Download Insurance Policy Coverages: Claims, Retention, Loss Sustained, and Personal Liability and more Exams Insurance Economics in PDF only on Docsity!
LOUISIANA PROPERTY AND CASUALTY
INSURANCE EXAM ACTUAL EXAM 2024 |
ALL QUESTIONS AND CORRECT ANSWERS
WITH RATIONALES | ALREADY GRADED A+
| LATEST EDITION
Which part of an insurance policy covers claims-related expenses, reasonable expenses incurred by an insured to protect damaged property from further loss, or defense expenses? a) Insuring agreement b) Additional coverage c) Exclusions d) Declarations ------CORRECT ANSWER--------------b) Additional coverage The additional coverage portion of a policy provides an additional amount of coverage for specific loss expense, at no additional premium. Which of the following would not be a violation of Louisiana insurance regulations? a) Producer B charges his clients, in addition to the premium, a consulting fee. b) Producer C uses her license to write uncontrolled business only. c) Producer D collects premiums due on policies and deposits the funds in his own personal account. d) Producer A uses her license to write only insurance for herself and her immediate family. ------CORRECT ANSWER--------------b) Producer C uses her license to write uncontrolled business only. The purpose of a license is to primarily write non-controlled business. A claim is considered to have been made a) When notice is received and recorded by the insurer. b) When notice is received and recorded by any insured or the insurer, whichever comes first. c) When received in writing or telephonically by the insurer.
d) When notice is received by any insured. ------CORRECT ANSWER--------------b) When notice is received and recorded by any insured or the insurer, whichever comes first. This is a standard claims-made condition. When Commercial Crime Coverage Form M - Safe Depository Liability is written, what must be attached to the policy? a) The Robbery and Safe Burglary Provisions b) The General Provisions c) The Safe Depository General Provisions d) The Safe Depository Direct Loss Provisions ------CORRECT ANSWER--------------c) The Safe Depository General Provisions When this coverage is written, the Safe Depository General Provisions must be attached to the policy instead of the general provisions. Which of the following is NOT a goal of risk retention? a) To increase control of claim reserving and claims settlements b) To fund losses that cannot be insured c) To minimize the insured's level of liability in the event of loss d) To reduce expenses and improve cash flow ------CORRECT ANSWER--------------c) To minimize the insured's level of liability in the event of loss Retention usually results from three basic desires of the insured: to reduce expenses and improve cash flow, to increase control of claim reserving and claims settlements, and to fund losses that cannot be insured. Workers compensation statutes require employers to meet capital reserves requirements sufficient to pay any claims that might arise. Employers can meet such obligations through all of the following EXCEPT a) Self-insurance plans. b) Assigned risk plans. c) Competitive state funds. d) Second injury funds programs. ------CORRECT ANSWER--------------d) Second injury funds programs.
In which type of commercial crime policy coverage is triggered by a loss that happens during the policy period but is not necessarily discovered during the policy period? a) Loss sustained form b) Retroactive form c) Mysterious disappearance form d) Discovery form ------CORRECT ANSWER--------------a) Loss sustained form Loss sustained crime coverage pays for losses that occur during the policy period and are found for up to 1 year after the policy is terminated. The causes of loss insured against in an insurance policy are known as a) Perils b) Losses c) Risks d) Hazards ------CORRECT ANSWER--------------a) Perils Perils are the causes of loss insured against in an insurance policy. Residential structures, including individual condominium units, and their contents are insured by what part of the National Flood Insurance Program? a) Basic coverage form b) Residential Condominium Building Association Policy (RCBAP) c) General property policy form d) Dwelling policy form ------CORRECT ANSWER--------------d) Dwelling policy form The dwelling policy form is used to insure residential structures and their contents including individual condominium units. Driver A has a personal auto policy with Part C: UM/UIM limits of 100/300. He is injured by Driver B who has Part A: Bodily Injury Liability limits of 50/100. It is determined that Driver B is at fault for the accident. Driver A has $125,000 in medical expenses. How much will his Part C: UM/UIM coverage pay? a) $125,
b) $75, c) $50, d) $25,000 ------CORRECT ANSWER--------------c) $50, Underinsured motorist coverage acts as excess over the at-fault motorist's coverage. It will pay the difference between the insured's UIM limits and the at- fault driver's bodily injury limits (in this scenario, $100,000 of the insured's coverage minus $50,000 of the other driver's). Because of the per person limits of Driver A's underinsured motorist coverage, the policy will pay the amount necessary to bring payment up to the per person limit. The policy will not pay more than the limits of liability. Because an insured owns a lot of expensive jewelry, her insurance agent has advised her to purchase a scheduled personal property endorsement. If the insured adds this endorsement to her homeowners policy, which of the following statements would be correct? a) The endorsement becomes primary coverage and the HO contract is secondary. b) Coverage C limits will no longer apply to the jewelry insured by the endorsement. c) The amount of coverage will be doubled. d) The endorsement becomes excess coverage. ------CORRECT ANSWER--------------b) Coverage C limits will no longer apply to the jewelry insured by the endorsement. When items are scheduled, they are excluded from Coverage C as insured items, and are covered only under the scheduled personal property endorsement. Which of the following terms refers to a person's ability to do some work or the need to do alternative work? a) Temporary total disability b) Temporary partial disability c) Permanent partial disability d) Permanent total disability ------CORRECT ANSWER--------------b) Temporary partial disability The insuring agreement is the part of the policy structure that describes the insured perils and the method of indemnification. Which of the following statements is NOT true regarding a personal umbrella liability policy?
