Auto insurance Practice test
Sam is involved in an accident with Fred. It is determined that Sam was 60% at fault for this accident in which he receives $5000 in dmgs. Fred was 40% at fault and received $1000 in dmgs. How much will Sam received under the Defense/doctrine of contributory negligence?
$0 - by also being partly responisble for the accident nothing will be paid. Under contributory negligence if one party contributes even 1% any claim for dmgs is eliminated/barred entirely. The defense or doctrine used to counter contributory negligence is the defense known as last clear chance
For homes subject to the state & defensible space req, the total amount of defensible space req around the home is
100 ft
The standard fire policy has 165 lines and the CA standard form fire policy has
158 lines of text -Standard fire policy sometimes referred to as the New York standard fire policy
Sam is involved in an accident with Fred and suffers $10,000 of dmg and it is determined that Fred is 25% at fault for the accident. How much would Sam be entitled to collect under the defense/doctrine of comparative negligence?
2,500 - Under comparative negligence Sam is entitle to collect percentage he was not at fault for (25%) of his dmgs
A self-insured retention under an umbrella policy would be
A dedcutible applicable to losses excluded by underlying coverage and covered by the umbrella.
After a catastrophe, there is often a significant increase in the cost of labor or materials to replace housing. This increase is known as:
A deman surge
Most liability claims are based on negligence that results in injury or dmg. An act of negligence is considered to be a tort. What does the term tort mean
A tort is a civil wrong doing that violates the rights of another
How you would compute the combined ratio is to:
Add the loss and expense ratios
Compared to Dp 1 Basic form, what additional coverage does Dp 2 Broad form have?
Additional living expenses - Dp 1 requires endorsements fro additiona living expenses it is included in Dp 2 and DP3
Why would an agent use a HO 3 policy instead of a DP 3 policy to insure the property
Broader coverage is needed by the insurer. Homeowners policies are broder than dwelling policies because all homeowners include theft and personal liability. Dwelling policies would require endorsement for these coverages.
Withholding, rather than misstating, a material fact on an insurance application is an act of which of the following?
Concealment
Which part of the policy is said to personalize it?
Declarations
Which of the following coverages must be offered to all insureds that purchase residential property insurance policies in CA?
Earthquake coverage
According to California Insurance Law, who is legally allowed to cancel an insurance policy?
Either the insured or insurer
Associations organized to protect claimants, policyholders, annuitants, and creditors of financially impaired insurers are known as:
Guaranty Associations - There are 2 Guarantee Associations in Ca. There is teh Ca Insurance Guarantee Association(CIGA) that deals with insolvency of property and casualty insurers. There is the Ca Life and Health Insurance Guarantee Associaiton (CLHIGA) the protects life and health policyholders against insurer insolvency.
Any person who transacts insurance without a valid license is:
Guilty of a misdemeanor, Subject to a fine not exceeding $50,000 and/or improsonment, Subject to imprisonment in county jail for a period not exceeding one year.
Yactch policies typically provde for:
Hull, protection and indemnity
Yacht policies typically provide coverage for:
Hull, protection and indemnity - Yacht policies for test purposes are structured and use the same terminology as ocean marine policies used to insure commercial watercraft.
In all of the marketing systems the insurance company owns and controls the accounts, policy records and renewals. If the agency or agent and terminate their relationship that person losses all rights and interest in the accounts and related commissions, except in
Independent Agency system - in the independent agency system, the agent owns and controls accounts, policy records, and renewals. If an indenpendent agent's contract with a particular insurer terminates, the agent retains rights to active accounts and can place them with another insurer and continue to receive commssions.
The insured endorsed their personal auto policy with the *** extended nonowned endorsements. What coverage would be made available under this endorsements?
Liability and medical payments
The watercraft endorsement on a homeowner's policy extends coverage for:
Liability coverage for watercraft listed on the schedule
Under a yacht policy, protection and indemnity provides coverage for:
Liability if the insured vessel strikes a marina and injures a dock worker.
