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SectionsSection 1 of 32 ANSWER A ( p. 2.10)p. 8ANSWER A ( p. 2.11)p. 10ANSWER
A ( p. 2.13)p. 15ANSWER A ( p. 3.8)p. 16ANSWER A ( p. 3.9)p. 17ANSWER A ( p.
3.14)p. 19ANSWER A ( p. 3.16)p. 23ANSWER A ( p. 4.3)p. 23ANSWER A ( p. 4.5)p.
24ANSWER A ( p. 4.7)p. 26ANSWER A ( p. 4.10)p. 27ANSWER A ( p. 4.15)p.
28ANSWER A ( p. 4.17)p. 30ANSWER A ( p. 4.19)p. 31ANSWER A ( p. 4.20)p.
32ANSWER A ( p. 5.10)p. 37ANSWER A ( p. 6.17)p. 46ANSWER A ( p. 6.20)p.
47ANSWER A ( p. 8.5)p. 57ANSWER A ( p. 8.8)p. 58ANSWER A ( p. 8.9)p. 58ANSWER
A ( p. 8.11)p. 59ANSWER A ( p. 8.14)p. 60ANSWER A ( p. 8.16)p. 67ANSWER A ( p.
9.5)p. 67ANSWER A ( p. 9.6)p. 68ANSWER A ( p. 9.10)p. 71ANSWER A ( p. 9.15)p.
73ANSWER A ( p. 9.18)p. 73ANSWER A ( p. 10.7)p. 81ANSWER A ( p. 10.8)p. 82Zoom
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Chapter 1 QUESTION 0
Within the realm of Risk Management, insurance is a technique that is often
used. When insurance is used it is
primarily attempting to
a. Isolate the cost of losses.
b. Prevent the cost of losses.
c. Reduce the cost of losses.
d. Transfer the cost of losses.
ANSWER D
QUESTION
When insurance is used to transfer possible losses to the insurer, the vehicle
that accomplishes this transfer is the
a. Policy.
b. Agent.
c. Letter of transfer.
d. Broker of record letter.
ANSWER A
QUESTION
An insurance policy is a contract that states the rights and duties of
a. The insured and insurer and agent.
b. The insured and the insurer.
c. The insured and the agent.
d. The insured and other third parties.
ANSWER B
QUESTION Transferring the costs of losses to an insurer would be unnecessary, if
there were no
a. Exposures to loss.
b. Civil courts.
c. Agents.
d. Reinsurance.
ANSWER A
QUESTION
Making a profit for the insurance company is a major objective for which one of
the following departments?
a. Underwriting department
b. Finance department
c. Marketing department
d. Claims department
ANSWER A
QUESTION
An insurance company pays for covered losses and, in effect, distributes the
costs of losses among all
a. Insurers in a state.
b. Insureds.
c. Members of society.
d. Claimants.
ANSWER B
QUESTION
All of the following statements regarding loss exposures are true, EXCEPT:
a. There would be no need to transfer the costs of losses if there were no
exposures to loss. b. For a loss exposure
to exist, there must be the possibility of a loss.
c. It is necessary for a loss to occur for a loss exposure to exist. d. Every
home has a fire loss exposure.
ANSWER C QUESTION
The law of large numbers is a mathematical principle that states that as the
number of similar but independent
exposure units increases, the relative
a. Accuracy of predictions about future outcomes decreases.
b. Accuracy of predictions about future outcomes increases.
c. Frequency of predictions about future outcomes decreases.
d. Frequency of predictions about future outcomes increases.
ANSWER B
QUESTION
In order for the law of large numbers to operate, insurance companies need to
insure
a. A large number of similar exposure units.
b. Exposure units that are widely dispersed.
c. Exposure units that have not had losses.
d. A large number of unique exposure units.
ANSWER A
QUESTION
What states that as the number of similar but independent units increases, the
relative accuracy of predictions
about future outcomes based on these exposure units also increases?
a. The principle of indemnity
b. The principle of reciprocal pricing
c. Loss trending and forecasting
d. The law of large numbers
ANSWER D
QUESTION
John has worked for Alloto, Inc. for 25 years and is considering retiring within
the next two years. John's
retirement is an example of
a. A personnel loss exposure for Alloto, Inc.
b. A human loss exposure for Alloto, Inc.
c. A liability loss exposure for Alloto, Inc.
d. A loss transfer loss exposure for Alloto, Inc.
ANSWER A
QUESTION
Pam operates a home business that requires her clients to come to her house. The
possibility of one of Pam's
clients tripping on a step leading to Pam's house and injuring herself is a
a. Property loss exposure.
b. Liability loss exposure.
c. Personnel loss exposure.
d. Human loss exposure.
ANSWER B
QUESTION
The possibility of Chuck's house being damaged by fire is
a. A property loss exposure relating to real property.
b. A property loss exposure relating to personal property.
c. A noninsurable loss exposure.
d. A commercial loss exposure. ANSWER A OBJECTIVE 4
QUESTION
All of the following are characteristics of ideally insurable loss exposures,
EXCEPT:
a. Losses that are definite and measurable
b. Losses that are accidental
c. Large number of similar exposure units
d. Large concentration of financial capacity
ANSWER D
QUESTION
Which one of the following is most likely to have the characteristics of an
ideally insurable loss exposure?
a. Explosion of an industrial factory steam boiler
b. Sun damage to an exterior paint finish
c. Physical damage to a lunar land rover
d. Termite damage to a home
ANSWER A
QUESTION
One of the major reasons why government insurance programs exist is because the
insurance may
a. Not be available from private insurers.
b. Be too complicated for private insurers to write.
c. Not be allowed to be written by private insurers.d. Be a significant source
of revenue for the government.
