INS 22_Sample Exam

INS 22 Sample Exam The following sample exam consists of two sections—Part A and Part B. On the actual exam, you must answer all questions in both part A and Part B of the exam. Each question is worth one point. Each Part A question should be answered independently of the others. Part B questions may include or refer to specific facts, cases, or ­exhibits. In Part B, your answers must be based on the information provided. When several questions are based on the same set of facts during a computer-administered exam, those facts will appear in a separate window and remain in view for the duration of the questions.

Part A 1. Which one of the following is considered real property? a. An automobile b. A house c. Furniture d. A motorhome 2. In general, a loss prevention measure is implemented to a. Eliminate any possibility of loss. b. Reduce loss severity. c. Break the sequence of events that leads to a loss. d. Keep backup information and assets in reserve. 3. An insurance policy states that the insured must report losses promptly to the insurer. This is an example of a policy a. Condition. b. Definition. c. Insuring agreement. d. Declaration.

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2  Personal Insurance—INS 22 4. Having a theoretically infinite number of possible loss scenarios is one of the limitations of a. Post-loss policy analysis. b. The DICE method. c. Pre-loss policy analysis. d. Determining the amount payable for a claim. 5. Which one of the following is the most commonly used method of compensating auto accident victims? a. Financial responsibility laws b. Tort liability system c. Uninsured motorist coverage d. Unsatisfied judgment funds 6. Unsatisfied judgment funds are funds established in some states to compensate auto accident victims who a. Sustain bodily injury caused by an uninsured motorist and ­obtain compensation from their own uninsured motorist ­coverage. b. Are injured by a negligent driver who has liability insurance at the time of the accident. c. Have obtained a court judgment that is uncollectible because the guilty party cannot pay. d. Are injured at work and able to collect workers ­compensation. 7. In a state with a modified no-fault plan, how will the insurance companies pay the bodily injury expenses resulting from an automobile accident between two unrelated drivers insured with the required no-fault coverage? a. Each insurer will pay for the other driver’s damages. b. Each insurer will pay for its own policyholder’s damages. c. The insurers must determine which driver was greater than 50 percent at fault. That insurer will compensate both parties. d. The insurers must determine what percentage each driver was at fault. The insurers will compensate each driver based on those percentages.

Sample Exam  3 8. A plan for insuring high-risk drivers in which all auto insurers doing business in the state are assigned their proportionate share of high-risk drivers based on the total volume of automobile insurance written in a state is a. A joint underwriting association. b. A reinsurance facility. c. Excess and surplus lines. d. An automobile insurance plan. 9. Which one of the following statements is true regarding automobile insurance rating? a. State regulators require that all insurers offer discounts on auto rates for passive restraints. b. Most insurers base automobile rates on primary rating factors and do not consider any other factors in establishing rates. c. State regulators require that rates be adequate, reasonable, and not unfairly discriminatory. d. Drivers with lower-than-average loss exposure are charged higher rates. 10. The declarations page of a personal auto policy a. Shows the name of the insured and the insured’s mailing ­address. b. Indicates that the policy period starts at 12:01 PM standard time at the address of the insurer. c. Lists any exclusions that are attached to the policy. d. Identifies common policy definitions. 11. Under the liability coverage in the Personal Auto Policy (PAP), the insurer agrees to pay a. Judgments for bodily injury intentionally caused by the ­insured. b. Defense costs incurred by the insurer. c. Judgments in excess of the liability limits. d. Costs incidental to claims not covered by the policy. 12. The Insuring Agreement in Part A—Liability Coverage of the Personal Auto Policy (PAP) contains descriptions of all of the following, EXCEPT: a. Persons and organizations insured b. Defense costs covered c. Limit of liability d. Damages covered

