The phrase “general liability” is used to refer to the legal liability of a business arising
from all of the following EXCEPT
A) employees injured on the job.
B) defective products.
C) liability assumed by contract.
D) completed operations.
Which of the following statements about surety bonds is (are) true?
I. The surety has a legal right to recover a loss payment it made on behalf of a
defaulting principal.
II. The obligee is the party who benefits from the bond if the principal fails to perform.
A) I only
B) II only
C) both I and II
D) neither I nor II
Darla purchased an unendorsed Homeowners 3 policy. While the policy was in force, a
fire occurred that destroyed a living room set. The living room set cost $4,000 new, but
was 25 percent depreciated when the loss occurred. Replacement furniture will cost
$4,400. Assuming no deductible, how much will Darla receive from her insurer?
A) $3,000
B) $3,300
C) $3,400
D) $4,400
Barb was injured in an auto accident. She was totally disabled and collected disability
income benefits for 8 months. She would like to return to work on a part-time basis to
see if her recovery is complete. During this period, her insurer will pay reduced
disability income benefits. This type of disability is called
A) recurrent disability.
B) presumptive disability.
C) permanent disability.
D) partial disability.
Which statement is (are) true regarding property and liability insurance market
conditions?
I. Premiums are high when the insurance market is “hard.”
II. Underwriting standards are tight when the insurance market is ‘soft.”
A) I only
B) II only
C) both I and II
D) neither I nor II
All of the following are elements of negligence EXCEPT
A) the ability to pay damages.
B) the failure to perform a legal duty to use reasonable care.
C) damages or injuries to a claimant.
D) proximate cause between the negligent act and the injury or harm that occurs.
The homeowners policy excludes a loss brought about by two or more perils where one
peril is covered under the policy and the other perils are excluded. This situation is
called
A) ordinance or law.
B) proximate cause.
C) concurrent causation.
D) nullification.
A loss reserve established for each individual claim when it is reported to a property
and casualty insurance company is call a(n)
A) admitted asset.
B) incurred-but-not-reported (IBNR) reserve.
C) unearned premium reserve.
D) case reserve.
Juanita paid a life insurer $45,000 in exchange for an immediate life annuity. Juanita
will receive $500 per month from the insurer, and her life expectancy is 15 years (180
months). What is the exclusion ratio in this case?
A) 33.33 percent
B) 40.00 percent
C) 50.00 percent
D) 66.67 percent
Chris applied for life insurance and paid the first premium on Monday. She was given
an insurability premium receipt which specified that coverage was effective on the date
of the application or the date of the medical exam, whichever is later. She took the
medical exam the following Thursday. She was found to be in perfect health. On which
day was her coverage effective?
A) on Monday, when she completed the application and paid the first premium
B) on Wednesday, two days after completing the application and paying the first
premium
C) on Thursday when she passed the medical exam
D) on Saturday, two days after passing the medical exam
Which of the following statements about the regulation of insurance company
investments is (are) true?
I. The purpose of regulating insurance company investments is to prevent insurers from
making unsound investments which could threaten their solvency.
II. Life insurers can invest an unlimited amount of their assets in common stocks.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following statements about coverage for loss of use (Coverage D) under
the Homeowners 3 policy is true?
A) If a covered loss makes the home unfit for living, the insurer pays additional living
expenses the insured may incur as a result of the loss.
B) The duration of payments for additional living expenses is limited to a maximum of
30 days.
C) There is no coverage for loss of rent if an insured peril makes the part of the
premises rented to others uninhabitable.
D) There is coverage for loss of business income if an insured peril forces a home
business to be terminated.