General Insurance Exam Questions And Answers
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Get ready to test your knowledge with the General Insurance Exam Quiz! This quiz is designed to help you review and understand key concepts essential for general insurance exams. Covering a wide range of topics such as insurance policies, risk management, underwriting, claims processing, and regulatory principles, this quiz will give you a solid overview of what to expect in your exam.
Each question is crafted to challenge your understanding of general insurance fundamentals and provide a comprehensive review of critical areas. Perfect for anyone preparing for their insurance certification or wanting to refresh their knowledge, this quiz will Read morehelp you identify your strengths and areas needing improvement.
General Insurance Exam Questions and Answers
- 1.
Medical payments under a homeowners policy are available for expenses resulting from an injury to which of the following?
- A.
The named insured
- B.
A residence employee
- C.
A person who is at the insured location without permission
- D.
Any regular resident of the insured's household who pays rent
Correct Answer
B. A residence employeeExplanation
Medical payments under a homeowners policy are available for expenses resulting from an injury to a residence employee. This means that if a residence employee, such as a nanny or a housekeeper, gets injured while working at the insured's home, the homeowners policy will cover their medical expenses.Rate this question:
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- 2.
Some property insurance policies provide for payment of the full policy limit in the event of a total loss by a covered peril, regardless of the actual value of the property. These policies are known as which of the following?
- A.
Indemnity policies
- B.
ACV policies
- C.
Valued or agreed amount policies
- D.
Market value policies
Correct Answer
C. Valued or agreed amount policiesExplanation
Valued or agreed amount policies provide for payment of the full policy limit in the event of a total loss by a covered peril, regardless of the actual value of the property. These policies are different from ACV (actual cash value) policies, which only pay for the depreciated value of the property at the time of the loss. Indemnity policies, on the other hand, reimburse the policyholder for the actual amount of the loss up to the policy limit. Market value policies pay out based on the current market value of the property.Rate this question:
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- 3.
When an uninterrupted chain of events resulting from a negligent act causes a loss, that act is considered to be which of the following?
- A.
An assumption of risk
- B.
An intervening cause
- C.
The proximate cause of loss
- D.
A matter of strict liability
Correct Answer
C. The proximate cause of lossExplanation
The proximate cause of loss refers to a negligent act that directly leads to a loss through an uninterrupted chain of events. It is the primary cause that sets in motion a sequence of events, ultimately resulting in the loss. This concept is important in determining liability and causation in legal cases. It is different from an assumption of risk, which involves voluntarily accepting the potential risks associated with an activity, an intervening cause, which is an unforeseeable event that breaks the chain of causation, and strict liability, which holds a party liable regardless of fault.Rate this question:
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- 4.
For how many days does the coverage apply at another location for property removed to protect it from a flood under the National Flood Insurance Program?
- A.
60 days
- B.
45 days
- C.
30 days
- D.
15 days
Correct Answer
B. 45 daysExplanation
Under the National Flood Insurance Program, if you move your property to protect it from a flood, the insurance will cover it at the new location for up to 45 days. This means that if you take your belongings to a safer place because a flood is coming, the insurance helps cover any damage to them for a month and a half. This coverage is important because it gives people a way to safeguard their property during floods without worrying about the cost of potential damages while temporarily relocated.Rate this question:
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- 5.
In legal terms, when one party's actions result in giving up a known right, what has the party created?
- A.
Unilateral contract
- B.
Representation
- C.
Warranty
- D.
Waiver
Correct Answer
D. WaiverExplanation
A waiver occurs when a person voluntarily gives up a known right, typically through explicit declaration or by some act that implies the intention to relinquish the right. In legal contexts, waivers are significant because they prevent the person who has waived the right from claiming any contrary course of action later on. For instance, if someone signs a document stating they waive the right to sue a company, they cannot legally file a lawsuit against that company regarding the specified matters in the future. Waivers are used to avoid disputes and clarify that certain rights will not be enforced.Rate this question:
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- 6.
What is the purpose of a deductible in an insurance policy?
- A.
To increase the premium paid by the policyholder
- B.
To decrease the insurance company's liability for small claims
- C.
To provide additional coverage beyond the policy limit
- D.
To extend the policy term
Correct Answer
B. To decrease the insurance company's liability for small claimsExplanation
A deductible is a specific amount that a policyholder must pay out-of-pocket before the insurance company pays a claim. The main purpose of a deductible is to decrease the insurer's liability for small or minor claims, thereby encouraging policyholders to avoid filing frequent, small claims. It also helps in managing the cost of premiums, as generally, higher deductibles lead to lower premium costs. This system allocates some risk back to the policyholder, ensuring they have a financial stake in the risk management process.Rate this question:
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- 7.
