2024 Edition

Property and Casualty Insurance Agent Licensing Practice Exam

Take this free practice test to get an idea of what is on your state's property and casualty insurance agent licensing exam.

As an insurance agent, one is allowed to offer many different lines of coverage – provided that the required training and testing qualifications have been met. Those who wish to sell property and casualty insurance are required to possess the proper licensing for each state in which they conduct business. In order to obtain a P&C insurance license, individuals must take and successfully pass an exam that is offered by the state licensing boards.

The actual exam tests your knowledge, skills and abilities in: Types of policies, bonds, and related terms, Insurance terms and related concepts, and Policy provisions and contract law under national and state insurance law.

To prepare for your licensing exam, use our full-length 500 question Property & Casulty Insurance Agent Practice Exam with answers fully explained for ideal study.
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Insurance Terms and Related Concepts

1.	Which of the following statements about personal liability coverage (Coverage E) of an unendorsed HO-3 homeowners policy is true?
		a. Coverage is written on an accident basis.
		b. Coverage is provided for bodily injury liability.
		c. Coverage is provided for business and professional liability.
		d. Coverage is provided for personal injury liability.
Coverage is provided for bodily injury liability. In addition, coverage is written to cover the negligence of the insured. Business and professional liability and personal injury are excluded. Incorrect answer. Please choose another answer.

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2.	The term for an insurance company that is not backed by a state government is called:
		a. Alien company
		b. An admitted company
		c. A non-admitted company
		d. Bailee
A non-admitted insurer is an insurance company not authorized by a state government to do business in that state. As such, the company does not have to follow any state regulations. A couple of drawbacks to a non-admitted insurance company are claims are not guaranteed to be paid if the insurer becomes insolvent and insureds can't appeal a case to the state insurance department. An alien insurance company is located in a different country than where they provide coverage. An admitted company is authorized by a state government, and a bailee takes possession of goods but doesn't own them. Incorrect answer. Please choose another answer.

3.	A condominium owner installed wall-to-wall carpeting over the hardwood floors in their unit. If there was a total loss, the carpeting would be covered as:
		a. Improvements and betterments
		b. Personal property
		c. Common property
		d. Supplementary payments
Improvements and betterments are fixtures, additions, alternations, and installations that a homeowner or tenant makes to a part of the building. Examples of improvements and betterments are permanently installed bookcases, cabinets, countertops, partitions, etc. Personal property is property that belongs to the property owner, and common property refers to property owned by a group of individuals such as lobbies and hallways in a condominium unit. Supplementary payments refers to special payments an insurance company makes to an insured such as legal and defense costs. Incorrect answer. Please choose another answer.

4.	A home buyer learns they need to get insurance on the home they are buying before the closing. They apply for a policy and learn that the policy may not issue until a week or so after the closing. What document would the insurance agent give the customer to show proof of homeowner insurance on the date of the closing?
		a. Declarations
		b. Binder
		c. Good faith
		d. Coinsurance
A binder is a legal contract that shows the insurance company agrees to provide coverage until the actual policy has gone through underwriting and is approved for issuance. Coverage under a binder usually lasts between 30-90 days. The declarations page includes essential information about the policy such as the insured, coverage, and coverage effective dates. Good faith refers to the concept of an insurance company acting honestly and reasonably when processing claims. Coinsurance refers to cost-sharing where an insured must pay a portion of a covered expense. Incorrect answer. Please choose another answer.

5.	An applicant for a DP-3 landlord policy told the insurance agent their rental property was rented on a long-term lease. An insurance investigation showed that the property had been vacant for a year. What is the insurance term for the insured's actions?
		a. Endorsement
		b. Subrogation
		c. Indemnification
		d. Representation
Representation is what the insured states on an insurance application. The failure to properly represent the facts could cause a claim to be denied or could lead to fraud charges. An endorsement is a rider to a policy that adds a benefit or changes coverage. Subrogation refers to the ability of an insurance company to go after a third party that caused a loss to recoup costs they paid to an insured. Indemnification refers to an insurance company compensating an insured after a loss. Incorrect answer. Please choose another answer.

