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AL P&C University of Alabama Study
Guide
If a company cancels an auto policy mid-term, the refund will be made on a : A. pro rata basis B. short rate basis C. retroactive basis D. coinsurance basis - A. Pro Rata Basis What is the term used to describe terminating the insurance relationship at the end of the policy period? A. Cancellation B. Nonrenewal C. Separation D. Exclusion - B. Nonrenewal Which is the best example of an indirect loss? A. Sequential loss B. Liability loss C. Employee theft D. Loss of use - D. Loss of use Which is a two party contract? A. Property B. Casualty C. Liability D. Auto - A. Property Insurance contracts offset A. speculative risk B. pure risk C. gambling D. created risk - B. Pure risk Which of the following is a third party contract? A. Property
B. Casualty C. Earthquake D. Theft - B. Casualty Risk is best define as A. chance of loss B. certainty of loss C. financial loss D. sentimental loss - A. chance of loss Being subject to a loss is A. liability B. indemnity C. exposure D. subrogation - C. exposure The ranking insured in a Personal Lines contract is the A. named insured B. first named insured C. mortgagee D. husband - A. named insured To be paid a claim under a P & C contract, insurable interest must exist A. At the time of application B. on the policy date C. at the time of loss D. at the time of claim settlement - C. at the time of loss This type of company is run for the benefit of the policyowners: A. Stock B. Mutual C. Foreign D. Alien - B. Mutual Ohio Casualty is doing regular business in Indiana. Within the same state of Indiana, Ohio Casualty would be considered a(n) A. domestic company B. nonadmitted company
A. Doctrine of Warranties B. Doctrine of Representations C. Doctrine of Utmost Good Faith D. Doctrine of Reasonable Expectations - C. Doctrine of Utmost Good Faith An incorrect statement made intentionally on a Personal Auto insurance application is a A. Fraud B. Warranty C. Misrepresentation D. Conceament - C. Misrepresentation A binder is a(n) A. Interim insuring agreement B. Application C. Counteroffer D. Endorsement - A. Interim insuring agreement Which of the following is NOT true regarding consideration in a P & C policy? A. Part of the insured's consideration is the premium B. Parts of the insured's consideration are the statements on the application C. Parts of the company's consideration are the promises in the policy D. Part of the company's consideration is the payment of a claim - D. Part of the company's consideration is the payment of a claim Any ambiguities in a P & C policy will be resolved in favor of the policyowner because the policy is a(n) A. contract of adhesion B. conditional contract C. unilateral contract D. Aleatory contract - A. contract of adhesion A person who has responsibility for the financial wellbeing of another is a(n) A. accountant B. attorney-in-fact C. broker D. fiduciary - D. fiduciary A binder can expire on all of the following EXCEPT:
A. date of application B. day coverage goes into effect C. day the binder expires D. day following the notification that the binder has been cancelled - A. Date of application Which is NOT true regarding hazards and perils? A. Hazards come in three groups: Basic, Broad, and Special B. Perils are active and hazards are inactive C. Hazards can be physical, moral, and morale D. Peril's come in three groups: Basic, broad, and special - A. Hazards come in three groups: Basic, Broad, and Special A box of dynamite is a(n) A. moral hazard B. physical hazard C. morale hazard D. excellent addition to a toy collection - B. Physical hazard If you look to be covered by everything which is not excluded, you should buy A. special cause of loss B. basic cause of loss C. broad cause of loss D. named peril coverage - A. Special Cause of loss All of the following statements concerning valuation in a property policy are true EXCEPT: A. Under Agreed Value, the insured and the company establish the value before the loss occurs B. Under the Stated Amount, the insured does not know what will be paid on a loss until the loss occurs C. Under Stated Amount, the insured is guaranteed the limit on the Dec page following a loss D. Functional Replacement is also known as Repair Cost - C. Under Stated Amount, the insured is guaranteed the limit on the Dec page following a loss Andy has two property policies with identical peril power covering his property. The first has a limit of $75,000 and the second has a limit of $25,000. If Andy suffers a $4000 covered loss, how will the two policies pay? A. The first will pay $3,000 and the second will pay $1,000. B. The first will pay $4,000 and the second will pay nothing.
A. Compensatory damages B. Special Damages C. General Damages D. Punitive Damages - D. Punitive Damages Which is true about Umbrella Liability policies? A. they are extremely expensive B. they are designed to be the primary payor C. they are written for excessive amounts D. they are the same as Excess Liability policies. - C. they are written for excessive amounts A demolition company is using dynamite to destroy an old downtown building. Which of the following applies? A. Negligence B. Strict Liability C. Premises Liability D. Products Liability - B. Strict Liability The liability term used to describe damage to an individual's mental state is: A. bodily injury B. property damage C. personal injury D. advertising injury - C. personal injury Which of the following is true concerning the Medical Payments section of a liability contract? A. It pays only if the insured is legally liable B. It can pay for the injured party's lost wages C. It has rather low dollar limits D. it pays in addition to any liability judgments - C. It has rather low dollar limits You are hit by a Greyhound bus, this incident is a(n) A. accident only B. occurrence only C. both D. Neither - C. both Which of the following is NOT negligence?
