State: Texas | Category: Property and Casualty Insurance | All tests in this Category:
Practice Test 1 Practice Test 21. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.
8. 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.
9. 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.
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. 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.
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. 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.
14. 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.
15. 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.
16. 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.
17. 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.
18. 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.
19. 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.
20. 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.
21. 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.
22. 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.
23. 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.