2. The Ultimate Study Guide - Part 2
51. What type of auto policy endorsement would you recommend
to Shelia, a San Francisco resident who does not own her own car,
yet occasionally borrows a friends’ Corolla or rents from Avis?
A. Drive Other Car endorsement.
B. Vicarious Liability endorsement.
C. Personal Injury Protection endorsement.
D. Named Non-owner coverage endorsement.
3. The Ultimate Study Guide - Part 2
51. What type of auto policy endorsement would you recommend
to Shelia, a San Francisco resident who does not own her own car,
yet occasionally borrows a friends’ Corolla or rents from Avis?
A. Drive Other Car endorsement.
B. Vicarious Liability endorsement.
C. Personal Injury Protection endorsement.
D. Named Non-owner coverage endorsement.
4. The Ultimate Study Guide - Part 2
51. (D) Named Non-owner coverage endorsement:
In a covered auto, the BI coverage follows the vehicle. However, a
“Named Non-Owner” policy is available for non-vehicle owners
who occasionally rent a car or borrow one from a friend.
The Named Non-Owner policy allows the bodily injury (BI)
coverage to follow them from vehicle to vehicle.
5. The Ultimate Study Guide - Part 2
52. Tyler has an H05 policy with the replacement cost
coverage of $500,000 on his dwelling structure coverage "A”,
plus $50,000 coverage for his separate (appurtenant)
structures. In order to ensure that Tyler is adequately covered
in the event of a partial loss, what minimum insurance limits
for coverage "A" and "B" must Tyler maintain?
A. Coverage limits of $500,000 for "A" and $50,000 for "B”
B. Coverage limits of $400,000 for "A" and $40,000 for "B”
C. Coverage limits of $300,000 for "A" and $30,000 for "B”
D. Coverage limits of $450,000 for "A" and $45,000 for "B"
6. The Ultimate Study Guide - Part 2
52. Tyler has an H05 policy with the replacement cost
coverage of $500,000 on his dwelling structure coverage "A”,
plus $50,000 coverage for his separate (appurtenant)
structures. In order to ensure that Tyler is adequately covered
in the event of a partial loss, what minimum insurance limits
for coverage "A" and "B" must Tyler maintain?
A. Coverage limits of $500,000 for "A" and $50,000 for "B”
B. Coverage limits of $400,000 for "A" and $40,000 for "B”
C. Coverage limits of $300,000 for "A" and $30,000 for "B”
D. Coverage limits of $450,000 for "A" and $45,000 for "B"
7. The Ultimate Study Guide - Part 2
52. (B) $400,000 of coverage "A" dwelling and $40,000 of coverage "B"
on the other structures:
The true test for this question is to determine if you can seek out the key
word partial, as in partial loss. With a partial loss, the question infers
Coinsurance
Remember to subtract 20% from the dwelling and other structure values,
as the Insured is only responsible for maintaining 80% insurance to value.
(For additional help please see the “Coinsurance Revealed” document) .
Of the following limits, (“A”) Dwelling = $500,000, and (“B”)
Other/appurtenant structures = $50,000 Simply subtract 20% from each
and you are dialed in. Therefore, Coverage “A” = $400,000, and “B” =
$40,000.
8. The Ultimate Study Guide - Part 2
53. Commercial General Liability (CGL) policies exclude coverage
for personal property the policy holder is financially responsible
for, but does not own. For example, the owner of a dry cleaning
establishment is responsible for his customer’s clothing while it is
being laundered.
The “Three C's of Commercial” describes items of personal
property in an Insured’s (1) Care, (2) Custody, and (3) Control.
Which policy form provides coverage for the 3 C's of commercial?
A. Inland Marine
B. Ocean Marine
C. Extra Expense Coverage
D. Protection and Indemnity
9. The Ultimate Study Guide - Part 2
53. Commercial General Liability (CGL) policies exclude coverage
for personal property the policy holder is financially responsible
for, but does not own. For example, the owner of a dry cleaning
establishment is responsible for his customer’s clothing while it is
being laundered.
The “Three C's of Commercial” describes items of personal
property in an Insured’s (1) Care, (2) Custody, and (3) Control.
Which policy form provides coverage for the 3 C's of commercial?
A. Inland Marine
B. Ocean Marine
C. Extra Expense Coverage
D. Protection and Indemnity
10. The Ultimate Study Guide - Part 2
53. (A) Inland Marine:
Remember: Inland Marine coverage insures the “Three C’s”
of commercial policies.
Without inland marine coverage, “personal property of others” is
not covered in a commercial policy.
11. The Ultimate Study Guide - Part 2
54. Morton collides with a Ferrari. His Personal Umbrella
policy offers additional coverage for which of the following?
A. Excess property damage (PD) coverage that applies to
the wrecked Ferrari in this case.
B. Excess liability coverage for bodily injuries (BI)
suffered by the Ferrari’s driver and passengers.
C. Excess personal injury (PI) protection for himself.
D. Excess liability and property damage coverage
(both BI and PD).
12. The Ultimate Study Guide - Part 2
54. Morton collides with a Ferrari. His Personal Umbrella
policy offers additional coverage for which of the following?
A. Excess property damage (PD) coverage that applies to
the wrecked Ferrari in this case.
B. Excess liability coverage for bodily injuries (BI)
suffered by the Ferrari’s driver and passengers.
C. Excess personal injury (PI) protection for himself.
D. Excess liability and property damage coverage
(both BI and PD).
13. The Ultimate Study Guide - Part 2
54. B: Excess liability coverage for bodily injuries (BI)
suffered by the Ferrari’s driver and passengers.
(As the Morton Salt Umbrella Girl says: “When it rains, it pours!”)
When Morton collided with the Ferrari, his umbrella policy
did not cover that car’s expensive repair or replacement.
Eligibility for Umbrella policies:
In order to be eligible to purchase an umbrella policy, an Insured must first be covered
with the underlying limits of $500K (Auto BI) and $300K (Home BI).
Remember this:
Umbrella policies only offer excess liability coverage,
so take them with a “grain of salt”, as Umbrella policies
do not cover excess property damage.
14. The Ultimate Study Guide - Part 2
55. What or who is represented by the term "Your" listed in
the Declarations page (The “D” in “D.I.C.E”) of a Business
Owners Policy (BOP)?
A. The Insurer.
B. The Named Insured.
C. The Named Insureds.
D. Both the Insurer and Insured.
15. The Ultimate Study Guide - Part 2
55. What or who is represented by the term "Your" listed in
the Declarations page (The “D” in “D.I.C.E”) of a Business
Owners Policy (BOP)?
A. The Insurer.
B. The Named Insured.
C. The Named Insureds.
D. Both the Insurer and Insured.
16. The Ultimate Study Guide - Part 2
55.(C) The Named Insureds:
This question tests your understanding of the definitions
for “You”, “Your” and “We”.
Reminder:
“Your” is the plural of “You".
In this case, "Your" means Named Insureds (plural).
17. A. The Insured must maintain 100% of the completed value
coverage in order to avoid a coinsurance penalty.
B. The Insured must maintain 80% insurance to market value
in order to avoid a coinsurance penalty.
C. The Insured must maintain 100% insurance to market value
in order to avoid a coinsurance penalty.
D. The Insured must maintain 80% of the completed value
coverage in order to avoid a coinsurance penalty.
56. Coinsurance is a method of “risk sharing” used by commercial
property insurers, and comes into play when a policy holder’s Real
property suffers a partial loss. Which of the following statements is
accurate in regards to the commercial property Coinsurance
requirement?
18. A. The Insured must maintain 100% of the completed value
coverage in order to avoid a coinsurance penalty.
B. The Insured must maintain 80% insurance to market value
in order to avoid a coinsurance penalty.
C. The Insured must maintain 100% insurance to market value
in order to avoid a coinsurance penalty.
D. The Insured must maintain 80% of the completed value
coverage in order to avoid a coinsurance penalty.
56. Coinsurance is a method of “risk sharing” used by commercial
property insurers, and comes into play when a policy holder’s Real
property suffers a partial loss. Which of the following statements is
accurate in regards to the commercial property Coinsurance
requirement?
