Texas Insurance Practice Exam Answers

Texas Insurance Practice Exam Answers

Subrogration may follow which of the following events?

An insured collects from her insurance company for damages caused by a third party

Medical payments coverage under a BOP applies to expenses incurred by non-insureds for bodily injury and reported to the insurer within:

One year after the accident

Claims expenses covered under Section II – Personal Liability of the standard Homeowners forms do NOT pay for which of the following?

Loss of the insured’s earnings subject to a pre-determined limit of $300 per day

Which statement best describes “defense” coverage under the Section II – Liability coverage of the Businessowners policy?

Defense costs are not subject to a limit

Under an aircraft policy what is NOT a covered territory usually covered (unless endorsed) while the aircraft is in flight?

Costa Rico

Under a standard Equipment Breakdown policy, the full replacement cost will be paid on the claim, if the equipment is repaired within what time period following the loss?

24 months

When a licensee in Texas receives an inquiry from the Insurance Department regarding their insurance transactions, he or she must respond in writing:

Not later than the 15th day after the date the inquiry is received

The sprinkler leakage coverage of a Commercial Property form does not provide coverage for:

damage to growing crops from malfunctioning sprinklers

Under the appraisal clause in a commercial inland form, which of the following is true?

the insurer still retains its right to deny the claim entirely

All of the following statements are true regarding state Guaranty Associations, Except:

The fund assists insurers in gaining new insurance business by allowing them to advertise their membership in the Guaranty Association.

The Personal Inland Marine coverage form that covers clothing, cameras and other portable property worn or carried by tourists and travelers is known as a:

Personal Effects floater.

Each of the following is a feature of Business Income Coverage, EXCEPT

Monetary deductibles. .

The limits of the Employers’ Liability section of a standard workers’ compensation policy are:

Listed on the Information page..

The term “time element coverage” is used when the amount of loss depends on:

The time it takes to repair, rebuild or restore damaged property.

Under a personal automobile policy with uninsured motorists coverage, a disagreement between an insurance company and an insured on the amount of a loss can be settled by:

Arbitration

Aaron purchases a Homeowners insurance policy for $700,000 with a 4% deductible. A few months later, a heavy hailstorm destroys his roof, porch, and windows, causing $50,000 in damages. How much should Aaron expect to receive from the insurance company to pay for the damages?

$22,000

A Personal Umbrella policy will cover an insured for an “occurrence” or “offense” that occurs

Anywhere in the world.

The NAIC Model Unfair Claim Settlement Practice Act provides for a financial penalty of _________ for each violation of the Act.

$1,000

If a building insured under a BOP has been vacant or unoccupied beyond _____ the insurer can send the insured a notice of cancellation.

60 days

Risk retention and purchasing groups are used to provide which of the following types of coverage?

Products Liability insurance..

The Now Company carries a special BOP policy with a liability limit of $500,000. The company is involved in an accident causing $200,000 bodily injury damage and $200,000 property damage. The total amount collectible under the policy is:

$400,000

Which of the following would be covered under an aviation policy?

A temporary substitute aircraft.

Generally, an employee’s average weekly wage is determined in Texas by which of the following computations?

The employee’s wages for the 13 consecutive weeks preceding the injury divided by 13..

All of the following injuries occurring on the job would probably be deemed compensable, EXCEPT

A cerebral hemorrhage occurring at work and caused from years of high blood pressure.

Which of the following is NOT a responsibility of the Insurance Commissioner in any given state?

Setting insurance rates

As a fiduciary agent, an adjuster has the power to bind the insurer. Which of the following statements is FALSE regarding this power?

Only an adjuster’s written statements can legally bind an insurer..

Which of the following would require bailee coverage?

A TV repair shop.

Jack rents a home to Tanya and maintains a DP-3 policy on the dwelling. Tanya accidentally leaves the oven on all day while she is out, her Lasagna catches fire, burning Jack’s house to the ground, along with all the contents located inside. Which of the following items would be covered under Coverage C of Jack’s DP-3 policy?

Jack’s appliances..

