Download Alabama P&C Licensing Practice Exam with Answers and more Exams Insurance law in PDF only on Docsity!
Alabama P/C Licensing Practice Exam
with Answers
Replacement cost less depreciation defines... a. ACV b. market value c. insurable value d. agreed value - a - ACV A building owner purchases a property policy in the amount of $60k on his $100k building. The contract contains an 80% co ins clause. If he suffers a covered loss of $10k he will receive a settlement in the amount of __ disregarding the deductible. a. 4.8k b. 7.5k c. 8k d. 10k - b - 7.5k Insurance binders are__ a. valid for 30d b. limited to personal lines risks c. interim insuring agreements d. required to be written - c - interim insuring agreements A consequential loss can also be called a(n)__ a. gambling loss b. speculative loss c. indirect loss d. excluded loss - c - indirect loss Which statements must represent the absolute truth? a. representations b. assertions c. material d. warranties - d - warranties Knowingly withholding material information on an application is__ a. waiver b. concealment
c. misrepresentation d. fraud - b - concealment Which type of insurance company is designed to pay dividends to policyowners? a. stock b. mutual c. reinsurance d. RRG - b - mutual A company domiciled in this state is best described as a __ company. a. foreign b. domestic c. alien d. local - b - domestic An insurance company's promise to pay a loss can be found in which policy section? a. declarations b. insuring agreement c. conditions d. extensions - b - insuring agreement The rules which govern the actions of the company and the policyowner within an insurance contract can be found in the policy ______. a. declarations b. insuring clause c. conditions d. exclusions - c - condition A short-term proof of insurance coverage provided to an insured until a policy can be delivered is known as a(n)... a. endorsement b. proposal c. application d. binder - d - binder Which is NOT considered an insurable loss? a. gambling losses b. income losses due to a business' inability to remain open following a covered loss
d. claim payments - c - something of value Which is NOT a common method of settling P&C losses? a. agreed value b. ACV c. Replacement Cost (RC) d. original purchase price - d - original purchase price Which of the following is a peril? a. improper storage of flammables b. hail c. wet floors d. icy roads - b - hail All of the following are true concerning a Personal Umbrella policy EXCEPT: a. it provides extra limits of coverage b. it indemnifies the insured for a variety of liability losses c. it is the the only liability coverage an individual needs d. it provides coverage for exposures not covered by other policies owned by the insured - c - it is the only liability coverage an individual needs If an HO-3 has a coverage limit of $100k on the dwelling, how much coverage would automatically apply to cover the insured's personal property in Coverage C? a. $10k b. $20k c. $50k d. $100k - c - 50k All of the following are true about the Personal Liability coverage of a Homeowners contract EXCEPT: a. it is generally written as a single, occurrence limit b. it covers an insured's legal liability arising from non business activities c. the insurance company is not required to defend a nuisance suit d. the basic limit of coverage is $100k - c - the insurance company is not required to defend a nuisance suit Which Additional Coverage is found in the Homeowners Broad Form HO-2? a. flood b. volcanic eruption
c. theft d. collapse - d - collapse What is the primary objective of the Med Pay to Others coverage in Section II of a Homeowners policy? a. provide first aid coverage for the family members b. to avoid negligence claims c. to pay only if the insured if negligent d. to offset the liability deductible - b - to avoid negligence claims Which Homeowners coverage provides for indirect loss coverage? a. Coverage A - Dwelling b. Coverage B - Other Structures c. Coverage C - Personal Property d. Coverage D - Loss of Use - d - Coverage D - Loss of Use A home is covered under a Homeowners Comprehensive form HO-5 for $150k. The cost of replacing the home is $200k. Following the loss, the insured would receive settlement of ___ disregarding any deductible. a. up to the Replacement Cost (RC) b. up to the Actual Cash Value (ACV) c. up to the Market Value d. up to the Stated Value - b - up to the Actual Cash Value (ACV) In a Homeowners policy, wall-to-wall carpeting would be covered as __? a. building b. contents c. personal property d. personal effects - a - building Which of the following is true concerning a Special Form Homeowners HO-3 w/o endorsement? a. it will pay the ACV of personal property loss b. Coverage A - Dwelling is issues on a named peril basis c. Coverage B - Other Structures is removed by endorsement to reduce the premium if there are no other structures d. the HO-3 is most frequently used to cover tenants - a - it will pay the ACV of personal property loss
c. $ d. $1,000 - c - $ Uninsured Motorists coverage provides coverage for which of the following? a. bodily injury to an uninsured motorist b. bodily injury to an insured c. liability coverage for drivers who cannot buy coverage through standard companies d. liability coverage for underage drivers - b - bodily injury to an insured Tom is driving w/ auto limits of 100/300/100 when he causes an accident injuring two people in the amounts of $60k and $125k. What is the maximum his policy will pay for the accident? a. $100k b. $160k c. $185k d. $300k - b - $160k A Personal Auto Policy will provide Supplementary Payments to cover all of the following EXCEPT: a. costs of investigating the accident b. the premium for a bail bond c. the premium for an appeal bond d. rental car coverage - d - rental car coverage Personal Auto Policy - Collision coverage will NOT pay in which situation? a. an insured flips his automobile into a ditch b. a thief steals the car and then wrecks it c. a friend borrows the car and smashes into a mailbox d. an insured sustains a collision in a Temporary Substitute vehicle - b - an insured sustains a collision in a Temporary Substitute vehicle Which is NOT covered under a Personal Auto Policy? a. an insured's trailer b. a temporary substitute auto c. a new auto acquired 3 days ago d. a company car provided to the insured - d - a company car provided to the insured The Collision coverage of a Personal Auto policy pays claims on what basis?