19. The Ultimate Study Guide - Part 2
56. (B) The Insured must maintain 80% insurance to market value
in order to avoid a coinsurance penalty.
An Insured receives a lower premium with Coinsurance, but must
maintain coverage equal to 80% of the market value of the
property. Otherwise, a coinsurance penalty will be imposed in the
event of a loss.
In order to avoid the coinsurance penalty (where the insurance
company underpays the claim), the Insured needs to carry a
minimum of 80% insurance to market value.
20. The Ultimate Study Guide - Part 2
57. Which of the following “ABC order sets” represents those
found in a (CGL) policy?
A. A Dwelling, B Separate Structures, C Personal Property.
B. A (BI) Bodily Injury & (PD) Property Damage liability,B Personal &
Advertising injury, and C Medical payments to others.
C. A Separate Structures, B Dwelling, C Personal Property.
D. A Personal & Advertising injury, B Medical payments to others, C
(BI) Bodily Injury & (PD) Property Damage liability.
21. The Ultimate Study Guide - Part 2
57. Which of the following “ABC order sets” represents those
found in a (CGL) policy?
A. A Dwelling, B Separate Structures, C Personal Property.
B. A (BI) Bodily Injury & (PD) Property Damage liability,B Personal &
Advertising injury, and C Medical payments to others.
C. A Separate Structures, B Dwelling, C Personal Property.
D. A Personal & Advertising injury, B Medical payments to others, C
(BI) Bodily Injury & (PD) Property Damage liability.
22. The Ultimate Study Guide - Part 2
57. D (BI) Bodily Injury & (PD) Property Damage liability, B Personal
& Advertising injury, and C Medical payments to others:
This question tests your understanding of the A, B and C types
of a CGL policy.
Remember:
• “A” = BI/PD
• “B” = Personal & Advertising Injury
• “C” = Medical Payments
23. The Ultimate Study Guide - Part 2
58. In which of the following situations will the $5,000 Medical
Payments coverage "B" limits in Mandy’s personal auto policy
(PAP) apply?
A. Mandy suffers $4,100 in injuries due to an auto accident that occurred
while she was delivering a parcel on behalf of her employer.
B. Mandy suffers $1,500 in minor injuries due to an airbag deployment
caused by a rear-end collision at a railroad crossing.
C. Mandy suffers a broken nose from an auto accident that
requires cosmetic surgery performed by Gray’s Anatomy Dr.
“McSteamy” Sloan for the price of $7,500.
D. Both B & C, up to the $5,000 limit for choice "C".
24. The Ultimate Study Guide - Part 2
58. In which of the following situations will the $5,000 Medical
Payments coverage "B" limits in Mandy’s personal auto policy
(PAP) apply?
A. Mandy suffers $4,100 in injuries due to an auto accident that occurred
while she was delivering a parcel on behalf of her employer.
B. Mandy suffers $1,500 in minor injuries due to an airbag deployment
caused by a rear-end collision at a railroad crossing.
C. Mandy suffers a broken nose from an auto accident that
requires cosmetic surgery performed by Gray’s Anatomy Dr.
“McSteamy” Sloan for the price of $7,500.
D. Both B & C, up to the $5,000 limit for choice "C".
25. The Ultimate Study Guide - Part 2
58 D: Both B & C, up to the $5,000 limit for choice "C".
Med pay is covered under coverage "C" in a personal auto policy.
It provides basic medical expense coverage to the driver and
passengers and covers their injuries on a per person basis.
Mandy's cosmetic surgery will be funded for a maximum limit of
$5,000 per her contractual agreement with the insurer. Meanwhile,
answer choice A would have been covered under a Workers Comp
policy and is therefore a coverage "B" exclusion.
26. The Ultimate Study Guide - Part 2
59. An Implied Warranty (otherwise known as an assumed truth)
made by an Insured during the application process is considered to
be which of the following?
A. A representation
B. A testimony
C. A pledge of good faith
D. A statement of promise
27. The Ultimate Study Guide - Part 2
59. An Implied Warranty (otherwise known as an assumed truth)
made by an Insured during the application process is considered to
be which of the following?
A. A representation
B. A testimony
C. A pledge of good faith
D. A statement of promise
28. The Ultimate Study Guide - Part 2
59 A: A representation
Remember:
Representation = Implied Warranty
29. The Ultimate Study Guide - Part 2
60. All of the following statements regarding the "Extra Expense"
coverage in both a Business Owners Policy (BOP) and a
Commercial Package Policy (CPP) are false except?
A. Extra expense coverage comes automatic in both a (BOP) and
(CPP) with the purchase of Business Income coverage.
B. Extra expense coverage is only available in a (BOP).
C. Extra expense coverage is only available in a (CPP).
D. Extra expense coverage can be purchased in addition to Business
Income coverage, and is available in both BOP's and CPP's.
30. The Ultimate Study Guide - Part 2
60. All of the following statements regarding the "Extra Expense"
coverage in both a Business Owners Policy (BOP) and a
Commercial Package Policy (CPP) are false except?
A. Extra expense coverage comes automatic in both a (BOP) and
(CPP) with the purchase of Business Income coverage.
B. Extra expense coverage is only available in a (BOP).
C. Extra expense coverage is only available in a (CPP).
D. Extra expense coverage can be purchased in addition to Business
Income coverage, and is available in both BOP's and CPP's.
31. The Ultimate Study Guide - Part 2
60. D: Extra expense coverage can be purchased in addition to Business
Income coverage, and is available in both BOP's and CPP's.
Extra expense coverage financially carries an insured business
owner while he/she is being indemnified for his/her loss.
This coverage also covers necessary relocation costs.
32. The Ultimate Study Guide - Part 2
61. Both the Broad and Special Commercial Package Policy
(CPP) forms include Standard Glass Coverage, with which of
the following limits?
A. No more than $250 per plate or pane.
B. No more than $500 per plate or pane.
C. No more than $1,000 per plate or pane.
D. No more than $5,000 per plate or pane.
33. The Ultimate Study Guide - Part 2
61. Both the Broad and Special Commercial Package Policy
(CPP) forms include Standard Glass Coverage, with which of
the following limits?
A. No more than $250 per plate or pane.
B. No more than $500 per plate or pane.
C. No more than $1,000 per plate or pane.
D. No more than $5,000 per plate or pane.
34. The Ultimate Study Guide - Part 2
61. (B):
Standard glass coverage provides both the broad and special (CPP)
coverage forms with glass breakage coverage limited to no more
that $500 per plate or pane.
35. The Ultimate Study Guide - Part 2
62. In a “prior approval” state policy premium rates charged to
Insureds may not have any of the following characteristics,
except:
A. Fairly discriminatory, based on sound actuarial principles
B. Unsatisfactory
C. Unprecedented
D. None of the above
36. The Ultimate Study Guide - Part 2
62. In a “prior approval” state, policy premium rates charged to
Insureds may not have any of the following characteristics,
except:
A. Fairly discriminatory, based on sound actuarial principles
B. Unsatisfactory
C. Unprecedented
D. None of the above
37. The Ultimate Study Guide - Part 2
62. (A) fairly discriminatory based on sound actuarial principles.
(Watch out for the double negative on this question!)
This question really asks: “Which of the following characteristics
may insurance rates have?” Therefore, the best answer is “Fairly
discriminatory, based on sound actuarial principles”.
38. The Ultimate Study Guide - Part 2
63. When Ricky, Lucy, Fred and Ethyl drove to Tijuana in 1955,
the personal auto policy (PAP) for Ricky’s new Pontiac convertible
covered their trip only because he had the foresight to purchase a
“_______ ______ endorsement” in advance, and he made sure not
to drive ____ miles beyond the border and to return within ___
days.
Which of the following correctly fills in the blanks?
A. Mexico Indemnity, 10 miles, 25 days
B. Mexico Indemnity, 25 miles, 10 days
C. Mexico Coverage, 25 miles, 10 days
D. Mexico Coverage, 25 miles, 25 days
39. The Ultimate Study Guide - Part 2
63. When Ricky, Lucy, Fred and Ethyl drove to Tijuana in 1955,
the personal auto policy (PAP) for Ricky’s new Pontiac convertible
covered their trip only because he had the foresight to purchase a
“_______ ______ endorsement” in advance, and he made sure not
to drive ____ miles beyond the border and to return within ___
days.
