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NC Property Insurance Practice Exam
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Under a Personal Property Floater, a loss is covered when it occurs: A.in the insured's home only B.in the United States only C.in the United States or Canada only D.anywhere in the world - correct answer D A Commercial Property policy specifies which of the following responsibilities as a duty of the insured? A.To return the policy if it is canceled by the insurer B.To provide a sworn Proof of Loss statement if requested by the company C.To pay the mortgagee in full in the event of a total loss D.To pay premiums within thirty days after receiving an invoice - correct answer B The Personal Liability section of a Homeowners policy covers which of the following options? A.Damage to an insured's property caused by a visitor B.Bodily injury to a resident caused by a neighbor's dog C.Property damage caused by war D.Bodily injury caused by the personal activities of an insured - correct answer D The principle of indemnity is designed to avoid: A.two policies sharing payment for a loss B.overpayment of a claim C.the return of earned premiums D.a Coinsurance clause of less than 80 percent - correct answer B An insured's HO-2 Form has a $100,000 coverage limit on the dwelling and a $50,000 Personal Property limit with the standard deductible. If a sailboat valued at $1,500 is stolen from the insured's premises, the insured will collect a MAXIMUM of which of the following amounts? A.$1, B.$1, C.$1,
D.$1,500 - correct answer B A primary obligation of an insurer is to: A.pay the claims covered under the policy B.provide a financial statement with each policy C.make inspections and surveys of insured property D.prepare an inventory after a loss - correct answer A Inland Marine insurance is commonly used to insure all of the following items EXCEPT: A.automobiles B.stamps C.camera equipment D.jewelry - correct answer A G insures G's television repair shop under a Building and Personal Property Coverage Form with limits of $100,000 on the building and $50,000 on business personal property. A fire causes $10,000 in damage to the building and $20,000 in losses to the contents. G also has to pay $1,000 for debris removal. If the policy has a deductible of $250, G will receive a MAXIMUM of which of the following amounts from the insurer? A.$29, B.$30, C.$30, D.$31,000 - correct answer C Which of the following businesses would be eligible for a Businessowners policy? A.Auto body shop B.Theater C.Branch bank D.Barber shop - correct answer D An insured has an HO-3 Form. When using a snowblower borrowed from a neighbor, the insured strikes a large rock and causes $2,000 worth of damage to the snowblower. Under which section of the policy could payment be made on the insured's behalf? A.Personal Property B.Building C.Personal Liability
D.pro rata return - correct answer C Which of the following phrases BEST defines a hazard? A.A condition that increases the chance of a loss B.The uncertainty of a loss C.The cause of a loss D.An unexpected loss - correct answer A A Commercial Building and Personal Property form provides coverage for: A.a patio attached to the building B.business personal property C.personal auto held for sale D.guard dogs - correct answer B Under a Homeowners policy, an insured is required to take all of the following actions when a covered loss occurs EXCEPT: A.give prompt notice to the insurer or its producer B.hire an appraiser to determine the amount of loss C.notify the police if the loss is the result of theft D.protect the property from further loss - correct answer B An insured owns a set of six drawing pens designed and used by Benjamin Franklin. Each pen is worth $1,000 alone, but the set is worth $12,000. One pen is destroyed by a covered peril. Under the Pair and Set clause, the insurer will pay a MAXIMUM of which of the following amounts? A.$1, B.$2, C.$7, D.$12,000 - correct answer C Which of the following statements about a mortgagee's rights under the Dwelling Property Basic Form (DP-1) is INCORRECT? A.No act by the insured will jeopardize the mortgagee's rights. B.The mortgagee may file a Proof of Loss if the insured fails to do so. C.The mortgagee is entitled to receive prior notice of a policy's cancellation. D.The mortgagee may abandon the insured property to the insurer. - correct answer D
