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AD Banker Exam (Latest 2024/ 2025 Update)
Questions and Verified Answers| 100%
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Q: In an insurance contract, the value that each party gives the other is called the:
A. Acceptance B. Consideration C. Offer D. Subject matter Answer: B Consideration Consideration can take the form of money, goods, a promise to do something, or anything else that changes the legal position of the party. A contract cannot exist without consideration being given by both sides.
Q: An insurer that is authorized to do business in a particular state is said to be:
A. Admitted B. Non-Admitted C. Foreign D. Domestic Answer: A Admitted An admitted insurer is an insurer that is authorized to transact insurance in a state by that state's insurance department, as evidenced by a Certificate of Authority to transact business.
Q: A potential cause of loss, such as fire, explosion, flood, or theft is considered to be a(n):
A. Peril B. Accident C. Occurrence D. Hazard
Answer: A Peril A peril is a cause of potential loss to property such as fire, windstorm, hail, or flood.
Q: Which of the following might be considered a physical hazard?
A. Dishonesty on the part of an insured B. The insured's attitude that good housekeeping is not important C. The storage of flammables near a furnace D. The storage of flammables in a fireproof container Answer: C The storage of flammables near a furnace A physical hazard is a condition on the property, or exposed to the property, that increases the probability of loss to the property.
Q: Rates that cannot be used until the Department or Division of Insurance approves them are
referred to as: A. Use and file rates B. File and use rates C. Open competition rates D. Prior approval rates Answer: D Prior approval rates In prior approval states, rates cannot be used until the Department or Division of Insurance authorities approve them, or until a specific time has passed after the filing without being disapproved.
Q: A fire sprinkler system installed in a factory is considered which of the following methods
of managing risk? A. Transfer B. Avoidance C. Reduction
A. Waiver B. Unilateral statement C. Representation D. Misrepresentation Answer: D Misrepresentation Misrepresentation is a false statement in the application and if material, meaning the company's decision to issue the application would have been different, the policy would be voided.
Q: The insurance contract is said to be a contract of utmost good faith, because:
A. The insured must warrant that his/her representations are true B. The insurer has drawn up the contract and, therefore, there is no intent to deceive C. Concealment of known facts on the part of the insured will void the contract D. Each party is entitled to rely upon the representations of the other that there is nothing concealed or dishonest Answer: D Each party is entitled to rely upon the representations of the other that there is nothing concealed or dishonest It is assumed that utmost good faith exists in both parties to the contract.
Q: D does not agree with the insurance company's value of his property damaged as a result of
his recent property loss. Which of the following establishes the procedure D and the insurance company must use to settle this issue? A. Appraisal Clause B. Loss Payable Clause C. Definitions Clause D. Claim Settlement Clause Answer: A Appraisal Clause The Appraisal Clause of the insurance policy provides a method of settling disputes between the insurer and the insured as an alternative to legal action.
Q: Which part of a property insurance policy describes the perils?
A. Definitions B. Declarations C. Insuring Agreement D. Additional Coverages Answer: C Insuring Agreement The Insuring Agreement is the company's commitment to protect the insured and includes a description of the perils.
Q: The termination of an insurance policy, by either the insured or the insurer before the
expiration date, is known as: A. Subrogation B. Cancellation C. Nonrenewal D. Abandonment Answer: B Cancellation Either party to the contract may cancel insurance policies before the expiration of the policy if the cancellation notice requirements are met.
Q: Which of the following is stated in the insuring agreement?
A. The perils excluded by the policy B. The perils insured against C. The location of insured property and the named insured's mailing address D. The Other Insurance provision Answer: B The perils insured against The insuring agreement states the insurance company's promise to pay the insured, including the exact perils insured against by the policy.
Answer: D The exclusions The Declarations Page contains the information necessary to tailor the policy to the individual and property insured. The exclusions, common to all policies, are found in the Exclusions section of the policy and coverage forms.
Q: Short rate cancellation occurs when:
A. An insurer cancels the policy mid-term B. A policy is flat cancelled C. The policy is non-renewed D. The insured cancels the policy mid-term Answer: D The insured cancels the policy mid-term When the insured cancels a policy before the expiration date, a short rate cancellation is issued and the insurer retains a portion of the unearned premium to cover costs.
Q: Which property condition requires the insurer broaden coverage during the policy period
without an increase in premium? A. Appraisal B. Assignment C. Liberalization D. Other Insurance Answer: C Liberalization The Liberalization Clause states that if the insurance company makes a change that broadens coverage under this edition of the policy without an additional premium charge, the change will automatically apply to this policy.
Q: When coverage applies to losses from all perils except those specifically excluded, the
policy is said to be written on which of the following basis? A. Open Perils B. Valued
C. Named Perils D. Agreed Amount Answer: A Open Perils The open perils policy insures against all perils that are not excluded, rather than enumerating the perils being insured against.
