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Question 1 of 30
1. Question
Which regulatory filing must an insurer submit to have policy forms approved by the state department of insurance?
Correct
Insurers must file policy forms and related materials with the state for review and approval before using them. The other options are different regulatory filings.
Incorrect
Insurers must file policy forms and related materials with the state for review and approval before using them. The other options are different regulatory filings.
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Question 2 of 30
2. Question
Miguel sells a builders risk policy to a contractor client. A month later, he convinces the client to cancel it to buy a different but similar policy from another insurer through Miguel. This scenario most likely involves which prohibited practice?
Correct
Twisting occurs when a producer persuades an insured to replace, lapse, or cancel a policy without an adequate basis – such as to generate more commissions. Miguel’s actions appear to involve twisting.
Incorrect
Twisting occurs when a producer persuades an insured to replace, lapse, or cancel a policy without an adequate basis – such as to generate more commissions. Miguel’s actions appear to involve twisting.
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Question 3 of 30
3. Question
Mr. Roberts, an insurance broker, encounters a situation where he has a personal interest in recommending a particular insurance product to a client. What should Mr. Roberts do?
Correct
Mr. Roberts should disclose any conflict of interest to his client and present alternative insurance products objectively. By transparently disclosing his personal interest and offering alternative options, Mr. Roberts upholds ethical standards and ensures that clients can make informed decisions based on their best interests. Failing to disclose conflicts of interest may undermine trust and credibility, leading to potential regulatory sanctions and reputational damage for the broker.
Incorrect
Mr. Roberts should disclose any conflict of interest to his client and present alternative insurance products objectively. By transparently disclosing his personal interest and offering alternative options, Mr. Roberts upholds ethical standards and ensures that clients can make informed decisions based on their best interests. Failing to disclose conflicts of interest may undermine trust and credibility, leading to potential regulatory sanctions and reputational damage for the broker.
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Question 4 of 30
4. Question
What is the purpose of a “deductible” in an insurance policy?
Correct
The purpose of a deductible in an insurance policy is to share the risk of loss between the insured and the insurer. The insured agrees to pay a predetermined amount (the deductible) out of pocket before the insurance company begins to pay for covered losses. By requiring the insured to bear some of the initial costs of a claim, deductibles help reduce the insurer’s financial exposure and discourage frivolous claims.
Incorrect
The purpose of a deductible in an insurance policy is to share the risk of loss between the insured and the insurer. The insured agrees to pay a predetermined amount (the deductible) out of pocket before the insurance company begins to pay for covered losses. By requiring the insured to bear some of the initial costs of a claim, deductibles help reduce the insurer’s financial exposure and discourage frivolous claims.
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Question 5 of 30
5. Question
Which of the following types of insurance policies typically includes a “replacement cost” provision?
Correct
Homeowners insurance policies typically include a replacement cost provision, which covers the cost of repairing or replacing damaged property without deducting for depreciation. This provision ensures that homeowners receive adequate compensation to restore their property to its pre-loss condition in the event of covered damage or destruction.
Incorrect
Homeowners insurance policies typically include a replacement cost provision, which covers the cost of repairing or replacing damaged property without deducting for depreciation. This provision ensures that homeowners receive adequate compensation to restore their property to its pre-loss condition in the event of covered damage or destruction.
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Question 6 of 30
6. Question
What does “replacement cost” mean in insurance?
Correct
The cost to replace damaged property with new property of similar kind and quality. Replacement cost is a valuation method used in insurance that calculates the cost of replacing damaged or destroyed property with new property of similar kind and quality, without deducting for depreciation. This means that the insurance company will pay for the full cost of replacing the damaged property, rather than just its depreciated value. Replacement cost coverage is commonly offered for property insurance, such as homes, where the goal is to restore the insured property to its pre-loss condition.