A. Ignorance B. Inaction C. Carelessness D. Intentional Act - D. Intentional Act Which of the following is true concerning defense costs in a liability contract? A. They only pay if you are legally liable B. They pay in addition to the limits of the policy C. They must be purchased separately D. They can cover the insured's costs of suing a negligent party - B. They pay in addition to the limits of the policy Assume that Cal's Commercial Liability policy has an occurrence limit of $100, and an aggregate limit of $500,000. Further assume that so far this year, his insuror has paid claims of $420,000. when an injured shopper is awarded $90,000, how much will Cal's policy pay? A. $80, B. $90, C. $100, D. Cannot be determined by the information provided - A. $80, Fire Legal Liability is most important to A. Landlord B. Mortgagee C. Employee D. Tenant - D. Tenant Which of the following coverages can be found in all Homeowners forms but in no unendorsed Dwelling policies? A. Wind B. Hail C. Vandalism D. Theft - D. Theft Which of the following is Coverage D in a Dwelling policy? A. Additional Living Expense B. Fair Rental Value C. Broad Form Theft D. Limited Theft - B. Fair Rental Value
D. 500
What is the standard deductible in an HO-3? A. 50 B. 100 C. 250 D. 500 - C. 250 What is the maximum horsepower allowed for a boat that you own to be covered under the Personal Liability section of a Homeowners policy? A. 25 B. 50 C. 100 D. 200 - A. 25 You are driving your car with your son and the neighbor's kid to soccer practice when you run a red light and hit Calvin and his family in their car. Under what part of your Personal Auto Policy would Calvin's injuries be? A. Part A B. Part B C. Part C D. Part D - A. Part A Using the above information, what part of your policy covers the neighbor kid's injuries? A. Part A B. Part B C. Part C D. Part D - B. Part B Using the above information what part of your policy covers Cal's car? A. Part A B. Part B C. Part C D. Part D - A. Part A Using the above information what part of your policy covers your car? A. Part A B. Part B
C. Part C D. Part D - D. Part D You run a stop sign, hitting Calvin and Clara's car. Cal's injuries are in the amount of $30,000 and Clara's total $12,000. Thier car is damaged in the amount of $11,000. Your liability limits are 25/50/10. How much will your company pay for Cal and Clara's bodily damage injury and property damage? A. $47, B. $52, C. $53, D. $75,000 - A. $47, All of the following are true concerning Auto policy Med Pay EXCEPT: A. Med Pay will pay medical bills for up to three years after the accident B. Med Pay pays on per person limits C. Med Pay will cover your injuries sustained in an auto D. Med Pay coverage is triggered by negligence - D. Med Pay coverage is triggered by negligence What is the equivalent Single limit of 100/300/100? A. $100, B. $200, C. $400, D. $500,000 - C. $400, Cal is driving the family car with his wife Clara, Cal Jr., and their daughter Katie. He has Med Play limits of $25,000. If Cal is in a wreck, and he and all of his passengers are injured, what is the maximum that his person Auto Policy will pay? A. $25, B. $50, C. $75, D. $100,000 - D. $100, You have Underinsured limits of 100/300/50 when an underinsured motorist runs a stop sign causing you bodily injury of $75,000. His limits are 25/50/10. How much will you be paid by the two companies? A. $75, B. $100, C. $125, D. $150,000 - A. $75,
D. the minimum building deductible for a property insured for $90,000 is $1,000 - D. the minimum building deductible for a property insured for $90,000 is $1, Which of the the following could a farmer NOT cover under an NFIP policy? A. House B. Barn C. Growing Crop D. Silo - C. Growing Crop The Commercial Package policy may contain a maximum of how many coverage modules? A. 1 B. 2 C. 7 D. 9 - C. 7 The ranking insured in the Commercial Package Policy is the A. Named Insured B. First Named Insured C. Mortgagee D. Assignee - B. First Named Insured A Policy is written to provide only Equipment Breakdown coverage is a A. Monoline Policy B. multi-line Policy C. package Policy D. commercial policy - A. Monoline Policy A CPP goes into effect at what time of day? A. 12:01pm B. 12:01 AM C. 12:01 fm D. 12:01 bc - B. 12:01 AM Which of the following is Not a coverage module choice in the CPP? A. Crime B. Farm C. Inland marine D. Garagekeepers -
D. Garagekeepers Which of the following options is NOT available in the Commercial Property policy? A. Agreed Value B. Replacement Cost C. Inflation Guard D. Fair market Value - D. Fair market Value Which if the following losses would NOT be covered by the Basic Cause of Loss form? A. Collapse B. Wind C. Hail D. Civil Commotion - A. Collapse What is the standard deductible in a Commercial Property policy? A. $ B. $ C. $ D. $1,000 - C. $ What is the maximum that the Fire Department Service charge will pay in a Commercial Policy? A.$ B. $ C. $1, D. $1,500 - C. $1, A vacant building can lose coverage altogether after how many days? A. 10 B. 30 C. 45 D. 60 - D. 60 In a Business Income coverage, the time elapsed from the loss until the building is fully repaired is known at the A. down time B. period of restoration C. extended period
