Illinois Property & Casualty Insurance License, Practice Exams

The voluntary and intentional giving up of a known right is called:

1. Estoppel
2. Waiver ✓
3. Concealment
4. Subrogation

Why: A waiver is the intentional and voluntary relinquishment of a known legal right.

The implied warranty of legality in ocean marine requires that:

1. The voyage occur in daylight
2. The vessel be domestically owned
3. All cargo be perishable
4. The venture be a lawful one ✓

Why: The warranty of legality requires that the insured venture be legal; insuring an illegal voyage (e.g., smuggling) is unenforceable.

Under 215 ILCS 5/524, before an applicant in an urban area is entitled to a FAIR Plan inspection, the applicant must show a diligent effort to obtain basic property insurance evidenced by how many attempts?

1. 3 attempts ✓
2. 5 attempts
3. 1 attempt
4. 2 attempts

Why: Section 524(1) requires that the applicant, after diligent effort, has been unable to obtain basic property insurance as evidenced by 3 attempts to procure it.

Which statement about Homeowners Section II Coverage E limits is correct?

1. It is unlimited for any suit brought by a guest injured on the residence premises
2. It is a per-occurrence limit, commonly starting at $100,000 and increasable ✓
3. It is always written equal to the Coverage A dwelling limit shown on the declarations
4. It applies to property damage only, not bodily injury

Why: Personal Liability (Coverage E) is written with a per-occurrence limit, commonly starting at $100,000 and increasable for higher protection.

A coal miner who develops pneumoconiosis (black lung disease) from workplace dust exposure may receive benefits under:

1. The Defense Base Act, which covers respiratory illness in workers at government-contracted sites
2. The Jones Act, for dust below decks
3. The Black Lung Benefits Act (Federal Mine Safety) ✓
4. FELA, on proof of employer negligence

Why: The Black Lung Benefits Act provides compensation to coal miners who are totally disabled by pneumoconiosis (black lung) arising from mine employment.

Under Section 152, when is a company itself held guilty of a rebating violation committed by one of its non-officer agents?

1. Whenever any agent of the company commits the violation, because the company is strictly liable for its producers
2. Only if the agent earned more than $1,000 of commission on that policy
3. Only if an officer, director, or department head knowingly permitted the act or had prior knowledge of it ✓
4. Never, since only the individual producer can violate Section 151

Why: Section 152(3) provides a company is not guilty of violating Section 151 by reason of an act of an agent who is not an officer, director, or department head, unless an officer, director, or department head knowingly permitted the act or had prior knowledge of it.

A business that performs incidental contracts and also assumes a railroad's liability in a sidetrack agreement has the assumed liability covered under the CGL because:

1. It is a Coverage B personal and advertising injury offense committed in the conduct of the insured's business
2. A sidetrack agreement is an 'insured contract' excepted from the contractual liability exclusion ✓
3. The pollution exclusion contains a stated exception for railroad operations carried out on a sidetrack
4. All liability the insured assumes by written contract is covered automatically

Why: Sidetrack agreements are listed insured contracts, so liability assumed under them is excepted from the contractual liability exclusion.

Which loss would be covered under HO-3 on the dwelling but NOT on personal property, due to the difference in covered perils?

1. A fire loss originating in the home's attached garage
2. An accidental, non-named-peril physical loss to the structure ✓
3. A lightning strike that damages the roof
4. A windstorm loss to the siding and shingles

Why: HO-3 covers the dwelling open-peril, so an accidental loss not on the named-perils list is covered for the structure but not for Coverage C personal property, which is named-peril only.

An order of the Director entered under Section 154.8 finding an improper claims practice is subject to judicial review under which section of the Code?

1. Section 431
2. Section 401
3. Section 426
4. Section 407 ✓

Why: Section 154.8(2) provides that any order of the Director pursuant to that Section is subject to judicial review under Section 407 of the Code.

Under the PAP, when an insured has two PAPs from DIFFERENT insurers covering the same liability loss on a non-owned auto, coverage is generally coordinated as:

1. Both primary, with each insurer paying its full limit until the loss is satisfied
2. Each excess, sharing on the basis stated in the other-insurance provision ✓
3. The newer policy is void for concealment
4. Neither pays, since the auto owner's policy is the only coverage

Why: When the insured's coverage is excess (as on a non-owned auto) under two policies, they typically share the excess pro rata as provided in the other-insurance clause.