a) Accident insurance, because it pays medical expenses regardless of fault. b) Accident insurance, because it has the same limits. c) Bodily injury coverage, because it pays the insured's doctor bills. d) Bodily injury coverage, because it provides legal protection if the insured causes injuries to others. ------CORRECT ANSWER--------------a) Accident insurance, because it pays medical expenses regardless of fault. Medical payments will pay for accidental bodily injury of an insured, regardless of fault or auto. It will pay medical expenses of others occupying the insured auto. The designation symbols used in commercial auto policies can be found in which policy section? a) Conditions b) Covered Auto c) Liability Coverage d) Definitions ------CORRECT ANSWER--------------b) Covered Auto Section I - Covered Auto of a commercial auto policy explains the designation symbols used in that coverage. Which of the following liability exposures is most likely for a small specialty clothing retail boutique? a) Operations liability exposure b) Product liability exposure c) Completed operations liability exposure d) Premises liability exposure ------CORRECT ANSWER--------------d) Premises liability exposure The premises liability exposure exists when there is use of the premises. Operations liability exposure relates to activities in addition to use. Product liability exposure is the possibility that the public might be injured by the product. Completed operations liability refers to liability for work already performed or completed. For a boutique retail store, the only possible liability would arise from customer injury while on the premises. All of the following are true of Coverage B - Other Structures EXCEPT a) It must be added by endorsement to a homeowners policy.
b) This coverage is not applicable on the HO-4 policy form. c) The amount of coverage provided by Coverage B is an amount equal to 10% of Coverage A. d) Land where the other structures are located is not covered. ------CORRECT ANSWER--------------a) It must be added by endorsement to a homeowners policy. Homeowners policies automatically provide an amount of insurance in Coverage B that is equal to 10% of the amount written as Coverage A. This amount may be increased by endorsement. All of the following are supplemental payments included in the liability section of a personal auto policy EXCEPT a) Up to $100 for the cost to secure the release of a vehicle from an impoundment lot following a covered accident. b) Up to $200 a day for loss of earnings due to attendance at hearings or trials. c) Premiums on appeal bonds in any suit the insurer defends. d) Up to $250 for bail bonds required because of a covered accident. ------CORRECT ANSWER--------------a) Up to $100 for the cost to secure the release of a vehicle from an impoundment lot following a covered accident. A personal auto policy does not pay the cost of the release of a vehicle impounded by a law enforcement agency. A large antenna is damaged when a tree branch hits an insured farm dwelling during a storm. Coverage A of a farm property coverage form would insure damages for this occurrence up to a) $1,000. b) $2,000. c) $3,000. d) $4,000. Antennas, towers, and satellite dishes attached to the dwelling are covered under Coverage A, but have a special limit of insurance of $1,000 in any 1 occurrence. ------ CORRECT ANSWER--------------a) $1,000. Antennas, towers, and satellite dishes attached to the dwelling are covered under Coverage A, but have a special limit of insurance of $1,000 in any 1 occurrence.
