P&C Property & Casualty Insurance License MCQ 3

Question 1

A business owner's fire sprinkler system activates accidentally and damages inventory. Which commercial property coverage would respond?

Accepted Answer

Sprinkler leakage coverage

Answer

Sprinkler leakage coverage specifically covers damage caused by the accidental discharge of water from automatic sprinkler systems.

Question 2

Which of the following best describes the 'coinsurance' clause in a commercial property policy?

Accepted Answer

Requires the insured to carry coverage equal to a specified percentage of the property's value or share in any loss

Answer

The coinsurance clause requires the insured to maintain coverage at a specified percentage (commonly 80%) of the property's value or become a co-insurer in any loss.

Question 3

Under workers' compensation, the employer's liability portion of the policy covers:

Accepted Answer

Employee lawsuits alleging employer negligence not covered by the WC statute

Answer

Part Two (Employer's Liability) of a workers' comp policy covers common-law suits by employees for work-related injuries that fall outside the statutory WC system.

Question 4

An agent who binds coverage on behalf of an insurer without authorization is acting under which type of authority?

Accepted Answer

Apparent authority

Answer

Apparent authority arises when an insurer's actions lead a third party to reasonably believe the agent has authority that was never actually granted.

Question 5

Business interruption insurance is designed primarily to cover:

Accepted Answer

Lost net income and continuing expenses while a business is closed due to a covered loss

Answer

Business interruption (Business Income) coverage replaces lost net income and pays continuing fixed expenses during the period of restoration after a covered property loss.

Property & Casualty Insurance License Test Practice Test

Property & Casualty Insurance License Test Practice Test

P&C Property & Casualty Insurance License MCQ 3