CA Adjusters license
The deductible under the "regular" flood insurance program for each coverage (building and contents) is: $1,000 $5,000. $2,000. $750.
The correct answer is: $1,000. EXPLANATION: The flood program deductibles have recently been revised. It should also be noted that the deductibles apply separately to each coverage per loss.
Cars driven by Sue Trent and Jim Higgins were involved in an automobile accident. Ms. Trent's car was a total loss, and she obtained a settlement of $25,000 for her injuries. Scott Finley, Ms. Trent's passenger, was injured and incurred $6,000 in medical expenses. Mr. Higgins, the responsible party, carries Bodily Injury coverage with limits of $15,000 per person and $30,000 per accident, and Property Damage coverage of $5,000. His policy will pay a maximum of: $26,000 $29,000 $35,000 $39,000
The correct answer is: $26,000 EXPLANATION: Mr. Higgins' policy will pay a maximum of $26,000.
Under an Equipment Breakdown Protection policy with $500,000 in coverage, a covered "accident" resulted in the following: I. $500,000 worth of damage to the property. II. $10,000 damage to the property of another in the insured's care. III. $5,000 in legal fees to defend the insured in this case. The policy will pay a total of: $505,000. $500,000. $510,000. $515,000.
The correct answer is: $505,000. EXPLANATION: The maximum that can be paid is the limit of the policy. Legal expenses are in addition to the limit of coverage.
The named insured has a business auto policy issued by Company A and another auto policy issued by Company B. Company A's BAP has a limit of insurance for liability coverage of $100,000. Company B's policy provides $25,000 of liability coverage. If both policies apply to an accident on the same basis, how much of a $100,000 liability loss will Company A pay under its BAP? $100,000. $80,000. $50,000. $25,000.
The correct answer is: $80,000. EXPLANATION: The two companies provide a combined limit of $125,000. Company A provides 80% of the limits in place. In case of a $100,000 loss, company A would pay $80,000.
Anyone who threatens, forces or corruptly influences, obstructs or impedes the due and proper administration of the fraud law relating to the insurance business may be fined and/or imprisoned up to: 5 years. 15 years. 20 years. 10 years.
The correct answer is: 10 years. EXPLANATION: Under the Federal Insurance Fraud and False Statements Act, if a person impedes a fraud investigation relating to insurance, they may be fined and/or jailed up to 10 years.
What is the maximum period of time that coverage applies under civil authority business income coverage under the BOP? 72 hours 30 days 4 weeks 2 weeks
The correct answer is: 4 weeks . EXPLANATION: The newer edition of the form of the BOP (2010) has extended the time for loss of income under an act of a civil authority to four weeks. Previously it was three weeks. Refer to the outline published by the testing vendor for the edition date they are using.
A main street business has suffered an explosion loss from a hot water heating boiler. The civil authorities have blocked off the street and the insured's customers cannot get to his store. The insured carries a Businessowners Policy. He sustains a loss of income. Before his policy will pay any loss of income there is a ______hour waiting period and the policy will then pay for loss of income up to _____weeks. 72/four 24/two 12/four 48/three
The correct answer is: 72/four. EXPLANATION: The policy has a 72 hour waiting period before coverage will pay. It will pay for loss of income for up to four weeks or until the expiration date of the policy. The previous form provided for three weeks of coverage. The newer forms also require that the business suffering the damage must be located one mile or less from the insured's location.
Which of the following buildings is considered to be vacant? A house whose occupants have been on vacation for over 90 days A commercial office building in which 50% of the square footage is not leased A house with no furnishings or occupants for over 60 days A commercial building used only for storage purposes with no employees stationed there
The correct answer is: A house with no furnishings or occupants for over 60 days. EXPLANATION: A vacant building is empty. A building with furnishings but no occupants is merely unoccupied. Vacancy is a more severe physical hazard than unoccupancy. Most standard policies restrict or reduce coverage for vacancy that persists longer than 60 days.
An inland marine coverage which covers a store that has an average inventory of $250,000 or less of jewelry would need: A jewelers block policy. Commercial articles floater. Floor plan merchandise coverage form. Bailee's customers policy.
The correct answer is: A jewelers block policy EXPLANATION: A jewelers block policy is designed to cover a store that has an average inventory of $250,000 or less.
An insurance company can send a notice to the first named insured canceling a businessowners policy for all of the following, EXCEPT: Buildings with 69% or more of the rental units or floor area vacant or unoccupied. The building has been vacant or unoccupied 60 or more consecutive days. Concealment or fraud before or after the policy has been issued. A large liability loss has occurred and the limits are exhausted.
The correct answer is: A large liability loss has occurred and the limits are exhausted. EXPLANATION: A large liability loss is not a legal reason to terminate the policy. The policy also states that the insurer can send a five day cancellation notice due to vacancy. This may vary according to state laws regarding cancellation of commercial policies.
Lightning strikes a 50-foot oak tree in an insured's yard splitting the tree in half. The tree falls hitting several small trees causing extensive damage to the trees and scattering debris in the yard. The HO-2 form will pay: A maximum of $500 per tree. A maximum of $250 per tree. $250 per tree plus the cost of debris removal. $500 per tree plus the cost of debris removal.
The correct answer is: A maximum of $500 per tree. EXPLANATION: Most homeowner policies provide a maximum limit of 5% of Coverage A and a maximum of $500 for any one tree, shrub or plant.