4  Personal Insurance—INS 22 13. The medical payments coverage in the Personal Auto Policy (PAP) applies to a. Any person occupying a covered auto. b. Any insured who is also covered by workers compensation for the same accident. c. Anyone injured in an accident involving an insured. d. Anyone occupying a car not owned by any insured but driven by an insured. 14. An uninsured motor vehicle under the Personal Auto Policy (PAP) can mean a land motor vehicle or trailer of any type that meets any of the following criteria, EXCEPT: a. It is insured by an insurer incorporated in a state that is ­different from the state where the accident occurred. b. No bodily injury insurance or bond applies to it at the time of an accident. c. It is a hit-and-run vehicle whose operator cannot be ­identified and it hits the named insured’s covered auto. d. A bodily injury liability policy applies to it at the time of an accident but the insurance company becomes insolvent. 15. The application of two or more underinsured motorists coverage limits to a single auto accident because two or more separate policies apply is called a. Interpolicy stacking. b. Intrapolicy stacking. c. Other insurance stacking. d. Pro rata stacking. 16. According to Part D—Coverage for Damage to Your Auto of a Personal Auto Policy (PAP), the insurer’s limit of liability for a physical damage loss to a covered auto is a. The “blue book” value of the vehicle, taking into consideration the odometer reading and the vehicle condition. b. The estimated value as established by at least two auto ­appraisers. c. The lower of the cost to repair the vehicle or the total loss value. d. The lower of the actual cash value or the amount necessary to repair or replace the property with other property of like kind and quality.

Sample Exam  5 17. Under the Personal Auto Policy (PAP), a branch falling from a tree and denting the hood of a covered auto is an example of a. A liability loss. b. A collision loss. c. An other than collision loss. d. An uninsured motorists loss. 18. The Personal Auto Policy (PAP) contains a section outlining several important duties with which the insured must comply in order for the policy to provide coverage. Which one of the following is a general duty under the Personal Auto Policy (PAP)? a. Provide prompt notice to the state insurance department regarding the accident or loss b. Agree to submit to a physical examination at the insured’s own expense c. Submit the state required regulatory compliance forms to the insurer within a reasonable amount of time d. Authorize the insurer to obtain medical reports and other pertinent records 19. If the insurer makes a loss payment to a person who has a right to recover damages from a negligent third party, the insurer has which one of the following legal rights against that third party? a. Estoppel b. Salvage c. Subrogation d. Loss mitigation 20. The major advantage of the Limited Mexico Coverage endorsement to the Personal Auto Policy (PAP) is that it provides a. Primary liability insurance within twenty-five miles of the United States border. b. Additional liability insurance as well as providing physical damage coverage. c. Liability and physical damage coverage for trips to Mexico of more than ten days. d. All auto insurance coverages required by Mexican law. 21. The HO-3 policy provides a. Special form coverage on dwellings. b. Named perils coverage on dwellings. c. Special form coverage on personal property. d. Named perils coverage on other structures.

6  Personal Insurance—INS 22 22. The deductible, which appears on the declaration pages of a homeowners policy, is deducted from a. All loss payments. b. The total of all losses during the policy period. c. Section I (property) losses. d. Section II (liability) losses. 23. Which one of the following statements is true regarding Coverage A—Dwelling as it applies to the dwelling on the “residence premises” listed on the HO-3 policy Declarations page? a. The HO-3 could cover the entire building for a policyholder who owns a four-family home, lives in one unit, and rents the other units to tenants. b. Coverage A does not apply to structures attached to the dwelling, such as a garage or deck. c. The land at the residence premises is specifically included in the property coverage. d. When buying insurance, a homeowner should determine the Coverage A limit based on the cost to replace the dwelling including the cost of the land. 24. Coverage for other structures is automatically provided under the HO-3 policy with a limit that is a. 10 percent of the limit for Coverage A. b. 10 percent of the limit for Coverage C. c. 50 percent of the limit for Coverage A. d. 50 percent of the limit for Coverage C. 25. Which one of the following is an example of a loss caused by animals that would be covered by an unendorsed HO-3 policy (Section I)? a. The insured’s dog scratched the door repeatedly over time. The insured replaces the damaged door. b. A rat chews a hole in the garage door. The insured replaces the garage door. c. A deer leaps through a plate glass window of the insured’s house, breaking the glass, and damaging interior walls before escaping through the broken window. d. A group of birds nests in the chimney, causing a blockage. The insured cleans the chimney so that the fireplace can be used.

