USG Part 1 v2 Non CA Specific

The Ultimate Study Guide
Part One
The Ultimate Study Guide - Part 1

Welcome
to Part One of the
Ultimate Study Guide!
When you fully comprehend these concepts
(and score 90% or higher on all four parts)
You will be ready to move on to the
Study Lounge Sessions.

1. Which of the following instances
describes “Pure Risk”?
A. Probability of both loss and gain
B. Probability of loss only
C. Insured is no longer financially responsible.
D. None of the above choices describe a
"pure risk".

1. Which of the following instances describes ”Pure Risk”?
B. Probability of loss only
Pure risks have no chance for gain. This is in contrast to
“Speculative Risks”, which offer a chance for both loss
and gain. (Speculative risks are not insurable.)
Remember this:
“Pure Risk equals Loss Only”

2. Which of the following insurance company
distribution systems has "policyholders" who are
"profit sharers" in the company?
A. Reciprocal Insurers
B. Mutual Insurers
C. Lloyds of London
D. Stock Insurer

2. Which of the following insurance company distribution systems
has "policyholders" who are "profit sharers" in the company?
B. Mutual Insurers
Remember: “Profit Sharers” = “Mutual”
Watch out for this one, and remember:
“Share in Profits = Stock”

3. The following characteristics of insurance
contracts are true, except…
A. Insurance is a method of risk transference
B. Insurance protects against contingent or
unknown events
C. Insurance policies help distribute loss exposures
D. Insurance policies eliminate risk

3. The following characteristics of insurance contracts are true, except…
D. Insurance policies eliminate risk
Nothing, including Insurance, can entirely eliminate risk.
Insurance is merely the transference of risk.

4. For an individual to be found negligent (and therefore
legally liable), which of the following circumstances must
occur in the event of an accident?
A. Negligence was the proximate cause of loss suffered.
B. There was a legal duty to act or not to act.
C. Bodily injury, property damage or both resulted from
breach of legal duty.
D. All of the circumstances above are required

4. D: All of the circumstances above are required
●Remember: “Negligence makes up the largest form of
Tort law”, and that statement holds true here.
●Tort is characterized by duty, breach, proximate cause
and damages of (BI & PD). Therefore, “All of the above”
is the correct answer.

5. Which of the following four elements of an
insurance contract states both who and what are
insured?
A. Insuring agreement
B. Exclusions section
C. Declarations page
D. Conditions section

5 = C: Declarations page
Remember:
“Declarations” = “Who and What is Insured”.
Also remember: The “D” in “D.I.C.E.” (the four
elements of a contract) stands for Declarations.

6. Six years ago, Eddie the insured paid $8,000 for his dining
room set. Eddie submitted a claim to recover from fire sprinkler
damage resulting from a fondue dinner disaster that ruined his
carpet and dining room furniture 14 days ago. The claims team
has depreciated the value of his furniture and carpet by $5,000.
The current replacement cost of the furniture and carpet is
$10,000. What will the insurer pay?
A. $4,000
B. $10,000
C. $5,000
D. $2,000

#6 = C. $5,000 (Watch out – the exam is trying to trick you here):
The only numbers you need are the (RC number for Replacement
Cost (which they’ll give you) and the DEP number for Depreciation
(which they’ll also give you).
There is another number that does not belong. Simply focus on the
numbers $10,000 and $5,000, as $10,000 is the amount to replace (i.
e.
the Replacement Cost number).The $5,000 is the Depreciation
number (DEP).”
The “six years ago”, and the original cost of $8,000 is erroneous.
(Hint: Use your scratch paper on this one) Simply write out the

7. Which of the following sentences represents the
complete coinsurance formula used to calculate the amount
payable in the event of a partial loss?
A. The amount of insurance carried, minus the deductible,
multiplied by the loss.
B. The amount of insurance required, divided by the amount carried,
multiplied by the loss, subtracting any applicable deductible.
C. The amount of insurance carried, divided by the amount
required, multiplied by the loss subtracting any applicable deductible.
D. None of the above

#7 C: The amount of insurance carried, divided by the amount
required, multiplied by the loss subtracting any applicable deductible.
Above is the verbal format of the co-insurance formula.
It is easier to remember as:
“Did over Should times the Loss, minus the Deductible”

8. Dwelling policies DP's offer worldwide coverage on
personal property; coverage "C" covers up to what
percentage value?
A. Up to 10% of coverage "C" is covered worldwide.
B. DP's exclude coverage "C" once contents are moved
beyond 100 ft. from dwelling.
C. Up to 100% of coverage "C" is covered worldwide.
D. Dwelling policies do not offer worldwide coverage.

