To become a Texas insurance agent, you must:
Pass an exam
A real estate agent gave his client an incorrect price of a home, what policy will cover that?
Professional
A professional liability policy would cover if a real estate agent gave his client an incorrect price of a home. The specific type of professional liability policy that the agent would want is an errors and omissions policy (E&O).
Which party to a performance bond makes the guarantee?
Surety
The surety makes the guarantee on a performance bond. The surety is the insurer. The principal performs. The surety guarantees to the obligee that the principal will perform.
A broker who sells surplus lines insurance:
Represents a surplus lines insurer
Surplus lines insurers, such as Lloyds of London, appoint surplus lines brokers to handle their business. A bond is required to guarantee payment of the premium taxes to the state, which are collected locally. Surplus lines companies operate with very little state regulation and are exempt from obtaining a certificate of authority. Surplus lines brokers must be licensed by the state.
What type of a bond guarantees a job will be completed on time per the terms of the contract?
A performance bond
A performance bond guarantees that a job will be complete on time per the terms of the contract.
Directors and officers (D&O) liability covers all of the following EXCEPT:
IRS fine for tax evasion
D&O liability is a type of professional liability, which excludes dishonesty. It covers directors and officers of corporations who are sued as individuals by their stockholders.
E&O insurance that includes bodily injury and property damage would be purchased by:
An architect or engineer
E&O is purchased by insurance agents, lawyers and realtors to cover financial losses their clients may suffer. However, E&O purchased by an architect or engineer also covers BI and PD due to their negligence that could cause injury to others or damage to the property of others.
All are excluded on a professional liability policy EXCEPT:
Negligence
Professional liability policies cover the insured's legal liability resulting from negligence, errors and omissions and other aspects of rendering or failure to render professional services. Fraud, dishonesty and criminal activities are not covered.
On a professional liability policy written for a doctor, the insurer wants to settle without going to court. Which of the following is true about this situation?
They cannot do so without the insured's consent to settle
Under a surety bond, the obligee is the party who:
Will be paid damages if default occurs
If a company wants to self-insure for workers' compensation, they must do which of the following?
Obtain permission from the department of workers' compensation
In order for a business to self-insure for their workers' compensation coverage an employer would need permission of the Department of Workers' Compensation. In order to obtain permission, the business must post a bond, usually a minimum of $100,000.
For total disability, a workers' compensation policy will pay how much?
66 2/3% of the injured employee's wages, up to certain maximums.
For total disability a workers' compensation policy will pay 66 2/3% of the injured employee's wages, up to certain maximums.
If you are injured on the job, workers' compensation will pay up to _____ of average weekly wages:
66 2/3%
Workers' compensation covers medical bills (without limit), disability income (up to 66 2/3% of average weekly wages), rehabilitation, dismemberment, death and survivors benefits. Coverages are statutory and vary by state.
Workers' compensation does not cover:
Punitive damages
: Workers' compensation policies do not cover punitive damages.
Workers' compensation medical benefits:
Have no dollar or time limit on covered expenses
Medical benefits under workers' compensation are payable without a dollar or time limit.
All are true about workers' compensation EXCEPT:
Medical benefits are subject to a statutory maximum amount
Although there are maximum limits on disability income and various other workers' compensation coverages, coverage for medical bills is provided without limits.
Generally, an employer is required by state law to carry workers' compensation insurance if it has _____ or more employees
1
Usually employers must carry workers' compensation coverage for one or more employees although certain employees are exempt, including sole proprietors, partners and casual laborers. Casual labor is performed by the neighbor kid mowing your lawn or by your housekeeper.
All of the following are true regarding workers' compensation laws EXCEPT:
The employee may not sue the employer in the event of injury
Workers' compensation is considered to be an exclusive remedy, in that
the employee is entitled to benefits under the law regardless of
fault. However, employees may give up their right to the statutory
coverages and file a law suit against their employer if the employer
was grossly negligent by purposely causing the employee's injury. Part
II of a workers' compensation policy, employer's liability, covers the
employer in this event.
All are true regarding workers' compensation coverage EXCEPT:
An injured worker must prove that the employer was negligent
Workers' compensation is no-fault coverage and the injured employee need not prove negligence in order to collect the statutory coverages
What happens when an employee violates posted safety precautions?
The insurer has to pay all claims regardless
Coverage is no-fault. The insurer must pay the claim of the injured worker regardless, although coverage may be denied if the injury or disease is intentionally caused by the employee, or results from intoxication on the job, or occurs during activities which are not part of the job.
Loss of income benefits on workers' compensation are usually covered to what percentage of gross income?
