Indiana Property & Casualty Insurance License Exam — All Questions

The entire contract provision in a property and casualty policy means that:

• a.The agent's spoken promises modify the contract
• b.The insurer's underwriting file is part of the deal
• c.The company's advertising becomes a warranty
• d.The policy and application are the whole contract✓

The provision confines the agreement to the written policy plus whatever is attached to it, so nothing outside the four corners of the document adds to or subtracts from coverage. That is why an agent's oral assurance cannot rewrite the form and why the underwriting file and the company's brochures are not part of the bargain. Any change must be made by a written endorsement made part of the contract.

An applicant says nothing about a fire that destroyed an earlier building at the same location, and the insurer does not ask about it. This is best described as:

• a.Concealment of a material fact✓
• b.A warranty the insured breached
• c.A misrepresentation of a fact
• d.An immaterial omission of history

Concealment is silence about a material fact the applicant knew and had a duty to disclose; a misrepresentation, by contrast, is an untrue statement actually made. Loss history at the very same location is plainly material, since it would change how an underwriter rates or accepts the risk, so calling it immaterial fails. A warranty is a promise written into the contract, not information withheld before it issues.

Immediately after a covered fire, which action is a duty the policy places on the insured?

• a.Discard the damaged property to clear the site
• b.Protect the property from further damage✓
• c.Begin permanent repairs before an inspection
• d.Settle directly with anyone who was injured

Duties after loss include giving prompt notice, protecting the property from additional damage, preparing an inventory, cooperating with the investigation and submitting to examination under oath. Making permanent repairs or throwing out damaged goods first destroys the evidence the adjuster needs to value the claim, and settling voluntarily with a claimant is barred because it prejudices the insurer's defense.

In the claim process, a proof of loss is best described as:

• a.The insurer's formal offer to settle a claim
• b.A receipt showing the insured paid the premium
• c.The adjuster's written estimate of repair cost
• d.A sworn statement of the loss and its amount✓

The proof of loss is the insured's own signed and sworn statement of the time, cause and amount of the loss and of the insured's interest in the property, and the policy requires it before the insurer must pay. It is not the adjuster's estimate, which is the insurer's own valuation of the same damage, and it is not a settlement offer, which comes later once the claim has been reviewed.

The insured and the insurer agree the fire loss is covered but cannot agree on what it is worth. Under the appraisal condition:

• a.The insurer's adjuster sets the binding amount
• b.Each picks an appraiser and they pick an umpire✓
• c.The claim is denied until the parties agree
• d.A court decides the amount before any payment

Appraisal is a valuation mechanism, not a coverage mechanism: each side names a competent independent appraiser, the two of them select an umpire, and agreement between any two of the three sets the amount of loss. It is available only where coverage itself is not in dispute. Nothing in it lets the adjuster fix the figure alone or forces the insured into court, and the claim is not denied merely for want of agreement.

The suit against us condition in a property policy provides that the insured may sue the insurer only if:

• a.The insured hires counsel approved by the insurer
• b.The loss exceeds the deductible by a wide margin
• c.The insurer has refused arbitration in writing
• d.The insured has complied with the policy terms✓

The condition bars an action unless there has been full compliance with the terms of the policy, including notice, proof of loss and cooperation, and unless suit is brought within the time the policy allows, a period that varies by jurisdiction. Its purpose is to make the insured exhaust the claim process first. The insurer does not select the insured's lawyer, and the size of the loss is not a condition of suing.

After a covered glass loss, the insurer notifies the insured that it will replace the glass rather than pay cash. This is permitted because:

• a.The deductible was not yet collected
• b.The insured waived cash by filing a claim
• c.Repair is required whenever it costs less
• d.The policy gives the insurer that option✓

Loss settlement conditions reserve to the insurer the choice of paying the loss in money or of repairing or replacing the damaged property with material of like kind and quality, after telling the insured what it intends to do. It is the insurer's election, not a rule that the cheaper route must be taken, and not something the insured surrenders by filing. The deductible is subtracted from the settlement either way.

A warehouse is covered by two policies on the same property, one for $100,000 and one for $300,000, each with a pro rata other-insurance clause. A $40,000 covered loss occurs. The $100,000 policy pays:

• a.$10,000✓
• b.$20,000
• c.$40,000
• d.$30,000

Pro rata sharing gives each policy the share its limit bears to the total insurance in force: $100,000 out of $400,000 is one quarter, so that policy pays one quarter of the $40,000 loss, or $10,000, while the larger policy pays $30,000. Splitting the loss evenly at $20,000 apiece ignores the limits, and no single policy pays the whole loss where a pro rata clause governs.