8. Dwelling policies DP's offer worldwide coverage on personal
property; coverage "C" covers up to what percentage value?
A. Up to 10% of coverage "C" is covered worldwide.
(Watch out on this one):
World wide coverage of “C” is numerically calculated
to be 10% of “A” on a DP (Dwelling Policy); however,
it is 100% of “C” worldwide on an HO Homeowners form.

9. Kayla, a potential client, is in the process of purchasing a
condominium. Her homeowner’s association will require her to carry
10% interior structure coverage as the minimum personal liability
coverage of $100,000. Kayla currently has personal property with
$25,000 replacement cost value. Which HO policy form is designed
to fit Kayla's insurance needs?
A. An HO8 with $25,000 replacement cost value for coverage "C".
B. An HO6 with replacement cost value for coverage "C".
C. An H04 with replacement cost value for coverage "A".
D. An H03 with the HO15 endorsement attached.

9: B - an HO6 with replacement cost value for coverage "C"
Remember: Condo = HO6. Note that the HO6 and the HO4
can be connected in your mind, as
an HO4 has Zero type A (Structure Coverage)
and HO6 has Limited type A coverage.

10. Andy, a tenant at the Trump Terraces, needs which HO
policy form to cover his minimum personal liability
requirements of $100,000 as well as provide coverage to
replace his contents valued at $50,000?
A. An H05 with ACV coverage on his contents.
B. An H03 with the H015 endorsement attached
C. An H04 with ACV coverage on his contents.
D. An H04 with guaranteed replacement cost coverage on his
personal property up to $50,000.

10. D: An H04 with guaranteed replacement cost coverage on
his personal property up to $50,000.
H04’s are all about coverage “C” for the tenants’ personal
property. (Think: “Their Couch, their Computers and Clothes).
The HO4 by nature is created to offer personal liability “E” and
personal property “C” to the tenants who are renting. (FYI: This is
a great policy for apartment renters.) The coverage “E” is for
tenants liability.
It might help to remember "E" for Everything.
(“E” is usually $100,000 by default.)

11. An “All Risk” or “Open Peril” H03 form covers _____
property, while an H015 endorsement covers _____
property on a replacement cost basis? Meanwhile, an H03
with an H015 endorsement is equivalent to an H0___?
A. Real, Personal, H05
B. Personal, Real, H05
C. Real, Personal, H08
D. Personal, Real, H03

11: A - Real, Personal, HO5
“All Risk" is akin to the word “Special”. In essence, it means that you will be covered for
everything (except for what’s excluded). Therefore, an H03 policy (although very special)
is unique because of coverage “A”, which covers "real property". Meanwhile, the “C”,
which covers personal property, is not special yet… It is actually “broad”. However, when
the HO15 endorsement is added to the HO3 it becomes equal to an H05 instead of similar
to it.
In essence, an HO3 plus an HO15 Endorsement equals an HO5 policy.

12. Which of the following choices best
describes a "collision" loss?
A. An accident resulting from colliding with a deer.
B. An "upset" or overturn on an icy curve.
C. Damage to ones vehicle during an earthquake.
D. An insured’s vehicle is stolen and wrecked during
a police chase.

r
12. Which of the following choices best describes a "collision" loss?
1. An "upset" or overturn on an icy curve.
Collision is part of coverage “D” in a PAP (Personal Auto Policy).
Remember: There are two parts of “D”: 1.) Comp, and 2.) Collision.
Both are included in “D” but have different functions. Comp handles
everything that collision doesn’t and Collision handles the collisions.
The two need each other as a balance and together they make up
coverage “D”. However, on the exam, each has a different deductible.
Comp is typically $250, and collision is $500.
This question hinges upon one’s interpretation (This is fairly simple):
Although “collision” means “hitting something” (a light pole or another
vehicle), it can also mean a roll-over. The exam uses the term “upset” to
mean roll-over. An upset is also a collision. Comprehensive covers
damage caused by an earthquake, flood, theft, and vandalism. (Now
here’s the super sneaky one): Hitting an animal is technically a Comp
loss. Essentially, it is treated as though “The deer hit the car” (I know it’
s sad, but could show up on the test.)