66 2/3
Workers' compensation employers liability does not cover bodily injury occurring in
Mexico
You may purchase workers' compensation from all of the following EXCEPT:
A reciprocal insurance exchange
An employer may usually comply with the workers' compensation law by:
Any of these
On a crime insurance policy, a crime requiring the threat of violence is:
Robbery
Robbery is a crime against a person and requires a threat of violence. Burglary is a crime against property and requires forcible signs of entry or exit.
The business auto coverage part automatically covers which of the following under the liability section?
Mobile equipment being transported or towed by the insured
Explanation: Read this question carefully. Note it is asking about coverage under the business auto coverage part, not the commercial general liability coverage part. The operation of mobile equipment is covered under the CGL for liability, but is not included under the definition of a covered auto on the business auto coverage part, unless it is being towed by or carried by a covered auto.
Under the business auto coverage part of a CPP, liability insurance is extended to cover mobile equipment of the insured while it is being:
Carried or towed by a covered auto
Explanation: Note the question is asking about the business auto coverage part, not the CGL. The business auto policy does extend liability insurance to mobile equipment automatically while it is being towed or carried by a covered auto.
Which type of crime coverage requires forcible signs of entry or exit?
Burglary
Explanation: Definitions are very important in crime insurance. Burglary is a crime against property that requires forcible entry or exit. Robbery is a crime against a person that requires a threat of violence. Theft is any act of stealing. Mysterious disappearance is the probability of theft. For example, a premises burglary policy would not provide any coverage if the door was left unlocked
Business auto may cover liability for all EXCEPT:
Front-end loaders
Explanation: A business auto policy makes a distinction between the definition of mobile equipment and autos. A front-end loader is considered to be mobile equipment and not covered. However, if mobile equipment is being carried or towed by a covered auto, coverage does apply. For example, a self-propelled cherry picker or similar device used to raise or lower workers is not covered. But, if the cherry picker was mounted on or carried by a covered auto, it would be covered.
Under business auto coverage, each of the following is true about classifications of covered autos EXCEPT:
Mobile equipment is considered to be covered as autos
Explanation: Mobile equipment is not covered on a business auto policy, except when it is towed by or carried by a covered auto. Mobile equipment, such as forklifts, should be covered under a commercial general liability (CGL) policy.
The name of the policy that is usually written on a blanket basis to protect auto dealers and repair shops for legal liability in the event a customer's car is damaged is called:
Garagekeepers legal liability
Explanation: Garagekeepers legal liability is a bailee type coverage that protects auto dealers, repair shops and parking lots for their liability arising out their temporary care, custody or control of a customer's car. A garage liability policy is a special policy designed to cover the unique liability of these same types of businesses, other than bailee's coverage which is excluded. The CGL has no coverage for auto liability. Business auto coverage insures customers who have either a fleet of autos or use their vehicles in pick up or delivery.
The name of the bailee type coverage that provides legal liability for damage to customers' cars that are left with the insured for service, repair or storage is:
Garagekeepers legal
Explanation: Since auto dealers, repair shops and parking lots are responsible for damages that could occur to their customer's cars while they are acting as bailees, they often purchase garagekeepers legal liability, which provides the needed physical damage coverages. To cover their BI and PD risk exposure related to premises and products liability, they may also purchase a garage liability policy, which is very similar to a CGL, except that it also covers their auto liability while operating their own or their customer's cars.
Garage liability coverage is broader than business auto liability coverage because it:
Provides some coverage for premises, products, and completed operations
Explanation: Garage liability is a special policy that covers the unique risk exposures presented by clients in the automobile business. For example, if you owned a car dealership, you would need premises and operations for your facility plus products liability for the activities of your mechanics. However, you would also need auto liability for your salespeople taking customers on test drives. All of these exposures are covered by a garage liability policy. If you also want coverage for damage to your customers cars left in your care, custody or control, you need to buy garagekeepers legal liability as well.
On a business auto policy (BAP), mobile equipment is:
Covered when carried or towed by a covered auto
Explanation: A business auto policy (BAP) does not cover mobile equipment (like a backhoe), except when carried or towed by a covered auto. However, a CGL will cover the operation of mobile equipment. If an insured does not have a CGL, his BAP may be endorsed to cover the operation of mobile equipment.
On a commercial crime policy, money is defined as all EXCEPT:
Evidence of debt
Explanation: Most commercial crime policies do not cover money. If they do, money is defined to include currency, coins and travelers checks. Evidence of debt (also known as a promissory note) is not included within the definition of money.
Under the business auto coverage form, mobile equipment may:
Be covered for liability while being towed
On a commercial crime policy, the duties of the insured and the insurer are stated in the:
Conditions
An employee stealing goods and selling them for a profit would be covered by which policy?