If an insured meets or exceeds the coinsurance requirement, the coinsurance penalty:

1. Reduces the limit by the shortfall
2. Does not apply; the loss is paid in full up to the limit ✓
3. Still applies, cutting the payment by the coinsurance percentage carried
4. Doubles the deductible on the loss

Why: When the insured carries at least the required amount, there is no penalty and covered losses are paid up to the limit (less deductible).

Fair dealing and good faith in claims handling require an insurer and producer to:

1. Avoid all direct contact with the insured once defense counsel has been retained on the claim file
2. Pay only the largest claims in full and settle the smaller ones for a fraction of their value
3. Delay payment on every claim as long as the statute of limitations allows, to preserve reserves
4. Treat the insured honestly, investigate fairly, and not unreasonably deny valid claims ✓

Why: The duty of good faith and fair dealing requires honest, prompt, and fair treatment of insureds and reasonable handling of valid claims.

A building worth $200,000 has an 80% coinsurance clause and is insured for $120,000. A $40,000 loss occurs (no deductible). The insurer pays:

1. $40,000
2. $24,000
3. $32,000
4. $30,000 ✓

Why: Required = 80% × $200,000 = $160,000. Payment = ($120,000 ÷ $160,000) × $40,000 = $30,000.

A limit expressed as 'per occurrence' refers to:

1. The most paid for all damages arising from a single event ✓
2. The most paid for any one injured person's bodily injury
3. The deductible applied to each claim
4. The annual maximum for all claims combined

Why: A per-occurrence limit caps the total amount payable for all damages arising out of a single covered event.

Speculative risk is generally uninsurable because it:

1. Cannot be measured
2. Involves the chance of either loss or gain ✓
3. Involves only the chance of loss with no chance of gain
4. Is always catastrophic

Why: Speculative risk involves the possibility of gain as well as loss, like gambling, and is not insurable; only pure risk is insurable.

Which best describes "hired autos" in commercial auto?

1. Autos the named insured leases, hires, rents, or borrows for business use ✓
2. Employees' own personal autos driven on company errands and reimbursed by the mile
3. Autos the named insured holds title to and garages at its premises
4. Customer vehicles left at a repair shop, which the shop hires out while they wait

Why: Hired autos are vehicles the insured leases, hires, rents, or borrows, addressed by Symbol 8 for liability.

Hired auto physical damage coverage under the BACF can be provided by:

1. Symbol 7 alone, since it reaches every auto the insured operates, rented units included
2. An endorsement to the workers compensation policy covering autos employees rent on trips
3. Symbol 1, which covers any auto and so picks up hired units for physical damage
4. Endorsement or designation that extends physical damage to autos the insured hires or rents ✓

Why: Physical damage on hired autos is added via the appropriate symbol (e.g., 8) or hired auto physical damage endorsement, often with a stated limit.

Under 215 ILCS 5/143.17, the nonrenewal notice requirement does NOT apply if the insurer:

1. Manifests its willingness to renew directly to the named insured ✓
2. Files a copy of the expiring policy's declarations page with the Department of Insurance
3. Has already collected the renewal premium through the insured's producer
4. Gives the insured 10 days' notice instead of the usual period

Why: Section 143.17(b) provides the nonrenewal notice requirement does not apply where the insurer manifests willingness to renew, stating premium, payment plan, and who may receive payment.

In ocean marine, Freight coverage protects:

1. Port fees and wharfage charges billed at each call
2. The cargo owner's anticipated profit once the goods reach market
3. The crew's wages, provisions, and repatriation expenses if the voyage is abandoned midway
4. The shipowner's loss of earnings/freight revenue if cargo is not delivered ✓

Why: Freight insurance covers the shipowner's potential loss of freight income (the money earned for transporting cargo) if a covered loss prevents delivery.