The personal auto policy makes what coverage available under the named nonowner endorsement?
Liability, medical payments, and ininsured motorists
Is the new standardized umbrella policy being used by insurers?
No, because each company defines covered exposures based upon their own experience.
The miscellaneous Type vehicle endorsement for motorcycles and recreational vehicles waives the standard req of a ; 4 wheel drive and/or vehicle weight of less than 10,000 lbs. limitaiton. This allows the PAP to cover a motorcycle, RV, dune buggy or even a golf cart. Many times a specialty policy is preferable to endorsing the PAP for an RV because the PAP does nto provide coverage for:
None
All property owners in the State of Ca wishing to purchased flood insurance may:
Not all property owners may purchased a floos.
Libel, slander, false arrest, and invasion of privacy are considered to be intentioanl torts. Which type of liability insurance does the insured need to ensure the he/she has protection against possible claims for these types of torst?
Personal Injury Liability - Personal injury is intentional or deliberate act or ommission that dmgs a person's reputation or mental state. - Personal Injury is endorese in residential and included in Commercial
Residential property policies do not cover any losses caused by:
Smk dmg from industrial operations, smokestacks, and smudging - these are not covered. These are exclusions on all residential policies. It is dmg that is expected. Smudging is a process to keep citrus from freezing.
If the insurer cancels a 1 year(annual) policy effective 3 months after the policy's inception date:
The insured receives a refund in the amount of 75% of the annual premium.
Which of the following is a principal rating factor for a personal automonile policy?
The number of miles the drives each year. This is the second principal rating factor that must be used according to the Code.
A person in the business of financing real or personal property it is lawful for them to verbally recommend that insurance be place through a particular agent or insurer only if
The recommendation is also put in writing. Lenders cannot require a person to place their insurance with a particular agent or insurer as a condition of a loan. They can make a verbal recommendation ifthey also put the recommendation in writng.
The best definition of illegally taking of prperty either with or without force would be:
Theft
In a personal auto policy(PAP) which would not need an endorsement to be covered?
Transportaton expenses - This is included in part D and applies to all collision and other tan collision claiims.
Which of the following does not normally use a standard coverage form
Umbrellas - are not usually written on a standard coverage for. ISO just recently can out with a standard form for personal umbrellas however insurers still prefer their own forms. There are no standard commercial umbrella forms
Absolute liability is imposed on a risk:
When there is negligence whether proven or not
Which of the following would apply to coverage for landlord furnishing in an HO-3?
$2500
The client paid an annual premium of $1200. Nine months into the contract the insurer canceled the policy for cause and refunded:
$300
According to Fair Claims Settlement Practices in the CCR's the insurer has how many calendar days to remit payment for a claim once all parties are in agreement
30 days. (40 dys for insurer, 21 days licensee inquiry from DOI, 15days notice of claim for insurer.
All of the following meet the definition of the insured under a HO 3 policy, except
A 73 old grandma residing in an adult care facility - Grandma is not living in the household therefore Not considered an insured. - Spouse and relatives must be living in the household to be considered insured. The exception is children away at school.
Which of the following would not be considered an insured under the personal auto policy>
A licensed driver takes your car for a joyride and is involved in an accident
Of the following which would best define proximate cause in relationship to liability insurance/
A negligence act that causes bodiliy injury or property dmg that follows a sequence of uninterrupted, but related chain of events. - Proximate cause whether it is property or liability is what starts the chain of related events (without interruption/uninterrupted/unbroken) that ends in injury or dmg. In liability the proximate cause is negligence and in property the proximate cause must be an insured peril.
All of the following are defined as a covered auto in a personal auto policy except:
A newly acquired additional vehicle purchased 30dayds ago and unreported - This would not be a covered auto since it was not reported within the proper time frame which would be either 4 days or 14 days depending upon the vehicles already insured.
