Renewal Insurance 1 Practice Test

These questions are part of the practice quiz. Start practicing

• Which principle stresses proposing only services within your realm of expertise and bringing in others when their expertise will benefit the customer?
• Under the New Jersey Ethics Code, which practice is prohibited for state officials?
• Canon 4 requires CPCUs to strive to improve in which areas?
• Which arrangement places the ethical behavior 'Being honest in all communications' at position 3?
• Which statement best describes medical payments to others coverage in these examples?
• Rule R1.1 requires a CPCU to do what?
• In actuarial pricing, what does actuarial soundness mean?
• Stop-loss protection in health insurance serves to
• Which statement best describes Agent or Broker of Record Letter handling?
• What is the primary function of probable maximum loss (PMM) in underwriting and pricing?
• Which factor is least relevant when selecting a carrier for clients?
• Section II, Coverage F provides coverage for which of the following?
• As an officer in an insurance agency during a confidential acquisition, which statement best describes your obligations to employees?
• Rule R3.2 requires CPCUs to avoid letting what interfere with professional judgment?
• Which designations do not require abiding by a code of ethics to receive and continue to hold?
• What is the difference between waiver and estoppel in insurance contracts?
• Rule R3.1 prohibits which kind of conduct?
• Some decisions are made alone or with input from a small group. Which statement about the decision process is true?
• Which statement best describes compliance in the renewal licensing process?
• Most states require insurers to file rates and forms with the state regulator. Is it ethical for an agent to have a friend call to obtain copies of filings rather than going to the source?
• Which question prompts you to consider how a decision would appear if it became public?
• Which is not an example of bodily injury under homeowners policies?
• Under a tenant homeowners policy (HO 4), which event would the policy cover the tenant's liability for damages to the building?
• What is insurable interest and why is it required at the time of loss?
• Which of the following is a stipulation of the medical payments to others provision?
• What type of organizations draft codes of ethics?
• In which situation is a subrogation waiver most appropriately used?
• Which statement about riders is correct?
• Which statement about damage to property of others coverage is accurate?
• Dick asks whether his woodworking hobby has liability coverage under his homeowners policy. What should the insurer tell him?
• When bidding, which practice is recommended?
• An agent misrepresents the percentage of operations over water on an application to obtain approval. What is the appropriate course of action?
• What is premium audit and why might it occur after the policy period?
• What does business income coverage protect, and when is it used?
• Define the term adverse selection and its impact on insurance markets.
• Which statement is accurate about first aid expenses coverage?
• Canon 1 of the CPCU Code of Professional Ethics states CPCUs should place which above their own?
• What is a significant risk of intentional misrepresentation on an application?
• Which incident would not be covered by Emily's homeowners policy liability coverage?
• When the insured cancels a policy, what is typically refunded?
• Which statement best captures the difference between exclusions and endorsements in an insurance policy?
• If applicant has two speeding tickets and two non-fault accidents, is it acceptable to omit these from the application?
• Which statement correctly contrasts straight commission and contingent commission in insurance sales?
• When multiple policies may respond to a claim, the policy in force at the time of the incident is typically considered to be the:
• Which topic is addressed by placing the customer's interest first in decisions?
• Which statement about deductibles in property insurance is correct?
• Under which circumstance would the medical payments coverage fail to protect a worker employed by the insured?
• Under the medical payments to others coverage, which item is not covered?
• Which of the following best describes insurable risk?
• First aid expenses coverage is designed to pay for:
• You recently purchased a book of commercial business from a retiring agent who did not always return audit return premiums. What action should you take?
• What is the difference between a declarations page and an insuring agreement?
• Under confidentiality until official announcement, what should Walter tell his employees about the merger?
• While reviewing a prospective account, you notice discrepancies between an agent’s coverage summary (open perils with 80% coinsurance) and the actual policy (named perils with 90% coinsurance). What action is appropriate?
• In a case where prejudgment interest counts toward the policy limit and damages exhaust the limit, who pays the prejudgment interest?
• Some decisions are made alone or with input from a small group. Which statement about the decision process is true?
• If an agent intentionally misrepresents on an application, who might end up paying the claim?
• Which statement distinguishes perils and hazards?
• Why did John disclose the conflict of interest related to the sales contest?
• Polly borrows her neighbor's self-propelled lawn mower after the neighbor's mower is in repair. The mower is damaged when it runs into a pool. The policy's damage to property of others coverage covers the replacement cost for all of the following reasons, except which?
• Your company discovers a prolonged substance abuse issue in the workplace when you find a bottle of vodka and pills in an employee’s office. What is the proper course of action?
• Stop-loss protection in health insurance is designed to
• What is the purpose of adding an additional insured to a policy?
• In a December claim scenario, are you justified in delaying payment to the next calendar year?
• If state law requires workers compensation for an au pair and the homeowner lacks workers compensation coverage, what is the result when the au pair is injured at home?
