Personal Lines Insurance Test

1. A situation in which some kind of loss is possible is referred to as:

  1. Insurability
  2. Risk
  3. Transference
  4. Intangibility

2. Insurance handles risk by

  1. Reducing it
  2. Avoiding it
  3. Transferring it
  4. Ignoring it

3. An insurance policy is a contract between an insured and an insurer in which

  1. Specific future losses will be covered in exchange for payment
  2. Risk of loss is reduced
  3. Payments are sure to increase
  4. None of the above

4. The payments an insured makes to an insurer are called

  1. Product options
  2. Benefits
  3. Premiums
  4. Deductibles

5. Which of the following is not an unfair claim settlement practice?

  1. Misrepresentation of pertinent facts of policy
  2. Failing to promptly acknowledge, settle, or deny a claim
  3. Rebating
  4. Attempting to settle a claim for less than entitled in insured policy

6. What type of hazard is a deliberate creation of loss by an insured in order to collect insurance payment or benefits?

  1. Morale hazard
  2. Physical hazard
  3. Moral hazard
  4. Legal hazard

7. Which statement about state regulation of insurance is correct?

  1. Rate structures may be excessive but not discriminatory
  2. Different rates may be charged to groups of policyholders who pose different degrees of risk
  3. Companies may offer discount rates that cover costs but do not show a profit
  4. States strictly regulate how much money is spent to advertise insurance products

8. What part of the policy structure answers the following, “Who, what, when, where, and what limits?”

  1. Injuring clause
  2. Declaration
  3. Definitions
  4. Conditions

9. For a partial property loss to be paid at replacement cost, what percentage of the market value of the home has to be insured?

  1. 100%
  2. 90%
  3. 80%
  4. 70%

10. Which of the following is a basic perils exclusion?

  1. Fire
  2. Lightning
  3. Explosion
  4. Falling object

11. In a homeowner’s policy, what is Coverage D?

  1. Dwelling
  2. Other structure
  3. Loss of use
  4. Personal property

12. What coverage pays for damage to your auto when it collides with something or overturns?

  1. Comprehensive
  2. Collision
  3. Liability
  4. Uninsured motorist

13. Which of the following would be classified as personal property?

  1. Woodsheds
  2. Garage door openers
  3. Snowmobiles
  4. Hedges

14. Which names below are well-known insurance rating services?

  1. Standard & Poor’s and A.M. Best
  2. Procter & Gamble and Johnson & Johnson
  3. Medicaid and Medicare
  4. Crosse and Blackwell and Caswell-Massey

15. Auto insurance premiums may vary according to

  1. The driver’s age, gender, and driving record
  2. The vehicle’s safety features and theft rating
  3. Geographic location and the use of the vehicle
  4. All of the above

16. The basic parts of auto insurance coverage includes

  1. Liability, medical expenses, property damage, uninsured/underinsured motorist
  2. The insured, the insurer, the beneficiary
  3. Personal injury, property damage, loss of use, and liability
  4. Declarations, coverages, exclusions, conditions, and definitions

17. Both homeowner’s and renter’s insurance would cover

  1. Damage to the insured’s dwelling
  2. Damage to detached structures
  3. Personal property stolen while the policyholder is on vacation
  4. All of the above

18. Covered expenses for loss of use do NOT include

  1. A rental home or hotel room
  2. Meals
  3. Entertainment
  4. Parking

19. Personal liability coverage added to your homeowner’s policy protects against

  1. Damage to someone else’s property caused by a member of your household or your pet
  2. Physical injury to someone that occurs on your property
  3. Physical injury to someone caused by a member of your household or your pet
  4. All of the above

20. Which set of factors will increase the price of homeowner’s insurance?

  1. Newer home, brick construction
  2. Wood frame construction, volunteer fire department
  3. Two-adult household, whole-home security system
  4. Contents insured for actual cash value, low claim frequency