A deer jumps through the window of an insured's home, damaging the interior and exterior walls. Which of the following Homeowners Forms listed below is the LEAST comprehensive form that will still provide coverage for this loss? A.HO-1 Form B.HO-2 Form C.HO-3 Form D.HO-5 Form - correct answer C S is purchasing a Commercial Property policy to cover a commercial building with a replacement cost of $100,000. The policy includes an 80 percent Coinsurance clause. To avoid a coinsurance penalty in the event of a partial loss, S should purchase a policy with minimum limits of AT LEAST which of the following amounts? A.$100, B.$90, C.$80, D.$20,000 - correct answer C During a tornado, a barn is destroyed when a section of its wall is blown down, knocking over a lantern, which sets the barn on fire. The proximate cause of loss is the: A.fire B.collapse of the wall C.tornado D.smoke - correct answer C All of the following options are examples of insurable interest EXCEPT: A.a person's interest in property she is buying on contract B.a tenant's interest in improvements she has made to a leased building C.a TV repairman's interest in a customer's TV which has been repaired but is still on premises D.an individual's interest in property her parents will someday leave to her - correct answer D Special Form or Open Perils coverage: A.Provides coverage against the named perils B.Provides coverage against scheduled risks C.Is limited by the named exclusions D.Includes no exclusions - correct answer C
Which of the following coverages may be added by endorsement to a Boiler and Machinery policy? A.Expediting Expenses B.Extra Expense C.Property Damage Liability D.Damage to Property of the Insured - correct answer B In a Commercial Property form, if a building is left vacant, coverage for vandalism will continue for up to how many days? A.Thirty B.Forty-five C.Sixty D.Ninety - correct answer C Which of the following Homeowners coverages does NOT generally contain a deductible? A.Personal property B.Other structures C.Liability D.Dwelling - correct answer C Information provided by the insured in a Proof of Loss is considered: A.a warranty B.a representation C.an assignment D.an agreement - correct answer B Which of the following terms can be defined as a policy provision that omits certain risks from coverage? A.Declarations B.Insuring Agreement C.Conditions D.Exclusions - correct answer D Actual cash value is most often defined as which of the following options? A.Replacement cost less depreciation
B.Amount paid less depreciation C.Fair market value plus appreciation D.Appraised value - correct answer A A building adjacent to an insured's business is severely damaged by fire. Because of the nature of the damage to the adjoining property, the insured is denied access to the business by the fire department. If the insured's property is covered under a Business Income Coverage Form, the insurer will cover the loss of earnings for a MAXIMUM of: A.three weeks B.thirty days C.sixty days D.six months - correct answer A A fire in an insured's restaurant burns the kitchen walls and causes smoke damage to the entire interior. Water used to extinguish the fire causes extensive damage to floors and furnishings. The water damage is best described as: A.a time element loss B.a consequential loss C.a direct loss D.an indirect loss - correct answer C Which of the following sources may be used to provide property insurability information? A.Police records B.Physical inspections C.Checking account statements D.Lie detector tests - correct answer B All of the following perils are covered under a Building and Business Personal Property Coverage Form with a Causes of Loss-Basic Form attached EXCEPT: A.smoke B.sprinkler leakage C.sinkhole collapse D.earth movement - correct answer D The procedure for resolving a disagreement between an insured and an insurer about a loss is described in which of the following parts of an insurance policy?