- Which of the following only pays of you are legally liable? A. Medical Payments B. Defense Costs C. Bodily Injury Liability D. Supplementary Payments - C. Bodily Injury Liability
- Which CGL coverage's does the National Inquirer get? A. A & B B. A & C C. B & C D. A,B, & C - B. A & C
- Commercial Med Pay will make medical payments for up to how long after a loss? A. 1 yr B. 2 yr C. 3yr D. 5 yr - A. 1 yr
- A policyowner is charged a self-insured retention with his umbrella when A. he suffers any loss B. his underlying coverage reaches its limit C. his Excess Liability policy reaches is limit D. his underlying policy does not provide coverage - D. his underlying policy does not provide coverage Which of the following is covered under the CGL? A. Pollution Liability B. Professional Liability C. Employee injury liability D. Independent Contractor liability - B. Professional Liability Medical Payment limits are expresses as A. occurrence limits B. aggregate limits C. agreed value limits D. per person limits - D. per person limits If Carl is assigned to drive a cash deposit to the bank, Carl is acting as a
A. messenger B. custodian C. guard D. watchperson - A. messenger Which of the following is NOT money? A. currency B. Coins C. Register Checks D. Securities - D. Securities A thief finds the door to an appliance store has been left unlocked. He enters and take several Big Screen TV's. The thief had committed A. burglary B. robbery C. theft D. vandalism - C. theft Robbery of a watchperson is considered to be a (n) A. burglary B. robbery C. holdup D. extortion - A. burglary Fidelity Bonds are used in connection with A. Employee errors and omissions B. employee absences C. employee negligence D. employee theft - D. employee theft To cover all employees on one Fidelity bond you would use a(n) A. Individual Bond B. Name Schedule Bond C. Blanket Bond D. Position schedule bond - C. Blanket Bond The Commercial Crime policy pays for losses in the basis of what?
Which of the following would NOT be covered by Equipment Breakdown coverage? A. Steam Boilers B. Refrigeration Equipment C. Computers D. Toilets - D. Toilets Equipment Breakdown coverage losses are settled on what basis A. ACV B. Replacement Cost C. Functional Replacement Cost D. Agreed Value - B. Replacement Cost The insurance company may suspend coverage on any unsafe insured object by giving written notice how many days in advance? A. 10 B. 15 C. 30 D. the suspension is immediate - D. the suspension is immediate How many vehicles are required to qualify for fleet rates? A. 5 or more B. 10 or more C. 20 or more D. 25 or more - A. 5 or more A company which provides private passenger vehicles for each of its 10 sales reps would likely purchase the A. Business Auto coverage form B. motor carriers coverage form C. Auto dealers coverage form D. personal auto policy - A. Business Auto coverage form A business concerned with its liability when employees use their own vehicles on company business needs A. Drive other car coverage B. Individual Named Insured endoresement C. Employee as insured endorsement D. Symbol #9 nonowned autos only - A. Business Auto coverage form
A Car Wash concerned about its responsibility for customers's cars should buy A. Motor Carrier Coverage Form B. Auto Dealers Coverage Form C. Garagekeepers endorsement to business auto D. Drive other Car Coverage - C. Garagekeepers endorsement to business auto The Motor Carrier Act of 1980 requires minimum liability limits of ______ when transporting specified hazardous materials such as explosives. A. 1,000, B. 2,000, C. 2,500, D. 5,000,000 - D. 5,000, To determine which autos are covered autos in a Business Auto Coverage form, you should refer to the A. Declarations Page B. Insuring Clause C. Policy Conditions D. Policy Endorsements - A. Declarations Page Which is NOT true about Ocean Marine policies? A. They are manuscripted policies B. They must be filed and approved before use C. they can be used to insure ships and boats D. they can be used to insure a ship's cargo - B. They must be filed and approved before use Inland Marine policies are frequently used to cover all of the following EXCEPT A. Buildings B. Property held by a bailee C. off premises business personal property D. off premises mobile equipment - A. Buildings The Nationwide Marine Definition does which of the following? A. lists everything that can be covered by an Ocean Marine policy B. Lists everything that can be covered by an Inland Marine policy C. Lists the risks that cannot be covered by a Marine policy D. Generally distinguishes Marine risks from Property risks - D. Generally distinguishes Marine risks from Property risks
