Insurance Exam Practice Questions and Answers

Insurance Exam Practice Questions and Answers

 

Which of the following annuity benefit payment options would generate the highest monthly payments to the contract owner upon annuitization?

 

Ans: Pure or straight life



All of the following are dividend options on a participating life insurance policy:

Paid-up additions
1-year term
Cash

 

The person upon whose life an annuity is based is known as the:

 

Insured

 

When a policyowner uses the cash value in their policy to buy a lesser amount of permanent life insurance, they have exercised which nonforfeiture option:

 

Reduced paid-up

 

Which of the following life insurance settlement options enables the beneficiary to conserve the proceeds of a life insurance policy?

 

Interest only

 

In the case of a variable annuity sold to a senior citizen in this state for which the owner has directed that the premium be invested in the mutual funds underlying the contract during the 30-day cancellation period, cancellation during that period entitles the owner to a refund of:

 

The account value

 

 

 

They are purchased by those who are worried about outliving their savings.

 

They are not suitable as short term investments.

They may be used as a life insurance settlement option.

 

 

All of the following are true regarding annuities

 

 

 

Which of the following would not be considered to be ordinary life insurance?

 

 

Group (Life Insruance)

 

 

 

Which type of term life insurance has a level face amount but a premium that increases each year as the insured gets older?

 

 

Renewable

 

 

 

 

The transfer of risk to an insurance company is an effective risk management technique when:

 

 

 

The amount and frequency of future losses are unknown

 

 

 

 

If a corporation and a shareholder enter into an agreement that requires the corporation to buy the shareholder’s shares upon his or her death, they have entered into:

 

 

 

A buy/sell agreement

 

 

 

The greater the number of similar exposure units insured, the easier it will be to predict future claims based upon the law of:

 

 

 

Large numbers

 

 

 

 

Which risk classification will have the highest premium?

 

 

 

Non-standard

 

 

 

 

The person upon whose life a life insurance policy is based is known as the:

 

 

 

Insured

 

 

 

A client who wants life insurance protection and cash values that fluctuate in value based upon the performance of a separate account should purchase:

 

 

 

Variable life

 

 

 

 

When making a life settlement, a policyowner will permanently transfer all rights of ownership in the policy to another party by making a(n):

 

 

 

Absolute assignment

 

 

 

 

Which of the following completes the application for life insurance?

 

 

 

Applicant

 

 

 

 

If the beneficiary of a life insurance policy wants $1,000 per month for as long as the money lasts, they should choose the ________ settlement option.

 

 

 

Fixed amount

 

 

 

 

The incontestability clause in a life insurance policy protects the insured by preventing an insurer from denying a claim:

 

 

 

After the policy has been in effect for a specified period of time

 

 

 

 

Under social security, being fully insured entitles a worker and family to full benefits. To achieve fully insured status, an individual must attain at least ____ quarters of coverage.

 

 

 

40

 

 

 

 

Where replacement is involved, every life insurer that uses an agent in a life insurance or annuity sale shall send to the existing life insurer a written communication advising of the replacement within ____ working days of the date the application was received.

 

 

 

3

 

 

 

 

The premium that an employer pays for group life insurance coverage for an employee that exceeds $50,000 in coverage is:

 

 

 

Taxable as income to the employee

 

 

 

 

If a whole life policy is being kept in force by use of the waiver of premium rider, what happens to the policyowner’s cash value?

 

 

 

It will accumulate in the usual manner

 

 

 

 

Adding a comprehensive long-term care rider to a life insurance policy will provide the insured with which of the following coverages:

 

 

 

Nursing home and home based care

 

 

 

 

Under a long-term care rider, which of the following are considered to be activities of daily living?

 

 

 

Dressing and eating

 

 

 

 

When making a life settlement, a policyowner will permanently transfer all rights of ownership in the policy to another party by making a(n):

 

 

 

 

Absolute assignment

 

 

 

 

 

Indemnify Insurance, Inc. writes Ocean Marine policies using a deductible amount that is stated on the form and applies to any loss covered by the policy. This is known as:

 

 

 

 

An average deductible

 

 

 

 

 

Which of the following would NOT be included in an adjuster’s initial / field / preliminary report?

 

 

 

 

The results of mediation

 

 

 

 

 

which of the following statements about Excess Liability insurance policies is FALSE?