Which of the following statements best describes a representation in an insurance application? A representation is a statement made by the applicant that he believes to be true when made, but which might prove to be false. A representation is a promise by the applicant that certain conditions will continue to exist throughout the policy term. A representation explains the promise made by the insurance company. Another name for a representation is a warranty.
The correct answer is: A representation is a statement made by the applicant that he believes to be true when made, but which might prove to be false. EXPLANATION: A representation the truth to the best of the applicant's knowledge and belief. It is an honest statement of a supposed fact. A misrepresentation is a knowingly false statement. A warranty is a statement guaranteed as factual.
Which of the following relieves the financial burden on the claimant by making certain payments to the claimant even before the claim is negotiated? Advance Payment Rehabilitation Partial Release Partial Release With Conditions
The correct answer is: Advance Payment. EXPLANATION: Most adjusters are given the authority to make advance payments when liability is clear. This relieves the financial burden on the claimant when funds are needed immediately. The remainder of the claim is negotiated and settled at a later date.
Which of the following is a valid reason to deny coverage or charge a higher premium for an automobile policy? Race or religion Adverse driving history or motor vehicle record Sexual orientation Ancestry
The correct answer is: Adverse driving history or motor vehicle record EXPLANATION: Adverse driving history or motor vehicle record is the only valid reason of those listed to deny coverage or charge a higher premium.
Which of the following can be categorized as liability doctrines? Vicarious Res Ipsa Loquitur Strict All of the Responses are Correct
The correct answer is: All of the Responses are Correct. EXPLANATION: All of these terms can be categorized a liability doctrines. Res Ipsa Loquitur means "the thing speaks for itself."
An adjuster, acting as a fiduciary agent, should do which of the following? - Not represent interests which are adverse to those of the principal - All of the responses are correct - Not seek profit from an outside source as a consequence of actions for and behalf of the principal - Act with a high degree of fidelity and loyalty to the interests of the principal
The correct answer is: All of the responses are correct . EXPLANATION: A fiduciary agent represents a principal, and therefore must place the principal's financial interests above any other and act with the utmost degree of care to protect the principal's financial interests.
As used in legal terminology, the word "attest" refers to: To bear witness to certain facts To affirm certain facts To state truly and genuinely All of the responses are correct
The correct answer is: All of the responses are correct. EXPLANATION: All of the responses are correct.
In cases involving the repair of an auto in California, no insurer may: All of the responses are correct. Require that an automobile be repaired at a specific repair shop. Require a claimant to travel an unreasonable distance to inspect a replacement automobile, to conduct an inspection of the vehicle, to obtain a repair estimate or to have the automobile repaired at a specific shop. Suggest or recommend that an automobile be repaired at a specific repair shop, unless all of the requirements set forth in the California Insurance code, section 758.
The correct answer is: All of the responses are correct. EXPLANATION: All of these responses are correct regarding the repair of an auto.
Which of the following would be considered a "supplementary payment" coverage under a business auto policy? - All post-judgment interest in a suit defended by the insurer - Payment for an insured employee's truck being used by the employee on a business-related trip - Costs for a private investigator hired by an employee to prove he was not involved in a hit and run accident of which he has been accused - Up to $2,000 for the cost of bail bonds for an employee involved in an accident while he was on a trip to Mexico that he won for exceeding sales goals set by the company
The correct answer is: All post-judgment interest in a suit defended by the insurer. EXPLANATION: Supplementary payments do not include physical damages, nor personal expenses of employees. The bail bonds would be covered except that Mexico is outside the coverage area.
Which of the following would be covered by the advertising injury coverage under the farm forms? An insured farmer who unknowingly disparaged the crops grown by another farm Advertising the wrong price of the goods Advertising the wrong description of the goods Intentionally making disparaging remarks about another's farm products
The correct answer is: An insured farmer who unknowingly disparaged the crops grown by another farm. EXPLANATION: The coverage would cover a farmer who unknowingly disparages the crops grown by another farm. Intentional acts, advertising incorrect prices or descriptions are not covered.
What is "insolvency" under the California Insurance Code? - An insurer whose paid-in capital is impaired beyond the minimum for the class of insurance that it transacts in the state. - An insurer whose policyholder's surplus is insufficient to pay the claims under its policies, - An insurer whose liabilities exceed its assets. - An insurer which has frequently failed to pay covered claims on a timely basis.
The correct answer is: An insurer whose paid-in capital is impaired beyond the minimum for the class of insurance that it transacts in the state. EXPLANATION: The correct answer comes directly from the Code's definition of an insolvent carrier.
Which of the following best describes a sidetrack agreement which is an insured contract under the CGL? Rock-N-Jocks enters into a lease agreement to open a store at the mall. ABC General Contracting has "hold harmless" wording in their contract with XYZ Plumbing for worked performed on behalf of ABC. B&O railroad builds an extension track off of their main line and runs the track right behind the loading dock of the Ford Motor Company. Otis Elevator Company installs the elevators in the new office tower.
The correct answer is: B&O railroad builds an extension track off of their main line and runs the track right behind the loading dock of the Ford Motor Company. EXPLANATION: Even though the track is the property of B&O railroad, it was built for the benefit of the Ford Motor Company. Ford enters into a sidetrack agreement with the railroad. This is an insured contract under Ford's CGL in case of injuries sustained on the side track.
