Question 1

Mark purchased a boat owners package policy. While using his boat, he negligently hit a pier. A person standing on the pier fell and was severely injured. Which of the boat owners package policy coverages will respond to a lawsuit filed as a result of this negligent act?

Accepted Answer

Liability coverage is the coverage that responds to a lawsuit filed against Mark as a result of his negligent act of hitting the pier and injuring a person standing on it. This coverage provides protection for bodily injury and property damage that Mark may be legally responsible for due to the boating accident.

Question 2

Paul has a personal auto policy with a per-person liability limit of $300,000. He also has a personal umbrella policy with a limit of $2,000,000 and a self-insured retention of $1,000. How much will be paid by each policy if a person wins a judgment of $500,000 against Paul as a result of bodily injury arising from the auto accident?

Accepted Answer

The auto policy will pay up to its limit of $300,000. The remaining $200,000 will be paid by the umbrella policy after the self-insured retention of $1,000 is satisfied. Therefore, the auto policy will pay $300,000, and the umbrella policy will pay $200,000, for a total of $500,000.

Question 3

Jerry built a home in a flood plain. He did not purchase flood insurance. Recently, a noted meteorologist predicted torrential rains for the area for the next 7 days. Jerry attempted to purchase flood insurance through the National Flood Insurance Program. Which flood insurance provision is likely to block Jerry's efforts to obtain coverage for protection against the predicted torrential rain?

Accepted Answer

The waiting period provision in flood insurance policies typically requires a policy to be in force for a certain period of time before coverage for a flood event becomes effective. Therefore, since Jerry is attempting to obtain coverage during a predicted flood event, the waiting period provision is likely to block his efforts to obtain coverage.

Question 4

William would like to insure his home. He does not want theft or personal liability coverage; however, he would like "open perils" (all-risks) coverage on the dwelling. William should purchase a

Accepted Answer

The Dwelling Property 3 Form is the correct choice for William because it offers "open perils" coverage for the dwelling, which means it covers all risks except those specifically excluded in the policy. This aligns with William's desire for comprehensive coverage on his home without the need for theft or personal liability coverage.

Question 5

All of the following are ISO personal umbrella liability policy exclusions EXCEPT

Accepted Answer

Liability arising out of uncompensated board service for a nonprofit organization is not typically excluded under ISO personal umbrella liability policies, whereas the other options listed are common exclusions.

Question 6

Tina purchased a personal umbrella policy with a $1 million limit and a $1,000 self-insured retention. Her insurer required her to carry a $300,000 liability limit under her homeowners policy. Tina was held responsible for slandering a public official. The public official won a $100,000 judgment against Tina. The insurer that wrote Tina's homeowners policy denied coverage. How much will the insurer pay under Tina's personal umbrella policy?

Accepted Answer

Since Tina's homeowners policy did not cover the loss, her personal umbrella policy would apply. The $1,000 self-insured retention would not apply in this situation because the loss exceeded the retention amount. Therefore, the insurer would pay the difference between the $100,000 judgment and the $300,000 liability limit under her homeowners policy, which is $100,000 - $300,000 = -$200,000. Tina's personal umbrella policy would then pay the remaining $200,000 up to the $1 million limit. Therefore, the insurer would pay $99,000 ($300,000 - $100,000) and Tina's personal umbrella policy would pay $1,000 (retention) + $200,000 (excess judgment) = $201,000.

Question 7

Which of the following statements about title insurance is true?

Accepted Answer

Title insurance provides protection against title defects that occurred prior to the effective date of the policy. A premium is only paid once, at the time of purchase, and the policy term runs for the duration of the time that the insured owns the property. The policy does not guarantee possession of the property but provides financial protection in case a defect in the title causes financial losses.

Question 8

Which of the following statements is (are) true with regard to an unendorsed ISO Dwelling Form?
I.The Dwelling forms provide theft coverage and personal liability insurance.
II.The Dwelling 3 form provides broader property coverage than the Dwelling 1 form.

Accepted Answer

II is true because the Dwelling 3 form, also known as the special form, indeed offers broader property coverage than the Dwelling 1 form, which is a basic form providing more limited coverage. The Dwelling forms, without endorsements, do not automatically include theft coverage or personal liability insurance; these coverages require additional endorsements or separate policies.

Question 9

Frank purchased a building in a run-down area of a city. When Frank was unable to obtain property insurance in the voluntary insurance market, an agent suggested that he contact a state pool created in the 1960s that makes property insurance available in riot-prone areas. The state pool the agent referred to is called a(n)

Accepted Answer

The FAIR (Fair Access to Insurance Requirements) plan is a state-run program created to provide property insurance coverage to those who cannot obtain insurance in the voluntary market due to high-risk conditions in their area such as riot-prone neighborhoods. The other options, unsatisfied judgment fund, guaranty fund plan, and assigned risk plan, are all different types of state-run insurance programs but do not specifically address coverage in high-risk areas.

Question 10

All of the following are commonly excluded by personal umbrella policies EXCEPT

Accepted Answer

Personal umbrella policies typically provide additional liability coverage beyond what is offered by standard insurance policies, including coverage for libel, slander, and other types of personal injury. These are not commonly excluded, unlike intentional acts, professional liability, and aircraft liability, which are typically not covered.

