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KS Property & Casualty practice questions

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Question 1Insurance Regulation, Licensing, and Kansas-Specific Statutes and Rules

How is the Kansas Commissioner of Insurance selected, and what is the length of the term?

  1. Elected by Kansas voters to a four-year term Correct answer.
  2. Appointed by the Insurance Board to a six-year term
  3. Appointed by the governor to a four-year term
  4. Elected by the Kansas Legislature to a two-year term

Explanation

Kansas voters elect the Commissioner of Insurance, who heads the Kansas Insurance Department, to a four-year term. The Commissioner is not appointed by the governor or the legislature.

Question 2Insurance Regulation, Licensing, and Kansas-Specific Statutes and Rules

Kansas insurance laws are principally codified in which chapter of the Kansas Statutes Annotated?

  1. Chapter 75
  2. Chapter 40 Correct answer.
  3. Chapter 60
  4. Chapter 12

Explanation

The Kansas Insurance Code appears primarily in Chapter 40 of the Kansas Statutes Annotated, beginning at K.S.A. 40-101. Other chapters address different subjects such as local government and civil procedure.

Question 3Insurance Regulation, Licensing, and Kansas-Specific Statutes and Rules

Under Kansas law, which activity requires an individual to hold an insurance producer license?

  1. Soliciting, negotiating, or selling insurance for a commission Correct answer.
  2. Referring a friend to an insurer without discussing terms
  3. Reviewing a policy at the insured's request as a favor
  4. Reading an insurance trade publication

Explanation

Kansas requires a producer license for persons who sell, solicit, or negotiate insurance for compensation. Purely clerical, informational, or social activities do not require licensure.

Question 4Insurance Regulation, Licensing, and Kansas-Specific Statutes and Rules

A Kansas producer offers to give a client half of the commission earned on a new policy to encourage the purchase. This conduct is best described as:

  1. Permissible if disclosed to the insurer
  2. Permissible for policies over a stated premium
  3. An illegal rebate Correct answer.
  4. A lawful marketing expense

Explanation

Kansas unfair trade practice law prohibits rebating any part of a premium or commission as an inducement to buy insurance. Sharing commission with a client to encourage a purchase is an illegal rebate.

Question 5Insurance Regulation, Licensing, and Kansas-Specific Statutes and Rules

What are the minimum bodily injury and property damage liability limits required for a private passenger auto policy in Kansas?

  1. $20,000 per person / $40,000 per accident / $10,000 property damage
  2. $50,000 per person / $100,000 per accident / $50,000 property damage
  3. $30,000 per person / $60,000 per accident / $25,000 property damage
  4. $25,000 per person / $50,000 per accident / $25,000 property damage Correct answer.

Explanation

Kansas statutory minimum auto liability limits are 25/50/25: $25,000 per person, $50,000 per accident for bodily injury, and $25,000 for property damage. Higher limits may be purchased but are not the statutory minimum.

Question 6Insurance Regulation, Licensing, and Kansas-Specific Statutes and Rules

The Kansas Automobile Injury Protection Act requires that a Kansas auto liability policy provide:

  1. Collision coverage for the insured vehicle
  2. Personal injury protection benefits for the named insured and passengers Correct answer.
  3. Towing and rental reimbursement
  4. Only uninsured motorist coverage

Explanation

Kansas is a no-fault state for auto injuries, and the Automobile Injury Protection Act requires personal injury protection benefits. PIP covers specified medical, disability, and related expenses without regard to fault.

Question 7Insurance Regulation, Licensing, and Kansas-Specific Statutes and Rules

When an insurer appoints a Kansas producer to act on its behalf, which party is responsible for filing the appointment with the Commissioner?

  1. The appointing insurer Correct answer.
  2. The Kansas Guaranty Association
  3. The insured, at policy delivery
  4. The producer, within 10 days

Explanation

The insurer that appoints a producer is responsible for notifying the Commissioner of the appointment. The producer does not file the insurer's appointment, and the insured has no role in the appointment process.