ANSWER A
( pp. 1.11-1.12) QUESTION
All of the following are types of insurance provided by the federal government,
EXCEPT:
a. Flood insurance
b. Crop insurance
c. Tenants insurance
d. Social Security
ANSWER C
( p. 1.11) QUESTION
Government insurance programs exist because
a. The government has expertise in handling insurance claims.
b. The government has the necessary financial resources.
c. The government has infrastructure and staff to provide insurance.
d. The government has legal representatives in every state of the union.
ANSWER B ( p. 1.11)
OBJECTIVE 6
QUESTION
The department in an insurance company that is primarily concerned with
determining customer's needs and
then promoting products/services to meet those needs is the
a. Customer service department.
b. Underwriting department.
c. Public relations department.
d. Marketing department.
ANSWER D
( pp. 1.12-1.13) QUESTION
What is the process by which insurers decide which potential customers to insure
a. 75%
b. 90%
c. 105%
d. 115%
ANSWER B ( p. 3.18) QUESTION A decrease in incurred losses will generally cause
a decrease in all of the following, EXCEPT: a. Combined ratio
b. Expense ratio
c. Overall ratio
d. Loss ratio
ANSWER B ( pp. 3.16-3.17) OBJECTIVE 8
QUESTION
The capacity ratio compares an insurer's written premiums to its
a. Total liabilities.
b. Admitted assets.
c. Policyholders' surplus.
d. Earned premiums.
ANSWER C ( p. 3.20) QUESTION
Old Faithful Insurer has written premiums of $1,400,000 and policyholders'
surplus of $400,000. What does the
capacity ratio indicate about Old Faithful Insurer?
a. Financial weakness
b. Financial strength
c. Operating strength
d. Operating weakness
ANSWER A ( p. 3.20) OBJECTIVE 9
QUESTION
The liability that represents insurance premiums that are prepaid for service
that the insurer has not yet rendered
is the
a. Written premium reserve.
b. Estimated premium reserve.
c. Projected premium reserve.
d. Unearned premium reserve.
ANSWER D ( p. 3.12) QUESTION Comparing an insurer's incurred losses to its
earned premiums will determine its a. Loss ratio.
b. Expense ratio.
c. Operating ratio.
d. Combined ratio.
ANSWER A ( p. 3.16) INS 21 Questions Answers Materials Dumps Chapter 4 QUESTION
Principals often authorize another party to act on their behalf. This
relationship is called a. Broker.
b. Fiduciary.
c. Agency.
d. Attorney in fact.
ANSWER C ( p. 4.3) QUESTION When an agency relationship is created between a
principal and the agent, it requires a high degree of a. Trust.
b. Patience.
c. Oversight.
d. Creativity.
ANSWER A ( p. 4.3) QUESTION When an insurer appoints an agent to act its behalf,
the agent's scope of authority is spelled out in the a. Broker of record letter.
b. Insurance contract.
c. Agency contract.
d. Letter of intent.
ANSWER C ( p. 4.4) QUESTION All of the following are true about the insurance
agency relationship, EXCEPT: a. The agency agreement is a written agreement
between the insurer and an agent b. The agency agreement gives the agent the
right to represent the insurer and sell insurance on the insurer's
behalf
c. The principal is the party the agent authorizes to bind coverage
d. The agent is the party authorized by the principal to act on the principal's
behalf
ANSWER C ( p. 4.3) QUESTION Which one of the following statements is true
regarding the agency contract? a. The agent is the principal in the agency
contract relationship.
b. An agency contract is also known as an agency endowment.
c. Insurance agency contracts usually have a fixed expiration date.
d. The agency contract states the scope of the agency's authority to conduct
business for the insurer.
ANSWER D ( p. 4.4) OBJECTIVE 1
QUESTION
In an insurance agency relationship, the agent's fundamental responsibility is
to act for the benefit of the
a. Insured.
b. Insurer.
c. Broker.
d. Policyholder.
ANSWER B ( p. 4.4) QUESTION The primary duty of a principal to its agent is to
a. Pay the agent for services performed.
b. Generate sales leads for the agent.
c. Hire and train sales people.
d. Be obedient.
ANSWER A ( p. 4.5) QUESTION From an insured's point of view, relative to the
concept of agency, little distinction exists between the a. Broker and the
claimant.
b. Insurance agent and the insurance department.
c. Broker and the insurer.
d. Insurance agent and the insurer.
ANSWER D ( p. 4.5) QUESTION The laws of agency impose all of the following
specific duties on agents, EXCEPT: a. Profitability
b. Obedience
c. Loyalty
d. Accounting
ANSWER A ( pp. 4.4-4.5) QUESTION The laws of agency impose all of the following
specific duties on all agents, EXCEPT: a. Prudence
b. Accounting
c. Loyalty
d. Relaying information
ANSWER A ( pp. 4.4-4.5) QUESTION Which one of the following is the principal's
primary duty to the agent? a. To pay the agent for services performed
b. To act as the agent's legal representative
c. To educate and train the agent
d. To act on behalf of the agent in court proceedings
ANSWER A ( p. 4.5) OBJECTIVE 2
QUESTION
The authority that the principal specifically grants to the agent is contained
in the agency contract. This authority
is known as
a. Implied authority.
b. Apparent authority.
c. Express authority
d. Contractual authority.