Under a standard (ISO) Homeonwers HO 3 real property and personal property are covered for the perils of:
All risk - coverage applies to real property, broad form named perils coverage applies to personal property(Odd numbers HO 3 and HO 5 cover structures(real property) open peril which is also known as all risk. Even numbers HO2, HO4, HO6 are Broad form. The exception to the even number rue is HO8 which is basic perils)
The measure of loss potential which is used for pricing of insurance is known as:
An exposure unit
The peril of burglary concerning covered personal property os not covered under which dwelling form
Basic form - Dp-1 Basic does not cover the peril of Burglary, - The peril on the DP policies is dmgs by burglars. None of the Dp policies would cover taking personal property by burglars as that is theft. Dmg by burglars is not covered under a dp 1. Dmg by burglars is covered under DP 2 or DP 3 though dm to personal property is covered, theft of personal property is not covered without endorsements on all of the DP
What additional coverage is provided in a Dp3 Special form that is not provided in a DP1 Basic form
Collapse - under other/additional coverage collapse is not covered on dp1 basic, however it is covered under dp 2 and dp 3 - No basic policy whether residential or commercial covers collapse, discharge of water, falling objects, freezing, weight of ice, snow, sleet, dmg by burglars, electrical surges.
In the business of insurance, concealment is defined by all of the following statements except
Concealment does not occur if no inquiry is made. There can be no concealment if there is no inquiry.
The best description of a hazard is a/an
Condition that may increase the chance that a loss may occur.
Boatowners liability policies typically exclude:
Contractual liability
Dp-2 Broad form includes an additional benefit under other /extension of coverages that is not included in Dp-1 Basic form whihc is.
Coverage fro landscaping knows: Lawns, trees and scrubs.
Which of the following losses is not excluded under the physical damge coverage of a personal auto policy?
Dmg to vehicle being used as part of a share the expense carpool - any form of car pool is covered for test purposes.
Which of the following perils insured under Dp 1 are broadened in a Dp 2
Explosion, Vehicle, Smoke, All of these choices provide broader coverage on DP 2 in comparisoin to DP 1. Dp2 covers explosion of steam boilers or steam pipes and Dp 1 does. DP 2 and Dp3 cover dmg to the premises by the insured or tenat vehicles and DP 1 does not. DP 2 and DP 3 cover smoke dmg from insured fire place and Dp 1 does not.
All of the following are additional coverages provided by the homewoners policy except
Fair rental value - This is not an additional coverage. This is included in Coverage D - loss of use in a HO policy which combines additional living expense and fair rental value(loss of rent) under one coverage. In DP's this is coverage D and coverage e would provide addiotional living expense
What is one peril included in DP 2 Broad form that is not included in DP 1 basic form.
Falling objects - DP 1 basic does not cover the peril of falling objects. Dp2/broad and Dp-3 special do cover falling objects.
Some losses would be covered even if an earthquake occurred. These types of loss would be covered if the peril; ensues (happens as a consequence of the earthquake. These ensuing losses must be caused by the following peril:
Fire, explosion, and glass breakage.
According to the CA earthquake Authority(CEA) when must earthquake insurance be offered?
For all residential properties up to 4 units. earthquake must be offered withing 60 dys of the policy effective date, the insured has 30 days to accept or decline.
Notifying the police is a req under which of the following circumstances, as it applies to a personal auto policy?
For hit and run accidents and thefts.
The primary difference between fraud and misrepresentation would be that
Fraud is always intentional; misrepresentation may be either unintentional or intentional
A type of auto insurance that car owners can buy to protect themselves againts lossess that can arise when the amont of compensation received from a total loss does not fully cover the amount the insured owes on the vehicle financing or lease agreement would be:
Gap insurance
Which type of policy would provide both property and liablity coverage for the owner of a condminium as well as for assessments following dmg to the building and other structures.
HO 6 insures the unit owners condo. remember the word condos is 6 letters
Currently in CA there are 6 forms available under the homeowner series. Four are for homes and one each for tenants and Condo owners. WHich of the following is the correct grouping of these forms?