Incorrect
The cost to replace damaged property with new property of similar kind and quality. Replacement cost is a valuation method used in insurance that calculates the cost of replacing damaged or destroyed property with new property of similar kind and quality, without deducting for depreciation. This means that the insurance company will pay for the full cost of replacing the damaged property, rather than just its depreciated value. Replacement cost coverage is commonly offered for property insurance, such as homes, where the goal is to restore the insured property to its pre-loss condition.
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Question 7 of 30
7. Question
What is “actual cash value” coverage in an insurance policy?
Correct
“actual cash value” coverage refers to the depreciated value of the damaged property. It takes into account the property’s age, condition, and market value at the time of the loss. The insured receives the current value of the property, which may be less than the cost of replacing it with new property.
Incorrect
“actual cash value” coverage refers to the depreciated value of the damaged property. It takes into account the property’s age, condition, and market value at the time of the loss. The insured receives the current value of the property, which may be less than the cost of replacing it with new property.
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Question 8 of 30
8. Question
What does the term “deductible” refer to in an insurance policy?
Correct
the “deductible” is the amount the insured must pay towards a claim before the insurer covers the remaining cost. It represents the insured’s share of the risk and helps prevent small or frequent claims, keeping insurance premiums affordable. The insured is responsible for paying the deductible, and the insurer covers the remaining cost up to the policy limits.
Incorrect
the “deductible” is the amount the insured must pay towards a claim before the insurer covers the remaining cost. It represents the insured’s share of the risk and helps prevent small or frequent claims, keeping insurance premiums affordable. The insured is responsible for paying the deductible, and the insurer covers the remaining cost up to the policy limits.
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Question 9 of 30
9. Question
Michelle owns a nail salon and purchases a business owners policy with specialty endorsements for salons, including $50,000 in coverage for loss of income. How much could Michelle receive under this endorsement if a fire forces her salon to close for 4 months while repairs are made, resulting in $80,000 in lost income?
Correct
Business owners endorsements provide additional, customized coverage beyond the base policy. In Michelle’s case, she has a specialty endorsement for the salon industry that includes $50,000 in loss of income coverage. Since she incurred $80,000 in lost income while closed, she can collect the full $50,000 limit.
Incorrect
Business owners endorsements provide additional, customized coverage beyond the base policy. In Michelle’s case, she has a specialty endorsement for the salon industry that includes $50,000 in loss of income coverage. Since she incurred $80,000 in lost income while closed, she can collect the full $50,000 limit.
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Question 10 of 30
10. Question
Tyra insures a rental property for the building’s $200,000 market value and purchases an endorsement for guaranteed replacement cost up to an additional 25% of the policy limit. If the building is completely destroyed in a fire and costs $350,000 to rebuild, how much could Tyra receive from the insurance company?
Correct
The guaranteed replacement cost endorsement covers building costs above the policy limits, up to an additional 25% of those limits. 25% of Tyra’s $200,000 policy limit is $50,000. So combined with the original limit, the total coverage is $250,000. Since the cost to rebuild was $350,000, more than the total coverage, Tyra would receive the full $250,000 available.
Incorrect
The guaranteed replacement cost endorsement covers building costs above the policy limits, up to an additional 25% of those limits. 25% of Tyra’s $200,000 policy limit is $50,000. So combined with the original limit, the total coverage is $250,000. Since the cost to rebuild was $350,000, more than the total coverage, Tyra would receive the full $250,000 available.
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Question 11 of 30
11. Question
Mrs. Chang owns a florist shop and purchases an endorsement with her business policy to cover perishable stock. If the refrigeration unit fails due to an electrical surge during a covered peril and Mrs. Chang loses $5,000 worth of perishable flowers and arrangements, but the coverage limit for perishable stock is $3,000 per occurrence, how much can she expect to receive?
Correct
The perishable stock endorsement provides coverage beyond the standard policy, but still subject to specified limits. In this case, the coverage limit was $3,000 per occurrence. Although the value of the loss was $5,000, the insurer will only pay up to the $3,000 endorsement limit.
