Fundamentals of Insurance - Practice Exam 12- questions
with complete solutions
A building valued at $120,000 is insured for $30,000 and there is an 80% co-insurance clause on
the policy. The building was totally destroyed by fire last weekend. The insured would receive a
settlement of:
a. 7,000
b. 12,000
c. 30,000
d. 37,5000 Correct Answer: c. 30,000
The reinstatement clause contained in most policies of commercial property insurance provided
that:
a. The insureds shall have as much insurance on the property after an insured loss as they had
immediately prior to it
b. Coverage which is suspended due to a breach of policy conditions is automatically reinstated
when that breach is corrected
c. Coverage which has been terminated by the insurer may be re-instated at the request of the
insured upon application to the insurer in writing
d. Property lost or damaged shall be re-instated with equivalent property of like kind and quality
Correct Answer: a. The insureds shall have as much insurance on the property after an insured
loss as they had immediately prior to it
The locked vehicle warranty requires that:
a. The vehicle be equipped with a theft deterrent system
b. The vehicle locked between the house of 9:00 p.m. and 6:00 a.m. and when not in motion
c. The vehicle containing the property insured be properly licensed and registered by the
highway traffic board
d. Visible signs of forcible entry must be present before the insurer will agree to pay any claim
for theft Correct Answer: d. Visible signs of forcible entry must be present before the insurer
will agree to pay any claim for theft
Loss resulting from the taking of property by a person breaking into the premises is defined as:
a. Theft
b. Robbery
c. Burglary
d. Hold-up Correct Answer: c. Burglary
Crime policies define certain terms as they relate to coverage. The broadest meaning is given to:
a. Burglary
, b. Theft
c. Kidnapping
d. Robbery Correct Answer: b. Theft
In addition to the coverage provided for the explosion of boilers and pressure vessels, boiler, and
machinery policies also provide this important coverage:
a. Wear and Tear
b. Gradual Deterioration
c. Mechanical and Electrical Breakdown
d. Latent Defect Correct Answer: c. Mechanical and Electrical breakdown
The builders risk - Broad Form can be used to insure all of the following items, except one. Pick
the exception:
a. All materials and supplies entering into the completed project
b. Value of landscaping
c. Temporary building on project site
d. Contractors tools and equipment Correct Answer: d. Contractors tools and equipment
The basic principle behind business interruption insurance is:
a. To restore the building to the condition it was in before the loss
b. To find a place for the employees to work during the period that the business is out of
operation
c. Restore the income that would have been earned had the loss not occurred
d. To maintain a higher level of operation during the period of repair than exsisted prior to the
loss Correct Answer: c. Restore the income that would have been earned had the loss not
occurred
Payment is made for as long as the business results are affected by the interruption, subject to
specified limits. This statement is a characteristic of:
a. Earnings form
b. Profits form
c. Extra Expense Insurance
d. Broad Form Correct Answer: b. Profits form
Liability policies are concerned with matters of civil liability. Civil Law:
a. Deals with wrongs against society
b. Uses fines, penalties, probation or imprisonment as a means of enforcing its many rules
c. Focuses on compensating the victim for the financial loss or damage suffered
d. Deals primarily with settling disputes on contractual matters Correct Answer: c. Focuses on
compensating the victim of the financial loss or damage suffered
with complete solutions
A building valued at $120,000 is insured for $30,000 and there is an 80% co-insurance clause on
the policy. The building was totally destroyed by fire last weekend. The insured would receive a
settlement of:
a. 7,000
b. 12,000
c. 30,000
d. 37,5000 Correct Answer: c. 30,000
The reinstatement clause contained in most policies of commercial property insurance provided
that:
a. The insureds shall have as much insurance on the property after an insured loss as they had
immediately prior to it
b. Coverage which is suspended due to a breach of policy conditions is automatically reinstated
when that breach is corrected
c. Coverage which has been terminated by the insurer may be re-instated at the request of the
insured upon application to the insurer in writing
d. Property lost or damaged shall be re-instated with equivalent property of like kind and quality
Correct Answer: a. The insureds shall have as much insurance on the property after an insured
loss as they had immediately prior to it
The locked vehicle warranty requires that:
a. The vehicle be equipped with a theft deterrent system
b. The vehicle locked between the house of 9:00 p.m. and 6:00 a.m. and when not in motion
c. The vehicle containing the property insured be properly licensed and registered by the
highway traffic board
d. Visible signs of forcible entry must be present before the insurer will agree to pay any claim
for theft Correct Answer: d. Visible signs of forcible entry must be present before the insurer
will agree to pay any claim for theft
Loss resulting from the taking of property by a person breaking into the premises is defined as:
a. Theft
b. Robbery
c. Burglary
d. Hold-up Correct Answer: c. Burglary
Crime policies define certain terms as they relate to coverage. The broadest meaning is given to:
a. Burglary
, b. Theft
c. Kidnapping
d. Robbery Correct Answer: b. Theft
In addition to the coverage provided for the explosion of boilers and pressure vessels, boiler, and
machinery policies also provide this important coverage:
a. Wear and Tear
b. Gradual Deterioration
c. Mechanical and Electrical Breakdown
d. Latent Defect Correct Answer: c. Mechanical and Electrical breakdown
The builders risk - Broad Form can be used to insure all of the following items, except one. Pick
the exception:
a. All materials and supplies entering into the completed project
b. Value of landscaping
c. Temporary building on project site
d. Contractors tools and equipment Correct Answer: d. Contractors tools and equipment
The basic principle behind business interruption insurance is:
a. To restore the building to the condition it was in before the loss
b. To find a place for the employees to work during the period that the business is out of
operation
c. Restore the income that would have been earned had the loss not occurred
d. To maintain a higher level of operation during the period of repair than exsisted prior to the
loss Correct Answer: c. Restore the income that would have been earned had the loss not
occurred
Payment is made for as long as the business results are affected by the interruption, subject to
specified limits. This statement is a characteristic of:
a. Earnings form
b. Profits form
c. Extra Expense Insurance
d. Broad Form Correct Answer: b. Profits form
Liability policies are concerned with matters of civil liability. Civil Law:
a. Deals with wrongs against society
b. Uses fines, penalties, probation or imprisonment as a means of enforcing its many rules
c. Focuses on compensating the victim for the financial loss or damage suffered
d. Deals primarily with settling disputes on contractual matters Correct Answer: c. Focuses on
compensating the victim of the financial loss or damage suffered