Question 8Insurance Regulation, Licensing, and Kansas-Specific Statutes and Rules

A producer licensed in another state in good standing applies for a Kansas nonresident producer license. Kansas generally will:

  1. Deny the license unless the producer moves to Kansas
  2. Require the producer to retake the Kansas licensing exam
  3. Issue the license without a Kansas exam based on reciprocity Correct answer.
  4. Require Kansas residency before licensing

Explanation

Kansas grants nonresident producer licenses on a reciprocal basis when the applicant holds a valid home-state license in good standing. The applicant generally is not required to retake the Kansas licensing examination.

Question 9Insurance Regulation, Licensing, and Kansas-Specific Statutes and Rules

A Kansas business entity applies for an insurance producer license. Kansas law requires the business entity to:

  1. Maintain a surety bond equal to annual commissions
  2. Be owned only by Kansas residents
  3. Designate a licensed individual producer Correct answer.
  4. Have every employee hold a producer license

Explanation

A business entity producer license requires the entity to designate an individual producer who is licensed and responsible for the entity's compliance with insurance law. Not every employee must be licensed.

Question 10Insurance Regulation, Licensing, and Kansas-Specific Statutes and Rules

How many continuing education credit hours must a Kansas resident producer complete every two years, including ethics?

  1. 12 hours, including 3 hours of ethics Correct answer.
  2. 6 hours, including 1 hour of ethics
  3. 24 hours, including 6 hours of ethics
  4. No continuing education is required after initial licensing

Explanation

Kansas resident producers must complete 12 credit hours of continuing education every two years, and 3 of those hours must be in ethics. Continuing education is a condition of license renewal.

Question 11Insurance Regulation, Licensing, and Kansas-Specific Statutes and Rules

A Kansas resident insurance producer license is issued for what term before renewal is required?

  1. Four years
  2. Three years
  3. One year
  4. Two years Correct answer.

Explanation

Kansas resident producer licenses are issued for a two-year term and must be renewed with the required continuing education. The term is not annual or multi-year beyond two years.

Question 12Insurance Regulation, Licensing, and Kansas-Specific Statutes and Rules

Kansas may issue a temporary producer license to allow time to complete licensing after:

  1. The producer fails the licensing exam twice
  2. The producer's license is revoked for fraud
  3. A licensed producer dies or becomes disabled Correct answer.
  4. The producer moves out of state

Explanation

Kansas law allows a temporary producer license in limited circumstances, such as the death or disability of a licensed producer, so the business can continue while a permanent licensee is arranged. A temporary license is not available to avoid exam or disciplinary requirements.

Question 13Insurance Regulation, Licensing, and Kansas-Specific Statutes and Rules

Kansas requires an insurer to offer uninsured motorist coverage. The named insured may reject it by:

  1. Telling the producer by phone
  2. Notifying the Kansas Insurance Department
  3. Simply not paying the premium
  4. Signing a written rejection Correct answer.

Explanation

Kansas requires uninsured motorist coverage to be offered, and the named insured may reject it only by a written rejection. An oral statement or nonpayment is not a valid rejection.

Question 14Insurance Regulation, Licensing, and Kansas-Specific Statutes and Rules

The Kansas Property and Casualty Insurance Guaranty Association was created to:

  1. Guarantee dividends to policyholders
  2. Provide coverage for uninsured drivers
  3. Pay claims of insolvent P&C insurers Correct answer.
  4. Regulate auto insurance rates

Explanation

The Kansas Property and Casualty Insurance Guaranty Association pays covered claims against property and casualty insurers that have become insolvent. It does not regulate rates or provide coverage for uninsured motorists.

