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PROPERTY AND CASUALTY INSURANCE - FINAL EXAM
UPDATED QUESTIONS WITH 100% CORRECT ANSWERS
"An insured that owns a completely refurbished 1956 Corvette has a need for: - CORRECT
ANSWER A) Replacement cost coverage
B) Functional replacement cost coverage •• C) Stated amount coverage D) Market value coverage"
"A loss valuation provision that replaces damaged property with a functional equivalent is: -
CORRECT ANSWER A) Actual cash value
B) Replacement cost C) Market value •• D) Functional replacement cost"
"All of the following are considered an insured location under a Homeowner Policy EXCEPT: -
CORRECT ANSWER A) The residence premises
•• B) The insured's two-unit rental dwelling C) A wedding hall rented by the insured for his daughter's wedding D) A picnic grove rented by an insured for a family reunion"
"An insurer must defend an insured: - CORRECT ANSWER A) Only if it is clear that coverage
applies •• B) If the claim is arguably within the scope of coverages C) Never D) Only if it is clear the insured had knowledge of this claim"
"Under a Homeowner Policy, theft of building materials is: - CORRECT ANSWER A) Always
covered B) Never covered C) Covered if the insured is building a new house •• D) Covered if the insured is remodeling the house in which he resides" "An owner of duplex is insured under a Dwelling Policy and regularly turns off the Dwelling's heat
when the property is not rented. In this case: - CORRECT ANSWER •• A) Coverage for damage
due to freezing is excluded B) Coverage is provided for all perils C) Coverage is excluded for all perils
D) coverage for Fire EC and V&MM is excluded" "What common policy provision limits the location that coverage may apply under an insurance
policy? - CORRECT ANSWER A) Arbitration Provision
B) Standard Mortgage Clause C) Loss Payable Clause •• D) Policy Territory Provision"
"If an insured fails to provide prompt notice of loss, the insurer: - CORRECT ANSWER •• A)
May argue that is has been prejudiced by the delay and deny the claim B) Deny the claim outright for not being prompt C) Cancel the insured for violating a policy provision D) Pay the claim outright and not consider the affect of late notice"
"Which of the following is covered under the Farm Property Form? - CORRECT ANSWER A)
Theft of a trailer off premises B) Unauthorized instructions to transfer money C) Inventory shortages •• D) Theft of a watercraft on premises"
"Under the National Flood Insurance Program: - CORRECT ANSWER A) No waiting period
applies B) A 5-day waiting period applies C) A 20-day waiting period applies •• D) A 30-day waiting period applies so now applications, except if the application is in conjunction with a loan, in which no waiting period applies"
"Contribution by Equal Shares: - CORRECT ANSWER A) Is applicable in Workers Compensation
B) Is excess over primary coverage C) Prorates coverage between all policies equally •• D) Is a form of proportional coverage in which losses are paid equally by all policies until one policy is exhausted, whereby the other policy pays alone"
"Which of the following is NOT a requirement necessary to qualify as a producer in Iowas? -
CORRECT ANSWER A) Pass the exam required by statute
B) Be a resident of the state of Iowa C) Be of good character and company •• D) Complete a 36-hour licensing course"
B) Indemnity C) Coinsurance D) Salvage"
"Which of the following is CORRECT of Collision coverage under the Personal Auto Policy? -
CORRECT ANSWER •• A) It is the upset of a covered auto or its impact with another vehicle or
object B) Examples of collision include missiles or falling objects C) Examples of collision include fire, theft or larceny D) Examples of collision include explosion, earthquake or windstorm"
"Insurance is a method which: - CORRECT ANSWER A) Reduces risk
B) Retains risk C) Avoids risk •• D) Transfers risk"
"A known right that is voluntarily relinquished by an insurer is: - CORRECT ANSWER A)
Estoppel •• B) Waiver C) Subrogation D) Appraisal"
"Which of the following activities would require an individual to be licensed as a producer? -
CORRECT ANSWER A) Giving a homeowner brochure to prospect
•• B) signing an insurance application C) Depositing a check into the insurer's premium account D) Arranging or making meeting appointments for licensed proudcer"
"the process of treating and managing loss exposures is risk: - CORRECT ANSWER A)
Avoidance B) Selection C) Identification •• D) Management"
"Under the Personal Auto Policy: - CORRECT ANSWER A) OTC and Collision coverage are
generally written with the same deductible amount B) Flood is excluded under the OTC coverage
•• C) Applicable sales tax is paid on stolen vehicles D) Loss settlement is on a replacement cost basis" "An insurance contract feature that permits all ambiguous areas to be construed in favor of the
insured is: - CORRECT ANSWER A) Aleatory
•• B) Adhesion C) Good faith D) Subrogation"
"Producers are only permitted to share or split commission if: - CORRECT ANSWER A) There is
