Test 2 insurance

13)Furniture, which is destroyed when a building burns down, is an example of a(n): A) Direct loss B) Indirect loss C) Consequential loss D) Residual loss

A

18)The four broad categories or lines of insurance are: A) Property, Disability, Life, Casualty B) Property, Liability, Disability, Life c) Liability, Casualty, Death, Disability D) Property, Homeowners, Auto, Inland Marine

A

23)Jack owns his home. Which of the following persons have an insurable interest in that home? A) Jack B) Jack's neighbor, Tom C) Both Jack and Tom D)Neither jack nor Tom

A

26)Which of the following policies do not include coverage for theft and liability, but allows the insured to add the coverages by the use of endorsements? A) Dwelling policy B) Surety policy c) Homeowners policy D) All ofthe above automatically cover theft and liability

A

31)What item of personal property is included in Coverage A under an H0-3 policy? A) Paint on the premises to be applied to the interior B) Detached fences C) Lawnmower used to maintain the exterior premises D) Decorative fountain

A

34)Subsidence is: A) Excluded under the Earth Movement exclusion B) Automatically covered under the HO-3 policy C) Excluded under the Water Damage exclusion D) Covered under the Sinkhole Collapse endorsement

A

38)All of the following business occupancies would be permitted in a dwelling insured under a Dwelling form, except A) A small art supply shop run by the insured and his sister B) A professionaloffice where the insured offers tax advice to clients C) A beauty shop operates by the insured and her daughter D) A photo studio run by the insured and her neighbor

A

44)A liability policy that provides increased limits and expanded coverage over underlying casualty coverage is: A) Umbrella liability B) Excess liability C) Pro rata liability D) Professional liability

A

48)You have an insured that doesn't own a car but, on occasion, drives cars that belong to her friends. She is concerned that the limits her friends are carrying on their policies might be too low. She is also planning a trip to Florida and will be renting a car while there. What would you recommend she do? A) Buy a Personal Auto policy and add the Named Non-Owner policy endorsement B) Buy a Personal Auto policy and add the Extended Non-Owned Liability endorsement C) These types of exposures would not beinsurable D) Buy a Personal Auto policy and add the Extended Transportation endorsement

A

5) Actual cash value is defined as the: A) Amount to replace damaged property less depreciation B) Value of the damaged property on the open market C) Amount agreed upon by the insured and the insurer at policy inception D) Amount to replace damaged property without a deduction for depreciation

A

51)0f the following loss scenarios, identify the one that is excluded from coverage under both the Collision and Other Than Collision coverage ofthe insured's PAP. A) A laptop computer owned by the insured is stolen from the vehicle while it is parked in the insured's driveway; there are signs of forced entry into the vehicle B) Theft of the vehicle occurs because the insured leaves the keys in the ignition when he makes a quick stop at the grocery store C) A sign is bklown off a building during a windstorm and causes severe damage to the vehicle while it is parked in an outdoor public parking lot D) The vehicle is swept downstream during a flashflood

A

55)Kathy was in an accident that caused her $10,000 in damages. She was found to be 3096 at-fault. Under Contributory Negligence, how much can Kathy expect to be paid by the insurer? A) $0 B) $3,000 C) $7,000 D) $10,000

A

57)The PAP Part E: Duties After an Accident or Loss section applies to: A) The insured B) The insurer C)The Commissioner D)all of the above

A

61)All ofthe following expenses are covered in addition to the limits of liability under Part A- Liability of a PersonalAuto policy, except: A) Prejudgment interest B) Premiums on appeal bonds C) Loss of earnings for attending trials at the company's request D) Cost of bail bonds related to a covered accident

A

71)What steps need to be taken to terminate a licensee's license that is in the possession of an employer? A) The licensee needs to give a written notice of intent to the Insurance Commissioner B) The employer must return the license to the licensee, who must then return the license to the Insurance Commissioner C) The licensee must give written notice to the employer who must then send the license to the Insurance Commissioner D) The license cannot be terminated prior to the expiration date; it becomes inactive

A

74)What type of insurers and insurance is a Surplus Lines Broker involved with? A) Non-admitted insurers; Property and Casualty insurance B) Admitted insurers; Property and Casualty insurance C) Non-admitted insurers; Life and Disability insurance D) Admitted insurers; Property insurance only

