EXAMFX Property and Casualty Insurance 3 — Questions and Answers
Question 1: Which of the following is an example of an 'inland marine' policy?
- Homeowners policy covering personal property
- Cargo coverage for goods shipped by truck (Correct answer)
- Workers compensation policy
- Commercial auto policy
Correct answer: Cargo coverage for goods shipped by truck
Inland marine policies cover property in transit over land and certain types of movable property.
Question 2: A 'named-perils' property policy differs from an 'open-perils' policy in that it:
- Covers all perils except those specifically excluded
- Only covers perils specifically listed in the policy (Correct answer)
- Has lower premiums than open-perils policies
- Requires no deductible
Correct answer: Only covers perils specifically listed in the policy
Named-perils policies only pay for losses caused by perils explicitly listed, placing the burden of proof on the insured.
Question 3: Under personal auto policy (PAP) liability coverage, the insurer's duty to defend the insured ends when:
- The claimant files a lawsuit
- The policy limits have been exhausted (Correct answer)
- The insured reports the accident late
- The vehicle is declared a total loss
Correct answer: The policy limits have been exhausted
Once the insurer pays its policy limit, its duty to defend the insured in that claim is extinguished.
Question 4: Which homeowners form provides the BROADEST coverage for both the dwelling and personal property?
- HO-1 (Basic Form)
- HO-2 (Broad Form)
- HO-3 (Special Form) (Correct answer)
- HO-8 (Modified Coverage Form)
Correct answer: HO-3 (Special Form)
The HO-3 covers the dwelling on an open-perils basis and personal property on a named-perils basis, making it the most widely used and broadest standard form.
Question 5: A 'split limit' auto liability policy expressed as 25/50/25 means:
- $25,000 property damage, $50,000 per person BI, $25,000 per accident BI
- $25,000 per person BI, $50,000 per accident BI, $25,000 property damage (Correct answer)
- $25,000 total coverage split among all claimants
- $50,000 maximum per accident regardless of injury type
Correct answer: $25,000 per person BI, $50,000 per accident BI, $25,000 property damage
Split limits are expressed as bodily injury per person / bodily injury per accident / property damage per accident.
Question 6: What is the primary purpose of a 'proof of loss' requirement in a property insurance claim?
- To allow the insurer to cancel the policy after a loss
- To provide the insurer with a formal statement of the amount claimed and circumstances of the loss (Correct answer)
- To transfer ownership of the damaged property to the insurer
- To waive the insured's right to appraisal
Correct answer: To provide the insurer with a formal statement of the amount claimed and circumstances of the loss
A proof of loss is a sworn statement by the insured detailing the loss, amount claimed, and relevant facts required by the policy.
Question 7: Under workers compensation insurance, the 'exclusive remedy' doctrine means:
- The employee may sue the employer in civil court for pain and suffering
- The employee's only remedy against the employer is through workers compensation benefits (Correct answer)
- The employer can choose which benefits to provide
- The insurer is the sole party that can deny a claim
Correct answer: The employee's only remedy against the employer is through workers compensation benefits
Exclusive remedy bars injured employees from suing their employer in tort; workers comp is the sole remedy against the employer.
EXAMFX Property and Casualty Insurance 3
Which of the following is an example of an 'inland marine' policy?