Which of the following statements about the entire contract clause is true?
A) It allows the insurer to change the policy terms without the insured’s consent.
B) It specifies that all statements in the application are considered warranties.
C) It specifies that the life insurance policy and the attached application constitute the
complete agreement between the parties.
D) It prevents the insurance company from contesting a policy after it has been in force
for two years during the lifetime of the insured.
All of the following statements about avoidance are true EXCEPT
A) Certain loss exposures are never acquired.
B) Certain loss exposures may be abandoned.
C) The chance of loss for certain loss exposures may be reduced to zero.
D) It can be used for any loss exposure facing a firm.
Which of the following statements about methods for estimating loss reserves for
property and casualty insurers is (are) true?
I. The judgment method involves the use of a statutory formula to estimate the loss
reserve.
II. The average value method is used when the number of claims is large and the claims
are settled quickly.
A) I only
B) II only
C) both I and II
D) neither I nor II
The effect of an annual out-of-pocket limit in an individual medical expense policy is to
A) limit the lifetime benefits payable under the policy.
B) put a cap on annual benefits the insurer will pay.
C) prevent the insured from receiving duplicate benefits if medical expenses are also
covered under workers compensation insurance.
D) cover 100 percent of eligible medical expenses after an insured has incurred a
specified amount of out-of-pocket expenses.
All of the following are covered under the dwelling coverage (Coverage A) of the
Homeowners 3 policy EXCEPT
A) any structure attached to the dwelling.
B) the land on which the insured dwelling is located.
C) materials and supplies intended for alteration or repair of the dwelling.
D) materials and supplies intended for construction of a detached garage.
Which of the following statements about the uninsured motorists coverage of the PAP is
true?
A) The coverage usually applies only to property damage.
B) The coverage applies only if the uninsured motorist is legally liable.
C) Unless higher amounts are purchased, the maximum benefit is normally limited to
$1,000.
D) A covered person’s only recourse is to sue the insurer if there is a disagreement over
the amount of damages.
What information is contained in the insuring agreement of an insurance policy?
A) a description of the property or life to be insured
B) a summary of the major promises of the insurer
C) a summary of the obligations of the insured
D) a list of the property, losses, and perils that are not covered
In the ISO Commercial Crime Coverage form, robbery is defined as the
A) unlawful taking of property to the deprivation of the insured.
B) unlawful taking of property from the care and custody of a person by someone who
has caused or threatens to cause bodily harm or who has committed an unlawful act
witnessed by that person.
C) unlawful taking of money or securities through the alteration of a negotiable
instrument.
D) unlawful taking of property from inside the premises by someone who unlawfully
enters or leaves the premises as evidenced by marks of forcible entry or exit.
Carelessness or indifference to a loss is an example of
A) physical hazard.
B) objective probability.
C) moral hazard.
D) attitudinal hazard.
Which of the following statements about brokers is (are) true?
I. They legally represent the insured rather than the insurance company.
II. They are prohibited from being licensed as agents.
A) I only
B) II only
C) both I and II
D) neither I nor II
Acme Company has three identical manufacturing plants, one on the Texas Gulf Coast,
one in southern Alabama, and one in Florida. Each plant is valued at $200 million.
Acme’s risk manager is concerned about the damage which could be caused by a single
hurricane. The risk manager believes there is an extremely low probability that a single
hurricane could destroy two or all three plants because they are located so far apart.
What is the probable maximum loss associated with a single hurricane?
A) $0 million
B) $200 million
C) $400 million
D) $600 million
Rick is risk manager of Herald News, a daily newspaper in a competitive market. Rick
wants to make sure that if Herald’s printing facility is damaged or destroyed, the paper
will continue to be published. What type of insurance can Rick purchase to cover the
added cost of continuing to print the paper after a physical damage loss has occurred?
A) contingent business income coverage
B) product liability insurance
C) business income from dependent properties coverage
D) extra expense coverage
For which of the following situations would there be personal liability coverage under
the homeowners policy?
I. The named insured accidentally injures her husband with a chain saw.
II. The named insured breaks his wife’s valuable vase while practicing his golf swing.
A) I only
B) II only
C) both I and II
D) neither I nor II