6.	A homeowner wanted insurance to cover a potential water backup in their basement. What would they need to do to get this type of coverage?
		a. Nothing. Water backup is never covered under homeowner policies
		b. Nothing. Water backup is automatically covered under all HO policies
		c. Add an endorsement to cover water backup
		d. Purchase a flood insurance policy
He would have to add an endorsement to cover water backup. Water backup is excluded from most homeowner policies, but it can usually be added by endorsement for an additional premium. A flood insurance policy wouldn't cover this type of loss as it only covers damage due to surface water. Incorrect answer. Please choose another answer.

7.	___________ refers to what had the most significant impact in causing the loss, when two or more perils, independently, bring about the loss at the same time. It also considers whether the insured peril caused it.
		a. Legal liability
		b. Proximate cause
		c. Time element loss
		d. Personal loss
Proximate cause. Legal liability has to do with negligent damages to another party. Time element loss is a type of business income loss. Personal loss is a general term that is not applicable. Incorrect answer. Please choose another answer.

8.	Covered costs under a liability policy aside from the costs paid for any injuries or damages are:
		a. Ancillary costs
		b. Supplemental costs
		c. Consequential costs
		d. Aleatory costs
Supplemental costs are paid to the insured in addition to the policy's liability limits. Examples include: paying for an attorney and lost earnings for appearing in court. The other options A, C, and D are terms not associated with liability policies. Incorrect answer. Please choose another answer.

9.	Michelle, who lives in a subdivision with a Homeowners' Association, had a large living oak tree blow down in a windstorm and damage her neighbor's Porsche. She has an unendorsed Special Form HO-3 homeowners' policy and a $1 million-dollar personal umbrella policy. Under which policy can the neighbor expect to find coverage for his loss?
		a. Michelle's homeowners' policy
		b. Michelle's umbrella policy
		c. The neighbors personal auto policy
		d. The Homeowners' Association commercial general liability policy.
Michelle is not legally liable for damage caused by a windstorm to a living, healthy tree. The neighbor would need to seek relief under the "other than collision" section of his personal auto policy. Incorrect answer. Please choose another answer.

10.	Something that might increase the likelihood that a loss will occur is called a:
		a. Catastrophe
		b. Risk
		c. Hazard
		d. Peril
Hazard. A catastrophe causes sudden damage. A peril is a cause of loss. Risk is the uncertainty arising from the possible occurrence of given events that would result in a loss with no opportunity for gain. Incorrect answer. Please choose another answer.

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11.	A device that is used to minimize small claims and lower premiums is called a(n):
		a. Transfer of risk
		b. Deductible
		c. Coinsurance
		d. Arbitration
Deductible. Transfer of risk is transferring the risk to another party, such as an insurance company. Coinsurance requires you to carry coverage for a certain percentage of your property's value. Arbitration is when an independent third party settles a claim dispute. Incorrect answer. Please choose another answer.

12.	Which homeowners policy is not designed for owner-occupied dwellings?
		a. HO-3
		b. HO-8
		c. HO-4
		d. HO-5
HO-4 policies are designed for those renting a dwelling. HO-3, HO-5, and HO-8 policy forms are intended for owner-occupied dwellings. Incorrect answer. Please choose another answer.

13.	Another name for compensatory damages is:
		a. Punitive
		b. General
		c. Broad
		d. Actual
Compensatory (or Actual) damages reimburse a party for a loss sustained in order to make the party whole. Punitive damages are damages exceeding simple compensation and serve to punish the defendant. General damages are damages which exceed simple compensation and awarded to punish the defendant. Broad damages are not a particular type of legal damage. Incorrect answer. Please choose another answer.

14.	Rex has a personal auto policy with bodily injury liability limits of $100,000 per person, $300,000 per accident, and property damage limit of $100,000. His personal umbrella policy has a limit of $1,000,000 and requires underlying auto limits to be $250,000 per person, $500,000 per accident for bodily injury, and $100,000 for property damage. Rex is found negligent in a car accident. The jury awards the plaintiff a total of $950,000 in damages, of which $150,000 were for the claimant's 2018 Bentley automobile. How much will the umbrella pay for this loss?
		a. $950,000
		b. $800,000
		c. $550,000
		d. $150,000
$800,000. The bodily injury award is $800,000 ($950,000 - $150,000 - the value of the property damaged Bentley) since Rex was supposed to carry a $250,000 BI limit on his auto but only carried $100,000. There is a coverage gap of $150,000 so that brings the BI claim payment to $650,000. Rex carried the required $100,000 PD limit on his auto, so the umbrella pays in full for it. $650,000 + $150,000 = $800,000. Incorrect answer. Please choose another answer.

