Wisconsin Personal Lines Insurance License Exam — All Questions

A homeowner with a valuable diamond ring worth far more than the policy's jewelry sublimit can obtain full, itemized coverage by adding a:

• a.Personal umbrella sitting above the homeowners limits
• b.Higher deductible on the personal property coverage
• c.Loss-of-use endorsement raising additional living costs
• d.Scheduled personal property endorsement listing the ring✓

A scheduled personal property endorsement (personal articles floater) lists specific high-value items such as jewelry, furs, or fine art with individual limits based on appraisals, providing broader, often open-perils coverage above the policy's sublimits and frequently with no deductible. Raising the deductible or adding loss-of-use or umbrella coverage does not solve the problem of a low internal sublimit on valuable items.

A personal umbrella policy is used to:

• a.Add liability limits above the home and auto policies✓
• b.Provide first-dollar liability with no underlying policy
• c.Replace the property coverage on the homeowners policy
• d.Pay for collision damage to the insured's own vehicle

A personal umbrella policy adds an extra layer of liability limits above the insured's underlying home and auto liability coverage, and it may cover some claims the underlying policies exclude, subject to a self-insured retention. It generally requires the insured to maintain specified underlying limits. It is excess liability protection, not property coverage and not a substitute for underlying insurance.

On a scheduled personal property endorsement, each article that is listed is:

• a.Paid at actual cash value less the theft sublimit
• b.Insured for a stated amount, usually with no deductible✓
• c.Added to Coverage C without a separate limit
• d.Covered only while it stays on the premises

Scheduling lists each article with its own limit, normally set from an appraisal or a bill of sale, on an agreed or stated amount basis, usually with no deductible, and the coverage follows the item away from the home. The answer that leaves the item inside Coverage C misses the point of the endorsement, which is to give the article a separate limit instead of a share of the contents limit.

A thief takes a $9,000 ring from a home insured on a standard unendorsed form. The most the policy will pay for that ring is:

• a.$2,500
• b.$1,500✓
• c.$200
• d.$9,000

On a standard unendorsed form, theft of jewelry, watches and furs is subject to a special limit of $1,500, so the owner of a $9,000 ring collects only $1,500 and absorbs the rest. The $2,500 figure is the theft sublimit for firearms and for silverware and goldware, and $200 is the limit on money and coins. Scheduling the ring is what removes this cap.

An increased special limits endorsement differs from scheduling personal property because it:

• a.Covers the listed items anywhere in the world
• b.Insures each listed article for an appraised value
• c.Raises the class sublimit without listing items✓
• d.Removes the deductible from every theft loss

An increased special limits endorsement simply buys a higher dollar cap for a whole class, such as jewelry or firearms, with no appraisal and no itemized schedule, and the coverage stays on the underlying policy's perils and deductible. Scheduling is the option that names each article and insures it for an appraised amount, which is why it is used for one unusually valuable piece.

The personal property replacement cost endorsement changes how contents losses are settled, from:

• a.Replacement cost to actual cash value
• b.Named perils to an open-perils basis
• c.A stated amount to fair market value
• d.Actual cash value to replacement cost✓

Without the endorsement, personal property is settled at actual cash value, which is replacement cost less depreciation for age and wear. The endorsement pays the cost of new property of like kind and quality, subject to the policy conditions, so a ten-year-old sofa is replaced rather than depreciated. The endorsement changes valuation, not the perils insured, so the named-perils answer describes a different change.

Water back-up and sump overflow coverage responds to which of these losses?

• a.Storm surge pushes seawater into the home
• b.A sewer backs up through the basement drain✓
• c.Rain floods the street and soaks the yard
• d.A swollen river runs in a basement window

The endorsement covers water that backs up through sewers or drains or that overflows from a sump or sump pump, a loss the unendorsed policy excludes. It is not flood coverage: water arriving from a rising river, a flooded street or a storm surge is surface water and needs a separate flood policy. Candidates who treat the two as interchangeable leave the insured with the wrong protection.