a. ACV (actual cash value) b. RC (replacement cost) c. Stated Value d. Agreed Value - a - ACV (actual cash value) What is the equivalent Single Limit of liability to Split Limits 50/100/50? a. $50k b. $100k c. $150k d. $200k - c - $150k Your Personal Auto - Med Pay would NOT cover which of the following? a. an uninsured friend injured in your car b. injuries you sustain riding in your neighbor's car c. injuries suffered by your 8yo when struck by a vehicle as he was crossing the street d. injuries suffered by a pedestrian who you bump w/ your car while he is crossing the street - d - injuries suffered by a pedestrian who you bump w/ your car while he is crossing the street Which vehicle is excluded from coverage under your Personal Auto Policy? a. an auto you are provided by the repair shop when yours in in for repair b. your neighbor's car that you borrow infrequently c. a company vehicle provided for your regular use d. a new car that you take for a test drive - c - a company vehicle provided for your regular use Personal Auto - Med Pay coverage will pay medical bills for __ a. up to 1yr from the policy date b. up to 1yr from the date of the accident c. up to 3yr from the policy date d. up to 3yr from the date of the accident - d - up to 3yr from the date of the accident Which is covered by a Personal Auto Policy? a. carpooling b. injuries sustained by an employee on the job c. carrying passengers for a fee d. custom equipment - a - carpooling
d - skis The minimum Flood deductible is ___ a. $ b. $ c. $ d. $1,000 - b - $ A Flood policy becomes effective at what time? a. when coverage is bound b. on the date of the application c. 30 days following the date of application d. 60 days following the date of application - c - 30 days following the date of application Under the National Flood Program, which is true? a. the deductible can be applied twice, once to the building and again to the contents b. if your community fails to participate in the flood program, you can still buy flood insurance c. building losses are settled ACV (actual cash value) and contents are settled as RC (replacement cost) d. you must live in the flood plain to buy a Flood policy - a - the deductible can be applied twice, once to the building and again to the contents Dave wants Earthquake coverage for his home. He can obtain this coverage by purchasing which of the following? a. Broad Form Homeowners HO- b. Special Form Homeowners HO- c. Comprehensive Form Homeowners HO- d. an Earthquake endorsement - d - an Earthquake endorsement Replacement cost (RC) coverage for Homeowners Coverage C - Personal Property is obtained in which of the following ways? a. purchasing a Special Form Homeowners HO- b. purchasing a Comprehensive Form Homeowners HO- c. purchasing a Replacement Cost (RC) endorsement d. maintaining 80% insurance to value - c - purchasing a Replacement Cost (RC) endorsement Which is the following calculations reflects the method by which an insurance premium is calculated?
