1. When an insured purchases the new vehicle replacement plus (NVR+) endorsement, at what point is the vehicle written off?
A. When any amount of insured damage is sustained to the vehicle
B. When the amount of insured damage exceeds the vehicle's fair market value Correct
C. When the insured would prefer to have the vehicle replaced instead of repaired
D. When the amount of insured damage exceeds half of the vehicle's market value
Explanation
Under the NVR+ endorsement, a vehicle is written off when repair costs exceed its fair market value, as this indicates it is uneconomical to repair. Any damage or half market value thresholds are not standard criteria, and insured preference does not determine write-off status.
2. A chef accidentally drops a kitchen towel onto a lit stove in a restaurant. The towel catches fire, and the fire spreads through the kitchen. The restaurant's sprinkler system is activated, and the fire department arrives to extinguish the fire. The kitchen equipment sustains fire, smoke, and water damage. What is the peril in this scenario?
A. Fire Correct
B. Negligence
C. Water
D. Smoke
Explanation
Fire is the primary peril in this scenario, as it initiated the damage to the kitchen equipment. Negligence is a cause, not a peril, while water and smoke are secondary effects resulting from the fire and sprinkler activation.
3. Which type of loss is EXCLUDED under a basic homeowners policy?
A. Flooding Correct
B. Explosion
C. Impact by aircraft
D. Transportation of personal property
Explanation
Flooding is typically excluded under a basic homeowners policy, requiring separate coverage or an endorsement. Explosion and aircraft impact are named perils often covered, and transportation of property may be covered under specific conditions.
4. Which activity best represents the term selling within an insurance interaction?
A. Meeting client needs with products Correct
B. Harvesting referrals from current clients
C. Presenting clients with the highest premium options
D. Cold calling as many prospective clients as possible
Explanation
Selling in insurance involves matching products to client needs to provide appropriate coverage. Referrals and cold calling are prospecting methods, and presenting high-premium options does not prioritize client needs.
5. What is a deductible for a first-party automobile loss?
A. An amount the insured must pay on a claim after the insurer has paid to the maximum policy limits
B. A specified amount the insured must pay on a claim before the insurer will cover the rest of the claim Correct
C. A variable amount the insured must pay to a third party towards damages for which the insured is liable
D. An amount by which the insurer may discount the insured's premium as a reward for a loss-free policy term
Explanation
A deductible is the fixed amount the insured pays on a first-party claim before the insurer covers the remaining loss. It is not paid after policy limits, to third parties, or as a premium discount.