An earthquake endorsement is needed because a standard homeowners form:

• a.Excludes earth movement, but covers an ensuing fire✓
• b.Covers earth movement up to a tenth of Coverage A
• c.Covers earthquake only if the home is a total loss
• d.Excludes any fire that follows a quake or landslide

Earth movement, including earthquake, is excluded from the standard form, so the peril has to be added by endorsement or bought as a separate policy. The exclusion does not reach an ensuing fire: if a quake topples a heater and the house burns, the fire loss is covered because fire is an insured peril. The answer that denies fire following a quake states the exclusion far too broadly.

Identity theft expense coverage added to a homeowners policy generally pays:

• a.The full balance a thief charged to the accounts
• b.Cash the thief drew from the checking account
• c.Notary, mailing and legal costs to restore credit✓
• d.Any drop in the value of the insured's home

The endorsement is expense coverage: it reimburses the costs of putting an identity back together, such as notary and certified mail charges, credit report fees, attorney fees and lost wages spent resolving the fraud. It generally does not repay the fraudulent charges or the stolen funds themselves, which are usually the bank's or card issuer's problem, so the answer naming the account balance describes the wrong loss.

A permitted incidental occupancies endorsement is the right answer when the insured:

• a.Rents the whole dwelling to a series of tenants
• b.Operates a delivery firm out of a leased warehouse
• c.Runs a small studio inside the residence premises✓
• d.Stores a neighbor's furniture in a rented garage

The endorsement recognizes a described small business occupancy on the residence premises, lifting the business exclusion for that occupancy and extending liability and business property coverage to it. It is tied to the residence: a business run from a leased warehouse elsewhere needs a commercial policy, and renting the whole dwelling out is a dwelling policy question, not an incidental occupancy.

On a standard unendorsed form, Coverage B will not cover an other structure that is:

• a.Joined to the dwelling only by a utility line
• b.Used by the insured to store garden tools
• c.Rented to a person who is not a tenant of the home✓
• d.Set well back from the dwelling on the lot

Coverage B excludes a structure rented or held for rental to anyone who is not a tenant of the dwelling, unless it is used solely as a private garage, so a shed rented to a stranger needs the structures rented to others endorsement. Distance from the dwelling does not defeat coverage, and a building connected only by a fence or utility line still counts as an other structure rather than part of the dwelling.

A homeowner begins caring for five unrelated children for pay. Under the unendorsed policy, that activity is:

• a.Excluded, as liability arising out of a business✓
• b.Covered, because the children become insureds
• c.Covered, as an incidental use of the household
• d.Covered, but only up to the medical payments limit

Home day care is a business, and the Section II business exclusion applies to bodily injury arising out of it, so an unendorsed homeowners policy leaves the operation uninsured. The insured needs a home day care endorsement where the insurer offers one, or a separate business policy. Guests injured on the premises are not insureds, and medical payments does not rescue an excluded business exposure.

Adding the personal injury endorsement extends Section II to claims for:

• a.Damage to property rented to the insured
• b.Libel, slander and false arrest✓
• c.Injury arising out of a business venture
• d.Bodily injury to a resident relative

Section II normally responds only to bodily injury and property damage. The personal injury endorsement adds offenses such as libel, slander, defamation, false arrest or detention, malicious prosecution, invasion of privacy and wrongful eviction. It does not open the policy to business liability, which stays excluded, and injury to a resident relative remains outside Section II as an insured is not a third party.

An owner of an older home buys increased ordinance or law coverage because the built-in additional coverage:

• a.Is capped at ten percent of Coverage A✓
• b.Applies only to a home built in the last decade
• c.Leaves out demolition of the damaged dwelling
• d.Pays only for the undamaged part of the building

The standard form includes ordinance or law as an additional coverage of ten percent of Coverage A, which pays the increased cost of repairing or rebuilding to current codes, plus demolition and the cost of tearing down undamaged parts. On an older home that percentage is often far too small, so the endorsement raises it. Demolition is inside the additional coverage, not left out of it.

The inflation guard endorsement protects an insured by:

• a.Raising the limits during the term✓
• b.Guaranteeing new-for-old on contents
• c.Paying claims above the Coverage A limit
• d.Waiving the deductible on a total loss

Inflation guard raises the limits of insurance automatically through the policy term, in small steps, so that Coverage A keeps pace with rising construction costs instead of drifting below what a rebuild would cost. It works inside the limits rather than above them, so the answer describing payment beyond the Coverage A limit is wrong. Replacement cost on contents comes from a separate endorsement.

