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CPCU 552 FINAL EXAM QUESTIONS AND ANSWERS 2024 | Comprehensive Test Bank And Study Guide
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CPCU 552 FINAL EXAM QUESTIONS AND ANSWERS 2024 |Comprehensive Test Bank And Study Guide
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CPCU 552 FINAL EXAM1. The need for excess or umbrella liability insurance is closely related to three basic issues
involved in the use of liability insurance. Those three issues include all of the following,
EXCEPT:
A. Layering of liability coverages.
B. Insurer solvency.correct
C. Effect of aggregate limits.
D. Difficulty in determining the maximum possible loss.
B is correct. (Obj 1 – Type A).
The need for excess or umbrella liability insurance is closely related to three basic issues
involved in the use of liability insurance:
-Effect of aggregate limits.
-Difficulty in determining the maximum possible loss.
-Layering of liability coverages.
2. Which one of the following statements is correct regarding the need for excess or umbrella
liability coverage?
A. Higher average deductibles in primary liability insurance policies have created a
demand for more excess liability insurance coverage.wrong
B. The need for excess or umbrella liability coverage has declined in recent years due
to the lower frequency of large verdicts against insureds.
C. Insureds often purchase excess or liability insurance coverage because their
primary insurers are unwilling to provide adequate limits within the primary insurance
layer.correct
D. Excess and umbrella liability coverages provide additional coverages for liability
exposures in which it may be difficult to estimate the minimum probable loss.
C is correct. (Obj 1 – Type A).
A is incorrect. The deductible in a primary liability insurance policy does not affect excess or
umbrella liability coverage. The excess or umbrella liability coverage would become effective
once the limit (not the deductible) of the primary policy has been reached.
B is incorrect. Large verdicts have become increasingly common and have served to
increase the need for excess or umbrella liability coverage.
D is incorrect. Excess and umbrella liability coverages provide additional coverages for
liability exposures in which it may be difficult to determine the maximum possible loss.
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, 3. Because of the difficulty in estimating the maximum possible loss for liability claims, many
insureds should consider:
A. Purchasing an excess or umbrella liability coverage.correct
B. Increasing their commercial general liability policy deductible.
C. Creation of separate business entities for each service offering.
D. Implementing a risk management program designed to eliminate hazardous
conditions.
A is correct. (Obj 1 – Type A).
Although most property loss exposure have a maximum possible loss that can be
determined, this is not the case for most liability loss exposures. As a result, insureds should
consider the purchase of an excess or umbrella liability policy to cover potentially large
liability losses.
4. Which one of the following statements is correct regarding excess liability insurance and
umbrella liability insurance?
A. Almost all insurers writing excess and umbrella liability policies use standardized
policies.
B. From a practical standpoint, the distinction between excess and umbrella liability
policies may be unclear.correct
C. Umbrella liability policies rarely provide coverage for defense costs.
D. An excess liability policy offers broader protection than that provided by the
underlying coverage.
B is correct. (Obj 1 – Type A).
A is incorrect. Many insurers writing excess and umbrella liability policies write their own
custom policies.
C is incorrect. Most umbrella liability policies provide defense coverage.
D is incorrect. An excess liability policy does not offer broader protection than that provided
by the underlying coverage. The coverage may actually be more restrictive.
5. Which one of the following represents a difference between an excess policy and an
umbrella liability policy?
A. Almost all excess liability insurance policies are written on standardized forms, while
almost all umbrella liability policies are manuscript forms.
B. An excess policy contains a self-insured retention amount, while an umbrella liability
policy excludes this provision.
C. An excess policy offers no broader protection than that offered in underlying policies,
while an umbrella policy may provide coverage not available in underlying
policies.correct
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