Personal Lines Insurance Practice Exam Questions and Answers Latest | 100% Correct.

Personal Lines Insurance Practice Exam Questions and Answers Latest | 100% Correct. Bobby, age 16, borrows his parents' car without their permission and gets into an accident. Which of the following statements about coverage under the parents' personal auto policy is CORRECT? A) Bobby is covered by his parents' policy because he is included in the definition of named insured. B) Bobby is not covered for this accident because he used the car without permission. C) Bobby is not covered because it was not his car. D) Bobby is covered by his parents' policy because he is a family member. - ANSWER D) Bobby is covered by his parents' policy because he is a family member. Explanation: Bobby is a family member and thus automatically is covered under the family's PAP policy. Even though Bobby is using the car without permission, the exclusion pertaining to nonpermissive users does not apply to use of an owned auto policy by resident family members. Reference: 8.7.2 in License Exam Manual A parking valet at a hotel uses a guest's car to do a personal errand and damages the car in a collision. The guest has a personal auto policy (PAP). The insurance company will pay the claim and ____. A) relieve the parking valet of legal liability for the loss B) subrogate against the named insured C) subrogate against the parking valet D) recover any additional loss from the lienholder - ANSWER C) subrogate against the parking valet Explanation: Part-D coverage for Damage to Your Auto of the PAP contains a no benefit to bailee provision. This provision states that a carrier or other bailee for hire, such as a parking gar5age, service station, or moving company will not directly or indirectly benefit from the PAP's insurance. A bailee is an individual or Personal Lines Insurance Practice Exam Questions and Answers Latest | 100% Correct entity that assumes possession of goods owned by another for the purpose of transporting, servicing, or storing them. When temporary custody is assumed, the bailee becomes legally liable for the goods. Reference: 8.7.2 in the License Exam Manual Who of the following are required to be members of the Arizona Property and Casualty Insurance Guaranty Fund? A) All insurers that write the types of insurance that are protected by the fund in Arizona B) Foreign property and casualty insurers only C) lien property and casualty insurers only D) All insurers that write insurance in Arizona, including life and health insurers - ANSWER A) All insurers that write the types of insurance that are protected by the fund in Arizona Explanation: All insurers that write types of insurance that are protected by the fund are required to be member insurers of the fund. Reference: State Supplement in the License Exam Manual. Reference: 4.4.16.3 in the License Exam Manual Which one of the following dwellings would a HO-3 Homeowners Form cover? A) Condominium B) Office building C) Single-family home D) Apartment building - ANSWER C) Single-family home Explanation: HO-3 Homeowners Form covers owner-occupied single family dwellings. Condominiums are covered by the HO-6. Office and apartment buildings would be covered by a commercial policy. Reference: 7.4.1 in the License Exam Manual Which on of the following would be classified as a general damage? A) Pain and suffering B) Lost wages C) Medical bills D) Damaged property - ANSWER A) Pain and suffering Explanation: Compensatory damages compensate an injured party for injuries sustained- nothing more. Their purpose is to make a person whole again in the position that existed before the loss or harm. Compensatory damages are further categorized by: general damages (which necessarily result from the act or omission, such as emotional distress, inconvenience, and pain and suffering) and special damages (losses measured in exact sums of money including medical bills, travel expenses for medical care, prescription costs damaged property, and lost wages). Reference: 5.3.6 in the License Exam Manual Which of the following statements about flood insurance is NOT correct? A) There are two types of flood insurance programs available: emergency and regular B) A flood includes an overflow of inland or tidal waters C) Sewer backup into a dwelling is not considered flood and is not covered D) Personal property in a basement or outside in the yard is covered - ANSWER D) Personal property in a basement or outside in the yard is covered Explanation: Personal property in a basement or outside in the yard is NOT covered under flood insurance. Reference: 9.4 in the License Exam Manual Which of the following coverages is NOT included in a boatowners/watercraft package policy? A) Medical payments B) Liability C) Longshore and harbor workers' compensation insurance D) Property - ANSWER C) Longshore and harbor workers' compensation insurance Explanation: Boatowners/watercraft package policies were developed by individual insurance companies and they combine property, liability, and medical payments insurance on an open peril basis. Longshore and harbor workers' compensation insurance is found in personal yacht policies, which are used to insure larger vessels than those covered under boatowners policies. Reference: 9.8.1 in the License Exam Manual An insured owns a pet lion that is caged on the homeowner's property. The owner takes great care to warn neighbors of the possible danger by posting signs, fencing the yard, and locking the cage at all times. When a neighbor's child manages to open the cage and is bitten, what type of liability would apply to the lion owner? A) Absolute liability B) Contractual liability C) Premises liability