 

 

 

 

They can be written to broaden the coverage of the underlying liability policy

 

 

 

 

 

 

Adrianna owns a dwelling that is covered under a DP-3 form and located in a rural area close to a small wooded area. While grazing outside of Adrianna’s picture window one day, a deer sees its own reflection and jumps through the picture window to scare off the “other” deer. Once inside the dwelling, the deer realizes he is trapped and causes significant damage to the walls, floor and furniture. Adrianna is covered for $100,000 under Coverage A and for $50,000 under Coverage C. Which of the following statements is TRUE regarding this loss?

 

 

 

 

 

The insurer would deny the claim for the personal property and pay the loss to the dwelling on an RCV basis. is correct.

 

 

 

 

 

Which of the following is generally not considered to be a legal defense against claims of negligence?

 

 

The loss to the plaintiff was caused intentionally by the defendant.

 

 

 

 

 

Alec goes to an amusement park and rides a roller coaster that was designed to flip the riders upside down. Alec is taller than the average person so when the roller coaster flips, he hits his head on the safety bar. After receiving medical care, Alec files a claim against the amusement park, seeking payment for his medical bills, pain and suffering. What defense against negligence would the amusement park most likely use to deny this claim?

 

 

 

 

 

Assumption of risk.

 

 

 

 

The NAIC Model Unfair Claim Settlement Practices Act specifies that the insurance company must provide the proper claim forms with a reasonable explanation of how to use them to the claimant within:

 

 

 

 

15 calendar days of the request.

 

 

 

 

 

Scott lives in Texas and has submitted a claim to his insurance company. He has received notice from the insurer that the claim is covered under the policy and they will be paying the claim. How long does the insurer have to pay Scott’s claim according to Texas law?

 

 

 

 

Not later than the fifth business day after the notice was made

 

 

 

 

 

What are the limits on medical benefits for workers compensation claims?

 

 

 

 

 

No dollar limit and no time limit

 

 

 

 

 

In a trial, the duty of a party to prove that the facts it claims are true is known as:

 

 

 

 

The burden of proof.

 

 

 

 

 

When an HO-3 is issued with a $75,000 Coverage A limit on a one-family dwelling, what is the automatic amount of insurance for Coverage B?

 

 

 

 

Your answer: $7,500 is correct.

 

 

 

 

 

Mr. Thompson carries the minimum auto liability limits in his state. He drives his car to New York which requires bodily injury limits of $25/50 and a wrongful death limit of $50/100 and no-fault coverage. If he has an accident in New York what coverage would he have?

 

 

 

 

Your answer: The coverage will automatically be modified to comply with the New York requirements. is correct.

 

 

 

 

Which of the following are the authorities that an agent can hold?

 

 

Express and implied

 

 

 

Which of the following terms refers to such disabilities the loss of a limb, hearing , or eye sight?

 

 

Permanent partial disability

 

 

 

An insured owns a building valued at $400,000. To comply with the 80% coinsurance provision of his insurance policy, how , much should he insure the property for?

 

 

 

 

80% of the property’s replacement cost or more

 

 

 

 

 

What will happen if a house covered by a standard mortgage clause is a total loss?

 

 

 

 

The insurer pays the mortgagee according to the mortgagee’s interest in the property.

 

 

 

 

 

What is the civil penalty for violating a cease and desist order of the Commissioner?

 

 

$10,000

 

 

 

 

 



If a property is covered by Company A for $20,000 and Company B covers the same property for $40,000, how much will Company A pay on a $24,000 loss?

 

 

 

 

$8,000

 

 

 

 

 

In a farm policy, any cost incurred by the insurer for the investigation or defense of a claim will be paid by

 

 

 

 

The insurer.

 

 

 

 

 

Which of the following is true regarding a risk retention group?

 

 

 

 

It is a liability insurance company owned by its members.

 

 

 

 

An insured has a liability policy that sets the amount for all claims that arise from a single incident at $50,000. Which type of limit of liability does this insured’s policy have?

 

 

 

 

Per occurrence

 

 

 

 

 

Which of the following is an example of a protective safeguard in a businessowners policy?

 

 

 

 

Automatic sprinkler system

 

 

 

 

 

If a licensee wants to transact insurance under a different name than that listed on his or her producer’s license, which of the following must occur?

 

 

 

 

The change must be reported to the Commissioner.

 

 

 

 

 

Bob’s home is insured for $100,000 under a dwelling policy. Yesterday his home suffered $20,000 damage from a fire. Today the home was struck by lightning, starting another fire that completely destroyed the structure. Bob’s policy will pay

 

 

 

 

$100,000.