a written agreement between the two producers •• B) Both are licensed for the same line of authority C) The insured knows the arrangement D) The insurance division knows of the arrangement" "All of the following are requirements necessary to secure a nonresident producer's license
EXCEPT: - CORRECT ANSWER A) File a license application with the insurance division
B) submit an original certification by the insurance commissioner of the applicant's state of residence •• C) Place business with surplus lines producer D) Pay a license fee to the insurance division"
"All of the following are prohibited in Iowa EXCEPT: - CORRECT ANSWER A) Twisting
B) Rebating •• C) Commission splitting D) Misrepresentation"
"The Standard Fire Policy: - CORRECT ANSWER A) Is commonly used to insure large
commercial risks •• B) Is the basis to today's modern property policies C) Provides liability coverage D) Generally is used to insure homeowner exposures"
"Under a Flood Policy, which of the following losses would NOT be covered: - CORRECT
ANSWER A) Flood damage to property in a living room
•• B) Flood damage to property in a basement bedroom C) Flood damage to a dwelling located within 100 feet of a river
D) A credit license"
"Under a property insurance policy, policy limits are: - CORRECT ANSWER A) Subject to an
annual aggregate B) Subject to a lifetime aggregate •• C) Automatically restored after a loss D) Automatically reduced after a loss"
"Under a Dwelling Policy, Coverage C - Personal Property is: - CORRECT ANSWER A)
Automatically included as an Other Coverage B) Limited to 50% of the Coverage A - Dwelling Amount •• C) Only provided when the insured pays the premium for the coverage D) A prohibited coverage under all forms"
"Under a Dwelling Policy, a vacancy of more than 60 consecutive days: - CORRECT ANSWER A)
Excludes coverage in the event of a fire claim •• B) Excludes coverage int he event of a Vandalism and Malicious Mischief claim C) Excludes coverage int he event of a riot and civil commotion D) Excludes coverage in the event of a lightning claim"
"All of the following would be eligible for a Dwelling Policy EXCEPT: - CORRECT ANSWER A) A
four-unit tenant occupied apartment building B) A one-unit owner occupied residence •• C) A one-unit floral shop D) A three-unit dwelling that is both tenant and owner occupied"
"All of the following are insured locations under a Homeowners Policy EXCEPT: - CORRECT
ANSWER A) A vacant lot owned by the insured
•• B) Vacant land used to park cars for a fee C) A hotel room rented tot he insured while on vacation D) The residence premises as indicated int he declarations" "All of the following are covered losses under Personal Property - Coverage C of the Homeowners
Policy EXCEPT: - CORRECT ANSWER A) Coverage applies to losses at the residence premises
B) Coverage applies to losses at the insured's auto C) Coverage applies while in vacation in Europe •• D) Coverage applies to scheduled property"
"Under all Homeowner Policy, damage to property of others will NOT be covered if it is caused
intentionally by an insured that is at least: - CORRECT ANSWER A) 10 years of age
B) 18 years of age •• C) 13 years of age D) 21 years of age" "If Policy A's limit is $100,000 and Policy B's limit is $40,000, how much would each policy pay
under contribution by equal shares in the event of a $150,000 loss. - CORRECT ANSWER A)
Policy A pays $75,000 and Policy B Pays $75, •• B) Policy A pays $100,000 and Policy B pays $40, C) Policy A pays $100,000 and Policy B pays $50, D) Policy A pays $150,000 and Policy B pays $0"
"For a cancellation of an insurance policy to be effective it: - CORRECT ANSWER A) Must be
forward by certified mail •• B) Must provide advance written notice of termination C) May only be mailed D) Must be delivered in person"
"The tendency of poor risk to seek coverage BEST describes: - CORRECT ANSWER A) Adhesion
B) Aleatory •• C) Adverse selection D) Estoppel"
"All of the following are characteristics of an admitted insurance company EXCEPT: - CORRECT
ANSWER A) Must pass state required minimum financial standards
B) Must agree to abide by statutory regulation •• C) Accepts surplus and excess lines business D) Producers business through local branches and producers"
"Which of the following activities is permitted in Iowa? - CORRECT ANSWER A) Returning a
percent of the policy's premium to the insured as an inducement to buy the policy •• B) Discrimination based upon sound actuarial justification C) Coercing debtors into purchasing insurance as a condition of a loan D) Stating policy dividends are guaranteed"
•• D) Schedule the property"
"All of the following are CORRECT of the Iowa Automobile Insurance Plan EXCEPT: - CORRECT
ANSWER A) It is a market for individuals that are unable to secure standard coverage
•• B) Self-insurers must participate C) All insurers writing auto insurance in Iowa are required to participate in the plan D) The plan provides for an equitable appointment of risks"
"Under the Homeowner's Policy, medical payments would NOT apply to: - CORRECT ANSWER
A) A guest injured by fallen branches •• B) A disease transmitted by an insured C) A neighbor's child injured by a softball thrown by the insured's 10-year-old son D) A mailman bitten by the insured's dog off the premises" "Which of the following statements would be CORRECT if an insured failed to maintain the