Question 15Insurance Regulation, Licensing, and Kansas-Specific Statutes and Rules

A person submits a false insurance claim to a Kansas insurer. Under Kansas law, this act:

  1. Is only a breach of the policy contract
  2. Requires only repayment of the amount claimed
  3. Is insurance fraud and may be prosecuted as a crime Correct answer.
  4. Is allowed if the claim is under $1,000

Explanation

Kansas law treats knowingly presenting a false insurance claim as insurance fraud, which may be investigated by the Insurance Department's fraud unit and prosecuted as a crime. Repayment does not eliminate criminal exposure.

Question 16Insurance Regulation, Licensing, and Kansas-Specific Statutes and Rules

The Kansas Commissioner of Insurance has authority to examine an insurer's books and records in order to:

  1. Determine the insurer's financial condition and compliance Correct answer.
  2. Set producer commissions
  3. Approve individual policy forms for all lines
  4. Audit the insurer's federal income tax

Explanation

The Commissioner conducts examinations to verify an insurer's financial condition and compliance with Kansas insurance law. Examinations are a regulatory tool, not a means to set commissions or perform federal tax audits.

Question 17Insurance Regulation, Licensing, and Kansas-Specific Statutes and Rules

A Kansas producer collects premium from an insured and deposits it in the producer's personal checking account. This violates:

  1. The guaranty association assessment rules
  2. The surplus lines diligent search requirement
  3. Kansas minimum auto liability limits
  4. A fiduciary duty to keep premium funds separate Correct answer.

Explanation

Premium collected from insureds is held in a fiduciary capacity, and producers must not commingle those funds with personal money. Depositing premium into a personal account breaches that fiduciary duty.

Question 18Insurance Regulation, Licensing, and Kansas-Specific Statutes and Rules

A person who represents an insured in negotiating a claim for a fee in Kansas must hold:

  1. A securities license
  2. A real estate license
  3. A public adjuster license Correct answer.
  4. A mortgage broker license

Explanation

Kansas requires a public adjuster license for a person who, for compensation, acts on behalf of an insured in negotiating or settling a claim. A company adjuster acting for the insurer holds an adjuster license in the appropriate capacity.

Question 19Insurance Regulation, Licensing, and Kansas-Specific Statutes and Rules

An insurer terminates a producer's appointment. Under Kansas law, the insurer must:

  1. Wait for the producer to notify the Commissioner
  2. Notify the Commissioner of the termination Correct answer.
  3. Obtain the producer's written consent
  4. Publish notice in a newspaper

Explanation

The insurer must notify the Commissioner when it terminates a producer's appointment. The producer does not bear the notification duty, and newspaper publication is not the required method.

Question 20Insurance Regulation, Licensing, and Kansas-Specific Statutes and Rules

A Kansas resident was convicted of a felony involving dishonesty. Under federal and Kansas requirements, the person may engage in the business of insurance only if:

  1. The insurer approves the hiring
  2. The felony occurred more than five years ago
  3. The person pays a civil penalty
  4. The Commissioner grants written consent Correct answer.

Explanation

Federal law prohibits a person convicted of a felony involving dishonesty or breach of trust from engaging in the business of insurance without the written consent of the appropriate insurance regulator. Kansas follows this requirement, and mere passage of time or an insurer's approval is not enough.

Question 21Insurance Regulation, Licensing, and Kansas-Specific Statutes and Rules

The Kansas Commissioner of Insurance finds after a hearing that an insurer engaged in an unfair trade practice. The Commissioner may:

  1. Set the insurer's premium rates for five years
  2. Order the insurer to leave Kansas permanently
  3. Issue a cease and desist order Correct answer.
  4. File criminal charges without a prosecutor

Explanation

The Commissioner may issue a cease and desist order and pursue other administrative remedies for unfair trade practices after proper proceedings. Criminal prosecution is handled by prosecutors, and the Commissioner does not set rates as a punishment.