A

77) Regarding a Personal Auto policy, when is an agent required to inform an insured of any conditions which may be precedent to coverage A) At application B) At policy delivery C) At renewal D) There is no requirement to inform the insured

A

79)Insurers give certain legal authority to their agents, which are either stated in a contract or merely understood to be true, based on the relationship between the agent and the insurer. What type of authority is illustrated by an agent that acts beyond the scope of their authority?, A) Apparent authority B) Implied authority c) Fiduciary authority D) Express authority

A

83)An insurance company that is owned by its policyholders is referred to as which ofthe following? A) Mutual insurer B) Reinsurer C) Exchange syndicate D) Inter-insurance exchange

A

87)What term is defined as the refusal to enter into a business transaction with another person until he or she complies with certain conditions, or grants specific concessions? A) Boycott B) Twisting C) Coercion D) Fraud

A

9) A man has a car that he feels is too expensive to insure. Which ofthe following is the risk management method ofavoidance he may use? A) Sell the car and not replace it B) Request a higher deductible to pay less premium C) Avoid his agent and not renew the policy D) Purchase a less expensive car to insure

A

Which advisory organization(s) develop policy forms for the standard market? A) Insurance Services Office (ISO) B) National Association of Insurance Commissioners (NAIC) and the American Association of Insurance Services (A C) National Association of Insurance Commissioners (NAIC) and the Insurance Services Office (ISO) D) Insurance Services Office (ISO) and the American Association of Managing GeneralAgents (AAMGA)

A

10)Which of the below would best relate to the term "pure risk"? A) Buying a lottery ticket B) Buying an insurance policy C) Betting on a horse race D) There is no such thing as a "pure risk

B

16)In which part of an insurance contract would you expect to find a description of the duties and obligations of the insured? A) Declarations B) Conditions C) Insuring Agreement D) Exclusions

B

20)With regard to insurance policies, all of the following have responsibilities within the contract, except: A) Agent B) Commissioner C) Insured D) Insurer

B

28)What is the primary difference between an HO-2 and an HO-3 policy? A) The liability coverage B) The perils insured against C) The property covered D) The policy territory

B

33)Bob already has a Homeowners policy. What will Bob need to add to protect him from claims for libel and slander? A) Bodily Injury coverage B) Personal injury endorsement C) Slander endorsement D) There is no coverage Bob can purchase to coverthis exposure

B

35)of the following Homeowner forms, which is usually referred to as the renters policy? A) HO-8 B) HO-4 C) HO-5 D) None ofthe above

B

40)A policyholder wants to buy a Boatowners policy. Why? A) He wants Hull coverage B) His Homeowners policy is too limited C) He wants Hull and Liability coverage D) He wants Liability

B

42)What is the primary difference between the Medical Payments coverage of a Boatowners policy and an HO-3 Watercraft endorsement? A) There is no difference B) The Boatowners policy covers first and third party injuries and the Watercraft endorsement covers third party injuries only D) The Watercraft endorsement has a lower limit of liability than the Boatowners policy C) The Watercraft endorsement excludes losses while the boat is on the water and the Boatowners policy covers the losses

B

45)A watch, which is worth $6,000, is scheduled on a Personal Articles Floater attached to an HO-3 for $5,000. What would be the maximum amount the insured would collect is the watcb were stolen A) since the loss was caused by theft, the insured could collect a maximum of 1,500 B) The insured would be able to collect a maximum of$5,000 for the loss C) The insured would be entitled to collect up to $6,000, since that is what the watch was worth D) There is no coverage for the loss

B

46)All of the following would not be eligible for coverage under the California FAIR Plan, except A) a youthful driver with less than 3 years driving experience B) a home which is well taken care of, but is located in a designated hazardous brush fire area C) a home that has faulty wiring, which needs to be repaired and is occupied by the owner D) an insured with multiple vehicles and three youthful licensed drivers under the age of 25

B

52)Marktrades in a car that is only insured for liability coverage. How many days does he have to add Collision coverage to his new car before the coverage no longer applies? A) He must add it immediately B) 4 days C) 14 days D) 30 days

B

60)All of the following describe a livery conveyance, except: A) Yellow Cab charges $1.20 for the 1 mile and $0.40 each additional mile B) John and Beth commute to work together and split the cost of the gas C)Beth pays $20 per day to hire a shuttle to get to work D) Joe owns a Towncar and is paid $100 per passenger for limo services