Sample Exam  7 26. If law enforcement officials seize an insured’s personal computer to search for files that might be related to a crime, the insured under an HO-3 policy may be unsuccessful in claiming a theft loss on the computer due to the a. Intentional Loss exclusion. b. Governmental Action exclusion. c. Ordinance or Law exclusion. d. Personal Computer exclusion. 27. The medical payments coverage in a homeowners policy covers certain medical expenses incurred by a. Nonresidents of the insured’s household. b. Insureds. c. Residents of the insured’s household other than residence employees. d. Resident relatives of the insured. 28. The Claim Expenses additional coverage under Section II of a homeowners policy covers a. Premiums on bonds exceeding the personal liability limit. b. The insured’s reasonable expenses at the insurer’s request. c. Medical payments incurred by others. d. The insured’s personal liability. 29. Which one of the following is a true statement regarding Coverage E— Personal Liability and Coverage F—Medical Payments to Others of the HO-3 policy? a. Coverages E and F exclude coverage for the insured’s rendering or failure to render professional services. b. Loss that results from the transmission of a communicable disease by an insured is specifically covered under Section II of the homeowners policy. c. Corporal punishment is specifically defined in the home­ owners policy as “spanking, slapping, hitting, and similar disciplinary actions.” d. The controlled substance exclusion applies to the legitimate use of prescription drugs by a person following the orders of a licensed physician.

8  Personal Insurance—INS 22 30. Which one of the following statements is true regarding “aircraft liability” coverage under the HO-3 policy? a. The homeowners policy excludes all aircraft liability. b. Model airplanes that do not carry people or cargo are ­considered to be “aircraft” in the HO-3 policy. c. Hobby aircraft that do not carry people or cargo are ­considered to be “aircraft” in the HO-3 policy. d. If the insured flies her radio-controlled model airplane through a neighbor’s picture window, the resulting liability claim would not be covered. 31. If a claim is paid under Coverage F—Medical Payments to Others of a homeowners policy, a policy condition makes it clear that a. The payment settles the loss and the insurer has no additional legal obligation to the insured. b. The insurer no longer has a right to defend the insured against a Coverage E claim. c. The insurer is required to pay damages even if the insured was not connected to the injury. d. The payment is not an admission of liability by the insured or the insurer. 32. Which one of the following statements regarding the liberalization clause is true in a homeowners policy? a. If the insurer during the policy period adopts a revision that broadens the coverage without additional premium charge, the increased coverage will automatically apply to all existing policies on the date it is implemented within the state. b. The liberalization clause applies to changes introduced when the insurer makes a general homeowners program revision that both broadens and restricts coverage. c. Policyholders insured under a current homeowners series of the homeowners policy would automatically benefit from any changes that might be introduced in a new policy edition introduced in future years. d. The liberalization clause applies to any claim an insured files. 33. The HO-3 policy a. Is fully assignable without the insurer’s consent. b. Is assignable only with the insurer’s written consent. c. May be assigned when the insured makes a written request within 60 days of the assignment. d. Cannot be assigned to another party.

Sample Exam  9 34. Which one of the following describes the difference between the HO-3 Special Form and the HO-2 Broad Form? a. The HO-3 provides Coverage C limits that are 50 percent of Coverage A. The HO-2 provides Coverage C limits that are 40 percent of Coverage A. b. The HO-3 provides coverage for all causes of loss, unless ­specifically excluded, for Coverages A and B. The HO-2 ­provides coverage for named perils for Coverages A and B. c. The HO-3 is designed for an owner-occupant of a house. The HO-2 is designed for a tenant-homeowner of an apartment. d. The HO-3 is the preferred homeowners policy for home­ owners who have had no prior losses. The HO-2 is designed for homeowners who have experienced some losses. 35. Which one of the following homeowners forms provides the broadest property coverage of any of the standard unendorsed homeowners forms? a. HO-2 Broad Form b. HO-3 Special Form c. HO-5 Comprehensive Form d. HO-8 Modified Coverage Form 36. After a loss covered by a homeowners policy, an insured may find that repairs must be made under a newer, stricter building code. An endorsement that provides increased coverage for such a situation is the a. Loss Assessment Coverage endorsement. b. Ordinance or Law—Increased Amount of Coverage ­endorsement. c. Change in Code endorsement. d. Loss Contingency endorsement. 37. The Credit Card, Electronic Fund Transfer Card or Access Device, Forgery and Counterfeit Money Coverage—Increased Limit endorsement may be appropriate for a. Any insured who holds a credit card. b. Any insured who uses an automated teller machine. c. Insureds who hold numerous credit cards. d. Insureds who tend to overspend because of credit availability.