A 'per person' limit in a liability policy applies to:

1. Property damage claims only
2. The deductible per claimant
3. The maximum payable for bodily injury to one individual ✓
4. The total of every claim paid during the policy period, across all occurrences

Why: A per-person limit caps the amount payable for bodily injury sustained by any single individual.

Where a covered Illinois employee is under 16 and illegally employed, the amount of death-case compensation otherwise payable is:

1. Reduced by 50%
2. Unchanged
3. Increased by 50% ✓
4. Paid only to the State

Why: Section 7(h) provides that if the injured employee is under 16 and illegally employed, the compensation payable under paragraphs (a)–(d) and (f) is increased 50%.

Under the CGL Supplementary Payments, the insurer will pay up to how much per day for the insured's loss of earnings while attending a trial at the insurer's request?

1. $1,000
2. $100
3. $250 ✓
4. $500

Why: Supplementary Payments include up to $250 per day for the insured's actual loss of earnings due to attendance at hearings or trials at the insurer's request.

Under Section 408.3, monies deposited into the Insurance Financial Regulation Fund may be used only for which purpose?

1. Grants to community organizations that market insurance products to senior citizens and coordinate outreach through the Department's consumer division
2. Funding the operations of the Office of the State Fire Marshal
3. Paying cash refunds of premium taxes overpaid under Section 412
4. Department expenses incurred in analyzing, investigating, and examining the financial condition or control of insurance companies ✓

Why: Section 408.3 restricts use of the Insurance Financial Regulation Fund to the Department's expenses in analyzing, investigating, and examining the financial condition or control of insurers, plus specified Interstate Insurance Receivership Commission costs.

Choosing a high deductible and paying small losses out of pocket is an example of which method of handling risk?

1. Retention ✓
2. Avoidance
3. Transfer
4. Sharing

Why: Retention means accepting responsibility for some or all of a loss, such as through deductibles or self-insurance.

The primary purpose of a coinsurance clause in property insurance is to:

1. Increase the deductible automatically whenever property values rise during the term
2. Lower every insured's premium by a fixed percentage regardless of the amount carried
3. Extend liability protection to others who share ownership of the insured property
4. Encourage insureds to carry coverage close to the full value of the property ✓

Why: Coinsurance encourages insureds to insure to value (e.g., 80%, 90%, or 100%) by penalizing underinsurance at the time of a loss.

A bond guaranteeing that the contractor will pay subcontractors, laborers, and material suppliers is a:

1. Maintenance bond
2. Performance bond
3. Payment bond ✓
4. Bid bond

Why: A payment bond guarantees that subcontractors and suppliers will be paid, protecting against liens.

Coverage E in the Dwelling Policy provides which of the following?

1. Additional living expense for the owner-occupant ✓
2. Identity theft restoration expenses, up to $25,000 per occurrence
3. Medical payments to injured guests
4. Personal liability for bodily injury

Why: Coverage E — Additional Living Expense pays the increased cost of living elsewhere while the insured's own residence is being repaired after a covered loss.

"Your covered auto" under the PAP includes:

1. Any car the insured happens to drive, owned or not, anywhere in the world, so long as the owner has given permission
2. Only vehicles the insured leases under a written agreement of six months or longer, with owned autos added by endorsement
3. Vehicles shown in the Declarations, newly acquired autos, trailers owned, and temporary substitutes (per terms) ✓
4. Only the first auto listed in the Declarations, with later additions needing a new policy

Why: "Your covered auto" encompasses vehicles in the Declarations, certain newly acquired autos, owned trailers, and qualifying temporary substitute autos.

A Homeowners insured suffers theft of firearms. The special Coverage C limit for theft of firearms is commonly:

1. $2,500 ✓
2. $200
3. $5,000
4. $1,500

Why: Theft of firearms is subject to a special sublimit (commonly $2,500) under Coverage C; collections worth more should be scheduled.

Under PAP Part C, uninsured motorists coverage primarily pays for:

1. Comprehensive losses such as fire, theft, and hail, whenever the insured carries no separate physical damage coverage
2. Bodily injury the insured is legally entitled to recover from an uninsured at-fault driver ✓
3. Damage to the insured's own car only, with bodily injury left to Part B medical payments in every state
4. Damages the insured owes to others after causing the crash, once the Part A limit has been exhausted

Why: UM coverage pays bodily injury damages the insured could have recovered from a negligent uninsured motorist; UMPD for property may be available in some states.