underlying liability limits as required by a Personal Umbrella Policy? - CORRECT ANSWER A)
The insured would have to pay the self-insured retention •• B) The insured would be responsible for the difference between the underlying amount and the amount required by the umbrella C) It would have no effect upon the umbrella coverage D) All coverages would be voided"
"All of the following would be considered a covered auto under a Personal Auto Policy EXCEPT: -
CORRECT ANSWER A) A utility trailer attached to an auto
•• B) A self-contained motor home C) A newly acquired vehicle D) A boat trailer attached to a pickup" "An individual is insured under a Homeowners Policy with a coverage A limit of $100,000. He rents out his detached garage to a local mechanic who uses it to operate an auto repair shop. A
fire ensures and the garage is completely destroyed. In this case, the insurer will: - CORRECT
ANSWER A) Pay The full limit of $100,
B) Pay the full limit of $10, C0 Pay one half as required by the policy's Other Insurance provision •• D) Pay nothing"
"All of the following would be considered an uninsured motor vehicle EXCEPT: - CORRECT
ANSWER A) A vehicle not covered by a bodily injury liability policy or bond
B) A vehicle covered by a bodily injury liability policy or bonding company that denies coverage or becomes insolvent •• C) A vehicle with minimum limits of coverage D) A hit-and-run vehicle whose driver cannot be identified"
"Which of the following is true of the Iowa Motor Vehicle Financial Responsibility Law? -
CORRECT ANSWER A) Underinsured Motorist Coverage must be included in all policies
•• B) Owners are required to prove financial responsibility at the time of an accident that results in bodily injury or property in excess of $1, C) Coverage must include liability insurance with minimum limits of $50, D) Uninsured Motorist Coverage must be included in all policies"
"The policy period on present day insurance policies generally begins and ends at: - CORRECT
ANSWER A) Noon
B) Midnight •• C) 12:01 am Standard Time D) 12:00 am GMT" "Which of the following policy provisions would permit the insurer to seek payment against a
negligent third party that caused the insurer to pay a claim? - CORRECT ANSWER A) Other
Insurance Clause B) Liberalization Clause C) Transfers of Rights and Duties •• D) Transfer of Rights and Recovery" "Under the Standard Mortgage Clause, if an insured fails to comply with a policy requirement, the
mortgage company: - CORRECT ANSWER •• A) May act to protect its interests
B) Will do nothing C) Will notify the insurance division D) Will notify the department of banking"
"In a legal contract, the element that refers tot he price paid or bargaining part of a contract is: -
CORRECT ANSWER A) Agreement
•• B) Consideration C) Competent parties D) Legal purpose"
"A Temporary License may be issued to approved individuals for a period of: - CORRECT
ANSWER A) Twelve Months
B) Nine Months •• C) 90 days with extensions up to 180 days D) 30 days"
"All of the following applicants may be denied a producer's license EXCEPT: - CORRECT
ANSWER •• A) An attorney
B) An individual that provides incomplete information on a license application C) An applicant whose letter of clearance is dated 120 days prior D) A nonresident not licensed in their state of domicile"
"Personal liability coverage under the Dwelling Policy is: - CORRECT ANSWER A) Automatically
provided under the policy •• B) Only provided by endorsement C) Broader and more comprehensive than homeowner personal liability D) Limited to 10% of Coverage A"
"All of the following would be considered a hazard EXCEPT: - CORRECT ANSWER A) Trash and
debris in the basement of a home B) Broken steps and hand railings C) Overloaded electrical wiring •• D) Properly stored paint and related solvents" "A fire severely damages a tenant occupied duplex insured under a Dwelling Policy. After the fire
the tenants are forced to move. In this case: - CORRECT ANSWER A) The Dwelling Policy will
pay nothing B) The Dwelling Policy will pay the tenant's extra expenses •• C) The Dwelling Policy will pay the owner's loss of rental value D) The Dwelling Policy will pay the tenant's moving allowance"
"The Notice of Aftermarket Crash Parts must be given to the insured no later than at: - CORRECT
ANSWER A) Application of insurance
B) Approval of insurance •• C) Delivery of policy D) Time of repair"
"The Principle of Indemnity is used extensively in the property casualty field to: - CORRECT
ANSWER A) Indemnity an insured in excess of their loss
B) Reduced lawsuits •• C) Restore or reimburse one to the extent of their loss
D) Promote arbitration"
"A producer who learns of adverse underwriting information on an insured should: - CORRECT
ANSWER A) Do nothing
B) Process cancellation of the policy •• C) Advise the insurance company of the adverse information D) Process an endorsement deleting the newly discovered exposure" "The authority granted by the insurer tot he producer that permits the producer to put coverage