• A client needs a certificate of insurance for a bid on a project. The coverage is with a surplus lines insurer and you have no authority to issue a certificate. Should you exceed your authority to issue the certificate? Which is best practice?
• Which statement about deductible effects is correct?
• When Sally's dog bites a passing pedestrian who stops to pet it, what duty does Sally have regarding her homeowners policy?
• Abner Adjuster's claims firm has a comprehensive rule-based ethics code that prohibits accepting gifts of any value. If Abner accepts extravagant gifts from defense firms, what is the likely result?
• Which statement about coinsurance is NOT true?
• Which statement about insurable risk is accurate?
• If the decision does not need to be made immediately, have you considered all options and discussed it fully with others who can provide guidance?
• Which practice is ethical in conflicts of interest when placing a customer's insurance?
• What does the grace period mean?
• What are the main duties of an insurance agent in the sales process?
• Why is consistency with previous similar decisions important?
• Under the New Jersey Ethics Code, which statement best describes gifts to state officials?
• What is the primary purpose of risk management in insurance?
• Two common goals of a code of ethics include protecting reputation and protecting assets.
• In evaluating Betsy Broker's ethical conclusions, which area should she NOT consider?
• Regarding a supersedeas bond in connection with a homeowners claim, what is the insurer's responsibility under the homeowners policy?
• In Nancy's case, the medical payments to others coverage will pay for all the following, except?
• What role does compliance play in renewal licensing?
• Which would NOT be an example of ethical behavior?
• Which statement best captures actuarial soundness in insurance pricing?
• When making hiring decisions, what is a prudent approach to maximize the probability of selecting a superior performer?
• Which statement differentiates participating and nonparticipating policies?
• John Agent owns a small agency focusing on commercial lines accounts. To start differentiating in the marketplace with integrity, what is the first step he should take?
• Which action is most likely to trigger denial under concealment or fraud in a homeowners policy?
• Which topic addresses intellectual property and avoiding infringement?
• Under a homeowners policy, first aid expenses for injuries to others are covered under which provision?
• Your company encourages hiring of minorities and you have a candidate with all requisite skills but heavy accent; is it ethical to consider this?
• What is the purpose of a proof of loss form and when is it typically required?
• Which scenario illustrates a claim arising off the insured premises?
• What is the agent's primary duty regarding customer data privacy?
• Regarding handling a workplace substance abuse issue, does your response depend on whether you are a manager or a fellow employee?
• What is the final stage in the described ethical decision process?
• Who sets the ethical tone for a corporation?
• What is the difference between actual cash value and replacement cost?
• In the given scenario, when would Julia's homeowners policy provide coverage for an incident involving a watercraft?
• Which action by the insured could lead to cancellation?
• Under which circumstance would Pablo be outside the medical payments coverage of Ashley's policy?
• What is a potential consequence of a material misrepresentation on an insurance application?
• With a liability limit of $100,000 and a claim requiring $105,000 including $5,000 in prejudgment interest, who pays the $5,000 and why?
• Describe underinsurance vs overinsurance?
• A homeowners policy excludes liability coverage for the use of a golf cart in which circumstance?
• In risk management, what does retention mean?
• The agency owner is rude to employees and makes inappropriate remarks to female staff. What should the agent do?
• Which action best maintains ethical compliance when you lack authority to issue a certificate for non-admitted coverage?
• If two named insureds are sued for the same incident, the policy limit applies to:
• What effect does nonrenewal have on a policy?
• Under the New Jersey Ethics Code, which action must a state official take before engaging in activities regulated by a state agency?
• What is an endorsement and how does it differ from a rider?
• What is the problem with the ethics code phrase 'normal business amenities'?
• Which scenario away from the insured premises would be covered under medical payments coverage?
• Which statement correctly distinguishes per-occurrence limit and aggregate limit?
• Why must the insured provide accurate replacement cost or value information to the insurer?
• Which term describes the approach that lists prohibited types of actions?
• Under these examples, which statement accurately describes cemetery injuries and coverage?
• How do deductibles affect premium costs and claim frequency?
• What factor should you consider when selecting the carrier and commission level for a client?
• In a state with rebating prohibitions, if you offer an account an interest-free financing option that is not broadly available, is this rebating, and is offering it to one account vs. others unfair discrimination?
• Disclosing to the insured any subjectivities or contingencies that are contained in a quote to the insured.
• Which of the following best describes the primary use of PMM in underwriting?
• In a hospital bidding scenario, is it ethical to bid on the account given no conflict policy?
• Barry is sued after a tombstone incident in a cemetery. The claim is covered because which statement is true?
• Why does Ralph's hearse incident get covered by the homeowners policy?
• Which practice supports fair competition in bidding?
• In a state where a surplus lines quote cannot be delivered on an account that an admitted insurer would write with equivalent coverage, is it ethical to call three admitted insurers to see if they would decline the account without submitting it?
