RMI 3011 EXAM 2 QUESTIONS WITH CORRECT ANSWERS LATEST UPDATE 2026
Each of the following is an example of information found on the declarations page of a policy EXPECT:
- Name of the insured
- A summary of the insurer's major promises
- Amount of the premium
- Deductible amount - Answers A summary of the insurer's major promises
Which of the following statements concerning policy "definitions" is/are true?
I. The aleatory nature of insurance contracts makes it necessary for insurers to precisely define certain
words in a policy in order to avoid having to pay for losses the insurer never intended having to pay.
II. Defined words make it easier to determine if a loss can be covered by the policy - Answers Both I
and II
Which of the following statements concerning policy exclusions is true?
(a) Coverage while carrying passengers for a charge is usually included under a Personal Auto Policy
(PAP)
(b) Coverage for use of an automobile is typically included under a HO policy
(c) Coverage for flood is excluded because of moral hazard concerns
(d) Particular coverage isn't needed by most insureds - Answers (d) A particular coverage isn't needed
by most insureds
Joe owns a brewery that he insurers with a commercial insurance policy with a $20,000 aggregate
deductible. During a single policy period, He experiences the following covered losses.
Loss 1: $10,000
Loss 2: $6,000
Loss 3: $7,000
How much will Joe's insurer pay Joe for Loss 3? - Answers $3,000
Which of the following statements concerning the coinsurance clause of a property insurance policy
is/are true?
I. The coinsurance clause only applies to partial losses, not total losses
II. The fundamental purpose of coinsurance is to achieve rating equity - Answers Both I and II
When each insurance policy applicable to a loss only pays its share of the loss based on its proportion
of the total available insurance coverage, it is an example of:
(a) Primary and excess insurance
(b) Pro rata liability
(c) contribution by equal shares
(d) all of the above - Answers (b) Pro rata liability
Which of the following statements is/are true?
I. Other-insurance provisions apply to the payment of losses when more than one policy provides
coverage for the same loss
II. Other-insurance provisions are an exception to the principle of indemnity - Answers I only
_______ impose certain requirements on an insured before they are able to receive payment for a
covered loss.
(a) Declarations
(b) Insuring agreement
(c) Exclusions
(d) Conditions - Answers (d) conditions
Disability income insurance uses a special type of deductible. No benefits are paid during the initial
period of disability (e.g. 30 days). What is this type of deductible, which is expressed in time rather
than in dollars, called?
(a) Aggregate deductible
(b) Straight deductible
(c) Elimination (waiting period)
, (d) Calendar-year deductible - Answers (c) Elimination (waiting period)
Deductibles are used for all of the following reasons EXCEPT
(a) To reduce premiums
(b) To eliminate small claims
(c) To achieve rating equity
(d) To reduce attitudinal and moral hazard - Answers (c) To achieve rating equity
Which of the following statements about "open perils" coverage is/are true?
I. All losses are covered except those specifically excluded
II. Named-perils coverage typically provides broader coverage to an insured than open-perils
coverage. - Answers I only
David owns a commercial building with a replacement cost of $4 million. The building is insured on a
replacement cost basis for $2.4 million under a fire insurance policy that has an 80% coinsurance
clause. How much will David collect if the building sustains a covered fire loss with a replacement cost
of $80,000? - Answers $60,000
Moira owns a commercial building she insured for $400,000 subject to an 80% coinsurance clause.
The building was completely destroyed by a fire (covered loss). At the time of loss, the building's
replacement cost was $800,000. How much will Moira collect from her insurance company as a result
of this fire? - Answers $400,000 - it's a total loss
Which of the following statements about problems arising from the use of a coinsurance clause is/are
true?
I. The amount of insurance should be periodically evaluated to avoid a coinsurance penalty because of
inflation
II. An agreed value coverage option is one method used to solve the problem of values that fluctuate
throughout the policy term. - Answers Both I & II
Connie has an individual medical expense policy with a $1,000 deductible. She is required to pay 20%
of covered expenses in excess of the deductible. The insurer will pay 80% of expenses in excess of the
deductible. If Connie has eligible medical expenses of $26,000, how much will be paid by her insurer?
- Answers $20,000
Patrick purchased two property insurance policies to insure his office building. The policy from
Company A provides $400,000 of coverage. The policy from Company B provides $100,000 of
coverage. If Patrick suffers a $200,000 covered loss, how much of the loss will each company pay if
the loss is settled on a pro rata basis by each insurance company? - Answers Policy A: $160,000
Policy B: $40,000
Which of the following statements about eligibility requirements for HO insurance is/are true?
I. An eight-unit apartment complex is an eligible dwelling as long as the tenants are families
II. Renters and condominium owners are both eligible for coverage under an HO-6 coverage form -
Answers Neither I nor II
Each of the following is covered under the dwelling coverage (Coverage A) of the HO3 policy EXCEPT:
(a) An attached garage
(b) Materials intended for repair of the dwelling
(c) The land on which the insured dwelling is located
(d) At attached carport - Answers (c) The land on which the insured dwelling is located
Which of the following statements about the coverage for OS (coverage B) under the HO-3 policy is
true?
(a) Coverage B doesn't insure structures on the residence premises connected the dwelling by a fence
(b) A detached barn located on the resident premises is a structure covered under Coverage B
(c) A horse stable located on the resident premises rented to another is covered under Coverage B.
(d) 30% of the dwellings coverage limit applies as additional insurance for OS - Answers (b) A
detached barn located on the resident premises is a structure covered under Coverage B
Which of the following property is covered under Coverage C of the HO-3 policy?