Liability Coverage under the Personal Auto Policy includes: Bodily injury coverage Property damage coverage Both bodily injury and property damage coverage Damage to personal property of others in the insured's vehicle and damaged in an accident
The correct answer is: Both bodily injury and property damage coverage. EXPLANATION: The policy provides both bodily injury and property damage liability coverage. It does not cover the insured's personal property or personal property of others in the insured's vehicle.
All of the following are standard exclusions in the H0-3 form, EXCEPT: Inherent vice Wear and tear War Breakage
The correct answer is: Breakage. EXPLANATION: Breakage is covered only if caused by an insured peril. The others are specifically excluded.
Which part of an insurance policy sets the rules of conduct, duties, and obligations of the insured and insurer under the terms of the insurance contract? Conditions Declarations Insuring Agreement Exclusions
The correct answer is: Conditions. EXPLANATION: The conditions section of the policy sets the provisions, rules of conduct, and obligations of the insured and the insurance company and is the correct answer. The insuring agreement describes the covered perils, the nature of the coverage and the contractual agreement between the parties. The declarations page of the policy lists the name and address of the named insured, the policy period, the amount of coverage, the premium and the deductibles. The exclusions list the perils that are excluded from the coverage under the contract.
In claims adjusting which of the following describes a "sworn statement?" A verbal statement as to the facts in front of witnesses An accident report signed by the investigating police officer A record of events surrounding an accident as told by the interviewee to the adjuster Contains language attesting that a statement is true and is signed by the interviewee
The correct answer is: Contains language attesting that a statement is true and is signed by the interviewee. EXPLANATION: A sworn statement contains language attesting that a statement is true and is signed by the interviewee.
Which of the following coverages would protect an insured against liability assumed by written and oral contracts? Contractual Liability. Products and Completed Operations Liability. Fidelity Bond. Premises and Operations Liability.
The correct answer is: Contractual Liability. EXPLANATION: This coverage is now provided, without additional premium, in the CGL contract. The type of covered contracts are defined in the policy.
When it is known that an employee is guilty of theft or other dishonest act, how is coverage affected? Coverage will continue if the employee agrees to make complete restitution. Coverage continues until the expiration date of the coverage. Coverage is cancelled immediately. Coverage will continue if an additional premium is charged for the increased exposure.
The correct answer is: Coverage is cancelled immediately. EXPLANATION: When it is known that an employee has committed a crime, the coverage for that employee terminates immediately for future losses.
The insured is insured under a DP-3 dwelling form and is remodeling the dwelling. He does not have a place to store the materials. His next door neighbor permits the insured to store the materials in his garage. The garage is destroyed by fire and the materials are also destroyed. Which of the following applies? - The policy has a special limit under an extension of coverage that applies. - Coverage is included under the building coverage and would apply since the materials are next to the insured's premises. - The policy would not pay the claim since the materials were off the insured's residence premises. - The materials must be in an enclosed structure for coverage to apply.
The correct answer is: Coverage is included under the building coverage and would apply since the materials are next to the insured's premises. EXPLANATION: The policy would respond to pay the loss because the policy covers building materials located on or next to the insured premises.
Which of the following is NOT true concerning the Terrorism Risk Insurance Act and amended in 2015 and now referred to as the Terrorism Risk Insurance Extension Act? Coverage is mandatory The insured can reject the coverage It is an agreement between insurers and the United States government to provide coverage Must be certified as an act of terrorism by the Secretary of Treasury in concurrence with the Secretary of Homeland Security and the US Attorney General
The correct answer is: Coverage is mandatory. EXPLANATION: The coverage is not mandatory and can be rejected. Under the 2015 extension, an act of terrorism must be certified by the Secretary of Treasury in concurrence with the Secretary of Homeland Secretary (previously it was the in concurrence with the Secretary of State). Note: Please check the outline from the testing vendor in your state to determine the version of the Act on which it is testing.
A steam boiler has been inspected and found to be in serious need of repairs. The inspector "red tags" the item. This means: A thirty day grace period is provided until repairs are made after which coverage is suspended Coverage is suspended until repairs are made The entire facility must be shut down until repairs are made The company will cancel the entire insurance applicable to all property insured
The correct answer is: Coverage is suspended until repairs are made. EXPLANATION: This means that coverage is suspended until repairs are made.
Which of the following statements is correct regarding pollution caused by smoke released from an industrial operation covered under the Commercial Property Policy? Always covered Never covered Covered on an "excess basis" Covered if caused by a covered cause of loss peril
The correct answer is: Covered if caused by a covered cause of loss peril. EXPLANATION: The Commercial Property Policy will not pay for loss or damage caused by or resulting from the discharge, dispersal, seepage, migration, release or escape of pollutants unless the discharge, dispersal, seepage, migration, release or escape was caused by a covered cause of loss. Release of smoke from an industrial operation is not a covered cause of loss.
Which one of the following is not an HO policy form? DP-1 HO-4 HO-6 HO-8
The correct answer is: DP-1 EXPLANATION: The DP-1 form is a dwelling form.
The most comprehensive coverage provided by the Dwelling Property program is found in the: DP-3. DP-1. DP-2. DP-4.
The correct answer is: DP-3. EXPLANATION: The DP-3 form provides "open-peril" (all risk of loss) for the dwelling and other structures. The other forms provide "named peril" coverage.
