Arkansas Insurance Adjuster Practice Exam

Which statement BEST describes the 'Follow Form' in excess liability coverage?

1. Excess liability insurance that often covers more risks than the base policy

2. Excess liability insurance that 'follows' the base insurance policy to the letter

3. Insurance coverage that is written on the Standard Liability Insurance Form provided by NAIC

4. Excess liability insurance that 'follows' the base policy, but includes its own set of limitations and exclusions

The correct answer is: Excess liability insurance that 'follows' the base insurance policy to the letter

The 'Follow Form' in excess liability coverage refers to a type of insurance that specifically follows the terms and conditions of the underlying or base policy. This means that the excess policy will mirror the coverage and limitations of the primary policy, but will provide additional coverage for any excess claims. Option A is incorrect because it suggests that excess liability insurance always covers more risks than the base policy, when in reality it may have the same limits and exclusions but just provides additional coverage for excess claims. Option C is also incorrect because the 'Follow Form' does not necessarily refer to a specific form provided by NAIC, but rather the concept of following the base policy. Option D is also incorrect because excess liability insurance generally follows the base policy without its own set of limitations and exclusions, unless specifically stated in the policy.