15.	Jeff Smith has a personal auto policy. Select the coverage that would apply when a deer leaps in front of his car and causes damage.
		a. Comprehensive/other than collision
		b. Collision
		c. Medical payments
		d. Liability
Comprehensive, also known as 'other than collision,' is the part of the policy that responds to damage from birds or animals. The collision portion of the policy responds to collisions that are not bird or animal-related. Medical payments pay for a medical expense, not physical damage to the auto. Likewise, liability pays for damage to another party, not the insured vehicle. Incorrect answer. Please choose another answer.

16.	A hazard where a party protected from risk acts differently than if they did not have protection is called what?
		a. Moral hazard
		b. Legal hazard
		c. Morale hazard
		d. Physical hazard
Moral hazard. Legal hazards could cause a loss due to legal issues. Morale hazard relates to a person's attitude about their belongings. Physical hazards are conditions, behaviors, or actions that contribute to a loss. Incorrect answer. Please choose another answer.

Types of Policies

17.	All of the following are basic perils covered under all Homeowners' policies except:
		a. Fire or smoke
		b. Vandalism
		c. Riots and civil commotion
		d. Falling objects
Falling objects are not a covered peril under a basic HO-1 policy form. A,B, and C are listed perils covered under the HO-1 policy form. Incorrect answer. Please choose another answer.

18.	Which of the following statements about DP-3 policies is false?
		a. It covers the structure for open perils.
		b. It covers loss of rents.
		c. It covers other structures such as a fence, shed, or detached garage.
		d. It pays for losses to the structure at actual cash value.
A DP-3 policy covers the structure for replacement cost. It's an all-risk policy that covers loss of rents and other structures. A DP-2 also pays for losses to the structure at replacement cost, and a DP-1 pays for losses to the structure for actual cash value. Incorrect answer. Please choose another answer.

19.	A homeowner owns a 100-year-old log cabin in the woods with no electricity, heating, air conditioning, or plumbing. The home is in reasonably good condition and it is owner-occupied. The owner gets water from an outdoor pump and uses an outhouse. The home has a wood-burning stove for heat. What type of homeowner policy is appropriate for this home?
		a. HO-3
		b. HO-5
		c. HO-6
		d. HO-8
The HO-8 is a modified coverage form. The home described would cost more to replace than the value of the home. Due to its outdated construction and lack of modern utilities, this home wouldn't qualify for a standard HO-3 or HO-5 policy which are standard homeowner policies. An HO-6 is a condo-owner policy. Incorrect answer. Please choose another answer.

20.	A driver swerved to avoid hitting a car that was backing out of a parking lot and hit a telephone pole. The driver and one of the passengers took an ambulance to the emergency room to be treated for minor injuries. What part of a personal auto insurance policy would respond to the loss concerning injuries?
		a. Medical payments or personal injury protection (PIP)
		b. Bodily injury
		c. Comprehensive
		d. Collision
Depending on which state the driver was insured in, injuries for the driver and passenger are covered under medical payments or PIP on their own policy. These coverages pay regardless of fault. Bodily injury refers to liability coverage for others if an insured causes an accident. Comprehensive auto insurance covers the insured's vehicle for non-collision events such as hitting an animal, hail damage, falling objects, glass breakage, etc. Collision covers the insured's vehicle for damage due to a collision. Incorrect answer. Please choose another answer.

21.	A cyber liability insurance policy covers all of the following except:
		a. Legal defense expenses
		b. Loss of sales
		c. Forensic investigations
		d. Crisis management expenses
A cyber liability insurance policy generally covers most costs connected with a data breach or other cybercrime. It covers legal defense costs, the costs to investigate a cyberattack, and crisis management costs to manage the negative effects such as notifying affected individuals, making provisions to monitor their credit, and setting up a call center, etc. Individual policies may differ slightly, but none of them cover the loss of income due to a system shutdown a cyberattack, or data breach. Incorrect answer. Please choose another answer.