Max was injured on the job in Texas. Max has reached MMI but will have a permanent limp while walking that was due to the compensable injury. Which of the following terms as defined by the Texas Workers Compensation code best describes how Max’s injury will be

classified?

Max’s injury is now classified as an “impairment

Lara is moving to Europe for two years in order to take advantage of a promotion at her job. She will not take her 4-seat propeller plane with her. What type of Aviation policy would be best for Lara to purchase for coverage on her plane while it is in storage and she is in Europe?

All Risks – Not in Motion

The first insurance policy to have its wording standardized by law is:

The 1943 New York Standard Fire policy.

Pete is covered under a Personal Auto policy with Indemnify Insurance when his car is stolen. Six months pass, Pete’s car is never found. and the policy period with Indemnify expires. Pete decides to purchase another Personal Auto policy with Fiduciary Insurance, Inc. Pete is covered under the policy with Fiduciary for about three months, when his stolen automobile is found with only minor physical damage. How will this claim be handled?

Indemnify Insurance will pay the claim

Joe enters into a contract with Martha to set fire to her house so she can collect on her insurance policy. Martha will pay Joe a portion of the insurance proceeds for his trouble. Which of the following parts of a valid contract is missing in this situation?

Legal purpose

Which of the following vehicles is considered an owned auto under a personal auto policy?

A replacement car purchased by the insured a week ago but not yet reported to the insurance company. .

When must a Texas insurer notify a claimant of either the acceptance or rejection of a claim after receiving all of the requested items, statements, and forms requested from the claimant?

Not later than the 15th business day.

An insured carries property insurance with a limit of $25,000 and an 80% coinsurance requirement. The covered building, however, is worth $40,000. How much would she collect in the event of a total loss?

$25,000

All of the following items have a special limit of liability for Coverage C of the Homeowners forms, EXCEPT:

Outdoor furniture.

If a dwelling or commercial building has been without occupants for a significant period of time, but personal property still exists within the dwelling or building, it is considered:

Unoccupied.

Texas insurance licensees must complete _____ hours of continuing education each reporting period.

24.

Which of the following would cover “unattached structures” under a Homeowners policy?

Coverage B..

Sam the shopkeeper mops the floor of his store and forgets to set the “Caution Wet Floor” sign in the area to warn his customers. Sarah walks through the store a few moments later, slips on the floor and injures her arm and leg. This is an example of:

A negligent tort.

Coverage A of the HO-2 form would cover which of the following items?

Paint to be used on the building

A building is insured by three insurance companies to spread coverage on a particular type of hazardous risk. In case of a loss under a Commercial Property policy, the payment of the claim would invoke the pro-rata liability clause which means:

Each insurer pays in accordance to the percentage its coverage bears to the total amount of insurance in force

Accounts receivable insurance will not pay:

Amounts owned to the insured but left uncollected because of billing errors.

Katherine lives in Texas. A third-party claim has been filed against her insurance policy by Joe, for an accident in which Katherine was liable. Joe’s attorney contacts Katherine’s insurance company and makes an initial offer to settle the claim. The insurance company must notify Katherine of the offer, in writing:

Not later than the 10th day after the date the initial offer was made..

Under which of the following claims settlements are the claim invoices presented and paid with no attempt to obtain a separate release?

A walk-away release

Failure of a Texas licensee to obtain the required number of continuing education credit hours during the required biennium will result in

An automatic fine of $50 per credit hour not completed

Under the provisions of the standard BOP policy, what happens when an insured fails to advise the insurance company that the insured’s sprinkler system is inoperative beyond a 48 hour period?

Coverage for fire losses will be excluded

When a state is “monopolistic” with workers’ compensation coverage, employers in that state are:

Required to purchase their workers’ compensation coverage from the state-funded plan..

The insured is covered under an ISO HO-5 policy. What coverage does the insured have for personal property?

Open perils

When a covered loss disables the insured watercraft, the standard Watercraft policy provides coverage for “towing and assistance” in the amount of:

$500 for a single event and $1,000 for the entire policy period..