ANSWER C ( p. 4.6) QUESTION
The scope of an agent's authority can go beyond the terms of the agency contract
and may include authority to
perform other tasks necessary to accomplish the purpose of the agency
relationship. This authority is referred to
as a. Implied authority.
b. Apparent authority.
c. Express authority
d. Contractual authority.
ANSWER A ( p. 4.7) QUESTION
An agent may at times act on behalf of the principal in ways that the principal
did not intend, and a third party
reasonably believes that the agent has sufficient authority. This authority is
known as
a. Implied authority.
b. Apparent authority.
c. Express authority
d. Contractual authority.
ANSWER B ( p. 4.7) QUESTION The authority that the principal specifically grants
the agent is called a. Implied authority.
b. Express authority.
c. Apparent authority.
d. Conditional authority
ANSWER B ( pp. 4.6-4.7) QUESTION
When an insurance company appoints an insurance agent to serve as its
representative, what specifies the scope
of authority given to the agent in this relationship?
a. Implied authority
b. Binding authority
c. A unilateral contract
d. An agency contract
ANSWER D ( pp. 4.6-4.7) QUESTION Authority that the insurance company
specifically grants to an agent is called a. Binding authority
b. Express authority
c. Implied authority
d. Apparent authority
ANSWER B ( pp. 4.6-4.7) OBJECTIVE 3
QUESTION
One of the main distinguishing features between independent agency systems and
other marketing systems is
the ownership of
a. The company expiration list.
b. Insurance company stock.
c. The sales prospecting list.
d. The agency expiration list.
ANSWER D ( p. 4.9) QUESTION An independent business owner or firm that sells
insurance by representing customers rather than insurers is a. An insurance
broker.
b. A managing general agency.
c. An exclusive agent.
d. A direct writer.
ANSWER A ( p. 4.10) QUESTION
If a consumer or policyholder had a preference for dealing with sales
representatives who are employees of the
insurer, which marketing system would they choose?
a. Insurance broker
b. Managing general agency
c. Exclusive agent
d. Direct writer
ANSWER D ( p. 4.11) QUESTION
An independent business owner or firm that sells insurance by representing
customers rather than insurance
companies is which one of the following?
a. An independent adjuster
b. An underwriter
c. An insurance broker
d. An insurance carrier
ANSWER C ( p. 4.10) OBJECTIVE 4
QUESTION
Sometimes an agent may be eligible for a commission based on its premium volume
and profitability. This type
of compensation is called
a. A contingent commission.
b. A sales commission.
c. An indirect commission.
d. An annual commission.
ANSWER A ( p. 4.15) QUESTION
Sometimes a policy is cancelled or non-renewed even though the agent was paid
its commission. In these
situations the agent will be requested to return the
a. Earned commission.
b. Unearned commission.
c. Contingent commission.
d. Estimated commission.
ANSWER B ( p. 4.14) QUESTION At the end of the year, agencies that have
carefully selected business throughout the year can earn a sizeable a.
Contingent commission.
b. Sales commission.
c. Indirect commission.
d. Annual commission.
ANSWER A ( p. 4.15) QUESTION
For an independent agency or an exclusive agency, the percentage of the premium
that goes to the agency or to
the producer for new policies sold or existing policies renewed is the
a. Contingent commission
b. Profit sharing
c. Salary
d. Sales commission
ANSWER D ( pp. 4.14-4.15) QUESTION An independent agent received his monthly
commissions for the new policies he has sold. Even though he wrote twenty new
policies that month, his commission was low. Which one of the following explains
why this could occur? a. Commissions are not fully earned at the time of a sale.
Other policies written by the agent might have been
cancelled with the unearned portion of the commission returned to the insurance
company.
b. The agent failed to provide the level of service required by the insurance
company. The insurance commission
was reduced as an incentive for better performance.
c. The agent did not meet the premium volume and profitability levels that were
specified in his contract;
therefore, his commission was reduced.
d. The agent is a salaried employee of the insurance company and receives only
contingent commissions.
ANSWER A ( pp. 4.14-4.15) QUESTION
The managers of an independent agency are hoping to earn contingent commissions
from several insurers at the
end of the year. What should the agency managers attempt to do to earn
contingent commissions?
a. Reduce the number of homeowners policies written for houses in urban areas
compared to the homeowners
policies written for houses in rural areas.
b. Reduce the number of employees required to acquire and service the policies
in the agency.
c. Increase the premium volume and profitability level of the agency's business
with those insurers.
d. Increase the level of customer service provided to policyholders and
claimants.
ANSWER C ( pp. 4.15-4.16) OBJECTIVE 5
QUESTION
With respect to advertising, programs that emphasize the names of both the
insurer and the agent are typically
the
a. Agents' Trade Association.
b. Exclusive agency system.
c. Direct writing system.
d. Independent agency system.
ANSWER B ( p. 4.16) QUESTION Advertising by independent agencies promotes a.