Incorrect
The perishable stock endorsement provides coverage beyond the standard policy, but still subject to specified limits. In this case, the coverage limit was $3,000 per occurrence. Although the value of the loss was $5,000, the insurer will only pay up to the $3,000 endorsement limit.
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Question 12 of 30
12. Question
Which of the following is covered under commercial property insurance?
Correct
Buildings and structures. Commercial property insurance provides coverage for the physical assets of a business, such as buildings, structures, and their contents. It is designed to protect against damage or loss caused by covered perils, such as fire, theft, vandalism, or natural disasters. The coverage typically includes the building itself, as well as equipment, inventory, furniture, and fixtures within the premises.
Incorrect
Buildings and structures. Commercial property insurance provides coverage for the physical assets of a business, such as buildings, structures, and their contents. It is designed to protect against damage or loss caused by covered perils, such as fire, theft, vandalism, or natural disasters. The coverage typically includes the building itself, as well as equipment, inventory, furniture, and fixtures within the premises.
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Question 13 of 30
13. Question
A business experiences a break-in, and valuable equipment is stolen. Which coverage would typically apply in this situation?
Correct
Commercial property insurance. In this scenario, the theft of valuable equipment would typically be covered under commercial property insurance. This coverage ensures that the business is protected financially and can recover from the loss. It is important for businesses to secure their premises and have comprehensive coverage to safeguard their assets.
Incorrect
Commercial property insurance. In this scenario, the theft of valuable equipment would typically be covered under commercial property insurance. This coverage ensures that the business is protected financially and can recover from the loss. It is important for businesses to secure their premises and have comprehensive coverage to safeguard their assets.
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Question 14 of 30
14. Question
A business experiences a water leak that damages its office furniture. Which coverage would typically apply in this situation?
Correct
Commercial property insurance. In this scenario, the damage to the office furniture caused by the water leak would typically be covered under commercial property insurance. This coverage protects against losses resulting from covered perils, including water damage from leaks. It is crucial for businesses to have adequate coverage for their furniture and other assets to mitigate the risks associated with unexpected events.
Incorrect
Commercial property insurance. In this scenario, the damage to the office furniture caused by the water leak would typically be covered under commercial property insurance. This coverage protects against losses resulting from covered perils, including water damage from leaks. It is crucial for businesses to have adequate coverage for their furniture and other assets to mitigate the risks associated with unexpected events.
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Question 15 of 30
15. Question
Mr. X owns a retail store, and a customer is injured by a falling shelf. Which type of casualty insurance policy would provide coverage for this situation?
Correct
General liability. General liability insurance would provide coverage for this situation because it covers bodily injury or property damage caused by the insured’s negligence. In this case, the falling shelf caused bodily injury to a customer.
Incorrect
General liability. General liability insurance would provide coverage for this situation because it covers bodily injury or property damage caused by the insured’s negligence. In this case, the falling shelf caused bodily injury to a customer.
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Question 16 of 30
16. Question
Which type of casualty insurance policy would be most suitable for a manufacturer of pharmaceutical products to protect against claims of injuries caused by their medications?
Correct
Product liability. Product liability insurance would provide coverage for injuries caused by the manufacturer’s pharmaceutical products. It protects against claims arising from injuries or damages caused by defective or harmful medications.
Incorrect
Product liability. Product liability insurance would provide coverage for injuries caused by the manufacturer’s pharmaceutical products. It protects against claims arising from injuries or damages caused by defective or harmful medications.
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Question 17 of 30
17. Question
Mr. X owns a manufacturing company, and a defective product causes a fire at a customer’s location. Which type of casualty insurance policy would provide coverage for the damage caused by the fire?
Correct
Product liability. Product liability insurance would provide coverage for the damage caused by the fire as a result of a defective product. It protects against claims arising from injuries, damages, or losses caused by a defective product.
Incorrect
Product liability. Product liability insurance would provide coverage for the damage caused by the fire as a result of a defective product. It protects against claims arising from injuries, damages, or losses caused by a defective product.
