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PROPERTY AND CASUALTY EXAM 100
QUESTIONS AND VERIFIED ANSWERS
All of the following are true about speculative risk EXCEPT: A. Speculative risk involves an uncertainty of loss B. Speculative risk involves a possibility of gain C. Speculative risk is a feature of gambling D. Speculative risk is a feature of insurance - ANSWER- D. Speculative risk is a feature of insurance In the property and casualty insurance field, insurable interest must exist: A. At the time appliction is made for insurance B. For at least 5 years C. At the time of application or at the time of loss D. At the time of loss - ANSWER- D. At the time of loss The uncertainty about loss that exists whenever more than one outcome is possible is called: A. Insurable Interest
B. Hazard C. Indeminty D. Risk - ANSWER- D. Risk Insurable interest exists only when a number of conditions are met. Which of the following is not one of the requirements for insurable interest? A. The applicant must face a risk of loss B. The applicant must have an interest in protecting what is insured C. The applicant must not have a potential for gain because of the insurance D. The applicant must not share the interest with anyone else - ANSWER- D. The applicant must not share the interest with anyone else All of the following are true about insurance EXCEPT: A. It is a social device for spreading loss over large numbers of people B. It involves the pooing of large numbers of indivual risks C. It is a form of gamblinb because it may or may not pay off D. It transfers risk from one party to a group - ANSWER- C. It is a form of gambling because it may not pay off Something that may increase the seriousness of a loss if loss occurs, or that increases the liklihood that a loss will occur is called a : A. Catastrophe B. Risk C. Peril D. Hazard - ANSWER- D. Hazard
D. Gambling - ANSWER- B. The possibility of loss only Which of the following is an insurable risk? A. Wear and tear on a valuable oriental rug B. Theft of a paperback book C. Hail damage to the roof of a car D. All of the above - ANSWER- C. Hail damage to the roof of a car A moral hazard: A. Arises through an individual's carelessness or irresponsible action B. Is the tendency to create a loss on purpose, to collect from the insurance company C. Arises from the condition, occupancy, or use of the property itself D. Is not a consideration in insurable risk - ANSWER- B. Is the tendency to create a loss on purpose, to collect from the insurance company In which of the following would a person have an insurable interest? A. The house she owned but has rented out to a tenant B. The car on which she is still paying C. Both A and B D. Neither A or B - ANSWER- C. Both A and B A binder: A. Is always a written agreement B. Guarantees that a policy wil be issued C. May only be issued by the insurance company
D. May be oral or written - ANSWER- D. May be oral or written A client can provide insurable interest via: A. Police report B. Physical inspection C. Checking account statements D. Lie detector test - ANSWER- C. Checking account statements An insurance company owned by its policyholders, who recieve a return of unused premiums in the form of policy dividends, is a(n): A. Stock company B. Assesment insurer C. Mutal company D. Fraternal insurer - ANSWER- C. Mutal company Each of the following elements is necessary for formation of a legally valid contract EXCEPT: A. Consideration B. Agreement C. Signatures of each party D. Competent parties - ANSWER- C. Signatures of each party In the formation of a legal contract, each party must give something of value. Under contract law, this is referred to as: A. Adhesions B. Consideration
A. Stock B. Service C. Mutual D. Assessment - ANSWER- C. Mutual Which element of an insurance contract requires that the insured have the legal capacity to make a contract? A. Agreement B. Competent parties C. Consideration D. Legal object - ANSWER- B. Competent parties All of the following statements regarding concealment are false EXCEPT: A. Concealment is never grounds for rescission of a policy B. Concealment is the failure tomdisclose any material fact C. If concealment is suspected, the burden of proof is on the insured D. Concealment involves answering a question without intent to defraud - ANSWER- B. Concealment is the failure tomdisclose any material fact All of the following statements are true about a representation EXCEPT: A. A representation of a fact is the same as an expression of opinion B. It usually appears in an application C. A policy is usually voided if a misrepresentation is of material fact D. Representations are sometimes given orally - ANSWER- A. A representation of a fact is the same as an expression of opinion
Which of the following would not be covered by the Terroism Act? A. CGL B. Worker's compensation C. Health Insurance D. Surety insurance - ANSWER- C. Health Insurance All of the following are true regarding the DP-2 broad form policy EXCEPT: A. It is a named peril form B. It is ACV on the contents C. It contains the 80% coininsurance clause D. Theft id covered peril - ANSWER- D. Theft is covered peril On the DP-1 basic form, all of the following are covered under the perils of extended coverage EXCEPT: A. Vehicles B. Aircraft C. Vandalism D. Riot and cevil commotion - ANSWER- C. Vandalism The DP-2 broad form automatically insures covered property against loss from any cause while being removed from a premises endangered by a peril insured against for no more than: A. 5 days B. 30 days C. 60 days D. 90 days - ANSWER- B. 30 days
C. Coverages for other structures and loss of rental value D. Coverages for building collapse and for lawns, trees, and plants - ANSWER- D. Coverages for building collapse and for lawns, trees, and plants Two dwelling fir policies are written on the sa e house. Company A has a limit of $300,000 and Company B has a limit of $100,000. If the insured suffers a $100,000 loss, how will Company A pay? A. $25, B. $50, C. $75, D. $100,000 - ANSWER- C. $75, On a DP-1 basic dwelling fire form, water damage is covered if due to: A. Fire B. Flood C. Sewer backup D. Leaking swimming pool - ANSWER- A. Fire The main difference between the various dwelling property forms is the: A. Coverage for rental value B. Coverage for other structures C. Coverage for personal liability D. Covered property perils - ANSWER- D. Covered property perils