Coverage C under the Dwelling Policy insures:

1. The dwelling structure
2. Personal property of the insured ✓
3. Personal liability
4. Detached other structures

Why: Coverage C — Personal Property covers the household contents and personal belongings of the insured. The Dwelling Policy contains no liability coverage by default.

Civil Authority coverage under a Business Income form provides for loss when:

1. The insured voluntarily closes the premises for a remodeling project and loses income during the shutdown
2. A government order prohibits access to the premises due to a covered cause of loss to nearby property ✓
3. Employees walk off the job in a strike and the plant cannot operate
4. A competitor opens a store nearby and sales fall sharply

Why: Civil Authority extends Business Income/Extra Expense when access to the insured premises is prohibited by a civil authority because of a covered cause of loss to property in the vicinity.

The main difference between a 'follow-form' excess policy and an umbrella is that the follow-form excess policy:

1. Provides coverage broader than the underlying for offenses the primary form excludes
2. Covers losses for which no underlying insurance exists at all, subject to a retention
3. Always carries a self-insured retention of at least $10,000 that the insured must pay before it responds
4. Generally provides the same coverage terms as the underlying policy, only with higher limits ✓

Why: A follow-form excess policy mirrors the underlying policy's terms and conditions, simply adding limits; an umbrella can be broader.

Because insurance contracts are drafted by the insurer and the insured must accept them as written, they are characterized as contracts of:

1. Utmost good faith
2. Adhesion ✓
3. Indemnity
4. Aleatory nature

Why: A contract of adhesion is prepared by one party, the insurer, and offered on a take-it-or-leave-it basis; ambiguities are construed against the drafter.

A tangible condition such as icy steps or faulty wiring is an example of a:

1. Moral hazard
2. Morale hazard
3. Physical hazard ✓
4. Speculative hazard

Why: A physical hazard is a tangible characteristic of property, persons, or operations that increases the chance of loss.

The implied warranty of 'no deviation' means:

1. The cargo cannot be repacked or transshipped en route
2. The premium cannot be adjusted once the voyage begins
3. The vessel must not depart from the customary or agreed route without necessity ✓
4. The vessel must sail under the flag of registry named in the declarations

Why: The warranty against deviation requires the vessel to follow the customary or agreed-upon route; unjustified departure can void coverage.

The requirement that contracting parties be of legal age, sane, and not under the influence refers to which contract element?

1. Offer and acceptance
2. Competent parties ✓
3. Legal purpose
4. Consideration

Why: Competent parties means each party must have the legal capacity to contract, being of legal age, mentally competent, and sober.

The principle that allows insurers to predict losses more accurately as the number of similar exposure units increases is the:

1. Principle of indemnity
2. Law of agency
3. Law of large numbers ✓
4. Doctrine of reasonable expectations

Why: The law of large numbers states that the larger the number of similar exposures, the more predictable actual loss experience becomes.

Theft coverage under the standard Dwelling Policy is:

1. Provided only for liability claims
2. Automatically included in all forms
3. Only available on DP-1
4. Not included unless added by endorsement ✓

Why: The Dwelling Policy does not include theft coverage by default; it must be added by a theft coverage endorsement.

For purposes of carrying out investigations into possible criminal violations of the Insurance Code, the Department of Insurance is treated under Section 401.5 as what?

1. A residual market mechanism
2. A private investigative consumer reporting agency
3. An arm of the Office of the State Fire Marshal
4. A criminal justice agency under all federal and State laws ✓

Why: Section 401.5(a) deems the Department a criminal justice agency under all federal and State laws and regulations for purposes of these investigations, giving it access to criminal justice information.

An 'owner's policy' certified as proof of financial responsibility under 625 ILCS 5/7-317 must provide bodily-injury and property-damage coverage of at least:

1. $25,000 / $50,000 / $20,000 ✓
2. $25,000 / $65,000 / $10,000
3. $30,000 / $60,000 / $25,000
4. $20,000 / $40,000 / $15,000

Why: Section 7-317(b) sets the certified motor-vehicle-liability-policy minimums at $25,000 per person, $50,000 per crash, and $20,000 property damage.