What do you call evidence, presented in court that can be seen and felt? Testimonial evidence Direct evidence Tangible evidence Demonstrative evidence
The correct answer is: Demonstrative evidence. EXPLANATION: Demonstrative evidence includes actual objects, pictures, models and other devices which are intended to clarify the facts for the judge and jury: how an accident occurred, actual damages, medical issues, or methods used in committing an alleged crime. Many of these may not be actual evidence, but "aids" to understanding.
The insured car dealer carries dealer's physical damage coverage with comprehensive and collision coverage. One of the salesmen allows an old customer to test drive a van. The customer steals the car and it is later found heavily damaged in an accident. The adjuster will: Pay the claim under "theft" since the insured carries comprehensive coverage. Pay the claim under "collision" since the insured carries collision coverage. Deny the claim unless the insured carries "false pretense" coverage. Deny the claim unless the insured carries "drive other car" coverage.
The correct answer is: Deny the claim unless the insured carries "false pretense" coverage. EXPLANATION: False pretense coverage is an optional coverage purchased in addition to the other physical damage coverage. False pretense protection provides coverage when the insured voluntarily parts with property by means of a trick and having it stolen. An example would be a dealer letting someone test drive a car and they don't return the vehicle.
The negligent act of the agent is imputed to the principal if the act occurred within the course and scope of the agent's employment. This means that the principal becomes: Empowered to terminate the employee Additionally liable with the employee for damages Directly liable for damages to a third party None of the responses are correct
The correct answer is: Directly liable for damages to a third party. EXPLANATION: The employer essentially steps into the shoes of the employee.
Uninsured Motorists Coverage indemnifies only when: - The other driver is legally liable for the accident. - The insured is legally entitled to recover for bodily injury. - The other driver is uninsured, insured for less than the financial responsibility limits required by the state, insured by a company that denies coverage or is insolvent, or is injured by a hit-and-run driver. - Each of the criteria in all of the responses has been met for the insured to be indemnified.
The correct answer is: Each of the criteria in all of the responses has been met for the insured to be indemnified. EXPLANATION: Each of the responses is true to allow the insured to be indemnified under uninsured motorist's coverage.
One purpose of a deductible is to: Eliminate small claims. Prevent underinsurance. Prevent catastrophic claims. Allow the insured to ignore physical hazards.
The correct answer is: Eliminate small claims. EXPLANATION: Deductibles are a form of self-insurance. This is the part of the loss the insured must pay. Most, but not all, policies contain property loss deductibles. Higher deductibles can also reduce premiums.
Another name for umbrella liability insurance is: Excess. Primary. Malpractice. Errors and omissions.
The correct answer is: Excess. EXPLANATION: Excess is another name given to umbrella coverage. It pays in excess of the limits of underlying coverage.
Name the coverage that applies to the extra cost the insured incurs to make temporary repairs and speed up the permanent repairs or replacement of damaged covered equipment under an Equipment Breakdown policy. Expediting expense coverage Extra expense coverage Removal expense coverage Contributing expense coverage
The correct answer is: Expediting expense coverage EXPLANATION: This is called expediting expense coverage.
Which of the following is not a dwelling policy form? Extended Basic Broad Special
The correct answer is: Extended. EXPLANATION: The three dwelling policy forms are basic (DP-1); broad (DP-2); and special (DP-3).
A newspaper company is interested in protecting against the additional costs of continuing to print the newspaper at a temporary location in the event its buildings were destroyed. Which of the following coverages should the newspaper company purchase? Extra Expense Open Perils Loss of Rents Contingent Gross Earnings
The correct answer is: Extra Expense. EXPLANATION: The purpose of extra expense coverage is to cover any increase in expenses incurred by the insured (after a direct property loss which interrupts the business) to decrease the amount of time the business is idle or interrupted.
Which of the following is the type of report indicating the initial results of the investigation of a claim? Field Report Interim Report Full Report Claims Report
The correct answer is: Field Report. EXPLANATION: This report can also be called the initial report and is the result of the initial investigation.
Which of the following is NOT covered under a premise burglary claim? Product is stolen Damage to a door Fire to the building caused from the break in Damage to a show case
The correct answer is: Fire to the building caused from the break in. EXPLANATION: Crime insurance coverage does not include the peril of fire to the premises however caused, except loss of or damage to "money" and "securities" and loss from damage to a safe or vault other than a safe or vault. Fire coverage is provided for most property under commercial property coverage.
Coverage provided by the basic dwelling form (DP-1) automatically includes which of the following perils? Fire, Lightning and Internal Explosion Fire and Lightning only Fire, Lightning, and Extended Coverages (EC) Fire, Lightning, Extended Coverages (EC), and Vandalism and Malicious Mischief (VMM)
The correct answer is: Fire, Lightning and Internal Explosion. EXPLANATION: The DP-1 form includes fire, lightning and internal explosion, It does not include the extended coverage perils or vandalism unless indicated on the declarations page.
Under the insuring agreements relevant to Equipment Breakdown, coverage is provided for: Boiler machinery only First party property damage only First party coverages and property damage to other's property Damages caused by solely by explosion
The correct answer is: First party coverages and property damage to other's property. EXPLANATION: An Equipment Breakdown Policy provides, in essence, loss or breakdown coverage for electrical, mechanical, heating/air conditioning and business equipment systems. This coverage is most noteworthy because it covers certain perils that are excluded by other policies. And, it's not just the physical damage caused by the explosion or breakdown that's of importance. Valuable time and profits which might normally be lost because the cause of loss was an excluded peril can, under this coverage, be reimbursed under Business Interruption and Extra Expenses coverage until repair of the damaged or broken boiler or machinery is completed. Damage to the personal property of others is also included.