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22.	A sudden hailstorm severely damaged ten cars in an employer's parking lot. Which type of insurance would respond to the loss?
		a. The employer's commercial auto policy
		b. Each car owner's personal auto policy
		c. The employer's commercial general liability policy
		d. Nothing. Hail damage isn't covered for autos.
The comprehensive portion of each car owner's policy would cover the loss. However, if a car owner didn't purchase comprehensive insurance, there would be no coverage for the loss. A commercial auto policy wouldn't cover the loss because the company doesn't own the cars. Commercial general liability covers bodily injury and property damage caused by the company, so it wouldn't cover in this situation. Hail damage may be covered under the comprehensive portion of a personal auto policy provided the insured purchased the coverage. Incorrect answer. Please choose another answer.

23.	George's rental home is covered under a basic dwelling form DP-1 policy. The weight of snow and ice causes $15,000 of damage to his roof, $10,000 of damage to his interior walls, and $2,000 of damage to the tenants' contents. George has a $1,000 deductible. What is the total dollar amount of damage covered under his policy?
		a. $15,000
		b. $10,000
		c. $27,000
		d. This is not a covered peril under DP-1.
Weight of snow or ice is not a covered peril under a basic form DP-1. Incorrect answer. Please choose another answer.

24.	Jenny's Flower Shop has an unendorsed Business Owners Policy (BOP), and an unendorsed commercial auto policy in force. Deb, one of Jenny's employees, takes her personal vehicle to the bank to make a deposit for Jenny's Flowers. En route, Deb hits a pedestrian in the bank parking lot while the pedestrian is getting out of her car, causing permanent bodily injury to the pedestrian. Which policy will respond to the loss?
		a. The pedestrian's personal auto policy
		b. Jenny's Business Owners Policy
		c. Jenny's commercial auto policy
		d. The bank's commercial liability policy
The medical or no-fault section of the pedestrian's personal auto policy will respond. Because Jenny's BOP and commercial auto policy were not endorsed to extend coverage to non-owned auto exposures, neither will respond. The bank had no contributing factors that led to the accident, and is therefore not negligent. If it were winter in Fargo, ND, for example, and the bank parking lot was covered in ice and contributed to the accident, the bank may be found negligent. Incorrect answer. Please choose another answer.

25.	The ABC Construction Company is transporting a crane to a building under construction in the city. While en route, the boom hits a utility pole, knocking out power to a popular steakhouse restaurant and causing it to close and suffer a loss of income. Which one of ABC's insurance policies will respond to the loss?
		a. Commercial Auto
		b. Commercial Inland Marine
		c. Commercial General Liability
		d. Contractors Bond
The property damage section of a commercial general liability policy will respond to the loss. Property damage means physical injury to tangible property, including the loss of use of property. Commercial inland marine policies respond to the theft of scheduled equipment. Commercial property responds to property losses at the business location only. Commercial Auto responds to commercial auto only. Incorrect answer. Please choose another answer.

26.	Under an HO-3 homeowners policy coverage, C - personal property is covered in which countries?
		a. North America
		b. United States
		c. United States, Canada, and Mexico
		d. Worldwide
Personal property is covered worldwide. For example, if your personal property is stolen while on vacation in Italy, it is covered as if it were stolen from your home in the United States. Incorrect answer. Please choose another answer.

27.	Hank's Excavating Company has a bulldozer worth $200,000 which is stolen off the back of one of the company's flatbed trailers parked overnight at a job site. Which one of Hank's insurance policies will respond to the loss?
		a. Commercial Inland Marine
		b. Commercial Property
		c. Commercial General
		d. Commercial Auto
Commercial inland marine policies respond to theft of scheduled equipment. Commercial inland marine policies respond to the theft of scheduled equipment. Commercial property responds to property losses at the business location only. Commercial General Liability does not respond to property losses. Commercial Auto responds to commercial auto, not equipment. Incorrect answer. Please choose another answer.

