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Alabama Personal Lines Exam
Comprehensive Questions (Frequently
Tested) with Verified Answers Graded A+
Which Homeowner's policy provides all risk or open peril coverage on the dwelling but broad form coverage on the personal property? - Answer: HO- The HO-4 is basically intended to cover which of the following types of risks? - Answer: An apartment-dweller's personal property An individual otherwise qualified except for having taken and passed the examination can be issued a temporary insurance producer license, which is valid for a maximum period of - Answer: six months Who of the following would have Liability coverage under Chuck's Personal Auto policy? - Answer: All of the above The authority given by the company to the agent is NOT formally written or communicated is called - Answer: implied authority Which of the following correctly identifies common characteristics of Fidelity Bonds? - Answer: Fidelity Bonds commonly provide coverage for an insured act occurring during the bond period and discovered before the end of the discovery period. An automobile collision would be considered - Answer: an accident and an occurrence
Which of the following are excluded property losses under all Homeowner's forms? - Answer: All of the above What type of Ocean Marine insurance covers goods while they are in transit over water? - Answer: cargo Under the Personal Auto policy, Uninsured Motorists coverage provides coverage for bodily injury for which the insured is legally entitled to recover that results from an accident with - Answer: all of the above Which of the following statements about notice of cancellation of an Alabama automobile polity is CORRECT? - Answer: For reasons other than non-payment of premium, the insurer must provide at least 20 days notice of cancellation of an automobile policy. Assume the following items were stolen from the insured's home. Which one of the these losses would be fully covered under Coverage C (Personal Property) of the Homeowner's policy, assuming the loss was for the full value of the property described? - Answer: A $1,000 emerald bracelet Which Homeowner's coverage provides indirect loss coverage? - Answer: Coverage D (Loss of Use) Coverage D under a standard Homeowner's policy contains coverage for - Answer: loss of use All of the following are correct statements regarding coverage under a Boatowner's policy EXCEPT - Answer: Most Boatowner's policies have no limitations or exclusions related to how the boat may be used. To file a claim for coverage under Part B (Med Pay) of the Personal Auto policy, the claimant - Answer: must incur expenses within three years of the accident
Which of the following would NOT be covered under the Other Than Collision section of a Personal Auto policy? - Answer: Theft of a portable radio left on the seat Under the Personal Auto policy, which of the following losses would be considered a collision loss? - Answer: None of the above For the most part, property insurance policies are considered to be - Answer: two-party contracts. In addition to earthquake, what other perils does the Earthquake Causes of Loss form cover? - Answer: Volcanic eruption Which of the following statements about surplus line brokers is CORRECT? A. An Alabama resident must be licensed as a property and casualty insurance producer to hold a surplus line broker license. B. An Alabama resident must post a bond of at least $50,000 to be licensed as a surplus line broker. C. To be licensed in Alabama as a non-resident surplus line broker, the applicant must be licensed as a surplus line broker in their home state. D. All of the above statements are correct. - Answer: All of the above statements are correct. Under a Personal Auto policy, your duties following a loss include all of the following EXCEPT - Answer: file a lawsuit against any negligent third party The maximum claim amount covered by the Alabama Insurance Guaranty Association is - Answer: An insurer compare what it paid in claims against the amount received in premiums to determine its - Answer:
Which of the following is NOT a category of the Nationwide Marine Definition? - Answer: Private passenger autos A person who for compensation, fee or commissions negotiates settlement of claims under insurance contracts in Alabama is called a/an - Answer: adjuster Coverage C under a Dwelling or Standard Homeowner's policy contains coverage for - Answer: personal property What is arbitration? - Answer: A means of settling disputes between the insured and the insurer Which of the following statements BEST describes a collision - Answer: An insurance contract is "one-sided" because the insurance company is the only party that is legally bound to perform its part of the contract. This means that an insurance contract is a/an - Answer: unilateral contract Every automobile insurance policy sold in Alabama must _________coverage for uninsured motorist - Answer: offer An insurance producer must inform the Alabama Commissioner of Insurance of administrative action against the producer by another governmental agency within_____ days of its final resolution. - Answer: 30 In Crime insurance, any act of stealing is considered - Answer: theft
You are held responsible when you 13-year-old daughter vandalizes a neighbor's house. This is an example of - Answer: Vicarious liability Providing misleading comparisons of the terms and benefits of an insurance policy for the purpose of inducing the policyholder to change to another policy is known as - Answer: twisting Which of the following is NOT a Supplementary Payment under a Personal Auto policy? - Answer: The definition of "Casualty" insurance includes - Answer: liability insurance Which of the following is normally NOT an exclusion under the Equipment Breakdown Coverage policy? - Answer: internal explosions Which of the following is a peril - Answer: Hail An insured who needs coverage for her home and its contents against loss caused by earthquake can obtain it with - Answer: either a separate Earthquake policy or a Dwelling or Homeowner's policy with an Earthquake endorsement attached. Which of the following is INCORRECT concerning premiums collected by an insurance producer in Alabama? - Answer: Premium payments become the property of the producer All of the following are requirements to receive an Alabama insurance producer license EXCEPT:
- Answer: An applicant must have a diploma from an approved college or university. if you have not met the Continuing Education requirement when it is time to renew your license, you may? - Answer: request and extension and continue to do business until your request is accepted or denied
Submitting false proof of insurance to the state can result in the suspension of the owner's vehicle registration for - Answer: three months The Valuable Papers and Records Inland Marine coverage for reimburses the insured for replacing all of the following EXCEPT - Answer: damaged securities and paper money When the insured's home is damaged in a tornado, she is forced to move into a hotel for several days while repairs are made. The additional expenses the insured incurs for the hotel are considered a/an - Answer: indirect/consequential loss Which one of the following terms describes a contract where the insurer drafts the contract and the applicant must accept or reject it? - Answer: Adhesion Which of the following provides temporary coverage for the insured between the time the application is made and the policy is issued? - Answer: Binder Which of the following are considered 'Other Structures' under the Homeowner's policy? - Answer: Any structure on the premises that is not attached to the dwelling What type of insurance policy only insures against perils that are specifically listed in the policy?
