Insurance Regulation
Which of the following are not a requirement to obtain an insurance license
A. Be competent and trustworthy
B. Be at least 18 years of age
C. Have a high school diploma or GED
D. Have intent in good faith, to engage in the type of business that the license applied for would permit
All but C
Allan owns a house and drives his car to work every day. Owning a house and driving a car are examples of what?
A risk is the chance of loss
Which is the most accurate definition of insurable interest?
A. A valid reason to take legal action against an insurance company
B. The amount of money an insurance company makes on its investments
C. A legally valid reason to buy insurance for a specific risk
D.The amount of insurance an insurance company sells
Insurable interest is a valid reason to buy insurance for a given risk.
C. A legally valid reason to buy insurance for a specific risk
Which of the following statements is NOT true?
A. DP-1 (Basic Form) is a named peril policy. B. DP-2 (Broad Form) is a named peril policy. C. DP-3 (Special Form) is a named peril policy. D. Open peril means all perils are automatically covered, except for the perils that are excluded.
C. “DP-3 (Special Form) is a named peril policy.” Actually, DP-3 (Special Form) is an open peril policy.
The homeowners policy is considered to be a package policy, because it has
A. three main parts: Part I – Building, Part II – Dwelling, and Part II – Personal Property. B. coverage for all perils, with no exclusions. C. two main parts: Part I – Owners and Part II – Renters. D. two main parts: Section I – Property and Section II – Liability.
D. The homeowners policy has two main parts: Section I – Property and Section II – Liability.
When does a new individual license expire?
A new individual license shall expire on the last day of the licensee’s birth month following the two-year anniversary of the license issue date, unless renewed.
Bradley is thinking about intentionally burning down his house, so he can collect the insurance money. This is an example of what?
Moral Hazard — An increased chance of loss due to someone’s lack of character or trustworthiness (e.g. lying, cheating, stealing, arson, intentional wrong).
What is an insurance Policy is what?
Insurance policies are contracts between two parties: the insured (the first party) and the insurer (the second party).
Which of the following would qualify for a dwelling policy?
A. Charles owns a home and rents it out to a tenant. B. Freddy owns a six family unit residential building. C. Samantha runs a travel agency out of her home with seven employees. D. Sylvia has a forty acre farm with a barn and lots of cattle.
A. Homes rented to a tenant are eligible for a dwelling policy. Dwelling policies cannot insure buildings with more than four family units, businesses with more than two employees, and farm properties.
Which of the following perils is covered by all the homeowner policy forms?
A. Volcanic eruption B. Earthquake C. Flood D. War
A. All the homeowner policy forms cover damage caused by volcanic eruption.
What are the continuing education requirements for a producer?
*24 credit hours of continuing education for every two-year licensing period;
*3 of the 24 credit hours must be ethics courses; and
*at least half (12) of the required hours must be through classroom instruction.
First Party — The insured
Second Party — The insurer
Third Party — Someone other than the insured or the insurer
Teresa’s auto insurance policy has the following liability split limits: $250,000 / $500,000 / $100,000. The second number is
A. property damage per occurrence. B. property damage per person. C. bodily injury per occurrence. D. bodily injury per person.
C. The second number of the split limits is the bodily injury per occurrence limit.
Rafael has a DP-2 (Broad Form) policy. Which of the following perils is NOT covered by his policy?
A. fire B. burglary damage C. glass breakage D. theft
D. Theft is not a listed peril under DP-2 (Broad Form).
Which of the following is NOT covered by Coverage A of homeowners policy?
A. Nails and screws in a box next to the dwelling that will be used to build an attached deck B. The land that the dwelling sits on C. A garage attached to the dwelling D. Lumber on the ground next to the dwelling that will be used to build an attached deck
B. The land that the dwelling sits on
What is the focus of the Gramm-Leach-Bliley act?
privacy
What are the five methods of handling risk?
A. Peril, Exposure, Sharing, Premium, Retention (PESPR)
B. Sharing, Transfer, Avoidance, Reduction, Retention (STARR)
C. Speculative, Pure, Avoidance, Reduction, Peril (SPARP)
D. Avoidance, Pure, Casualty, Property, Sharing (APCPS)
Annie was in a car accident in which the other driver, Lenny, was deemed to be at fault. Annie’s insurance company indemnified Annie and then sued Lenny to recover the amount it paid Annie. This is an example of
A. duty to defend. B. salvage. C. substitution. D.subrogation.
D.Subrogation is the insurer’s legal right to seek damages from a negligent third party, after the insurer has indemnified the insured.
What are the five dwelling property coverages?
A. Dwelling, Contents, Personal Property, Fair Rental Value, Personal Injury B. Dwelling, Other Structures, Personal Property, Fair Rental Value, Additional Living Expense C. Building, Other Structures, Personal Property, Fair Living Value, Additional Rental Expense D. Dwelling, Other Structures, Personal Property, Liability, Medical Expense
Dwelling, Other Structures, Personal Property, Fair Rental Value, Additional Living Expense
To remember the five dwelling coverages, think DOPFA!
A strong wind ripped through Eddie’s backyard causing $5,000 damage to his five oak trees. How much will his homeowners policy pay under the Trees, Shrubs, and Other Plants additional coverage?
A. $500 B. $1,000 C. nothing D. $5,000
C. Nothing will be paid. The Trees, Shrubs, and Other Plants additional coverage does not provide coverage for damage caused by wind.
Which of the following statements about the Fair Credit Reporting Act is NOT true?
A. There are two types of reports: consumer report and investigative consumer report.
B. It regulates how information about consumers may be gathered and helps ensure the validity of reports.
C. It gives consumers the right to know when a report is being made about their credit history. D.The focus of the law is privacy.
D.The focus of the law is privacy
Dario has a $500 deductible on his auto insurance policy. Having a deductible is considered which method of handling risk?
Risk Retention: Having a deductible is considered risk retention, since the insured is keeping part of the risk.
Terri has a $50,000 mortgage on her home that she insures for $250,000. If the building is completely destroyed by a covered peril, the insurer will
A. pay $250,000 to Terri. B. pay half to Terri and pay half to the mortgagee. C. pay $250,000 to the mortgagee. D. pay $50,000 to the mortgagee and pay $200,000 to Terri.
D.The insurer will pay $50,000 to the mortgagee and pay $200,000 to Terri. Any loss payable for damaged property will be paid to both the mortgagee (lender) and the mortgagor (insured) as their insurable interest appears.
Duane has a dwelling policy on a home that he owns and rents out to Johnny. A windstorm causes extensive damage to the home, making it uninhabitable, and Johnny doesn’t pay the $2,000 monthly rent. Coverage D will
A. reimburse Duane for the loss of rental income. B. pay nothing. C. reimburse Duane only if the home was uninhabitable for more than one year. D. reimburse Duane only if the home was completely destroyed.
A reimburse Duane for the loss of rental income.
Coverage D of a dwelling policy will reimburse Duane for the loss of rental income.
Marcus is negligent when his dog bites a neighbor causing extensive injuries and medical bills. The neighbor sues, and the case is settled for $75,000. Which coverage on Marcus’ homeowners policy will for this loss?
A. Coverage D – Loss of Use B. Coverage A – Dwelling C. Coverage F – Medical Payments to Others D. Coverage E – Personal Liability
D. Coverage E – Personal Liability will pay, since the insured was negligent and the injuries are significant.