Brand recognition of the companies represented.
b. The agency rather than the insurers it represents.
c. Symbols used to increase recognition of the insurers represented.
d. Attention to the prices of the policies offered.
ANSWER B ( pp. 4.15-4.16) ANSWER C ( p. 5.13) OBJECTIVE 5
QUESTION
An underwriter is reviewing an application for a start-up business that is
planning on opening in about one
month. Overall the underwriter is impressed with the account but would like to
obtain more information on the
owners of the business, especially their experience. Which one of the following
sources of underwriting
information would be most helpful to the underwriter in this situation?
a. Claim files
b. Premium audit reports
c. Consumer investigative report
d. Applicant or insured's records
ANSWER D ( pp. 5.13-5.14) QUESTION
An underwriter is reviewing an application for a business that is just being
created. The business will
manufacture a product that the owner herself just invented. Which one of the
following sources of information
would probably be most helpful to the underwriter?
a. Claim files
b. Premium audit reports
c. Consumer investigative report
d. Previous carrier
ANSWER C ( pp. 5.13-5.14) QUESTION
A new underwriter is reviewing an application for a business that is just being
created. He's not comfortable that
he fully understands the nature of the product and the business involved. Which
one of the following sources of
information should he use to increase his comfort level?
a. Claim files
b. Premium audit report
c. Consumer investigative report
d. Producer
ANSWER D ( pp. 5.13-5.14) QUESTION
All of the following are sources of information underwriters use as they gather
information for underwriting,
EXCEPT:
a. Producers
b. Government records
c. Inspection reports
d. Educational records ANSWER D ( pp. 5.13-5.14) OBJECTIVE 6
QUESTION
Which one of the following represents a physical hazard in the GhostWriter
Publishing case?
a. The suspicious fire
b. The ownership of the building
c. The book-binding glue
d. The 50-gallon drum
ANSWER C ( pp. 5-15-5.16) QUESTION Which one of the following represents a
morale hazard in the GhostWriter Publishing case? a. Failure to install
sprinklers and ventilation
b. Use of the glue
c. The suspicious fire
d. The lack of profits
ANSWER A ( pp. 5.15-5.16) QUESTION Which one of the following represents a legal
hazard in the GhostWriter Publishing case? a. The treatment of the employees
b. The toxic pollution
c. The inability to provide GhostWriter's involvement in the fire
d. The court interpretation of the policy language
ANSWER D ( pp. 5.15-5.16) OBJECTIVE 7
QUESTION
In evaluating an application, an underwriter has three options: accept without
modification, reject, and accept
with modification. Which one of the following is most correct?
a. Accepting with modification requires the greatest amount of creativity.
b. Rejecting the application requires the greatest amount of creativity.
c. Accepting without modification requires the greatest amount of creativity.
d. Accepting with modification requires the least amount of creativity.
ANSWER A ( pp. 5.16-5.17) QUESTION When courts mandate coverage broader than the
insurers intended in its policies, this is referred to as a a. Moral hazard.
b. Legal hazard.
c. Judicial hazard.
d. Regulatory hazard.
ANSWER B ( p. 5.16) QUESTION
Why would an underwriter modify the rate charged for the coverage provided when
evaluating an application
for insurance?
a. Because treaty reinsurance in unavailable for the exposures indicated
b. To address the moral hazards the underwriter identified during investigation
c. To better match the rate to the characteristics of the risk
d. Because the applicant is not acceptable for coverage
ANSWER C ( pp. 5.5.16-5.17) QUESTION
Which one of the following underwriting options requires the greatest amount of
underwriting creativity on the
part of the underwriter?
a. Accepting the application with modifications
b. Accepting the application without modifications
c. Processing the application without using an expert or knowledge-based system
d. Rejecting the application
ANSWER A ( pp. 5.16-5.17) OBJECTIVE 8
QUESTION
In evaluating an application, an underwriter thinks that the class of business
is not one that the company wishes
to write, but he would need to physically inspect it to be certain. He also
realizes that the business is located in an
undesirable section of the city. Based on the location alone, the underwriter
decides not to issue the policy.
According to many state insurance laws, this would be an example of
a. Diversification.
b. Unfair discrimination.
c. Fair discrimination.
d. Regulated discrimination.
ANSWER B ( pp. 5.16-5.17) QUESTION How do states prohibit unfair discrimination
by insurers? a. By reviewing each policy cancellation or nonrenewal and the
justification for the insurer's action
b. By maintaining a channel for policyholder complaints
c. By identifying it as an unfair trade practice in state insurance laws
d. By examining insurers' mission statements and objectives
ANSWER C ( pp. 5.19-5.20) QUESTION Why do states require that insurers notify
the insured before a policy is to be canceled or nonrenewed? a. To provide the
state an opportunity to investigate the reason for the cancellation or
nonrenewal
b. To give the policyholder an opportunity to replace the coverage
c. To eliminate the possibility of an insurer canceling all policies covering a
category of business or in a
geographic area
d. To reduce the opportunity for an insurer to red line
ANSWER B ( pp. 5.19-5.20) OBJECTIVE 9
QUESTION
In evaluating an application, an underwriter realizes that the amount of
insurance required is more than the
company is willing/able to provide. If the underwriter decides to issue the
policy for the requested limits, she
will probably need to secure
a. Treaty reinsurance.
b. Increased surplus.
c. Facultative reinsurance.
d. Coinsurance.