13. Gizelle is insured with a personal auto policy with the
following Bodily Injury (BI) limits of $25,000 per person and
$50,000 per occurrence, and reads as 25/50 on her Declarations
page. Gizelle is found negligent and therefore legally liable in an
auto accident which injures three people. The injuries are as
follows. Person 1: $10,000; Person 2: $8,000; Person 3: $27,000.
How much will the insurer pay?
A. $60,000
B. $51,000
C. $43,000
D. $53,000

# 13 C. $43,000
Gizelle purchased the liability limits of 25/50. This means that for third
party liability claims, Gizelle's policy will pay no more than $25,000 per
person, and no more than $50,000 per occurrence. Instead of just testing
your math skills, this question tests your ability to take the maximum
liability limits into account.
On your scratch paper, write out the following three injured persons and
their injuries. Person 1: $10,000, Person 2: $8,000, Person 3: $27,000.You
might think to simply add the costs for person 1, 2 and 3. However, in this
case, you must take into consideration the $25,000 limit. Therefore,
substitute the maximum of $25,000 (instead of $27,000) for person
number 3.Now you can do the addition: $10,000 plus $8,000 plus
$25,000. (Answer to this question = $43,000)

14. Which policy is most similar to a personal auto
policy (PAP), in terms of coverage letter "B" (med
pay for the driver and permissive use occupants)?
A. Yacht Policy
B. Boat Owner’s Policy
C. Ocean Marine Policy, with a personal watercraft
endorsement attached.
D. None of the above

14. Which policy is most similar to a personal auto policy (PAP), in terms of
coverage letter "B" (med pay for the driver and permissive use occupants)?
B. Boat Owner’s Policy
Remember:
Boat Owner’s policies are very similar to Auto policies,
particularly because of med pay (coverage “B”)

15. Jennifer owns a clothing store with inventory values that
fluctuate seasonally throughout the year. Which of the
following insurance policy forms will adjust coverage "B" in
a Business owners policy (BOP)?
A. Peak Season Endorsement
B. Seasonal Protection and Indemnity Coverage Endorsement
C. Value Reporting Form
D. Business Income with Extra Expense Coverage

15. Jennifer owns a clothing store with inventory values that fluctuate seasonally
throughout the year. Which of the following insurance policy forms will adjust
coverage "B" in a Business owners policy (BOP)?
C. Value Reporting Form
How to Remember:
“Victoria’s Secret dramatically increases its Valuable
inventory in anticipation of Valentine’s day.”
(The “V” stands for fluctuating inventory Values)

16. Which of the following are characteristics of an
implied warranty (representation)?
A. Oral or Written
B. Altered or Withdrawn
C. Neither of the Above
D. All of the Above

#16: D - All of the Above
Most folks know that an oral or written Representation can be
expressed or implied. However, it also can be altered or
withdrawn at the inception of the contract.
Prepare yourself for another important question by remembering
this:
A Representation qualifies as an Implied Warranty.

17. When an agent desires to sell a new product and makes
misleading statements to his client regarding his or her current
"in-force" policies (in an attempt to entice the insured to
surrender or forfeit the existing contract), the agent has
committed a violation of the Insurance Code known as:
A. Intimidation by Coercion
B. Nothing (“A Sale is a Sale”)
C. Twisting
D. Warranty Violation

17. When an agent desires to sell a new product and makes misleading
statements to his client regarding his or her current "in-force" policies (in an
attempt to entice the insured to surrender or forfeit the existing contract), the
agent has committed a violation of the Insurance Code known as:
C. Twisting
How to Remember:
The agent “Twisted” his client’s arm in order for the client
to drop the contract.

18. Three years ago, an insured named Chad purchased $10,000
in audio equipment that comprises the surround sound system
listed in his H06. The claims adjuster determined that the items
have depreciated by $4,000. Meanwhile, it would cost $13,000
replace Chad's equipment at today’s prices. Which actual cash
value settlement will Chad receive?
A. $9,000
B. $10,000
C. $7,000
D. $13,000

18. Three years ago, an insured named Chad purchased $10,000 in audio
equipment that comprises the surround sound system listed in his H06. The
claims adjuster determined that the items have depreciated by $4,000.
Meanwhile, it would cost $13,000 replace Chad's equipment at today’s
prices. Which actual cash value settlement will Chad receive?
A. $9,000
Cause ACV = RC – DEP.
($13,000 = RC#) ($4,000 = DEP #)

19. Which of the following insurance company structures is
managed by a board of directors and is owned by
stockholders who share in the profits?
A. Fraternal
B. Reciprocal
C. Stock
D. Mutual

19 (C) Stock Insurance companies:
“Share in Profits” is the answer to questions regarding stock companies.
Meanwhile, “Profit Sharers” means mutual.

20. If an agent sells an H04 policy with a $750 deductible and an
attached contents replacement endorsement (instead of a $100
deductible with the same endorsement), statistically what would
happen to the insurer in terms of coverage "C" claims submitted?
A. Fewer coverage "C" claims submitted to the insurer.
B. Greater number of coverage "C" claims submitted by the insured.
C. Increase in premium for the insured.
D. Increase in commissions for the agent.

