State: New York | Category: Property and Casualty Insurance | All tests in this Category:
Practice Test 1 Practice Test 21. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.
8. Who is considered an insured under CGL?
An insured includes the named insured and other persons or organizations described in the declarations and endorsements.
9. 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.
10. 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.
11. 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.
12. 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.
13. Which action may the New York DFS Superintendent take against a licensee who violates the Insurance Law?
The Superintendent has enforcement powers including issuing cease-and-desist orders and requiring remedial actions; arrest or nationwide imprisonment is outside the regulator’s scope.
14. 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.
15. 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.
16. 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.
17. 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.
18. 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.
19. 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.
20. Vocational rehabilitation benefits are designed to:
Vocational rehabilitation assists an injured worker in returning to suitable employment, often through retraining or job placement.
21. Which statement describes the New York DFS's authority over rates and policy forms for many lines of property and casualty insurance?
In New York, the DFS (through the Superintendent) has substantial authority to pre-approve or disapprove rates and forms for many lines to protect consumers.
22. 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.
23. 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.
24. 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.
25. 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.