For how long must an adjusting firm maintain its claim files? For as long as any statute of limitations For the current year and 10 prior years For the current year and 4 prior years For the current year only
The correct answer is: For the current year and 4 prior years. EXPLANATION: Per the California DOI, adjusting firms must maintain files for the current policy year and the preceding four years, at the company's principal place of business.
Which of the following risks is eligible for the BOP? Funeral Home Auto Repair Shop Amusement Parks Tavern
The correct answer is: Funeral Home. EXPLANATION: Only the funeral home would be eligible for the BOP. The BOP is designed for the small to medium type of commercial risks. Certain classes of business are not eligible.
Which of the following crime endorsements affects employee theft coverage? I. Name or position schedule. II. Client's property. III. Forgery IV. Safe depository. I and II only I, II, III, and IV I, II, and IV only I, II, and III only
The correct answer is: I and II only. EXPLANATION: Employee theft coverage covers loss to the insured's property due to "theft" by an employee, whether identified or not. The name or position schedule endorsement requires that the guilty employee's name or position be named on the endorsement; the client's property endorsement extends coverage to property owned by a client, as long as the "theft" was by an "identified employee".
David has damaged his vehicle by striking a tree. He can: I. Take the car to a repair garage recommended by the insurer. II. Take the car to a garage of his choice. III. Accept payment based on the adjuster's estimate. I, II and III I and II only I and III only I only
The correct answer is: I, II and III EXPLANATION: The choice belongs to the David, the insured.
Which of the following components MUST be included in the definition of a hostile fire: I. Rapid oxidation accompanied by a flame or at least a glow. II. Must be sudden and unexpected. III. Must have been intentionally set by the insured. IV. Must spread beyond its intended place. I, II and IV only I, II, III and IV I and II only I, III and IV only
The correct answer is: I, II and IV only. EXPLANATION: This definition must include three of the four components expressed here. In addition, a hostile fire is one that is spread beyond its intended place or a place not intended for it.
Basic benefits available under a typical workers compensation policy include which of the following? I. Medical expenses. II. Loss of income. III. Rehabilitation. IV. Pain and suffering. I, II, and III only. I and II only. I, III, and IV only. I, II, III and IV.
The correct answer is: I, II, and III only. EXPLANATION: Workers compensation indemnifies an injured or ill worker for direct expenses resulting from the cause with rehabilitation provided to encourage a worker to return to productivity.
While reviewing an application for an insurance license, the California Insurance Commissioner may: I. Request additional information. II. May ask for affidavits. III. May request additional statements. I, II, and III I and III only II and III only I and II only
The correct answer is: I, II, and III. EXPLANATION: These requirements are intended to provide full disclosure of information to determine whether the prerequisites for the license have been met.
n Workers Compensation terminology, "misconduct" means: Improper conduct of employees Improper conduct of the business Improper or bad behavior Intentional acts designed to injure
The correct answer is: Improper or bad behavior. EXPLANATION: In Worker's Compensation terminology, "misconduct" means improper or bad behavior.
In claims adjusting, what are the most difficult types of damages to evaluate? Intangible Damages Medical Expenses Loss of Wages Property Damages
The correct answer is: Intangible Damages. EXPLANATION: Intangible damages, referred to a "general damages" are the most difficult to evaluate. An example would be pain and suffering.
In workers compensation the term "willful" means which of the following? Unsupervised Negligent With good reason Intentional
The correct answer is: Intentional. EXPLANATION: The terms "willful" and "intentional" are synonymous.
Which of the following is NOT true regarding the Fair Credit Reporting Act? - It requires insurance companies to notify an applicant in advance that an investigative consumer report may be ordered. - It permits a consumer report to list adverse information about the consumer, such as lawsuits, arrests and convictions, only if those items occurred within seven years before the report. - It permits a consumer report to list information about bankruptcies only if they occurred within 12 years before the report. - It permits a consumer reporting agency to furnish a consumer report for employment purposes.
The correct answer is: It permits a consumer report to list information about bankruptcies only if they occurred within 12 years before the report. EXPLANATION: The Fair Credit Reporting Act requires that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper use of such information. Bankruptcies may be included in a consumer report if they predate the report by 10 years or less.
All of the following would need a License and Permit Bond, EXCEPT: Plumbers Electricians Lawyers Real Estate Agents
The correct answer is: Lawyers. EXPLANATION: A lawyer does not need to have a bond in order to practice law. They should have professional liability insurance. The other three would all need a bond to be licensed to do work in the city, state or other municipality.
Death benefits under Workers Compensation laws include all of the following EXCEPT: Reasonable burial expenses for a worker that suffered a fatality on the job up to the maximum set by law. Support payments equal to 66 2/3% for replacement of the employee's lost wages. Lifetime benefits for all dependents. Dependent children are eligible for benefits until reaching the age of 18.
The correct answer is: Lifetime benefits for all dependents. EXPLANATION: Lifetime benefits are not available for dependent children.
What is not covered by "extra expense" coverage in commercial property insurance? Rent Payments at a Temporary Location Moving Expenses Overtime Pay Required to Make Repairs Loss of Income
The correct answer is: Loss of Income. EXPLANATION: Extra Expense Coverage is a form of Business Interruption Coverage. It covers all reasonable extra expenses incurred by the insured in order to continue as nearly as practical the normal operation of a business that has been damaged by an insured peril. It does not cover the loss of income a business may suffer. Other forms like the "loss of income" forms would cover the loss of income.