An insured has a dwelling insured for $40,000 and content insured for $25,000. A vandal cuts his $500-valued tree in the middle of the night. How much the policy will pay? A. $ B. $ C. $ D. $500 - ANSWER- D. $ All of the following choices are true about insurance EXCEPT: A. It is social device for spreading loss over a large number of people B. A large, uncertain loss is traded for a small, certain loss C. Insurance is a mechanism for handling speculative risk D. Insurance transfers risk from 1 party to a group - ANSWER- C. Insurance is a mechanism for handling speculative risk Melissa Jones has 2 property policies covering the same house. Company A's policy is written for $75,000. Company B's policy is written for $25,000. In the event of a $10,000 loss, how much will Company B pay? A. $2, B. $10, C. $25, D. $75,000 - ANSWER- A. $2, All of the following are examples of strict (or absolute) liability EXCEPT: A. An unfenced swimming pool B. Keeping wild animals as pets C. Storing explosive
C. 3 years D. 5 years - ANSWER- B. 1 year The purpose of coinsurance on fire insurance is: A. To require the client to pay part of every claim B. To require the client to carry proper coverage C. To eliminate coverage for small claims D. To reinforce the principal of indeminty - ANSWER- B. To require the client to carry proper coverage What is the name of the area of tort law that provides remedies for wrongful acts other than crimes and breach of contract? A. Negligence B. No-fault C. Assumed liability D. Waiver and estoppel - ANSWER- A. Negligence The named insured is found where within the policy? A. Limits of liability B. Definitions C. On the policy declarations D. Exclusions - ANSWER- C. On the policy declarations A careless person represents which type of hazard? A. Morale hazard B. Moral hazard
C. Physical hazard D. Convert hazard - ANSWER- A. Morale hazard When a direct chain of events resulting from a negligent act causes injury or damage, that act is considered to be: A. The direct cause B. The proximate cause C. Strict liability D. An intervening cause - ANSWER- B. The proximate cause Insurers eliminate coverage for small claims and help to control the cost of insurance with: A. Coinsurance B. Pro-rata liability C. A deductible D. An aggregate limit - ANSWER- C. A deductible When a policy will pay the full cost of replacement at today's prices without any deduction for depreciation, coverage has been written on what basis? A. Actual cash value B. Stated amount C. Valued D. Replacement cost - ANSWER- D. Replacement cost Which of the following contractual elements consists of the offer and the acceptance? A. Consideration
C. Insuring agreement D. Exclusions - ANSWER- A. Conditions Data regarding thr premium, limits, name and address of the insured and the policy period are found in what part of the contract? A. Exclusions B. Declarations C. Insuring agreement D. Conditions - ANSWER- B. Declarations What part of an insurance contract specifies the perils insured against? A. Exclusions B. Declarations C. Insuring agreement D. Conditions - ANSWER- C. Insuring agreement What part of an insurance contract describes the perils that are not covered in an all-risk policy? A. Exclusions B. Declarations C. Insuring agreement D. Conditions - ANSWER- A. Exclusions On an HO policy, where would you look to see who is covered as an insured? A. Declarations
B. Definitions C. Insuring agreement D. Conditions - ANSWER- B. Definitions All are true about consideration EXCEPT: A. It is required in the formation of a valid contract B. It must be equal between the parties C. It is defined as the exchange of values D. The premium paid is exchanged for the insurer's promise to pay future claims - ANSWER- B. It must be equal between the parties All are items to be found in the declarations section of a policy EXCEPT: A. Names of all the insureds B. A description of the property covered C. The premium charged D. The effective date of coverage - ANSWER- A. Names of all the insureds The clause in the dwelling policy that limits the liability of the insurer to a portion of the loss no greater than "the amount hereby insured shall bear to the whole insurance covering the property against the peril involved, whether collectible or not" is called the: A. Appraisal clause B. Pro-rata liability clause C. Cancellation clause D. Abandonment clause - ANSWER- B. Pro-rata liability clause Of the following, which is true about Coverage C on a dwelling policy?
C. The costs associated with moving the mobile home to a new permanent location D. Wind damage - ANSWER- C. The costs associated with moving the mobile home to a new permanent location On an HO-6 ('00), coverage for personal property is: A. Basic form named perils B. Broad form named perils C. Special form all-risks D. Replacement cost - ANSWER- B. Broad form named perils If a $100,000 home is covered for replacement cost average with an 80% coinsurance requirement, what is the minimum limit the insured would have to carry to have partial losses paid in full? A. $100, B. $60, C. $80, D. $75,000 - ANSWER- C. $80, Coverage D on an HO-6 is what? A. 30% of A B. 30% of C C. 10% of A D. 20% of C - ANSWER- B. 30% of C All of the following statements are true regarding flood insurance EXCEPT: A. It is only available in designated areas
B. Coverage may be provided for dwellings or commercial property C. Coverage may be provided on growing crops or livestock D. Coverage is excluded on money and securities - ANSWER- C. Coverage may be provided on growing crops or livestock Which type of policy requires no adjuster to call on you after a claim? A. Fire B. Auto C. Jewlery floater D. Fine arts floater - ANSWER- D. Fine arta floater The NFIP's emergency program provides: A. Disaster relief following a major storm B. Community assistance in affecting a flood insurance plan quickly C. Limited coverage while the FIA studies the community's needs D. Coverage for low-income families that cannot afford insurance - ANSWER- C. Limited coverage while the FIA studies the community's needs In order to have replacement cost coverage on a BOP, the insured must select which of the following coinsurance provisions on the policy? A. 80% B. 90% C. 100% D. No requirement - ANSWER- A. 80%
