EXAMFX Property and Casualty Insurance 2 — Questions and Answers
Question 1: Under a standard homeowners policy, which of the following losses would typically be EXCLUDED?
- Fire damage to the dwelling
- Theft of personal property
- Flood damage from a river overflow (Correct answer)
- Liability for a guest injured on the premises
Correct answer: Flood damage from a river overflow
Standard homeowners policies exclude flood damage; separate flood insurance through the NFIP is required.
Question 2: The 'other structures' coverage in a homeowners policy typically provides what percentage of the dwelling coverage limit?
- 5%
- 10% (Correct answer)
- 20%
- 50%
Correct answer: 10%
Coverage B (other structures) is automatically set at 10% of the Coverage A dwelling limit.
Question 3: Which auto insurance coverage pays for damage to the insured's own vehicle when the at-fault driver has no insurance?
- Collision coverage
- Comprehensive coverage
- Uninsured motorist property damage (Correct answer)
- Medical payments coverage
Correct answer: Uninsured motorist property damage
Uninsured motorist property damage (UMPD) covers damage to the insured's vehicle caused by an uninsured at-fault driver.
Question 4: A business owner's policy (BOP) is LEAST suitable for which type of business?
- A small retail store
- A home-based consulting firm
- A large manufacturing plant (Correct answer)
- A small restaurant
Correct answer: A large manufacturing plant
BOPs are designed for small-to-medium businesses; large manufacturers with complex exposures require individually rated commercial policies.
Question 5: In property insurance, 'coinsurance' requires the insured to carry coverage equal to at least what percentage of the property's value to receive full loss payment?
- 50%
- 70%
- 80% (Correct answer)
- 100%
Correct answer: 80%
The standard coinsurance clause requires the insured to carry at least 80% of the property's replacement cost value.
Question 6: Which of the following describes 'subrogation' in property and casualty insurance?
- The insurer cancels the policy after paying a claim
- The insured transfers the right to recover damages to the insurer after a loss payment (Correct answer)
- The insured increases coverage limits after a loss
- The insurer pays the full replacement cost without depreciation
Correct answer: The insured transfers the right to recover damages to the insurer after a loss payment
Subrogation allows the insurer to step into the insured's shoes and sue the negligent third party after paying the claim.
Question 7: Under a commercial general liability (CGL) policy, which coverage part protects a business against claims arising from completed work that causes bodily injury after the job is done?
- Premises and operations liability
- Products and completed operations liability (Correct answer)
- Personal and advertising injury liability
- Employers liability
Correct answer: Products and completed operations liability
Products and completed operations coverage responds to claims arising after work is finished or products are sold.
EXAMFX Property and Casualty Insurance 2
Under a standard homeowners policy, which of the following losses would typically be EXCLUDED?