A policy contains an excess other-insurance clause. When another policy also covers the same loss, the excess policy:

• a.Shares in proportion to the two policy limits
• b.Pays half the loss alongside the other insurer
• c.Is void because of the duplicate coverage
• d.Pays only after the other insurance is used up✓

An excess clause puts that policy behind any other collectible insurance, so it pays nothing until the primary limit is exhausted and then only what remains. That differs from pro rata sharing, where each policy contributes according to its limit. When two policies are written on different terms, the resulting non-concurrency can leave the clauses in conflict and the insured with less than expected.

After a driver damages the insured's fence, the insured signs a paper releasing that driver from all claims and then files with his own insurer. The effect is that:

• a.The release transfers to the insurer on payment
• b.The insurer's recovery right has been impaired✓
• c.The insurer must still pay and pursue the driver
• d.The driver's insurer now owes the whole loss

The subrogation condition requires the insured to do nothing after a loss that would prejudice the insurer's right to step into his shoes and recover from the party at fault. Signing a release destroys that right, and the insurer may reduce or deny the claim to the extent it was harmed. A waiver given before any loss can sometimes stand, but a release signed afterward cannot be handed on to the insurer.

A homeowner intentionally sets fire to his own insured house. Under the standard mortgage clause, the mortgagee:

• a.Receives only the unearned premium back
• b.Is paid to the extent of its interest✓
• c.Loses its claim along with the owner's
• d.Must first sue the owner for the balance

The standard mortgage clause creates a separate contract between the insurer and the mortgagee, so the mortgagee's interest survives acts of the owner that would defeat the owner's own claim, arson and misrepresentation included. Having paid, the insurer takes an assignment of the mortgage or subrogates against the owner. The mortgagee need not sue first, and it is owed its interest rather than a premium refund.

An insured sells his building and tries to hand the property policy to the buyer. That assignment is effective only if:

• a.The policy has run half of its term
• b.The buyer assumes the unpaid premium
• c.The insurer consents to it in writing✓
• d.The deed and policy are recorded together

A property policy is a personal contract between the insurer and the particular insured whose character, loss history and use of the property were underwritten, so it cannot be handed to a stranger without the insurer's written consent. Paying the outstanding premium or recording documents at the courthouse does nothing to bind an insurer to someone it did not evaluate, and the age of the policy is irrelevant.

The difference between cancellation of a policy and non-renewal of a policy is that cancellation:

• a.Returns the entire premium to the insured
• b.Terminates the contract before it expires✓
• c.Declines to continue it past expiration
• d.Requires the insured's written agreement

Cancellation cuts the contract short while the term is still running, and either party may do it on the terms the policy and the law of the jurisdiction allow. Non-renewal is a decision made at the end of a term not to offer another one, so the contract simply runs out on schedule. Neither one needs the other party's agreement, and cancellation returns unearned premium only, not the whole premium.

A policy carries a $1,000 deductible for each occurrence. A windstorm damages the roof for $12,000 and, three months later, a separate hailstorm causes $4,000 of damage. The insurer pays in total:

• a.$14,000✓
• b.$16,000
• c.$11,000
• d.$15,000

A per-occurrence deductible is subtracted from each separate loss, so the insured absorbs $1,000 twice: $11,000 is paid on the wind claim and $3,000 on the hail claim, a total of $14,000. Applying one deductible to the whole year yields $15,000, and ignoring the deductible altogether yields the full $16,000. The deductible reduces the payment; it is not a bill sent to the insured.

A bank that financed the insured's equipment is shown on the declarations as a loss payee. That means the bank:

• a.Owes the premium if the insured does not
• b.Can cancel the policy and collect a refund
• c.Is paid for damage to that equipment✓
• d.Receives liability coverage as an insured

A loss payee has a financial interest in specific property and is named so that payment for damage to that property runs to it along with the insured; its rights reach no further than that property. An additional insured, by contrast, is brought under the liability coverage. Only the named insured holds the right to change or cancel the policy and the duty to pay the premium.

A customer slips in the insured's store and sues him. What the insured presents to his liability insurer is:

• a.A third-party claim, defended by the insurer✓
• b.A subrogation claim against the customer
• c.An excess claim over the customer's health plan
• d.A first-party claim for the insured's own loss

A first-party claim is the insured presenting his own loss to his own insurer, such as fire damage to the store itself. When someone outside the contract asserts a claim against the insured, it is a third-party claim, and the liability policy owes both a defense and payment of damages up to the limit. Subrogation runs the other way, against whoever caused the insured's loss.

Which government body licenses resident property and casualty insurance producers in Indiana?