Q: The part of a property policy that gives basic information such as the named insured, a
description of the property, the location of the property, and the amount of premium involved, is known as the: A. Declarations B. Insuring Agreement C. Policy Provisions D. Conditions Answer: A Declarations The Declarations contain the information that is specific to the individual and property being insured.
Q: Actual Cash Value is best defined as which of the following?
A. Appraised value B. Replacement cost C. Today's current price, minus depreciation D. Market value Answer: C Today's current price, minus depreciation Actual Cash Value valuation provides that the policy will pay the cost to repair or replace the damaged property at the time of loss, less a depreciation factor based upon the age of the property.
The aggregate limit is reduced by the amount paid each time a claim is paid during the policy term.
Q: Which of the following would be considered an attractive nuisance?
A. A back lawn B. A toy store C. A trampoline D. A candy store Answer: C A trampoline
Q: Bodily Injury may include which of the following?
A. Loss of Earnings B. False Arrest C. Invasion of Privacy D. Slander Answer: A Loss of Earnings Bodily injury includes such items as medical expenses, lost wages, mental anguish, death and disfigurement.
Q: The maximum amount a policy will pay in the event of a loss, regardless of the number of
insureds, claims made, lawsuits filed, or parties making claims is the: A. Deductible B. Premium C. Limit of liability D. Split limit Answer: C Limit of liability
The limit of liability, or limits of insurance, are shown on the policy declarations page and are the most paid by the policy regardless of the number of insureds, claims made, lawsuits filed, or parties making claims or filing lawsuits.
Q: A liability policy contains a per person bodily injury limit of $25,000 and a per occurrence
limit of $50,000. If an accident were to occur and three persons have claims of $20,000 each, the total amount paid is: A. $75, B. $50, C. $60, D. $25, Answer: B $50, The policy pays up to $25,000 for each person injured, but no more than $50,000 per occurrence, regardless of the number of persons injured. Therefore, the limit for this accident is $50,000.
Q: When a claimant can prove that a product caused an injury, the fact that the manufacturer
will be held liable regardless of whether the product was defective or not, is considered which of the following? A. Contingent Liability B. Direct Liability C. Vicarious Liability D. Strict Liability Answer: D Strict Liability The doctrine of strict liability applies to products and their manufacturers. It holds that the manufacturer can be held responsible for an injury caused by a product, even if the product is not defective.
Q: Which coverage always contains an occurrence limit?
A. Strict liability B. Advertising injury C. Personal injury
B. Libel C. Slander D. False Arrest Answer: A Bodily Injury Personal Injury is non-bodily injury to a person arising from wrongful conduct.
Q: The person specifically designated in the policy as the person with whom the contract of
insurance has been made, is considered to be the: A. Contract Insured B. Contingent Insured C. Named Insured D. Additional Insured Answer: C Named Insured The Named Insured is the entity with whom the insurance contract is made. When there is more than one entity designated as named insured in the policy, then contractual obligations are transacted with the first one designated, known as the first named insured.
Q: Policyholder J has a no-fault auto policy. Upon being hit by a driver that ran a stop light, J
suffers a broken leg. Whose insurance company will pay for J's injury? A. J's insurer B. The insurer of the at-fault driver C. The court will determine which insurer is responsible D. J's and the negligent driver's insurer will share the loss Answer: A J's insurer Under no-fault insurance, the injured party collects insurance benefits from his/her own insurance as if it were first-party coverage, eliminating the need to determine negligence or legal liability.
Q: Which of the following best describes a liability policy that is written on a primary basis?
A. It pays only after other insurance covering the same loss is exhausted B. It provides only basic coverage C. It shares the loss with other policies covering the same loss D. It is the policy that pays first with respect to other policies Answer: D It is the policy that pays first with respect to other policies Sometimes liability insurance is written in layers to provide higher limits of coverage. When this is done, the primary insurance pays the entire claim until its limits are exhausted, then the excess policy pays the balance of the claim.
Q: Which of the following statements about medical payments is true?
A. They apply to all expenses incurred within 5 years of the accident B. Payments are made regardless of fault or negligence C. They apply to members of amateur athletic teams sponsored by the insured D. They apply to all persons, including the insured on the premises for any reason Answer: B Payments are made regardless of fault or negligence Medical payments coverage provides payment of medical and medically associated expenses on a voluntary basis, without regard to negligence or fault on the part of the insured.
Q: Which of the following is true of the Dwelling Under Construction Endorsement of a
Dwelling Policy? A. The amount of insurance in force is the limit of liability stated in the Declarations B. Insurance applies to the Dwelling and to other structures C. The premium is based upon the average amount of insurance during construction D. The insured has up to 90 days to notify the company that the dwelling is occupied Answer: C The premium is based upon the average amount of insurance during construction The limit of liability for Coverage A is provisional and is based on the building's value upon completion. The limit of insurance at any given time prior to completion is a percentage of the
At the insured's request, Coverage C will apply to personal property of a guest or servant while located on the described location. Personal property of a tenant or boarder is not covered.