Employee dishonesty
The broadest commercial crime policy is:
Theft, disappearance, and destruction
Employee dishonesty covers which of the following?
Employee pilferage
The definition of an insured's product under a CGL does not include which of the following?
Vending machines rented to others
Explanation: On a CGL, the definition of the insured's product does not include vending machines or other property rented to or located for the use of others, but not sold.
On a CGL, which coverage protects the insured for negligently causing BI or PD?
Correct Answer:
Premises liability
Explanation: Premises liability is covered under BI and PD, which is coverage A. Personal and advertising injury liability is covered under coverage B and medical to others is coverage C
To become a Texas insurance agent, you must
Pass an exam
Conditions for a corporate agency seeking a Texas insurance agent's license include:
All active corporate officers must have individual agent's licenses
If an agent's license is suspended or revoked, what happens to their accounts:
They continue in force
Which of the following is NOT considered an unfair practice
Paying dividends to policyholders out of a surplus accumulated from participating policies
Making false or malicious statements about the financial condition of an insurer or agent is what type of Unfair Trade Practice:
Defamation
A person appointed by an insurer to solicit or sell insurance on their behalf in this state is known as a(n):
Agent
The type of government primarily concerned with the regulation of insurance and insurance companies is
State government
Which of the following is NOT prohibited under the Unfair Practices section of insurance law:
Readjusting group premium rates based on loss or expense experience
Circulating deceptive sales material to the public is what type of Unfair Trade Practice:
Misleading advertising
Texas resident agents must complete _____ hours of continuing education every two years.
30
Sharing commissions is legal if:
The other party is licensed for the same lines of insurance you are
The Insurance Commissioner shall examine each established, authorized insurer in Texas no less than:
Once every five years
Explanation: All established, authorized insurers must go through a complete financial examination (audit) by representatives of the Commissioner's office at least once every five years, or more often as necessary to protect the public.
What is the maximum time a Texas insurance agent's license may be issued for:
Two years
Temporary licenses issued in Texas generally:
Expire in 90 days
Explanation: Temporary licenses expire in three months, or 90 days, and cannot be renewed
If a license is revoked, the licensee shall NOT be eligible for a new license:
For at least 5 years
Explanation: A revoked licensee must wait at least five years before attempting to re-qualify, and even then might not be successful
An agent who procures a license for the principal purpose of obtaining insurance for themselves, for family members or employees, violates the regulations prohibiting:
Controlled business
Explanation: Controlled business is insurance you write on yourself, your family or your employees. You can write some controlled business, but you cannot get a license to principally do so.
Which of the following is true concerning policy limits on a CGL?
Products and completed operations has the same per occurrence limit as premises and operations, but a separate aggregate limit
Explanation: On a CGL declarations page, the limits are shown as follows: the fire damage limit is per any one fire; the medical expense limit is per any one person; personal and advertising injury liability does have a separate policy limit; but products and premises liability are both subject to the same per occurrence limit, although products does have its own aggregate limit, which is usually lower than the general aggregate limit for premises.
What portion of a CGL would cover a waitress spilling hot soup on a customer that causes burns?
Products and completed operations
Explanation: If you are a waitperson, what is your product? Food, right? So it is products and completed operations liability that would apply if the server was to spill hot soup on a customer that causes burns.
In liability policies, supplementary payments:
Are payable in addition to the policy limit of liability
Explanation: Supplementary payments, such as the cost of bail bonds and loss of earnings incurred by an insured to assist the insurer in their investigation are always in addition to limits. A CGL covers loss of earnings up a maximum of $250 per day.
The most significant difference between the claims made and the occurrence forms of a general liability policy is:
What triggers the insurance coverage
Explanation: On a claims made form, coverage is triggered if the claim occurs during the policy period and is turned in during the policy period or the extended reporting period. On an occurrence form, coverage is triggered if the claim occurs during the policy period regardless of when it is turned in. Obviously, clients prefer occurrence forms.
On a claims made CGL, the supplemental extended reporting period:
Costs extra and must be added by endorsement
Explanation: The supplemental extended reporting form is of unlimited duration. It may be added by endorsement for an extra premium charge which may not exceed 200% of the annual premium. It must be requested by the first named insured within 60 days after policy expiration.
On a CGL, the aggregate limit on products and completed operations liability applies:
Per policy period
Explanation: An aggregate or total limit applies separately to each policy period and limits the most the insurer will pay for all claims in a particular area during the year. Claims paid reduce the aggregate amount of insurance remaining to pay future claims, but each aggregate is restored in full on the next renewal date.