B

62)An insured has a Personal Auto policy, but does not pay the insurance premium when it is due. The insurer is going to cancel the policy for non-payment. How many days notice must the insurer give to the insured? A) 5 B) 10 C) 15 D) 20

B

65)There are 20 classes of insurance in California. Which of the following are 3 of the classes? A) Life, Fire, Business B) Life, Fire,Title C) Fire, Marine, Casualty D) Life, Title, Commercial

B

68)Which of the following situations would amountto fraud? A) An unintentional concealment of information that has no bearing on the risk insured B) Intentionally withholding material information from an application for insurance to geta better rate C) Disclosing all information that is relevant to the risk when applying for an insurance policy D) None ofthe above acts would Ee considered fraud

B

69)lf the Insurance Commissioner determines that an agent or broker has failed to keep or maintain proper records of the insurance they transact, he may issue an order requiring the licensee to establish and complete those records. What is the timeframe given to comply with the order? A) 30 days from the date ofthe order B) 60 days from the date of the order C) 90 days from the date ofthe order D) 120 days from the date ofthe order

B

7) Which of the following would be considered special damages? A) Compensation for a person's emotional suffering B) Compensation for loss of income due to an injury C) Compensation for loss of a foot D) Compensation for a scar sustained during an accident

B

72)Which of the following is true about an exclusive or captive agent? A) Captive agents contact prospects by referral only B) Exclusive or captive agents represent one insurer C) exclusive agents place insurance with exclusive insurers D) exclusive or captive agents are experts on one class of insurance

B

75)An independent agent can only write insurance for one company. A) True B) False

B

8) How is a Combined Ratio determined? A) Loss ratio minus expense ratio B) Loss ratio plus expense ratio C) Loss ratio multiplied by expense ratio D) Loss ratio divided by expense ratio

B

86)Which choice would not be unlawful for an insurer to do under the PAP? A) Direct the claimant to go to a specific shop for an inspection B) Upon the claimant's request, provide a list of repair shops C) Direct the claimant to go to a specific shop far away for an estimate D) Direct the claimant to go to a specific shop far away for repairs

B

Restoring a person to the same financial condition they enjoyed prior to loss is the: A) Principle of insurable interest B) Principle of indemnity C) Law of large numbers D) Principle of adhesion

B

12)There are 4 elements that must be presentto establish negligent liability. Which ofthe following is not one ofthe 4 elements? A) Injury or property damage to another must have occurred B) There must be a legal duty to act or not to act under the circumstances C) There must be an intervening cause between the negligent act and the injury or damage D) A breach of legal duty must have occurred

C

15)All of the following explain the characteristics that are unique to insurance contracts, except A)All relevant facts must be disclosed honestly and completely by both parties B) Only the insurer must perform under certain conditions C) There is an equal exchange of dollar amounts or value within the contract D) Becausethe insured must accept the contract, as written by the insurance by the courts, the interpretation that favors the insured will be enforced company, on a 'take it or leave it basis, if the contract can be interpreted in more than oneway

C

17)Risk is transferred when it is: A) Ignored B) Prevented C) Insured D) Retained

C

21)Where would an insured that is in the business of importing exotic animals from Africa most likely go to obtain insurance coverage? A) State Competitive Fund B) Foreign insurer C) Excess and Surplus Lines insurer D) Alien insurer

C

24)If an insurer cancels a policy 3 months after the effective date of a year-long policy, what would the insured be entitled to if they had already paid their premium in full? A) Full refund B) No refund C) 75% refund D) 75% refund minus a 10% fee

C

27)Which ofthe following loss exposures is not covered by Section Il of Ron's Homeowners policy? A) Ron's activities while rebuilding a car, which doesn't have an engine in it, in his garage at home B) Ron's use of his motorized golf cart on a golf course D) Ron'e use of his riding lawnmower while he is mowing his lawn C) Ron's registered personalauto while used on his own property, which includes 10 acres of undeveloped land

C

29)Loss under a Watercraft endorsement is covered if it arises out of: A) Rental of the watercraft to others B) The use of the watercraft to transport people for a fee C) The use of a sailboat in a racing competition D) The use ofthe watercraft to transport goods for a fee

C

32)Under Ann's HO-3 policy, what would be the limit for grave markers that are damaged by a peril covered under Coverage C? A) $1,500 B) $2,500 C) $5,000 D) 10% of Coverage C