10  Personal Insurance—INS 22 38. A homeowners policy differs significantly from the DP-3 policy in that the unendorsed DP-3 policy a. Only provides liability coverage for owner-occupied ­dwellings. b. Does not provide liability coverage. c. Provides liability coverage only for on-premises occurrences. d. Does not provide liability coverage for ‘intentional acts.’ 39. The Transportation/Permission to Move endorsement (MH 04 03) provides coverage a. For increased limits removal expenses for a mobilehome ­endangered by an insured peril. b. For transportation perils (such as collision) when the mobilehome is moved to a new location. c. To a lienholder only for the transportation perils of collision and upset. d. To a mobilehome tenant who changes to a new mobilehome location seasonally. 40. The initial phase of a community’s participation in the National Flood Insurance Program (NFIP), during which property owners are allowed to purchase limited amounts of insurance at subsidized rates, is a. The regular program. b. The emergency program. c. The “Write-Your-Own” flood insurance program. d. A beachfront or windstorm plan. 41. Beachfront and windstorm plans are state-sponsored insurance plans whose primary purpose is to a. Provide flexible coverage to fill gaps in the National Flood Insurance Program’s flood coverages. b. Provide a state-based alternative to the federally operated flood insurance programs. c. Restrict construction and limit land use in coastal areas ­exposed to heavy windstorm losses. d. Provide property insurance in coastal areas exposed to heavy windstorm losses.

Sample Exam  11 42. Inland marine floaters typically share which one of the following characteristics? a. They are written for docks, watercraft, and related marine structures. b. They usually cover unique perils not addressed by ­“traditional” insurance policies. Examples include wear and tear, insect damage, and mechanical breakdown. c. They generally provide special form (open perils) coverage on a worldwide basis. d. They are always written with a deductible. 43. Which one of the following is covered for watercraft liability under an HO-3 policy? a. A 48-foot sailing vessel owned by an insured b. A 60-horsepower inboard boat rented by an insured c. A 48-foot sailing vessel not owned or rented by an insured d. A 60-horsepower inboard boat owned by an insured at policy inception 44. Which one of the following is usually excluded under a personal umbrella policy? a. Slander b. Defense costs c. False arrest d. Professional liability 45. Under a personal umbrella policy, if the insured fails to maintain the required underlying insurance, the umbrella policy will pay a. Nothing. b. No more than it would have paid if the underlying insurance were in effect. c. The amount that would otherwise have been covered by the underlying insurance. d. The amount that would otherwise have been covered by the underlying insurance subject to a self-insured retention. 46. Which one of the following is the best definition of personal loss exposures (also called human loss exposures)? a. The death of a working person with outstanding or unfulfilled financial obligations. b. The death of any person before the retirement age of 65. c. Any catalyst that increases the possibility of a financial loss. d. Any condition or situation that presents the possibility of a direct financial loss to a person.

12  Personal Insurance—INS 22 47. The technique of reducing overall investment risk by acquiring several investments with differing levels of risk is called a. Yield management. b. Mutual funds. c. Risk management. d. Diversification. 48. Financial planners usually suggest that individuals begin saving and investing for retirement a. At the earliest possible age. b. Beginning at age twenty-five. c. Beginning at age thirty-five. d. Not later than age 40. 49. A pension plan in which the contribution rate or amount is specified, but the retirement benefit is variable is a a. Defined contribution plan. b. Defined benefit plan. c. Individual retirement account. d. Profit sharing plan. 50. An annuity that pays income at some future date in a lump sum or as income under a payment option is a a. Flexible-premium annuity. b. Fixed annuity. c. Deferred annuity. d. Variable annuity. 51. The Old-Age, Survivors, Disability, and Health Insurance program (OASDHI) provides monthly retirement benefits based on the worker’s primary insurance amount (PIA). The PIA is a. Based on the worker’s average indexed monthly earnings. b. Based on the number of credits (quarters) earned. c. Reduced if the worker retires early at age sixty-two. d. Reduced if both the worker and spouse collect retirement benefits.