b) Define insurance as interstate commerce. c) Allow consumers access to credit and private consumer reports. d) Allow insurance companies access to medical information for underwriting purposes. ------CORRECT ANSWER--------------a) Protect private customer information filed with a financial institution. The Gramm-Leach-Bliley Act was passed to protect private customer information that is filed with a financial institution. Customers must be given two disclosure notices (one at the onset of business and one before information is disclosed), as well as a yearly updated disclosure notice. An insured carries a property policy on her home in the amount of $250,000. A bank is shown as the mortgagor in the policy. Last month the insured made her final mortgage payment, but did not remove the bank from the policy. In the event of a covered loss to her home, how much will the bank receive? a) The standard minimum of 10% that is paid to lenders b) All of the payment would be made to the mortgagor shown in the policy. c) Nothing d) Up to the amount of debt that the insured has with the bank ------CORRECT ANSWER--------------c) Nothing Because the bank does not have a financial interest in the house at the time of loss, they will receive nothing. A building insured with commercial property insurance has been vacant 90 days. Which of the following is NOT true? a) Payment for unnamed perils is reduced by 15%. b) Payment for unnamed perils is reduced by 25%. c) The insured has no coverage for losses caused by theft. d) The insured has no coverage for losses caused by glass breakage. ------CORRECT ANSWER--------------b) Payment for unnamed perils is reduced by 25%. If the building has been vacant for more than 60 consecutive days before the loss, the insurer will not pay for damage caused by vandalism, sprinkler leakage, glass breakage, water damage, theft, or attempted theft. If the loss is caused by any other peril, the insurer will reduce the amount they would have otherwise paid by 15%. Personal property coverage under a homeowners policy would cover
a) Property moved to a newly acquired residence after 60 days. b) A pet that the insured is temporarily keeping for a friend. c) The insured's camera if it is stolen while the insured is on vacation. d) A neighbor's fence if damaged by the insured. ------CORRECT ANSWER--------------c) The insured's camera if it is stolen while the insured is on vacation. Coverage C is provided on a worldwide basis. Coverage for medical payments under a personal auto policy applies to expenses following a covered accident that are incurred and services rendered within what maximum time period? a) 90 days b) 1 year c) 3 years d) 5 years ------CORRECT ANSWER--------------c) 3 years A coverage requirement in the policy states that medical expenses must be incurred within three years of the accident. The services also must be rendered within that time period. The Residential Condominium Building Association Policy (RCBAP) is used for residential condominium building associations to cover the entire building under one policy. Which of the following statements about RCBAP is true? a) It does not protect the individual owner from loss to personal property owned exclusively by the unit owner. b) It provides limited coverage for personal property owned exclusively by the unit owner. c) It is designed to provide exclusive coverage for the individual owner and provides not coverage for the unit owner. d) This policy form is not approved for use in the states of New York or New Jersey. -----
- CORRECT ANSWER--------------a) It does not protect the individual owner from loss to personal property owned exclusively by the unit owner. The Residential Condominium Building Association Policy (RCBAP) is used for residential condominium building associations to cover the entire building under one policy, all units, improvements within the units and personal property owned in common is covered with a contents policy. The RCBAP does not protect the individual owner from loss to personal property owned exclusively by the unit owner.
Bob's home is insured for $100,000 under a dwelling policy. Yesterday his home suffered $20,000 damage from a fire. Today the home was struck by lightning, starting another fire that completely destroyed the structure. Bob's policy will pay a) $100,000. b) $80,000. c) $20,000. d) $120,000. ------CORRECT ANSWER--------------a) $100,000. Bob's policy will pay $100,000. If the repairs had been made ($20,000) and then the home destroyed, the policy would have paid $120,000 as two separate losses. Due to the unrepaired damage, the total amount of coverage is only the face amount of the policy. How much coverage is provided under a homeowners policy for theft or unauthorized use of a credit card? a) $ b) $ c) $1, d) $5,000 ------CORRECT ANSWER--------------b) $ $500 is provided automatically, and may be increased by endorsement. Under Coverage C of a homeowners policy, the amount of insurance provided to cover personal property of the insured is ------CORRECT ANSWER-------------- 50 % of the amount provided as Coverage A Who is not considered an employee in a CGL? a) Full-time worker b) Part-time worker c) Temporary worker d) Leased worker ------CORRECT ANSWER--------------c) Temporary worker By definition in a CGL, a temporary worker is not considered an employee. Which of the following types of agent authority is also called "perceived authority"?
A. Implied B. Fiduciary C. Apparent D. Express ------CORRECT ANSWER--------------C. Apparent Apparent authority (also known as perceived authority) is the appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created. An insured stated on her application for life insurance that she had never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. Which of the following will explain the reason a death benefit claim is denied? A. Material misrepresentation B. Waiver C. Utmost Good Faith D. Estoppel ------CORRECT ANSWER--------------A. Material misrepresentation A material misrepresentation will affect whether or not a policy is issued. If the insured had been truthful, it is very likely that the policy would not be issued. On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are A. Paid at a fixed rate every year. B. Taxable as ordinary income. C. Guaranteed. D. Not taxable since the IRS treats them as a return of a portion of the premium paid. --- ---CORRECT ANSWER--------------D. Not taxable since the IRS treats them as a return of a portion of the premium paid. With participating policies, policyowners are entitled to dividends, which, in the case of mutual companies, are nontaxable because they are considered a return of excess premiums. In what way can an agent demonstrate a high standard of ethics? A. Recommending qualified retirement plans to each client
What documentation grants express authority to an agent? A. Fiduciary contract B. State provisions C. Agent's contract with the principal D. Agent's insurance license ------CORRECT ANSWER--------------C. Agent's contract with the principal The principal grants authority to an agent through the agent's contract. If a court ordered payment for a loss that was not covered in the policy even if it was clearly worded, it would be an example of which legal concept? A. Indemnity B. Reasonable expectations C. Cease and desist D. Nonforfeiture ------CORRECT ANSWER--------------B. Reasonable expectations If, because of advertising or sales literature or statements by an agent, an insured could reasonably expect the coverage, the courts have held that the insurer must provide that coverage. Following a career change, an insured is no longer required to perform many physical activities, so he has implemented a program where he walks and jogs for 45 minutes each morning. The insured has also eliminated most fatty foods from his diet. Which method of dealing with risk does this scenario describe? A. Reduction B. Transfer C. Avoidance D. Retention - -----CORRECT ANSWER--------------A. Reduction The insured's change in lifestyle and habits would likely reduce the chances of health problems. Which of the following does the term proximate cause refer to?