• a.Indiana Insurance Commission
• b.Indiana Department of Financial Institutions
• c.Indiana Bureau of Motor Vehicles
• d.Indiana Department of Insurance✓

In Indiana, insurance is regulated by the Indiana Department of Insurance, which licenses producers, reviews insurers, handles consumer complaints, and enforces the state insurance code. The motor-vehicle agency and banking regulators do not license insurance producers.

What are Indiana's minimum required auto liability limits (bodily injury per person / per accident / property damage)?

• a.$25,000 / $50,000 / $10,000
• b.$15,000 / $30,000 / $10,000
• c.$20,000 / $40,000 / $15,000
• d.$25,000 / $50,000 / $25,000✓

Indiana sets minimum liability of $25,000 for bodily injury to one person, $50,000 per accident, and $25,000 for property damage (25/50/25), per Indiana Code 9-25-4-5 (property-damage minimum raised to $25,000 for accidents on or after July 1, 2018). Higher limits are available; confirm current figures with the Indiana Department of Insurance.

How does Indiana assign responsibility for auto accident claims?

• a.A state that requires no auto liability coverage at all.
• b.A choice state, where drivers annually elect tort or no-fault.
• c.A no-fault state, where each driver's PIP pays their own injuries regardless of fault.
• d.A traditional at-fault (tort) state, where the at-fault driver's liability coverage responds to the other party's claims.✓

Indiana follows a traditional at-fault (tort) system rather than no-fault: the driver who causes a crash is liable, and that driver's liability coverage pays the other party's injury and property claims up to the 25/50/25 minimums (Indiana Code 9-25-4-5 (property-damage minimum raised to $25,000 for accidents on or after July 1, 2018)). It does not mandate personal injury protection (PIP).

Uninsured/underinsured motorist coverage on a Indiana auto policy primarily provides what?

• a.Coverage that pays the at-fault driver's own liability judgments.
• b.A federal reinsurance pool that reimburses all crash losses.
• c.Uninsured motorist coverage that protects the insured when an at-fault driver has no or too little insurance.✓
• d.A guarantee that premiums can never increase after a claim.

Uninsured/underinsured motorist (UM/UIM) coverage protects the policyholder and passengers when the responsible driver is uninsured or underinsured. Indiana regulates how UM/UIM is offered and rejected; producers should confirm the current offer-and-waiver rules with the Indiana Department of Insurance.

Under Indiana insurance law, a producer offering a client cash or a gift not stated in the policy as an inducement to buy is:

• a.It is always permitted as a marketing discount.
• b.It is a prohibited unfair trade practice (illegal rebating).✓
• c.It is required on every personal-lines sale.
• d.It is regulated only for commercial policies.

Rebating - giving something of value not specified in the policy to induce a sale - is a prohibited unfair trade practice under the Indiana insurance code. The state's unfair-trade-practices provisions also bar misrepresentation, false advertising, unfair discrimination between like risks, coercion, and unfair claim settlement. The Indiana Department of Insurance can fine, suspend, or revoke a license for violations.

Premiums a Indiana producer collects from clients on behalf of an insurer are treated how?

• a.They are fiduciary (trust) funds that must not be commingled with the producer's personal funds or converted.✓
• b.They become the producer's personal income once collected.
• c.They belong to the state guaranty association.
• d.They may be freely used for office expenses until remitted.

Premium funds a producer collects are held in a fiduciary capacity for the insurer and the insured. Under Indiana law they may not be commingled with personal funds or converted to personal use; misappropriation is grounds for Indiana Department of Insurance discipline and possible criminal liability.

What does a resident generally do to become a licensed property and casualty producer in Indiana?

• a.Hold any state's license and notify the motor-vehicle agency.
• b.Be appointed by an insurer with no examination required.
• c.Apply to the Indiana Department of Insurance, complete any required prelicensing education, pass the state P&C exam, clear a background check, and pay the fee.✓
• d.Simply register a business name with the county clerk.

A resident applicant obtains a Indiana P&C producer license through the Indiana Department of Insurance: submitting an application, completing any required prelicensing course, passing the licensing examination, clearing a background/fingerprint check, and paying the fee. Confirm current prelicensing-hour and fee details with the Indiana Department of Insurance, as they are set by rule and change.

To keep a Indiana P&C license active, a producer must generally do what each renewal period?

• a.Renew only when changing employers.
• b.Complete continuing education only if the producer sells annuities.
• c.Renew on the state cycle with a fee and complete state-approved continuing education, including an ethics component.✓
• d.Never renew, because a P&C license is issued for life.

To stay licensed, a Indiana producer must renew on the state's cycle, pay the renewal fee, and complete state-approved continuing education (including an ethics portion) before renewing. To transact a specific insurer's business the producer must also be appointed by that company. Verify the exact CE hour totals and renewal cycle with the Indiana Department of Insurance, as those figures are set by the regulator.