Embed Size (px)
Citation preview
Insurance authors have traditionally defined risk as
a. Any situation in which the probability of loss is zero.
b. Any situation in which the probability of loss is one.
c . U n ce r t a i n t y co n ce rn in g th e o ccu r r en ce o f l o s s .
d . T h e p ro b ab i l i t y o f a l o s s o ccu r r i n g .
C
Uncertainty based on a person’s mental condition or state of mind is known as
a . O b j e c t i v e r i s k .
b . O b j e c t i v e p r o b a b i l i t y .
c . S u b j e c t i v e p r o b a b i l i t y .
d . S u b j e c t i v e r i s k .
D
A p e r i l i s
a . T h e c a u s e o f a l o s s
b . A co nd i t i o n th a t i nc r ea s es t h e ch an ce o f a l o s s
c . T h e p ro b ab i l i t y t h a t a l o s s wi l l o ccu r
d . A m o r a l h a z a r d
A
Dense fog that increases the chance of an automobile accident is an example of a
a . P h y s i c a l h a z a r d
b . M o r a l h a z a r d
c. Peril
d . S p e c u l a t i v e r i s k
1) Traditionally, risk has been defined as
A) any situation in which the probability of loss is one.
B) any situation in which the probability of loss is zero.
C) uncertainty concerning the occurrence of loss.
D) the probability of a loss occurring.
Answer: C
2) Objective risk is defined as
A) the probability of loss.
B) the relative variation of actual loss from expected loss.
C) uncertainty based on a person's mental condition or state of mind.
D) the cause of loss.
Answer: B
3) An insurance company estimates its objective risk for 10,000 exposures to be 10 percent.
Assuming the probability of loss remains the same, what would happen to the objective risk if
the number of exposures were to increase to 1 million?
A) It would decrease to 1 percent.
B) It would decrease to 5 percent.
C) It would remain the same.
D) It would increase to 20 percent.
Answer: A
4) Uncertainty based on a person's mental condition or state of mind is known as
A) objective risk.
B) subjective risk.
C) objective probability.
D) subjective probability.
Answer: B
5) The long-run relative frequency of an event based on the assumption of an infinite number of
observations with no change in the underlying conditions is called
A) objective probability.
B) objective risk.
C) subjective probability.
D) subjective risk.
Answer: A
6) Which of the following statements about a priori probabilities is correct?
A) They are subjective probabilities based on ambiguity in the way probability is perceived.
B) They are subjective probabilities that may vary among individuals because of factors such as
age, gender, education, and the use of alcohol.
C) They are objective probabilities that can be determined by deductive reasoning.
D) They are objective probabilities that can be determined by subjective reasoning.
Answer: C
7) An individual's personal estimate of the chance of loss is
A) an objective probability.
B) an objective risk.
C) a subjective probability.
D) an a priori probability.
Answer: C
8) A peril is
A) a moral hazard.
B) the cause of a loss.
C) a condition which increases the chance of a loss.
D) the probability that a loss will occur.
Answer: B
9) An earthquake is an example of a
A) moral hazard.
B) peril.
C) physical hazard.
D) objective risk.
Answer: B
10) Dense fog that increases the chance of an automobile accident is an example of a
A) speculative risk.
B) peril.
C) physical hazard.
D) moral hazard.
Answer: C
11) Faking an accident to collect insurance proceeds is an example of a
A) physical hazard.
B) objective risk.
C) moral hazard.
D) attitudinal hazard.
Answer: C
12) Carelessness or indifference to a loss is an example of
A) physical hazard.
B) objective probability.
C) moral hazard.
D) attitudinal hazard.
Answer: D
13) Some characteristics of the judicial system and regulatory environment increase the
frequency and severity of loss. This hazard is called
A) moral hazard.
B) physical hazard.
C) attitudinal hazard.
D) legal hazard.
Answer: D
14) Taylor Tobacco Company is concerned that the company may be held liable in a court of law
and ordered to pay a large damage award. The characteristics of the judicial system that increase
the frequency and severity of losses are known as
A) moral hazard.
B) particular risk.
C) speculative risk.
D) legal hazard.
Answer: D
15) A phrase that encompasses all of the major risks faced by a business firm is
A) financial risk.
B) speculative risk.
C) enterprise risk.
D) pure risk.
Answer: C
16) Which of the following statements about financial risk is (are) true?
I. Enterprise risk does not include financial risk.
II. Financial risk is easily addressed through the purchase of insurance.
A) I only
B) II only
C) both I and II
D) neither I nor II
Answer: D
17) All of the following are considered financial risks EXCEPT
A) the decline in the value of a bond portfolio because of rising interest rates.
B) increased cost of production because of rising commodity prices.
C) loss of money because of adverse movements in currency exchange rates.
D) destruction of a production facility caused by an explosion.
Answer: D
18) Katelyn was just named Risk Manager of ABC Company. She has decided to create a risk
management program which considers all of the risks faced by ABC-pure, speculative,
operational, and strategic-in a single risk management program. Such a program is called a(n)
A) financial risk management program.
B) enterprise risk management program.
C) fundamental risk management program.
D) consequential risk management program.
Answer: B
19) A pure risk is defined as a situation in which there is
A) only the possibility of loss or no loss.