Which of the following correctly fills in the blanks?
A. Mexico Indemnity, 10 miles, 25 days
B. Mexico Indemnity, 25 miles, 10 days
C. Mexico Coverage, 25 miles, 10 days
D. Mexico Coverage, 25 miles, 25 days
40. The Ultimate Study Guide - Part 2
63. C: Mexico Coverage, 25 miles, 10 days
For the
“Mexico Coverage Endorsement”,
please remember these two numbers:
Return within a maximum
of Ten days, and travel no more
than 25 miles past the border.
41. The Ultimate Study Guide - Part 2
64. Commercial crime losses which either "occur" during the
annual policy period, or are "discovered" up to one year after a
policy cancellation (by the insured or by the underwriter), are
covered by which of the following policy form types?
A. Discovery Type
B. Occurrence
C. Loss Sustained
D. Claims Made
42. The Ultimate Study Guide - Part 2
64. Commercial crime losses which either "occur" during the
annual policy period, or are "discovered" up to one year after a
policy cancellation (by the insured or by the underwriter), are
covered by which of the following policy form types?
A. Discovery Type
B. Occurrence
C. Loss Sustained
D. Claims Made
43. The Ultimate Study Guide - Part 2
64. C: Loss sustained:
This question specified that the loss was concerning commercial
crime. “Loss Sustained” is one of the two types of policy forms for
Commercial Crime coverage.
Remember this by memorizing:
Crime Forward = Loss Sustained
44. 65. Regarding the Equipment Dealer’s Coverage form endorsement
(available in a business owner’s policy [BOP] and a commercial package
policy [CPP]), the following statements are generally not accurate, with
which exception?
A. Street legal mobile equipment used on city streets during customer test
drives.
B. Refurbished equipment is not covered, as long as it is owned property of
the insured policy owner.
C. The equipment dealer’s coverage form endorsement releases the insured
business owner of all legal liability when the equipment is in the care
custody and control of that dealer’s customer.
D. The equipment dealer’s coverage form endorsement covers the insured
business owner’s customer’s equipment while in the dealer’s care,
custody and control for maintenance and repair purposes.
45. 65. Regarding the Equipment Dealer’s Coverage form endorsement
(available in a business owner’s policy [BOP] and a commercial package
policy [CPP]), the following statements are generally not accurate, with
which exception?
A. Street legal mobile equipment used on city streets during customer test
drives.
B. Refurbished equipment is not covered, as long as it is owned property of
the insured policy owner.
C. The equipment dealer’s coverage form endorsement releases the insured
business owner of all legal liability when the equipment is in the care
custody and control of that dealer’s customer.
D. The equipment dealer’s coverage form endorsement covers the insured
business owner’s customer’s equipment while in the dealer’s care,
custody and control for maintenance and repair purposes.
46. The Ultimate Study Guide - Part 2
65. D: The equipment dealer’s coverage form endorsement covers the insured
business owner’s customer’s equipment while in the dealer’s care,
custody and control for maintenance and repair purposes.
Watch out for the double negative phrasing in this question:
This question is essentially asking: “Which of the following statements is
accurate?”
The equipment dealer’s coverage form endorsement covers the insured
business owner’s customers equipment while in the dealer’s care, custody
and control for maintenance and repair services.
47. The Ultimate Study Guide - Part 2
66. Stop loss limits are activated in group medical insurance
policies once an insured member has _______.
A. Met his/her annual deductible.
B. Met both the annual deductible and the maximum out of pocket limit.
C. Met the annual deductible and exceeded the maximum out of pocket
limit.
D. Met both the annual deductible and the coinsurance provision.
48. The Ultimate Study Guide - Part 2
66. Stop loss limits are activated in group medical insurance
policies once an insured member has _______.
A. Met his/her annual deductible.
B. Met both the annual deductible and the maximum out of pocket limit.
C. Met the annual deductible and exceeded the maximum out of pocket
limit.
D. Met both the annual deductible and the coinsurance provision.
49. The Ultimate Study Guide - Part 2
66. (C) Met the annual deductible and exceeded the maximum out
of pocket limit:
Remember the key word: Exceed
Stop Loss Limits are activated once an insured has exceeded his or
her out of pocket limit. Stop Loss Limits primarily come into effect
with a major medical event, such as a bypass surgery.
50. The Ultimate Study Guide - Part 2
67. An individual or family member’s loss (such as death,
disability, illness, and loss of employment) can be categorized as
which of the following types of losses?
A. Personnel loss exposure
B. Personal loss exposure
C. Consequential loss exposure
D. Time-element consequential loss exposure
51. The Ultimate Study Guide - Part 2
67. An individual or family member’s loss (such as death,
disability, illness, and loss of employment) can be categorized as
which of the following types of losses?
A. Personnel loss exposure
B. Personal loss exposure
C. Consequential loss exposure
D. Time-element consequential loss exposure
52. The Ultimate Study Guide - Part 2
67. (B) Personal loss exposure:
(Watch out for the word “Personnel” in the other answer choices.
That was a “trap” answer!)
The key words are: “Family” and “Personal Loss”
This question cites an individual or family, and clearly not an
employee or group of employees.
Tip from Insuratest:
“It doesn't get more personal than with family.”
53. The Ultimate Study Guide - Part 2
68. Part of an insurance agent’s profession involves the explanation
of the benefits of each type of policy. Which of the following
statements is not a benefit of an insurance policy?
A. An insurance policy offers an Insured protection for the
unexpected.
B. An Insured’s risk can be transferred to an insurer through
the purchase of an insurance policy.
C. Risk retention is a feature benefit of purchasing an
insurance policy.
D. The proper insurance policy form can satisfy lean-holder
requirements.
54. The Ultimate Study Guide - Part 2
68. Part of an insurance agent’s profession involves the explanation
of the benefits of each type of policy. Which of the following
statements is not a benefit of an insurance policy?
A. An insurance policy offers an Insured protection for the
unexpected.
B. An Insured’s risk can be transferred to an insurer through
the purchase of an insurance policy.
C. Risk retention is a feature benefit of purchasing an
insurance policy.
D. The proper insurance policy form can satisfy lean-holder
requirements.
55. The Ultimate Study Guide - Part 2
68. (C) Risk retention is a feature benefit of purchasing an
insurance policy:
Retention of risk by the insured directly contradicts the definition
of insurance. Insurance, by definition, is the transference of risk.
Retention is the opposite of transference.
56. The Ultimate Study Guide - Part 2
69. Mel leased a building on Livermore’s First street and owned
and operated his antique dealership there for many years. As a
tenant, when was Mel’s building considered vacant (as deemed by
coverage “B” in his Business Owner’s Policy)?
A. When an inadequate amount of coverage "B” was on premises in order
to conduct normal business operations.
B. When more than 70% of the total insured structure was neither sub-
leased or in use by Mel’s business.
C. When Mel’s business closed for a period of 55 days while the building
underwent a seismic retrofit after the 1989 Loma Prieta earthquake.
D. When less than 31% of the commercial building coverage "B" is
occupied by the insured policy owner or leased by tenants.
57. The Ultimate Study Guide - Part 2
69. Mel leased a building on Livermore’s First street and owned
and operated his antique dealership there for many years. As a
tenant, when was Mel’s building considered vacant (as deemed by
coverage “B” in his Business Owner’s Policy)?
A. When an inadequate amount of coverage "B” was on premises in order
to conduct normal business operations.
B. When more than 70% of the total insured structure was neither sub-
leased or in use by Mel’s business.
C. When Mel’s business closed for a period of 55 days while the building
underwent a seismic retrofit after the 1989 Loma Prieta earthquake.
D. When less than 31% of the commercial building coverage "B" is
occupied by the insured policy owner or leased by tenants.
58. The Ultimate Study Guide - Part 2
69. (A) When there is an inadequate amount of coverage "B" on premises by
which to conduct normal business operations:
Remember:
Coverage "B" is business personal property and when the question
includes the word “Tenant”, the answer will include the phrase:
“Insufficient business personal property”.
