the following will the Thomas family experience with this situation?
Select one:
A. Because of the consistent and reliable pool of funds, reinsurance will not usually be needed for this type of insurance.
B. Because of the limited but consistent growth of peer-to-peer insurance, a majority of states have approved the diverse regulatory requirements.
C. The Thomas' peer-to-peer group began on a local level and now has proven it can easily and quickly achieve a countrywide presence.
D. Peer-to-peer insurance offers the novel insurance approaches of self-selection of pool members and how to manage excess funds. - ANS-D
Telematics devices track driving habits and then
Select one:
A. Divide auto insurance applicants into homogeneous classes.
B. Transmit that information wirelessly to a computer.
C. Perform sophisticated modeling techniques to make that information relevant.
D. Classify each insured auto for its principal use. - ANS-B
The Transportation Network Driver Coverage (No Passenger) endorsement
Select one:
A. Adds a transportation network platform definition.
B. Provides coverage when the insured is logged into a transportation network platform until the driver accepts a passenger's request.
C. Provides coverage without passengers while the driver is logged into a transportation network platform.
D. Specifies that coverage does not apply to Part C—Uninsured Motorists Coverage. - ANS-C
Which one of the following changes the definition of "business" in the homeowners policy to include home-sharing?
Select one:
A. Damage to Property of Others—Increased Limits endorsement
B. Home-sharing Host Activities Damage to Property of Others provision
C. Broadened Home-sharing Host Activities Coverage Endorsement
D. Home-sharing Host Activities Amendatory Endorsement - ANS-D
Erin makes custom draperies in the basement of her home. Initially, she made these draperies for herself and family members, but she began to sell these draperies to a broader audience. Which one of the following exposures would likely be covered under an unendorsed homeowners policy should Erin's home be destroyed by a covered peril?
Select one:
A. The cost to replace her sewing equipment
B. The loss of customer data Erin stored on her computer
C. The cost of materials purchased to aid in increasing sales
D. The loss of income from drapery sales while the home is rebuilt - ANS-A
Which one of the following is a primary basis for a property to be eligible for coverage under beachfront and windstorm plans?
Select one:
A. The property must be ineligible for coverage in the voluntary market and must be located within at least 10 miles of a flood plain.
C. Underlying policy review
D. Policy file completion - ANS-B
A customer service representative (CSR) receives a call from a customer whose homeowners policy has been canceled as a result of her loss frequency. She is angry because some of the losses were not covered, some losses were below her deductible, and only one loss was of significant value. Which one of the following is the best way for the CSR to respond to this criticism while working to retain the customer?
Select one:
A. Be empathetic while explaining that all losses have the potential of having significant value, and try to negotiate a renewal with a higher deductible
B. Place coverage with another insurer that is willing to accept the customer's loss history at a higher premium
C. Refer the customer to an agency specializing in providing coverage to customers with a high loss frequency
D. Encourage the customer to express her anger and listen empathetically - ANS-A
As an insurance agent, Lucy uses various ways to keep in touch with customers. Based on her experience, she knows that this will help improve customer retention. Which one of the following would be considered cross-selling?
Select one:
A. Sending e-newsletters explaining loss exposures
B. Offering to quote other lines of coverage
C. Sending out "Getting to Know You" surveys
D. Completing an annual policy review - ANS-B
The value of an insurance contract in the event of a claim
Select one:
A. Includes peace of mind.
B. Includes the opportunity to profit.
C. Is purely financial.
D. Is purely remedial. - ANS-A
Joey, while driving, was involved in a two-car accident. Joey sustained a severe injury from the accident. The other party, who was at fault, did not maintain an auto insurance policy for the vehicle. Which one of the following would provide coverage for Joey when the other driver does not have an automobile liability policy?
Select one:
A. Uninsured motorist (UM)
B. Personal injury protection (PIP)
C. Collision
D. Underinsured motorist coverage (UIM) - ANS-A
