Which of the following statements about his professional liability insurance is CORRECT?

Everett is an insurance of persons representative who works exclusively for Moon Life Insurance. He

wants to leave the company and become an independent representative. He knows that before he branches out on his own, he needs to ensure he has sufficient liability insurance.

Which of the following statements about his professional liability insurance is CORRECT?
A . His liability insurance must have coverage of not less than $1,500,000 per claim.
B . If a contract has a deductible, it may not exceed $20,000.
C . This insurance covers gross faults committed by an insurance representative.
D . Professional liability insurance covers fraud or misappropriation.

View Answer

Answer: B

Explanation:

For an insurance representative such as Everett who intends to transition to an independent role, maintaining adequate professional liability insurance is crucial. According to LLQP guidelines, the requirements for liability insurance coverage mandate that if the policy includes a deductible, it cannot exceed $20,000 per claim​. This limit helps ensure that insurance representatives can reasonably cover the deductible amount without facing significant financial hardship in case of a claim.

Regarding the other answer choices:

A liability insurance policy is typically required to have a minimum coverage of $1,000,000 per claim, not $1,500,000.

Professional liability insurance does not cover gross negligence, fraud, or intentional misconduct such as fraud or misappropriation​. It is designed to cover errors, omissions, and negligence within the scope of professional duties, provided they are not intentional or fraudulent acts.

Therefore, option B accurately reflects LLQP stipulations regarding the deductible limit on professional liability insurance for insurance representatives.