State: North Carolina | Category: Property and Casualty Insurance | All tests in this Category:
Practice Test 1 Practice Test 21. In a hull policy with a 80% coinsurance requirement and a loss of 40 on a hull valued at 100, how much does the insurer pay?
Under coinsurance, payout = loss × (amount of insurance carried / value). Here, 40 × (80/100) = 32.
2. A supersedeas bond is used to:
A supersedeas bond allows the enforcement of a judgment to be postponed during an appeal, protecting the appellant from immediate execution of the judgment.
3. A probate bond is typically required to:
Probate bonds protect the estate and heirs by ensuring that the fiduciary (executor/administrator) acts honestly and fulfills duties according to law.
4. Waiver in an insurance contract is best described as:
Waiver occurs when a party voluntarily gives up a known right, which may affect future enforcement of that right.
5. Who is considered an insured under CGL?
An insured includes the named insured and other persons or organizations described in the declarations and endorsements.
6. If a building has an 80% coinsurance requirement and replacement cost is $200,000, but the insured carries $120,000, a loss of $20,000 occurs. How much will be paid under coinsurance?
Required amount = 0.80 × 200,000 = 160,000. Payout = (120,000 / 160,000) × 20,000 = 0.75 × 20,000 = 15,000.
7. During the initial contact after a loss, which action should the adjuster take?
Early contact should establish duties, collect essential information, and preserve evidence to support a fair adjustment.
8. Which characteristic is essential for an insurer to adequately price risk in property/casualty lines?
A large pool of similar exposure units provides data to predict losses and set premiums accurately.
9. Supplementary Payments under CGL typically include which of the following?
Supplementary Payments cover defense costs and certain bonds; they are paid in addition to the policy limits.
10. Piracy coverage in standard Ocean Marine cargo forms is generally:
Piracy is typically encompassed within the standard perils of the sea in many Ocean Marine cargo forms, though endorsements can modify coverage.
11. Which statement best describes the indemnity principle in property & casualty insurance?
Indemnity aims to restore the insured to the financial position they had before the loss. It should not allow profit or windfalls beyond the actual loss.
12. A fidelity bond primarily covers losses caused by:
Fidelity bonds protect employers from losses due to employee dishonesty, such as theft or fraud.
13. Vocational rehabilitation benefits are designed to:
Vocational rehabilitation assists an injured worker in returning to suitable employment, often through retraining or job placement.
14. The Contractual Liability Exclusion in CGL generally excludes liability assumed under contract, except for which of the following?
The exclusion typically excludes liability assumed under contract, but insured contracts listed in the policy are often covered.
15. Under HO-2 broad form, personal property is insured on which type of peril basis?
HO-2 applies personal property coverage on a named-perils basis, listing specific perils that are covered.
16. Misrepresentation occurs when the applicant provides information that is:
Misrepresentation involves false statements that are material and relied upon by the insurer when issuing the policy. It can lead to denial of coverage or rescission.
17. A material fact is a fact that:
A material fact is information a reasonable insurer would consider important in making underwriting or coverage decisions.
18. Who has the authority to review and approve or disapprove rate and form filings for property and casualty insurance in NC?
In North Carolina, the Department of Insurance reviews rate and form filings for P&C insurance, and the Commissioner may approve, disapprove, or require changes.
19. A policy shows BI limits of 50/100 and a PD limit of 50,000. What does the middle number (100) represent?
In a split limit notation, the first number is BI per person, the second is BI per accident (total for all injured in the accident), and the third (if present) is PD per accident.
20. Under Institute Cargo Clauses, which statement best describes the difference between Clause A (All Risks) and Clause B (Named Perils)?
Clause A provides broad coverage for all risks unless specifically excluded; Clause B covers only perils that are named in the policy.
21. Insurable interest in property insurance must exist at what time for a valid claim?
For property insurance, insurable interest must exist at the time of loss to establish a valid claim and ensure the interest is genuine.
22. The exclusive remedy rule in workers' compensation means:
In most systems, workers' compensation is the exclusive remedy for work-related injuries, barring most civil lawsuits against the employer for the same injury.
23. Products-Completed Operations Hazard provides coverage for claims arising from which of the following?
This hazard covers injuries or damages arising from products or completed work after the product has been sold or work completed.
24. What does a Combined Single Limit (CSL) mean in auto liability?
CSL sets one single limit per accident for both bodily injury and property damage, rather than separate BI and PD limits.
25. A supply bond guarantees that a supplier will:
A supply bond guarantees that the supplier will provide the goods or materials as specified in the contract, or the surety will cover the losses up to the bond amount.