An admitted (authorized) insurer is one that:

1. Is incorporated outside the United States and operates here through a branch office
2. Sells only surplus lines coverage, placed through licensed surplus lines brokers
3. Is owned by its policyholders rather than by stockholders
4. Has received a certificate of authority to do business in the state ✓

Why: An admitted or authorized insurer has been granted a certificate of authority by the state insurance department to transact business there.

Coverage B of the CGL provides protection against which of the following?

1. Bodily injury to an employee arising out of employment
2. Medical expenses paid without regard to the insured's legal liability
3. Personal and advertising injury such as libel, slander, and false arrest ✓
4. Damage to the insured's own product after it leaves the premises

Why: Coverage B — Personal and Advertising Injury — covers offenses like libel, slander, false arrest, and wrongful eviction. It is separate from bodily injury and property damage.

Violations of 18 U.S.C. § 1033 can result in:

1. A written warning letter from the state insurance department and nothing further
2. Loss of eligibility to write NFIP flood policies, with no other consequence
3. A surcharge added to the producer's errors and omissions premium at renewal
4. Federal criminal penalties including fines and imprisonment ✓

Why: Section 1033 carries federal criminal penalties, including fines and imprisonment, depending on the offense and resulting harm.

PAP Part B — Medical Payments covers:

1. Lost wages and the cost of household services the named insured cannot perform while recovering from the accident
2. Medical expenses of the other driver only, and only after that driver's own liability insurer has denied the claim
3. Repair costs for damage to the covered auto, plus any medical bills the insured cannot recover from the at-fault driver
4. Reasonable medical and funeral expenses for the insured and occupants of the covered auto, regardless of fault ✓

Why: Medical Payments covers reasonable and necessary medical and funeral expenses for an insured injured in an auto accident, paid without regard to fault.

Under the CGL, the duty to defend ends when:

1. The policy is renewed and a fresh set of aggregate limits takes effect for the new term
2. The applicable limit of insurance has been exhausted by payment of judgments or settlements ✓
3. The insured retains its own attorney and the insurer reimburses those fees
4. The first claim of the policy period is filed against the insured

Why: The insurer's duty to defend ceases once the applicable limit is used up by judgments or settlements.

The Special Causes of Loss form is best characterized as:

1. An open-perils (all-risk) form covering risks of direct physical loss unless excluded ✓
2. A form that excludes theft, so a separate crime coverage part must be purchased for stolen stock
3. A named-peril form covering only fire and lightning, with all other causes added by endorsement
4. A liability form protecting the insured against third-party claims arising from the premises

Why: The Special form is open-perils: it covers risk of direct physical loss unless specifically excluded or limited, shifting the burden of proof to the insurer.

A pet dog owned by the insured causes damage. Animals are addressed in a Homeowners policy how?

1. Animals are excluded as covered property but liability for injury they cause may fall under Coverage E ✓
2. Animals are scheduled under Coverage D, and the policy pays their appraised value when a covered peril strikes the home
3. Animals are covered under Coverage A whenever they are kept inside the dwelling structure at the time of the loss
4. Animals are covered as personal property under Coverage C, up to a $500 special limit

Why: Animals, birds, and fish are excluded as Coverage C property, but bodily injury or property damage caused by a pet may be covered under Section II liability.

A producer who exceeds the actual authority granted by the insurer but acts within the authority the public reasonably believes the producer has may still bind the insurer because of:

1. Express authority
2. Subrogation
3. Apparent authority ✓
4. The law of large numbers

Why: Apparent authority can bind the insurer when a third party reasonably relies on the appearance of authority the insurer permitted to exist.

A lender requires flood insurance as a condition of a mortgage because the property is in a Special Flood Hazard Area. This requirement comes from:

1. The federal Do-Not-Call rules
2. State law, which conditions the recording of every mortgage on proof of flood insurance before the closing may occur
3. TRIA's make-available requirement
4. Federal flood law requiring federally regulated lenders to mandate flood coverage in high-risk zones ✓

Why: Federal law requires lenders regulated or insured by the federal government to require flood insurance on properties located in Special Flood Hazard Areas.

