CA Insurance Code & Ethics Chapter Quizzes

55 years of age of older Advertisements for term life insurance for individuals age 55 and older must adhere to strict criteria or prominent disclosures (see CIC 10127.8).

Advertisements for term life insurance must adhere to strict criteria of extensive disclosures if directed to persons...

Blanket life Blanket life insurance is available to newspapers hiring persons as "independent contractors" to deliver newspapers. (CIC 10222).

After being hired to deliver newspapers to his neighbors, a man is provided with $10,000 of life insurance by the newspaper. He would be covered under which kind of life insurance?

Offer the supplement policy on a guaranteed issue basis Once a person becomes eligible for Medicare supplement plans, and during the open enrollment period, coverage must be offered on a guaranteed issue basis.

An applicant is discussing his options for Medicare supplement coverage with his agent. The applicant is 65 years old and has just enrolled in Medicare Part A and Part B. What is the insurance company obligated to do?

All of these: Contributing to the California Guarantee Association, soliciting insurance to a person who is not eligible for membership, California Joint Underwriters Association Risk retention group may not contribute to any insurance insolvency Guarantee Association funds, nor are its member protected by such plans. They are also not participants in any of the insurance residual markets in the state.

California prohibits a risk retention group from engaging in which of the following?

Neglect on the part of the insured to communicate all information known to be material to the insurer Concealment is a legal term for the intentional withholding of information by the insured that is material to the insurer (i.e. critical in making an underwriting decision). Information that is known or should be known, waived by the other party or immaterial to the risk, does not need to be communicated in a contract.

Concealment as defined by the California Insurance Code is...

Both the insurer and insured to rescind The violation of a material warranty or other material provision of a policy, on the part of either party, entitles the other to rescind.

The violation of a material warranty or other material provision of a policy allows...

26 The term "dependents" includes the insured's spouse and all children from birth until 26 years of age.

What is the limiting age for dependent children of the insured employee in a group life plan (other than disabled children)

It purchases liability insurance covering all members on a group basis The purpose of purchasing group is the purchase of liability insurance on a group basis.

Which of the following is a characteristic of a purchasing group?

15 days The employer or the insurer must give the employee notice of his/her right to convert to individual coverage within 15 days of termination of employment (or at least 15 days prior to the expiration date of the conversion period).

Within how many days of termination of employment must an employer give notice of the employee's right to convert the group policy to an individual policy?

5 days Removal from premises endangered by the perils (fire & lightning) insured against automatically applies for 5 days.

Removal coverage under a standard fire policy remains in effect for...

3 years The replacing and existing insurers must retain evidence of all signed applications and disclosures, as well as other materials used in replacement or conservation, for no less than 3 years.

Replacement of life insurance and annuities policies requires for the replacing and existing insurers to retain evidence of all signed applications and disclosures for no less than...

Only perils listed in the policy are covered Named perils contracts cover only those perils specified in the policy.

The Standard Fire Policy is named perils contract, which means...

The materiality of given concealment The materiality of a given concealment.

The importance of a misrepresentation is determined by...

Insurance Insurance is the mechanism whereby an insured is protected against loss by specified future contingency or peril in return for the present payment of premium. Because many other individuals with the same or similar risk of loss are paying premiums, funds are available to indemnify those who actually suffer that loss.

What do individuals use to transfer their risk of loss to a larger group?

The same number of hours of training in workers compensation as required for a property or casualty broker-agent on the same subject According to the California Insurance Code, the accident and health agents who want to sell 24-hour care coverage must complete an approved CE course on workers compensation and general principles of employer liability. The required number of hours must be equal to, but no greater than the required prelicensing hours for a property or casualty broker-agent on the same subjects.

What is the education requirement of accident and health agents who want to sell 24-hour care coverage?

100% of the insurance on the life of the insured employee In group polices, insurance coverage can be extended to the dependents of the insured employee. The coverage, however, cannot exceed 100% of the insurance on the life of the insured employee.

What is the maximum amount of coverage that may be extended to the insured's dependents under a group life insurance policy?

To make workers compensation insurance available, especially to smaller companies with more limited payrolls California's State Compensation Insurance Fund (SCIF) provides workers compensation insurance. However, commercial insurers may also provide this insurance. The State's plan is typically utilized only if a company cannot otherwise obtain the coverage in the commercial market. So, SCIF typically works with small employers with limited payrolls, as opposed to large corporations.

What is the purpose of California's State Compensation Insurance Fund (SCIF)?

10 days Notice of policy cancellation may be effective only if mailed or delivered by the insurer to the policyowner at least 20 days prior to the effective date of cancellation, or 10 days' notice when cancellation is for nonpayment of premium, accompanied by the reason for cancellation.

When an auto insurance policy is cancelled for nonpayment of premium, how many days' notice must the insurer provide to the policyowner?

Offer the insured to renew the policy at a different rate TRUTH: Notice of policy cancellation may be effective only if mailed or delivered by the insurer to the policyowner at least 20 days prior to the effective date of cancellation, accompanied by the reason for cancellation. The insurer must also notify the insured about the existence of the automobile liability assigned risk plan.