Q: Policyholder M insures her owner-occupied single family residence under a dwelling
property policy (DP-3) with a limit of $100,000. If the dwelling is damaged in a fire, what policy coverage will pay for M's extra costs to stay in a motel and board her pets while the fire damage is being repaired? A. Coverage C B. Coverage D C. Coverage E D. Coverage B Answer: C Coverage E Coverage E pays for the necessary increase in living expenses incurred by the insured if the building is rendered unfit for its normal use.
Q: Under all the Dwelling Forms, the dwelling described in the declarations is covered under:
A. Coverage E B. Coverage B C. Coverage C D. Coverage A Answer: D Coverage A Coverage A applies to the Dwelling at the described location; Coverage B, to Other Structures; Coverage C, to Personal Property; Coverage D, to Fair Rental Value, and Coverage E to Additional Living Expenses.
Q: Under a Dwelling Policy, the coverage extension of Debris Removal will pay for:
A. The removal of the debris caused by an insured peril B. The removal of debris resulting from the action of a civil authority C. The removal of the debris from an automobile accident on the insured location D. The removal of debris resulting from demolition required by an ordinance or law
Answer: A The removal of the debris caused by an insured peril This coverage pays the insured's reasonable expenses for the removal of debris of covered property if the property is damaged by an insured peril.
Q: Which of the following is true regarding the Personal Liability Supplement?
A. It covers the insured's personal autos B. It provides coverage for claim expenses, first aid expenses and damage to property of others C. The Limit of Liability is the same as the Coverage A amount D. It covers Professional Services rendered by the insured Answer: B It provides coverage for claim expenses, first aid expenses and damage to property of others. The Claim Expenses, First Aid Expenses, and Damage to Property of Others are Additional Coverages that supplement Coverage L, Personal Liability, and Coverage M, Medical Payments.
Q: All of the following perils are included under the Dwelling Broad Form, except:
A. Smoke damage from industrial operations B. Falling Objects C. Volcanic Eruption D. Burglary Damage Answer: A Smoke damage from industrial operations Smoke damage is a covered peril of the Dwelling Broad Form. However, the description of the peril specifically excludes smoke from agricultural smudging or industrial operations.
Q: Which of the following is not true concerning Section II of the Homeowners Policy?
A. Payment under Damage to Property of Others is made regardless of negligence B. The coverage for Damage to Property of Others pays the replacement cost of the property damaged up to $1,000 per occurrence C. The Damage to Property of Others duplicates coverage that is included in Section I
Q: L owns a home covered under an HO-3 for $200,000. Under Coverage D, how much
coverage does L have for lost income if his basement apartment becomes uninhabitable due to a fire loss? A. $150, B. $30, C. $300, D. $60, Answer: D $60, For a covered loss, the Coverage D limit for additional living expense, fair rental value, and civil authority prohibited use is 30% of Coverage A. 30% of $200,000 is $60,000.
Q: Liability for use of which of the following vehicles is not covered by the Homeowners
policy? A. Riding lawn mower B. Motorized custom wheel chair for a resident family member C. Dune buggy used on a public beach D. Motorized golf cart used at the golf course Answer: C Dune buggy used on a public beach An owned vehicle designed for recreational use off public roads must be used on the insured premises for coverage to apply.
Q: Which form is designed for the unit-owner of a condominium?
A. HO- 2
B. HO- 8
C. HO- 4
D. HO- 6
Answer: D HO- 6 The HO-6 Form is designed for the owner-occupant of a condominium unit.
Q: Policyholder S has a HO-5 policy with a $250,000 Coverage A limit. After a strong wind
blows a mailbox into S's front picture window, causing $2,500 damage, S immediately buys $250 of wood and plastic sheeting to cover the damaged window and prevent further damage. How much will S's policy pay? A. $2, B. $ C. $2, D. $ Answer: C $2, When an insured's property is damaged by a covered peril, the Reasonable Repairs additional coverage pays the reasonable costs by the named insured to take necessary measures to protect the property against further damage. The policy would therefore pay the full amount of the loss to the window, plus the insured's cost in covering it to prevent further damage.
Q: Section II of a Homeowners policy may cover which of the following incidents?
A. The homeowner's family dog bites their 2 year old son B. An insured's guest damages the stair railing during a visit C. The insured hits and injures a swimmer while enjoying a ride in an owned inboard motorboat D. Bodily injury caused by an insured's activities while picnicking at a city park Answer: D Bodily injury caused by an insured's activities while picnicking at a city park. Bodily injury to others caused by the insured's activities is covered under the Homeowners liability section. Damages to the insured's property are not covered and damages caused by an owned inboard motorboat are excluded from coverage.
Q: Medical Payments under Section II of the Homeowners Policy would cover all of the
following, except: A. Prosthetic devices B. Loss of Income of an injured person C. Dental expenses D. Medical and surgical expenses