B) only the possibility of profit.
C) a possibility of neither profit nor loss.
D) a possibility of either profit or loss.
Answer: A
20) The premature death of an individual is an example of a
A) pure risk.
B) speculative risk.
C) fundamental risk.
D) physical hazard.
Answer: A
21) Which of the following statements about speculative risks is true?
A) They are almost always insurable by private insurers.
B) They are more easily predictable than pure risks.
C) They may benefit society even though a loss occurs.
D) They involve only a chance of loss.
Answer: C
22) An automobile that is a total loss as a result of a collision is an example of which of the
following types of risk?
I. Speculative risk
II. Diversifiable risk
A) I only
B) II only
C) both I and II
D) neither I nor II
Answer: B
23) All of the following are programs to insure fundamental risks EXCEPT
A) federally subsidized flood insurance.
B) auto physical damage insurance.
C) Social Security.
D) unemployment insurance.
Answer: B
24) All of the following are examples of personal risks EXCEPT
A) poor health.
B) unemployment.
C) premature death.
D) flood.
Answer: D
25) Which of the following is a reason why premature death may result in economic insecurity?
I. Additional expenses associated with death may be incurred.
II. The income of the deceased person's family may be inadequate to meet its basic needs.
A) I only
B) II only
C) both I and II
D) neither I nor II
Answer: C
26) Which of the following are often consequences of long-term disability?
I. Continuing medical expenses
II. Loss or reduction of employee benefits
A) I only
B) II only
C) both I and II
D) neither I nor II
Answer: C
27) All of the following are examples of direct property losses EXCEPT
A) the theft of a person's jewelry.
B) the destruction of a firm's manufacturing plant by an earthquake.
C) the cost of renting a substitute vehicle while a collision-damaged car is being repaired.
D) the vandalism of a person's automobile.
Answer: C
28) The extra expense incurred by a business to stay in operation following a fire is an example
of a(n)
A) fundamental risk.
B) speculative risk.
C) direct loss.
D) indirect loss.
Answer: D
29) Which of the following statements about liability risks is (are) true?
I. Future income and assets can be attached to pay judgments if inadequate insurance is carried.
II. There is an upper limit on the amount of loss.
A) I only
B) II only
C) both I and II
D) neither I nor II
Answer: A
30) All of the following are burdens to society because of the presence of risk EXCEPT
A) The size of an emergency fund must be increased.
B) Individuals may profit from accepting a speculative risk.
C) Society is deprived of certain goods and services.
D) Mental fear and worry are present.
Answer: B
31) Loss control includes which of the following?
I. Loss reduction
II. Loss prevention
A) I only
B) II only
C) both I and II
D) neither I nor II
Answer: C
1) The portion of a property and liability insurance contract that contains information about the
property or activity to be insured is called the
A)declarations. C) exclusions
B)conditions. D) insuring agreement A
2) What information is contained in the insuring agreement of an insurance policy?
A)a summary of the obligations of the insured
B)a description of the property or life to be insured
C)a summary of the major promises of the insurer
D)a list of the property, losses, and perils that are excluded C
3) Which of the following statements about "all risks" coverage is (are) true?
I . A l l l o s s es a r e co ve r ed ex cep t t ho s e lo s s e s sp ec i f i c a l l y ex c lu d ed .
II.The burden of proof is on the insured to prove that a loss is covered.
A) I only
B) II only
C) both I and II
D) neither I nor II A
4) The exclusion of flood in a homeowners policy is an example of an
A) excluded property.
B) excluded peril.
C) excluded loss.
D) excluded condition. B
5) Exclusions are used in insurance policies for all of the following reasons EXCEPT
A)to waive policy conditions.
B)to eliminate coverage for uninsurable perils.
C)to reduce moral hazard.
D)to eliminate coverage not needed by typical insureds. A
6) Reasons why a peril may be considered uninsurable and therefore excluded from insurance
contracts include which of the following?
I.The losses from the occurrence of the peril may be due to a predictable decline in
value.
II.The losses from the occurrence of the peril may be incalculable and catastrophic.
A) I only
B) II only
C) both I and II
D) neither I nor II C
7) The policy provision requiring the filing of proof of loss with the insurer is an example of
a(n)
A) Miscellaneous provision.
B) Insuring agreement.
C) Declaration
D) Condition. D
Which one of the following types of real property do many families own?
a. An automobile
b. A house
c. An apartment unit
d. A motor home
All of the following items are examples of personal property, EXCEPT:
a. A diamond wedding ring
b. A set of cookware
c. A fishing boat
d. A detached garage
Fire, windstorm, hail and theft are best described as examples of
a. Real property exposures
b. Personal property exposures
c. Causes of loss to property
d. Consequences of property losses
All of the following are situations that could lead to a liability loss for a family, EXCEPT:
a. A guest slips on an icy sidewalk outside their 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 sideswipes a neighbor's car and dents its fender while driving her own car.
d. The son throws a rock at a classmate who requires stitches for the injury to his head.
Joe has a young tiger that he keeps as a pet in a backyard fence. The tiger escapes and bites a
neighbor child who requires stitches. Joe argues that keeping the tiger violated no law and that he
took every precaution to restrain the tiger.