- Answer: Named peril policy In Alabama, uninsured motorist coverage is always included in an automobile liability policy unless - Answer: it is specifically rejected by the insured in writing Common elements, such as playground equipment, which condominium unit owners own jointly are covered by the - Answer: condominium association coverage form
In an Umbrella Liability Policy, the amount the insured must satisfy before payment may be made under the Umbrella for a loss NOT covered by an underlying policy is called the - Answer: Insurance may be used to manage - Answer: pure risk Bid bonds, performance bonds, payment bonds, and completion bonds are all examples of what type of surety bonds? - Answer: contract bonds Under the standard Homeowner's policy, Coverage F - Medical Payments to others, the policy will cover the necessary expenses medical expenses incurred for up to __________ from the date of the accident. - Answer: three years Which of the following describes an insurance company authorized to do business in a state? - Answer: admitted In what department of an insurance company are decisions made to accept or reject applicants?
- Answer: Underwriting If an insurance company intentionally prolongs the claims process, forcing the policyowner to sue for damages, the company has violated the principle of - Answer: Utmost Good Faith Who may cancel an insurance policy, assuming cancellation is not contrary to the law? - Answer: Either A or B (the insured, the insurance company) The minimum limits in Alabama for automobile liability are - Answer: 25/50/ The type of hazard represented by slick floors is called a - Answer: physical hazard
The Declarations Page in a Homeowner's Policy contains all of the following EXCEPT - Answer: The make and model year of your automobile Providing misleading - Answer: The insured has $200 deductible for Collision coverage. During and ice storm, the insured slides into a traffic sign and does $150 worth of damage to the car. How much would the insured collect for this loss under a Personal Auto policy? - Answer: $ The two major coverages provided by Section II of the Homeowner's forms are - Answer: personal liability and medical payments Horace is a licensed insurance producer in this state. Although he is appointed to represent several other insurance companies, he is not appointed to represent XYZ Insurance Company. Assuming XYZ Insurance Company is properly licensed to sell insurance in this state, if Horace places an insurance policy directly with XYZ Insurance Company - Answer: the company will be subject to a fine of three times the premiums received if it issues the policy without appointing Horace. Which of the following is correct regarding watercraft eligible for a Boatowner's policy - Answer: Most insurers limit eligibility for the Boatowner's policy to open-cockpit vessels which are 26 feet in length or less An insured is notified that the insurance company will not or is unwilling provide coverage after the current policy expires. This is considered to be a (n) - Answer: nonrenewal In a Named Peril policy, who has the burden of proving that a loss is covered? - Answer: the insured Which of the following is NOT included within the additional coverage provided under Section II(Liability) of the standard Homeowner's policy? - Answer: Debris Removal
Contracts in which only one party makes a legally enforceable promise are called - Answer: unilateral contracts. A client tripping and falling in a doctor's office is an example of - Answer: Premises Liability The act of transferring an insurance policy to another interest is - Answer: known as assignment, and may be done only with the insurance company's written consent. A consequential loss can be described as - Answer: an indirect loss Which of the following formulas expresses how actual cash value (ACV) is determined? - Answer: Replacement cost minus depreciation equals ACV A document attached to an insurance policy that amends the original contract is called - Answer: an endorsement The type of risk that exists as a consequence of an individual's personal actions toward others is a/an - Answer: liability risk. What law gives consumers recourse if they are denied insurance on the basis of information contained in their credit reports? - Answer: Fair Credit Reporting Act Which of the following would be considered an indirect, or consequential loss under a Homeowner's policy? - Answer: The cost of a hotel room after an insured loss to the home. Which Homeowner's policy provides broad form coverage on BOTH the dwelling and personal property? - Answer: HO-
The part of the policy that eliminates coverage for items better covered elsewhere is called the - Answer: Exclusions. When looking at automobile liability "split" limits, the first two numbers refer to - Answer: bodily injury. What type of insurance covers damage to goods in transit? - Answer: Marine An agency where the producer represents only one insurance company is a/an - Answer: exclusive agency. In Liability policies, Supplementary Payments - Answer: are paid in addition to the policy's limit of liability. Which section of the Personal Auto policy covers breakage of glass by a flying bird? - Answer: Other than Collision section If a company issues an auto collision coverage contract which excludes collisions, the company has violated the doctrine of - Answer: Reasonable Expectations Which statement regarding the Alabama Insurance Guaranty Association is FALSE? - Answer: Offering to give a prospect anything of value not specified in the contract to persuade the prospect to purchase the insurance is: - Answer: rebating. An insurance producer must inform the Alabama Commissioner of Insurance of a change in the licensee's legal name or address within __________ days of change - Answer: 30
