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| Section | Weight | Objectives |
|---|---|---|
| Insuring Contractors & Construction Risks | 15% | - Builders Risk Insurance - Contractors' Exposures |
| Commercial Property Coverages | 15% | - Policy Wordings and Clauses - Business Interruption Insurance |
| Monitoring and Modifying Risk Plans | 5% | |
| Insuring Manufacturers & Distributors | 15% | |
| Specialty Lines: Auto, Crime, and Surety Bonds | 10% | |
| Commercial Liability Coverages | 15% | - General Liability - Errors and Omissions |
| Risk Management Principles | 15% | - Selecting Risk Management Techniques - Developing Risk Management Plans - Analyzing Risk Exposures |
| Introduction to Commercial Insurance | 10% |
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NEW QUESTION # 36
How is the premium for a garage policy computed on a monthly average basis?
Answer: A
Explanation:
The correct answer is A. Provides an adjustment at year end after charging a 100 percent advance premium . A garage policy may use a rating method that reflects the insured's fluctuating exposure throughout the policy term. Under a monthly average basis, the insurer charges an advance premium at policy inception and later adjusts the premium according to the actual exposure reported or calculated for the policy period. This method is useful for garage risks because the number of vehicles, inventory, dealer plates, or operational exposure may change during the year. The key point is that the insured pays an advance premium first, and the final earned premium is determined after the insurer reviews the exposure information. If the final premium is higher, the insured may owe additional premium; if lower, a return premium may apply subject to policy terms. Option B is incorrect because the monthly average method is not simply a quarterly reporting arrangement. Option C is wrong because it refers to a partial advance premium of 75%, not the stated method. Option D is reversed, because if the adjusted premium is greater, the insured owes more.
Course topic reference: Automobile, Crime, and Bonds; Garage Policies; Premium Rating; Monthly Average Basis .
NEW QUESTION # 37
Insurance premiums on automobile fleet policies are based on which factor?
Answer: A
Explanation:
The correct answer is A. Overall experience of all drivers . Fleet automobile insurance is rated differently from ordinary individual automobile insurance. In a personal or individually rated commercial auto policy, the insurer may focus heavily on the driving record of a specific driver, the vehicle's use, location, and vehicle characteristics. In a fleet policy, however, the underwriting approach looks at the entire group of vehicles and drivers as a collective exposure. The insurer is concerned with the overall claims experience, loss frequency, loss severity, driver controls, vehicle use, fleet size, safety procedures, maintenance practices, and management of the fleet as a whole. The individual driving records may still be reviewed as part of underwriting, but the premium basis is not simply the record of one driver. Likewise, original vehicle purchase price and the mechanical condition of one vehicle do not determine the fleet premium by themselves. The key underwriting logic is that a fleet produces a pattern of risk over time. Therefore, the insurer prices the policy according to the overall experience and performance of the entire fleet operation.
Course topic reference: Automobile, Crime, and Bonds; Commercial Automobile Insurance; Fleet Rating; Underwriting Factors .
NEW QUESTION # 38
The senior manager of XYZ Trucking Company has received her company's automobile renewal policy, and considers the premium excessive. She asks her broker what exposures are covered under the policy. What will her broker make her aware of?
Answer: B
Explanation:
The correct answer is C. There could be a non-owned exposure if XYZ's employees use their own vehicles for company business . Commercial automobile insurance must address more than vehicles owned by the business. A trucking company clearly has owned automobile exposures through its trucks, trailers, and scheduled units, but it may also have non-owned automobile exposure. Non-owned exposure arises when employees, owners, or others use vehicles not owned by the company while conducting company business.
For example, an employee may use a personal vehicle to attend a meeting, pick up documents, visit a terminal, or perform an errand for the employer. If an accident occurs, the company may be named in a lawsuit because the employee was acting within the scope of employment. Option A is wrong because XYZ's own trucks are owned vehicles, not non-owned vehicles. Option B may relate to hired or temporary substitute vehicles, not the general non-owned exposure described. Option D is wrong because directors' and officers' personal vehicles are not owned by the company merely because they are used for business purposes. Course topic reference: Automobile, Crime, and Bonds; Commercial Automobile; Owned, Hired, and Non- Owned Automobile Exposures .
NEW QUESTION # 39
What is insurer solvency?
Answer: C
Explanation:
The correct answer is C. The ability of an insurer to meet its financial obligations . Insurer solvency is a fundamental concept in insurance because an insurance promise only has value if the insurer is financially able to pay covered claims when they become due. Solvency means the insurer has sufficient assets, capital, reserves, liquidity, and financial strength to meet policyholder obligations. For brokers, solvency is relevant when selecting markets, especially for large commercial accounts, long-tail liability risks, specialty placements, and high-limit programs. A financially unstable insurer may offer attractive premiums, but that does not help the client if the insurer cannot respond when a major loss occurs. Option A describes a form of participation or insurance arrangement, not solvency. Option B is incorrect because rating agencies provide opinions about financial strength, but solvency itself is not merely an obligation to satisfy a rating. Option D refers to claims activity, not financial ability. Brokers must consider insurer strength, reputation, licensing, claims-paying record, and market stability when recommending coverage. Course topic reference:
Introduction to Commercial Insurance; Insurer Solvency; Market Selection; Financial Strength and Claims-Paying Ability .
NEW QUESTION # 40
How does a self-insured retention (SIR) differ from a deductible?
Answer: D
Explanation:
The correct answer is C. Applies to losses below a specific amount . A self-insured retention, or SIR, is an amount of loss that the insured must retain and pay before the insurer's obligation applies. It is commonly used in liability programs, especially for larger or more sophisticated insureds that are willing to retain predictable or lower-level losses. The key difference from many deductibles is that an SIR often means the insured is responsible for handling and funding losses within the retained layer, while the insurer responds only after the SIR is exhausted, depending on wording. A deductible usually forms part of the insured loss under the policy, with the insurer often adjusting the claim and recovering or applying the deductible amount.
Option A is not precise because SIR is risk retention, not insurance. Option B is not the best distinguishing feature and depends on wording and limit structure. Option D is wrong because SIRs can strongly encourage loss prevention by making the insured financially responsible for smaller losses. The best answer is that the SIR applies to the layer of losses below a stated threshold. Course topic reference: The Insurance Portion of a Risk Management Plan; Risk Retention; Self-Insured Retention; Deductibles; Liability Program Structure .
NEW QUESTION # 41
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