ANSWER C ( p. 5.11) QUESTION
If an insurance company's policyholders' surplus has decreased, this will
adversely impact how much business
they are able to write. When this situation happens it results in a reduction in
a. Capacity.
b. Retention.
c. Adverse selection.
d. Profits.
ANSWER A ( p. 5.4) Chapter 6 QUESTION
An insured suffers a serious loss, such as the destruction of his or her house,
and hires someone to represent his
or her interests. The person hired is
a. A staff adjuster.
b. A producer.
c. A public adjuster.
d. An independent adjuster.
ANSWER C ( pp. 6.7-6.8) QUESTION
Sometimes an insurer does not have enough policyholders in a given region to
justify hiring its own claim
representatives. In these situations, the insurer is likely to use
a. An independent adjuster.
b. A third party administrator.
c. A public adjuster.
d. A regional adjuster.
ANSWER A ( pp. 6.6-6.7) QUESTION
Sometimes an insurer will provide authority to some of its agents to settle and
pay certain types of claims up to a
specified limit. When this occurs it is called
a. Binding authority.
b. Settlement authority.
c. Temporary authority.
d. Producer authority.
ANSWER B ( p. 6.7) QUESTION Generally, an inside claim representative a. Meets
with parties involved with the loss
b. Handles claims by phone or mail from the insurer's office
c. Visits the scene of the loss to investigate damages
d. Offers claim settlement service for a fee to insurers
ANSWER B ( p. 6.5) QUESTION Mary's car collides with two other cars, and several
people are injured. The accident occurs near her insurer's branch office
location. What type claim representative will Mary's insurer generally use to
handle this claim? a. Independent adjuster
b. Public adjuster
c. Inside claim representative
d. Outside claim representative
ANSWER D ( p. 6.6) QUESTION All of the following describe an independent
adjuster, EXCEPT: a. Self-employed
b. Contracted by an insurer
c. Employee of an insurer
d. Employee of an adjusting firm
ANSWER C ( pp. 6.6-6.7) QUESTION
Jim notifies ABC Insurer of an accident with an ABC insured in a state in which
ABC does not do business. What
type of claim staff will ABC Insurer generally use to investigate this claim?
a. Inside claim representative
b. Outside claim representative
c. Independent adjuster
d. Independent agent
ANSWER C ( pp. 6.6-6.7) QUESTION
ABC Widget Company pays for all its property losses up to $3 million and
purchased insurance for losses over
$3 million. What is this plan called?
a. Coinsurance
b. Reinsurance
c. Self-insurance
d. Umbrella insurance
ANSWER C ( p. 6.8) QUESTION
XYZ Company has established a self-insurance plan to treat its loss exposures.
Other than its internal staff, what
resources would XYZ Company generally use to settle claims?
a. Independent adjusters b. Public adjusters
c. Third party administrators
d. Outside claim representatives
ANSWER C ( pp. 6.8-6.9) OBJECTIVE 1
QUESTION
Despite the unique challenges and variations from case to case, the last step in
the claim handling process is
usually
a. Determine cause of loss.
b. Determine the amount of damages.
c. Verify coverages.
d. Negotiate and settle.
ANSWER D ( p. 6.9) QUESTION
If an insured's house burns down to the ground due to lightening, the most
difficult part of the claim handling
process will probably be
a. Determining the cause of loss.
b. Verifying coverage.
c. Determining the amount of damages.
d. Determining insurable interest.
ANSWER C ( p. 6.13) QUESTION
In an auto accident where serious bodily injuries are involved, the most
difficult part of the claim handling
process will probably be
a. Verifying coverage.
b. Determining cause of loss
c. Negotiating and settling the claim.
d. Determining insurable interest.
ANSWER C ( p. 6.9) OBJECTIVE 2
QUESTION
In property insurance claims, there is sometimes a question of whether coverage
exists or not. In these situations
the insurer will send a reservation of rights letter. The purpose of this letter
is to advise the insured that
a. A coverage problem may exist. b. The claim will be handled by an independent
adjuster. c. The policy may not be renewed due to loss frequency. d. The claim
is in excess of their deductible. ANSWER A ( p. 6.10) QUESTION A person or
entity that would suffer a financial loss if their property were damaged has a.
A contractual interest.
b. A discretionary interest.
c. A renewable interest.
d. An insurable interest.
ANSWER D ( p. 6.10) QUESTION
If an insured submits a claim for a seven-year-old refrigerator that was damaged
due to lightening, the adjuster
will probably factor in an allowance for wear and tear. This is called
a. Replacement cost.
b. Depreciation.
c. Stated amount.
d. Agreed amount.
ANSWER B ( p. 6.14) QUESTION If an insured wants to receive "new for old" in the
event of a property loss, he or she would purchase a. Actual Cash Value (ACV).
b. Replacement cost.
c. Agreed value.
d. Market value.