Sample Exam  13 52. Which one of the following best describes the likely life insurance needs of a single person with no dependents or outstanding financial obligations? a. An extensive amount of whole life insurance as an ­investment for retirement b. A moderate amount of term insurance to benefit family ­members c. A moderate amount of term insurance for charitable ­donations d. A modest amount of life insurance for funeral expenses and uninsured medical bills 53. Universal life insurance is a. A life insurance policy that separately states the protection, savings, and expense components. b. A savings account that provides for life insurance payments from the interest on the savings. c. Insurance protection from which the insured may obtain loans for major expenses. d. An insurance and savings account that requires disciplined adherence to monthly payments. 54. The purpose of the suicide clause in a life insurance policy is to a. Provide the insurer with some protection against an insured who purchases a life insurance policy with the intention of committing suicide. b. Exclude all death benefits that result from suicide to d­ iscourage policyholders who might contemplate ending their lives. c. Enable the insurer to retain paid premiums if an insured ­commits suicide and the insurer denies the claim. d. Provide payment of death proceeds anytime during the policy period as a public service to the family members. 55. The waiver of premium rider that can be added to a life insurance policy a. Reduces or waives premium payments for a whole life policy if interest rates exceed an established percentage. b. Reduces or waives premium payments for a whole life policy when the insured reaches a maximum age threshold. c. Eliminates premium payments during a period of total ­disability if the disability occurs before a certain age. d. Eliminates premium payments during a period of unemployment if the duration of the unemployment is one year or more.

14  Personal Insurance—INS 22 56. Which one of the following statements is true regarding the underwriting factors that group life insurers generally consider when determining whether a group is acceptable? a. Professional and alumni associations are preferred groups. b. The turnover of the group should be low enough to increase the average age of the group. c. The group must not be formed solely for the purpose of purchasing insurance. d. The group should be relatively small. 57. Which one of the following is a method used to reimburse surgeons under surgical expense insurance? a. A fixed dollar amount specified for each procedure b. On the basis of the physicians usual charges c. According to usual, reasonable, and customary charges ­according to the physician d. According to usual, reasonable, and customary charges ­according to the insurance plan 58. The broad coverage of major medical insurance is best described as coverage for a. Medical expenses within the limits of underlying basic ­medical expense policies. b. Expenses that result from hospitalization and related services after the first 24 hours. c. Reasonable and necessary medical expenses due to a covered illness or accident. d. Reasonable and necessary outpatient expenses due to a ­covered illness or accident. 59. One type of group dental plan is a nonscheduled plan. Which one of the following describes this plan? a. Only diagnostic and preventive services are covered. Dentists are reimbursed specific dollar amounts for each service. b. Only diagnostic and preventive services are covered. Dentists are reimbursed on the basis of their usual, reasonable, and customary charges. c. Most dental services are covered. Dentists are reimbursed specific dollar amounts for each service. d. Most dental services are covered. Dentists are reimbursed on the basis of their usual, reasonable, and customary charges.

Sample Exam  15 60. Which one of the following best describes the characteristics of a health maintenance organization (HMO)? a. Limited healthcare services are provided by physicians who are part of the network to a specific group for a fixed prepaid fee. Other healthcare services must be obtained outside of the network. b. Limited healthcare services are provided to members for a discounted fee. Other healthcare services must be obtained outside of the network. c. Comprehensive healthcare services are provided to a specific group for a fixed prepaid fee. Members are usually restricted to physicians who are part of the network. d. Comprehensive healthcare services are provided to members for a discounted fee. Members are usually restricted to physicians who are part of the network. 61. Short-term group disability income insurance plans typically have an elimination period that ranges from a. One to seven days for sickness. b. One to seven days for sickness and accidents. c. Thirty to sixty days for occupational disabilities. d. Thirty to sixty days for nonoccupational disabilities. 62. Medicare insurance (Part A) provides five major benefits. Which one of the following is one of those benefits? a. Annual mammograms b. Health care education c. Durable medical equipment d. Hospice care