Even if Joe is correct, he might face a claim for damages based upon which one of the
following?
a. Absolute liability
b. Negligencec.
c. Statutory liabilityd.
d. Intentional torts
An individual's liability losses may
a. Not exceed the value of his or her real property.
b. Not exceed the value of all of his or her assets, including both personal and real property.
c. Not exceed the amount of his or her current income.
d. Consume most of his or her present assets and future income.
A claim for money damages because of injury to another party or damage to another party's
property is best described as
a. A tort.
b. Errors and omissions.
c. A liability loss.
d. A property loss exposure.
All of the following statements are true regarding personal risk management, EXCEPT:
a. Many individuals and families consider insurance to be the only way to handle their loss
exposures.
b. Most individuals and families should expect their insurance agent to select insurance
coverages for them.
c. Identifying all of their loss exposures is difficult for most individuals and families.
d. Individuals and families should monitor and revise their risk management decisions.
All of the following statements are true regarding insurance as a risk management technique,
EXCEPT:
a. Insurance companies can cover all losses to which individuals and families are exposed.
b. Insurance is just one of the risk management techniques available to individuals andfamilies.
c. Insurance offers an excellent risk management technique to cover many exposures of
individuals and families.
d. Insurance is available for property- liability and life - health exposures.
Installing burglar alarms, storing vehicles in a garage, and maintaining vehicles in good working
order are all examples of which one of the following?
a. Risk retention
b. Transfer of risk
c. Loss control
d. Insuring loss exposures
INS 22 Chapter 2 - Materials, Dumps, Questions Answers
All of the following are identified as problems associated with automobile insurance, EXCEPT:
a. Large underwriting losses
b. Irresponsible drivers
c. Antilock braking systems
d. High cost of automobile accidents
Which one of the following statements is true?a. People who drive while under the influence of
alcohol or drugs do not contributesignificantly to the fatality rate in theU.S.b. An individual has
a right to decide whether or not to obtain automobile insurance and this
decision does not affect othersin any way.
c. Many states have tightened their drunk-driving laws and are imposing strict penalties
forfirst-time offenders.
d. Most drivers responsible for multiple accidents can be underwritten in the
standardmarket.QUESTION2All of the following classes of individuals are likely to have
difficulty purchasing automobileinsurance at standard rates,EXCEPT:a. Young, unmarried male
driversb. Persons convicted of multiple traffic violationsc. Young, inexperienced female drivers
d. Persons convicted of one minor traffic violation
QUESTION3All of the following factors have contributed to the high costs of automobile
accidents, EXCEPT:a. Increases in auto repair costs
b. Insurers' increasing underwriting costs
c. Rising legal costsd. Higher costs associated with medical expensesQUESTION4Which one of
the following statements best explains why drivers with no auto insurance createproblems for all
drivers?Drivers with no insurancea. Are frequently the sources of auto insurance fraud . The cost
of fraud drives the cost of insurance up for all auto owners.b. Are frequently associated with
alcohol and drug abuse and accidents associated with thoseabuses.c. Have their losses paid
through social services, increasing the costs of all automobileinsurance.
d. Usually cannot pay for injuries and damage they have caused. As a result,
innocentaccident victims receive nocompensation.
QUESTION5An underwriting loss occurs when
a. An insurer's losses and expenses for a given period are higher than its premium income
forthe same period.
b. An insurer's losses for a given period exceed its loss goals for the same period.c. An insurer is
not able to pay for the losses incurred on its policies, and it must seekcompensation from its
reinsurer.d. An insurer is not able to pay for the losses incurred on its policies, and it must
seekcompensation from its guaranteedfund.QUESTION 6An underwriting loss occurs when an
insurer's losses anda. Investment expenses are higher than its premium income for that period.b.
Expenses are lower than its premium income for that period.
c. Expenses are higher than its premium income for that period.
d. Investment expenses are lower than its premium income for that period.OBJECTIVE
1QUESTION 0Which one of the following is the most commonly used method of compensating
auto accidentvictims?a. Financial responsibility laws
b. Tort liability system
c. Uninsured Motorist Coveraged. Unsatisfied judgement fundsWhich one of the following
statements regarding compulsory insurance laws is most accurate?
a. Such laws provide incomplete protection due to low minimum requirements.
b. All accident victims are guaranteed compensation.c. Accident victims are compensated
immediately with no delay from the legal system.d. Such laws encourage careless driving and
increase the number of automobile accidents.QUESTION2Under the tort liability system, injured
accident victims must prove that
a. Another party was negligent before they can collect damages.
b. They are unable to purchase insurance from another source before they can collectdamages.c.
The insurance limits they have purchased are equal to or greater than the state minimumlimits
before they can collectdamages.d. They have met the financial responsibility laws of the state
before they can collect damages.QUESTION3In evaluating the effectiveness of financial
responsibility laws in providing protection againstirresponsible drivers, critics pointout that
injured persons might still not be fully indemnified for their injuries becausea. The costs of auto
accidents are increasing too rapidly for the financial responsibility laws tokeep pace.
b. Financial responsibility laws require only minimum amounts of financial
responsibility,which might not fully compensate the injured person.
c. The legal system is continually eroding the effectiveness of the financial compensation lawsby
generating compensationfor minor injuries.d. The insurance companies providing insurance that
meet financial compensation laws areunable to compensate accidentvictims in a timely
manner.QUESTION 4Compulsory insurance laws are considered to be superior to financial
responsibility lawsbecausea. There are minimal delays in compensating the victim of an
automobile accident througheffective use of compulsory autoinsurance .b. Compulsory insurance
laws do not require that the victims of an automobile insuranceaccident prove fault to
receivecompensation.c. States enforce compulsory insurance laws more effectively than financial
responsibility laws.
d. Motorists must provide proof of financial responsibility before an accident occurs,
ratherthan afterward.