C

37)Under an unendorsed Homeowners policy, the insured's personal property is covered: A) Only on the premises B) Only off the premises C) On and offthe premises D) There is no coverage

C

39) All of the following are ture reguarding the California Standard Form Fire Insurance Policy, except A) the contenent and wording of the policy is found within the california insurance code B) the policy form is rarely used today, but played a "historical role" in shaping the structure of todays homeowners policies C) the exact wording of the Standard Form is contained in most fire policies that insure property in california D) in situations where the standard form is no utilized the form that is used is required to conatin at least the same or better coverage

C

4) What gives an injured party the right to seek compensation if it is proven that another person with negligence injury? A) Statutory code B) Criminal code C) Tort law D) Case law

C

41)An applicant would like to buy a personal Umbrella policy. A)There are no requirements for underlying policies B) Your insurer may require he maintain underlying liability coverage by carrying auto liability coverage; underlying personal liability coverage is not required C) your insurer msy require that he maintain underlying liability coverage by carrying auto and personal liability coverage D) Your insurer may require that he maintain personal liability coverage; underlying auto liability coverage is not required

C

50)Damage to a vehicle due to an earthquake is: A) Not covered B) Covered under Collision C) Covered under Other Than Collision D1 Only covered ifthe Earth Movement endorsement was purchased

C

54)The old insurance term 'Comprehensive' means: A) Collision B) Specified Causes of Loss C) Other Than Collision D) None ofthe above

C

58)What is the limit per day for transportation expenses under an unendorsed Personal Auto polícy? A) $10 B) $15 C) $20 D) None

C

63)Which of the following would not allow an applicant to qualify for the Good Driver Discount? A) At-fault accident with property damage paid out B) Insured received a speeding ticket 1 year ago C) At-fault acident with minor bodily injury paid out D) Not at-fault accident where the passenger in the insured's vehicle was a fatality

C

64)Under Proposition 103, which of the following is allowed as a principal rating factor for Personal Auto policies? A) Credit record B) Year of the auto C) Driver's safety record D) Make of the auto

C

67)A representation in an insurance contract may qualify which of the following? A) An express warranty B) An amendment c) An implied warranty D) A policy provision

C

73)A Solicitor is: A) A person authorized, by and on behalf of an insurer, to transact all classes of insurance, other than life insurance B) A person who, for compensation and behalf of another person, transacts insurance, other than life insurance, with but not on behalf of an insurer C) A natural person employed to aid an insurance agent or insurance broker in transacting insurance, other than life insurance D) A person licensed by the Insurance Commissioner to solicit and place insurance, other than life insurance, with admitted insurers

C

78)All ofthe following are true about an Insurance Adjuster, except: A) They are not licensed B) They work for the insurer C) They are private investigators D) They can secure evidence to be used before any court

C

81)The California Insurance Code states that all Personal Lines Broker-Agents keep records of insurance they transact. General policy records must be kept for: A) A minimum of five years B) A minimum of threeyears C) A minimum of 18 months D) A minimum of oneyear

C

85)Which ofthe following statements best describes the term 'insolvency as it relates to insurance? A) The inability of an insurance company to write business in a state, other than its domicile state, because of restrictions placed upon it by the Commissioner B) The inability of the California Insurance Guaranty Association to provide financial backing to a specific insurer as the result of that insurer not paying contributions to the Association C) The inability of an insurer to meet financial obligations to policyholders as a result of a deficient amount of paid-in capital D) The denial of a claim payment by an insurer because of fraudulent intent by the insured

C

88)All ofthe following are true about the "Notice of Insurance Information Practices", except A) Must notify the insured if information will be gathered from outside sources B) Must state what information will be gathered C) Must be signed by the insured D) Must advise the insured of the types of disclosures that can be made

C

11)Lisa was driving her car to run an errand for her employer, on work time, when she injured a pedestrian. With regard to her employer's responsibility from the accident, this is an example of A) Absolute liability B) Strict liability C) Negligence D) Vicarious liability

D

14)Which ofthe following is considered an intentional tort? A) An automobile accident B) Ownership of a pet rattlesnake C) Blasting operations in a residential neighborhood D) Unauthorized release of confidential information

D

19)The portion of an insurance premium covering the unexpired term of a policy is called: A) Flat rate premium B) Short rate premium C) Barned premium D) Unearned premium