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Part B Dudley and Tricia Barton. Dudley and Tricia Barton have an unendorsed Personal Auto Policy (PAP) covering Tricia’s sedan and Dudley’s SUV with the following coverages and limits: Liability $100,000/$300,000/$50,000 Medical Payments $5,000 Uninsured Motorists $100,000/$300,000 Other Than Collision Actual Cash Value Less $250 Collision Actual Cash Value Less $500 Rushing to get home after working late one night, Tricia ran a red light, striking a van and injuring its driver, Wilma. The damages and costs resulting from the accident and subsequent lawsuit are as ­follows: Damages to Tricia’s sedan $5,000 Damages to Wilma’s van $12,000 Wilma’s medical injuries $57,000 Tricia’s medical injuries $2,000 Defense costs $10,000 Tricia is found to be liable for the accident. Dudley and Tricia live in a state without a no-fault insurance law. 63. Dudley and Tricia Barton. How much will Tricia’s insurer pay under Part D—Damage to Your Auto? a. $4,500 b. $4,750 c. $16,500 d. $17,000 64. Dudley and Tricia Barton. How much will Tricia’s insurer pay under Part A—Liability Coverage? a. $57,000 b. $67,000 c. $79,000 d. $81,000

Sample Exam  17 65. Dudley and Tricia Barton. How much, if any, will Tricia’s insurer pay under Part B—Medical Payments Coverage? a. $0 for Tricia’s injuries; $0 for Wilma’s injuries b. $0 for Tricia’s injuries; $5,000 for Wilma’s injuries c. $2,000 for Tricia’s injuries; $0 for Wilma’s injuries d. $2,000 for Tricia’s injuries; $5,000 for Wilma’s injuries 66. All of the following could lead to a liability loss for a family, EXCEPT: a. A guest slips on an icy sidewalk in front of the family’s home and breaks his leg. b. The father trips on a broom he left lying in the driveway and breaks his arm. c. The daughter, who is 16 years old, sideswipes a neighbor’s car and dents its fender while driving her own car. d. The son, who is 13 years old, throws a rock at a classmate who requires stitches for an injury to his head. 67. A family funds a retention program by maintaining a savings account for the purpose of paying for any losses that fall within the deductible of its homeowners policy. Which one of the following steps in the risk management process is the family following? a. Implementing selected risk management techniques b. Selecting appropriate risk management techniques c. Examining the feasibility of risk management techniques d. Analyzing loss exposures 68. A state’s no-fault automobile insurance law permits an injured party who experiences permanent disfigurement to sue the responsible party for noneconomic loss. This feature of the no-fault law illustrates a. A deductible. b. An unsatisfied judgment fund. c. A monetary threshold. d. A verbal threshold. 69. Joe and Kitty Clements have a Personal Auto Policy (PAP). Their granddaughter, Katherine, lives with them. Does Katherine qualify as a “family member”? a. No, Katherine is not a ward or foster child. b. No, Katherine has not been adopted by the Clements. c. Yes, as long as Katherine is a resident of the household. d. Yes, as long as Katherine is an operator of a vehicle owned by the household.

18  Personal Insurance—INS 22 70. Keith commutes into the city in his car, and he provides a ride to two co-workers who live near him. Every other week, the co-workers take turns buying the gasoline for Keith’s car. Does this activity create a public or livery conveyance situation that would preclude liability coverage under Keith’s Personal Auto Policy (PAP)? a. No, because Keith is involved in a share-the-expense car pool. b. No, as long as Keith does not report the money for the gasoline as taxable income. c. Yes, coverage is excluded as long as Keith receives compensation from his co-workers in the form of gasoline expenses. d. Yes, coverage is excluded, but only while the co-workers are in the vehicle. 71. Becky owns an automobile insured with an unendorsed Personal Auto Policy (PAP). Her friend lets her drive his motorcycle with the friend riding on back as a passenger. Becky accidentally drives it into a tree, killing her friend and injuring herself. The funeral for her friend costs $3,000. Becky’s hospital bills total $3,000, and she has surgical bills of $4,000. As a result of this accident, the Part B—Medical Payments Coverage of Becky’s PAP will pay a. $0. b. $3,000. c. $7,000. d. $10,000. 72. Larry drove his car and was involved in a two-car accident caused by the other driver, who was uninsured. The at-fault driver offered Larry a substantial amount of money in satisfaction of his damages. Larry accepted the money in settlement of his losses and released the other driver from further liability. Larry later submitted an uninsured motorists claim under his Personal Auto Policy (PAP). The uninsured motorists claim would be a. Paid for damages accruing after the settlement with the ­at-fault driver. b. Paid in addition to the money paid by the at-fault driver. c. Denied because the at-fault driver can be considered ­self-insured under the circumstances. d. Denied because coverage under these circumstances is ­excluded.

