The major difference between the dwelling coverage (Part A) of the Homeowners 2
(Broad From) policy and the Homeowners 3 (Special Form) policy is that
A) the HO-3 provides open perils (“all risks”) coverage and the HO-2 provides
named-perils coverage.
B) the HO-3 provides actual cash value coverage, the HO-2 provides replacement cost
coverage.
C) the HO-3 is always written without a deductible, the HO-2 always written with a
deductible.
D) the HO-3 can be used for any type of construction, the HO-2 is limited to wood
frame construction.
Which of the following is a standard nonforfeiture option?
A) paid-up additions
B) life income
C) extended term insurance
D) reduction of premiums
Which of the following statements concerning FAIR plans is (are) true?
I. All property is eligible for coverage regardless of physical condition.
II. Losses and expenses are shared by insurers who participate in a plan.
A) I only
B) II only
C) both I and II
D) neither I nor II
Reasons why a peril may be considered uninsurable and therefore excluded from
insurance contracts include which of the following?
I. The losses from the occurrence of the peril may be due to a predictable decline in
value.
II. The losses from the occurrence of the peril may be incalculable and catastrophic.
A) I only
B) II only
C) both I and II
D) neither I nor II
Brian buys and sells investment securities for his clients. Brian also decided to become
a licensed life insurance agent to better serve his customers. While Brian’s primary
focus is buying and selling financial securities for his clients in exchange for
commissions, he also earns commissions on his life insurance sales. Brian is a(n)
A) financial planner.
B) stock broker.
C) insurance broker.
D) personal-producing general agent.
Donna is single and earns $30,000 annually. She is covered under her employer’s
retirement plan. Donna would like to start a traditional IRA and contribute $3,000 this
year. Which of the following describes her ability to establish a traditional IRA and the
tax treatment of her contribution?
A) Her contribution is fully tax deductible.
B) Her contribution is partially tax deductible.
C) No portion of the contribution is tax deductible.
D) Donna is not eligible to establish a traditional IRA, so no contribution can be made.
Which of the following statements about the scheduled personal property endorsement
to the homeowners policy is (are) true?
I. It provides named-perils coverage on scheduled items.
II. It can be used to insure valuable items such as jewelry, silverware, and coin
collections.
A) I only
B) II only
C) both I and II
D) neither I nor II
All the following statements concerning a Roth 401(k) plan are true EXCEPT
A) After-tax dollars are used to fund the plan.
B) Investment earnings accumulate on a tax-free basis.
C) Employees at all income levels may contribute to the plan, but annual contributions
are limited.
D) Qualified distributions at retirement are fully taxable.
Which of the following statements about group short-term disability income plans is
true?
A) Most plans pay benefits for a period of 3 to 5 years.
B) Most plans cover occupational disabilities only.
C) Most plans provide benefits for total disabilities only.
D) Most plans have a 90-day elimination (waiting) period.
EFG Company experienced a reduced demand for its products during a recession. EFG
managers were considering laying off some workers when the personnel director said,
“Let’s not lay off these workers. If we do, our unemployment insurance premiums will
increase. The state considers employment stability when determining our premium.”
Considering the firm’s employment record when determining the rate to charge for
unemployment insurance is called
A) experience rating.
B) class rating.
C) schedule rating.
D) retrospective rating.
All of the following statements about the Medicare Prescription Drug Plan are true
EXCEPT
A) Medicare prescription drug coverage is available to all Medicare beneficiaries.
B) Medicare prescription drug coverage is funded exclusively through the Part A
payroll tax.
C) The Medicare prescription drug program provides financial help for beneficiaries
with limited income and financial resources.
D) In addition to the initial deductible, there is a coverage gap where the beneficiary
must pay the entire cost of prescription drugs.
One tort reform permits manufacturers to assert that as long as the product conformed
to the prevailing technology and production methods at the time it was produced, it
cannot be considered a defective product today. This defense is called the
A) collateral source rule.
B) state of the art defense.
C) strict liability defense.
D) privity of contract rule.
Which of the following statements regarding private insurance and government
insurance is (are) true?
I. Private insurance includes life and health insurance and property and liability
insurance.
II. All government insurance is social insurance.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following statements about participation in the Social Security program is
(are) true?
I. Most private sector employees are covered under the Social Security program.
II. Each employee has the right to “opt out” of the Social Security program if the
employee does not wish to participate in the program.
A) I only
B) II only
C) both I and II
D) neither I nor II
A name that encompasses all of the major risks faced by a business firm is
A) financial risk.
B) speculative risk.
C) enterprise risk.
D) pure risk.
Which statement is (are) true with respect to enterprise risk management programs?
I. They address traditional property, liability, and personnel loss exposures.
II. They do not address financial risks.
A) I only
B) II only
C) both I and II
D) neither I nor II
Kelly was hit by a car while she was walking to the park. She incurred $750 in medical
costs at a hospital emergency room. Kelly has coverage for this charge under which of
her Personal Auto Policy (PAP) coverages?
A) bodily injury liability
B) other-than collision
C) medical payments
D) collision
Tom opened a store in a mall. His store is located between a theater and a department
store. Tom counts on the theater and department store to generate walk-in business at
his store. While his store has been successful, Tom knows that if either or both of the
other businesses closed, his store would suffer an economic loss. What type of
dependent property situation is illustrated in this scenario?
A) contributing location
B) recipient location
C) manufacturing location
D) leader location