20. If an agent sells an H04 policy with a $750 deductible and an attached contents replacement
endorsement (instead of a $100 deductible with the same endorsement), statistically what would
happen to the insurer in terms of coverage "C" claims submitted?
(A) Fewer coverage "C" claims claims submitted to the insurer:
The more risk retention (also known as the “R” in S.T.A.R.R.) on
behalf of the Insured, the fewer claims for the insurer. Claims
under $750 are eliminated in this case.

21. Which crime insurance form is most comprehensive
in terms of offering coverage for a broad range of perils?
A. Burglary
B. Theft
C. Robbery
D. Off premises theft of money and securities.

21. (B) Theft:
Theft is the broadest form of crime insurance.
(Think of theft as the ceiling above robbery and burglary.)
• Robbery is characterized by fear or threat of violence.
• Burglary is evident by forcible entry or exit.

22. The standard Claims Made form of a professional liability policy has
an effective date as well as a retroactive date listed on the policy’s
Declaration page. What is the primary benefit of the retroactive date and
what time period does it cover in reference to the effective date?
A. The retroactive date covers professional liability claims that occur one
year after the effective date.
B. The retroactive date covers professional liability claims that occur up to
five years after the effective date of coverage.
C. The retroactive date covers professional liability claims that occur up to
one year before the policy effective date as - long as the loss is
discovered during the policy term.
D. All above are correct.

22. The standard Claims Made form of a professional liability policy has
an effective date as well as a retroactive date listed on the policy’s
Declaration page. What is the primary benefit of the retroactive date and
what time period does it cover in reference to the effective date?
A. The retroactive date covers professional liability claims that occur one
year after the effective date.
B. The retroactive date covers professional liability claims that occur up to
five years after the effective date of coverage.
C. The retroactive date covers professional liability claims that occur up
to one year before the policy effective date as - long as the loss is
discovered during the policy term.
D. All above are correct.

22: C. The retroactive date covers professional liability claims that occur up to
one year before the policy effective date as - long as the loss is discovered during
the policy term.
“Claims made” policies, on the liability side, have a “retroactive”
date. The retroactive date is exactly one year prior to the effective
date.
Example: An effective date, or the date the policy started, is
3/25/15.
The retroactive date (which is specific to the Claims Made policy)
is 3/25/14 in this case.

23. Commercial Auto (CAP) policies use symbols instead
of letters to indicate both who and what are covered by a
particular policy. Which of the following symbols
describes “Owned autos other than private passenger
autos”?
A. Symbol 9
B. Symbol 4
C. Symbol 7
D. Symbol 1

23. (B) Symbol 4:
Symbol 4 describes “owned” autos
other than private passenger autos.

24. Medicare part ____ (the “Medicare Supplement”) requires
an additional paid premium in order for an insured to receive
Physician service benefits. Meanwhile, Medicare part ____
covers hospital services, and becomes automatic once the
insured reaches age 65.
A. Medicare part A & B
B. Medicare part B & A
C. Medicare part C & D
D. Medicare part D & C

24. Medicare part B & A:
(“Physician’s Services” is Medicare Part “B”.)
Part “A” covers hospital services and becomes automatic once an insured turns
age 65.
Remember: “A” for Automatic
Part “B” is typically for drugs administered in a hospital bed.
Remember: “B” for Bed
Part “C” is also known as Medicare advantage
Remember: “C” is for Care Plus!
Part “D” stands for prescription drugs.
Remember: “D” for “Drugs outside of the hospital”

1. Madison purchased an H04 policy to comply with the "tenant" liability
insurance requirements of her primary residence, the Trump Towers.
Madison's policy includes coverage "C" limits of $50,000 with a $500
deductible. However, Madison's agent did not entice her to purchase
the contents replacement endorsement. Therefore, her only settlement
option is ACV in a water damage claim to replace her computer
($3,000 replacement cost) , credenza ($5,000 replacement cost), and
clothing ($12,000 replacement cost). Assuming depreciation of 20%
what will the insurer pay Madison?
A. $15,500
B. $16,500
C. $16,000
D. $17,500

25 A. $15,500:
Advice: Use your scratch paper to write down all of the numbers. Then, circle the numbers
that fit the profile “RC” (replacement cost/value), and the ones that fit the DEP
(depreciated value).
Now, cross out the other number on this question: ($50,000). This is simply a distracter
number!
The replacement cost (RC) for the computer ($3,000), credenza ($5,000) plus clothing
($12,000) totals $20,000.
Now, you need to calculate the DEP, which is 20% of the replacement cost (This is an easy
percentage to remember: think of Macy’s holding a 20% off sale.)
20% of $20,000 is also fairly easy to calculate, and that amount is $4,000. (On the other
hand, 10% is even easier to calculate. Therefore, simply calculate 10% and multiply by
two.)
Using the formula ACV = RC-DEP, ACV equals $20,000 minus $4,000. Now don't forget
the $500 deductible, especially after you've come this far. Therefore, the answer is (A)
$15,500.