All of the following statements regarding medical payments under the general liability policy are true, EXCEPT: - This coverage can pay some medical expenses of a person whose injuries arise out of the named insured's premises or operations - Medical payments claims can be made for injuries caused by a product of the named insured. - Medical payments coverage will cover expenses incurred up to one year from the accident date. - Medical payments coverage can be provided even when an insured is clearly not responsible for the injury.
The correct answer is: Medical payments claims can be made for injuries caused by a product of the named insured. EXPLANATION: Medical payments coverage does not apply to product liability claims.
Which of the following would NOT be covered by a flood insurance policy? Overflow of water from a pond on the insured property Mudslides from recent heavy rain. Collapse of land along the shore of a body of water Inundation and overflow of surface waters
The correct answer is: Mudslides from recent heavy rain. EXPLANATION: Damage caused by mudflow is covered under the policy. Mudslides are not.
If an adjusting firm intends to add a new branch office, what action must be taken? Report the new location to the commissioner immediately Report the new location within 30 days Must first obtain a branch office certificate No action needs to be taken
The correct answer is: Must first obtain a branch office certificate. EXPLANATION: Adjusters cannot conduct business from any location other than that shown on the records of the Commissioner as his or her place of business unless he or she has received a branch location certificate for that location. A licensee must notify the Commissioner in writing within 10 days after the closing or changing the location of a branch office.
Which of the following is not considered an act of terrorism under the Terrorism Risk Insurance Act, now known as the Terrorism Risk Insurance Extension Act? Losses must be at least $5 million to be considered an act or acts of terrorism Must be a violent act or an act that is dangerous to human life, property or infrastructure Must result in damage within the United States and certain areas outside the Unites States Must not have been committed by an individual or individuals as part of an effort to coerce the civilian population of the United States or the policies or affect the conduct of the United States government
The correct answer is: Must not have been committed by an individual or individuals as part of an effort to coerce the civilian population of the United States or the policies or affect the conduct of the United States government. EXPLANATION: To be considered an act of terrorism, there are guidelines to determine if the damages were caused by other than an act of war. Along with the other correct responses to this question, the act must have been committed by an individual or individuals as part of an effort to coerce the civilian population of the United States or to influence the policy or affect the conduct of the United States government by coercion.
If an adjusting firm opens a new location, when may it start doing business? After a branch manager is appointed After 10 days Immediately Not until a branch office certificate has been issued
The correct answer is: Not until a branch office certificate has been issued. EXPLANATION: A licensee may not advertise or conduct a business from any location other than that shown on the records of the Commissioner as his or her principle place of business unless he or she has received a branch office certificate for such location. A licensee must notify the Commissioner in writing within 10 days after the closing or changing the location of a branch office.
How are crop insurance premiums calculated? Number of fields Number of crops Number of acres Per farm
The correct answer is: Number of acres. EXPLANATION: Crop insurance is based on acreage for each crop.
Where is covered property listed and described on the BOP? In the coverage form Under the conditions On the declarations page Under the extensions of coverage
The correct answer is: On the declarations page. EXPLANATION: Covered property is listed and described on the declarations page.
Under an HO-3 form materials and supplies to be used in construction, alteration or repair of the structure and kept next to the residence premises are covered: If they have been at the location more than 30 days. If they have been at the location less than 30 days. Only if they are lost due to an insured peril. Only if they are lost due to fire.
The correct answer is: Only if they are lost due to an insured peril. The items would be covered if destroyed by an insured peril. Note that the items must either be on the insured's residence premises or next to the residence premises such as in a neighbor's garage.
When can an independent adjuster operate under a fictitious name? Never Only when he or she has obtained written permission from the Commissioner. For a 30 day period only For a 60 day period only
The correct answer is: Only when he or she has obtained written permission from the Commissioner. EXPLANATION: Only when he or she has obtained written permission from the Commissioner.
What legal duty does a property owner owe to a trespasser? Not set traps Warn of hidden dangers on the property Ordinary duty of care Post no trespassing signs where access is not permitted
The correct answer is: Ordinary duty of care. EXPLANATION: The owner of the property has an ordinary duty of care.
Which of the following is NOT provided by the farm employers liability and farm employees medical payments insurance endorsement? - Payment of statutory workers compensation benefits - Pays medical payments to an injured farm employee - Provides employers legal liability coverage where a bodily injury has occurred to an employee - Provides defense coverage to the farm owner as a result of an injured employee who brings a legal action
The correct answer is: Payment of statutory workers compensation benefits. EXPLANATION: This endorsement offers farm employers liability coverage and farm employee medical payments insurance. This endorsement does not provide statutory workers compensation benefits.
Which of the following is the correct description of the medical expenses limit in the liability section of the BOP? Per accident Per person, per occurrence Per incident Per location, per occurrence
The correct answer is: Per person, per occurrence. EXPLANATION: Medical payments under the BOP are based on "per person, per occurrence."
Which of the following situations would be covered under bodily injury (BI) liability coverage? Physical Impairment False Arrest Libel Suicide
The correct answer is: Physical Impairment EXPLANATION: Libel, slander, and suicide are not covered within the definition of bodily injury. Physical impairment is a form of bodily injury. Libel and slander are forms of "personal injury" coverage.