Watch out…
This can be easily confused with another
common exam question in which the words:
“Owner” and “Less than 31% is leased to tenants”
are connected!
59. The Ultimate Study Guide - Part 2
1. Sig Henne owns a building on First Street and operated a men’s
clothing store in that location until he retired in the 1980’s. Sig
eventually leased the building to Clio, who ran an antique store there.
At what point was Sig’s building considered vacant, specific to
coverage “B” of his Business Owners Policy?
A. When there an inadequate amount of coverage "B" was on premises by
which to conduct normal business operations.
B. When more than 70% of the total insured structure is neither sub-leased
or in use by Sig, the insured policy owner.
C. When Sig’s building closed for a period of 55 days while it
underwent a seismic retrofit after the 1989 Loma Prieta earthquake.
D. When less than 31% of the commercial building coverage "B" was
occupied by owner Sig Henne or leased by tenants.
60. The Ultimate Study Guide - Part 2
1. Sig Henne owns a building on First Street and operated a men’s
clothing store in that location until he retired in the 1980’s. Sig
eventually leased the building to Clio, who ran an antique store there.
At what point was Sig’s building considered vacant, specific to
coverage “B” of his Business Owners Policy?
A. When there an inadequate amount of coverage "B" was on premises by
which to conduct normal business operations.
B. When more than 70% of the total insured structure is neither sub-leased
or in use by Sig, the insured policy owner.
C. When Sig’s building closed for a period of 55 days while it
underwent a seismic retrofit after the 1989 Loma Prieta earthquake.
D. When less than 31% of the commercial building coverage "B" was
occupied by owner Sig Henne or leased by tenants.
61. The Ultimate Study Guide - Part 2
70. (D) When less than 31% of the commercial building coverage "B" is
occupied by the insured policy owner or leased by tenants :
(This is the counterpart of the previous question.)
When the exam question states “Owner” and “vacant”, the correct
answer always contains the phrase: “Less than 31% Used or
Rented.
(If the question had stated ‘Tenant”, the correct answer would have
included the phrase: “Insufficient business personal property”.)
62. The Ultimate Study Guide - Part 2
71. Andy, a builder of custom homes, requests coverage for the
bulldozers, generators and scissor lifts he uses on construction
sites. Which policy type would you recommend?
A. Motor Truck Cargo Form
B. Builders Risk Coverage Form
C. Contractor’s Equipment Floater
D. Contractor’s Property Umbrella
63. The Ultimate Study Guide - Part 2
71. Andy, a builder of custom homes, requests coverage for the
bulldozers, generators and scissor lifts he uses on construction
sites. Which policy type would you recommend?
A. Motor Truck Cargo Form
B. Builders Risk Coverage Form
C. Contractor’s Equipment Floater
D. Contractor’s Property Umbrella
64. The Ultimate Study Guide - Part 2
71. (C) Contractor's equipment floater:
The Contractor’s Equipment Floater covers equipment that is used
as part of the business but is not held for rent or sale.
To remember this term, think a flying bulldozer “floating” from job
site to job site.
65. The Ultimate Study Guide - Part 2
72. Which of the following risk scenarios would be best suited for
the NFIP?
A. A log cabin located near a riverbank in a flood plain.
B. A Victorian home located within five hundred feet of a fire hydrant.
C. Wayne, a driver who has several moving violations listed on his motor
vehicle report and is not eligible for coverage in the primary market.
D. A haunted mansion with a wood shake roof, broken windows and
peeling exterior paint.
66. The Ultimate Study Guide - Part 2
72. Which of the following risk scenarios would be best suited for
the NFIP?
A. A log cabin located near a riverbed in a flood plain.
B. A Victorian home located within five hundred feet of a fire hydrant.
C. Wayne, a driver who has several moving violations listed on his motor
vehicle report and is not eligible for coverage in the primary market.
D. A haunted mansion with a wood shake roof, broken windows and
peeling exterior paint.
67. The Ultimate Study Guide - Part 2
72. A: A log cabin surrounded by tall grassy fields and located ten minutes
from the nearest fire station.
The NFIP National Flood Insurance Program was created for
homes located in high flood risk areas, such as homes on the coast
or near riverbeds and lakes
68. The Ultimate Study Guide - Part 2
73. Condo owner Sherwin ideally would purchase an HO__ policy to
cover his personal liability, contents and minimal structure coverage.
With that coverage, Sherwin’s interior paint would be covered by
coverage letter ___.
Which of the following fills in the blanks and best describes Sherwin’s
ideal HO option and correct coverage letter?
A. An HO5; interior paint covered by letter "C".
B. An HO4; interior paint covered by letter "B".
C. An HO6; interior paint covered by letter "A".
D. An HO8; interior paint covered by letter "A".
69. The Ultimate Study Guide - Part 2
73. Condo owner Sherwin ideally would purchase an HO__ policy to
cover his personal liability, contents and minimal structure coverage.
With that coverage, Sherwin’s interior paint would be covered by
coverage letter ___.
Which of the following fills in the blanks and best describes Sherwin’s
ideal HO option and correct coverage letter?
A. An HO5; interior paint covered by letter "C".
B. An HO4; interior paint covered by letter "B".
C. An HO6; interior paint covered by letter "A".
D. An HO8; interior paint covered by letter "A".
70. The Ultimate Study Guide - Part 2
73. C: An HO6; interior paint covered by letter "A".
This question is either sticky, tacky or dry:
Interior paint becomes part of the wall once it is applied.
At that point, the paint is covered by the Structure coverage.
Structure coverage is known by the letter "A" in HO’s and DP’s.
Remember the “A” for the paint “Applied” to a structure!
71. The Ultimate Study Guide - Part 2
74. Jennifer asks her personal assistant Kimberly to pick up a
replacement for her 3G iPhone. On the trip for her employer,
Kimberly causes an auto accident that injures three others.
What liability describes Jennifer’s situation as Kimberly’s
employer?
A. Absolute liability.
B. Comparative negligence liability.
C. Contributory negligence liability.
D. Vicarious Liability.
72. The Ultimate Study Guide - Part 2
74. Jennifer asks her personal assistant Kimberly to pick up a
replacement for her 3G iPhone. On the trip for her employer,
Kimberly causes an auto accident that injures three others.
What liability describes Jennifer’s situation as Kimberly’s
employer?
A. Absolute liability.
B. Comparative negligence liability.
C. Contributory negligence liability.
D. Vicarious Liability.
73. The Ultimate Study Guide - Part 2
74. (D) Vicarious liability:
“for her employer” (or “on behalf of her employer” ) is a hint that
should immediately trigger these words in your memory:
“Vicarious Liability”
Another example:
Devin has an auto accident while picking up office supplies for his
employer. In this case, the employer is Vicariously liable, as the accident
occurred on company time, while the employee was doing company
business.“
74. The Ultimate Study Guide - Part 2
75. All of the following perils (causes of loss) are covered in a
Broad form DP2 and Special form DP3. Which peril is not covered
in a basic form DP1?
A. Damage caused by lightning (“an electronic discharge from the
earth’s atmosphere”).
B. Fire with a visible light, glow or incandescence (smoke damage
excluded).
C. Removal during the period of restoration.
D. Collapse due to the weight of contents, persons or animals.
75. The Ultimate Study Guide - Part 2
75. All of the following perils (causes of loss) are covered in a
Broad form DP2 and Special form DP3. Which peril is not covered
in a basic form DP1?
A. Damage caused by lightning (“an electronic discharge from the
earth’s atmosphere”).
B. Fire with a visible light, glow or incandescence (smoke damage
excluded).
C. Removal during the period of restoration.
D. Collapse due to the weight of contents, persons or animals.
76. The Ultimate Study Guide - Part 2
75. (D) Collapse:
Please note the coverages in the DP'S dwelling policy forms. “Collapse”,
Falling objects and additional living expenses are covered in both a DP2
Broad form & DP3 Special Form policy, but is not covered in the DP1 Basic
Form.
Tip from Insuratest:
This question will be asked three times, and each question will have a different
correct answer.
If “Collapse” is an answer choice, choose it!
If “Falling Objects” is an answer choice, choose it!
