Insurance Coverage and Liability Quiz

In the context of insurance, what does 'self-insured retention' refer to?

• The amount an insurer pays before coverage begins.

• The amount the insured must pay first on losses excluded by underlying policies.

• The deductible amount for health insurance claims.

• The total premium paid for an insurance policy.

Answer explanation

'Self-insured retention' refers to the amount the insured must pay first on losses that are not covered by underlying policies, making it a key aspect of risk management in insurance.

Which of the following is a requirement for surplus lines insurance?

• The insurer must be admitted in the state.

• The broker must hold a surplus lines license and document diligent search declinations.

• The policy must cover only health-related claims.

• The insurer must be a federal entity.

Answer explanation

For surplus lines insurance, the broker must hold a surplus lines license and document diligent search declinations to ensure that coverage is sought from admitted insurers before turning to non-admitted ones.

Which of the following is NOT typically covered by an umbrella/excess liability policy?

• Bodily injury and property damage liability

• Routine medical expenses

• Personal injury liability

• Legal defense costs

Answer explanation

Routine medical expenses are not covered by an umbrella/excess liability policy, which typically covers bodily injury, property damage, personal injury liability, and legal defense costs.

What is the primary focus of Employment Practices Liability Insurance (EPLI)?

• To cover property damage claims.

• To cover wrongful employment acts such as discrimination and harassment.

• To provide health insurance for employees.

• To insure company vehicles.

Answer explanation

The primary focus of Employment Practices Liability Insurance (EPLI) is to cover wrongful employment acts such as discrimination and harassment, protecting employers from related claims.

What is the role of Chesapeake Employers’ Insurance Company in Maryland?

• It is a federal insurance company operating nationwide.

• It is a private insurance company offering competitive rates.

• It only provides insurance for self-insured employers.

• It is Maryland’s insurer of last resort for employers unable to secure coverage in the voluntary market.

Answer explanation

Chesapeake Employers’ Insurance Company serves as Maryland’s insurer of last resort, providing coverage for employers who cannot obtain insurance in the voluntary market, ensuring they have access to necessary workers' compensation.

What is the primary purpose of a court bond?

• To provide health insurance coverage.

• To cover auto insurance claims.

• To ensure compliance with court orders or judgments.

• To offer life insurance benefits.

Answer explanation

The primary purpose of a court bond is to ensure compliance with court orders or judgments, providing a financial guarantee that obligations will be met.

What is the primary purpose of a surety bond?

• To provide health insurance coverage.

• To guarantee the principal’s performance of an obligation.

• To offer life insurance benefits.

• To cover auto insurance claims.

Answer explanation

The primary purpose of a surety bond is to guarantee the principal’s performance of an obligation, ensuring that the obligations are fulfilled as agreed.

Which of the following is an example of a specialty liability insurance?

• Life insurance

• Homeowners insurance

• Errors & Omissions (E&O) insurance

• Auto insurance

Answer explanation

Errors & Omissions (E&O) insurance is a type of specialty liability insurance that protects professionals against claims of inadequate work or negligent actions, making it the correct choice among the options provided.

What is an example of a situation where a personal umbrella liability policy would be used?

• A homeowner needs additional coverage for a personal injury claim.

• A company needs to insure its office building against fire.

• A trucking firm faces a multi-car liability claim exceeding their auto policy limit.

• An individual requires coverage for a health-related issue.

Answer explanation

A personal umbrella liability policy provides extra coverage beyond standard homeowners insurance, making it suitable for a homeowner needing additional protection against personal injury claims.

What is the primary function of an umbrella liability policy?

• To provide primary insurance coverage.

• To offer coverage for health-related claims.

• To provide extra limits above underlying liability policies.

• To replace all existing insurance policies.

Answer explanation

The primary function of an umbrella liability policy is to provide extra limits above underlying liability policies, offering additional protection in case of large claims.