Under 215 ILCS 5/143.17, does renewing a policy waive an insurer's grounds for cancellation that existed before the renewal took effect?

1. Only grounds relating to nonpayment of premium arising before the renewal survive it; every other ground is waived
2. Only if the insured did not know of the grounds when the renewal premium was paid
3. No, renewal does not constitute a waiver or estoppel as to grounds existing before the renewal ✓
4. Yes, accepting the renewal premium waives every ground known to the insurer

Why: Section 143.17(d) states renewal does not constitute a waiver or estoppel with respect to grounds for cancellation that existed before the effective date of the renewal.

Under 215 ILCS 5/143a, limits of UM coverage for a vehicle under one policy may not be aggregated (stacked) with similar coverage on other vehicles. This anti-stacking rule means:

1. The insured may collect the sum of the UM limits carried on every vehicle listed on the policy
2. The insurer must double the UM limit when two or more cars are insured
3. UM coverage is void whenever more than one vehicle appears on the policy
4. The total available UM coverage for one person in one crash is limited to a single vehicle's limit ✓

Why: Section 143a bars aggregating UM limits across vehicles, so the total UM coverage available for bodily injury to one person in one crash is not increased by insuring multiple vehicles.

The 'mysterious disappearance' of property is typically covered under which?

1. DP-1 basic named-peril coverage, once the theft endorsement is attached to the policy
2. HO open-peril personal property scheduling (e.g., personal articles floater) ✓
3. Coverage F medical payments, which reimburses the value of property that cannot be located
4. Coverage D, loss of use, limited to 20% of the Coverage A limit

Why: Open-peril scheduled coverage (personal articles floater) can cover mysterious disappearance, which named-peril forms typically do not.

An insured's son is away at college and keeps belongings in a dorm. Under the Homeowners policy, that property is:

1. Never covered once the student has been away from the residence premises for more than 45 consecutive days
2. Often covered as an insured's property at another residence, subject to the off-premises limit ✓
3. Covered only under Section ii liability for damage the son causes
4. Subject to no limits, since dormitory property is scheduled automatically

Why: A student who is an insured may have personal property at another residence covered subject to the off-premises 10%/$1,000 limitation, depending on form conditions.

Actual cash value (ACV) is most commonly calculated as:

1. The original purchase price
2. Market value plus depreciation
3. Replacement cost minus depreciation ✓
4. Replacement cost plus appreciation

Why: ACV is typically replacement cost at the time of loss minus depreciation for age, wear, and obsolescence.

Workers' compensation wage-replacement (indemnity) benefits typically pay the worker:

1. Only the difference between the worker's wages and any unemployment compensation collected during the same weeks
2. One hundred percent of pre-injury gross wages, reported on a W-2 and fully subject to income tax
3. A flat statewide amount set by statute, the same for every worker
4. A percentage of average weekly wage, generally tax-free and subject to a maximum ✓

Why: Indemnity benefits usually replace a percentage (often around two-thirds) of the worker's average weekly wage, are generally tax-free, and are subject to statutory minimums and maximums.

A driver with 25/50/15 limits causes an accident injuring three people for $20,000 each ($60,000 total). How much does BI liability pay?

1. $25,000 (the per-person bodily injury limit)
2. $60,000 (the combined single limit for the policy)
3. $50,000 (limited by the per-accident BI maximum) ✓
4. $15,000 (the minimum financial-responsibility limit)

Why: Each person's $20,000 is under the $25,000 per-person limit, but the total $60,000 exceeds the $50,000 per-accident maximum, so BI pays $50,000.

Under the Building and Personal Property Coverage Form, which coverage applies to the building structure and permanently installed fixtures?

1. Coverage A — Building ✓
2. Coverage C — Personal Property of Others
3. Coverage B — Business Personal Property
4. Coverage D — Extra Expense

Why: Coverage A (Building) covers the described building, completed additions, fixtures, permanently installed machinery, and equipment.