An insurer's loss ratio is determined by dividing what?
- A.
Premiums by combined losses and expenses
- B.
Premiums by underwriting losses
- C.
Operating expenses by total premiums
- D.
Underwriting losses by total premiums
Correct Answer
D. Underwriting losses by total premiumsExplanation
The loss ratio is used to compare the company's loss experience from year to year. It is calculated by dividing the amount of incurred underwriting losses by the earned premium. It can be calculated separately for individual lines of insurance or the company's entire operations.Rate this question:
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- 8.
Under most property insurance policies, the policy territory includes which of the following?
- A.
Only the United States
- B.
The United States, its territories and possessions, and Canada
- C.
The United States, Canada, and Mexico
- D.
All of North America and Europe
Correct Answer
B. The United States, its territories and possessions, and CanadaExplanation
Under most property insurance policies, the policy territory typically includes the United States, its territories and possessions, and Canada. This means that coverage extends to properties located within the United States, its territories (such as Puerto Rico, Guam, etc.), possessions (such as American Samoa), and Canada. Including these areas in the policy territory ensures that properties situated within these regions are covered by the insurance policy, providing broader protection for policyholders.Rate this question:
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- 9.
Claims-made general liability coverage does not apply to bodily injury or property damage that occurs when?
- A.
On the policy's retroactive date
- B.
Before the policy's retroactive date
- C.
After the policy's retroactive date
- D.
Before the effective date, if there is no retroactive date
Correct Answer
B. Before the policy's retroactive dateExplanation
Claims-made general liability coverage only applies to bodily injury or property damage that occurs after the policy's retroactive date. This means that any claims arising from incidents that happened before the retroactive date are not covered by the policy.Rate this question:
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- 10.
Under liability insurance policies, what does an "aggregate limit" mean?
- A.
It is the most the insurer will pay for any one accident.
- B.
It is the most the insurer will pay for all losses during any one policy period.
- C.
It is the maximum limit for each claim when multiple claimants arise out of the same occurrence.
- D.
It is the single largest limit that applies when a loss is covered by two or more policies issued by the same insurer.
Correct Answer
B. It is the most the insurer will pay for all losses during any one policy period.Explanation
An "aggregate limit" under liability insurance policies refers to the maximum amount that the insurer will pay for all losses that occur during a specific policy period. This means that regardless of the number of claims or accidents that take place within that period, the insurer will only pay up to the aggregate limit. Once that limit is reached, the insurer will not provide any further coverage for losses.Rate this question:
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- 11.
In the event of a physical damage loss that makes a covered auto unavailable for a period of time, a personal auto policy will provide coverage for transportation expenses at the rate of $20 per day up to how much?
- A.
A maximum payment of $300
- B.
A maximum payment of $460
- C.
A maximum payment of $600
- D.
A maximum payment of $740
Correct Answer
C. A maximum payment of $600Explanation
In addition to collision and other than collision coverage, if a covered loss makes an insured auto unavailable, a personal auto policy will provide coverage for transportation expenses up to $20 per day, subject to a maximum payment of $600.Rate this question:
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- 12.
Under the business auto coverage part, each of the following is true about the classifications of covered autos, which are designated by numerical symbols shown in the declarations, except for which of the following?
- A.
All classes of newly acquired autos are automatically covered.
- B.
An insured can select different classifications for various coverages.
- C.
"Any auto" is the broadest coverage classification.
- D.
"Hired autos" include autos the insured leases, hires, rents, or borrows.
Correct Answer
A. All classes of newly acquired autos are automatically covered.Explanation
Under the business auto coverage part, all classes of newly acquired autos are automatically covered. This means that when a business acquires a new vehicle, it is automatically covered under the policy without the need for any additional action or endorsement. This is different from the other statements, which discuss the ability to select different classifications for various coverages, the broadest coverage classification being "any auto," and the inclusion of leased, hired, rented, or borrowed autos under the classification of "hired autos."Rate this question:
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- 13.
What is called something that might increase the likelihood that a loss will occur?
- A.
Peril
- B.
Hazard
- C.
Risk
- D.