HO forms -2, 3, 4, 5, 6, and 8 - 2,3,5,8 are used for homes, 4 is renters/tenants/. 6 condos unit owners
All of the following are covered property under HO policy except
Hovercraft
Which of the following is not a collision loss as defined under the personal auto policy
Impact between the covered auto and a deer. The policy states that losses caused by impact with bird, animal, or missile(something flying through the air like a rock) are not collision losses.
What are the licensing req for individuals that are permitted to sell the Ca FAIR plan?
Individuals with either a Fire & Casualty agent/broker or personal lines agent/broker license - producers with the broker/agent license can sell all government programs pertaining to property and casualty
Which of the following endorsements is designated to help prevent underinsurance caused by economic conditions.
Inflation guard
The cost to rebuild or replace a home increases for all of the following reasons after a catastrophe such as tornadoes or wildfire, except:
Insurance policy issues - Insurance does not increase the cost to rebuild after a catastrophe; it just might not be enough to cover all of the increased costs.
The purpose of the 16 point bold type disclosure on a surplus lines policy is to inform the
Insured that the policy is being issued through a non admitted insurer -
The commissioner of insurance and the DOI has all of the following powers, except
Interpretting policy provisions - The Commissioner approves of policy forms and types of contracts sold in this state. The commissioner does not interpret policy provisions.
In the property insurance field, a friendly fire is one which:
Is intentionally set and remains within its intended limits.
Which of the following is false concerning the Limited Auto License.
It is an agent license, Limited Lines AUto licenses require the licensee be appointed to act as an agent of a business entity or insurer, This license precludes the licensee from being autorized to broker auto insurance and from charging broker fees. THE ANSWER ALL OF THESE ARE FALSE <- ALL THE STATEMENTS ARE TRUE
The coverage provided and the req for the Mexico coverage endorsement to a PAP issued in CA would be
It provides liability coverage on an excess basisf or any accident in Mexico with 25 miles of the US border for trips days or less. This endorsement applies when one American Driver hits another American driver within 25 miles of the border.
The physical dmg insuring agreement of a personla auto policy would cover which of the following?
Loss of a CD player installed in the vehicle dashboard.
Which of the following would be cosidered special dmgs?
Lost wages, and future loss of earnings. - these are special specific dmgs as they have a specific economic value. This meas that most claims adjustors would come up with the same amount to be paid for these dmgs. Special dmgs/loss are also known as specific dmgs have actual economic value as they are based upon bills and numbers that can be identified and calculated. General dms will differ depending on various factos such as age, occupation, other awards for the same type of situation and expertise of the adjuster.
If a motor home is scheduled on a miscellaneous type vehicle endorsement, all of the following property is covered except:
Luggage - Under part D, the coverage is amended to cover cooking, dining, plumbing, or refirgeration facilities; awnings or cabanas; or any other facilities or equipment designed to be used with a motor home. It adds the exclussion We will not pay for loss to: clothing or luggage; business or office equipment; articles which are sales samples or used in exhibitions
Type of property policy that lists the specific perils or cause of loss insured against would be an
Named peril policy - Named peril policies list the perils that are covered by the policy. Ex of named peril policies would be baisc, broad form, earthquake, or a flood policuy.
What is the per day limit for transportation expenses under an unendorsed personal auto policy?
None, this would req an endorsement for rental reimbursement. - Transportation expense is provided by PART D Dmg to your Auto(physical dmg) for all collision and other than collision losses. The limit is $20 per day for a maximum of $600(30days). This $20.00 per day can be used for any form of transportation such as a taxi, bus, or rental car.
Which of the following would not be a proper way to evaluate a potential client insurance needs?
Obtain a copy of the current insurance policy and coverages.
What type of coverage is provided by an inland marine policy?
Open or all risk coverage - Inland marine policies have only a few limited exclusions.
All of the following are considered intentional torts except;
Ownership of a wild animal
Which of the following events may be covered by insurance?