A reciprocal insurer is best described as:

1. An insurer owned and operated by the federal government to write perils private carriers avoid
2. A corporation owned by its stockholders, who elect the board of directors and receive dividends
3. An unincorporated group of subscribers who insure one another, managed by an attorney-in-fact ✓
4. A foreign insurer that writes only surplus lines business through resident surplus lines brokers

Why: A reciprocal or interinsurance exchange is an unincorporated association of subscribers who exchange insurance among themselves, administered by an attorney-in-fact.

Financial responsibility laws generally require a driver to:

1. Carry a separate policy for every licensed member of the household before any of them may lawfully drive on public roads
2. File an annual statement of net worth with the motor vehicle department
3. Demonstrate the ability to pay for damages they cause, usually by maintaining minimum liability insurance ✓
4. Carry comprehensive and collision coverage on every vehicle they register, in addition to liability limits

Why: Financial responsibility laws require motorists to prove they can pay for bodily injury and property damage they cause, most commonly through minimum liability insurance.

Under 215 ILCS 5/143a-2(1), underinsured/uninsured motorist coverage in excess of the Section 7-203 minimum must be offered in an amount equal to:

1. Twice the property-damage limit
2. The insured's bodily-injury liability limits ✓
3. The medical-payments limit
4. A flat $100,000 per person

Why: Section 143a-2(1) requires UM coverage equal to the insured's bodily-injury liability limits unless the insured specifically rejects the excess in writing.

A building with exterior walls, floors, and roof made of combustible wood materials is classified as:

1. Fire-resistive construction
2. Frame construction ✓
3. Joisted masonry
4. Modified fire-resistive

Why: Frame construction has combustible exterior walls (typically wood), giving it the highest fire-rate classification and risk.

Electronic equipment such as a permanently installed aftermarket sound/navigation system not factory-installed is, under the unendorsed PAP, generally:

1. Subject to exclusion or limitation unless added by endorsement ✓
2. Paid under Part B medical payments rather than Part D physical damage
3. Covered in full under Part D, just like factory-installed equipment
4. Always replaced with a new unit of like kind

Why: The PAP limits or excludes certain non-factory permanently installed electronic equipment; broader coverage requires an endorsement.

For NFIP purposes, a 'flood' generally requires:

1. A general and temporary condition of partial or complete inundation of normally dry land, often affecting two or more properties ✓
2. Any accumulation of water inside the dwelling, including a burst supply line that fills a finished basement overnight, whatever the source
3. A presidential major disaster declaration for the county
4. Water damage caused only by tides or coastal storm surge

Why: The NFIP defines flood as a general and temporary condition of inundation of normally dry land, typically affecting two or more acres or two or more properties.

Under 215 ILCS 5/534.3, a first-party or third-party claim is EXCLUDED from being a 'covered claim' if the insured's net worth exceeds what amount?

1. $1,000,000
2. $25,000,000 ✓
3. $50,000,000
4. $10,000,000

Why: Section 534.3(b)(iv) excludes claims by or against an insured whose net worth exceeds $25,000,000 (measured on the prior December 31, consolidated with affiliates).

Under Section 8(b), weekly temporary total disability (TTD) benefits become payable only if the period of incapacity for work lasts more than:

1. 1 working day
2. 7 working days
3. 14 working days
4. 3 working days ✓

Why: Section 8(b) provides that if temporary total incapacity lasts more than 3 working days, weekly compensation is paid beginning on the 4th day and continues as long as the total temporary incapacity lasts.

A reporting form in commercial property is used when:

1. Values fluctuate and the insured periodically reports current values ✓
2. Only liability coverage is needed for the operation
3. The risk is a single building of fixed value that the insured owns outright and rarely changes
4. Coverage is written monoline for the insured's auto fleet

Why: Reporting forms suit fluctuating inventory values; the insured periodically reports values and premium adjusts, helping match coverage to actual exposure.

What is the minimum property-damage liability limit required for an Illinois auto policy under 625 ILCS 5/7-203?

1. $10,000
2. $15,000
3. $20,000 ✓
4. $25,000

Why: Section 7-203 requires a property-damage limit of not less than $20,000 for damage to property of others in any one crash.