If “Additional Living Expenses” is a choice, choose it!
77. The Ultimate Study Guide - Part 2
76. An HO3 Special form and an HO4 tenant’s form are two
entirely different contracts, but both have similar coverage "E"
(personal liability), and "F" (medical payments to others).
Which coverage letter most differentiates an HO3 policy from an
HO4 policy?
A. Coverage "C" (personal property).
B. Coverage "D" (loss of use).
C. Coverage "A" (dwelling/structure).
D. Coverage "D" (fair rental value).
78. The Ultimate Study Guide - Part 2
76. An HO3 Special form and an HO4 tenant’s form are two
entirely different contracts, but both have similar coverage "E"
(personal liability), and "F" (medical payments to others).
Which coverage letter most differentiates an HO3 policy from an
HO4 policy?
A. Coverage "C" (personal property).
B. Coverage "D" (loss of use).
C. Coverage "A" (dwelling/structure).
D. Coverage "D" (fair rental value).
79. The Ultimate Study Guide - Part 2
76. C: Coverage "A" (dwelling/structure):
Coverage "A" differentiates HO3 and HO4 policies:
An HO3 policy includes (replacement cost) coverage "A".
However, an HO4 policy has zero dollar “A” coverage.
Tip from Insuratest:
When remembering HO4 policies, think “4 Rent”.
80. The Ultimate Study Guide - Part 2
77. The adult day care benefit of a Long Term Care (LTC) policy
provides which of the following benefits for the insured who are unable
to perform two or more activities of daily living ADL's?
A. Full-time nursing home care for Insureds who require assistance
with two ADL's: Blindness and Deafness.
B. Full-time nursing home care for Insureds who require assistance
with two ADL's: Eating and Dressing.
C. Part-time nursing home care for Insureds living at home and
require assistance with two ADL's: Shopping and Updating their
Facebook status.
D. Part-time nursing home care for Insureds living at home and
requiring assistance with two ADL's: Eating and Dressing.
81. The Ultimate Study Guide - Part 2
77. The adult day care benefit of a Long Term Care (LTC) policy
provides which of the following benefits for the insured who are unable
to perform two or more activities of daily living ADL's?
A. Full-time nursing home care for Insureds who require assistance
with two ADL's: Blindness and Deafness.
B. Full-time nursing home care for Insureds who require assistance
with two ADL's: Eating and Dressing.
C. Part-time nursing home care for Insureds living at home and
require assistance with two ADL's: Shopping and Updating their
Facebook status.
D. Part-time nursing home care for Insureds living at home and
requiring assistance with two ADL's: Eating and Dressing.
82. The Ultimate Study Guide - Part 2
77 D. Part-time nursing home care for Insureds living at home and
requiring assistance with two ADL's: Eating and Dressing.
Part-time nursing care (for Long Term Care LTC benefit recipients who live at
home) is one of the Adult Day Care benefit features of an LTC policy.
Remember: An insured will receive the benefits of their long term care policy
when a physician documents his/her difficulty with two Activities of Daily
Living (ADL).
Please note that Blindness and Deafness are not ADL’s!
Tip from Insuratest:
The correct ADL related answers on the state exam are most likely to be: "Eating
and Dressing".
83. The Ultimate Study Guide - Part 2
78. Thia, owner of "Hair Tini" Salon, purchased a (BOP) policy to cover
her business risk exposure. The Commercial General Liability (CGL)
portion of her policy covers alcoholic beverages in all but which of the
following situations?
A. Thia offers complimentary pink champagne mimosas to her
bride and bridesmaid clients as they receive new hair styles for
the bride’s big wedding day.
B. Thia throws a staff party that includes invited guests. At the party,
Thia serves complimentary beer and pretzels, wine and cheese, and
an assortment of soft drinks and crackers.
C. Thia transforms her salon into a small comedy club on Friday evenings
and sells alcoholic beverages to attendees of the “Kevvy Kev Show”.
D. Thia offers her favorite client a complimentary glass of wine during her
"Hair Tini" salon experience.
84. The Ultimate Study Guide - Part 2
78. Thia, owner of "Hair Tini" Salon, purchased a (BOP) policy to cover
her business risk exposure. The Commercial General Liability (CGL)
portion of her policy covers alcoholic beverages in all but which of the
following situations?
A. Thia offers complimentary pink champagne mimosas to her
bride and bridesmaid clients as they receive new hair styles for
the bride’s big wedding day.
B. Thia throws a staff party that includes invited guests. At the party,
Thia serves complimentary beer and pretzels, wine and cheese, and
an assortment of soft drinks and crackers.
C. Thia transforms her salon into a small comedy club on Friday evenings
and sells alcoholic beverages to attendees of the “Kevvy Kev Show”.
D. Thia offers her favorite client a complimentary glass of wine during her
"Hair Tini" salon experience.
85. The Ultimate Study Guide - Part 2
78 C: Thia transforms her salon into a small comedy club on Friday evenings
and sells alcoholic beverages to attendees of the “Kevvy Kev Show”.
The business of selling alcohol (or furnishing it for a fee)
is excluded by CGL policies.
However, complimentary alcohol at a company party is covered -
as it is only incidental to (and not part of their regular) business practices.
86. The Ultimate Study Guide - Part 2
79. The liability section in Hans Olsen’s Automotive Services’
Commercial Package Policy (CPP) excludes coverage on his customer’s
vehicles and the personal property that Olsen does not own while in his
Care, Custody and Control.
Which of the following additional policies must Olsen’s Automotive
purchase, in order to close this coverage gap?
A. Protection and Indemnity Coverage.
B. A Gap Insurance Policy.
C. An Ocean Marine Insurance Policy.
D. An Inland Marine Insurance Policy.
87. The Ultimate Study Guide - Part 2
79. The liability section in Hans Olsen’s Automotive Services’
Commercial Package Policy (CPP) excludes coverage on his customer’s
vehicles and the personal property that Olsen does not own while in his
Care, Custody and Control.
Which of the following additional policies must Olsen’s Automotive
purchase, in order to close this coverage gap?
A. Protection and Indemnity Coverage.
B. A Gap Insurance Policy.
C. An Ocean Marine Insurance Policy.
D. An Inland Marine Insurance Policy.
88. The Ultimate Study Guide - Part 2
79.(D) An Inland Marine Insurance Policy.
Liability policies exclude the coverage for items in one’s Care, Custody,
and Control.
We call those the “3C's” for short. The 3C's can only be covered by
Inland Marine coverage.
In a Commercial Package Policy, the "I" in “B.A.C.F.L.I.P.”
stands for “Inland Marine”.
89. The Ultimate Study Guide - Part 2
80. Rick and Diana just purchased their first single family home
and want an HO policy that provides real property coverage "A" on
an "All Risk" or "Open Peril" basis.
Which policy would you recommend?
A. HO8
B. HO4
C. HO3
D. HO6
90. The Ultimate Study Guide - Part 2
80. Rick and Diana just purchased their first single family home
and want an HO policy that provides real property coverage "A" on
an "All Risk" or "Open Peril" basis.
Which policy would you recommend?
A. HO8
B. HO4
C. HO3
D. HO6
91. The Ultimate Study Guide - Part 2
80. (C) H03:
Open peril coverage is the same as “All risk” coverage.
By definition, the HO3 is an all risk policy.
92. The Ultimate Study Guide - Part 2
81. Neil has a Personal Auto Policy (PAP) that includes the “Sound-
stereo & other electronic equipment endorsement” to cover his H1
Hummer’s upgraded stereo system.
While parked outside Harrah’s Reno on a hot August night, Mr.
Diamond’s H1 was broken into and the installed navigation system was
stolen. How much will the insurer pay Neil for his loss?
A. Guaranteed Replacement Cost
B. Up to $1,500
C. Up to $200
D. Up to $750
93. The Ultimate Study Guide - Part 2
81. Neil has a Personal Auto Policy (PAP) that includes the “Sound-
stereo & other electronic equipment endorsement” to cover his H1
Hummer’s upgraded stereo system.
While parked outside Harrah’s Reno on a hot August night, Mr.
Diamond’s H1 was broken into and the installed navigation system was
stolen. How much will the insurer pay Neil for his loss?