QUESTION 5Unsatisfied judgment funds are funds established in some states to compensate
auto accidentvictimsa. Who sustain bodily injury caused by an uninsured motorist and obtain
compensation fromtheir own uninsured motoristcoverage.b. Who are injured by a negligent
driver who has liability insurance at the time of the accident.
c. Who have obtained a court judgment that is uncollectible because the guilty party
cannotpay.
d. Who are injured at work and able to collect workers compensation.QUESTION 6Uninsured
motorists coverage, as an approach for compensating automobile accident victims,has all of the
following defects,EXCEPT:a. An injured person might not be fully compensated for his or her
economic loss.
b. The victim must prove that he or she has no other source of compensation
beforecoverage applies.
c. The victim is paying for insurance to protect against the failure of others to act responsibly.d.
For an injured person to collect payment under uninsured motorist coverage, the
legalresponsibility of the uninsuredmotorist for the accident must be established.QUESTION
7Underinsured motorist coverage is
a. Coverage that provides additional limits of protection when a negligent driver's
insurancelimits are not enough to payfor the damages.
b. An expansion of the perils and coverage limits that are provided by uninsured
motoristcoverages.c. Available only in states that have financial responsibility laws.d. Coverage
that stacks on top of the lower uninsured motorist coverage limits.OBJECTIVE 2QUESTION
0Which one of the following statements is true regarding no- fault automobile insurance?a.
Under a no-fault system, an injured person does not need to establish fault, but must prove
negligence in order to collectpayment for damages.
b. No-fault laws generally apply only to injuries and not to damage to property.
c. No-fault laws typically provide no benefits for loss of earnings for an injured person.d. An
injured party must sue to obtain medical expenses above a particular monetary thresholdin all
no-fault plans.QUESTION 1Which one of the following would best describe a pure no- fault
system?a. A person retains full rights to sue a negligent party for injuries.b. A person retains full
rights to pursue an uninsured motorist claim.
c. A person seeks compensation for injuries from his or her own policy and cannot
seekdamages from a negligent party.
d. A person's right to seek damages for injuries from a negligent party is limited, but
noteliminated.QUESTION 2How will the insurance companies pay the bodily injury expenses
resulting from the accidentbetween Marsha and the otherdriver?a. Each insurer will pay for the
other driver's damages.
b. Each insurer will pay for its own policyholders damages.
c. The insurers must determine which driver was greater than 50 percent at fault. That insurerwill
compensate both parties.d. The insurers must determine what percentage each driver was at fault.
The insurers willcompensate each driver based onthose percentages.QUESTION 3What type of
no-fault law applies in Marsha's state?
a. Modified no- fault
b. Pure no-faultc. Add -on no-faultd. Personal injury protectionQUESTION 4All of the
following are arguments presented by those who favor no- fault laws, EXCEPT:
a. They eliminate the need to determine fault which can be difficult.b. They avoid delays in
making claim payments due to the lengthy legal process.c. They eliminate inequities in claim
payments.
d. They increase amounts paid for claim investigation and legal costs.
QUESTION 5The no- fault insurance in Marsha's state includes aa. Deductible.b. Unsatisfied
judgment fund.
c. Monetary threshold.
d. Verbal threshold.QUESTION 6A personal injury protection (PIP) endorsement is an
endorsement to an auto insurance policythat describes
a. The no-fault benefits to be paid to the insured.
b. Benefits to be paid to an insured for an at-fault accident.c. Benefits to an insured when he or
she is outside the covered vehicle.d. The no-fault benefits to be paid to persons not
covered.OBJECTIVE 3QUESTION 0A plan for insuring high- risk drivers in which all auto
insurers doing business in the state areassigned their proportionate shareof high- risk drivers
based on the total volume of automobile insurance written in a state isa. A joint underwriting
association.b. A reinsurance facility.c. Excess and surplus lines.
d. An automobile insurance plan.
QUESTION 1Some specialty insurers provide auto insurance to high - risk drivers. The auto
insurance policiesfrom these specialty insurersgenerally have
a. Premiums that are substantially higher than premiums charged in the standard market.
b. Premiums that are subsidized by all insurers writing automobile insurance in the
stateaccording to an assessmentrepresenting their proportionate share of losses and expenses.c.
Limits of insurance coverage that are lower than the state's compulsory insurance laws.d.