(a) A diamond ring insured under a separate personal articles policy
Each of the following is an example of information found on the declarations page of a policy EXPECT:
- Name of the insured
- A summary of the insurer's major promises
- Amount of the premium
- Deductible amount - Answers A summary of the insurer's major promises
Which of the following statements concerning policy "definitions" is/are true?
I. The aleatory nature of insurance contracts makes it necessary for insurers to precisely define certain
words in a policy in order to avoid having to pay for losses the insurer never intended having to pay.
II. Defined words make it easier to determine if a loss can be covered by the policy - Answers Both I
and II
Which of the following statements concerning policy exclusions is true?
(a) Coverage while carrying passengers for a charge is usually included under a Personal Auto Policy
(PAP)
(b) Coverage for use of an automobile is typically included under a HO policy
(c) Coverage for flood is excluded because of moral hazard concerns
(d) Particular coverage isn't needed by most insureds - Answers (d) A particular coverage isn't needed
by most insureds
Joe owns a brewery that he insurers with a commercial insurance policy with a $20,000 aggregate
deductible. During a single policy period, He experiences the following covered losses.
Loss 1: $10,000
Loss 2: $6,000
Loss 3: $7,000
How much will Joe's insurer pay Joe for Loss 3? - Answers $3,000
Which of the following statements concerning the coinsurance clause of a property insurance policy
is/are true?
I. The coinsurance clause only applies to partial losses, not total losses
II. The fundamental purpose of coinsurance is to achieve rating equity - Answers Both I and II
When each insurance policy applicable to a loss only pays its share of the loss based on its proportion
of the total available insurance coverage, it is an example of:
(a) Primary and excess insurance
(b) Pro rata liability
(c) contribution by equal shares
(d) all of the above - Answers (b) Pro rata liability
Which of the following statements is/are true?
I. Other-insurance provisions apply to the payment of losses when more than one policy provides
coverage for the same loss
II. Other-insurance provisions are an exception to the principle of indemnity - Answers I only
_______ impose certain requirements on an insured before they are able to receive payment for a
covered loss.
(a) Declarations
(b) Insuring agreement
(c) Exclusions
(d) Conditions - Answers (d) conditions
Disability income insurance uses a special type of deductible. No benefits are paid during the initial
period of disability (e.g. 30 days). What is this type of deductible, which is expressed in time rather
than in dollars, called?
(a) Aggregate deductible
(b) Straight deductible
(c) Elimination (waiting period)
, (d) Calendar-year deductible - Answers (c) Elimination (waiting period)
Deductibles are used for all of the following reasons EXCEPT
(a) To reduce premiums
(b) To eliminate small claims
(c) To achieve rating equity
(d) To reduce attitudinal and moral hazard - Answers (c) To achieve rating equity
Which of the following statements about "open perils" coverage is/are true?
I. All losses are covered except those specifically excluded
II. Named-perils coverage typically provides broader coverage to an insured than open-perils
coverage. - Answers I only
David owns a commercial building with a replacement cost of $4 million. The building is insured on a
replacement cost basis for $2.4 million under a fire insurance policy that has an 80% coinsurance
clause. How much will David collect if the building sustains a covered fire loss with a replacement cost
of $80,000? - Answers $60,000
Moira owns a commercial building she insured for $400,000 subject to an 80% coinsurance clause.
The building was completely destroyed by a fire (covered loss). At the time of loss, the building's
replacement cost was $800,000. How much will Moira collect from her insurance company as a result
of this fire? - Answers $400,000 - it's a total loss
Which of the following statements about problems arising from the use of a coinsurance clause is/are
true?
I. The amount of insurance should be periodically evaluated to avoid a coinsurance penalty because of
inflation
II. An agreed value coverage option is one method used to solve the problem of values that fluctuate
throughout the policy term. - Answers Both I & II
Connie has an individual medical expense policy with a $1,000 deductible. She is required to pay 20%
of covered expenses in excess of the deductible. The insurer will pay 80% of expenses in excess of the
deductible. If Connie has eligible medical expenses of $26,000, how much will be paid by her insurer?
- Answers $20,000
Patrick purchased two property insurance policies to insure his office building. The policy from
Company A provides $400,000 of coverage. The policy from Company B provides $100,000 of
coverage. If Patrick suffers a $200,000 covered loss, how much of the loss will each company pay if
the loss is settled on a pro rata basis by each insurance company? - Answers Policy A: $160,000
Policy B: $40,000
Which of the following statements about eligibility requirements for HO insurance is/are true?
I. An eight-unit apartment complex is an eligible dwelling as long as the tenants are families
II. Renters and condominium owners are both eligible for coverage under an HO-6 coverage form -
Answers Neither I nor II
Each of the following is covered under the dwelling coverage (Coverage A) of the HO3 policy EXCEPT:
(a) An attached garage
(b) Materials intended for repair of the dwelling
(c) The land on which the insured dwelling is located
(d) At attached carport - Answers (c) The land on which the insured dwelling is located
Which of the following statements about the coverage for OS (coverage B) under the HO-3 policy is
true?
(a) Coverage B doesn't insure structures on the residence premises connected the dwelling by a fence
(b) A detached barn located on the resident premises is a structure covered under Coverage B
(c) A horse stable located on the resident premises rented to another is covered under Coverage B.
(d) 30% of the dwellings coverage limit applies as additional insurance for OS - Answers (b) A
detached barn located on the resident premises is a structure covered under Coverage B
Which of the following property is covered under Coverage C of the HO-3 policy?
(a) A diamond ring insured under a separate personal articles policy