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Question 18 of 30
18. Question
Mr. X owns a manufacturing company, and a product he produces causes an environmental pollution incident. Which type of casualty insurance policy would provide coverage for the cleanup costs and liabilities associated with the pollution incident?
Correct
Environmental liability. Environmental liability insurance provides coverage for claims arising from environmental pollution incidents caused by a company’s operations or products. It protects against liabilities for cleanup costs, property damage, and bodily injury resulting from pollution incidents.
Incorrect
Environmental liability. Environmental liability insurance provides coverage for claims arising from environmental pollution incidents caused by a company’s operations or products. It protects against liabilities for cleanup costs, property damage, and bodily injury resulting from pollution incidents.
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Question 19 of 30
19. Question
What is the purpose of bodily injury liability coverage in auto insurance?
Correct
To cover medical expenses and damages for others involved in an accident. Bodily injury liability coverage in auto insurance provides financial protection for the insured against claims or lawsuits resulting from injuries caused to others in an accident. It covers medical expenses, pain and suffering, and other damages for the injured party or parties.
Incorrect
To cover medical expenses and damages for others involved in an accident. Bodily injury liability coverage in auto insurance provides financial protection for the insured against claims or lawsuits resulting from injuries caused to others in an accident. It covers medical expenses, pain and suffering, and other damages for the injured party or parties.
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Question 20 of 30
20. Question
What is the purpose of liability waivers?
Correct
To transfer liability to the injured party. Liability waivers are legal documents designed to transfer the risk and responsibility of potential accidents or injuries from the liable party to the injured party. By signing a liability waiver, individuals acknowledge and accept the potential risks associated with a particular activity or situation, absolving the other party of liability.
Incorrect
To transfer liability to the injured party. Liability waivers are legal documents designed to transfer the risk and responsibility of potential accidents or injuries from the liable party to the injured party. By signing a liability waiver, individuals acknowledge and accept the potential risks associated with a particular activity or situation, absolving the other party of liability.
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Question 21 of 30
21. Question
What is a legal doctrine that holds employers responsible for the actions of their employees performed within the scope of their employment?
Correct
Respond eat superior is a legal doctrine that holds employers responsible for the actions of their employees when those actions are performed within the scope of their employment. This doctrine is based on the concept of vicarious liability, which imposes liability on one person for the actions of another. It is important in cases where an employee’s actions result in bodily injury or property damage to others.
Incorrect
Respond eat superior is a legal doctrine that holds employers responsible for the actions of their employees when those actions are performed within the scope of their employment. This doctrine is based on the concept of vicarious liability, which imposes liability on one person for the actions of another. It is important in cases where an employee’s actions result in bodily injury or property damage to others.
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Question 22 of 30
22. Question
What is a common eligibility requirement for obtaining a government contract?
Correct
Having previous experience in government contracting. While requirements for government contracts can vary, having previous experience in government contracting is a common eligibility requirement. This requirement helps ensure that contractors understand the unique rules, regulations, and processes associated with working with government agencies. It also demonstrates a level of competence and familiarity with the specific requirements of government contracts.
Incorrect
Having previous experience in government contracting. While requirements for government contracts can vary, having previous experience in government contracting is a common eligibility requirement. This requirement helps ensure that contractors understand the unique rules, regulations, and processes associated with working with government agencies. It also demonstrates a level of competence and familiarity with the specific requirements of government contracts.
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Question 23 of 30
23. Question
What does the term “exclusions” refer to in an insurance policy?
Correct
Situations where coverage is not provided. Exclusions in an insurance policy refer to specific situations, conditions, or risks that are not covered by the policy. These exclusions specify the circumstances under which the insurance company will not provide coverage. It is important for policyholders to understand the exclusions to ensure they have appropriate coverage for their specific needs.