Collision insurance coverage with a low deductible when the vehicle has a loss
payee.QUESTION 2Which one of the following statements is accurate with regard to state
automobile insuranceplans?a. Most plans demand higher limits than those required by the state's
financial responsibilitylaws.
b. Applicants must show evidence that they have been denied auto liability insurance
withina certain number of days.
c. Applicants are eligible for coverage regardless of offenses committed or the number of
violations of state or local laws.d. Premiums for liability coverage are usually comparable to
those available in the standardmarket.QUESTION 3All of the following statements are true of
Joint Underwriting Associations (JUAs), EXCEPT:
a. All auto insurers in the state must issue policies for their proportionate share of high-
riskdrivers.
b. A servicing insurer receives applications, issues policies, collects premiums, and
settlesclaims.c. All auto insurers in the state accept their proportionate share of underwriting
losses andexpenses.d. The JUA sets the insurance rates and approves the policy forms to be used
for high - riskdrivers.QUESTION 4Jon is a 17-year- old driver with six speeding tickets and an
at -fault accident. Jon has choseninsurance as his preferredmethod to meet financial
responsibility laws. Jon's application for standard insurance wasdeclined.All of the following
programs would help Jon secure insurance coverage (if available in hisstate), EXCEPT:
a. A reinsurance facility
b. A modified no- fault system
c. An automobile insurance pland. A specialty insurerQUESTION 5Insurers and other
organizations that make insurance available to those who cannot obtaincoverage from the
standard marketare calleda. A reinsurance facility.
b. The residual market.
c. The involuntary market.d. An automobile insurance plan.OBJECTIVE 4QUESTION 0Why do
states restrict an insurer's right to cancel or nonrenew automobile insurance policies?a. To
prohibit insurers from canceling a standard insurance policy and rewriting the coverage ina
substandard market for ahigher premiumb. To enforce the practice of requiring insurers to obtain
all of the premium for an automobileinsurance policy in advance of providing the coverage
c. To protect the public from actions that are thought to be unfair to policyholders
d. To encourage insurers to raise rates in order to maintain an adequate flow of
premiumsQUESTION 1Which one of the following reflects the basic objective of
underwriting?a. To select only the best insureds with no losses so that business will be profitable
for theinsurerb. To protect insureds from financial hardships since state government requires
auto insurancein order to operate a vehiclelegally in the state
c. To select insureds whose losses will not exceed those anticipated in the rates and will
thusbe profitable for theinsurer
d. To set low rates for insurance that will attract insureds
QUESTION 2Which one of the following statements is true regarding cancellation of an auto
insurancepolicy?a. An insurer cannot cancel a policy for material misrepresentation of relevant
information onthe application.
b. Insurers can usually cancel a new policy that has been in force for less than a
certainnumber of days (such as sixtydays).
c. In most states a verbal notice of cancellation is sufficient, provided notice is given 90
daysprior to the cancellation.d. Submission of a false or fraudulent claim can be used as grounds
for cancellation only in rareinstances.OBJECTIVE 5QUESTION 0Which one of the following
would be a primary rating factor in determining the premium forMarsha Stevens'
automobileinsurance?
a. The commuting use of the vehicle
b. The accidentc. The vehicle is a truckd. Marsha lives in a no- fault stateQUESTION 1Marsha
received a renewal notice for her auto insurance policy, and she noticed that herpremium had
decreased. Why mightthis occur?a. Trucks are considered to be safer than private passenger
vehicles. Some insurers areproviding new discounts for trucks.b. Marsha's insurance company
was able to recover the amount paid to her for her damages inthe accident from the otherparty.c.
The circumstances of the accident placed Marsha in a safe -driver category, lowering
herpremiums.
d. Competition among insurers for automobile business is intense among insurers.
Marsha'sinsurance company might becompeting against other insurers.
QUESTION 2The primary factors that most states and companies use for determining the cost of
personal
auto insurance include all of thefollowing, EXCEPT:a. Territoryb. Driver agec. Use of the auto
d. Vehicle horsepower
QUESTION 3Which of the following statements is true regarding automobile 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 otherfactors in
establishing rates.
c. State regulators require that rates be adequate, reasonable and not
unfairlydiscriminatory.
d. Drivers with lower- than -average loss exposure are charged higher rates.
INS 22 Chapter 3 Dumps, Questions Answers, Materials
ASSIGNMENT 2OBJECTIVE 0QUESTION 0While Jean was teaching Cindy to drive her van,
Cindy (driving under a learner's permit)negligently struck a school bus. Both Jean and Cindy
were sued by parents of the injuredchildren. Six children were injured with medical expenses
averaging $100,000 for each child.What is the total limit that the Montclairs' insurer will pay for
the injured childrens' medicalexpenses?a. Nothingb. $30,000
c. $300,000
d. $600,000QUESTION 1An insured under a personal auto policy with liability limits of
$100,000/$300,000/$25,000 isresponsible for an auto accident that resulted in $90,000 in
damages for bodily injury. Thedefense costs incurred by the insurer to defend the insured were
$20,000. What amount didthe insurer pay as a result of the accident?a. $20,000
b. $90,000c. $100,000
d. $110,000
QUESTION 2Jean Montclair lent her van to a church member, Lindsey, who was transporting a
group of teenagers to a church sponsored picnic. While on the way to the picnic, the van
overturned,injuring one of the teenagers. The parent of the injured teenager has sued Jean,
Lindsey, andthe church for the teenager's injuries and future disability. Who is insured for
liability under theMontclairs' personal auto policy for this accident?a. Jean onlyb. Jean and
Lindsey onlyc. Lindsey and the church only
d. Jean, Lindsey, and the church
QUESTION 3The state where Joe works has a law that requires vehicles in that state to have
$10,000 inpersonal injury protection insurance. This is not a requirement in Joe's state of
residence. Whatwill occur if Joe is involved in an accident in the state where he works?a. The
law will not apply to Joe, because he is not a resident.b. Joe will not be in compliance with the
law, and he will be personally responsible for therequired coverage.c. Joe's personal auto policy
will provide the coverage if Joe is unaware of the law andunknowingly failed to purchase it.
d. Joe's personal auto policy will automatically provide the coverage.