Question 11

Martin would like to insure valuable personal property limited in coverage by his homeowners policy. Martin has two options. He can purchase the coverage through a separate personal articles floater policy or he can add an endorsement to his homeowners policy. The endorsement is called the

Accepted Answer

The best option for Martin would be to add a scheduled personal property endorsement to his homeowners policy. This endorsement specifically provides additional coverage for valuable personal property that may not be covered or limited in coverage under the standard homeowners policy. It also allows Martin to specifically list and insure each item individually with its specific value, rather than just having a general coverage limit. This provides more comprehensive coverage and peace of mind for Martin.

Question 12

Congressional action in 2012 extended the National Flood Insurance Program (NFIP) until 2017. Which of the following is a key provision of the Biggert-Waters Flood Insurance Reform and Modernization Act of 2012?

Accepted Answer

The Biggert-Waters Flood Insurance Reform and Modernization Act of 2012 eliminated and phased out several rate subsidies, which had resulted in lower premiums for some policyholders. This was done to make the NFIP more financially stable and sustainable in the long term. The act did not include the elimination of waiting periods, write-off of the Hurricane Katrina deficit, or elimination of deductibles.

Question 13

Carolyn is considering the purchase of a large (60-foot) boat. She called her insurance agent to see if she needs a separate policy for the boat. The agent said that a special category of insurance policies was designed to insure large watercraft. These policies are called

Accepted Answer

Yacht insurance policies are specifically designed to insure large watercraft, like a 60-foot boat. The other options, flood insurance policies and Dwelling Property 3 (special form) policies, are not applicable to the situation as they do not provide coverage for boats. Floater policies may cover boats, but they are typically designed for smaller items that are more likely to be lost or stolen, such as jewelry or cameras.

Question 14

Which statement is true about medical expense coverage under the boatowners package policy?

Accepted Answer

Medical expense coverage under the boatowners package policy pays the medical expenses of a covered person who is injured while in the boat.

Question 15

Which of the following statements about a typical personal umbrella policy is (are) true?
I.Losses covered under an underlying policy and the umbrella policy are settled on a pro rata basis.
II.Losses not covered by the basic underlying contracts are subject to a self-insured retention which typically is at least $25,000.

Accepted Answer

The answer of Which of the following statements about a...

Question 16

Steve and Mary are art collectors. They own lithographs, etchings, and vintage photographs valued at over $250,000. Steve and Mary display their art collection at their home. They can insure this valuable personal property through a

Accepted Answer

The personal articles floater is the best choice as it is specifically designed to provide coverage for valuable personal property such as art collections. A title insurance policy provides coverage for property ownership issues and a dwelling property form typically covers the physical structure of a home. A personal umbrella policy provides liability coverage above and beyond what is provided by other policies.

Question 17

Tina purchased a personal umbrella policy with a $1 million limit. Her insurer required her to carry liability limits of 250/500/50 under her auto insurance policy. The personal umbrella policy was written with a $1,000 self-insured retention. Tina was responsible for an auto accident in which the other driver was severely injured. The other driver's bodily injuries were $400,000 and the property damage was $20,000. How much will the insurer pay under Tina's umbrella policy?

Accepted Answer

To calculate how much the insurer will pay under Tina's umbrella policy, we first need to determine how much coverage is already available under her auto insurance policy.

The liability limits under her auto policy are 250/500/50, which means:
- $250,000 per person bodily injury limit
- $500,000 per accident bodily injury limit
- $50,000 property damage limit

Since the other driver's bodily injury claim is $400,000, Tina's auto policy will pay out the full $250,000 per person limit, but will not cover the remaining $150,000. The property damage claim of $20,000 will be fully covered by her auto policy's property damage limit.

This means that the remaining amount of bodily injury coverage needed is $150,000. Since Tina has a $1 million limit on her personal umbrella policy, we know that she has enough coverage to cover the remaining amount of the bodily injury claim.

However, her umbrella policy has a $1,000 self-insured retention, which means that she must pay the first $1,000 in damages herself. Therefore, the insurer will pay out $150,000 minus the $1,000 retention, for a total of $149,000.

Therefore, the correct answer is C) $150,000.

Question 18

Len is considering the purchase of a home. As a home is a large investment, Len wants to make sure that there are no liens, easements, or other encumbrances preventing him from an unchallenged right to possess and enjoy his property. Len can protect this right through the purchase of

Accepted Answer

Title insurance protects the homeowner against any defects in the title that might prevent him from possessing and enjoying the property. It ensures that the title is clear, marketable, and free from liens, encumbrances, and other defects.

Question 19

Which of the following statements is (are) true about the National Flood Insurance Program?
I.You can't purchase flood insurance through this program if your property is located in a high-flood-risk area.
II.Coverage is not available for any property which has been flooded previously.

Accepted Answer

Both statements are false. The National Flood Insurance Program allows for the purchase of flood insurance even if the property is in a high-risk area or has been previously flooded, provided the community participates in the program.

Question 20

The personal umbrella policy covers some personal injuries. Which of the following is considered a personal injury?

Accepted Answer

Defamation of character is considered a personal injury under the context of personal umbrella policies, as it involves harm to a person's reputation rather than physical harm or property damage.

Quiz 24: Other Property and Liability Insurance Coverages