On March 4, 2007, five people were injured at a department store. The store was negligent. Four of the people were injured very seriously and subsequently filed claims against the store’s primary and umbrella polices. But one man whose leg was injured said his injury wasn’t too bad, and he didn’t file a claim against the store at that time. However, in April of 2008, the man’s leg began to bother him, and he had trouble walking. He then saw a doctor and filed a claim for the injury. Since the department store is covered under an occurrence form of commercial umbrella liability policy, which was renewed in 2007, the claim:

Will be covered by the 2007 Commercial Umbrella Liability policy

The insured carries a yacht policy. One of the crew members is injured while performing a work related task. What coverage must be added under the policy that would respond to cover the crew member’s injuries?

Jones Act (crew coverage)

A crew member has been injured on a ship. When his medical expenses are paid, this is known as

Cure

All of the following are rating factors used to calculate the premium that will be charged for a personal auto policy, EXCEPT:

Nationality of the owner.

Under an ocean marine policy, damage to the ship would be covered under what marine coverage?

Hull Insurance

Mr. Kessler has an auto policy with bodily injury limits of $15,000/$30,000. He injures two people in one accident. Mr. Brown receives injuries of $19,000. Mr. Jones receives injuries of $15,000. Legal expenses to defend Mr. Kessler total $10,000. How much is Mr. Kessler liable for after his insurance company makes its payment?

$4,000.

Mr. Smith, an insured under a personal auto policy, loans his car to Mr. Brown. Mr. Brown is employed by a building contractor. While driving the car on his employer’s business, Mr. Brown has an accident damaging a car and injuring its occupants. All three are sued. Who could be held legally liable?

All three may be held responsible and have to pay. .

What are the unique features of the ISO standardized Businessowners policy form?

The BOP provides “open peril” coverage for property..

Under what circumstances does an insurer allow the transfer of an insured’s rights and duties under a Commercial Package Policy without the permission of the insurer?

When the named insured dies

The definition of collapse in the Commercial Property forms that provide this coverage is:

The collapse must involve an abrupt falling down or caving in of the structure, rather than a gradual sequence of damage. is correct.

Customer’s property under a Commercial Property policy

Is covered while on the insured’s premises only

Each of the following is considered to be an “implied warranty” in an Ocean Marine insurance policy, EXCEPT:

General Average

An insured leases his building to a tenant. The tenant subsequently suffers a loss when the insured’s building burns. What should the tenant do?

Tenant must submit a claim to his/her own carrier.

A document that temporarily obligates an insurance company to provide coverage while the issuance of a policy is pending is known as:

A binder.

The insured carries a personal auto policy providing a bodily injury limit of $50,000 each person with a per accident injury limit of $100,000. He injures two occupants in another vehicle. Their injuries total $60,000 for Mr. Jones and $50,000 for Mrs. Jones. The insurance company spent $40,000 in defense and investigation costs. How much will the insured’s policy pay?

$140,000

Jessica took an adjuster prelicensing course approved by the Texas Department of Insurance. She has received her certificate showing that she passed the state licensing exam as well. How long does Jessica have to submit her license application to the Department before she will be required to take the state licensing exam again?

2 months from the date she passed her state licensing exam..

A contractor in need of a bid bond to obtain a contract is an example of a(n):

Principal. .

What type of insurance is usually provided or subsidized by the state or federal government because it is not ordinarily available from private insurers?

Residual market insurance

Mr. Thompson carries the minimum auto 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

The coverage will automatically be modified to comply with the New York requirements..

Isaac owns a home with an older furnace in need of repair. He leaves his home for a month to avoid the cold weather. He returns to find that the furnace had stopped working. Water pipes have frozen and burst and his property has been damaged. Since the water ran for almost a month, his water bill is extremely high. What will the adjuster pay?

The water damage

All of the following would be covered under a Builders Risk Policy, EXCEPT:

Prospective buyer

Which of the following is considered a surety?

A bond that guarantees the performance of contracts. .

A commercial property policy is written to Tom Smith and Jim Jones, d/b/a Smith & Jones Hardware. If the insurer chooses to cancel the policy, the cancelation notice will be mailed to:

Tom Smith only.

