fred loya practice exam 2

Which of the following is not true regarding a Certificate of Authority?

It is issued to group insurance participants.

The commissioner may examine any carrier's records every

5 years or as often as necessary

If a license lapses for less than 90 days, in addition to the renewal fee, the licensee must pay a penalty fee equal to ________ % of the renewal fee.

50

For how long must the Insurance commissioner have new forms in his possession before they can be used?

60 days

An example of a peril would be

A fire that damages the kitchen of a home.

Concerning insurance, the definition to fiduciary capacity is

A high level of trust given to someone when they are acting in the interests of another person.

Which of the following persons would be required to hold a producer license?

A person who negotiates insurance contracts.

Which of the following statements is NOT correct?

An agent may voluntarily surrender his license to the commissioner to avoid penalties.

Bob insists that the insurer owes him $10,000 for liability damages, while his insurer asserts that they owe him no more than $7,000. Which of the following would most likely describe the type of claim settlement they might pursue?

Arbitration

According to the Texas Insurance Code, any agent violating the Unfair Competition and Unfair trade Practices Law may result in all of the following penalties EXCEPT

Automatic revocation of the agent's license

In a property insurance policy, what is the term for the amount of a loss that the insured must cover out of his own pocket, and the insurer will only pay for the additional amount of the loss above this limit?

Deductible

A homeowner discovers that a valuable painting was stolen from her home, what type of loss would this be considered?

Direct loss

Which of the following describes an insurance company doing business only in the state that it was incorporate in?

Domestic

All of the following are found in the Declarations section of a policy EXCEPT the

Exclustions

The authority granted to an agent through the agent's contract is referred to as

Expressed Authority

Events or conditions that increase the chances of an insured loss occurring are referred to as

Hazard

Additional persons, businesses, or entities insured under the policy are known as

Insureds

What part of the insurance contract states the insurance company's promise to pay?

Insuring agreement

When applying for homeowners insurance, Mr. Applebee tells his agent that the home is used strictly as a residence. Actually, he manufactures fireworks in the basement of the home. What will happen if the insurance company discovers Mr. Applebee's misrepresentation after the policy is issued?

It will void the policy because Mr. Applebee misrepresented a material fact.

After a claim, the insured must do all of the following EXCEPT

Leave property unmoved until photos of damages can be taken.

The maximum amount that an insurance company will pay in the event of a loss is called

Liability limits

The reduction in quality, quantity or value of property is called

Loss

Under a policy, the condition that determines how the amount of damaged or lost property will be determined is known as

Loss valuation

If an agent, while selling a policy tells the prospect he is fully covered and everything will be taken care of, when this is not the fact, the agent is guilty of

Misrepresentation

Walking away from an unlocked but insured car represents a

Morale hazard

If an agent's license is expired less than 90 days, which of the following is not true?

Must retake the test.

Agents licensed in states where they are not residents are called Surplus Lines agent

Non Resident agent

What is true about a Mutual Insurer

Policyholders elect the Board of Directors.

Which of the following was created to pay benefits due to insureds after their insurance companies have been declared insolvent?

Property and Casualty Insurance Guaranty Association

Which of the following act is considered an unfair or deceptive act or practice?

Providing for the payment, part of the agent's commission to the insured.

Which of the following is not an example of an unfair claims practice

Rebating

When an insured decides to cancel an insurance policy before the expiration date, the unearned premium is returned on a

Short rate basis

What type of risk offers the opportunity for gain, as well as possibility of loss?

Speculative risk

Who is responsible for licensing insurance agents?

State Department of Insurance

A hard to place risk, written with a non admitted carrier is known as what?

Surplus lines

An agent discovers his newest client was the result of a referral. To show his thanks to the referring customer, the agent could

Thank the customer.

An agent tried to sell insurance over the phone to an applicant who appears to be confused, but is eventually able to give enough information for the application to be completed. After the policy was issued, the agent talked to the Insured's family, and they explained that the insured was recovering from a surgery and might have been under the influence of medication at the time of application. Which of the following is true?

The policy may be voided if it can be proven that the applicant was not capable of making a buying decision at the time of the application.

What would NOT be an unfair claim practice?

Using an arbitrator to resolve a dispute.

If an agent/company refuses to do business with a certain group or organization, they may be guilty of

boycotting

A banker is ready to close on a customer's loan. The bank is prepared to offer the loan but only if the customer purchases a life insurance policy from the bank in the amount of the loan. This is an example of

coercion

Who receives a dividend from a mutual insurer?

the insured