A. Guaranteed Replacement Cost
B. Up to $1,500
C. Up to $200
D. Up to $750
94. The Ultimate Study Guide - Part 2
81. (C) $200:
Please commit this to your memory:
The maximum dollar amount the insurer will pay for all audio/visual
equipment permanently mounted in a vehicle is $200.
95. The Ultimate Study Guide - Part 2
82. There are two types of exams the insurance commissioner
imposes on all insurers at least once every four years.
Which exam type focuses specifically on licensing compliance and
claims handling practices?
A. Insurer Financial Exam
B. Fiduciary Compliance Audit
C. Market Conduct Exam
D. Insurer Regulatory Audit
96. The Ultimate Study Guide - Part 2
82. There are two types of exams the insurance commissioner
imposes on all insurers at least once every four years.
Which exam type focuses specifically on licensing compliance and
claims handling practices?
A. Insurer Financial Exam
B. Fiduciary Compliance Audit
C. Market Conduct Exam
D. Insurer Regulatory Audit
97. The Ultimate Study Guide - Part 2
82. (C) Market conduct exam:
The two types of exams imposed on all admitted insurers
are:
1. Financial exams
2. Market Conduct exams.
Market conduct exams cover licensing compliance and
claims handling practices.
98. The Ultimate Study Guide - Part 2
83. La Bella hair Salon business owners Jennifer and Irma do
not own the building their hair salon is located in. Any
improvements and betterments they make to their rented
location is covered by the ________________ section of their
Business Owner's Policy BOP?
A. Business Personal Property
B. H04 tenant improvement
C. Tenant Legal Liability policy
D. Business pursuits endorement
99. The Ultimate Study Guide - Part 2
83. La Bella hair Salon business owners Jennifer and Irma do
not own the building their hair salon is located in. Any
improvements and betterments they make to their rented
location is covered by the ________________ section of their
Business Owner's Policy BOP?
A. Business Personal property
B. H04 tenant improvement
C. Tenant Legal Liability policy
D. Business pursuits endorsements
100. The Ultimate Study Guide - Part 2
83. (A) Business Personal property
Remember any TIB Tennants Improvements and Betterments is
considered business personal property
101. The Ultimate Study Guide - Part 2
84. Fats Domino is a famous New Orleans performer and survivor
of hurricane Katrina. Which of the following perils was not
covered in Fats’ unendorsed special form HO3 policy?
A. Smoke damage
B. 10% of coverage letter allotment for ordinance or law.
C. Damage caused by riots and or civil disturbances.
D. Flood/Mudflow
102. The Ultimate Study Guide - Part 2
84. Fats Domino is a famous New Orleans performer and survivor
of hurricane Katrina. Which of the following perils was not
covered in Fats’ unendorsed special form HO3 policy?
A. Smoke damage
B. 10% of coverage letter allotment for ordinance or law.
C. Damage caused by riots and or civil disturbances.
D. Flood/Mudflow
103. The Ultimate Study Guide - Part 2
84. (D) Flood/ mudflow):
Tip: Zero in on this:
Flood and Mudflow are not covered even in the "Special" policy
form - as those events are catastrophic in nature.
For this type of insurance, the client would need to purchase flood
coverage from the NFIP.
104. The Ultimate Study Guide - Part 2
85. Which of the following perils is covered in both a DP2 and
DP3 but not in a DP1?
A. Sprinkler Leakage
B. Mold
C. Appurtenant Structures
D. Collapse
105. The Ultimate Study Guide - Part 2
85. Which of the following perils is covered in both a DP2 and
DP3 but not in a DP1?
A. Sprinkler Leakage
B. Mold
C. Appurtenant Structures
D. Collapse
106. The Ultimate Study Guide - Part 2
85. (D) Collapse:
This is a popular exam question:
“Collapse” is covered in a DP 3 Special Form policy, but is not covered
in the DP1 Basic Form.
Repeated Tip from Insuratest: This question will be asked three times,
and each question will have a different correct answer.
If “Collapse” is an answer choice, choose it!
If “Falling Objects” is an answer choice, choose it!
If “Additional Living Expenses” is a choice, choose it!
107. The Ultimate Study Guide - Part 2
86. Which of the following endorsements covers a vacant building’
s losses from vandalism, malicious mischief, glass breakage and
fire sprinkler leakage ?
A. Extra Expense Coverage Endorsement.
B. Leasehold Interest Coverage Endorsement.
C. Vacancy Permit Endorsement.
D. VMM (Vandalism & Malicious Mischief Endorsement).
108. The Ultimate Study Guide - Part 2
86. Which of the following endorsements covers a vacant building’
s losses from vandalism, malicious mischief, glass breakage and
fire sprinkler leakage ?
A. Extra Expense Coverage Endorsement.
B. Leasehold Interest Coverage Endorsement.
C. Vacancy Permit Endorsement.
D. VMM (Vandalism & Malicious Mischief Endorsement).
109. The Ultimate Study Guide - Part 2
86. (C) Vacancy Permit Endorsement:
The Vacancy Permit Endorsement includes coverage for a building’s
vandalism, broken glass, and malicious mischief.
However,
the endorsement is only valid for the duration of the permit.
Remember:
Claim settlements for other perils are reduced by 15%.
110. The Ultimate Study Guide - Part 2
87. The four components of all insurance policies are represented by the
acronym “D.I.C.E”, which stands for: (1 Declarations Page, (2 Insuring
Agreement, (3) Conditions Section and (4) Exclusions Section.
In accordance with the Insurance Code, which component states that "At
application time" all property & casualty broker-agents must disclose all
relevant information regarding conditions of a proposed Insured’s
coverage agreement?
A. Declarations Page.
B. Insuring Agreement.
C. Conditions Section.
D. Exclusions Section.
111. The Ultimate Study Guide - Part 2
87. The four components of all insurance policies are represented by the
acronym “D.I.C.E”, which stands for: (1 Declarations Page, (2 Insuring
Agreement, (3) Conditions Section and (4) Exclusions Section.
In accordance with the Insurance Code, which component states that "At
application time" all property & casualty broker-agents must disclose all
relevant information regarding conditions of a proposed Insured’s
coverage agreement?
A. Declarations Page.
B. Insuring Agreement.
C. Conditions Section.
D. Exclusions Section.
112. The Ultimate Study Guide - Part 2
87. (C) Conditions Section:
The Agent must disclose all material information regarding the
policy’s conditions.
Remember this:
The "C" in “DICE” at time of application.)
113. The Ultimate Study Guide - Part 2
88. Newlyweds Patrick and Erin purchased their first single family
home and decided to insure their residence with an unendorsed
HO3 policy. Of the following potential losses, which would be
covered only through the purchase of an additional “Scheduled
Personal Property Endorsement?”
A. Earthquake caused damage to Erin’s new Waterford crystal
stemware.
B. Theft of their home entertainment system.
C. Damage to Erin's Laptop computer, due to an auto accident.
D. Flood damage.
114. The Ultimate Study Guide - Part 2
88. Newlyweds Patrick and Erin purchased their first single family
home and decided to insure their residence with an unendorsed
HO3 policy. Of the following potential losses, which would be
covered only through the purchase of an additional “Scheduled
Personal Property Endorsement?”
A. Earthquake caused damage to Erin’s new Waterford crystal
stemware.
B. Theft of their home entertainment system.
C. Damage to Erin's Laptop computer, due to an auto accident.
D. Flood damage.
115. The Ultimate Study Guide - Part 2
88. A): Earthquake caused damage to Erin’s new Waterford
crystal stemware.
The “Scheduled Personal Property Floater” covers breakage of glassware
caused by an earthquake. The floater covers fine crystal stemware.
On the other hand, an unendorsed homeowners policy would not cover
glass breakage caused by an earthquake on personal property.
Meanwhile, floods are only covered by flood insurance purchased
through the NFIP (National Flood Insurance Program).
116. The Ultimate Study Guide - Part 2
89. Dr. Conway owns two single-family-dwelling rental properties,
as well as a high value primary residence. Which of the following
policy combinations offers Dr. Conway the best overall protection?
