Insurance MCQ

A navigation error caused a cargo ship to run around on a reef. The ship, valued at $1.5 million, was carrying $1.5 million in grain and $1.5 in electronic devices. The ship sustained $150,000 in physical damage. If this loss is a "particular average" loss, how will the loss be settled? A) the owners of each of the three interests are responsible for $50,000 B) the owner of the ship is responsible for the entire $150,000 loss C) the two cargo owners are each responsible for $75,000 of the loss D) the owner of the ship is responsible for the first $100,000 of the loss, and the two cargo owners are each responsible for $25,000 of the loss Answer: B

The exterior walls, the roof, and the plumbing, heating and air conditioning systems of a residential condominium can be insured through the purchase of  A) builders risk insurance B) condominium association coverage form C) dwelling property broad form D) condominium commercial unit-owners insurance Answer: B

Tom opened a store in a mall. His store is located between a theater and a department store. Tom counts on the theater and department store to generate walk-in business at his store. While his store has been successful, Tom knows that if either or both of the other business closed, his store would suffer an economic loss. What type of dependent property situation is illustrated in this scenario? A) contributing location B) recipient location C) manufacturing location D) leader location Answer: D

An Inter-Ocean Transfer cargo ship was forced to jettison some cargo in heavy seas. If $400,000 worth of iron ore was jettisoned, for how much of this amount would Inter-Ocean Transfer be responsible under general average? A) nothing B) $160,000 C) $200,000 D) $400,000 Answer: B

Inter-Ocean Transfer owns 12 large cargo ships which transport goods. Inter-Ocean can obtain physical damage insurance on these vessels by purchasing A) hull insurance B) cargo insurance C) protection and indemnity insurance D) freight insurance Answer: A

One type of commercial property insurance excludes perils which are covered by the basic coverages. Some businesses buy this coverage to fill some gaps, including food and earthquake, and to cover property in other countries. This type of insurance is called A) protection and indemnity insurance B) building and personal property coverage form C) difference in conditions insurance D) builders risk coverage form Answer: C

Rick is risk manager of Herald News, a daily newspaper in a competitive market. Rick wants to make sure that if Herald's printing facility is damaged or destroyed , the paper will continue to be published. What type of insurance can Rick purchase to cover the added cost of continuing to print the paper after a physical damage loss has occurred? A) contingent business income coverage B) product liability insurance C) business income from dependent properties coverage D) extra expense coverage Answer: D

The inventory at Frank's business fluctuates. Frank's property insurance requires periodic reporting of inventory values. Frank believes he can save money by under-reporting the inventory. Last period, Frank reported $200,000 when he value was really $400,000. Shortly after filing report, when the value was $500,000, the inventory was destroyed. How much will Frank's insurer pay, assuming no deductible? A) nothing, as underreporting voids coverage B) $200,000 C) $250,000 D)$400,000 Answer: C

Renee is risk manager of XYZ company. She purchased a commercial Package Policy for her company and added one of the optional coverages. This option suspends the coinsurance clause and substitutes a new agreement covering any loss int eh same proportion that the limit of insurance bears to a value specified in the declarations. This provision is known as A) waiver of inventory coverage B) inflation guard coverage C) agreed value coverage D) replacement cost coverage Answer: C

All of the following statements about the business owners policy are true EXCEPT A) Coverage for business personal property includes coverage for leased personal property which the named insured has a contractual responsibility to insure. B) The amount of insurance on the buildings increase by a stated percentage each year. C) Additional coverages include pollutant cleanup and removal D) The policy must be written with a deductible of at least $2,000 for property losses Answer: D

Which of the following statements about the business owners policy is (are) true? I. It is designed primarily to meet the insurance needs of large manufacturing firms. II. It is a package policy designed to meet the basic property and liability needs of an insured in a single contract. A) I only B) II only C) Both I and II D) Neither I nor II Answer: B

A firm wishing to insure a single shipment of merchandise sent by a common carrier would purchase a(n) A) annual transit policy B) trip transit policy C) bailee's liability policy D) equipment floaters Answer: B

All of the following statements about filed inland marine forms are true EXCEPT A) A mail coverage form covers securities in transit by first-class mail, registered or certified mail, or expressed mail B) A commercial articles coverage form is used to insure photogenic equipment and musical instruments C) A jewelers block coverage form is used by individuals in insure jewelry limited in coverage by the homeowners form D) The signs coverage form covers neon, mechanical, and electrical sign. Answer: C

All of the following are considered to be means of transportation and communication for purposes of inland marine insurance EXCEPT A) trains B) tunnels C) transmission lines D) television towers Answer: A

Which of the following statements about ocean marine insurance is true? A) It usually covers the peril of war B) Hull insurance includes collision liability covering the ship's owner if the ship collides with another ship. C) Protection and indemnity (P&I) insurance covers the shipper of goods for cargo losses D) A particular average loss is a loss incurred only if a ship is totally lost or destroyed. Answer: B

All of the following are implied warranties in ocean marine insurance EXCEPT A) seaworthiness B) clear tile C) no deviation D) legal purpose Answer: B

Which of the following statements about marine insurance coverages is true? A) Hull insurance limits coverage to the breakdown of a ship's machinery and equipment. B) Cargo insurance protects the shipowner for the loss of the earnings if a ship is lost of damaged and goods are not delivered. C) Freight insurance covers the owner of cargo if the cargo is damaged or destroyed. D) Protection and indemnity insurance provides liability insurance to the ship owner for bodily injury and property damage to third parties. Answer: D

Which of the following statements describes a Difference in Conditions (DIC) Policy? A) It is a type of commercial umbrella liability policy. B) It is an all-risk policy that covers perils not insured by basic property insurance contracts. C) It is designed to cover indirect losses for which the insured has direct damage coverage. D) It is used to settle disputes when an insured has more than one insurance policy with differing policy provisions. Answer: B

One of the filed inland marine forms is the accounts receivable coverage form. In which of the following cases would the purchaser of this form be indemnified through the coverage? A) If the purchaser cannot pay amounts owed because the purchaser has become insolvent. B) If the purchaser cannot pay amounts owned because the purchaser has suffered an insured physical damage loss. C) If the purchaser cannot collect accounts receivable because of the destruction of records. D) If the purchaser cannot collect accounts receivable because the purchaser extended credit to a poor credit risks. Answer: C

Spoilage because of loss of refrigeration at a frozen foods processor would be covered under  A) equipment breakdown insurance B) extra expense insurance C) business income insurance D) inland marine insurance Answer: A