Question 22Insurance Regulation, Licensing, and Kansas-Specific Statutes and Rules

A Kansas surplus lines broker places coverage with an unauthorized insurer. Before doing so, the broker must:

  1. Obtain approval from the insured's mortgagee
  2. Document that authorized insurers declined the risk Correct answer.
  3. Notify the Kansas Guaranty Association
  4. Collect a 50 percent deposit

Explanation

Surplus lines placement requires a diligent search showing that the coverage is not available from authorized insurers. The broker must document that effort before placing the risk with an eligible unauthorized insurer.

Question 23Insurance Regulation, Licensing, and Kansas-Specific Statutes and Rules

An insurer charges two Kansas policyholders different rates for identical risks in the same class without a sound actuarial reason. This is:

  1. Permitted for new customers only
  2. Unfair discrimination prohibited by Kansas law Correct answer.
  3. Required by the Kansas rating law
  4. Permitted if the insurer is profitable

Explanation

Kansas prohibits unfair discrimination in rates among insureds in the same class with essentially the same risk. Charging different rates without an actuarial justification violates that rule.

Question 24Insurance Regulation, Licensing, and Kansas-Specific Statutes and Rules

An insurer is financially impaired and unable to meet its obligations. The Kansas Commissioner may seek court approval to:

  1. Impose a special tax on policyholders
  2. Place the insurer in rehabilitation or liquidation Correct answer.
  3. Cancel all policies without notice
  4. Transfer all policies to another state

Explanation

Kansas insolvency law allows the Commissioner to petition a court for rehabilitation or liquidation of an impaired insurer. These proceedings protect policyholders and creditors and are supervised by the court.

Question 25General Insurance Concepts, Terms, and Principles

Under the principle of indemnity, what is the goal of a property insurance payment after a covered loss?

  1. To give the insured a meaningful profit from the claim
  2. To punish the party whose negligence caused the loss
  3. To restore the insured to the pre-loss position Correct answer.
  4. To pay the policy limit regardless of the actual loss

Explanation

Indemnity means the insured is put back in roughly the same financial position held before the loss, no better and no worse. It is the reason policies contain limits, deductibles, and actual cash value options rather than paying whatever the insured asks.

Question 26General Insurance Concepts, Terms, and Principles

After an insurer pays a covered property claim caused by a third party's negligence, what does the insurer's right of subrogation permit?

  1. The insurer may pursue recovery from the responsible third party Correct answer.
  2. The insurer may deny the claim after it has already been paid
  3. The insurer may cancel the policy without any notice to the insured
  4. The insurer may collect the deductible from the insured a second time

Explanation

Subrogation transfers the insured's right to recover from the at-fault party to the insurer once the claim is paid. It supports indemnity by preventing the insured from collecting twice and by placing the cost on the party that caused the loss.

Question 27General Insurance Concepts, Terms, and Principles

Which situation is an example of a pure risk?

  1. Owning a home that could be damaged by fire Correct answer.
  2. Investing in a start-up company for a large return
  3. Opening a restaurant in a new neighborhood
  4. Buying stocks hoping the price will rise

Explanation

Pure risk presents only the chance of loss or no loss, with no possibility of gain, which is why it is insurable. Speculative risk involves the chance of gain as well as loss and is generally not insured.

Question 28General Insurance Concepts, Terms, and Principles

A homeowner's policy carries a $1,000 deductible, and the insured has a covered loss of $4,500. Ignoring all other provisions, how much will the insurer pay?

  1. $3,500 Correct answer.
  2. $5,500
  3. $4,500
  4. $1,000

Explanation

A deductible is the amount of a covered loss the insured retains before the insurer responds. Subtracting the $1,000 deductible from the $4,500 loss leaves $3,500 for the insurer to pay.

Question 29General Insurance Concepts, Terms, and Principles

In insurance terminology, which statement best distinguishes a peril from a hazard?

  1. A peril is the cause of a loss; a hazard raises the chance of it Correct answer.
  2. A peril is a condition that increases risk; a hazard is the loss itself
  3. A peril is the same thing as a hazard in all policy forms
  4. A peril is the premium charged; a hazard is the deductible

Explanation

A peril is the event that produces the loss, such as fire, wind, or theft. A hazard is a condition that increases the likelihood or severity of that loss, such as oily rags or faulty wiring.

