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PERSONAL LINES INSURANCE PRACTICE EXAM
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PERSONAL LINES INSURANCE PRACTICE EXAM
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PERSONAL LINES INSURANCE PRACTICE EXAMBobby, age 16, borrows his parents' car without their permission and gets into an
accident. Which of the following statements about coverage under the parents' personal
auto policy is CORRECT?
A) Bobby is covered by his parents' policy because he is included in the definition of
named insured.
B) Bobby is not covered for this accident because he used the car without permission.
C) Bobby is not covered because it was not his car.
D) Bobby is covered by his parents' policy because he is a family member. - Answers-D)
Bobby is covered by his parents' policy because he is a family member.
Explanation: Bobby is a family member and thus automatically is covered under the
family's PAP policy. Even though Bobby is using the car without permission, the
exclusion pertaining to nonpermissive users does not apply to use of an owned auto
policy by resident family members.
Reference: 8.7.2 in License Exam Manual
Which one of the following dwellings would a HO-3 Homeowners Form cover?
A) Condominium
B) Office building
C) Single-family home
D) Apartment building - Answers-C) Single-family home
Explanation: HO-3 Homeowners Form covers owner-occupied single family dwellings.
Condominiums are covered by the HO-6. Office and apartment buildings would be
covered by a commercial policy.
Reference: 7.4.1 in the License Exam Manual
Which on of the following would be classified as a general damage?
A) Pain and suffering
B) Lost wages
C) Medical bills
D) Damaged property - Answers-A) Pain and suffering
Explanation: Compensatory damages compensate an injured party for injuries
sustained- nothing more. Their purpose is to make a person whole again in the position
that existed before the loss or harm. Compensatory damages are further categorized
by: general damages (which necessarily result from the act or omission, such as
emotional distress, inconvenience, and pain and suffering) and special damages (losses
,measured in exact sums of money including medical bills, travel expenses for medical
care, prescription costs damaged property, and lost wages).
Reference: 5.3.6 in the License Exam Manual
Which of the following statements about flood insurance is NOT correct?
A) There are two types of flood insurance programs available: emergency and regular
B) A flood includes an overflow of inland or tidal waters
C) Sewer backup into a dwelling is not considered flood and is not covered
D) Personal property in a basement or outside in the yard is covered - Answers-D)
Personal property in a basement or outside in the yard is covered
Explanation: Personal property in a basement or outside in the yard is NOT covered
under flood insurance.
Reference: 9.4 in the License Exam Manual
Which of the following coverages is NOT included in a boatowners/watercraft package
policy?
A) Medical payments
B) Liability
C) Longshore and harbor workers' compensation insurance
D) Property - Answers-C) Longshore and harbor workers' compensation insurance
Explanation: Boatowners/watercraft package policies were developed by individual
insurance companies and they combine property, liability, and medical payments
insurance on an open peril basis. Longshore and harbor workers' compensation
insurance is found in personal yacht policies, which are used to insure larger vessels
than those covered under boatowners policies.
Reference: 9.8.1 in the License Exam Manual
An insured owns a pet lion that is caged on the homeowner's property. The owner takes
great care to warn neighbors of the possible danger by posting signs, fencing the yard,
and locking the cage at all times. When a neighbor's child manages to open the cage
and is bitten, what type of liability would apply to the lion owner?
A) Absolute liability
B) Contractual liability
C) Premises liability
D) Vicarious liability - Answers-A) Absolute liability
Explanation: The law imposes strict or absolute liability for specific situations or activities
that pose threats to the safety of others. People who own dangerous animals are held to
,a higher standard of care. Absolute liability applies when a person is liable for a
dangerous condition, regardless of the amount of care taken.
Reference: 5.3.4 in the License Exam Manual
Which of the following terms is used to describe an empty building that is not being
used?
A) Vacated
B) Absent
C) Unoccupied
D) Vacant - Answers-D) Vacant
Explanation: A building that is not currently in use and does not have enough furnishings
to function in its normal capacity is considered vacant. A building is unoccupied if no one
is currently in it, but furnishings are present and the occupants intended to return, as is
the case when the residents are out of town on vacation.
Reference: 4.4.15 in the License Exam Manual
Which of the following statements about umbrella policies is NOT correct?
A) They provide coverage above the limits of underlying policies.
B) They are written only for commercial risks.
C) Losses that are excluded by the underlying policy but covered by the umbrella are
subject to the umbrella's retention limit.
D) If the insured fails to keep the underlying coverage in force, the umbrella policy will
not cover the amount of loss that would have been paid by the underlying policy. -
Answers-B) They are written only for commercial risks.
Explanation: Umbrella liability policies may be written for both personal and commercial
risks.
Reference: 9.9.1 in the License Exam Manual
The agent has many responsibilities to the applicant. One involves a trust relationship
between the agent and the insured regarding the insured's finances and confidentiality.
In this case, the agent acts in what capacity?
A) Fiduciary
B) Consultant
C) Attorney-in-fact
D) Special agent - Answers-A) Fiduciary
Explanation: Agents have the duty to act in a fiduciary capacity that requires a high
degree of trust and confidence. This duty deals with the agent's dealings with both the
, insured and the insurer. The agent is expected to be trustworthy, act in good faith, and
preserve confidential information.
Reference: 1.9.2 in the License Exam Manual
Thomas had a forklift injury at work that caused his death. How much money will his
surviving spouse receive for burial expenses?
A) Up to $10,000
B) Up to $1,000
C) Up to $2,500
D) Up to $5,000 - Answers-D) Up to $5,000
Explanation: Burial expenses, not to exceed $5,000, are in addition to the
compensation.
Reference: See State Supplement
A parking valet at a hotel uses a guest's car to do a personal errand and damages the
car in a collision. The guest has a personal auto policy (PAP). The insurance company
will pay the claim and ____.
A) relieve the parking valet of legal liability for the loss
B) subrogate against the named insured
C) subrogate against the parking valet
D) recover any additional loss from the lienholder - Answers-C) subrogate against the
parking valet
Explanation: Part-D coverage for Damage to Your Auto of the PAP contains a no benefit
to bailee provision. This provision states that a carrier or other bailee for hire, such as a
parking gar5age, service station, or moving company will not directly or indirectly benefit
from the PAP's insurance. A bailee is an individual or entity that assumes possession of
goods owned by another for the purpose of transporting, servicing, or storing them.
When temporary custody is assumed, the bailee becomes legally liable for the goods.
Reference: 8.7.2 in the License Exam Manual
Who of the following are required to be members of the Arizona Property and Casualty
Insurance Guaranty Fund?
A) All insurers that write the types of insurance that are protected by the fund in Arizona
B) Foreign property and casualty insurers only
C) lien property and casualty insurers only
D) All insurers that write insurance in Arizona, including life and health insurers -
Answers-A) All insurers that write the types of insurance that are protected by the fund
in Arizona
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