A ship owner wanting coverage in case crew members bring liability suits for injuries sustained while working would purchase: Workers Compensation Hull Coverage Freight Coverage Protection and Indemnity
The correct answer is: Protection and Indemnity. EXPLANATION: Coverage would be obtained by purchasing protection and indemnity coverage.
Damage to Premises Rented to You is a separate coverage under the general liability policy and covers fire damage legal liability to: Real property owned by the named insured. Real property rented to the named insured. Personal property owned by the named insured. The coverage does not apply to any of the responses.
The correct answer is: Real property rented to the named insured. EXPLANATION: The coverage only applies to real property rented to the named insured and covers the insured's legal liability for damages caused by fire.
Under Coverage C of the homeowners program all of the following categories of property are limited, EXCEPT: Recreational furniture. Securities. Watercraft. Gold.
The correct answer is: Recreational furniture. EXPLANATION: All of the HO forms contain a list of property subject to limitations. Recreational furniture is not included within this list.
The appraisal clause in a policy is used to: Settle disputes concerning the amount of loss. Determine who is liable for damages. Deny coverage. Obtain facts prior to going to court.
The correct answer is: Settle disputes concerning the amount of loss. EXPLANATION: The appraisal clause is used where the insured and the insurer do not agree on the value of the loss. Either party can demand an appraisal of the loss.
A dry cleaner wants to insure the pressure boilers used in the business. They also would like to cover some equipment and accessories that can be used in the boilers but have not yet been installed. Which of the following, if any, can be used to cover this exposure? Expediting Expense Coverage Extra Expense Coverage Ordinance and Law Coverage Spare Parts and Equipment Coverage
The correct answer is: Spare Parts and Equipment Coverage EXPLANATION: The Spare Parts and Equipment Endorsement can be used to schedule the value of this extra equipment and accessories.
Mr. Jones has injured Susan Miller in an auto accident. Susan has sustained medical expenses, loss of wages, and the loss of use of her vehicle. These types of expenses are known as: Special Damages. General Damages. Exemplary Damages. Punitive Damages.
The correct answer is: Special Damages. EXPLANATION: These are called "special damages" and involve expenses where the costs are known or can easily be determined.
The term " subrogation" refers to: Substitution Negligence Legal liability Strict liability
The correct answer is: Substitution. EXPLANATION: Subrogation (also known as "transfer of right of recovery") in effect substitutes the insured party (the one who receives insurance recovery) with the insurer. The insurer then attempts to collect from the party responsible for the damage or injury the amount paid to it's insured.
Which of the following is an official notice of a lawsuit? Interrogatory Bailment Summons Notice of release
The correct answer is: Summons EXPLANATION: A summons is an official notice of a lawsuit. It is given to the person being sued, the defendant. If someone is being sued, he or she must notified in order to come to court and prepare to defend themselves. When a defendant is served with a summons, he or she is officially notified of the lawsuit.
The guarantee of an obligation is the subject of: Surety bonds. Crime insurance. Fidelity bonds. Contractual liability.
The correct answer is: Surety bonds. EXPLANATION: The purpose of the surety bond is to guarantee the performance of the principal.
Which of the following dwelling forms provides coverage for loss of rental income? - The Basic, Broad and Special Form - The Basic and Broad Forms only - The Broad and Special Forms only - The Special Form only
The correct answer is: The Basic, Broad and Special Form. EXPLANATION: All of the forms provide for rental value coverage. In the DP-2 and DP-3, it is 20% of the Coverage A limit and is additional coverage. With the DP-1, the 20% coverage reduces the available Coverage A amount on the dwelling. (Note: in North Carolina the percentage is 10%.)
The responsibility to prove a loss belongs to: The insurance company The insured The agent The adjuster
The correct answer is: The insured EXPLANATION: The duty to prove a covered loss is that of the insured.
All of the following are necessary for Liability coverage to apply under the PAP, except: The insured must not have been drinking. The person liable must be an insured person. The insured must be legally liable for the accident. The damage or injury must be the result of an auto accident.
The correct answer is: The insured must not have been drinking. It is not necessary that the insured not have been drinking alcohol at the time of the accident. Coverage would still apply.
Mary intentionally trips her neighbor while the neighbor is trespassing on the insured's property. Although the neighbor is not injured, Mary gives the neighbor $500 in cash to settle any potential liability claim. How will Mary's insurance company most likely respond in this situation? The insurer will reimburse Mary for the entire $500. The insurer will reimburse Mary for $500, less any applicable deductible. The insurer will sue the neighbor for the return of the $500 because the neighbor was not injured. The insurer will deny liability coverage because Mary's action was intentional.
The correct answer is: The insurer will deny liability coverage because Mary's action was intentional. EXPLANATION: Intentional acts are excluded and the company will deny the claim. The only exception to this exclusion is when the insured is attempting to use reasonable force to protect themselves or their property.
The California Insurance Commissioner may deny a license following a hearing for all of the following reasons, EXCEPT: The license applicant has been convicted of a speeding violation. The applicant does not have a good business reputation. The applicant is not properly qualified. The granting of the license would be against public interest.
The correct answer is: The license applicant has been convicted of a speeding violation. EXPLANATION: A speeding violation does not necessarily reflect on the ethics, morality or character of a license candidate.