ANSWER B ( p. 6.14) QUESTION
John has an unendorsed homeowner's policy. John's two-year-old bicycle is
stolen. The bicycle's purchase price
was $800, and depreciation is estimated at $450. What is the bicycle's actual
cash value?
a. $225
b. $350
c. $450
d. $800
ANSWER B ( p. 6.14) QUESTION Subrogation is the insurer's right to a. Recover
its claim payment from the party responsible
b. Drop a claim in exchange for an agreed amount of money
c. Estimate the value of the damaged property
d. Transfer coverage to a third party
ANSWER A ( p. 6.17) OBJECTIVE 3
QUESTION
In liability claims the claimant is referred to as the
a. Third party.
b. Second party.
c. First party.
d. Primary party.
ANSWER A ( p. 6.17) QUESTION With a liability claim, damages awarded for pain
and suffering incurred by the claimant are referred to as a. Punitive damages.
b. Special damages.
c. Secondary damages.
d. General damages.
ANSWER D ( p. 6.20) QUESTION What is an example of general damages? a. Hospital
expenses
b. Lost wages
c. Prescriptions
d. Disfigurement
ANSWER D ( p. 6.20) QUESTION A liability loss has the following damages: Medical
expenses $10,000
Damages for disfigurement $50,000
Damages for pain and suffering $100,000
What is the amount of special damages? a. $10,000
b. $50,000
c. $100,000
d. $160,000
ANSWER A ( p. 6.20) QUESTION A liability loss has the following damages: Medical
expenses $10,000
Damages for disfigurement $50,000
Damages for pain and suffering $100,000
What is the amount of general damages? a. $60,000
b. $110,000
c. $150,000
d. $160,000
ANSWER C ( p. 6.20) OBJECTIVE 4
QUESTION
Property insurers are subject to the possibility of many claims occurring from a
single event often straining their
resources. This is called
a. An accident.
b. An occurrence.
c. A catastrophe.
d. A simulation.
ANSWER C ( p. 6.21) QUESTION
In order to expedite claim handling during a catastrophe, an insurer will
consider modifying all of the following
procedures, EXCEPT:
a. Temporarily increasing claim handling authority for producers b. Making
advance payments to policyholders c. Using abbreviated claim handling procedures
d. Suspending the use of independent adjusting firms ANSWER D ( p. 6.23)
OBJECTIVE 5
QUESTION
One of the greatest challenges in dealing with a catastrophe is in the area of
staffing. Which one of the following
is an unlikely response to this challenge?
a. Identify and train staff from other areas to assist.
b. Establish relationships with independent adjusters to help manage overflow.
c. Purchase catastrophe reinsurance.
d. Bring in catastrophe teams of claims representatives from other regions.
ANSWER C ( p. 6.22) QUESTION The person hired by an insured to represent the
insured in handling a claim is called a a. First party adjuster.
b. Outside claim adjuster.
c. Independent adjuster.
d. Public adjuster.
ANSWER D ( p. 6.6) QUESTION
The insurer's right to recover and sell or otherwise dispose of insured property
on which the insurer has paid a
total loss is called
a. Fiduciary rights.
b. Salvage rights.
c. Constructive rights.
d. Catastrophe rights.
ANSWER B ( pp. 6.3-6.27) QUESTION A loss reserve determined by the claim
adjuster that is assigned to an individual claim is called a a. Case reserve.
b. Bulk reserve.
c. Third party reserve.
d. Deferred reserve.
ANSWER A ( pp. 6.20-6.24) Chapter 6 QUESTION
An insured suffers a serious loss, such as the destruction of his or her house,
and hires someone to represent his
or her interests. The person hired is
a. A staff adjuster.
b. A producer.
c. A public adjuster.
d. An independent adjuster.
ANSWER C ( pp. 6.7-6.8) QUESTION
Sometimes an insurer does not have enough policyholders in a given region to
justify hiring its own claim
representatives. In these situations, the insurer is likely to use
a. An independent adjuster.
b. A third party administrator.
c. A public adjuster.
d. A regional adjuster.
ANSWER A ( pp. 6.6-6.7) QUESTION
Sometimes an insurer will provide authority to some of its agents to settle and
pay certain types of claims up to a
specified limit. When this occurs it is called
a. Binding authority.
b. Settlement authority.
c. Temporary authority.
d. Producer authority.
ANSWER B ( p. 6.7) QUESTION Generally, an inside claim representative a. Meets
with parties involved with the loss
b. Handles claims by phone or mail from the insurer's office
c. Visits the scene of the loss to investigate damages
d. Offers claim settlement service for a fee to insurers
ANSWER B ( p. 6.5) QUESTION
Mary's car collides with two other cars, and several people are injured. The
accident occurs near her insurer's
branch office location. What type claim representative will Mary's insurer
generally use to handle this claim?
a. Independent adjuster
b. Public adjuster
c. Inside claim representative
d. Outside claim representative
ANSWER D ( p. 6.6) QUESTION All of the following describe an independent
adjuster, EXCEPT: a. Self-employed
b. Contracted by an insurer
c. Employee of an insurer
d. Employee of an adjusting firm
ANSWER C ( pp. 6.6-6.7) QUESTION
Jim notifies ABC Insurer of an accident with an ABC insured in a state in which
ABC does not do business. What
type of claim staff will ABC Insurer generally use to investigate this claim?
a. Inside claim representative
b. Outside claim representative
c. Independent adjuster
d. Independent agent
ANSWER C ( pp. 6.6-6.7) QUESTION
ABC Widget Company pays for all its property losses up to $3 million and
purchased insurance for losses over
$3 million. What is this plan called?
a. Coinsurance
b. Reinsurance
c. Self-insurance
d. Umbrella insurance
ANSWER C ( p. 6.8) QUESTION
XYZ Company has established a self-insurance plan to treat its loss exposures.