Policy Provisions and Contract Law

28.	What is a statement of fact given to an insurer by the insured concerning the insured's risk, which, if untrue, voids the policy?
		a. Warranty
		b. Waiver of subrogation
		c. Representation
		d. Estoppel
Warranty. Waiver of subrogation is giving up a right to recovery. Representation is a statement made on an application that the application is accurate to the best of the insured's knowledge. Incorrect answer. Please choose another answer.

29.	A policy provision that holds that an insurance company agrees to pay for losses according to the policy, defend the insured in a liability lawsuit, and provide certain other services is called:
		a. Insuring agreement
		b. Limitations
		c. Insurable interest
		d. Rider
Insurance policies are legal contracts. The insuring agreement is an important part of the contract that describes the insurance company's responsibilities to the insured in exchange for the insured paying premiums. Conditions, exclusions, and additions modify the description further. Limitations refers to the maximum amount of money a policy will pay toward a certain type of coverage. Insurable interest refers to a third party that has an economic stake in insured property that would result in financial hardship if it was destroyed. A rider is an add-on to a policy that either adds a benefit or amends the terms of a policy. Incorrect answer. Please choose another answer.

30.	All of the following are considered duties of the insured after a loss in an insurance contract except:
		a. Cooperate with the insurance company
		b. Notify the insurance company promptly
		c. Protect the property from further damage
		d. Notifying the police regardless of the cause of loss
After a loss, insureds are required to notify the insurance company, cooperate with the adjuster, protect their property and keep accurate reports of property and receipts. Insureds must notify the police if the cause of loss is theft, but it's not necessary to notify them otherwise. Incorrect answer. Please choose another answer.

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31.	A married couple turned their passenger van into a camper van. They sold their home and decided to live in the van as their primary residence as they toured the country. What type of insurance is appropriate to insure their van and their personal property?
		a. A homeowner's insurance policy
		b. Their auto insurance policy
		c. An RV insurance policy
		d. A tenant policy
Homeowners and auto insurance policies carry exclusions for using a vehicle as a primary residence. A tenant policy would not cover the vehicle. An RV insurance policy would cover liability, the vehicle and the contents. Incorrect answer. Please choose another answer.

32.	What type of coverage does a business owner need to insure all drivers of fleet vehicles on their commercial auto policy?
		a. Additional coverage is not needed as all drivers are automatically covered
		b. Supplementary coverage
		c. Blanket additional insureds endorsement
		d. Contractual liability
A blanket additional insureds endorsement is a rider that provides the same coverage for all additional insureds. This is common coverage for commercial auto policies so that all new drivers are automatically covered. Additional coverage refers to coverage that extends beyond the basic coverage or increases the limits stated in the policy. Supplementary coverage is extra coverage an insured can purchase to enhance their policy. Contractual liability refers to coverage for liability an insured assumes as a result of entering into a contract. Incorrect answer. Please choose another answer.

33.	A provision that states that the insurance company will pay to restore a pair or set of items to its original value before the loss took place is called:
		a. Indemnification clause
		b. A pair-and-set clause
		c. Severability clause
		d. Limit of liability clause
A pair or set of items are worth less when one part is damaged or missing. A pair-and-set clause is designed to pay an insured for the value of the entire set when one part is damaged or missing and a replacement item cannot be found. If the insurance company replaces the whole set, they must generally surrender the undamaged item to the insurer. An indemnification clause refers to the insurance company promising to pay for losses as stated in the policy. A severability clause refers to the concept of an insurance company insuring each covered individual as if the company issued a separate policy to each of them. A limit of liability clause states a specific maximum limit the insurance company is required to pay for a covered loss. Incorrect answer. Please choose another answer.

34.	All of the following are excluded under a HO-3 homeowners' policy, except:
		a. Theft
		b. Earth movement
		c. Neglect
		d. War
Theft is covered under an HO-3 policy. Earth movement, neglect, and war are all excluded. Incorrect answer. Please choose another answer.