Question 30General Insurance Concepts, Terms, and Principles

Kim buys a house in January and insures it. She sells the house in June, and in July a fire destroys it. Kim still holds the policy and files a claim. What is the insurer's position?

  1. Pay the claim only if Kim repurchases the property
  2. Deny the claim, because Kim no longer had an insurable interest Correct answer.
  3. Pay half the claim as a compromise between the parties
  4. Pay the claim, since a valid policy was in force at the time of loss

Explanation

Insurable interest in property must exist at the time of loss, not merely when the policy was purchased. Once Kim sold the house she had nothing to be indemnified for, so the claim fails even though the policy had not been cancelled.

Question 31General Insurance Concepts, Terms, and Principles

An insurer sets one low rate for homeowners coverage and accepts every applicant without underwriting. Applicants with the greatest exposure to loss enroll most heavily. This pattern is known as:

  1. Subrogation
  2. Adverse selection Correct answer.
  3. Law of large numbers
  4. Moral hazard

Explanation

Adverse selection is the tendency of applicants with higher-than-average expected losses to seek coverage more eagerly when rates are not matched to risk. Insurers counter it through underwriting, exclusions, and rating that reflects exposure.

Question 32General Insurance Concepts, Terms, and Principles

An adjuster assures an insured in writing that a late-reported claim will be accepted despite the policy's prompt-notice condition. The insurer later tries to deny the claim for late notice. Which doctrine most likely prevents the denial?

  1. Waiver and estoppel Correct answer.
  2. Utmost good faith
  3. Coinsurance
  4. Subrogation

Explanation

Waiver is the voluntary giving up of a known right, and estoppel stops a party from later asserting a right the other party relied on to their detriment. The adjuster's written assurance supplies both elements.

Question 33General Insurance Concepts, Terms, and Principles

A building with a replacement value of $500,000 is insured for $300,000 under a policy containing an 80% coinsurance clause. A covered loss is $100,000. Ignoring the deductible, what does the insurer pay?

  1. $80,000
  2. $100,000
  3. $60,000
  4. $75,000 Correct answer.

Explanation

When the limit carried falls short of the coinsurance requirement, the insurer pays only that fraction of the loss. The requirement is 80% of $500,000, or $400,000; $300,000 divided by $400,000 is 0.75, and 0.75 times $100,000 equals $75,000.

Question 34General Insurance Concepts, Terms, and Principles

Insurance is described as an aleatory contract because:

  1. Both parties exchange equal, predetermined amounts
  2. The amounts exchanged may be unequal and depend on chance Correct answer.
  3. Only the insurer is legally bound by the contract terms
  4. The contract must be written in plain language by statute

Explanation

In an aleatory contract the values exchanged are not equal and depend on an uncertain event. An insured may pay small premiums and collect a large claim, or pay premiums for years and collect nothing.

Question 35General Insurance Concepts, Terms, and Principles

A policy is characterized as a contract of adhesion, which means:

  1. The contract is void if the insured does not read it
  2. Only the insured may enforce the policy in court
  3. The insured and insurer negotiate all terms in advance
  4. The insurer drafts the terms and the insured accepts or rejects them Correct answer.

Explanation

In a contract of adhesion one party prepares the terms and the other takes them or leaves them. Because the insurer writes the policy, ambiguities are generally construed in favor of the insured.

Question 36General Insurance Concepts, Terms, and Principles

A 10-year-old roof would cost $12,000 to replace and has depreciated by 40%. Under an actual cash value settlement, what does the insured receive, ignoring any deductible?

  1. $6,000
  2. $4,800
  3. $12,000
  4. $7,200 Correct answer.

Explanation

Actual cash value equals replacement cost minus depreciation. Depreciation here is 40% of $12,000, or $4,800, which leaves $7,200 as the settlement amount.