Catastrophe
Correct Answer
B. HazardExplanation
A hazard is something that increases the likelihood that a loss will occur. It is a condition or circumstance that makes it more probable for a peril (a specific event that causes loss, like a fire or flood) to cause damage or loss. For instance, storing flammable materials improperly is considered a hazard because it increases the chance of a fire, which is the peril. Understanding hazards is crucial in both everyday risk management and in designing insurance policies to ensure that risks are appropriately identified and mitigated.Rate this question:
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- 14.
Tom Baxter has an automobile insured by a personal auto policy. He trades in his car and purchases a new private passenger auto as a replacement vehicle. If he does not notify the insurance company, the liability coverage for his replacement vehicle will apply automatically for how long?
- A.
10 days
- B.
30 days
- C.
60 days
- D.
Until the end of the policy period
Correct Answer
D. Until the end of the policy periodExplanation
Under a personal auto policy, if a newly acquired auto replaces another auto, the new vehicle automatically has the broadest coverage for liability, medical payments, and uninsured motorists coverage for any auto shown in the declarations until the end of the policy period.Rate this question:
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- 15.
What is a device used to minimize small nuisance claims and help keep insurance premiums down called?
- A.
Arbitration
- B.
Deductible
- C.
Valued policy
- D.
Coinsurance
Correct Answer
B. DeductibleExplanation
A deductible is a specific amount that the policyholder must pay out-of-pocket before the insurance company pays a claim. By having a deductible, insurance policies discourage small nuisance claims because the policyholder has to consider whether the cost of repairing the damage is worth more than the deductible they would have to pay. This system helps reduce the number of minor claims that insurance companies have to handle, which can lead to lower overall costs for the insurer. As a result, this helps keep insurance premiums more affordable for everyone.Rate this question:
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- 16.
Which type of insurance professional sells advice about insurance coverage but does not actually sell insurance coverage?
- A.
Excess and surplus lines agent
- B.
Solicitor
- C.
Consultant
- D.
Producer
Correct Answer
C. ConsultantExplanation
An insurance consultant is a type of insurance professional who provides expert advice about insurance coverage but does not sell insurance policies. Unlike agents or brokers who are involved in the selling of insurance products, consultants focus on analyzing existing insurance policies, assessing risks, and advising clients on the most suitable coverage options based on their specific needs. This role is crucial for businesses and individuals who require specialized knowledge to navigate complex insurance decisions, ensuring that they make informed choices without the pressure of purchasing from a specific provider.Rate this question:
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- 17.
Under the NCCI worker's compensation and employers liability policy form, what is the basic, or minimum, limit for employer's liability coverage per accident?
- A.
$50,000 per accident
- B.
$100,000 per accident
- C.
$250,000 per accident
- D.
$500,000 per accident
Correct Answer
B. $100,000 per accidentExplanation
Under the NCCI (National Council on Compensation Insurance) worker's compensation and employer's liability policy form, the basic or minimum limit for employer's liability coverage per accident is $100,000. This amount represents the minimum financial protection provided for each accident under the employer’s liability section of the policy. This coverage helps protect employers against lawsuits filed by employees for work-related injuries or diseases that are not covered under the worker’s compensation part of the policy. The $100,000 limit helps ensure that employers have a foundational level of financial protection against potential claims.Rate this question:
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- 18.
Which dwelling policy forms are named peril forms?
- A.
All dwelling forms
- B.
The basic and broad forms
- C.
The basic form only
- D.
The special form only
Correct Answer
B. The basic and broad formsExplanation
The correct answer is the basic and broad forms. In dwelling insurance, the Basic Form (DP-1) and Broad Form (DP-2) are named peril forms, meaning they only cover specific perils explicitly listed in the policy. The Basic Form covers limited perils like fire, lightning, and internal explosion, with options to add more through endorsements. The Broad Form expands on this by including additional named perils such as falling objects, burglary damage, and freezing of pipes. In contrast, the Special Form (DP-3) is an open peril form that covers all perils except those explicitly excluded, providing broader protection. Thus, only the Basic and Broad Forms are considered named peril forms.Rate this question:
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- 19.
If general liability "claims-made" coverage is renewed by "occurrence" coverage and the insured purchases a supplemental extended reporting period (ERP), for how long will the period for reporting claims under the policy be extended?
- A.
Indefinitely
- B.
5 years
- C.
3 years
- D.
60 days
Correct Answer
A. IndefinitelyExplanation
When a general liability "claims-made" coverage is switched to "occurrence" coverage and the insured opts to purchase a supplemental extended reporting period (ERP), the period for reporting claims under the policy can be extended indefinitely. This option allows the insured to report claims that are related to incidents that occurred during the claims-made policy period, even if the claims themselves are made after the policy has expired. This indefinite extension is critical for protecting the insured against late-coming claims that arise from incidents that happened during the active period of the claims-made policy.Rate this question:
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- 20.