A. Two DP3's for the rental properties and an HO8 for his
primary residence.
B. Two DP3's for the rental properties and an H06 for his
primary residence.
C. Two DP2's for the rental properties and an H03 for his
primary residence
D. Two DP3's for the rental properties and an H05 for his
primary residence.
117. The Ultimate Study Guide - Part 2
89. Dr. Conway owns two single-family-dwelling rental properties,
as well as a high value primary residence. Which of the following
policy combinations offers Dr. Conway the best overall protection?
A. Two DP3's for the rental properties and an HO8 for his
primary residence.
B. Two DP3's for the rental properties and an H06 for his
primary residence.
C. Two DP2's for the rental properties and an H03 for his
primary residence
D. Two DP3's for the rental properties and an H05 for his
primary residence.
118. The Ultimate Study Guide - Part 2
89. (D) Two DP3's for his rental properties and an HO5 for his
primary residence.
DP’s (Dwelling Policies) are designed for homes that are rented to others.
Dwelling policies are the ideal choice for "non-owner" occupied
residences and are generally less expensive than Homeowner’s Policies.
Meanwhile, HO5's are the best choice for high value homes, as they offer
"All risk" coverage for both Real and personal property.
119. The Ultimate Study Guide - Part 2
90. An HO3 policy covers only "Real" property on an "Open Peril" or
"All Risk" basis. Meanwhile, an H05 covers Both "Real" and "Personal"
property on an "All Risk" or "Open Peril" basis.
Which of the following endorsements will enable an H03 policy to offer
coverages equivalent to those found in an H05 policy?
A. An HO15 endorsement which covers personal property
coverage "C" on an "All Risk" or "Open Peril" basis.
B. An ordinance or law endorsement which enhances
coverage "A" by 10%.
C. A Protection and Indemnity coverage endorsement.
D. Scheduled personal property endorsement.
120. The Ultimate Study Guide - Part 2
90. An HO3 policy covers only "Real" property on an "Open Peril" or
"All Risk" basis. Meanwhile, an H05 covers Both "Real" and "Personal"
property on an "All Risk" or "Open Peril" basis.
Which of the following endorsements will enable an H03 policy to offer
coverages equivalent to those found in an H05 policy?
A. An HO15 endorsement which covers personal property
coverage "C" on an "All Risk" or "Open Peril" basis.
B. An ordinance or law endorsement which enhances
coverage "A" by 10%.
C. A Protection and Indemnity coverage endorsement.
D. Scheduled personal property endorsement.
121. The Ultimate Study Guide - Part 2
90. (A) An HO15 endorsement which covers personal property
coverage "C" on an "All Risk" or "Open Peril" basis:
In order to become the equivalent of an HO5 policy, an HO3 Policy
requires an HO15 endorsement.
Remember:
An HO15 endorsement enhances coverage "C" to be covered for the
broad form perils. Therefore, the primary difference between an HO3
and an HO5 is coverage "C" (Coverage for personal property).
122. The Ultimate Study Guide - Part 2
91. Which of the following liability forms comes standard with
Yacht policies, as it combines the necessary coverages for marine
legal liability, vicarious liability, and worker’s compensation into
one policy?
A. Inland Marine.
B. Ocean Marine.
C. Protection and Indemnity.
D. Hull and Harbor Worker’s coverage endorsement.
123. The Ultimate Study Guide - Part 2
91. Which of the following liability forms comes standard with
Yacht policies, as it combines the necessary coverages for marine
legal liability, vicarious liability, and worker’s compensation into
one policy?
A. Inland Marine.
B. Ocean Marine.
C. Protection and Indemnity.
D. Hull and Harbor Worker’s coverage endorsement.
124. The Ultimate Study Guide - Part 2
91. (C) Protection and Indemnity:
Yacht policies have a unique blend of liability coverage called
“Protection and Indemnity” coverage. This is a combination of
“Marine Legal” liability, “Vicarious” liability, plus a “Worker’s
Compensation” policy.
Tip from Insuratest:
Do you remember “Magnum P.I." from the 1980’s? Magnum P.I. strikes
me as a man who owns a luxury Yacht….
(Yacht = P&I coverage.)
125. The Ultimate Study Guide - Part 2
92. Which of the following describes a "Replacement Cost"
settlement?
A. Replacement cost of insured item, minus depreciation.
B. The amount for which an insured item of property could have been
sold.
C. An appraised value without depreciation.
D. The amount necessary to indemnify an Insured by replacing his
damaged property with items of similar make-up and workmanship.
126. The Ultimate Study Guide - Part 2
92. Which of the following describes a "Replacement Cost"
settlement?
A. Replacement cost of insured item, minus depreciation.
B. The amount for which an insured item of property could have been
sold.
C. An appraised value without depreciation.
D. The amount necessary to indemnify an Insured by replacing his
damaged property with items of similar make-up and workmanship.
127. The Ultimate Study Guide - Part 2
92. (D) The amount necessary to indemnity an insured by replacing
his damaged property with items of similar make-up and
workmanship:
“Replacement Cost Coverage” (on both physical & personal property)
pays to replace items of the same quality and construction at today’s cost,
with no questions asked.
This is in contrast to “Actual Cash Value”, where the value depreciates
over time.
128. The Ultimate Study Guide - Part 2
93. Which peril (cause of loss) is covered in a DP2 Broad form
policy, but not covered in a DP1 Basic form policy?
A. Earth movement / mudslide / mudflow.
B. Flood waters on the surface of normally dry land.
C. Removal during the period of restoration.
D. Falling objects.
129. The Ultimate Study Guide - Part 2
93. Which peril (cause of loss) is covered in a DP2 Broad form
policy, but not covered in a DP1 Basic form policy?
A. Earth movement / mudslide / mudflow.
B. Flood waters on the surface of normally dry land.
C. Removal during the period of restoration.
D. Falling objects.
130. The Ultimate Study Guide - Part 2
93. (D) Falling objects:
Yet another popular exam question:
“Falling Objects” is covered in a DP 2 Broad Form policy, but is
not covered in the DP1 Basic Form.
Repeated Tip from Insuratest: This question will be asked three
times, and each question will have a different correct answer.
If “Collapse” is an answer choice, choose it!
If “Falling Objects” is an answer choice, choose it!
If “Additional Living Expenses” is a choice, choose it!
131. The Ultimate Study Guide - Part 2
94. Which commercial crime policy form covers losses discovered
during the policy period but occurred before the effective date?
A. Loss Sustained policy form.
B. Discovery Type policy form.
C. Occurrence Type policy form.
D. Claims Made policy form.
132. The Ultimate Study Guide - Part 2
94. Which commercial crime policy form covers losses discovered
during the policy period but occurred before the effective date?
A. Loss Sustained policy form.
B. Discovery Type policy form.
C. Occurrence Type policy form.
D. Claims Made policy form.
133. The Ultimate Study Guide - Part 2
94. (B)Discovery Type policy form:
Questions involving commercial crime losses that occurred prior to the
effective date (Think: “Backwards”), will always include “discovery” in
the correct answer.
Therefore, you can memorize this question/answer sequence by
remembering: “Crime Backward = Discovery”.
134. The Ultimate Study Guide - Part 2
95. Natasha, a single-family homeowner, purchased an HO3 policy with
the following appraised Reconstruction values for “real” property:
• "A" Dwelling/Structure = $300,000;
• Other /Appurtenant structures = $30,000.
Which minimum coverage limits must Natasha carry to be sure she’s
covered in the event of a partial loss?
A. “A” $250,000; “B” $25,000.
B. “A” $200,000; “B” $20,000.
C. “A” $240,000; “B” $24,000.
D. “A” $300,000; “B” $30,000.
135. The Ultimate Study Guide - Part 2
95. Natasha, a single-family homeowner, purchased an HO3 policy with
the following appraised Reconstruction values for “real” property:
• "A" Dwelling/Structure = $300,000;
• Other /Appurtenant structures = $30,000.
Which minimum coverage limits must Natasha carry to be sure she’s
covered in the event of a partial loss?