All of the following are criteria for an accident to have occurred “in the course of” the employment under a workers’ compensation policy, EXCEPT:

While performing a task that a fellow worker requested, that was unusual to the employee’s job description, but occurred on the employer’s premises during working hours. is correct.

Which of the following statements is correct regarding pollution caused by smoke released from an industrial operation covered under the Commercial Property Policy?

Covered if caused by a covered cause of loss peril .

In the event of a loss under a personal auto policy, an insured is required to submit to the insurance company all of the following information, EXCEPT:

An appraisal of the damaged property.

A tornado blows over a wall of a barn which, in turn, knocks over a lamp and starts a fire. What is the proximate cause of loss?

Tornado.

Which of the following statements describes an action that the adjuster cannot take after a claimant has hired an attorney to represent him/her in handing a claim?

Contact the claimant without the consent of the attorney

All of the following statements are true of liability insurance, EXCEPT:

Liability insurance provides indemnification for the insured.

Bill Berry was at fault in an automobile accident. Which of the coverages listed would apply to the rental car expense incurred by the other driver while his damaged auto was being repaired?

Property Damage Liability.

All of the following situations involve misrepresentation, EXCEPT:

Michael manages an insurance agency and posts the sales numbers of all agents publicly each month, to promote competition..

The NAIC Unfair Claim Settlement Practices Act is intended to cover all of the following types of insurance claims, EXCEPT:

Boiler & Machinery (Equipment Breakdown) insurance claims..

An insured is covered under a DP-2 broad form Dwelling policy. A water pipe has frozen and burst and the insured has suffered floor and ceiling damage in his two-story home. The cost to remove and replace the walls to get to the pipe is $300. The cost to repair the floor is $400. The pipe that burst must now be replaced with a more expensive option to meet newer building codes. The cost to replace the pipe is $200. How much will the insurer pay?

$700

Which of the following best describes “covered property” under the Equipment Breakdown coverage form?

Any property that the insured owns or is in the insured’s care.

What does the phrase “free on board destination” mean?

Makes the seller responsible to the buyer until the goods have been delivered as agreed..

Under a liability policy the insurance company will pay damages on behalf of an insured when

When it is established that the insured is legally liable..

Which of the following is covered under the Commercial Property broad cause of loss form, but is not covered by the basic cause of loss form?

Weight of ice and snow

All of the following are types of “independent adjusters”, EXCEPT:

A public adjuster

What is the purpose of the “sue and labor clause” in ocean marine insurance?

Pertains to protecting the ship and other property from further damage..

An insured has taken a physical inventory of his merchandise and discovers a substantial shortage of valuable stock. He turns a claim in to the insurance carrier that provides his coverage under a Businessowners Policy. What coverage is provided by the BOP for merchandise that has mysteriously disappeared?

No coverage would apply

Willie’s Widgets is covered by a policy that includes a franchise deductible of $50,000 and a policy limit of $400,000. A fire rips through Willie’s warehouse, and he sustains $342,000 in damage. How much of the claim will Willie’s Widgets be responsible for paying?

$50,000..

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. .

When an insured is fulfilling the duty of proving a loss by taking an inventory of the damaged property, who pays the expenses incurred by the insured?

The insured..

Where is Covered Property listed and described on the BOP?

On the declarations page

Under Coverage F – Medical Payments in Section II of the standard Homeowners policies, medical expenses for the injured party will be paid as long as the claim is submitted:

Within three years of the date of the accident..

Which of the following would be excluded under the Personal Auto liability coverage?

A person transports people from the airport to nearby hotels for a fee. .

If an insured conceals a material fact, makes false statements or engages in a fraudulent act, he or she is guilty of:

Concealment

Which of the following best describes the “statutory MMI” under a worker’s compensation claim in Texas?

104 weeks of income benefits have been accrued and the injured worker has not already received MMI status as determined by the treating physician.

Which of the following statements concerning installation floaters is not true?

Coverage is written on a named perils basis only