Under liability insurance policies, what does the term "personal injury" usually mean?
- A.
Injury for such things as libel, slander, false arrest, or invasion of privacy.
- B.
Only bodily injuries are suffered by individuals.
- C.
Any form of injury that affects a person, including bodily injury, property damage, financial injury, and damage to one's reputation.
- D.
Injuries suffered by named insureds or family members who are insured under personal lines policies.
Correct Answer
A. Injury for such things as libel, slander, false arrest, or invasion of privacy.Explanation
The term "personal injury" under liability insurance policies usually refers to injury for things such as libel, slander, false arrest, or invasion of privacy. This means that if someone is harmed due to any of these actions, they may be covered under the liability insurance policy. It does not solely refer to bodily injuries, but includes other forms of injury that affect a person, such as damage to reputation or financial injury.Rate this question:
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- 21.
Under a personal auto policy, if an insured already has physical damage coverage for at least one vehicle, how many days does the insured have to notify the insurer and request coverage for a new vehicle from the date it is acquired to ensure automatic coverage?
- A.
30 days
- B.
14 days
- C.
10 days
- D.
7 days
Correct Answer
B. 14 daysExplanation
Under a personal auto policy, if an insured already has physical damage coverage for at least one vehicle, any newly acquired vehicle will automatically have the same level of coverage for 14 days from the date it is acquired. During this 14-day period, the insured must notify the insurer about the new vehicle and request the continuation of coverage. This provision ensures that the insured has immediate protection for the new vehicle while providing a reasonable timeframe to update their policy formally. This auto-coverage extension is crucial for maintaining uninterrupted insurance protection when switching or adding vehicles.Rate this question:
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- 22.
Which of the following is not true about difference in conditions (DIC) insurance?
- A.
DIC policies provide property and liability coverages
- B.
Traditional perils (such as fire, lightning, and so on) are usually excluded by DIC policies
- C.
DIC supplements other coverages and fills insurance gaps
- D.
DIC can provide considerable protection at a reasonable cost
Correct Answer
A. DIC policies provide property and liability coveragesExplanation
DIC policies do provide broad property coverage intended to supplement other coverages and fill insurance gaps. For this reason, DIC policies typically exclude coverage for traditional perils such as fire, lightning, and extended coverage perils. DIC policies do not provide any liability coverage.Rate this question:
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- 23.
If coverage for personal liability and medical payments is attached to a dwelling policy, what basic limit of coverage applies to medical payments unless a higher amount is purchased?
- A.
$500 per person
- B.
$1,000 per person
- C.
$2,500 per person
- D.
$5,000 per person
Correct Answer
B. $1,000 per personExplanation
When a dwelling policy includes coverage for personal liability and medical payments, the basic limit of coverage for medical payments is typically $1,000 per person. This amount serves as the default coverage limit, providing financial assistance for medical expenses incurred by someone injured on the insured's property, regardless of fault. The insured has the option to purchase higher coverage limits, but unless specified, $1,000 per person is the standard provision. This helps ensure quick and straightforward financial help to cover necessary medical costs, fostering goodwill and potentially preventing more costly liability claims.Rate this question:
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- 24.
Under which type of marketing system do agents or agencies operate as independent businesses but agree to represent only one insurance company?
- A.
Direct writer system
- B.
Exclusive of the captive agency system
- C.
Direct response system
- D.
Independent agency system
Correct Answer
B. Exclusive of the captive agency systemExplanation
In the exclusive captive agency system, the insurance company contracts with agencies, which are independent businesses, to represent and sell insurance only for that insurance company.Rate this question:
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- 25.
Which peril is not covered under a commercial property coverage part with the basic causes of loss form attached?
- A.
Windstorm
- B.
Explosion
- C.
Volcanic eruption
- D.
Sprinkler leakage
Correct Answer
D. Sprinkler leakageExplanation
Under a commercial property coverage part with the basic causes of loss form attached, perils such as windstorm, explosion, and volcanic eruption are typically covered. However, sprinkler leakage is not included in the list of covered perils in the basic form. Coverage for sprinkler leakage usually requires a more comprehensive form or a specific endorsement to be added to the policy. The basic form primarily covers the most direct and common types of physical damage but does not extend to more specific risks like those caused by accidental activation or malfunction of a sprinkler system.Rate this question:
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Sep 03, 2024Quiz Edited by
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