 

 

 

 

Which of the following is defined as a covered cause of loss in businessowners property coverage?

 

 

 

 

Leakage from fire-extinguishing equipment

 

 

 

 

 

Which of the following is an example of an unfair claims settlement practice?

 

 

 

 

Failure to promptly settle a claim when liability has been clearly established

 

 

 

 

 

Which of the following definitions best defines the term “accident”?

 

 

 

 

 

Ans: A sudden, unplanned and unexpected event, not under the control of the insured, resulting in injury or damage neither expected nor intended

 

 

 

 

 

An insured’s accounts receivable records have been damaged. The loss may be covered with

 

 

 

 

 

The accounts receivable coverage form.

 

 

 

 

 

Under the workers compensation system, who is responsible for the expenses resulting from work-related injuries and occupational diseases?

 

 

 

 

 

The employer, regardless of whether it was at fault for the injury or disease

 

 

 

 

 

When a vehicle travels from one state to another, what happens to the limits of policy liability in a personal auto policy?

 

 

 

 

They do not change.

 

 

 

 

 

Which of the following circumstances would be EXCLUDED under medical payments coverage of a personal auto policy?

 

 

 

 

The insured is injured while driving his motorcycle on his resident premises.

 

 

 

 

 

Which of the following is NOT an essential element of an insurance contract?

 

 

 

 

Counteroffer

 

 

 

 

 

Which of the following persons is required to hold a producer license?

 

 

 

 

A person who negotiates insurance contracts

 

 

 

 

 

Which of the following would NOT be classified as personal property for insurance purposes?

 

 

 

 

A house

 

 

 

 

 

Which of the following statements is true regarding the commercial general liability policy’s Coverage C – Medical Payments?

 

 

 

 

The coverage is considered good will because payments are made without regard to fault.

 

 

 

 

 

Who will transport the property of anyone who hires them?

 

 

 

 

Common carriers

 

 

 

 

 

In property and casualty insurance, what is the term for the amount of a loss that the insured must cover out of pocket, and the insurer will only pay for the additional amount of the loss above this limit?

 

 

 

 

Deductible

 

 

 

 

 

A restaurant is out of business for 3 days after an insured’s automobile hits an electrical pole. The pole falls and hits the building, knocking out all electrical power supply. Which of the following is NOT covered under the insured driver’s auto policy?

 

 

 

 

Lost revenues from the restaurant

 

 

 

 

 

How much is the premium for the dwelling under construction endorsement under the dwelling policy?

 

 

 

 

The average amount of insurance during construction

 

 

 

 

Which insurers are required to participate in the Pennsylvania Automobile Insurance Plan (Assigned Risk Plan)?

 

 

 

 

All insurers authorized to write auto liability insurance in the state

 

 

 

 

 

What is the required limit of insurance in the coinsurance clause for Coverage F – Unscheduled Farm Personal Property?

 

 

 

 

80% (note-Coverage F – Unscheduled Farm Personal Property insures all farm personal property on a blanket basis. Coverage F is subject to an 80% coinsurance clause.
)

 

 

 

 

 

Which of the following would be considered an unfair claims settlement practice?

 

 

 

 

A claims adjuster advises the insured that if the claim goes to arbitration, the insured would probably receive less than what is currently being offered

 

 

 

 

 

Which of the following criminal activities would be sufficient violation to warrant rejection, revocation, or suspension of an insurance producer’s license?

 

 

 

 

Forgery

 

 

 

 

 

In dwelling policies, automatic increase in insurance is

 

 

 

 

 

Coverage by endorsement.

 

 

 

 

 

 

What is the maximum amount of protection available to insureds under the Pennsylvania Property and Casualty Insurance Guaranty Association?

 

 

 

 

 

The amount of loss up to the amount of coverage in the original policy, not to exceed $300,000 (per claimant)

 

 

 

 

 

 

A mortgage company is named as a loss payee on the insured’s homeowners policy, under the standard mortgage clause. If the insured suffers a loss due to a fire, which of the following is true?

 

 

 

 

 

The loss is payable to the insured and the mortgagee.

 

 

 

 

 

 

With regards to a homeowners policy, which coverage provides for indirect or consequential losses?

 

 

 

 

Coverage D

 

 

 

 

 

How soon after the due date should the insurer pay the agent appointment fees?

