NMPCIP New Mexico Property and Casualty Insurance Producer - Set 2 - Part 3

Test your knowledge of technical writing concepts with these practice questions. Each question includes detailed explanations to help you understand the correct answers.

Question 41: A primary insurer transfers a portion of the risk it assumed on a large commercial account to another insurer, in exchange for a share of the premium, so that a single catastrophic loss does not threaten the primary insurer's own financial stability. Which arrangement is being described?

Coinsurance

Subrogation

Reinsurance

Retention

Question 42: A primary insurer signs a single ongoing agreement with a reinsurer that automatically covers an entire class of future policies as issued, rather than negotiating a separate agreement for each individual policy one at a time. Which of the following terms correctly names this kind of ongoing reinsurance agreement?

Facultative reinsurance

A risk retention group

A purchasing group

Treaty reinsurance

Question 43: A falling tree limb during an ice storm damages several ornamental shrubs planted near a homeowner's front porch. The homeowner wants to know whether the policy addresses this landscaping loss and, if so, under what limited terms. Which additional coverage applies, and how is it typically restricted?

trees and shrubs, subject to a sub-limit

Coverage A, with no special dollar limit

loss assessment, capped at the association charge

ordinance or law, tied to code costs

Question 44: An insurer allows a former producer to keep using company-branded materials for weeks after termination, and a customer reasonably believes the person still represents the insurer and purchases a policy through him. Which type of authority may bind the insurer because of this reasonable but mistaken belief?

Express authority

Apparent authority

Implied authority

Fiduciary authority

Question 45: An insured backs a car out of the home driveway and accidentally strikes a neighbor's parked vehicle, causing significant property damage to that vehicle. The insured then files a claim under the homeowners policy's personal liability coverage. How will this claim most likely be handled?

paid in full under Coverage E

paid, but only under Coverage F

denied, since motor vehicle liability is excluded

paid up to the Coverage C limit

Question 46: A fire under a covered peril makes a rented dwelling unfit to live in, and the landlord loses the rental income that tenant would have paid while repairs are completed. Which coverage under the dwelling policy reimburses that lost rental income?

Coverage C, personal property

Coverage E, additional living expense

Coverage B, other structures

Coverage D, fair rental value

Question 47: A large corporation decides not to purchase coverage from an outside insurer for certain losses, and instead sets aside its own funds in a formal plan to pay for those losses directly as they occur. Which of the following terms correctly identifies this method of handling risk?

Self-insurance

Reinsurance

A mutual insurer

A risk purchasing group

Question 48: Before recommending a policy, a producer checks an independent organization's published grade that reflects an insurer's claims-paying ability and overall financial strength rather than the price of any single product. Which of the following best describes the purpose this kind of independent grade serves for consumers and producers alike?

Sets the insurer's premium rates

Measures insurer financial strength

Guarantees claims will be paid

Replaces state licensing requirements

Question 49: Certain property policies specify that, in the event of a total loss to the named structure, the insurer will pay the full limit shown on the declarations regardless of the structure's actual value at the time of the fire. Which valuation concept does this describe?

Actual cash value policy

Functional replacement cost policy

Valued policy

Blanket policy

Question 50: An underwriter explains that a dwelling left completely empty of both furniture and residents for an extended stretch is treated differently under a property policy than a dwelling where the tenants moved out but their furniture and belongings remain inside. Which distinction is being drawn?

Blanket versus specific insurance

Primary versus excess coverage

Named peril versus open peril

Vacancy versus unoccupancy

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