A. Duty of the defendant to act B. Reason for filing a lawsuit C. Negligence that leads to an injury D. Injury that leads to monetary compensation ------CORRECT ANSWER--------------C. Negligence that leads to an injury Proximate cause is the reasonably foreseeable act or event that results in an injury or damage. Negligence may often be the proximate cause of the damage; without it, the accident would not have happened. This is also called direct liability. The policy conditions define A. The amount of coverage. B. How parties to the contract must act following a loss. C. The basic underwriting information. D. The excluded perils. ------CORRECT ANSWER--------------B. How parties to the contract must act following a loss. Conditions is an essential part of a policy structure. Conditions define what each party to the policy is required to do contractually in the event of a loss. All of the following are considered parts of the policy structure EXCEPT A. Conditions. B. Provisions. C. Exclusions. D. Insuring clause. ------CORRECT ANSWER--------------B. Provisions. Provisions is a broad term used to refer to the sections or clauses of an insurance policy that communicate the policy's benefits, conditions, etc. The essential parts of the policy are declarations, insuring clause, conditions and exclusions. What are the two types of compensatory damages? A. Special and general B. Pure and speculative C. Tort and general D. Normal and punitive ------CORRECT ANSWER--------------A. Special and general
A Standard Fire Policy may be written to cover all of the following EXCEPT A. Reinsurance. B. There are no exceptions. C. Personal property. D. Commercial property. ------CORRECT ANSWER--------------A. Reinsurance. The Standard Fire Policy will not be used for reinsurance between insurers. Which of the following is representative of the minimum liability requirement for auto policies issued in this state? a) 15/30/ b) 20/20/ c) 10/30/ d) 15/30/50 ------CORRECT ANSWER--------------a) 15/30/ Which workers compensation conditions states that the first named insured will act on behalf of all insureds under the policy?
- Cancellation
- Sole representative
- Transfer of your rights and duties (assignment)
- Inspection ------CORRECT ANSWER--------------2. Sole representative Which of the following statements regarding coverage for the flood and earthquake perils is true? a) Flood insurance is usually provided in property policies, but earthquake coverage is available by endorsement only. b) Both flood and earthquake are excluded perils in all property policies. c) Flood and earthquake coverage is available in all policies. d) Flood and earthquake coverage is available only through government insurance ------ CORRECT ANSWER--------------b) Both flood and earthquake are excluded perils in all property policies.
Flood and earthquake are both excluded perils in all property policies. However, coverage for both or either one usually can be purchased separately for an additional premium (by endorsement). Supplementary payments on a CGL provide all of the following EXCEPT (Choose from the following options)
- Pre-judgment and post-judgment interest.
- The cost of bonds to release attachment.
- Up to $500 a day for lost earnings and $2,000 for the cost of bail bonds.
- $100 in gasoline costs by the insured driving a witness to and from court. ------ CORRECT ANSWER--------------3. Up to $500 a day for lost earnings and $2,000 for the cost of bail bonds. Under the business auto coverage form, mobile equipment is covered for liability insurance (Choose from the following options)
- When listed on the declarations.
- When coverage is written as Symbol 1.
- When being carried or towed by a covered auto.
- On an excess basis. ------CORRECT ANSWER--------------3. When being carried or towed by a covered auto. In which of the following situations would off-premises coverage in a broad theft endorsement apply? (Choose from the following options)
- The insured's live-in maid's quarters are burglarized.
- The insured's jewelry is stolen from her vacation home after she returns home.
- The insured's vacuum cleaner is stolen from her apartment.
- The insured's camera is stolen from his vacation home while he is there. ------ CORRECT ANSWER--------------4. The insured's camera is stolen from his vacation home while he is there