All of the following statements are false regarding an insured's right to cancel an automobile policy, EXCEPT: - The named insured may cancel an auto policy at any time. - No partial or full premium refund is made if the named insured cancels the auto policy. - The named insured may cancel the auto policy by giving 45 days written notice to the company. - The named insured may not cancel the policy once it has been in force for two consecutive years with the insurance company.
The correct answer is: The named insured may cancel an auto policy at any time. EXPLANATION: The insured can cancel the auto policy at any time. No advance notice to the insurance company is required. When an insured cancels a policy, a return of premium will be given, less a penalty of around 10% of the unearned premium. For example, the insured pays a $1,200 annual premium and cancels exactly six months later. Instead of receiving a $600 refund (the remaining premium for the second half of the year) the insured will get approximately $540. This penalty is called a "short-rate" cancellation. If the insurer cancels the policy, the insured would receive the full $600, the amount of premium remaining for the second half of the year. This is called a pro-rata cancellation.
The insured is liable for $500,000 in damages for a personal injury claim that is covered under the insured's primary liability policy. The primary liability policy has a $300,000 limit per occurrence. The insured also has a $1 million umbrella liability policy with a $3,000 self insured retention limit. How would this case likely be settled? - The primary policy would pay $300,000 and the insured would pay $200,000. - The primary policy would pay $300,000, the insured would pay $3,000, and the umbrella policy would pay $197,000. - The primary policy would pay nothing; the umbrella policy would pay the full $500,000. - The primary policy would pay $300,000 and the umbrella policy would pay $200,000.
The correct answer is: The primary policy would pay $300,000 and the umbrella policy would pay $200,000. EXPLANATION: Since it is a covered claim under the underlying coverage, the umbrella policy picks up and pays the remaining portion of the claim.
Which of the parties to a bond is the insurance company? The principal The obligee The surety The agency
The correct answer is: The surety. EXPLANATION: The insurance company, which guarantees the principal's performance, is the SURETY. If the principal fails, the surety will indemnify the obligee up to the face amount.
If your insurance company cancels your commercial insurance, whom must they notify? They must notify all Insureds listed on the policy. They must notify whoever is listed first on the policy. They must notify the first named insured listed on the policy. They must notify whoever is responsible for premium payments.
The correct answer is: They must notify the first named insured listed on the policy. EXPLANATION: Only the first named insured listed on the policy is to receive any notices.
An adjuster's license expires every: Year Three years Two years Four years
The correct answer is: Two years. EXPLANATION: The license expires every two years and can be renewed. The law requires that the adjuster complete 24 hours of continuing educational courses every two years.
Amanda pays the annual premium on her policy. Six months later her policy is cancelled by the insurance company. Amanda is owed: Residual premium Premium due Unearned premium Earned premium
The correct answer is: Unearned premium. EXPLANATION: The policyholder is owed a refund of the unearned premium.
Making distinctions in the premium rates charged for insurance between insureds or property having like insuring or risk characteristics is an example of: Rebating Unfair Discrimination Unfair Representation False Underwriting
The correct answer is: Unfair Discrimination. EXPLANATION: Risks showing like characteristics must be treated equally. Making distinctions on similar risks is unfair discrimination.
An insurance company can audit the named insured's books and records: Only during the policy period. Up to one year after the termination of the policy. Up to three years after the termination of the policy. Up to five years after the termination of the policy.
The correct answer is: Up to three years after the termination of the policy. EXPLANATION: Normally an audit is performed at the end of each policy year. However, the policy provides that the insurer can perform an audit up to three years after the policy's termination date.
Under an equipment dealer's form, which of the following would not be covered? Inventory Serviced items Customer's property on the insured's premises Vehicles for highway use
The correct answer is: Vehicles for highway use. EXPLANATION: Inland marine forms provide coverage for the insured's goods as well as property of others, but they do not cover automobiles.
"Notice of legal action" can mean all of the following, EXCEPT: notice of action against the agent. notice of action against the insured received by the insurer. notice of action commenced against an insurer with respect to a claim. notice of action against the principal under a bond.
The correct answer is: notice of action against the agent. EXPLANATION: According to the California Code of Regulations (CCR 2695.2(o)), "notice of legal action" means notice of an action commenced against the insurer with respect to a claim, or notice of action against the insured received by the insurer, or notice of action against the principal under a bond, and includes any arbitration proceeding.
In order for an insurer to contract with the State Compensation Insurance Fund, it must meet all of the following criteria, EXCEPT: the insurer has substantial prior experience in transacting workers compensation business on another insurer's behalf. the insurer must have met all ratio requirements for risk based capital (RBC). the insurer has an A-rating or better from A.M. Best Company. the insurer has a minimum surplus of $100 million dollars.
The correct answer is: the insurer must have met all ratio requirements for risk based capital (RBC). EXPLANATION: According to the California Insurance Code (CIC 11780.5(2)), meeting ratio requirements for risk-based capital is not among the criteria that must be met.
The insured has a primary liability policy with a limit of $300,000 per occurrence and a $1 million umbrella liability policy with a $10,000 self-insured retention limit. The insured became liable for $800,000 in damages that are excluded by the underlying policy, but not by the umbrella policy. How would this case likely be settled?
The insured would pay $10,000, and the umbrella policy would pay $790,000. is correct. EXPLANATION: Since the underlying policy excludes coverage and assuming the umbrella provides the coverage, the umbrella policy would pay the claim less the $10,000 self insured retention limit.