D

22)In regard to entering into a valid contract, what is the term used to describe when a specific offer is made by one party and there is acceptance by the other party? A) Legal purpose B) Competent parties C) Consideration D) Agreement

D

25)Which ofthe following perils is included in a DP-2 but is not included in a DP-1? A) Explosion B) Volcanic eruption C) Sinkhole collapse D) Falling objects

D

30)Which of the following persons is not an insured under Section I of a Homeowners policy? A) The named insured B) The named insured's (resident) apouse C) The named insured's (resident) 25-year old nephew D) The named insured's (non-resident) daughter

D

36)Under a standard ISO HO-3, real property and personal property are covered for the perils of A) Broad form named perils applies to personal property; there is no coverage for real property since this is a tenant's form B) Broad form named perils coverage applies to both types of property C) All risk coverage applies to both types of property D) All risk coverage applies to real property; broad form named perils applies to personal property

D

43)The liability coverage in a Yacht policy is referred to as: A) Personal Liability Protection B) Property and Indemnity C) Hull coverage D) Protection and Indemnity

D

47)Which ofthe following is a true statement about CAARP? A) Only agents with two or more years of experience are eligible to place business with CAARP B) CAARP offers Dwelling coverage but not Homeowners coverage C) Commercial risks are not eligible for CAARP D) The minimum liability limits for CAARP policies are$15,000/$30,000/$5,000

D

49)If an insured purchases an all-terrain vehicle (ATV), what endorsement can be added to the Personal Auto policy to insure the vehicle? A) ATV endorsement B) Recreational Vehicle endorsement C) There is no endorsement available for this exposure D) Miscellaneous Type Vehicle endorsement

D

53)Jane's car needed servicing so she dropped it off at the repair shop. Once the work was completed, the mechanic took Jane's car for a test drive and got into an at-fault accident. Which coverage on Jane's policy will pay for the damage to her car? A) Collision B) Other Than Collision C) Property Damage D) No coverage applies

D

56)If an insured rents an auto while on vacation, what coverage, if any, will be available for Physical Damage coverage under a PAP? A) The least amount of coverage on any auto shown on the declarations B) No coverage available C) The coverage of the last auto shown on the declarations D) The broadest coverage on any auto shown in the declarations

D

59JUnder the Towing and Labor coverage on your auto policy, which of the following would be covered? A) 50 miles oftowing to the repair facility closest to your home B) Towing to the nearest repair facility and two hours of free labor C) Towing your vehicle to any location you desire D) Towing and labor costs each time a covered auto that is disabled is towed or labor is conducted at the site of disablement

D

6) The old term 'all risk means: A) It is an open policy B) The perils are named or specified C) There are no perils that are excluded D) None ofthe above are true

D

66JAccording to the CIC, which is not required to be specified in a policy? A) The risks being insured against B) The policy period C) The insurer's name D) The insured's address

D

70)What is true about a binder? A) Good for a specific number of days B) Has to be a written document C) Written for up to $1 million D) All of the above

D

76)Professional Liability protects the insured from liability resulting from: A) Liability assumed under a contract B) Dishonest acts C) The unprofessional conduct of an employee D) Errors and omissions

D

80)All licensees must have their license number printed on which ofthe following? A) Premium quotes for insurance B) Business cards C) Advertising and marketing material D) All ofthe above

D

82)When an insured is due a refund of their unearned premium, which ofthe following would a broker-agent be allowed to do with it? A) Use it to pay an unpaid deductible from a claim B) Use it to pay the premiums due on the same policy C) Use it to pay the premiums due on another policy D) B and C are correct

D

84)An admitted insurer can be: A) Domestic B) Foreign C) Alien D) Domestic, forelgn or alien

D

89)According to the CIC, which ofthe following is not defined as 'person'? A) Corporation B) Business C) Association D) State of California

D

90)Where could a person find many types of illegal and/or unethical activities and practices regarding insurance described A) On the back of the California license application B) Within the insuring agreement of a policy C) Included in the notice of appointment sent to the Commissioner, which is filed by the insurer D) Within the Californla Insurance Code (CIC) and the California Code of Regulations (CCR)

D

Hazards are anything that: A) Causes the loss B) Eliminates the chance of loss C) Decreases the chance of a loss occurring due to a peril D) Increases the chance ofa loss occurring due to a peril

D