 

 

 

 

 

Within 30 days

 

 

 

 

 

Which of the following is the federal body that regulates truckers who travel across state lines?

 

 

 

 

Federal Motor Carrier Safety Administration

 

 

 

 

 

According to the loss payment condition in HO policies, losses must be paid within how many days of the insurer receiving proof of loss?

 

 

 

 

60 days

 

 

 

 

 

 

In which of the following situations would punishment include imprisonment?

 

 

 

 

 

Omission of a material fact with intent to embezzle funds

 

 

 

 

 

 

Which of the following symbols is available to an insured with vehicles subject to no-fault coverage?

 

 

 

 

Symbol 5

 

 

 

In terms of parties to a contract, which of the following does NOT describe a competent party?

 

 

 

 

 

The person must have at least completed secondary education.

 

 

 

 

 

An individual’s construction company leaves mobile equipment and construction machinery on the job site until the project is completed. What could this individual use to insure it?

 

 

 

 

 

Contractors equipment floater

 

 

 

 

 

 

If an insured lives in a high-risk area and can’t find an insurer that will cover his/her property, which of the following would most likely provide coverage?

 

 

 

 

 

The FAIR Plan

 

 

 

 

 

 

If an insurer changes a form that it uses to transact insurance, it must do which of the following?

 

 

 

 

 

File the form with the Commissioner for approval

 

 

 

 

 

 

Which of the following is NOT a duty of the employer/insured if an injury occurs at the workplace?

 

 

 

 

 

Make voluntary payments for treatment of the worker’s injury

 

 

 

 

 

 

Which inland marine form would provide the best protection for a dry cleaning company against loss or damage to their customer’s property while in the care, custody, and control of the dry cleaners?

 

 

 

 

 

Bailee’s customer policy

 

 

 

 

 

 

Under the Motor Vehicle Financial Responsibility Law, First Party Benefits would NOT be denied for which of the following injuries?

 

 

 

 

 

Injury incurred while the person was under the influence of drugs or alcohol

 

 

 

 

 

 

A meteorite hits the insured’s car, causing damage. Under which of the following coverages in a personal auto policy would this loss be paid?

 

 

 

 

 

Other-than-collision

 

 

 

 

 

 

If an insurer terminates a producer’s appointment, the Commissioner must be notified within how many days?

 

 

 

 

30

 

 

 

 

 

 

The other insurances clause of an ocean marine policy allows coverage for which reasons?

 

 

 

 

 

 

To obtain coverage for war, strikes, and related risks not covered by the policy

 

 

 

 

 

 

 

Which of the following terms refers to other insurance that is written on the same risk, but not on the same coverage basis?

 

 

 

 

 

Nonconcurrency

 

 

 

 

 

 

What is the limit for the forgery or alteration coverage in the businessowners policy?

 

 

 

 

 

$2,500

 

 

 

 

 

 

An insured hits a deer and crashes his car into a tree. The total damage to the vehicle is $6,000. How will this loss be covered?

 

 

 

 

 

$6,000 would be paid under other-than-collision coverage.

 

 

 

 

 

 

In the computer fraud crime coverage form, what limit is placed on each occurrence of the loss of manuscripts, drawings, or records?

 

 

 

 

 

$5,000

 

 

 

 

 

 

What was created to keep telemarketers from calling consumers who do not wish contacted?

 

 

 

 

 

National Do Not Call Registry

 

 

 

 

 

 

The insured with a homeowners policy has had damage to his property caused by a volcano. Which of the following is true?

 

 

 

 

 

 

All volcanic eruptions within a 72-hour period will be considered one occurrence.

 

 

 

 

 

 

A trucking company owns a large fleet of trucks that transport oil across state lines. According to the financial responsibility requirements set by the Motor Carrier Act of 1980, what is the minimum amount of insurance the company must carry on vehicles that transport oil?

 

 

 

 

 

$1 million

 

 

 

 

 

 

Which of the following would be included in the farm liability coverage forms?

 

 

 

 

 

Bodily injury to a residence employee

 

 

 

 

 

 

In which of the following situations would the jewelers block extension cover a loss?

 

 

 

 

 

 

A jeweler fixes a necklace and sends it by registered mail to the owner. When the necklace arrives, it has been damaged.

 

 

 

 

 

 

Valuable papers and records form provides coverage for the reconstruction of all of the following types of records EXCEPT

 

 

 

Prepackaged software.