Equipment breakdown coverage added to a homeowners policy is what responds when:

• a.A kitchen fire destroys the furnace and ducts
• b.A falling tree crushes the outdoor condenser
• c.The central air unit burns out its motor✓
• d.The new water heater is stolen from a garage

The unendorsed policy excludes mechanical and electrical breakdown, so a compressor or motor that simply fails is the insured's expense until equipment breakdown coverage is added; the endorsement also covers the resulting damage to other property and often spoiled food. The tree, the fire and the theft are all covered perils on the underlying policy already, so none of them needs this endorsement.

Refrigerated property coverage is worth adding because a standard unendorsed form:

• a.Pays for spoiled food only after a total loss
• b.Caps all food spoilage at the theft sublimit
• c.Covers food only while the freezer is running
• d.Excludes an off-premises power failure loss✓

The standard form excludes loss caused by a power failure that happens away from the residence premises, which is exactly how most freezers full of food are lost. Refrigerated property coverage fills that gap for spoilage caused by an interruption of power or by mechanical failure of the unit, usually for a modest limit and a small deductible. Spoilage is not a theft loss, so no theft sublimit is involved.

The self-insured retention under a personal umbrella policy applies to a claim that is:

• a.Paid in full within the underlying auto limit
• b.Excluded by the umbrella and by the home policy
• c.Covered by both the umbrella and the auto policy
• d.Covered by the umbrella but not underlying✓

An umbrella asks the insured to keep stated underlying home and auto limits, and when a claim is covered by both, the underlying policy pays first and the umbrella sits above it. The retention is the insured's own layer, paid out of pocket, on the narrower set of claims the umbrella covers but the underlying policies do not. A claim the umbrella itself excludes never reaches the retention at all.

A condominium unit owner increases loss assessment coverage in order to pay:

• a.Monthly dues owed while the unit is unusable
• b.Damage to the unit's own walls and cabinets
• c.A share of the association's covered loss✓
• d.Property stolen from the basement storage cage

Loss assessment responds when the association charges each unit owner a share of a loss to the common property or of a liability judgment against the association. The standard form includes only $1,000 of it as an additional coverage, which a large assessment quickly exhausts, so unit owners buy more by endorsement. Damage inside the unit and stolen property are Coverage A and Coverage C matters, not assessments.

A homeowner applies for flood insurance under the National Flood Insurance Program. Coverage generally begins:

• a.Immediately once the agent binds it
• b.On the day the first premium is paid
• c.30 days after the application and premium✓
• d.When the lender records the mortgage

Flood is excluded by homeowners and dwelling forms and must be bought as a separate policy, and the National Flood Insurance Program applies a standard 30-day waiting period before coverage takes effect, with limited exceptions such as a loan closing. That waiting period is why a policy bought as a storm approaches does nothing; a producer cannot bind flood coverage for immediate effect the way home coverage is bound.

A single-family home would cost $340,000 to rebuild. The most building coverage its owner can buy through the National Flood Insurance Program is:

• a.$250,000✓
• b.$340,000
• c.$500,000
• d.$100,000

The National Flood Insurance Program caps a single-family residential building at $250,000 and its contents at $100,000, so this owner is left with $90,000 of building exposure and would need excess flood coverage from a private insurer to close it. The $100,000 figure is the contents maximum, not the building maximum, and the program does not write the full rebuilding cost of an expensive home.

A $6,000 fishing boat and its trailer are stolen from the insured's driveway. Under Coverage C of an unendorsed form, the policy pays:

• a.$6,000, the full value of the boat
• b.$1,500, the watercraft special limit✓
• c.$0, as theft of a boat is excluded
• d.$2,500, the business property limit

Watercraft, including their trailers, furnishings and equipment, carry a special limit of $1,500 under Coverage C, so the loss is paid at $1,500 and the owner absorbs the rest. The loss is not excluded, merely capped, which is why a boat of any real value belongs on a scheduled watercraft endorsement or a separate boat policy. The $2,500 figure applies to business property on the residence premises.