When an insurer cancels an automobile insurance policy for a reason other than nonpayment of premium, the insurer must meet all of the following requirements EXCEPT

A certificate of insurance The employer receives the original contract, but employees need only be given certificate in insurance showing their coverage and privileges. (CIC 10209)

When employees are covered by group insurance, they receive...

Not exclude pre-existing conditions that would have been covered by the original contract Replacement policies must cover any claim that would have been paid by the original policy. If the insured was still within the six month exclusion period at the time of replacement, only the "unsatisfied portion" of the exclusion period may be excluded. (CIC 10233.3)

When the long term care policy is replaced after it has been in effect for at least six months, the new policy may...

This represents a two-pronged coverage: workers compensation during work hours and regular medical coverage outside of work "24-hour coverage" means that employees are covered 24 hours a day: by workers compensation during working hours and some type of medical insurance of their time outside of the workplace.

Which of the following best describes the term "24-hour coverage" in relation to workers compensation insurance?

An employee is provided with workers compensation coverage and medical insurance coverage The concept of 24-hour coverage mean that an employee is provided with both a workers compensation policy and some type of medical insurance coverage such as a disability insurance policy or health care service plan contract for injuries or illnesses that occur outside of work. The employee is basically covered 24 hours a day.

Which of the following choices would define 24-hour coverage?

Asking his manager for clarifying information when the terms of a policy provision are unclear to him If the agent had acted unethically in this situation, he would have made up a response that may or may not have been true.

Which of the following demonstrates highly ethical behavior on the part of an insurance agent?

Telling a client that his monthly premium will be $150 instead of $300 so that he will be more likely to buy the policy This is an example of misrepresentation, which is an unfair trade practices prohibited by law.

Which of the following demonstrates unethical behavior on the part of an insurance agent?

A person must have been licensed to drive a motor vehicle for the previous 5 years A person only needs to be licensed to drive a motor vehicle for the previous 3 years.

Which of the following is NOT a requirement for purchasing a Good Driver Discount policy?

The type and model of vehicle California law states that rates and premiums for an automobile insurance policy shall be determined by application of the following factors in decreasing order of importance: (1) The insured's driving safety record; (2) The number of miles he or she drives annually; (3) The number of years of driving experience the insured has had.

Which of the following is NOT one of the 3 factors set by state law for determining rates and premiums on automobile insurance policies?

Coverage is commonly provided through a federally-funded program It is a peril excluded by most standard property forms. Coverage for the peril of earthquake may be added by endorsement to most property policies, or coverage may be written in a Difference in Conditions policy.

Which of the following is NOT true about earthquake coverage?

The extent to which the employees in a particular establishment have or have not persons dependent of them for support The California Insurance Code specifically states that rates shall take no account the extent to which the employees in a particular establishment have or have not persons dependent on them for support. All the other answer choices are factors in determining rates charged by State Compensation Insurance Fund. Another factor in addition to these would be bodily risk or safety, or other hazards of the plant, premises or work of each insured employer.

Which of the following is not a factor in determining rates charged by the California State Compensation Insurance Fund for insurance issued by it?

Illegal actions, as defined by the Insurance Code, can be presumed to be unethical. However, actions not included in the Insurance Code may also be unethical Illegal actions are always unethical. Actions not specifically designated as illegal may be ethical or unethical.

Which of the following is true about defining ethical behavior?

Unfair Trade Practices Unfair trade practices include unethical and illegal acts life misrepresentation, rebating, and defamation.

Which of the following laws in the Insurance Code define acts that constitute unfair methods of competition?

A state entity that exists solely to transact Workers Compensation Insurance on a nonprofit basis

Which of the following selections correctly describes the California State Compensation Insurance Fund?

While the Insurance Code defines acts that are illegal, it is not possible to list every action that may be considered unethical Illegal actions are always unethical. Actions not specifically designated as illegal may be ethical on unethical.

Which of the following statements is true regarding insurance ethics?

Admitted insurer subject to jurisdiction in Nevada

Which of the following would be exempt from the jurisdiction of the California Department of Insurance?

An oral representation by the applicant A warranty is a statement considered to be guaranteed to be true and becomes part of the contract. Representation in insurance contracts qualify as implied warranties.

Which of the following would qualify as an implied warranty in an insurance contract?

Valued Valued policies specify that the insured property will be valued at a specific sum. Open policies, on the other hand, do not specify a value up-front. The value is not determined until a loss occurs.

Which type of policy specifies the value of the insured objects in the policy itself?

Workers compensation insurance "24-hour coverage" means that employees are covered 24 hours a day: workers compensation during working hours and some type of medical insurance for their time outside of the workplace.

"24-hour coverage" includes health insurance and...

Either ethical or unethical Illegal actions are always unethical. Actions not specifically designated as illegal may be ethical or unethical.

Actions that are not specified as illegal are...

Harry who is waiting for his distant cousin's beach-front property as part of his inheritance TRUTH: A mere contingent or expectant interest in anything, not based on an actual right or claim to that thing, nor upon any valid contract for the ownership or possession of it, is NOT considered to be an insurable interest in that thing.