Question 37General Insurance Concepts, Terms, and Principles

An applicant for homeowners coverage states that the home has a working central alarm system, although it has been disconnected for a year. The applicant did not intend to deceive the insurer. How is this best classified?

  1. A concealment, since the applicant stayed silent
  2. A material misrepresentation of fact Correct answer.
  3. A nonissue, as there was no intent to deceive
  4. An implied warranty of alarm performance

Explanation

A representation is a statement of fact the applicant believes to be true, and if it is false and material the insurer may rescind the policy even without fraudulent intent. Concealment involves intentional silence, and warranties are promises written into the policy itself.

Question 38General Insurance Concepts, Terms, and Principles

Lightning strikes a house and starts a fire, and water used by firefighters damages the interior. The policy covers fire but excludes lightning. How is the water damage treated under proximate cause analysis?

  1. Not covered, because water damage is never a covered peril
  2. Not covered, because lightning was the first event in the chain
  3. Covered, because fire was the efficient, dominant cause of the loss Correct answer.
  4. Covered, but only if the fire department files a separate claim

Explanation

Proximate cause is the efficient or dominant cause that sets the loss in motion without a break in the chain of events. When fire is the efficient cause, resulting water damage is treated as fire damage and the fire coverage responds.

Question 39General Insurance Concepts, Terms, and Principles

Two policies cover the same building on the same basis. Policy A has a $200,000 limit, Policy B has a $300,000 limit, and neither contains an other-insurance clause. A $100,000 covered loss occurs. Under the pro rata method based on limits, how is the loss shared?

  1. Policy A pays $100,000 and Policy B pays nothing
  2. Policy A pays $40,000 and Policy B pays $60,000 Correct answer.
  3. Policy A pays $20,000 and Policy B pays $80,000
  4. Policy A pays $50,000 and Policy B pays $50,000

Explanation

Where concurrent policies lack other-insurance provisions, the loss is shared in proportion to the limits each policy provides. Policy A's share is $100,000 times $200,000 over $500,000, or $40,000, and Policy B bears the remaining $60,000.

Question 40General Insurance Concepts, Terms, and Principles

An applicant meets with a producer who holds authority to bind coverage, pays the premium, and receives a binder on a commercial building. A fire occurs two days later, before the policy is issued. What is the insurer's position?

  1. Coverage applies, because the binder gave temporary coverage Correct answer.
  2. Coverage applies only if the state approves the binder
  3. No coverage, because the policy was never issued
  4. Coverage applies only after home office approval

Explanation

A binder is temporary evidence that coverage is in effect from the date stated until the policy is issued or the binder expires. Because the producer had authority to bind, the insurer was already on the risk when the fire occurred.

Question 41Property Insurance Coverages, Exclusions, and Policy Provisions

A homeowner has an HO-3 special form policy. The coverage part that insures the dwelling building itself is:

  1. Coverage C - Personal Property
  2. Coverage A - Dwelling Correct answer.
  3. Coverage D - Loss of Use
  4. Coverage B - Other Structures

Explanation

Coverage A is the dwelling coverage on the residence premises, including structures attached to the dwelling. Coverage B applies to detached other structures; Coverage C applies to personal property; and Coverage D applies to loss of use.

Question 42Property Insurance Coverages, Exclusions, and Policy Provisions

Which homeowners form is designed for a tenant who rents an apartment and has no ownership interest in the building?

  1. HO-4 Correct answer.
  2. HO-6
  3. HO-3
  4. HO-8

Explanation

The HO-4 contents broad form is written for tenants and insures personal property, liability, and loss of use; it does not insure the rented building. The HO-3 is for owner-occupied dwellings, the HO-6 is for condominium unit owners, and the HO-8 is for older or historic homes.