26. An Insured’s unendorsed H03 ”Special Form" policy
covers personal property (coverage "C" on an "all risk" basis)
during which of the following situations?
A. The period of removal, for a maximum time of five days.
B. The period of removal, for a maximum time of 30 days.
C. Following a break-in resulting in a theft loss of $25,000.
D. Following a flood loss that destroys $25,000 in personal property.

26 B. During the period of removal for a maximum time of 30 days.
The HO3 covers “All Risk” on the building coverage “A” but not
on “C” (unless the HO15 endorsement is added). This would apply
the “All Risk coverage to “C”.
Remember the definition for “Removal”. During the period of
removal, “C” becomes “All Risk” for 30 days.

27. Adam's Personal Auto Policy (PAP) contains bodily injury (BI)
coverage limits of 25/50. While driving alone late at night, Adam
collided with another car and injured its three occupants. The court
found Adam negligent and consequently liable for all third party
injuries related to the crash. The third party BI claims for each of
the injured were: $3,000 for the first person, $16,000 for the second
and $26,000 for the third. What will the insurer pay on behalf of
Adam?
A. $45,000
B. $43,000
C. $44,000
D. $42,000

27 C. $44,000:
“Persons” was the hint to find in this question. The number on the left always
represents the "per person" amount. It applies to all third-party persons injured in
an occurrence.
The trick is to notice that person #3 has exceeded the "per person" BI agreement
of $25,000 by $1,000. When you do your math, use $25,000 instead of $26,000.
If you were looking at the “50” in the question, that is the "per occurrence"
amount. However, this question asks for the "per person" amount and then
simply tests your basic math skills.
Now let's add them up:
(Person 1) $3,000
(Person 2) + $16,000
(person 3) + $25,000 (not $26,000 - see above!)
Total: = $44,000

28. Taylor's PAP (Personal Auto Policy) provides "other than
collision" covered all of the following situations except:
A. When Taylor's permanently mounted navigation system was stolen while
her car was parked outside her apartment complex.
B. When Taylor's iPad was stolen from her parked convertible during a
morning coffee break at Starbucks.
C. When Taylor's factory mounted spare tire was stolen from the back of
her SUV while it was parked in a shopping mall parking lot.
D. When Taylor's vehicle was damaged by falling objects due to an
earthquake that occurred while parked in her garage.

28: B. When Taylor's iPad was stolen from her parked convertible during a
morning coffee break at Starbucks.
While personal property is covered in the HO contracts,
it is not covered in Auto contracts.
Exception: A car stereo is covered under the PAP (up to $200),
if it is permanently mounted in the vehicle.
(The iPad in this question was not permanently mounted.)

29. Coverage "D" in a Personal Auto policy (PAP) covers both
comprehensive and collision losses. Which of the following losses
would be covered as a comprehensive (hint: Anything other than a
collision) loss?
A. When an Insured’s Ferrari convertible is vandalized while parked at a
Katy Perry concert.
B. When an Insured’s permanently mounted Navigation system is stolen
from their Escalade.
C. When an Insured's Porsche is crushed by a large Oak Tree that falls as
the result of a violent windstorm.
D. All of the above will be covered by a comprehensive coverage form.

29. D: All of the above will be covered by a comprehensive
coverage form
All examples are covered under comprehensive (i.e. other than
collision) losses, including damage caused by a falling tree.
The Navigation system is covered up to $200, as it is permanently
mounted.

30. Any attempt by the Insured to deceive the Insurer by concealing
material facts (or offering misleading statements at time of application)
indicates that the Insured is attempting to secure an unlawful advantage
by obtaining a lower premium.
Therefore, in compliance with the State insurance code, the information
gathered in the formulation of an insurance contract must contain
information that is material and is used to estimate the Insurer’s
__________?
A. Disadvantages
B. Loss Ratio
C. Expense Ratio
D. Combined Ratio

30. A: Disadvantages
Material & Disadvantages are the key words here.
When you see the word “material” or “materiality” in a question,
the answer will always include the word “disadvantages” in it.
(Seek it out, mark it down and move on!)

31. The definition of "Risk" in relation to insurance is
best defined as?
A. The chance of loss or gain.
B. The uncertainty of or chance of loss.
C. The cause of a peril.
D. None of the above.

31. B The uncertainty or chance of loss:
Risk, by definition, is the uncertainty (or chance) of a loss
occurring.

32. Jamie just passed her Property and Casualty exam! When
can she legally transact insurance?
A. As soon as Jamie receives her license by e-mail and prints out a
hard copy.
B. When Jamie is hired by a brokerage firm and completes an eight
hour sales & ethics course.
C. When Jamie's insurance employer signs a "notice of
appointment" on her behalf.
D. As soon as Jamie is fingerprinted at the test site.