• In the Halloween hearse case, why is the claim covered?
• In property insurance, what is salvage?
• Which statement about endorsements and riders is incorrect?
• In the embers scenario, which statement correctly describes the insurer's duty to respond?
• What is insuring agreement and what purpose does it serve?
• John Agent and staff are developing objectives for a code of ethics they plan to draft. Which of the following is NOT an objective?
• Which is a common reason an insurer may cancel a policy?
• In the case of an insurance organization, which item may be included in its code of ethics?
• Insurance professionals who pass exams administered by the AICPCU and agree to abide by a specific code of professional ethics are entitled to use which designation?
• Which step is the first in the described ethical decision process?
• If you notice repeated misrepresentation by an agent across several accounts, who should you address this with?
• Define subrogation and its purpose in an insurance claim.
• Which statement about a tenant’s HO 4 policy's liability coverage is true?
• Why is the Chartered Life Underwriter, CPCU designation considered a professional designation?
• Which statement best describes a named peril policy?
• Are you prepared to pay the price for the decision?
• What is the final stage in the described ethical decision process?
• Which statement correctly distinguishes peril from hazard?
• What does utmost good faith require in insurance contracts?
• Explain the difference between representations and warranties in an insurance contract.
• Which statement accurately describes how endorsements and exclusions function within a policy?
• Dick's insurer defends a wrongful death claim with a $300,000 policy limit and a $50,000 defense cost. If the final settlement is $500,000, how much does the insurer pay for damages and defense?
• The initial step in establishing ethical standards in a business and drafting a code of ethics is which of the following?
• An insurer's newsletter reproduction program is described as unethical and illegal unless permission is obtained. Which statement best reflects this view?
• Two general approaches are commonly used when drafting codes of ethics.
• Which item is not a requirement to form an insurance contract?
• Explain moral hazard.
• Canon 2 of the CPCU Code states CPCUs should do what with their professional knowledge?
• If damages reach the policy limit in a claim, are defense costs paid by the insurer in addition to the limit?
• Which topic emphasizes guarding confidential data in a code of ethics?
• Workplace harassment by a client could lead to what kind of liability for the agent or company?
• A customer needs coverage but cannot afford the price. A competitor offers a more affordable product. What is the appropriate action?
• In a homeowners policy with a $300,000 liability limit, two named insureds are sued separately for negligence in the same incident. What is the maximum amount the insurer will pay for the claim, ignoring defense costs?
• Which of the following best describes reinsurance?
• What is the proper action if an applicant's information conflicts with underwriting guidelines?
• Which statement best defines a proof of loss form?
• As a result of his ethical conduct, how are John Agent's clients and underwriters likely to perceive him?
• Which hiring approach best ensures a fair and thorough evaluation of candidates?
• Which ethical principle is described as choosing actions that do the most good for the greatest number?
• Which statement best defines a subrogation waiver?
• In liability coverage, what does the per-occurrence limit specify?
• Rule R3.3 prohibits which actions?
• Which scenario would most likely not be covered under April's medical payments?
• In the ethics process of a professional society, who determines the punishment if a panel finds an ethics violation?
• Which of the following is a sign of rationalizing in arriving at a decision?
• In the dryer vent case, what type of loss does the neighbor suffer?
• In the dryer vent scenario, to determine which insurer is responsible for the claim, Mark must decide which timing rule applies. Which option correctly describes this rule?
• Which statement best describes the use of business income coverage?
• When weighing the pros and cons of an ethical decision, Bill Broker will likely ask a series of questions. Which of the following is a question that Bill will probably not ask?
• The concealment or fraud provision in a homeowners policy enables the insurer to deny coverage if the insured:
• If quotes come from the same insurer and the underwriter has said to use the lower quotes 'only if you must', which quote should you present?
• Why is data sharing among insurers sometimes necessary?
• In arriving at an ethical decision, identify the key issue and ponder questions about alternative decisions. Which of the following is one such question that might be asked?
• All of the following are ethical issues that have been raised in recent corporate scandals, such as Tyco and EXCEPT:
• Prejudgment interest in a tort case represents?
• Which of the following would have medical payments coverage for injuries sustained on Archie's premises?
• Which elements constitute negligence for liability purposes?
• Which action would qualify as concealment or fraud under a homeowners policy?
• Which option is not a stated goal of a code of ethics?
• What are the four essential elements of an insurance contract?
• What does coinsurance in property insurance require the insured to do at the time of loss?
• Which scenario is typically covered by homeowners liability coverage?
• Which exclusion would preclude liability coverage for Ambrose's claim involving damage caused by backing up a box truck?
• In the scenario where Wendy's house fire began before midnight and a replacement policy took effect at midnight, which insurer will pay the neighbor's claim?
• If a judgment exceeds the policy's liability limit, who pays the amount above the limit?