QCM : Casualty and Liability Insurance Fundamentals — 10 questions

Questions et réponses du QCM

1. What is the primary purpose of the liability part (Part A) in an automobile insurance policy?

To cover medical expenses for the insured driver
To repair the insured vehicle after an accident
To cover damages to the insured's auto from theft
To pay for bodily injury and property damage to others and provide legal defense

To pay for bodily injury and property damage to others and provide legal defense

Explication

Part A of an automobile insurance policy is designed to pay for bodily injury and property damage caused to others by the insured driver, as well as providing legal defense. It does not cover the insured's own medical expenses or vehicle repairs.

2. What is the primary purpose of casualty and liability insurance policies?

To cover damages to the insured's own property.
To provide health coverage for the insured.
To cover legal liabilities for damages or injuries caused to third parties.
To insure against theft and burglary.

To cover legal liabilities for damages or injuries caused to third parties.

Explication

Casualty and liability insurance policies mainly cover legal liabilities to third parties, not damages to the insured's own property or health coverage.

3. Which of the following best describes the function of an umbrella liability policy?

It is a type of fidelity bond that guarantees employee honesty.
It only covers personal injuries and not property damage.
It replaces the primary liability policy and provides basic coverage.
It provides higher limits of liability coverage above the underlying policy and is usually a standalone policy.

It provides higher limits of liability coverage above the underlying policy and is usually a standalone policy.

Explication

An umbrella liability policy offers higher liability limits beyond the primary policy and is often a standalone policy that 'follows form,' meaning it mirrors the coverage of the underlying policies. It does not replace primary coverage but extends it.

4. Which section of the auto policy covers bodily injury and property damage?

Part A (Liability)
Part B (Medical Payments)
Part C (UM/UIM)
Part D (Damage to Auto)

Part A (Liability)

Explication

Part A of the auto policy covers liability, which includes bodily injury and property damage claims against the insured.

5. In workers compensation insurance, what is meant by the term 'exclusive remedy'?

Employees can choose to sue their employer for damages.
Employers are only liable for injuries if gross negligence is proven.
Employees can claim benefits from multiple insurance policies simultaneously.
Employees are limited to workers' compensation benefits and cannot sue outside the system for work-related injuries.

Employees are limited to workers' compensation benefits and cannot sue outside the system for work-related injuries.

Explication

The 'exclusive remedy' doctrine in workers compensation law means that employees injured on the job can only receive benefits through the workers' compensation system and cannot sue their employer for damages outside of this system, providing a no-fault coverage.

6. What distinguishes a 'discovery' crime policy from a 'loss-sustained' crime policy?

Discovery applies only during the policy period; loss-sustained covers any occurrence.
Discovery covers crimes discovered during the policy period; loss-sustained covers crimes that occur or are discovered within a extended period after the policy ends.
Discovery requires a police report; loss-sustained does not.
Discovery policies are for personal crime; loss-sustained are for commercial crime.

Discovery covers crimes discovered during the policy period; loss-sustained covers crimes that occur or are discovered within a extended period after the policy ends.

Explication

A discovery crime policy insures crimes discovered during the policy period, while a loss-sustained policy can cover crimes occurring or discovered within an extended timeframe, even after policy expiration.

7. What is a key characteristic of umbrella/excess liability policies?

They only cover legal liabilities for auto accidents.
They extend the limits of liability beyond underlying policies and require underlying coverage.
They replace the primary liability coverage entirely.
They are only issued to individual policyholders, not commercial entities.

They extend the limits of liability beyond underlying policies and require underlying coverage.

Explication

Umbrella/excess policies provide higher coverage limits and require the insured to have certain underlying policies in place.

8. Which claims-made coverage trigger is used in professional liability policies?

Occurrence of the event regardless of when claim is filed.
The date the claim is made or reported.
The date the damage or injury occurs.
The date the policy is purchased.

The date the claim is made or reported.

Explication

Claims-made policies generally are triggered when a claim is made or reported within the policy period, regardless of when the incident occurred.

9. Which type of bond guarantees performance, and which guarantees honesty?

Surety bonds guarantee performance; Fidelity bonds guarantee honesty.
Fidelity bonds guarantee performance; Surety bonds guarantee honesty.
Both guarantee performance; neither guaranate honesty.
Both guarantee honesty; neither guaranate performance.

Surety bonds guarantee performance; Fidelity bonds guarantee honesty.

Explication

Surety bonds are designed to guarantee performance of contractual obligations, while fidelity bonds assure honesty of employees.

10. What is the general role of employees' workers compensation insurance?

To provide health coverage regardless of work-related injuries.
To compensate for injuries unrelated to work.
To provide no-fault coverage for injuries arising out of employment, and serve as an exclusive remedy.
To cover only injuries that are intentionally caused by the employee.

To provide no-fault coverage for injuries arising out of employment, and serve as an exclusive remedy.

Explication

Workers compensation provides no-fault coverage for work-related injuries and is typically the exclusive remedy available to injured employees.

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Auto liability — coverage?

Bodily injury and property damage liability.

Casualty & liability insurance — coverage?

Legal liabilities for damages or injuries to third parties

UM/UIM — meaning?

Uninsured and underinsured motorist coverage.

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