32 C: When Jamie's insurance employer signs a "notice of
appointment" on her behalf.
One cannot transact insurance without an active license.
One can only begin to transact insurance when a notice of
appointment is signed.
Remember, the key concept:
a signed notice of appointment.

33. The insurance industry includes foreign and alien insurers, as well as
admitted and non-admitted carriers. Which of the following describes a
domestic/admitted insurer in accordance with the Insurance Code?
A. A certified insurer that is structured, incorporated or organized in any
state that is considered it's home state.
B. An insurer that is structured, incorporated or organized in state other than
its home state with a certificate of authority.
C. An insurer that is structured, incorporated or organized in a country other
than the United States with a certificate of authority.
D. An insurer that is structured, incorporated or organized in it's home state),
with a certificate of authenticity.

33 A: A certified insurer that is structured, incorporated or
organized in any state that is considered it's home state.
On questions regarding domestic insurers,
Remember:
Domestic = Home State
Meanwhile, in order to be an admitted carrier, an insurer must have
a ”Certificate of Authority”.

34. Some states have a mandatory Fire and Casualty insurance
premium determination rating system designed to protect Insureds.
This system is enforced by the Department Of Insurance (DOI),
and is highly regulated by the Insurance Commissioner. Which of
the following terms describes this rating system?
A. Mandatory rating system.
B. Monopolistic rating system.
C. Prior approval rating system.
D. Competitive State rating system.

34. C: Prior approval rating system:
Regarding insurance rates, some states have a prior approval
requirement for all admitted insurers.
This means that the Department of Insurance must approve the
rates (premiums) for Insureds in advance.

35. The 007 Insurance co insures Clare’s 2005 Mustang
convertible. In the third month of a six month contract, Claire
trades in her convertible for a 2009 Jeep Wrangler. Claire pays for
the insurance on the Wrangler. What type of refund does Claire
receive for the unused portion of her Mustang contract?
A. Short Rate
B. Flat Rate
C. Pro-rate
D. Credit Refund

35 C: Pro-rate…
The point to remember here is that this question does not mention
"service charge." A service charge would have made “Short Rate”
the best answer.
When a service charge is not a factor and a refund is given, the best
answer choice is “Pro-rate”.

36. In Lily's Personal Auto Policy (PAP), which of the
following choices is or are specific to property insurance?
A. Bodily injury (BI) Liability Coverage "A".
B. Tort Liability Coverage "E.”
C. Medical payments to Others Coverage "B".
D. Comprehensive Coverage "D".

36. (D): Comprehensive coverage "D”…
Property damage on a personal auto policy has to do with physical
property of the Insured’s vehicle itself. This question tests this concept.
The coverage letter that is assigned to Comprehensive (or other than
collision) coverage is "D”.
How to Remember:
“Why does the letter “D” stand for Comprehensive?
(Do you comprehend?)”

37. David and Victoria purchase a three bedroom starter home and
plan to start a family there. They are interested in a policy that will
grow with them, offer the best product value and fit their budget.
As their agent, which of the following policies would you
recommend?
A. An HO5 with an HO15 endorsement for excess "B" coverage.
B. A DP3, as it is less expensive and is a perfect fit for a family
of three.
C. An HO6 with excess "A" coverage.
D. A special form HO3 with $300,000 "E" coverage.

37. D: A special form HO3 with $300,000 "E" coverage…
DP’s are for buildings “rented to others”, ranging from one to four units.
At the most basic level, HO’s are broader policies, particularly because
the DP liability is optional.
In an HO policy, liability insurance is fundamental and always included.
Most insurer’s minimum personal liability limits (included in coverage
"E”) are $100,000. This is most likely too low for single family home-
owners.
Meanwhile, $300,000 coverage "E" limits typically cost less than $6
extra per month and offer greater value to the Insured.

38. Gina recently purchased a beach front vacation condo in
Capitola, CA. Gina desires excess liability protection and more
than adequate medical payments coverage, as she plans to entertain
family and friends during the summer. As Gina’s agent, which HO
policy form package would you recommend?
A. An HO8 w/ $500,000 "A" coverage and $5,000 "F" coverage.
B. An HO4 w/ $500,000 "A" coverage and $5,000 "E" coverage.
C. An HO6 w/ $500,000 "A" coverage and $5,000 "F" coverage.
D. An HO5 w/ $500,000 "A" coverage and $5,000 "F" coverage.