D) Vicarious liability - ANSWER A) Absolute liability Explanation: The law imposes strict or absolute liability for specific situations or activities that pose threats to the safety of others. People who own dangerous animals are held to a higher standard of care. Absolute liability applies when a person is liable for a dangerous condition, regardless of the amount of care taken. Reference: 5.3.4 in the License Exam Manual Which of the following terms is used to describe an empty building that is not being used? A) Vacated B) Absent C) Unoccupied D) Vacant - ANSWER D) Vacant Explanation: A building that is not currently in use and does not have enough furnishings to function in its normal capacity is considered vacant. A building is unoccupied if no one is currently in it, but furnishings are present and the occupants intended to return, as is the case when the residents are out of town on vacation. Reference: 4.4.15 in the License Exam Manual Which of the following statements about umbrella policies is NOT correct? A) They provide coverage above the limits of underlying policies. B) They are written only for commercial risks. C) Losses that are excluded by the underlying policy but covered by the umbrella are subject to the umbrella's retention limit. D) If the insured fails to keep the underlying coverage in force, the umbrella policy will not cover the amount of loss that would have been paid by the underlying policy. - ANSWER B) They are written only for commercial risks. Explanation: Umbrella liability policies may be written for both personal and commercial risks. Reference: 9.9.1 in the License Exam Manual The agent has many responsibilities to the applicant. One involves a trust relationship between the agent and the insured regarding the insured's finances and confidentiality. In this case, the agent acts in what capacity? A) Fiduciary B) Consultant C) Attorney-in-fact D) Special agent - ANSWER A) Fiduciary Explanation: Agents have the duty to act in a fiduciary capacity that requires a high degree of trust and confidence. This duty deals with the agent's dealings with both the insured and the insurer. The agent is expected to be trustworthy, act in good faith, and preserve confidential information. Reference: 1.9.2 in the License Exam Manual Thomas had a forklift injury at work that caused his death. How much money will his surviving spouse receive for burial expenses? A) Up to $10,000 B) Up to $1,000 C) Up to $2,500 D) Up to $5,000 - ANSWER D) Up to $5,000 Explanation: Burial expenses, not to exceed $5,000, are in addition to the compensation. Reference: See State Supplement With a few exceptions, most personal insurance policies exclude losses arising out of all of the following EXCEPT: A) business activities B) rendering of professional services C) personal activities conducted away from the insured premises D) work-related injuries - ANSWER C) personal activities conducted away from the insured premises Explanation: Although there are limited exceptions, such as certain permitted incidental occupancies, personal lines policies typically exclude losses related to business activities, professional services, and work-related injuries. Reference: 7.6.2 in the License Exam Manual Which of the following items could be insured under Coverage C of a homeowners policy? A) Exotic birds B) Motorized go-kart C) Snowmobile D) Personal property usually located in a secondary residence - ANSWER D) Personal property usually located in a secondary residence Explanation: Coverage C covers personal property under a homeowners policy. Personal property usually located in a secondary residence may be insured under Coverage C. In addition, the following personal property is covered: personal property the insured owns or uses that is located anywhere in the world; personal property of others while it is in the portion of the residence the insured occupies; and personal property of a guest or employee while it is located in any resident the insured occupies. Animals and motorized vehicles are excluded. Reference: 7.5.1 in the License Exam Manual The insured's home is insured under an HO-3 with a $100,000 Coverage A limit. A tornado destroys the home and uproots a tree valued at $5,000. How much would the insurance company pay for the loss to the insured's home and tree? Ignore any deductible that would apply. A) $105,000 B) 95,000 C) $100,500 D) $100,000 - ANSWER C) $100,500 Explanation: The trees, shrubs, and other plants additional coverage does not cover damage caused by certain perils, such as wind. It covers damage caused by fire, lightning, explosion, riot, aircraft, vehicles not owned or operated by a resident, theft, and vandalism or malicious mischief. Coverage is limited to 5% of the Coverage A limit and a maximum of $500 for any one tree, shrub, or plant. Reference: 7.5.3 in the License Exam Manual An insured has a $60,000 Special Form (DP-3). When a covered loss in the amount of $10,000 damages the attached garage, how much of that amount is paid under the Coverage B-Other Structures? A) $0 B) $10,000 C) $1,000 D) $6,000 - ANSWER A) $0 Explanation: The attached garage is considered part of the dwelling, so the $10,000 is paid under Coverage A-Dwelling. Real property located on the described property and separated from the dwelling by clear space is covered by Coverage B-Other Structures. Reference: 6.4.3 in the License Exam Manual Section II of the homeowners policy provides liability coverage for all of the following EXCEPT A) use of a 17-foot sailboat B) renting the garage to a jewelry maker C) actions of a domestic animal in the care of the insured D) actions of a residence employee - ANSWER B) renting the garage to a jewelry maker