CU Insurance Products & Coverage Types 3 — Questions and Answers
Question 1: Which type of annuity contract guarantees a fixed interest rate during the accumulation phase, shielding the owner from market risk?
- Variable annuity
- Indexed annuity
- Fixed annuity (Correct answer)
- Immediate annuity
Correct answer: Fixed annuity
A fixed annuity credits a predetermined interest rate set by the insurer, providing predictable growth without market exposure.
Question 2: Under a Workers' Compensation policy, Part Two — Employers Liability covers:
- Statutory benefits owed to injured employees
- Lawsuits by employees alleging employer negligence beyond statutory limits (Correct answer)
- Medical payments to third-party visitors
- Job-related property damage claims
Correct answer: Lawsuits by employees alleging employer negligence beyond statutory limits
Employers Liability (Part Two) covers common-law suits by employees or their families that fall outside the exclusive-remedy provisions of workers' comp statutes.
Question 3: A 'floater' or 'inland marine' policy is BEST suited to insure:
- A fixed warehouse full of inventory
- Scheduled high-value items that move from location to location (Correct answer)
- Fleet vehicles garaged at one address
- Crop losses due to drought
Correct answer: Scheduled high-value items that move from location to location
Inland marine (floater) policies cover property that is mobile or in transit, such as jewelry, cameras, or contractor's equipment.
Question 4: The 'replacement cost' valuation method in a property policy differs from 'actual cash value' (ACV) because replacement cost:
- Deducts depreciation from the claim payment
- Pays the cost to repair or replace without a depreciation deduction (Correct answer)
- Only applies to total loss situations
- Requires the insured to pay the full replacement cost upfront
Correct answer: Pays the cost to repair or replace without a depreciation deduction
Replacement cost pays to restore property to its pre-loss condition without subtracting depreciation, while ACV deducts for age and wear.
Question 5: Professional Liability (Errors & Omissions) insurance is specifically designed to cover claims arising from:
- Physical injuries on business premises
- Negligent acts, errors, or omissions in professional services (Correct answer)
- Employee theft of client funds
- Vehicle accidents during work hours
Correct answer: Negligent acts, errors, or omissions in professional services
E&O policies respond to claims alleging a professional failed to perform services with the expected standard of care.
Question 6: Which feature of a Universal Life policy distinguishes it from Whole Life?
- It provides term coverage only
- Premium payments and death benefit amounts are flexible within limits (Correct answer)
- It has no cash value component
- Coverage automatically expires at age 65
Correct answer: Premium payments and death benefit amounts are flexible within limits
Universal life offers adjustable premiums and death benefits, allowing policyholders to vary payments as their financial needs change.
Question 7: A 'surplus lines' insurer differs from an admitted insurer in that a surplus lines insurer:
- Must file rates and forms with the state insurance department
- Is not licensed by the state but can write risks that admitted markets decline (Correct answer)
- Can only insure personal lines risks
- Must participate in the state guaranty fund
Correct answer: Is not licensed by the state but can write risks that admitted markets decline
Surplus lines carriers operate on a non-admitted basis, writing hard-to-place risks without rate/form approval requirements, and generally lack guaranty fund protection.
CU Insurance Products & Coverage Types 3
Which type of annuity contract guarantees a fixed interest rate during the accumulation phase, shielding the owner from market risk?