On a CGL written on an occurrence basis, bodily injury to others is covered if it occurs:
During the policy period
Explanation: If a CGL is written on an occurrence basis, any claim related to the policy period will be covered regardless of when the claim is turned in. This means that the insurer has open-ended liability into the future, which is known as long tail coverage. CGL policies are often written on a claims made basis to solve this problem.
If a store owner hires a janitorial service to clean the floors and a customer slips and falls on the wet floors and sues the store owner, which portion of the store owner's CGL would apply?
Premises and operations liability
Explanation: If a customer slips and falls on the floor of a store the premises and operations liability portion of the CGL would apply. The fact that the store owner hired a janitorial service to clean the floors is just there to distract you. Only go with independent contractors if the question is about a general contractor who hired others to do work for him.
Supplementary payments covered by a CGL would include which of the following?
The cost of an appeal bond
Explanation: The cost of an appeals bond and interest is a covered supplementary payment on the CGL. Other supplementary payments include loss of earnings, up to $250 a day, if the insurer requires the insured to attend a hearing, as well as unlimited defense costs.
Which of the following is not excluded under the CGL?
Injury or damage caused by the operation of mobile equipment
Explanation: Injury or damage caused by the operation of mobile equipment is covered by a CGL.
A claims made policy requires that:
The claim occur and be turned in prior to expiration
Explanation: Disregarding the fact that most claims made policies have a basic extended reporting period that allows claims that occurred during the policy period to be turned in up to 60 days late, a claims made policy requires both the claim to occur and be turned in during the policy period.
If you want your CGL policy to cover you in the event your employee injures someone while driving his own car on your company business, you should purchase:
Employer's non-owned auto
Explanation: Rental car coverage may be added by endorsement to provide coverage for car rental if your car is out of service. Garage liability is a special liability policy written for insureds in the automobile business. Employer's non-owned auto coverage can be added to a CGL to cover the employer's liability for situations created by an employee driving their own car on company business.
If you are a contractor and kids are playing at your jobsite after hours and are injured, which portion of your CGL would apply?
Premises and operations liability
Explanation: Premises and operations liability coverage would apply to the kids that are playing at the jobsite after hours and are injured.
If you purchase the optional supplemental ERP on a claims made CGL policy, the general aggregate policy limits on the supplemental ERP will be:
The same as on the prior policy, except aggregates are reinstated for claims first received during the supplemental ERP
Explanation: The supplemental ERP does not increase policy limits, except that the aggregate limits are reinstated for claims first received and recorded during the supplemental extended reporting period
On a CGL, the supplemental extended reporting period:
Must be added by endorsement
On a claims made CGL policy, the claims made language applies to which parts of the policy?
BI, PD, personal and advertising injury liability
Claims made language in a CGL applies to which coverages?
BI and PD and Personal injury and advertising liability coverages
On a CGL, coverage for premises and operations liability:
Is automatically covered
Underinsured motorists coverage:
Is an optional liability endorsement on a PAP
Explanation: Underinsured motorist coverage may be optional, but must be offered to the insured at policy inception. If rejected, it must be done so in writing. It covers when someone negligently injures you with their car and their limits are inadequate. They have insurance, but not enough. So, you turn this claim into your own insurer under UIM.
On a business auto policy (BAP), which accurately describes a hired auto?
One a business owner or employee rents when he or she is out of town on business
Explanation: A hired auto on a business auto policy is one that a business owner or an employee leases, hires, rents or borrows for a business related event. Of these choices the vehicle rented by the business owner or employee when he or she is out of town on business is a hired auto.
On a PAP, if your limits of liability are $25,000/$50,000/$25,000, what is the most your insurer will pay out to others as the result of 1 occurrence?
$75,000
Explanation: On a PAP with split limits, the per person limit for BI is included within the per occurrence limit for BI. In other words, the $25,000 payable to any one person counts towards the maximum per occurrence limit of $50,000, which is the most the insurer will pay for BI to others. However, the PD liability limit is separate, so the most the insurer will pay in this example is $50,000 for BI plus $25,000 for PD, for a total of $75,000.
Uninsured motorist coverage:
Covers injuries caused by hit-and-run drivers
Explanation: Uninsured motorist coverage provides coverage in the event you are injured by another driver who either has no insurance at all or whose coverage does not comply with the minimum required in the state. Hit and run drivers are also defined as uninsured motorists. UM usually covers injury only, not damage to your car.
Transportation expenses will cover an:
Auto borrowed from neighbor while yours is in a repair shop
Explanation: Transportation expenses pays $20 a day for up to 30 days, for an auto you drive while your covered auto is in the shop for a covered physical damage loss.