Incorrect
Situations where coverage is not provided. Exclusions in an insurance policy refer to specific situations, conditions, or risks that are not covered by the policy. These exclusions specify the circumstances under which the insurance company will not provide coverage. It is important for policyholders to understand the exclusions to ensure they have appropriate coverage for their specific needs.
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Question 24 of 30
24. Question
In the insurance industry, what does “endorsement” refer to?
Correct
An “endorsement” in the insurance industry refers to a document that amends the policy to add, delete, or change its provisions. It is also known as a rider or a floater
Incorrect
An “endorsement” in the insurance industry refers to a document that amends the policy to add, delete, or change its provisions. It is also known as a rider or a floater
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Question 25 of 30
25. Question
What is the purpose of a “nonforfeiture” provision in an insurance policy?
Correct
The “nonforfeiture” provision in an insurance policy is designed to prevent the policy from lapsing due to non-payment of premiums. It ensures that the policyholder retains some value or coverage even if the premiums are not paid
Incorrect
The “nonforfeiture” provision in an insurance policy is designed to prevent the policy from lapsing due to non-payment of premiums. It ensures that the policyholder retains some value or coverage even if the premiums are not paid
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Question 26 of 30
26. Question
In the context of small business insurance, what does property coverage typically protect against?
Correct
Property coverage typically protects small businesses against damage to physical assets such as buildings, equipment, inventory, and furniture due to events like fire, theft, vandalism, or natural disasters. It helps businesses recover financially from such losses and continue their operations.
Incorrect
Property coverage typically protects small businesses against damage to physical assets such as buildings, equipment, inventory, and furniture due to events like fire, theft, vandalism, or natural disasters. It helps businesses recover financially from such losses and continue their operations.
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Question 27 of 30
27. Question
Mr. Smith owns a small retail store. During a severe storm, the store’s roof sustains damage, and merchandise is destroyed by water leaks. Which type of insurance coverage would help Mr. Smith recover the financial losses?
Correct
Property coverage protects against damage to physical assets, including buildings, inventory, and equipment. In this scenario, the damage to the store’s roof and merchandise due to the storm would be covered under property insurance, helping Mr. Smith recover financially from the losses incurred.
Incorrect
Property coverage protects against damage to physical assets, including buildings, inventory, and equipment. In this scenario, the damage to the store’s roof and merchandise due to the storm would be covered under property insurance, helping Mr. Smith recover financially from the losses incurred.
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Question 28 of 30
28. Question
What is the primary purpose of property coverage in small business insurance?
Correct
Property coverage in small business insurance policies provides coverage for damage to physical assets such as buildings, equipment, inventory, and furnishings due to perils like fire, theft, vandalism, or natural disasters. It helps ensure that the business can recover financially from such losses and continue its operations.
Incorrect
Property coverage in small business insurance policies provides coverage for damage to physical assets such as buildings, equipment, inventory, and furnishings due to perils like fire, theft, vandalism, or natural disasters. It helps ensure that the business can recover financially from such losses and continue its operations.
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Question 29 of 30
29. Question
In the context of small business insurance, what is the purpose of workers’ compensation coverage?
Correct
Workers’ compensation coverage in small business insurance packages is designed to provide benefits to employees who suffer work-related injuries or illnesses, including medical expenses, lost wages, and rehabilitation costs, while protecting employers from lawsuits related to such injuries.
Incorrect
Workers’ compensation coverage in small business insurance packages is designed to provide benefits to employees who suffer work-related injuries or illnesses, including medical expenses, lost wages, and rehabilitation costs, while protecting employers from lawsuits related to such injuries.
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Question 30 of 30
30. Question
How does liability coverage protect small businesses against potential legal liabilities?
Correct
Liability coverage in small business insurance provides legal defense against liability claims, covering costs associated with legal defense and settlements arising from claims of bodily injury, property damage, or other harm caused to third parties.
Incorrect
Liability coverage in small business insurance provides legal defense against liability claims, covering costs associated with legal defense and settlements arising from claims of bodily injury, property damage, or other harm caused to third parties.