Sample Exam  19 73. Jessie was away from home and wanted to charge the battery on his laptop computer. He left the laptop in his car, plugged into the cigarette lighter. Jessie later discovered that his car had been broken into and his laptop had been stolen. Jessie’s car is insured under an unendorsed Personal Auto Policy (PAP). Disregarding any deductibles, what amount will Jessie’s insurer pay for the laptop? a. Nothing b. Actual cash value c. The amount necessary to replace the item with property of like kind and quality d. Replacement costs 74. Alfred has an unendorsed HO-3 policy. After a severe fire loss to Alfred’s house, an investigation proved that Alfred intentionally set the fire. Alfred was jailed for arson, and his property claim was denied. Which one of the following describes the rights granted by Alfred’s HO-3 policy to the mortgagee? a. The mortgagee will collect the full amount of the claim. b. The mortgagee will collect the amount of its insurable ­interest in the property. c. The mortgagee will collect the full amount of the claim if it joins with the insurer in prosecuting Alfred. d. The mortgagee will not collect any amount of the claim ­because the loss was a fraudulent act. 75. The Muller family owns a house with a current replacement cost of $250,000. They purchased the house for $275,000. The Mullers have an HO-3 policy with a Coverage A limit of $180,000. A fire totally destroys their home. How much will the Muller’s insurer pay for their destroyed house under the policy? a. $130,000 b. $162,000 c. $180,000 d. $225,000 76. Russ and Roberta Spratt own a single-family home insured to value under an HO-3 policy with a limit of $350,000 for the Coverage A— Dwelling with a $250 deductible. They also have a two-car detached garage on the premises with a second floor apartment. The garage apartment is rented to a local college student. Lightening strikes the garage and it burns to the ground. The replacement cost of the garage is $45,000. This loss to the detached garage is a. Covered up to the Coverage B limit of $34,750. b. Covered up to the replacement cost of $44,750. c. Not covered since a Coverage B exclusion applies. d. Not covered since lightening is not a covered peril.

20  Personal Insurance—INS 22 77. Ralph is a homeowner living in a subdivision of houses where the homeowners have formed an association. Collectively the members of the association own the subdivision’s clubhouse and tennis courts. The Loss Assessment additional coverage under Section II—Liability Coverages of Ralph’s homeowners policy provides coverage to Ralph for an assessment up to $1,000 arising from which one of the following losses? a. A tennis player tripped over a torn chain link fence surrounding the court. The tennis player sued the association for her injuries and recovered a judgment. b. Ralph’s daughter injured another player on the court when she accidentally released her racquet following a serve and that injured player made a claim against Ralph and his daughter. c. Ralph’s dog bit a tennis player on one of the courts and that tennis player made a claim against Ralph. d. A tennis player accidentally dropped a cigarette in the trash next to the clubhouse. The resulting fire totally destroyed the clubhouse. 78. Bob and Diane Rothwell’s rural home is insured with an HO-3 policy. During spring clean up, the Rothwells hired a college student to help clean up and burn the brush that had accumulated over the prior season. As the brush pile was burning, an unexpected wind carried the fire across the Rothwells’ pasture. Bob and Dianne, their fifteen-year-old son Jeff, Diane’s father who was visiting, the college student, and a neighbor all worked together to put out the fire before it spread to the neighbor’s yard. They all suffered some burns. All of the following parties involved in fighting the fire will be able to collect compensation for their medical bills to treat their burns from the Medical Payments to Others coverage from the Rothwells’ HO-3 policy, EXCEPT: a. Diane’s father b. Jeff c. The college student d. The neighbor