C. In Alabama, the minimum limits of uninsured motorist coverage for bodily injury are $25, per person and $50,000 per accident D. All of the above - Answer: All of the above Which of the following is true concerning insurable interest in a policy providing property insurance? - Answer: Hired autos and non-owned autos - Answer: are covered by the by the Business Auto policy at the insured's option by adding the appropriate symbols, 8 & 9. Which of the following would NOT be considered a covered auto under the Personal Auto policy? - Answer: A car owned by the insured's employer that the insured drives while making sales calls. Under a Personal Auto policy with NO ENDORESEMENT, when the insured's car breaks down and the car must be towed at a cost of $50, the loss is covered as A. an Other Than Collision loss B. a Collision loss C. Either A or B D. Neither A or B - Answer: Neither A or B In Alabama, by giving the proper notice an insurer can cancel an automobile insurance policy of A. nonpayment of premium B. using alcoholic beverages to excess C. being subject to epilepsy attacks D. all of the above - Answer: all of the above.
A flood would NOT be a covered loss in an unendorsed Homeowners policy. In which section of the policy would a Named Insured locate that information? - Answer: Exclusions Why do property policies exclude flood? - Answer: Flood exposures subject the insurance company to Adverse Selection Which of the following statement about binders is CORRECT? - Answer: A binder is designed to provide temporary insurance coverage. Harry borrows Tom's car and is at fault for injuring Paula and damaging her car. Whose policy pays? - Answer: Tom's is primary and Harry's is excess In the context of a surety bond, the party issuing the bond is called the - Answer: surety The part of an insurance policy indicates losses that are not covered - Answer: exclusions In an Homeowner's policy, wall-to-wall carpeting is insured under which coverage? - Answer: Dwelling What type of surety bond is used to bond guardians, administrators, and executors appointed by a court to manage the property or affairs of others? a. contract bond b. fidelity bond c. fiduciary bond d. public officials bond - Answer: fuduciary bond
c. coverage under Alabama Assigned Risk Plan d. all of the above - Answer: coverage under the Alabama Assigned Risk Plans The top priority of ANY level of FORTIFIED designation is: - Answer: The roof Coverage A under a standard Homeowner's policy contains coverage for - Answer: the dwelling and all permanent attachments Mary was injured when she was struck by a car. The driver, who cannot be identified, left the scene of the accident. Which part of Mary's Personal Auto policy will pay for her medical bills? - Answer: Uninsured Motorists An unendorsed DP-1 covers which of the following? - Answer: Basic perils for the dwelling and personal property. Under a Personal Auto policy, the insured's bankruptcy - Answer: does not relieve the company of its responsibilities. Which of the following is correct regarding liability coverage under an unendorsed HOMEOWNER'S policy for claims arising from the use of watercraft? - Answer: An HO policy provides liability coverage for claims arising from the use of watercraft for boats owned by the insured that are less than 26ft in length or are powered by motors with 25 total horsepower or less. Under the Personal Auto policy, Coverage D (Damage to Your Auto) is - Answer: optional coverage What is the purpose of Expediting Expense coverage under an Equipment Breakdown policy? - Answer: To cover the cost of rushing the repair or replacement of insured property.
Liability that is imposed as a matter of law without any regards to negligence is - Answer: Strict liability A policy written under a Homeowner's program has a building coverage limit of $80,000. How much Personal Property coverage is automatically available? - Answer: $40,000 [50%] In Alabama, the minimum limits of Uninsured Motorist coverage are - Answer: $25,000 per person and $50,000 per accident for bodily injury In Alabama, an applicant who fails two examinations for the same line of authority must wait at least ___________to take another exam for that line of authority - Answer: three months The type of Professional Liability policy an insurance agent needs is - Answer: Errors and Omissions insurance Which is a common term used to describe liability losses? - Answer: third party losses A liability policy has one policy limit that applies to both bodily injury and property damage losses. This is an example of a - Answer: single limit policy Liability insurance provides coverage for damages arising out of - Answer: unintentional torts Purposely planning a loss to collect on an insurance policy is an example of - Answer: MORAL hazard What type of insurance policy insures against any loss that is not excluded? - Answer: Open peril policy Under a Fidelity Bond known as the the - Answer: Obligee