Owning a home - This is a pure risk and only pure risk can be insured
What is the type of loss exposure that would be include land and property attached to it?
Property loss exposure - Property loss exposure includles both real and personal property exposures. Real property by definition includes land and the structures attached to it. Insurance will only pay for the structtures.
An all risk or open peril policy:
Protects against any peril except those specifically excluded
Under the peril of smk which of the following would be covered?
Puff-back - Insurance does not pay for situations that are known. Puffback is an accidnet. The furnace can misfire sending soot throughout the home.
The process whereby the insurer determines the appropriate charges for its policies is called?
Rate-making.
The Ca FAIR plan makes it possible for people that are unable to obtain insurance in the voluntary market to qualify for coverage through this program. Which type of insurance is obtained through the Fair Plan?
Real and personal property at a fixed location in areas designated
In order for a rate to remain in effect it must be:
Reasonable, not excessive: Adequate, not inadeqaute: Equitable, not unfairly discriminatory
An insured duties after a loss are described in the homeowners Section 1 conditions, The incorrect statement concerning the insured duties would be? the insured must
Submit to questions under oath while not in the presenc of any other insured. (This question has two possible incorrect answers so you have to determine which is most incorrect. The insured must protect property always, but must submit to examination under oath only if the insurer requests it.)
Guaranteed and Extended Replacement cost endorsement requires that
The dwelling be insured for its full replacement cost value at the time of policy is issued, the insured must allow the insurer to inspect the dwelling and notify the insurer of any alterations that increase the value of the insured dwelling, allow the insurer to make adjustments with possible periodic increases to adjust for inflation.
What is is about a liability policy that causes the need for inland marine coverage?
The exclusion for care, custody, and control
The person, persons or business actually named in the policy declarations is called
The named insured - those named on the declaration page and their spouses are considered to be name insureds and considered you and your in policy language
Exclude under an HO 3 as pesonal property would be
This is covered personal property. The sublimit of $1500 applies to theft only.
The purpose of the Ca FAIR plan consists of all of the following except:
To encourage competition among insurers who write business in CA. -The FAIR plan provides for the equitable distribution among admitted insurers for basic property insurance that cannot be obtained through the normal/standard/voluntary market.
A wrongful act other than a crime or breach of contract is an
Tort - is any wrongful act(or failure to act) that leads to harm of another. It can be intentional or unintentional. It is a civil/private wrong, and cannot be criminal or breach of contract against anotehr and the remedy/penalty is usually monetary
SInce motorcycle do not meet the eligibility req(4 wheel private passenger vehicle) for a PAP they need to be written
Using a miscellaneous vehicle endorsement to the personal auto policy, a seperate policy considered a specialty policy designed specifically for motorcycles.
An applicant would like to purchase a personal umbrella policy. The insurer may
Your insurer may require that he maintain undrelying liability coverage by carrying auto and personal liability coverage. Most insurer's require the insured to maintain both auto and personal liability coverage
A written provision that modifies the provisions of the original contract is known as
an endorsement
When a premium is based solely on an underwriter evaluation of an individual applicants loss potential this is known as:
judgement rating.
The dwelling policy form that offers the broadest type of coverage is which of the following?
special dp 3- known as the special form is an open peril policy which covers all perils except those that are excluded. The structures are open peril/all risk and the personal property is broad form perils - Special or DP 3 is the broadest of the dwelling forms as it provides. All risk/open peril on the structures, coverages A and B(real property) and broad form perils on the personal property Coverage C.There is no Standard or Dp 4 dwelling policy/form. Broad form or Dp 2 both real propery Coverage A and B, and personal property Coverage C are covered for broad form perils. Basic form or DP 1 covers real property coverage A and B and personal Property coverage C for basic perils
When an inunterrupted chain of events begins with an insured peril and ends in dmg, the peril is considered to be:
the proximate cuase - is an ubroken or uninterrupted chain of events. To be covered by aproperty policy the proximate cause must be an insured peril and end in dmg