Question 43Property Insurance Coverages, Exclusions, and Policy Provisions

Under a homeowners policy, the deductible generally applies:

  1. once each policy term regardless of number of losses
  2. to each covered property loss occurrence Correct answer.
  3. only to liability claims
  4. only after the full coverage limit is exhausted

Explanation

The deductible is subtracted from the amount otherwise payable for each covered property loss occurrence. Liability coverage under Section II generally is not subject to the property deductible.

Question 44Property Insurance Coverages, Exclusions, and Policy Provisions

Which loss settlement method pays to repair or replace damaged property without deducting for depreciation?

  1. Agreed value
  2. Functional replacement cost
  3. Replacement cost Correct answer.
  4. Actual cash value

Explanation

Replacement cost settlement pays the cost to repair or replace with new property of like kind and quality without deducting depreciation. Actual cash value deducts depreciation; functional replacement cost may use less costly modern equivalents; agreed value sets a fixed amount in advance.

Question 45Property Insurance Coverages, Exclusions, and Policy Provisions

A homeowners policy excludes direct physical loss caused by which peril?

  1. Flood Correct answer.
  2. Fire
  3. Windstorm
  4. Hail

Explanation

Homeowners forms exclude loss caused by flood, surface water, waves, and similar water damage. Flood coverage must be purchased separately, typically through the NFIP or a private flood insurer.

Question 46Property Insurance Coverages, Exclusions, and Policy Provisions

A condominium unit owner wants a policy that covers personal property, interior building elements, and liability. The appropriate homeowners form is:

  1. HO-4
  2. HO-5
  3. HO-6 Correct answer.
  4. HO-2

Explanation

The HO-6 unit-owners form is designed for condominium owners and covers personal property, limited building additions and alterations, loss of use, and liability. The HO-4 is for tenants, the HO-2 is a broad form for owner-occupants, and the HO-5 is a comprehensive form for owner-occupants.

Question 47Property Insurance Coverages, Exclusions, and Policy Provisions

The standard mortgage clause in a property policy is intended to:

  1. increase coverage automatically each year
  2. protect the lender's interest Correct answer.
  3. cancel the policy when the property is sold
  4. waive all deductibles for the lender

Explanation

The standard mortgage clause protects the lender's interest by allowing the mortgagee to receive loss payments and pay premium, and it keeps coverage in force for the mortgagee even if the insured's acts void the policy. It does not cancel coverage on sale or waive deductibles.

Question 48Property Insurance Coverages, Exclusions, and Policy Provisions

In commercial property insurance, a coinsurance clause requires the insured to:

  1. insure with more than one insurer
  2. maintain coverage only at replacement cost
  3. share a stated percentage of every loss dollar
  4. meet an insurance-to-value requirement Correct answer.

Explanation

A commercial property coinsurance clause is an insurance-to-value requirement: the insured must carry a specified percentage of the property's value. If the limit is lower, a coinsurance penalty reduces the loss payment.

Question 49Property Insurance Coverages, Exclusions, and Policy Provisions

Under an unendorsed HO-3, Coverage B - Other Structures is normally limited to what percentage of the Coverage A limit?

  1. 50% of Coverage A
  2. 10% of Coverage C
  3. 20% of Coverage A
  4. 10% of Coverage A Correct answer.

Explanation

Under an unendorsed HO-3, Coverage B provides 10% of the Coverage A limit for other structures on the residence premises. Higher limits can be added by endorsement.

Question 50Property Insurance Coverages, Exclusions, and Policy Provisions

Personal property ordinarily located at another residence is covered under HO-3 Coverage C up to:

  1. 20% of the Coverage A limit, with no dollar minimum
  2. 10% of Coverage C or $1,000, whichever is greater Correct answer.
  3. $2,500, regardless of the Coverage C limit
  4. 5% of the Coverage C limit, with no dollar minimum

Explanation

HO-3 extends Coverage C to personal property usually located at another residence, but the limit is 10% of the Coverage C limit or $1,000, whichever is greater. Property moved to a newly acquired principal residence has broader temporary coverage.