into effect prior to its actual submission tot he insurer, BEST describes: - CORRECT ANSWER • •
A) Binding authority B) Agency authority C) Implied authority D) Permitted authority"
"Basked upon the Law of Large Numbers, the larger the number of homogeneous units: -
CORRECT ANSWER A) Loss predictability will decrease
B) Loss predictability will remain the same •• C) Loss predictability will increase D) Loss severity will increase"
"a producer licensed for property and casualty insurance: - CORRECT ANSWER A) Is exempt
from continuing education if they function in a management capacity •• B) May complete 36 approved credits in life, health, property, or casualty insurance C) Is required to complete 36 approved credits in property and casualty insurance D) Is required to complete 36 approved credits in life and health insurance"
"A producer's license: - CORRECT ANSWER A) Is waived if 24 approved credits are completed
prior to application for license •• B) Must be renewed every three years subject tot he completion of approved CE C) Is not required in Iowa D) Is waived if you have a Bachelors Degree in insurance"
"All of the following would be considered an Unfair Claims Settlement Practice EXCEPT: -
CORRECT ANSWER A) Misrepresenting the policy provisions
B) Failure to promptly investigate claims C) Failure to deny or affirm coverage or pay a claim •• D) Failure to pay a claim not covered"
"Which of the following is a permitted producer activity when dealing with a customer? -
CORRECT ANSWER A) Being named as a beneficiary on a customer's insurance policy
•• B) Covered up to $5, C) Covered up to $7, D) Covered only if located on the residence premises"
"Insurance companies consider: - CORRECT ANSWER A) Unoccupancy a greater exposure
than vacancy •• B) Vacancy a greater exposure than unoccupancy C) Both vacancy and unoccupancy equally D) Buildings under construction as vacant"
"All of the following are true of Hostile Fire EXCEPT: - CORRECT ANSWER A) It is fire that
escapes its intended confines B) An examples would be fire damage caused when a wood log rolls out of a fireplace C) It is not specifically defines in the Standard Fire Policy or successor polices •• D) An example of hostile fire is the flame or glow of a cooking range"
"All of the following claim losses would be excluded under the Dwelling Policy EXCEPT: -
CORRECT ANSWER A) Fire damage to a garage located on the insured premises used as a
repair shop •• B) Fire damage to the insured's rowboat located in the attached garage C) Death of the insured's dog due to smoke inhalation D) Theft of the insured's automobile stolen from the detached garage"
"Under the Homeowner's endorsement Additional Residence Rented to Others: - CORRECT
ANSWER A) No one residence may contain more than one family
B) No one residence my contain more than two families C) No one residence may contain more than three families •• D) No one residence may contain more than four families"
"All of the following would be considered an Unfair Trade Practice EXCEPT: - CORRECT
ANSWER A) Entering into agreements of boycott, coercion or intimidation
B) Making false or derogatory statements about a competitor •• C) Using a computer proposal in the sale of insurance D) Misrepresenting the name, title of class of any life insurance" "An agreement of intimidation that results in the unreasonable restraint of trade or monopoly in
the business of insurance would be considered: - CORRECT ANSWER A) Rebating
B) Twisting •• C) Boycott and coercion D) Estoppel"
"Under the Homeowners Policy, all of the following are examples of property NOT covered
EXCEPT: - CORRECT ANSWER A) A diamond ring insured under the scheduled personal
property endorsement B) The insured's pet cat •• C) A personal computer located in the insured's home office D) A pickup truck used to service the insured's premises" "Under the Homeowner's Endorsement Business Pursuits, Section II - Liability is extended to
cover - CORRECT ANSWER A) Insurance agents
B) Professional liability C) Business partners •• D) Teachers" "Which of the following is NOT covered if a property is vacant for more than 60 consecutive days
prior to a loss? - CORRECT ANSWER A) Fire
B) Freezing •• C) Water damage caused by an accidental discharge D) Hurricane"
"Which of the following is sufficient enough to have an insured deny a claim? - CORRECT
ANSWER A) A misstatement
B) An untrue statement •• C) Making a material misrepresentation D) Failing to advise the insurer of a loss"
"All of the following are considered an insured under a Personal Auto Policy EXCEPT: - CORRECT
ANSWER •• A) A spouse residing in another state
B) The name insured's son while using a family auto at college C) A permitted user D) A spouse having the same residence address"
"Fire that escapes its confines is: - CORRECT ANSWER A) Friendly fire
•• B) Hostile fire C) Arson fire D) Excluded fire"
"The property peril "explosion" generally excludes loss caused by: - CORRECT ANSWER A) Gas
explosion •• B) Steam explosion C) Heat explosion D) Propane explosion"
C) Personal liability D) Business liability"