35.	Joey did not pay his auto insurance premium and as a result, his coverage lapsed. This is an example of what policy provision?
		a. Cancelation
		b. Non-renewal
		c. Punitive
		d. Comprehensive
Cancelation. The insurance company has the right to cancel for nonpayment of premium. Non-renewal is when the insurance carrier sends out advance warning that they will no longer offer coverage, effective on the next renewal date. Punitive and comprehensive to not apply to this scenario. Incorrect answer. Please choose another answer.

36.	This form states that you own a specific item or items.
		a. Loss cost
		b. Policy record
		c. Proof of loss
		d. Supplementary
Proof of loss. Loss cost is a term used in determining a loss ratio. Policy record and supplementary do not apply. Incorrect answer. Please choose another answer.

37.	Sam was stopped at a traffic light and was rear ended by another driver. The driver of the other vehicle was given a citation by police. Sam turned in a claim with his insurance company and they paid to repair Sam's car. The insurance company can recoup its claim cost by what policy provision?
		a. Subrogation
		b. Proof of loss
		c. Declaration
		d. Estoppel
Subrogation. Proof of loss is a form filed with the insurance company after a loss. Declaration is the page of the policy with the insured's name, address, and coverage limits. Estoppel is when you go against what you previously stated. Incorrect answer. Please choose another answer.

38.	A form that documents damaged or destroyed items is:
		a. A list of Contents
		b. Proof of loss
		c. Conditions
		d. Declarations
Proof of loss. A list of contents is often used to determine the amount of coverage needed. Conditions lists general requirements that the insured must meet. Declarations lists name, address, and coverage amounts. Incorrect answer. Please choose another answer.

39.	Which part of an insurance policy lists the name and address of the named insured on the policy?
		a. Conditions
		b. Exclusions
		c. Insuring agreement
		d. Declarations
The declarations page lists the name and address of the named insured. Typically, states will declare the requirements that must be met for the coverage to be valid. The Exclusions section lists what is not covered under the policy. The Insuring Agreement is where the insurer agrees to certain conditions, like pay for claims. Incorrect answer. Please choose another answer.

40.	An insurance policy is a contract between:
		a. The insured, the insurer, and the agent
		b. The insured and the insurer
		c. The insured and the agent
		d. The insured and all third parties
Insurance contracts are between an insured and an insurer. Incorrect answer. Please choose another answer.

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Types of Policies, Bonds, and Related Items

41.	Eric's bike shop has a business owner's policy (BOP). Eric runs an ad in the local newspaper indicating that Mike's Bikes sells inferior products. As a result, Mike's Bikes sues Eric's bike shop. Which of the following will provide coverage for any liability incurred by Eric's bike shop?
		a. Loss of Income
		b. Professional liability
		c. Copyright coverage
		d. Advertising injury
Advertising injury liability provides coverage for insured expenses, such as defense costs as well as damages if an insured is found liable for libel or slander. Loss of income is property coverage, not liability coverage. Professional liability coverage covers professionals like doctors, lawyers, architects, and others for errors caused while performing their occupation. There is no copyright infringement in this scenario. Incorrect answer. Please choose another answer.

42.	When a covered automobile is damaged in an accident which causes it to be unusable for a period of time, a personal auto policy will provide coverage for transportation expenses at the rate of $20 per day for up to how much total?
		a. $300
		b. $500
		c. $750
		d. $1,000
A personal auto policy pays up to $20 per day for 15 days for the loss of use of a covered auto. Incorrect answer. Please choose another answer.

43.	If an insurer decides not to renew a Commercial General Liability policy, how many days' notice must they give the first named insured?
		a. 14 days
		b. 30 days
		c. 60 days
		d. 90 days
If an insurance company decides not to renew a Commercial General Liability policy, they must give the named insured notice of the decision at least 30 days before the termination of the policy. Incorrect answer. Please choose another answer.

44.	This employer coverage pays wage and medical benefits to workers who become injured or ill while on the job. Each state mandates coverage and the wages and medical benefits differ from state to state.
		a. Group medical
		b. General liability
		c. Workers' compensation
		d. Loss of use
Workers' compensation. Group medical does not respond to work related injuries or sickness, nor does it pay lost wages. General liability pays for damage to another party when the insured is negligent. Loss of use is paid when you cannot use your vehicle. Incorrect answer. Please choose another answer.

