RIMS Documentation & Legal Requirements 3

Question 1

Which U.S. federal law mandates that employers with 20 or more employees provide written notice of COBRA continuation coverage rights within a specified timeframe?

Accepted Answer

COBRA itself under Title X of OBRA 1985

Answer

COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985) requires employers to provide qualifying beneficiaries written election notice within 14 days of the plan administrator receiving notice of a qualifying event.

Question 2

A risk manager is auditing vendor contracts and finds an 'insurance to value' clause. This clause is designed to:

Accepted Answer

Mandate that the insured maintain coverage equal to asset replacement cost

Answer

Insurance-to-value clauses require the insured to maintain coverage at a specified percentage (usually 80-100%) of the property's full replacement cost to avoid coinsurance penalties.

Question 3

Under the Fair Credit Reporting Act (FCRA), if an insurer uses consumer report information to take an adverse underwriting action, the insurer must:

Accepted Answer

Provide the applicant an adverse action notice identifying the reporting agency

Answer

FCRA requires insurers to issue an adverse action notice that identifies the consumer reporting agency used, allowing the consumer to obtain a free report and dispute inaccuracies.

Question 4

What is the key distinction between a 'reservation of rights' letter and a 'declination' letter in claims handling?

Accepted Answer

Reservation of rights defends under a coverage caveat; declination refuses to defend or indemnify

Answer

A reservation of rights letter allows the insurer to defend the insured while reserving the right to later deny coverage; a declination letter outright refuses defense and indemnification.

Question 5

Which type of insurance policy document formally amends, modifies, or adds to the terms of the original policy?

Accepted Answer

Endorsement

Answer

An endorsement (also called a rider) is a written document attached to the policy that changes its terms, conditions, exclusions, or coverages.

(RIMS) Risk and Insurance Management Society Certification Practice Test

(RIMS) Risk and Insurance Management Society Certification Practice Test

RIMS Documentation & Legal Requirements 3