B.Hazard C.Peril D.Cause - correct answer A A Commercial Package policy must include at least how many coverage parts? A.One B.Two C.Three D.Four - correct answer B Which of the following perils is covered by Broad Form perils but is not covered by the Basic Form? A.Vandalism B.Weight of ice and snow C.Riot D.Windstorm - correct answer B Pro-rata cancellation occurs when: A.a policy is nonrenewed B.a mortgage has been satisfied C.an insured cancels a policy at inception D.an insurer cancels a policy at any time - correct answer D A company's promise to pay for damage caused by or resulting from any covered Cause of Loss would be found in which of the following sections of a Commercial Property policy? A.Declarations B.Insuring Agreement C.Conditions D.Exclusions - correct answer B If an owner-occupied dwelling is totally destroyed without criminal fault on the part of the insured, the amount of the loss covered by a property policy would be based on: A.a depreciated value of the dwelling B.the policy limits C.the market value of the dwelling
D.the assessed value of the dwelling - correct answer B The Insurance Commissioner may issue a limited insurance representative license to an individual who wants to sell which of the following types of policies? A.Fire B.Automobile C.Mortgage Guaranty D.Health - correct answer C The Insurance Commissioner may suspend, revoke, or deny a producer's license for all of the following reasons EXCEPT: A.untrue statements on the license application B.conviction of a misdemeanor C.incompetency D.converting funds - correct answer B XYZ Insurance Company recently received its certificate of authority to sell property insurance in Illinois. XYZ is an Iowa insurer but will sell its products through its licensed Illinois producers. Which of the following statements is CORRECT about XYZ Company's involvement in the FAIR Plan? A.XYZ may not join the FAIR Plan, because it is a foreign company. B.XYZ may not join the FAIR Plan, because its producers are licensed in Illinois. C.Membership in the FAIR Plan is optional for XYZ. D.XYZ must belong to the FAIR Plan because it has a certificate of authority to sell homeowners insurance in Illinois. - correct answer D An individual appointed by an insurer to solicit applications for a policy of insurance or to negotiate a policy on its behalf is known as: A.an adjuster B.a consultant C.an insurance broker D.an insurance producer - correct answer D An insurer that permits different rate classifications for individuals of the same class and same hazard may be guilty of: A.boycotting B.unfair discrimination
D.pay a $3,000 fine per violation to the Division of Insurance - correct answer C Upon determining that a producer has violated the insurance law, the Insurance Commissioner is required to take which of the following actions? A.Place the licensee on probation immediately B.Publish notice of the violation C.Hold a hearing on the infraction D.Submit the infraction to the Department of Insurance for review - correct answer C The purpose of the FAIR Plan is to provide: A.automobile insurance for high-risk drivers B.crime insurance for residents of high-risk neighborhoods C.property insurance on recreational vehicles for which such coverage is unavailable in the regular market D.basic property insurance for which coverage is not available in the regular market - correct answer D After an insurer receives a satisfactory proof of loss from an insured on a fire loss, payment is due within a MAXIMUM of how many days? A.Five B.Thirty C.Sixty D.Ninety - correct answer A Which of the following situations is considered an insurance transaction? A.Two insurance companies share actuarial data. B.Two parties negotiate the term of coverage when executing an insurance contract. C.An independent audit company reviews a domestic insurer's records for a fee. D.An insured sends a policy to the bank in preparation for a mortgage closing. - correct answer B Making false or misleading statements about dividends or shares of surplus previously paid on an insurance policy is known as: A.unfair discrimination B.rebating C.coercion D.misrepresentation - correct answer D
In this state, a domestic insurer is defined as a company that: A.operates in this state but is incorporated in another state B.operates in this state but is domiciled in another state C.is headquartered in this state D.is incorporated in this state - correct answer D All of the following items contained in a basement are covered under the standard flood insurance policy EXCEPT: A.drywall for walls and ceilings and the cost of labor to nail it, unfinished and unfloated and not taped, to the framing B.functioning electrical outlets and switches C.carpet permanently installed over unfinished flooring D.fuel tanks, if installed in their functioning locations and connected to a power source - correct answer C An insurer that intends to nonrenew a Homeowners policy MUST take which of the following actions? A.Obtain coverage for the policyholder from another insurer B.Obtain coverage for the policyholder under the FAIR Plan C.Send a nonrenewal notice to the Commissioner of Insurance thirty days prior to the policy expiration date D.Send a notice stating the reason for nonrenewal to the insured - correct answer D After an insurance producer license is issued, a licensee MUST complete how many hours of approved continuing education courses every two years? A.Ten B.Fifteen C.Twenty D.Twenty-four - correct answer D Coverage of goods in transit is usually provided by which of the following types of insurance? A.Casualty B.Surety C.Inland marine D.Automobile - correct answer C
