Exam simulation number 2

13. The failure to disclose known facts is known as (Choose from the following options) 1. Concealment. 2. Fraud. 3. Warranty. 4. Misstatement.

1. Concealment.

2. Which of the following was designed to regulate the operation of risk retention groups and purchasing groups in California? (Choose from the following options) 1. Federal Liability Risk Retention Act 2. The California Guarantee Association 3. The Federal Risk Retention Association 4. Risk Retention Regulation Act

1. Federal Liability Risk Retention Act

4. California's Compulsory Financial Responsibility Law requires every driver and every owner of a motor vehicle to maintain financial responsibility (liability coverage) at all times. If you don't have acceptable financial responsibility and have an accident, you may lose your driver's license for up to (Choose from the following options) 1. Four years. 2. One year. 3. Two years. 4. Three years.

1. Four years.

27. Which of the following is NOT correct regarding false statements by a person engaged in the business of insurance? (Choose from the following options) 1. Omissions of material fact on insurance application are fraud. 2. False statements about financial condition of an insurer are unlawful. 3. Statements made with the intent to deceive are unlawful. 4. Oral statements cannot be considered fraud.

1. Omissions of material fact on insurance application are fraud. Right Answer 4. Oral statements cannot be considered fraud.

9. What method do insurers use to protect themselves against catastrophic losses? (Choose from the following options) 1. Reinsurance 2. Indemnity 3. Pro rata liability 4. Risk-management

1. Reinsurance

26. An insurance agent who diverts premiums held in a trust capacity for his or her own use (Choose from the following options) 1. Will be considered guilty of theft and be punished to the extent of the law. 2. Must report the premium as additional income to the insurer. 3. Will be fined $250 and required to attend a 3-hour ethics review course. 4. Must enter the transaction on a separate ledger and report such transactions.

1. Will be considered guilty of theft and be punished to the extent of the law.

18. Insurance policy is (Choose from the following options) 1. Any method used to transfer or avoid catastrophic risk. 2. A written instrument in which a contract of insurance is set forth. 3. A statement of insurable interest. 4. A verbal or written agreement between two parties to transfer risk.

2. A written instrument in which a contract of insurance is set forth.

17. A life insurance application is asking if the applicant has applied for any other life insurance within the past 6 months. The applicant states that he applied for $15,000 coverage from XYZ Co., but fails to mention the $150,000 coverage with DEF Co. The applicant is guilty of (Choose from the following options) 1. Warranty. 2. Concealment. 3. Misrepresentation. 4. Representation.

2. Concealment.

6. A contract which one party undertakes to indemnify another against loss is called (Choose from the following options) 1. Preparation. 2. Insurance. 3. Adverse Selection. 4. Risk.

2. Insurance.

15. Which of the following are considered standard levels of care? (Choose from the following options) 1. Skilled nursing care 2. Intermediate nursing care 3. Home health care 4. All of these

2. Intermediate nursing care Right Answer 4. All of these

24. 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 (Choose from the following options) 1. Coercion. 2. Loading. 3. Defamation. 4. Twisting.

2. Loading. Right answer 1. Coercion.

8. An insurer incorporated in which of the following locations would be considered a foreign insurer in Washington D.C.? (Choose from the following options) 1. Washington D.C. 2. Maryland 3. Mexico 4. Canada

2. Maryland

28. Which of the following entities is not an insurer, but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization? (Choose from the following options) 1. Stock company 2. Reciprocal association 3. Fraternal benefit society 4. Mutual company

2. Reciprocal association Right Answer 3. Fraternal benefit society

3. 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? (Choose from the following options) 1. When the loss is caused by an "act of God" 2. When the loss is to insured property that has be removed because of endangerment by a peril insured against under the policy 3. Always 4. Never

2. When the loss is to insured property that has be removed because of endangerment by a peril insured against under the policy

25. The violation of a material warranty or other material provision of a policy allows (Choose from the following options) 1. Only the insured to rescind. 2. Only the insurer to rescind. 3. Both the insurer and the insured to rescind. 4. Neither the insurer nor the insured to rescind.