Sample Exam  21 79. Ed and Genie Allen submitted a claim under an HO-2 policy for a property loss, and the insurer conducted an investigation. Under their HO-2 policy, which one of the following statements is true regarding the burden of proof? a. The insurer must prove that the loss was caused by an ­excluded cause of loss. b. Ed and Genie must prove that the loss was caused by a ­covered cause of loss. c. Under the HO-2 there is no burden of proof on either the ­Allens or the insurer. d. Because the HO-2 policy is an all risks policy, the burden of proof lies in the coverage investigation by the insurer. 80. Ben lost in his lawsuit against his neighbor, Jim, alleging that Jim had created a nuisance on his property. Jim has now filed a malicious prosecution claim against Ben. Under which endorsement to Ben’s homeowners policy can coverage for this claim be found? a. Personal Liability endorsement b. Ordinance or Law endorsement c. Additional Liability Coverages endorsement d. Personal Injury endorsement 81. Hank has purchased a home in a desirable urban neighborhood. The house has a rental unit on the second floor, as well as the first-floor unit in which Hank plans to live. Hank spent all of his savings on the down payment, and now is considering insuring the property under a DP-3 policy rather than an HO-3 policy to save money. Is Hank’s new residence eligible for a DP-3 policy? a. No, because the residence qualifies for HO-3 coverage. b. No, because dwelling policies are designed for tenant ­occupied dwellings. c. Yes, as long as it meets an insurer’s underwriting guidelines. d. Yes, as long as part of the dwelling is rented to others.

22  Personal Insurance—INS 22 82. Clarise owns a vacation home on a lake, and has insured it under an unendorsed DP-3 policy with a Coverage A limit of $120,000 and a Coverage C limit of $40,000. Clarise discovered that a rowboat she keeps tied to her dock on the lake has been stolen. She filed a claim under her dwelling policy for $700, the actual cash value of the rowboat. Would theft of the rowboat be a covered loss? a. No, watercraft are excluded property. b. No, theft is not a covered peril. c. No, theft of watercraft is covered only if the boat is within a fully enclosed building. d. No, 10 percent of the Coverage C limit is provided for rowboats and canoes while the property is away from the premises. 83. Ming purchased a 24-foot inboard motorboat and would like to cover it using special form (“all-risks”) coverage. Which one of the following types of policies is Ming most likely to purchase? a. ISO HO-3 b. Yacht c. Personal auto d. Small boat 84. Mario has an unendorsed HO-3 policy with a $500,000 limit for liability coverage. He also has a personal umbrella with a $2,000,000 limit of liability and a $10,000 self-insured retention. Mario is sued for slander and the court awards $1,600,000 to the plaintiff. What amount of the loss is paid by the umbrella policy? a. $1,090,000 b. $1,100,000 c. $1,590,000 d. $1,600,000

Sample Exam  23 85. Roxanne is a 40-year-old single parent of a 17-year-old son. She has been insured by a $300,000 life insurance policy for 17 years. Her premium payment is $100 per month. Roxanne’s son, Ted, is the sole beneficiary of the insurance policy. Roxanne has the following riders on her life insurance policy: Waiver of Premium Accidental Death Benefits Accelerated Death Benefits (catastrophic illness rider) Her life insurance premium was 15 days overdue when Roxanne was involved in a serious automobile accident. Assuming Roxanne died immediately in the auto accident, how much would be paid to Ted? a. $0 b. $299,900 c. $599,900 d. $600,000 © 2008 American Institute for Chartered Property Casualty Underwriters/Insurance Institute of America

24  Personal Insurance—INS 22

Answers to the INS 22 Sample Exam 1. b.

30. a.

59. d.

2. c.

31. d.

60. c.

3. a.

32. a.

61. a.

4. c.

33. b.

62. d.

5. b.

34. b.

63. a.

6. c.

35. c.

64. c.

7. b.

36. b.

65. c.

8. d.

37. c.

66. b.

9. c.

38. b.

67. a.

10. a.

39. b.

68. d.

11. b.

40. b.

69. c.

12. c.

41. d.

70. a.

13. a.

42. c.

71. a.

14. a.

43. c.

72. d.

15. a.

44. d.

73. a.

16. d.

45. b.

74. b.

17. c.

46. d.

75. c.

18. d.

47. d.

76. c.

19. c.

48. a.

77. a.

20. b.

49. a.

78. b.

21. a.

50. c.

79. b.

22. c.

51. a.

80. d.

23. a.

52. d.

81. c.

24. a.

53. a.

82. b.

25. c.

54. a.

83. d.

26. b.

55. c.

84. c.

27. a.

56. c.

85. c.

28. b.

57. d.

29. a.

58. c.

© 2008 American Institute for Chartered Property Casualty Underwriters/Insurance Institute of America