PERSONAL LINES INSURANCE PRACTICE EXAM

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PERSONAL LINES INSURANCE PRACTICE EXAM

Actual Qs and Ans - Expert-Verified Explanation -Guaranteed passing score -100 Questions and Answers

-Format: Multiple-choice / Flashcard

Question 1: Which one of the following auto policy coverages would pay for damage to the insured's car that the insured motorist caused by hitting a farmer's cattle while driving though the country?

• Collision
• Uninsured motorists
• Other than collision
• Liability

Answer:

• Other than collision

Explanation: Other than Collision coverage, also known as comprehensive coverage, protects against almost all accidental damage, with the exception of coverage provided under collision. Coverage includes losses due to fire, theft, explosions, earthquake, windstorm, missiles, falling objects, hail, water, flood, vandalism and malicious mischief, riot and civil commotion, glass breakage, and collision with birds or animals that are wild or domestic.

Reference: 8.12.1 in the License Exam Manual

Question 2: All of the following statements are TRUE regarding an insured's duties to the insurer after a loss to an insured dwelling EXCEPT

• undamaged property must be protected from further loss
• the insurance company must be notified of the loss

• the insured must furnish proof of loss
• the damaged property must be appraised

Answer:

• the damaged property must be appraised

Explanation: The property needs to be appraised only if the insured and the insurer cannot agree on the amount or value of the loss. The conditions section of the policy spells out, in detail, both the insurer's and the insured's rights and duties. If the insured does not comply with these conditions, the insurer may be released from its obligation to pay for a loss.

Reference: 6.5.1 on the License Exam Manual

Question 3: A business loses money because it was forced to close after a fire on the premises.This loss is described as

• a named peril
• a direct loss
• a proximate cause
• an indirect loss

Answer:

• an indirect loss

Explanation: Indirect loss is a financial loss incurred as a result of direct damage to property. In the case of a business, this includes loss of profits, rent, and continuing or extra expenses necessary to keep the business operating after a direct loss. For a personal dwelling, indirect loss involves the possible loss of rent from a rental unit or the extra expenses the homeowner incurs from living in a motel while the home is being repaired.

Reference: 4.4.6 on the License Exam Manual

Question 4: Which of the following types of property is NOT covered by a dwelling policy?

• 3 apartment dwellings
• Row houses
• Farm dwellings
• Mobile homes on permanent foundations

Answer:

• Farm dwellings

Explanation: Properties eligible for dwelling policies include mobile homes on permanent foundations, townhouses, row houses, and dwellings containing up to 4 apartments. Farm dwellings are not covered by dwelling or homeowners policies. They must be insured under the farm program policy.

Reference: 6.3.2 in the License Exam Manual

Question 5: Which of the following is an example of property that might be insured on an agreed value basis?

• Rare painting
• Car
• House
• Apartment building

Answer:

• Rare painting

Explanation: Some items of property are very difficult to value after a loss has occurred. In this situation, the insured and insurer will agree on a value before the policy is issued. Antique furniture or fine arts will most likely have agreed values. If a loss occurs, the agreed value will be the amount the insured is guaranteed to receive.

Reference: 4.4.10 in the License Exam Manual

Question 6: In Arizona, an insurer must give notice of its intention to not renew a homeowners policy at least ___ days before the end of the policy period.

• 60
• 20
• 30
• 10

Answer:

• 30

Explanation: An insurer must give notice of its intention to not renew a homeowners policy at least 30 days before the end of the policy period.

Reference: See State Supplement

Question 7: The provisions of the Terrorism Risk Insurance Act of 2002 apply to which of the following lines of insurance?

• Homeowners
• Commercial property
• Automobile
• Dwelling

Answer:

• Commercial property

Explanation: The Terrorism Risk Insurance Act of 2002 established a federal program to provide compensation for insured losses resulting from terrorism acts. Most commercial property and casualty policies are required to offer coverage for certified acts of terrorism. The program does not apply to personal lines coverage.

Reference: 3.8.2 in the License Exam Manual

Question 8: Jim and his family are considering a move to the West Coast but are very concerned about earthquakes. Jim called an insurance agent for advice. What is the best advice the agent could give Jim about adequately covering his new home for possible earthquake damage?

• A separate earthquake policy should be purchased to provide full coverage for earth

movement.

• Adding the earthquake endorsement will provide the coverage needed.
• The homeowners policy automatically provides earthquake coverage.
• A state insurance fund will cover any damage that occurs.

Answer:

• Adding the earthquake endorsement will provide the coverage needed.

Explanation: The basic homeowners policy specifically excludes earthquakes, including the land shock waves or earth movement caused by a volcanic eruption; landslide; mine subsidence; mudflow; and earth sinking, rising, or shifting. The earthquake endorsement must be added to the homeowners policy to provide coverage for damage caused by earth movement.

Reference: 7.5.7 in the License Exam Manual