a. unit of exposure / rate b. unit of exposure x rate c. unit of exposure + rate d. unit of exposure - rate - b - unit of exposure x rate The authority given to you in your agency contract is ___ a. expressed b. implied c. executive d. apparent - a - expressed Under the Laws of Agency, the insurance company you represent is the __ a. obligee b. principal c. fiduciary d. broker - b - principal A condition creating or increasing the chance for a loss is a __ a. peril b. hazard c. exposure d. risk - b - hazard Crops damaged by the toxic fumes escaping continuously from a nearby factory is a(n)__ a. occurrence b. accident c. intervening cause d. proximate cause - a - occurrence All are necessary elements in establishing negligence EXCEPT: a. duty b. breach of duty c. damages d. assumption of risk - d - assumption of risk Personal Injury includes all of the following EXCEPT: a. bodily injury
b. economic c. noneconomic d. special - a - punitive Which is covered by a Commercial Property policy? a. cash b. crops c. debris removal d. explosions of a boiler - c - debris removal All of the following are true concerning the Medical Payments section of a Commercial General Liability (CGL) policy EXCEPT: a. benefit limits are expressed on a per/person basis b. benefits are paid w/o regards to fault c. both direct and indirect losses are covered d. only premises and operations losses are covered - c - both direct and indirect losses are covered Which of the following is an Additional Coverage in a Commercial Property contract? a. pollution clean up and removal b. underground flues, pipes, and drains c. foundations d. pilings, piers, and docks - a - pollution clean up and removal The maximum that a Commercial General Liability policy will pay in any one policy period is known as the __ a. occurrence limit b. aggregate limit c. benefits limit d. liability ceiling - b - aggregate limit Fire liability coverage protects against negligent fire damage that you do to__ a. a building that you own b. a building next door to yours c. a building that you occupy as a tenant d. a building that you occupy as a tenant and the contents of that building - c - a building that you occupy as a tenant Which of the following is NOT true concerning Commercial Umbrella policies? a. they can cover losses not covered by the underlying coverages
b. they usually have a self-insured retention feature c. they provide excess coverage d. they are identical to Excess Liability contracts - d - they are identical to Excess Liability contracts A man becomes ill after eating a meal in a restaurant. The cost of treatment as a local hospital is $1.7k. Which coverage section of the restaurant's Commercial General Liability policy will respond to the claim? a. premises b. products c. completed operations d. medical payments - b - products An Insurance Agency's Commercial General Liability policy would produce which of the following coverages? a. host liquor liability b. automobile liability c. professional liability d. employee injury liability - a - host liquor liability Without endorsement, a Commercial Property policy pays losses on what basis? a. actual cash value (ACV) b. agreed value c. replacement cost (RC) d. stated value - a - actual cash value (ACV) Theft coverage is provided by a Commercial Property policy under which Cause of Loss form? a. basic b. broad c. special d. comprehensive - c - special In Crime insurance, the term burglary refers to the taking of property__ a. from within a locked premise leaving visible marks of force and violence at the point of entry or exit b. from a custodian through violence or threat of violence c. from an armored car or the employee of an armored car company d. from a messenger through violence or threat of violence -
b. open perils coverage c. basic perils coverage d. broad form perils coverage - a - specified perils coverage Which of the following businesses is NOT eligible for a Businessowners policy? a. shoe repair shop b. general contractor c. fast food restaurant d. convenience store with 30% of its revenue coming from gas sales - b - general contractor Which of the following businesses is NOT eligible for a Businessowners policy? a. condo association b. auto repair shop c. coffee shop d. jewelry repair shop - b - auto repair shop Which statement is NOT true concerning a Businessowners policy (BOP)? a. Business Income and Extra Expense coverage is provided for 12mo b. buildings insured at least 80% to value would have losses settled on a Replacement Cost (RC) basis c. the BOP does not have a coinsurance requirement d. the BOP can be written on a Named Peril or Open Perils basis - d - the BOP can be written on a Named Peril or Open Perils basis A BOP is written with an Occurrence limit of $300k and an Aggregate limit of $600k. Following a $50k loss, what are the remaining limits? a. $250k Occurrence and $550k Aggregate b. $300k Occurrence and $600k Aggregate c. $250k Occurrence and $600k Aggregate d. $300k Occurrence and $550k Aggregate - d - $300k Occurrence and $550k Aggregate All of the following are true about a Businessowners policy (BOP) EXCEPT: a. the BOP is a package policy for small, low-risk businesses b. the basic BOP deductible $ c. a BOP can be written on an Open Perils basis d. both the Additional coverages and the Extensions of coverage - d - both the Additional coverages and the Extensions of coverage Workers Compensation pay secondary to which of the following? a. CGL (commercial general liability)
b. Commercial Auto c. Equipment Breakdown d. None of the Above - d - None of the Above Which is NOT a source for Workers Comp coverage? a. Private insurance companies b. Reinsurance companies c. Monopolistic State funds d. Competitive State funds - b - Reinsurance companies Which Federal Workers Compensation law covers postal workers? a. Federal Employee Liability Act b. Longshore and Harborworkers Act c. Jones Act d. None of the Above - a - Federal Employee Liability Act (FELA- like "hey fella") Which of the following is not a part to a Surety bond? a. principal b. custodian c. obligee d. surety - b - custodian Which is true concerning the terms cargo and freight? a. they are synonymous b. cargo is the property being shipped and freight is the cost of the shipment c. freight is the property being shipped and cargo is the cost of the shipment d. freight is a direct loss coverage and cargo is an indirect loss coverage - b - cargo is the property being shipped and freight is the cost of the shipment Under an Ocean Marine contract, dumping cargo is save the ship is called__ a. jettison b. barratry c. stranding d. an Additional Peril - a - jettison Coverages A through D of the Farm Property Coverage form are identical to (the)__ a. Section I of Homeowners b. Commercial Package Policy c. Commercial Property Policy