QUESTION 4Joe, Jean, and Cindy were going out to dinner with Jeff and Tracy Oliver.
Everyone was packedinto the Olivers' sports utility vehicle. Jeff ran a stop sign and hit another
vehicle, injuringeveryone in the Olivers' vehicle. Each of the five passengers in the Olivers'
vehicle incurred$1,000 in medical expenses. What, if anything, will the Montclairs' personal auto
insurer pay formedical expenses as a result of the accident?
a. Nothing, because Jeff Oliver was at fault in the accident
b. Nothing, if the Olivers have at least $1,000 per person in medical expense coverage
c. $3,000d. $5,000QUESTION 5Which one of the following amounts will Larry's insurer pay as
a result of this accident?a. $24,000b. $36,000c. $44,000
d. $76,000
QUESTION 6What dollar amount will Ella's insurer pay for Part A - Liability Coverage as a
result of theaccident?a. $10,000b. $15,000c. $20,000
d. $25,000
QUESTION 7Assume that the driver of the compact car had $25,000 in damages, and he was
able to collect$20,000 for those damages from Ella's policy. What amount, if anything, would
the driver of the compact car be able to collect from the uninsured motorist coverage provided by
his ownpersonal automobile policy?
a. Nothing
b. $1,000c. $5,000d. $25,000 (or the coverage limit, whichever is less)QUESTION 8
What dollar amount, if anything, will Ella's insurer pay for Part B- Medical Payments
Coverageas a result of the accident?a. Nothingb. $1,000
c. $2,000
d. $3,000OBJECTIVE 1QUESTION 0Joe's name was the only one listed on the declarations
page of the policy. Jean becameconcerned when she saw the declaration page, because she
thought that Joe's and Jean'snames should both appear because each of them owns vehicles. Can
the personal auto policyshow both Joe and Jean as named insureds?a. No, the primary named
insured should appear on the declarations page.b. No, each individual should have his or her own
policy.c. Yes, the policy can be written in a husband's and wife's names by using an additional
namedinsured endorsement.
d. Yes, the policy can be written in either spouse's name, or in both husband's and
wife'snames.
QUESTION 1All of the following information is provided on the declarations page of an
automobileinsurance policy, EXCEPT:a. A description of the insured autosb. A schedule of
coveragesc. The name of the insurance company providing the coverage
d. A schedule of policy conditions
QUESTION 2Which of the following statements regarding the declarations page of an
automobile insurancepolicy is (are) true?
a. The declarations page shows the name of the policyholder or named insured and
thenamed insured's mailing address.
b. The usual annual policy period is the time during which the policy provides coverage
thatnormally starts at 12:01 p.m. standard time.
c. The declarations page lists any exclusions that are attached to the policy.d. All of the
aboveOBJECTIVE 2QUESTION 0Under the definitions provided in the Montclairs' personal
auto policy, does Cindy qualify as a"family member"?a. No, Cindy is not a ward or foster child.b.
No, Cindy has not been adopted by the Montclairs.
c. Yes, as long as she is a resident of the household.
d. Yes, as long as she is an operator of a vehicle owned by the household.QUESTION 1Which
one of the following would qualify as a temporary substitute vehicle under a personalautomobile
policy?a. A van rented by an insured during a household moveb. A trailer borrowed from a
neighbor to transport a horsec. A company car used by an employee to run an errand for the
employer
d. A car rented by an insured while her own insured auto is being repaired
QUESTION 2In the auto insurance policy definitions, "Your covered auto" includes which of the
followingclasses of vehicles that can be covered?a. A trailer owned by the insuredb. A temporary
substitute auto or trailerc. A newly acquired auto
d. All of the above
QUESTION 3In the auto insurance policy definitions, an eligible private passenger auto, pickup,
or van of which the named insured becomes the owner, or which the named insured leases during
thepolicy period is a
a. Temporary substitute vehicle.
b. Newly acquired auto.
c. Replacement auto.d. Trailer.OBJECTIVE 3QUESTION 0Joe Montclair commutes into the
city in his truck, and he provides a ride to two co-workers wholive near him. Every other week,
the co-workers take turns buying the gasoline for Joe's truck.Does this activity create a public
livery, which would exclude liability coverage from theMontclairs' policy?
a. No, Joe is involved in a share-the-expense car pool arrangement.
b. No, as long as Joe does not report the money for the gasoline as taxable income.c. Yes,
coverage is excluded for Joe's truck as long as Joe 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.QUESTION 1Assume that the following happened: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. Larry later filed an uninsured motoristsclaim.Which one of the following
would be the outcome?
a. UM Coverage would be denied because coverage under these circumstances is excluded.