38 (C) HO6:
An HO6 covers condos, and it most similar to an HO4, with the
same coverage “C” and similar coverage “A”.
Meanwhile, Medical payments coverage in an HO policy is
assigned the letter "F".
Here’s a way to remember coverage “F”:
“Oh my, someone Fainted in my house! Call a Medic!”

39. Which of the following HO policy forms is the "Special
Form policy” that provides "All Risk" (open peril) coverage
"A" on dwelling & appurtenant structures?
A. HO8
B. HO6
C. HO5
D. HO3

39 (D) HO3:
The HO3 is fundamentally an "All Risk" policy. This means that all
perils or causes of loss are covered - except for the listed perils that
are excluded.
The excluded perils are typically catastrophic in nature:
Earthquakes, Floods, Mudslides and Earth movement.

40. Which of the following Dwelling form DP policies
offers the broadest coverage?
A. DP2 Broad
B. DP4 Comprehensive
C. DP1 Basic
D. DP3 Special

40. (D) Special:
Don’t let this sneaky question trick you!
Remember the order of broadness:
• Basic is the least broad
• Broad is broader
• Special is broadest
(Meanwhile, there is no comprehensive DP form.)
Therefore, a Special form policy (like and DP3) is broader than the
broad form DP2.
While the DP2 is named the “Broad form”, you now know
it is not the broadest!

41. HO policies cover Dwelling ("__"), Separate/Appurtenant
structures ("__") and personal property ("__"), as part of section 1
coverage and lists their specific coverage amounts in the policies
Declarations Page. Which letters are assigned to these coverages in
the order they appear?
A. Dwelling "C", Separate/Appurtenant structures "B",
Personal property "A".
B. Dwelling "A", Separate/Appurtenant structures "C",
Personal property "B".
C. Dwelling "A", Separate/Appurtenant structures "B",
Personal property "C”.
D. Dwelling "C", Separate/Appurtenant structures "A”,
Personal property "B".

41 (C) Dwelling, Separate Appurtenant, personal property:
Coverage letter "A" is for the structure (think “A frame”).
"B" is for the separate/appurtenant structures (think “Barn”).
(“B” also includes fences, decks and built-in barbecues.)
Meanwhile, "C" covers personal property and is given the name
“broad”.

42. What provision found in HO3, HO5 and HO6 policies is
designed to add an extra 10% of dwelling/structure coverage "A”,
in the event of a mandatory building code upgrade at the time of
restoration?
A. An HO15 endorsement
B. Extra Expense Coverage provision
C. Ordinance or Law coverage provision
D. ADA requirement coverage provision

42 C: Ordinance or Law coverage provision.
Remember:
Ordinance (or law) coverage = 10% of coverage “A”
This coverage is designed to bridge the gap between the original
home replacement cost and the construction costs relevant to the
date of a potential present day claim.

43. Inland Marine policies are designed to cover personal
property on a/an ________ basis?
A. Broad form
B. Basic form
C. Itemized or scheduled
D. All risk

43 (D) All Risk:
Inland marine policies are “All Risk”.
Please note that PPF’s and PAF’s are both unique versions of the
Inland Marine policies.
Inland marine policies (the “I” in “B.A.C.F.L.I.P.”), define items
that are in the Care, Custody, and Control of Insureds. (We call this
the “Three C’s of Commercial”.)
Remember:
The “Three C’s of Commercial” are covered by an
all risk policy named Inland Marine, represented by
the “I” in B.A.C.F.L.I.P.

44. Which of the following homes would be eligible for
coverage under the NFIP?
A. A home in the course of construction.
B. The Tri-Lambda fraternity house, located within 500ft
of a fire hydrant.
C. A custom home located in the Woodland Hills, fifteen
minutes from the nearest fire station.
D. A beach front mansion built on a cliff, located within
400ft of a fire hydrant located in a flood plain.

44. Which of the following homes would be eligible for
coverage under the NFIP?
A. A home in the course of construction.
B. The Tri-Lambda fraternity house, located within 500ft
of a fire hydrant.
C. A custom home located in the Woodland Hills, fifteen
minutes from the nearest fire station.
D. A beach front mansion built on a cliff, located within
400ft of a fire hydrant in a flood plain.

44. (D.) A beach front mansion built on a cliff, located
within 400ft of a fire hydrant in a flood plain.
The NFIP is specifically designed for homes located in Flood
Zones, such as beach front homes, one's near lakes or rivers.

45. In the event of non-payment of a premium, how many
days prior to cancellation must insurers notify their Insureds?
A. 25 days
B. Seven days
C. 10 days
C. 30 days

45. (C) 10 days:
Insurers must provide a minimum of 10 days notice
for cancellation due to non-payment of premium.

