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Liability arising out of which of the following is covered under the personal injury
endorsement to the homeowners policy?
A) property damage liability
B) false arrest
C) bodily injury
D) business liability
Which of the following statements about variable life insurance is true?
A) Premium payments are flexible.
B) The death benefit cannot be higher or lower than a guaranteed, specified, value.
C) The policyowner has the option of investing the cash value in several investment
accounts.
D) The cash surrender value of the policy is guaranteed.
Which of the following statements about the legal obligations of a property owner is
(are) true?
I. A property owner must inspect the premises for the benefit of an invitee and correct
any unsafe conditions.
II. A property owner has the right to set a trap designed to injure a trespasser.
A) I only
B) II only
C) both I and II
D) neither I nor II
A credit-based score that is highly predictive of future claims cost is an individual's
A) CLUE score.
B) insurance score.
C) motor vehicle record score.
D) underwriting score.
The policy reserve at the end of any given policy year is called the
A) terminal reserve.
B) unearned premium reserve.
C) mean reserve.
D) initial reserve.
Five Below Zero is a new ski resort in Colorado. Five Below Zero is concerned that an
abnormally warm winter will prevent the accumulation of snow needed to have a
profitable ski season. Five Below Zero purchased a contract that will pay Five Below
Zero a lump sum payment if the daily high temperature exceeds 30 degrees for more
than 12 days between January 1st and March 31st. The contract Five Below Zero
purchased is called a(n)
A) catastrophe bond.
B) weather option.
C) interest rate swap.
D) convertible bond.
Ted purchased a home. To finance the purchase, he borrowed $140,000 from ABC
Bank, pledging the home as collateral for the loan. Shortly after purchasing the home,
Ted lost his job. He could not find another job and could not pay the mortgage each
month. Ted set fire to the home. The claims adjuster suspected arson, and an
investigation proved that Ted intentionally caused the loss. Under the mortgage clause
of the Homeowners 3 policy, how will this loss be settled?
A) The insurer has no liability because the loss was intentional.
B) The insurer will pay Ted the actual cash value of the loss as intentional loss is not
excluded.
C) The insurer will pay ABC the value of its insurable interest and pay Ted the value of
his insurable interest.
D) The insurer will pay ABC the value of its insurable interest and then attempt to
recoup the loss payment from Ted.
Which of the following statements is (are) true with regard to using interest-adjusted
cost data when shopping for life insurance?
I. Cost indexes apply to new policies and should not be used to determine whether to
replace a policy.
II. Cost indexes should only be used to compare similar plans of insurance.
A) I only
B) II only
C) both I and II
D) neither I nor II
A total loss under a valued policy is settled on the basis of the
A) market value of the loss.
B) actual cash value of the loss.
C) replacement value of the loss.
D) amount of insurance covering the loss.
Which of the following statements about the guaranteed purchase option is true?
A) An insured usually has 24 months to exercise an option.
B) The option cannot be exercised until the insured reaches age 40.
C) The amount of life insurance that can be purchased at each option is limited to 10
percent of the face amount of the basic policy.
D) The additional coverage can be purchased without demonstrating insurability.
A no-fault law under which benefits are paid to an accident victim without regard to
fault and the accident victim can still sue the negligent driver who caused the accident
is referred to as a(n)
A) pure no-fault law.
B) add-on no-fault law.
C) modified no-fault law.
D) comparative no-fault law.
Under a 401(k) plan, what is compared to determine if the plan unfairly discriminates in
favor of highly compensated employees?
A) the average percentage of salary made available for the highly compensated to take
as cash or to put into the plan is compared to the average percentage of salary made
available for other eligible employees to take as cash or to put into the plan
B) the ratio of eligible-to-participate highly compensated employees is compared to the
ratio of eligible-to-participate other employees
C) the average percentage of salary deferred by the highly compensated is compared to
the average percentage of salary deferred by other eligible employees
D) the percentage of highly compensated employees over age 50 who participate is
compared to the percentage of all other employees who participate
Which of the following persons is (are) covered for liability insurance under the PAP?
I. a family member who drives a covered auto
II. a family member who occasionally drives a friend's auto
A) I only
B) II only
C) both I and II
D) neither I nor II
