State: North Carolina | Category: Property and Casualty Insurance | All tests in this Category:
Practice Test 1 Practice Test 21. Which form provides open peril coverage for the dwelling and other structures, while personal property is insured on a named-peril basis?
The Special Form (HO-3) provides open peril coverage for the dwelling and other structures, while personal property (Coverage C) is insured on a named-peril basis.
2. Which statement about the exclusive remedy in workers' compensation is true?
The exclusive remedy doctrine generally prevents the employee from pursuing a civil action for damages for the same work-related injury.
3. Property Damage (PD) liability coverage pays for damage to:
PD liability covers damage to third-party property caused by an at-fault insured, not damage to the insured's own property or personal belongings.
4. Under NC law, the Commissioner’s power to hold hearings enables enforcement actions for alleged violations. Which statement is true?
The NC Commissioner has the authority to hold administrative hearings as part of enforcement actions, including taking sworn testimony.
5. Which of the following is a named peril commonly covered for personal property under HO-2?
Theft is a named peril that is typically covered for personal property under HO-2; floods and earthquakes are usually excluded unless endorsed.
6. General Average refers to which of the following concepts in marine risk?
General Average is a deliberate sacrifice to save the voyage, and the resulting costs are shared by all parties with an insurable interest.
7. Which statement correctly contrasts replacement cost (RC) and actual cash value (ACV) valuation?
Replacement cost is the current cost to replace the property with new, without subtracting depreciation. Actual cash value equals replacement cost minus depreciation.
8. Estoppel in an insurance contract refers to:
Estoppel prevents a party from asserting a right if their prior conduct or statements have led another party to rely on them in a manner that would be unjust to retract.
9. Disputes about the amount of loss are typically resolved through which mechanism?
The appraisal process is designed to resolve disagreements about loss amounts via appraisers and an umpire.
10. Who bears the burden of proving the amount of loss in a typical property claim?
The insured generally has the primary burden to prove the loss amount with documentation, while the insurer investigates and assesses liability.
11. Fire Department Service Charge coverage within a Commercial Property policy:
Fire Department Service Charge provides coverage for the cost of fire department services, up to a specified limit, when responding to a covered loss at the insured location.
12. The peril described as 'weight of ice, snow, or sleet' is typically included as a covered peril for which property under most homeowners forms?
Weight of ice, snow, or sleet on roofs is a peril commonly listed for the dwelling as part of many homeowners forms.
13. What is tail coverage in relation to claims-made professional liability policies?
Tail coverage, or an extended reporting period, allows claims that arise during the policy period to be reported after the policy ends, preserving coverage for events that occurred earlier.
14. The NC Insurance Commissioner may issue subpoenas during investigations. True or false?
The Commissioner has investigative authority, which includes the power to issue subpoenas and administer oaths to gather information.
15. What action may the NC Insurance Commissioner take against a licensee who violates insurance laws?
The Commissioner has the authority to suspend, revoke, or place on probation the license of a person or entity for violations of insurance laws or regulations.
16. Under a standard HO-3 policy, Coverage C (Personal Property) is typically written on which basis?
In HO-3, dwellig and other structures are open peril, while personal property (Coverage C) is typically insured on a named-peril basis.
17. Which statement about insurable interest is correct?
For property insurance, insurable interest must generally exist at the time of loss. For life insurance, insurable interest must exist at policy inception. This prevents wagering on losses.
18. Replacement Cost vs Actual Cash Value in a Commercial Property policy is generally:
Most CP policies default to Actual Cash Value unless Replacement Cost coverage is added by endorsement; RC coverage is common for buildings and can be extended to personal property with the right endorsements.
19. Salvage is used in loss adjustment to:
Salvage allows the insurer to recover some value from damaged property, reducing the net amount paid for the loss.
20. Direct Physical Loss in a Commercial Property policy means:
Direct physical loss refers to physical damage or destruction to covered property, as opposed to intangible or purely financial losses.
21. Which clause requires the insurer to obtain the insured's consent before accepting a settlement that could impose obligations on the insured?
Consent to settle provisions protect the insured from settlements that may admit fault or impose obligations beyond coverage. Without consent, the insurer may not settle a claim on behalf of the insured.
22. Money and securities are typically:
Money and securities are generally excluded from standard property coverage and require a separate endorsement or form to be covered.
23. What does a 'prior acts' endorsement address in a claims-made policy?
A 'prior acts' endorsement aligns with the retroactive date. It ensures coverage for acts occurring after that date that are first claimed during the policy period, preventing gaps when switching carriers.
24. Bodily Injury (BI) liability coverage in an auto policy primarily pays for injuries to which of the following?
BI liability pays for injuries or death suffered by others in an accident for which the insured is legally responsible, not for the insured's own injuries.
25. Which of the following is NOT typically covered as part of covered injuries & benefits?
Injuries off premises that are unrelated to work are generally not covered, whereas occupational diseases, work-related injuries, and related medical treatment are covered.