Which homeowners policy is designed for the tenants of rented premises?
A) Homeowners 2
B) Homeowners 4
C) Homeowners 6
D) Homeowners 8
MLX Drug Company would like to market a new hypertension drug. While the Food
and Drug Administration (FDA) was testing the drug, it discovered that the drug
produced a harmful side effect. When MLX learned of the FDA’s test result, MLX
abandoned its plan to produce and distribute the drug. MLX’s reaction illustrates
A) risk avoidance.
B) hedging.
C) risk transfer.
D) risk retention.
Which of the following statements regarding the Coverage E limit in the homeowners
policy is true?
A) It is an aggregate limit, and once the amount paid for one or more claims reaches the
limit, no additional coverage is provided.
B) The limit applies only if a court orders the insured to pay – there is no coverage for
settlements reached out-of-court.
C) Any legal defense costs incurred by the insurer are counted against the limit of
liability.
D) The limit applies on a per-occurrence basis so more than the limit could be paid
during the policy period.
Scott works in property and liability insurance marketing. He legally represents
insurance purchasers, rather than insurance companies. Scott is paid a commission on
the insurance placed with insurers. Scott is a(n)
A) exclusive agent.
B) direct writer.
C) branch manager.
D) insurance broker.
Which of the following expenses is covered under the medical insurance (Part B)
portion of the Medicare program?
A) a long-term stay in rest home
B) the fee charged by a surgeon for an operation
C) the cost of semis-private room during a hospital stay
D) routine prescription drugs outside of the hospital
Which of the following statements about eligibility requirements for qualified Health
Savings Accounts (HSAs) is (are) true?
I. Only individuals who are eligible for Medicare benefits can establish a qualified
HSA.
II. Applicants must be covered by a high deductible health plan and not be covered by
any other comprehensive health plan to establish a qualified HSA.
A) I only
B) II only
C) both I and II
D) neither I nor II
Bev lives in the suburbs and works downtown. She drives to work, and her most direct
route to work would require her to pass through an area where carjackings and
drive-by-shootings are common. Bev does not drive through this area. Instead, she uses
a route which adds 10 minutes to her commute. Which risk management technique is
Bev using with respect to the risk of injury while driving through the dangerous area?
A) noninsurance transfer
B) avoidance
C) passive retention
D) loss reduction
Which of the following statements about the Homeowners 8 policy is (are) true?
I. Losses to the dwelling are settled on a replacement cost basis if the dwelling is
insured for its full market value.
II. It is designed primarily for expensive, newer, dwellings.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following statements about the extra expense coverage form is (are) true?
I. It provides coverage for the increased cost that must be paid to continue operations
during a period of restoration.
II. It provides coverage for lost business income if a key customer or key supplier
experiences a loss.
A) I only
B) II only
C) both I and II
D) neither I nor II
Life annuity payments are made up of all of the following EXCEPT
A) return of premiums.
B) interest earnings.
C) unliquidated principal of annuitants who live too long.
D) unliquidated principal of annuitants who die early.
Arguments in favor of reforming the civil justice system include which of the
following?
I. There is often a long delay in settling lawsuits.
II. Compensation awards have decreased significantly over the past two decades.
A) I only
B) II only
C) both I and II
D) neither I nor II
What is the practical effect of an insurance contract being a contract of adhesion?
A) The insurer can refuse to pay claims unless the insured has complied with all policy
provisions.
B) The insured can assign the policy only with the insurer’s consent.
C) The insurer can sue the insured for failure to pay any premiums.
D) The policy is interpreted in the insured’s favor if the policy contains any ambiguities
or uncertainties.
All of the following statements about the businessowners policy are true EXCEPT
A) Coverage for business personal property includes coverage for leased personal
property which the named insured has a contractual responsibility to insure.
B) The amount of insurance on the buildings increases by a stated percentage each year.
C) Additional coverages include pollutant cleanup and removal.
D) The policy must be written with a deductible of at least $2,000 for property losses.
Which of the following statements about coverage under the federal flood insurance
program is (are) true?
I. Subsidized coverage is available for contents, but not for dwellings.
II. A $10,000 deductible applies to each loss.
A) I only
B) II only
C) both I and II
D) neither I nor II
Prior to passage of the Affordable Care Act, insurance policies typically contained a
provision excluding coverage for impairments that were present or were treated during
a specified period prior to the effective date of the policy. This provision is a(n)
A) time limit on certain defenses.
B) preexisting-conditions clause.
C) benefit period provision.
D) incontestable clause.
Which of the following was a consequence of passage of the Financial Modernization
Act (Gramm-Leach-Bliley)?
A) Formation of insurers was made easier because capital requirements were reduced.
B) It became easier for insurers to conduct business as they were no longer required to
be licensed in each state where they operate, but only in the state where they are
domiciled.
C) Insurers were required to prepare financial statements using generally accepted
accounting principles (GAAP) instead of using statutory accounting.
D) Depression-era barriers between underwriting risk, depository functions, and
securities underwriting were eliminated.
The process of determining which set of investments in plant and equipment to
undertake is called
A) regression analysis.
B) loss forecasting.
C) time value of money analysis
D) capital budgeting.
The policyholders’ surplus of an insurer is defined as the difference between its
A) assets and its liabilities.
B) premium income and its expenses.
C) reserves and its liabilities.
D) assets and its nonadmitted assets.
Sarah owns a property and liability insurance agency. She is authorized to represent
several insurance companies and she is compensated by commissions. Sarah’s agency
owns the expiration rights to the business she sells. Sarah is a(n)
A) independent agent.
B) exclusive agent.
C) direct writer.
D) insurance broker.