Other than its internal staff, what
resources would XYZ Company generally use to settle claims?
a. Independent adjusters
b. Public adjusters
c. Third party administrators
d. Outside claim representatives
ANSWER C ( pp. 6.8-6.9) OBJECTIVE 1
QUESTION
Despite the unique challenges and variations from case to case, the last step in
the claim handling process is
usually
a. Determine cause of loss.
b. Determine the amount of damages.
c. Verify coverages.
d. Negotiate and settle.
ANSWER D ( p. 6.9) QUESTION
If an insured's house burns down to the ground due to lightening, the most
difficult part of the claim handling
process will probably be
a. Determining the cause of loss.
b. Verifying coverage.
c. Determining the amount of damages.
d. Determining insurable interest.
ANSWER C ( p. 6.13) QUESTION
In an auto accident where serious bodily injuries are involved, the most
difficult part of the claim handling
process will probably be
a. Verifying coverage.
b. Determining cause of loss
c. Negotiating and settling the claim.
d. Determining insurable interest.
ANSWER C ( p. 6.9) OBJECTIVE 2 QUESTION
In property insurance claims, there is sometimes a question of whether coverage
exists or not. In these situations
the insurer will send a reservation of rights letter. The purpose of this letter
is to advise the insured that
a. A coverage problem may exist.
b. The claim will be handled by an independent adjuster.
c. The policy may not be renewed due to loss frequency.
d. The claim is in excess of their deductible.
ANSWER A ( p. 6.10) QUESTION A person or entity that would suffer a financial
loss if their property were damaged has a. A contractual interest.
b. A discretionary interest.
c. A renewable interest.
d. An insurable interest.
ANSWER D ( p. 6.10) QUESTION
If an insured submits a claim for a seven-year-old refrigerator that was damaged
due to lightening, the adjuster
will probably factor in an allowance for wear and tear. This is called
a. Replacement cost.
b. Depreciation.
c. Stated amount.
d. Agreed amount.
ANSWER B ( p. 6.14) QUESTION If an insured wants to receive "new for old" in the
event of a property loss, he or she would purchase a. Actual Cash Value (ACV).
b. Replacement cost.
c. Agreed value.
d. Market value.
ANSWER B ( p. 6.14) QUESTION
John has an unendorsed homeowner's policy. John's two-year-old bicycle is
stolen. The bicycle's purchase price
was $800, and depreciation is estimated at $450. What is the bicycle's actual
cash value?
ANSWER D ( p. 6.20) QUESTION A liability loss has the following damages: Medical
expenses $10,000
Damages for disfigurement $50,000
Damages for pain and suffering $100,000
What is the amount of special damages? a. $10,000
b. $50,000
c. $100,000
d. $160,000
ANSWER A ( p. 6.20) QUESTION A liability loss has the following damages: Medical
expenses $10,000
Damages for disfigurement $50,000
Damages for pain and suffering $100,000
What is the amount of general damages? a. $60,000
b. $110,000
c. $150,000
d. $160,000
ANSWER C ( p. 6.20) OBJECTIVE 4
QUESTION
Property insurers are subject to the possibility of many claims occurring from a
single event often straining their
resources. This is called
a. An accident.
b. An occurrence.
c. A catastrophe.
d. A simulation.
ANSWER C ( p. 6.21) QUESTION In order to expedite claim handling during a
catastrophe, an insurer will consider modifying all of the following procedures,
EXCEPT: a. Temporarily increasing claim handling authority for producers
b. Making advance payments to policyholders
c. Using abbreviated claim handling procedures
d. Suspending the use of independent adjusting firms
ANSWER D ( p. 6.23) OBJECTIVE 5
QUESTION
One of the greatest challenges in dealing with a catastrophe is in the area of
staffing. Which one of the following
is an unlikely response to this challenge?
a. Identify and train staff from other areas to assist.
b. Establish relationships with independent adjusters to help manage overflow.
c. Purchase catastrophe reinsurance.
d. Bring in catastrophe teams of claims representatives from other regions.
ANSWER C ( p. 6.22) QUESTION The person hired by an insured to represent the
insured in handling a claim is called a a. First party adjuster.
b. Outside claim adjuster.
c. Independent adjuster.
d. Public adjuster.
ANSWER D ( p. 6.6) QUESTION
The insurer's right to recover and sell or otherwise dispose of insured property
on which the insurer has paid a
total loss is called
a. Fiduciary rights.
b. Salvage rights.
c. Constructive rights.
d. Catastrophe rights.
ANSWER B ( pp. 6.3-6.27) QUESTION A loss reserve determined by the claim
adjuster that is assigned to an individual claim is called a a. Case reserve. b.
Bulk reserve.
c. Third party reserve.
d. Deferred reserve.
ANSWER A ( pp. 6.20-6.24) Chapter 8
----------------------------------------------------------------------------
Please refer the following 'Case Study' with appropriate Questions and Answers:
----------------------------------------------------------------------------
CASE: Printer's Thumb
The Printer's Thumb is a store specializing in printing and photocopying for
local businesses. The Printer's
Thumb's customers depend on fast and accurate service for their printing needs.