b. UM Coverage would pay in addition to the money paid by the at-fault driver.c. UM Coverage
would not apply because the at-fault driver was self-insured.d. UM Coverage would pay
damages not included in the payment from the at-fault driver.QUESTION 2For purposes of this
question, assume that Larry submitted an uninsured motorists claim afterthe accident and the
insurer paid it without exhausting policy limits. Two months later, Larrycontinued to experience
pain in his shoulder that intensified. Larry returned to his doctor formore tests. The test revealed
muscle and tendon injuries. Larry is sure that these injuriesresulted from the accident. Larry
submitted a claim for the additional costs associated with theshoulder injuries. The adjuster
handling the claim found that these injuries are often associatedwith golfing, and Larry might
have incurred these injuries through his years of playing golf.Larry and the adjuster are unable to
come to an agreement regarding the additional uninsuredmotorists claim. How can this be
resolved?
a. Through a proportional sharing between Larry's personal health care insurer and thepersonal
automobile insurerb. By negotiation between Larry's medical provider and the personal
automobile insurer
c. Through arbitration
d. Through subrogationQUESTION 3Which of the following describes the damages that can be
included as compensatory damages?a. Damages awarded by courts to punish wrongdoers
b. Payment for pain and suffering
c. Costs associated with defense of tortd. Cost of bail bondsQUESTION 4Which one of the
following statements is true regarding public or livery conveyances and theautomobile policy
coverage provided under the personal automobile policy?a. The public livery conveyance
exclusion eliminates coverage for ordinary business use of a carsuch as for newspaper or pizza
delivery, or for use by a traveling sales representative.b. Liability insurance applies to an
insured's ownership or operation of the vehicle while it isbeing used as a public or livery
conveyance.c. The public or livery conveyance exclusion applies to share-the-expense car pools.
d. A public or livery conveyance is one that is indiscriminately offered to the public.
QUESTION 5Sandra Hine, who is covered by a Personal Automobile Policy was injured along
with herneighbors, who were riding as guests in her car, in an automobile accident. Tragically,
theneighbor's daughter was killed in the accident. All of the following expenses would generally
bepaid under Sandra's personal automobile policy's medical payments coverage, EXCEPT:
a. Medical services rendered within five years of the accident
b. Funeral service expensesc. Medical expenses for injuries sustained by Sandra's neighbor
riding in the card. Surgical expenses for Sandra's neighbor
I N S 2 2 D U M P S Q U E S T I O N S M A T E R I A L S C H :
4
ASSIGNMENT 3OBJECTIVE 0
QUESTION
In the insuring agreement of Part D-Coverage for Damage to Your Auto of the personal
autopolicy the insurer promises to pay fora. Any unintended accident caused by a declared driver
b. Direct and accidental loss to a covered auto
c. All accidents not caused by an insured driverd. All losses within the deductible
amountQUESTION 1According to Part D-Coverage for Damage to Your Auto of a personal auto
policy,the insurer's limit of liability for a physical damage loss to a covered auto isa. The "blue
book" value of the vehicle taking into consideration the odometer reading and thevehicle
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
theproperty with other property of like kind and quality.
QUESTION 2Jessie received a radar detector from his brother for Jessie's birthday. The radar
detector hadcost his brother $250. Jessie discovered one morning that his car had been broken
into andthe radar detector, his radio, CD player, and CD's were all gone.Disregarding the
application of any deductibles, what amount will Jessie's insurer pay for theradar detector?
a. Nothing
b. Actual cash valuec. The amount necessary to replace the item with property of like kind and
qualityd. $250QUESTION 3following a minor covered accident, Jessie's vehicle was in the body
shop having a fenderrepaired. The vehicle was in the shop for five days. During those five days,
Jessie used publictransportation at a cost of $5.00 per day.What amount will Jessie's insurance
company pay for his transportation expenses while hisvehicle was in the shop?a. $0
b. $20.00
c. $60.00d. $75.00QUESTION 4Jessie and his girlfriend flew to California for a vacation. While
they were there, they rented acar. Jessie waived all of the optional coverages that were offered to
him at the car rentalagency. While driving the rented car, Jessie was at fault in an accident. The
repairs to therented car will cost $2000. What amount will Jessie's insured pay for the loss?a.
$450
b. $1,500
c. $2,000d. NothingQUESTION 5Jessie loaned his vehicle to his girlfriend. While she was using
the vehicle, she allowed anotherfriend, Tanya, to run an errand. Tanya promised to be back in ten
minutes. Hours later, Tanyahad still not returned. Tanya borrowed Jessie's vehicle to make a
delivery of cocaine. She wasstopped on the highway, the cocaine was discovered, Tanya was
arrested, and Jessie's vehiclewas confiscated. Jessie has tried without success to recover his
vehicle. The vehicle waseventually sold by the government at public auction. What amount will
Jessie's insurer pay for
the loss?a. Nothingb. $9,500c. $10,000
d. The amount of the outstanding loan to the loss payee
QUESTION 6John has a personal auto policy with both collision and other than collision
coverages. John wasworking out at the gym. When he finished, he found that his car had been
stolen from theparking lot. The police recovered John's car five days later, but it had been
damaged. John'sauto was in the shop ten days for repairs. For what number of days will John's
insurer pay himfor transportation expenses?a. 5b. 10
c. 13
d. 15
OBJECTIVE 1
QUESTION 0Bob has a personal auto policy with collision and other than collision coverages.