All of the following are examples of insurable interest in property insurance EXCEPT

Manuscripts and bullion TRUTH: Manuscripts or bullion may be covered if specifically named in writing in the policy.

All of the following are excluded from coverage under a standard fire policy EXCEPT

An insured loses a large sum in a poker game TRUTH: Any event, whether past or future, which may damnify a person having an insurable interest, or create a liability against him/her, may be insured against. Speculative losses are uninsurable.

All of the following are insurable events as defined in the Insurance Code EXCEPT

It can be distributed through a life insurance policy TRUTH: The terminology "24 Hour Coverage" comes from the fact that employees are covered "around the clock", i.e. 24 hours a day, 7 days a week, 365/366 days a year. While they are working, employees are covered under the Workers Compensation part of the policy. Off-the-job they are covered under the nonoccupational part. 24 Hour Coverage does not include distribution through a life insurance policy.

All of the following are true in regards to 24 Hour Coverage EXCEPT

Employees eligible for 24-hour coverage TRUTH: Employers Liability coverage is designed for situations in which employers need additional insurance for claims not covered under Workers Compensation laws. All of the scenarios described above would be covered except for the 24-hour coverage employees. 24-hour coverage provides employees with a both a workers compensation policy and some type of medical insurance coverage.

All of the following may be covered under the Employers Liability policy EXCEPT

This business may be closed under a cease and desist order issued by the Department of Industrial Relations All employers must obtain workers compensation insurance. Failure to do so may results in a cease and desist order from the Department of Industrial Relations.

An employer is on the verge of bankruptcy. To save money, the employer decides to cancel its workers compensation plan. Which of the following is true?

If the Insurance Code does not state that the practice is illegal, it may still be unethical Illegal actions are always unethical. Actions not specifically designed as illegal may be ethical or unethical.

An insurance agent would like to know if a particular business practice is ethical. Which of the following is true?

California Workers Comp Inspection Rating Bureau (WCIRB) The California Workers Comp Inspection Rating Bureau (WCIRB) is an unincorporated, nonprofit association comprised of all companies licensed to transact workers compensation insurance in California and has over 400 member companies.

An unincorporated, nonprofit association representing all insurance companies in the State of California licensed to transact workers compensation insurance is known as...

Be fined a sum of $10,000 An insurance company that violates the replacement provision of the Code will be fined $10,000 for the first offense.

Any insurer who engages in the insurance business and violates the Code with respect to insurance replacement shall on the first violation...

18 months In addition to meeting the criteria, the insured must have been licensed to drive in the United States or Canada for at least the previous 18 months.

Any person who claims that he or she meets the criteria based on a driver's license and driving experience acquired anywhere other than in the United States or Canada is presumed to be qualified to purchase a Good Driver Discount policy if that person has been licensed to drive in the U.S. or Canada and meets the criteria for that period for at least the previous...

24-hour coverage "24-hour coverage" means that employees are covered 24 hours a day: workers compensation during working hours and some type of medical insurance for their time outside of the workplace.

Bob works as a forklift driver in manufacturing plant. When he is at work, he is covered by workers compensation insurance. His employer has also included a major medical plan as part of his benefit package, so Bob is also coverage by insurance outside of working hours, as well. Which insurance term best describes this arrangement?

When the loss is to insured property that has to be removed because of endangerment by a peril insured against under the policy Property that has been removed to protect against a possible pending loss by a peril covered by the policy is covered for up to 5 days at another location for virtually any type of loss.

Even though the Standard Fire Policy is a named peril contract, under which of the following circumstances would the policy provide "all risk of loss" coverage on insured property?

Express warranty Warranties can either be expressed or implied. Statements in a policy are considered express warranty. Every express warranty becomes part of the insurance contract. Implied warranty is an unwritten or unspoken guarantee presumed to be made based on the circumstances of a transaction.

Factual statements about the insured or the risk in an insurance policy are considered...

2 If the insured buys any more than 2 policies within 12 months, this is considerer to be unnecessary and excessive. The exception to this rule is when a person buys a policy that allows him or her to consolidate coverage.

How many long-term care policies can be sold to an insured within a 12-month period before the number of policies is considered to be unnecessary?

Open policy Valued policies specify that the insured property will be valued at a specific sum. Open policies, on the other hand, do not specify a value up-front. The value is not determined until a loss occurs.

If an object's value is not specified until a loss occurs, it is insured under a(n)...

The Commissioner has all of these powers: complete control over the assets of the insolvent company, power to sue the company's officers, power to sell company's assets until all of its creditors are paid In a conservation or liquidation effort, the Commissioner may do all the above.

In a conservation or liquidation effort, what powers does the Commissioner have?

Unfair trade practice This scenario illustrates rebating, which is an unfair trade practice prohibited by law.

In an effort to sell more insurance policies, Bob the insurance agent promises his clients that he will give them $300 if they buy a policy from him. The Insurance Code prohibits this act. This scenario illustrates which insurance term?

All providers will have the same coverage options and conditions for each plan In reference to the standard Medicare Supplement benefits plans, the term "standard" implies that all providers will have the same coverage options and conditions for each plan.

In reference to the standard Medicare Supplement benefits plans, what does the term standard mean?