The Printer's Thumb has
developed a positive reputation by providing that service. The Printer's Thumb
occupies a building it owns;
Ultimate Lender holds the mortgage to the building. All of the equipment used
for printing and photocopying
was purchased with cash and is located in the building. The building and its
contents are covered by a property
insurance "special form coverage" policy.
One evening after working hours, lightning struck the building resulting in a
fire in the electrical wiring. Papers that had accumulated in the trash ignited
and substantial fire damage resulted. Damage resulted to the building, contents,
and a customer's original documents and files that were waiting to be copied.
Until repairs could be made, the Printer's Thumb rented a temporary office in an
available space in a local mall. The manager of The Printer's Thumb did not want
to lose the customers that he had worked so hard to develop by shutting down
servicing while repairs were made. All of The Printer's Thumb's customers have
agreed to continue business at the new location.
----------------------------------------------------------------------------
OBJECTIVE 0
QUESTION
There are two basic types of property: real property and personal property.
Wall-to-wall carpeting is typically
considered to be an example of real property because it
a. Tends to depreciate in value.
b. Is permanently installed.
c. Is readily visible.
d. Is easy to value.
ANSWER B ( p. 8.5) QUESTION Property insurance policies use the term "personal
property" to refer to the a. Contents of a building.
b. Equipment used to maintain the building.
c. Company's copyrights and trademarks.
d. Buildings not attached to the main building. ANSWER A ( p. 8.5) QUESTION
Many businesses have refrigeration equipment, production equipment, steam
boilers, and air conditioning
systems. These are all examples of
a. Property in transit.
b. Personal property.
c. Mobile equipment.
d. Boilers and machinery.
ANSWER D ( p. 8.7) OBJECTIVE 1
QUESTION
How will the claim representative assigned to The Printer's Thumb loss determine
whether the peril is covered
by the property policy?
a. If the peril is not specifically excluded by the policy, coverage is
provided.
b. If the peril is listed and described in the policy, coverage is provided.
c. If the manager of The Printer's Thumb can prove that the loss was caused by a
covered peril, coverage is
provided.
d. If the manager of The Printer's Thumb can prove that he was not responsible
for the loss, coverage is provided.
ANSWER A ( pp. 8.7-8.8) QUESTION
Many property insurance policies list the covered causes of loss they intend to
cover. These policies are
commonly known as
a. Special form.
b. Open perils.
c. Named perils.
d. Broad form.
ANSWER C ( p. 8.7) QUESTION
An important difference between named perils and special form coverage involves
the burden of proof. In a
special form policy, if a loss occurs to covered property it is initially
assumed that coverage applies. If there is a
question regarding coverage, the burden of proof will be on the
a. Insured.
b. Mortgagee.
c. Insurer.
d. Claimant.
ANSWER C ( p. 8.8) QUESTION
With a named perils policy, for coverage to apply, it must be proven that the
loss was caused by a covered cause
of loss. The burden to prove this is on the
a. Insured.
b. Mortgagee.
c. Insurer.
d. Claimant.
ANSWER A ( p. 8.8) OBJECTIVE 2
QUESTION
When property is lost or damaged, the value of the property is decreased. In
addition to direct damage to the
property there could be additional loss to the business known as
a. Lost income.
b. Deferred income.
c. Historical income.
d. Residual income.
ANSWER A ( p. 8.9) QUESTION
In order to determine the potential lost income to a business after a fire, an
analysis must be conducted to
determine projected income compared to post-lost income. This is referred to as
a
a. "What for" analysis.
b. "If only" analysis.
c. "What if" analysis.
d. "Why me" analysis.
ANSWER C ( p. 8.9) b. A deductible.
c. A policy limit.
d. The replacement value.
ANSWER A ( p. 8.30) QUESTION
Insurers generally have the option to repair, replace, or pay the value of lost
or damaged property. They will
usually go with the option that will
a. Reduce their costs.
b. Increase the insured's recovery.
c. Reduce the insured's costs.
d. Be the quickest.
ANSWER A ( p. 8.29) QUESTION
A portion of a covered property loss that is subtracted from the amount the
insurer would otherwise be obligated
to pay is the
a. Amount of the loan still outstanding.
b. Pro-rata premium.
c. Reinsurance.
d. Deductible.
ANSWER D ( p. 8.29) QUESTION Many property insurance policies impose a penalty
if the property is underinsured. This provision is known as a. Reinsurance.
b. Coinsurance.
c. The deductible.
d. Other insurance clause.
ANSWER B ( p. 8.30) OBJECTIVE 11
QUESTION
Under a property insurance policy, a fire that leaves its intended place is
known as a(n)
a. Hostile fire. b. Angry fire.
c. Uncontrolled fire.
d. Wild fire.
ANSWER A ( p. 8.16) QUESTION Willful and malicious damage to or destruction of
property is known as a. War.
b. Vandalism.
c. Burglary.
d. Robbery.
ANSWER B ( p. 8.19) INS 21 Questions Answers Materials Dumps Chapter 9 QUESTION
The law that consists of the body of principles and rules established over time
by courts on a case-by-case basis is
called
a. Administrative law.
b. Constitutional law.
c. Common law.
d. Regulatory law.
ANSWER C ( p. 9.5) QUESTION Laws made by formal enactments of legislative bodies
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