46. Shelly purchased the state minimum bodily injury (BI) limits of
15/30 and was involved in a collision. In court, Shelly was found to
be negligent and therefore legally liable. Shelly's at-fault accident
caused bodily injury to three people: Grant ($5,000), Lisa
($16,000), and Charles ($3,000). What will the insurer pay on
behalf of Shelly?
A. $22,000
B. $23,000
C. $24,000
D. $25,000

46 (B) $23,000:
Let’s check out the numbers first: $15,000 represents the per person limit and
$30,000 represents the per occurrence (accident) limit. Focus on person two
(Lisa) and notice that there is an issue. Lisa’s medical expenses have exceeded
the maximum allowed “per person” limit on the contract by $1,000. (This is the
essence of the question!)
Simply add up person one (Grant) and three (Charles) first. The sub-total is
$8,000. Then, add the max payout for the per-person agreement for Lisa. (In this
case, the maximum injury amount for Lisa is $15,000 - even though it is still
under the per occurrence limit of $30,000.) To calculate the correct answer, add
up Grant’s injuries ($5,000) with Lisa’s (remember: $15,000 and not $16,000!),
plus Charles’ $ 3,000. This equals $23,000.
(Please note that this question will be on your test!)

47. Kelly purchased an auto policy with both collision and
comprehensive coverage (letter "D”) for her Jeep Rubicon. Kelly’s
comprehensive deductible is $250, and her collision deductible is $500.
Later, Kelly's Jeep is stolen and eventually found wrecked. Her claim
settlement is $15,000 less the deductible. What settlement will Kelly
receive and which portion of coverage "D" covers the loss?
A. $14,500, Comprehensive
B. $14,500, Collision
C. $14,750, Comprehensive
D. $14,750, Collision

47 $14,750 Comprehensive:
This one is a bit tricky…
Coverage “D” in auto policies covers both Comp and Collision losses.
This question throws both of them in the blender like a coverage “D”
smoothie.
Please note that Theft takes precedent. Because the Jeep was stolen
(and wrecked later), it is a comprehensive loss instead of a collision loss.
Simply subtract the comprehensive deductible from the claim settlement:
( $15,000 minus $250) to give Kelly $14,750.

48. On his way home from the beach, Jesse’s yellow Lotus Elise
"upsets" on a slick highway 17 mountainous curve. Jesse's
comprehensive deductible is $250 and his collision deductible is
$500. The total damage to his Lotus was $16,500. What amount
will the insurer pay Jesse?
A. $16,000
B. $16,250
C. $16,500
D. None of the Above

48. (A) $16,000:
Tip to remember: Upset = Collision
Upset means overturn or roll over, or colliding with another object
as long as the vehicle was in the custody or control of the named
insured (or a permissive use driver) when the collision occurred.
The question requires basic math here, so use your scratch paper.
Start by writing down both deductibles. Comp = $250, Collision =
($500). Circle the one that fits and proceed to subtract the circled
deductible from the pay out. In this case: $16,500 minus $500 =
$16,000.00.

49. Which of the following settlement options is used by
insurers to pay claims on an Insured’s total vehicle loss under
coverage "D" (comprehensive & collision) losses?
A. Actual Cash Value
B. Fair Market Value
C. Stated Value
D. Both A and B

49. (D): Both Actual Cash Value (ACV) and Fair Market Value:
Vehicles with coverage “D” (both comp and collision) have
physical damage claims that are settled on an ACV basis - unless it
is a collector’s car.
Example: Dylan McKay’s vintage Porsche has a Stated Value
Contract. In Dylan’s case, depreciation is not a factor.

50. Which of the following losses is not covered under
coverage "D" comprehensive loss section of a Personal Auto
Policy (PAP)?
A. An Insured’s GPS system, permanently mounted in the
dash.
B. An Insured’s iPad, stolen from his convertible while parked
in the driveway.
C. An Insured’s spare tire, stolen from her SUV’s
undercarriage.
D. An Insured’s car, vandalized in a nightclub’s parking lot.

50. B: An Insured’s iPad, stolen from his convertible while parked
in the driveway.
Let’s crack the safe open, as this question is sneaky...
Focus on the item in question (An iPad in this case). The key is to
remember the coverages and their intentions. On a personal auto
policy, theft of “personal property” is not covered.
(However, theft of a stereo permanently mounted in the dash would
have been covered up to $200.)

End of Part One
If you're ready to continue,
Please move on to part two.

USG Part 1 v2 Non CA Specific

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to USG Part 1 v2 Non CA Specific

Similar to USG Part 1 v2 Non CA Specific (20)

More from Daniel J. Mastrantonio

More from Daniel J. Mastrantonio (7)

USG Part 1 v2 Non CA Specific