3. Both the insurer and the insured to rescind.

7. When doing business in this state an insurance company that is formed under the laws of another state is known as which type of insurer? (Choose from the following options) 1. Alien 2. Nonadmitted 3. Foreign 4. Domestic

3. Foreign

23. In determining how material a piece of information is to each party of a contract, the value is not determined by the event itself, but solely by which of the following? (Choose from the following options) 1. Amount of information that has been previously disclosed through the inquiry process. 2. Truthfulness of such statements being made. 3. Influence this information would have in forming an estimate of the advantages or the disadvantages of the contract. 4. Interpretation that the seller places on such information in the agreement.

3. Influence this information would have in forming an estimate of the advantages or the disadvantages of the contract.

16. Which of the following is true regarding the regulation of providers? (Choose from the following options) 1. There are no specifications on regulation of providers. 2. Only health care service plan providers fall under the jurisdiction of the DOI. 3. Providers must be under the jurisdiction of either the Department of Insurance or other governmental agencies. 4. Only the Department of Insurance can be the regulator for insurance providers.

3. Providers must be under the jurisdiction of either the Department of Insurance or other governmental agencies.

20. Which of the following insurers are owned by stockholders who have the usual rights of ownership, including the right of voting? (Choose from the following options) 1. Reciprocal 2. Fraternal 3. Stock 4. Mutual

3. Stock

22. All of the following must be specified in an insurance policy EXCEPT (Choose from the following options) 1. The risks insured against 2. The period during which the insurance is in force 3. The financial rating of the insurer 4. The parties between whom the contract is made

3. The financial rating of the insurer

1. If an insured intentionally failed to communicate information related to an implied warranty, which of the following may occur? (Choose from the following options) 1. The insurer may increase premiums at anniversary date. 2. The insurer will cancel the policy and retain the premiums paid. 3. The insurer may rescind the contract. 4. The insured will be fined.

3. The insurer may rescind the contract.

30. What is the purpose of California's State Compensation Insurance Fund (SCIF)? (Choose from the following options) 1. To pay claims on behalf of insurers that are unable to pay claims due to insolvency 2. To provide insurance to people who would be financially unable to obtain it otherwise 3. To make workers compensation insurance available, especially to smaller companies with more limited payrolls 4. To provide income replacement for California residents who are temporarily or permanently disabled

3. To make workers compensation insurance available, especially to smaller companies with more limited payrolls

11. Which of the following is NOT a "person" for legal purposes? (Choose from the following options) 1. A family's living trust 2. An incorporated, closely-held company 3. A business partnership 4. A family

4. A family

10. In property and casualty insurance, insurable interest is defined as the right of a person or entity to property in that such a loss to that property would cause a direct monetary loss to the person or entity. Which of the following statements is TRUE regarding insurable interest in property and casualty insurance? (Choose from the following options) 1. The insurable interest must exist only at the time of application of insurance. 2. Only the owner of the property has insurable interest. 3. Insurable interest also includes indirect monetary loss to the person or entity. 4. If the insured has no insurable interest, the contract is void.

4. If the insured has no insurable interest, the contract is void.

21. All of the following information must be communicated in an insurance contract EXCEPT (Choose from the following options) 1. Information that is material to the contract. 2. Information that is material even though it cannot be proven. 3. Information not requested by an agent and company, even if it's considered relevant. 4. Information the other party already knows.

4. Information the other party already knows.

12. What is the major difference between a Stock Company and a Mutual Company? (Choose from the following options) 1. Amount of death benefit 2. Number of producers 3. Types of whole life policies 4. Ownership

4. Ownership

14. The type of insurance that guarantees the behavior of persons and the performance of contracts other than insurance policies is known as (Choose from the following options) 1. Contract insurance. 2. Performance Guaranteed insurance. 3. Behavioral Contract insurance. 4. Surety insurance.

4. Surety insurance.

19. According to California law, all of the following may be covered as dependents under group life insurance EXCEPT (Choose from the following options) 1. The insured's spouse. 2. The insured's unmarried child, age 25. 3. Disabled children of the insured over age 26. 4. The insured's elderly parents living with the insured.

4. The insured's elderly parents living with the insured.

5. The importance of a misrepresentation is determined by (Choose from the following options) 1. The amount of money potentially lost. 2. The cost of investigation. 3. Whether or not the policy is already issued. 4. The materiality of a given concealment.

4. The materiality of a given concealment.