A. “A” $250,000; “B” $25,000.
B. “A” $200,000; “B” $20,000.
C. “A” $240,000; “B” $24,000.
D. “A” $300,000; “B” $30,000.
136. The Ultimate Study Guide - Part 2
95. (C) "A" $240,000; "B" $24,000:
Remember the phrase “Partial Loss”. (This is the only hint in the
question, and it tests your knowledge of coinsurance.)
Remember, the coinsurance number is nearly always 80%*. All you need
to do is take 20% off from the numbers provided, and you will arrive at
the 80% coinsurance requirement. In this case, subtracting 20% (or one
fifth) from both $300,000 and $30,000 equals the correct answer choice
of “$240,000 and $24,000”.
(* Important Exception: Builders Risk Policy = 100% of the Completed
Value – not 80%.)
137. The Ultimate Study Guide - Part 2
96. In effort to minimize coverage gaps and reduce redundancy in
policy language, both the CGL (Commercial General Liability) and
CAP (Commercial Auto Policy) use the terms "automobile" and
"mobile equipment" interchangeably. However similar in nature,
the CGL policy excludes _______ coverage in regards to mobile
equipment?
A. Vicarious liability.
B. Trailer interchange coverage.
C. Physical damage.
D. Professional liability.
138. The Ultimate Study Guide - Part 2
96. In effort to minimize coverage gaps and reduce redundancy in
policy language, both the CGL (Commercial General Liability) and
CAP (Commercial Auto Policy) use the terms "automobile" and
"mobile equipment" interchangeably. However similar in nature,
the CGL policy excludes _______ coverage in regards to mobile
equipment?
A. Vicarious liability.
B. Trailer interchange coverage.
C. Physical damage.
D. Professional liability.
139. The Ultimate Study Guide - Part 2
96. (C) Physical damage:
The policy definitions are the same and are designed to avoid gaps
in coverage. Please note that Commercial General Liability policies
exclude physical damage to mobile equipment.
140. The Ultimate Study Guide - Part 2
97. Kirk’s primary residence is currently covered with an HO3
policy. Additionally, Kirk owns several rental properties. You want
to ensure that Kirk is protected against potential liabilities
regarding wrongful eviction, plus libel & slander and invasion of
privacy claims. As Kirk’s agent, which liability endorsement would
you recommend?
A. An HO15 endorsement.
B. An Umbrella Policy endorsement.
C. A Professional Liability endorsement.
D. A Personal Injury Protection endorsement.
141. The Ultimate Study Guide - Part 2
97. Kirk’s primary residence is currently covered with an HO3
policy. Additionally, Kirk owns several rental properties. You want
to ensure that Kirk is protected against potential liabilities
regarding wrongful eviction, plus libel & slander and invasion of
privacy claims. As Kirk’s agent, which liability endorsement would
you recommend?
A. An HO15 endorsement.
B. An Umbrella Policy endorsement.
C. A Professional Liability endorsement.
D. A Personal Injury Protection endorsement.
142. The Ultimate Study Guide - Part 2
97. (D) A Personal Injury Protection endorsement:
The standard HO3 policy does not include personal injury protection.
This important coverage must be added by endorsement. The Personal
Injury Protection endorsement offers protection for claims regarding
wrongful eviction, false arrest, libel and slander.
143. The Ultimate Study Guide - Part 2
98. James and Jessica own an 1,100 sq. ft. commercial office building
currently worth $250,000 in today’s market. In order to receive a lower
premium, the two decide to insure their building for $150,000, with a
$1,000 deductible.
Unfortunately, James and Jessica suffered a water loss when a sprinkler
pipe ruptured. Repairing the damages totaled $50,000. In accordance with
their policy’s coinsurance agreement, how much will the insurer pay
James and Jessica for their loss?
A. $37,500
B. $36,500
C. $38,500
D. $37,400
144. The Ultimate Study Guide - Part 2
98. James and Jessica own an 1,100 sq. ft. commercial office building
currently worth $250,000 in today’s market. In order to receive a lower
premium, the two decide to insure their building for $150,000, with a
$1,000 deductible.
Unfortunately, James and Jessica suffered a water loss when a sprinkler
pipe ruptured. Repairing the damages totaled $50,000. In accordance with
their policy’s coinsurance agreement, how much will the insurer pay
James and Jessica for their loss?
A. $37,500
B. $36,500
C. $38,500
D. $37,400
145. The Ultimate Study Guide - Part 2
98. (B) $36,500
In order to solve this question, please first write these five variables down on your scratch paper:
• W/V =
• D =
• S =
• L =
• DED =
Now, let's fill in the blanks: The variable "W/V" stands for Worth or Value. The question states that
their commercial property is Worth $250,000.
OK, let’s plug that in our variable list: "W/V" = $250,000. OK, let's find the "D", which stands for
the amount carried or what the insured "Did" insure it for.
(continued)
146. The Ultimate Study Guide - Part 2
D = $150,000.
In order to find the "S" we're going to have to do a little bit of math. Please note that the "S" is
always 80% of the W/V. To compute the unknown value of "S" for this question, just multiply .80 x
$250,000.
It is easier to look at 80% as four fifths or four out of five. If you take four fifths of $250,000, you
have $200,000. This is your third variable - the "S" (Should have insured for).
S = $200,000.
The next variable to jot down on your scratch paper is the "L”, which stands for Loss. The question
147. The Ultimate Study Guide - Part 2
(Did ÷ Should x Loss) - Deductible = Amount Paid (by insurer in a partial loss).
$150,000
$200,000 x $50,000 = ??????
Now it's time to reduce this fraction. You can cross the zeros out on the left side to give you three-
fourths of $50,000 or (3/4 x $50,000).
One fourth of $50,000 equals $12,500. Three times $12,500 is $37,500, and that represents 3/4 of
$50,000. You’ve come this far, but don't forget that there is a $1,000 deductible. Therefore Choice
(B) $36,500 is the correct answer.
$150,000
$200,000 x $50,000 - $1,000 =
(B)$36,500.
The insured was penalized for not carrying the proper amount of insurance of 80% to value by the
insurer. In this case, the insurer underpaid the claim by $12,500. (Yikes!)
148. The Ultimate Study Guide - Part 2
99. When comparing an HO2 to a DP2, which of the following
statements is most accurate?
A. A DP2 offers broader coverage than an HO2.
B. A DP2 is more expensive than an HO2.
C. An HO2 offers broader coverage than a DP2 and is
therefore more expensive.
D. An HO2 is a better policy choice compared to a DP2, for
Diana who owns a four unit apartment building.
149. The Ultimate Study Guide - Part 2
99. When comparing an HO2 to a DP2, which of the following
statements is most accurate?
A. A DP2 offers broader coverage than an HO2.
B. A DP2 is more expensive than an HO2.
C. An HO2 offers broader coverage than a DP2 and is
therefore more expensive.
D. An HO2 is a better policy choice compared to a DP2, for
Diana who owns a four unit apartment building.
150. The Ultimate Study Guide - Part 2
99. (C) An HO2 offers broader coverage than a DP2 and is
therefore more expensive:
Homeowner’s policies generally offer better and broader coverage
than dwelling policies, but are generally more expensive.
However, Dwelling Policies are the correct choice for (non owner-
occupied) homes and small apartment buildings
rented to others
151. The Ultimate Study Guide - Part 2
100. A “Miscellaneous Type Vehicle endorsement” is a cost
effective means to insure motor homes that are only used on
occasion.
Which of the following items of property does this endorsement
not cover?
A. Attached collapsible overhang.
B. Attached RV mini-deck.
C. Built-in generator.
D. Luggage.
152. The Ultimate Study Guide - Part 2
100. A “Miscellaneous Type Vehicle endorsement” is a cost
effective means to insure motor homes that are only used on
occasion.
Which of the following items of property does this endorsement
not cover?
A. Attached collapsible overhang.
B. Attached RV mini-deck.
C. Built-in generator.
D. Luggage.
153. The Ultimate Study Guide - Part 2
100. (D) Luggage:
Luggage is never covered under a Miscellaneous type Vehicle
endorsement.
However, luggage is covered under coverage “C” (Personal
Property) within a standard Homeowner’s policy.
154. The Ultimate Study Guide - Part 2
End of Part Two
If you're ready to continue,
Please move on to part three.