Glass breakage to a covered building under broad and special homeowners forms is generally:

1. Covered only under DP-1, which adds breakage of glass as an extended coverage peril on all dwelling forms
2. Part of Section ii liability, since broken glass creates a hazard to visitors on the premises
3. Excluded entirely unless a separate glass floater is purchased for the storm doors and windows
4. Covered, though restricted if the dwelling has been vacant beyond the allowed period ✓

Why: Breakage of glass is a covered additional coverage/peril under broad and special forms, but coverage may be suspended when the dwelling has been vacant beyond the stated period.

Vocational rehabilitation benefits under workers' compensation are intended to:

1. Reimburse the employer for the cost of recruiting and training a replacement worker
2. Pay for all of the medical treatment the injured worker receives during the recovery period
3. Permanently replace the worker's lost wages once statutory indemnity benefits are exhausted
4. Help an injured worker retrain or be re-educated to return to gainful employment ✓

Why: Vocational rehabilitation provides retraining, education, or job-placement assistance so an injured worker can return to suitable employment.

Authority that is explicitly granted to a producer in the written agency contract is called:

1. Assumed authority
2. Express authority ✓
3. Apparent authority
4. Implied authority

Why: Express authority is the authority specifically granted to the agent in writing through the agency agreement.

Liquor liability (dram shop) coverage is needed because the CGL excludes liability for businesses that:

1. Serve prepared food to the public and are therefore required to hold a food-handler permit from the local health department
2. Manufacture, distribute, sell, or serve alcoholic beverages and cause or contribute to a patron's intoxication ✓
3. Rent out portions of their premises to tenants under written leases running longer than twelve consecutive months
4. Hire independent contractors whose work the insured does not directly supervise

Why: The CGL liquor liability exclusion applies to those in the alcohol business; they need separate liquor liability coverage.

Under the PAP, a "temporary substitute auto" used while the covered auto is being repaired is treated as:

1. A non-owned auto, which the pap leaves entirely uninsured
2. Excluded outright once the covered auto goes into the shop
3. A covered auto, picking up the coverages that applied to the disabled vehicle ✓
4. Covered for Part A liability only, never for damage to the substitute itself

Why: A temporary substitute for a covered auto out of service (for repair, breakdown, etc.) is covered with the same coverages as the vehicle it replaces.

Which of the following best describes the trade-off at the heart of the workers' compensation 'grand bargain'?

1. Employees gain the right to larger tort damages than a jury would award, while employers gain lower premiums
2. Employees waive all injury benefits, and employers post a bond to self-insure
3. Employees get prompt no-fault benefits; employers get limited, predictable liability (immunity from most tort suits) ✓
4. Employees may sue the employer freely in court, and employers pay nothing toward the award

Why: In the historic compromise, workers gained certain, prompt, no-fault benefits while employers gained protection from most tort lawsuits and predictable, limited liability.

Under the FCRA, when an insurer denies an application or charges a higher premium based on a consumer report, it must provide the consumer with:

1. A refund of every premium paid to date, with interest, within 30 days of the underwriting decision
2. A replacement policy issued at the originally quoted premium until the report is corrected
3. An adverse action notice including how to obtain a copy of the report ✓
4. A federal flood zone determination form

Why: The FCRA requires an adverse action notice that informs the consumer of the action, identifies the reporting agency, and explains the right to obtain a free copy of the report and dispute it.

Because the standard policy's Part One does not apply in monopolistic fund states (where coverage comes from the state fund), what does the policy still commonly provide for those states via endorsement?

1. Part One statutory benefits for those states
2. Vocational rehabilitation and retraining benefits
3. Stop Gap / Employers Liability coverage ✓
4. Other States Insurance listing the monopolistic states

Why: In monopolistic states, the state fund provides statutory benefits but not employers liability; a stop gap (Employers Liability) endorsement fills that gap.

After notifying the Director of a producer's termination, within what period must the insurer mail a copy of that notification to the producer?

1. Within 15 days after making the notification ✓
2. On the same day the Director is notified
3. Within 5 business days after making the notification
4. Within 30 days after making the notification

Why: Section 500-85(c) requires the insurer to mail a copy of the notification to the producer within 15 days after making the notification.