45.	A new insurance agent tells his client that he has bound coverage on his home. However, he did not follow through with binding coverage making it an ineligible risk. His home burns down. Where can the homeowner seek coverage?
		a. The agent's professional liability policy
		b. The agent's general liability policy
		c. The agent's personal umbrella policy
		d. The mortgage company who required home insurance
The agent's professional liability policy, aka the "errors and omissions policy." General liability and personal liability policies do not respond to professional liability claims. The mortgage company has no negligence in this situation and is not responsible. Incorrect answer. Please choose another answer.

46.	Mr. Smith found out that an employee had been stealing money from the cash register. Fortunately, Mr. Smith had purchased a bond that protected his business from this type of criminal activity. What kind of bond did Mr. Smith purchase?
		a. Surety bond
		b. Fidelity bond
		c. Agency bond
		d. Convertible bond
Fidelity means faithful or loyal. A fidelity bond protects business owners against dishonest acts by their employees. This includes fraud, embezzlement, misappropriation, wrongful conversion, larceny, willful misapplication, theft, and other acts of dishonesty. A surety bond is a contract between the surety, principal, and obligee to ensure that a contract will be fulfilled. An agency bond is a bond issued by a government body that finances activities that are related to public purposes. A convertible bond is fixed-income debt security that can be converted into equity shares or common stock and pays interest. Incorrect answer. Please choose another answer.

47.	A farm owner's policy covers all of the following except:
		a. The farmer's home
		b. The farmer's personal property and liability
		c. The farming operation's property and liability
		d. Crops growing in the field
In most cases, the farmer's home is located on the farm property. A farm owner's policy is designed to protect the farmer's property and liability for their home and their farming operations. The farmer's spouse and children would also be covered as insureds under a farm owner's policy. Farmers must purchase crop insurance to cover crops growing in fields. Incorrect answer. Please choose another answer.

48.	A customer entered the garage of an auto mechanic shop to speak to a mechanic about their car. The customer slipped and fell on an oil spill and had to be taken to the emergency room for treatment. What type of commercial insurance would have covered this type of loss?
		a. Garage liability
		b. Garage keepers insurance
		c. Medical payments
		d. Commercial auto insurance
Garage liability covers others for bodily injury due to an accident on company property. By contrast, garage keepers insurance covers someone else's autos or other property while it is in the care of the garage owner. Medical payments refers to coverage a business owner can add onto a commercial auto policy to cover the driver and passengers of a commercial vehicle. Incorrect answer. Please choose another answer.

49.	What are the three parties to a bond?
		a. The obligee, surety and the principal
		b. The shipper, the consignee and the carrier
		c. The insured, the insurer and a third party
		d. A contractor, subcontractor and the insurance company
The obligee is the party who requires someone to get a surety bond. The principal is the person who is obligated to a creditor, and the surety is the person who is responsible for paying if the principal defaults on payment or agreed actions. A shipper ships goods, a carrier transports them, and a consignee is the final recipient of goods. The insured is the party being insured; the insurer is the insurance company; and a third party is anyone else. A contractor is a person hired to perform tasks for a construction project; a subcontractor is hired by a contractor; and the insurance company may insure them both. Incorrect answer. Please choose another answer.

50.	A business owner learned that the government would be shutting down the road to his business for several weeks for road construction. The business was located on a dead-end street and customers would not be able to reach the business during the construction. What type of commercial insurance would protect the business?
		a. Employment practices liability
		b. Ordinance or law
		c. Business interruption
		d. Commercial general liability
Business interruption insurance is also known as business income insurance. It pays for losses where a business must temporarily close due to a covered loss. It may cover loss of revenue, mortgage/rent/lease payments, taxes, payroll, relocation, extra expenses, and training costs. Employment practices liability refers to insurance coverage that pays for losses where workers claim the company violated their rights. Ordinance or law coverage pays for the increased costs of repairing or rebuilding a building after a covered loss to meet the current building codes. Commercial general liability pays for losses due to bodily injury, property damage, and personal injury when caused by a business's products or operations or injuries that happen on company property. Incorrect answer. Please choose another answer.

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