Bob went towork early one morning and failed to see his neighbor's boat and trailer parked on
the streetacross the road from Bob's driveway. Bob backed into the boat, breaking the rear
window of Bob's car. The boat and trailer were not damaged. Bob thought he might call a friend
aboutreplacing the window. He made several calls, but never got a reply. Bob then checked
withseveral friends who had auto body shops to see if he could find a used window. When
Bobfinally turned the claim in to his personal auto insurance company, several months had
passed,and rain had ruined the upholstery of the back seat of his car. Which of the Duties After
anAccident or Loss in the Personal Auto Policy Conditions has Bob failed to comply with?a.
Cooperation with the insurer
b. Prevent further damage
c. Permit inspection and appraisald. Proof of lossQUESTION 1A person seeking coverage under
the personal automobile insurance policy must comply withwhich of the following general duties
after an accident or loss in order to receive paymentunder all of the coverages of the policy?a.
The person must provide prompt notice to the state insurance department regarding theaccident or
loss.b. The person must agree to submit to a physical examination at the insured's own expense.
c. The person must authorize the insurer to obtain medical reports and other
pertinentrecords.
d. The person must submit the state required regulatory compliance norms to the insurerwithin a
reasonable amount of time.QUESTION 2Additional duties required under Part D-Coverage for
Damage to Your Auto, include all of thefollowing, EXCEPT:
a. Provide proof of insurance
b. Prevent further lossc. Notify policed. Permit inspection and appraisal
OBJECTIVE 2
QUESTIONIf an insured deliberately leaves his or her auto in an urban area, unlocked, with the
keys in theignition, and later claims that the car has been stolen, the insurer discovering these
facts will
a. Invoke the automatic termination provision in the policy.
b. Deny coverage for the claim on the basis of the fraud condition.
c. Subrogate against the insured.d. Invoke the appraisal provision in the policy.QUESTION 1An
insurer's right to recover payment from a negligent third party isa. Appraisal.b. Assignment.c.
Adherence.
d. Subrogation.
QUESTION 2Under the Personal Auto Policy, when can legal action be brought against the
insurer?a. Only when coverage has been deniedb. Only when insurance subrogation attempts
have failedc. Only when the liability of the insured is involved
d. Only when the insured has fully complied with all of the policy terms
QUESTION 3If the insurer makes a loss payment to a person who has a right to recover damages
from anegligent third party, the insurer has what legal right against that third party?a. A legal
right of estoppelsb. A legal right of salvage
c. A legal right of subrogation
d. A legal right of loss mitigation
OBJECTIVE 3
QUESTION 0Lori has a company automobile with insurance coverage provided by her
employer's business
auto insurance. Lori cares for her elderly grandmother, Nell, at least one day each weekend,and
one evening during the week. Lori wants to help Nell live independently in her own homeas long
as she is able. However, Nell's memory is beginning to fade. When Lori runs errands forNell or
takes her to the store and the doctor's office, Nell insists that Lori drive Nell's car to"keep it
running" and to keep down the mileage on Lori's car. Lori is afraid that Nell might haveallowed
the insurance coverage on her car to lapse, or the limits of liability might be very low.What
coverage can Lori purchase to provide insurance for herself when she drives Nell's car?a. A
personal auto policy covering her company carb. Miscellaneous Type Vehicle endorsement
attached to a personal auto policyc. Extended Non-Owned Coverage for Named Individual
endorsement attached to a personalauto policy
d. Named Non-Owner Coverage endorsement attached to a personal auto policy
QUESTION 1The Underinsured Motorists coverage endorsement can be added to the personal
auto policy toprovide coverage to the insured and passengers when a negligent driver has auto
liability limitsa. Equal to or greater than the insured's underinsured limits but not adequate to pay
for theinjuries caused by the accident.b. That have been cancelled.
c. That are lower than the limits provided by the underinsured motorists coverage of
theinsured person.
d. Supplemented by a personal umbrella policy.QUESTION 2Dirk has a restored 1968 Mustang.
Dirk has spent a lot of money and time bringing the car backto a like-new condition. Dirk has
insured the Mustang under a personal auto policy withcollision and other than collision
coverages included. How can Dirk establish the value of theMustang with his insurer?
a. Request a Coverage for Damage to Your Auto (maximum limit of liability) endorsement
beadded to the personal auto policy
b. Request a Customizing Equipment endorsement be added to the personal auto policyc.
Request an Extended Coverage for Named Individuals endorsement be added to thepersonal auto
policyd. Request a Miscellaneous type Vehicle endorsement be added to the personal auto
policyQUESTION 3What endorsement could be used to modify the grandparents' PAP so that it
would provideliability coverage while Cindy is operating the ATV?
a. Miscellaneous type vehicle endorsement
b. Customizing equipment coverage endorsementc. Named non-owner coverage endorsementd.
Extended non-owned coverage for named individual endorsement
![2010 Auditing Released MC Questions [PDF Library][1]](https://img.pdfslide.net/doc/110x75/55cf98ca550346d03399b007/2010-auditing-released-mc-questions-pdf-library1.jpg)
