P&C Exam 1 Q&A (College)

In reference to the coverages provided in the basic form, the Boatowners Policy is similar to what other policy? A.) A commercial Inland Marine Policy B.) The Homeowners Policy C.) The Personal Auto Policy D.) The commercial Ocean Marine Policy

(C) The Personal Auto Policy Reason: Statement of fact.

A Personal Auto Policy (PAP) insured's car was a total loss when the car was stolen and wrecked. The insured has the following coverage: Liability, medical payments and "other than collision. Her PAP: A.) "Other than collision" will pay for the loss B.) Will not pay for this loss - no coverage C.) Medical payments will pay for the loss D.) Liability coverage will pay for the loss

(A) "Other than collision" will pay for the loss Reason: No one was hurt, so the Medical payments answer is wrong, and likewise, the insured did not cause any damage to others or their property, so the liability answer is wrong. This situation is typical of the "other than collision" coverage.

What is the limit for sound reproducing equipment under the coverage endorsement for excess sound reproducing equipment, audio, visual and data electronics, tapes, records, disks, and other media endorsement in a PAP? A.) $200 B.) The amount scheduled on the endorsement C.) $500 D.) $1,000

(A) $200 Reason: Statement of fact.

If the limits of liability on a structure are $75,000, and the structure is worth $125,000, how much would be owed on a fire loss of $50,000 if the policy has an 80% coinsurance requirement (disregard any deductibles)? A.) $37,500 B.) $40,000 C.) $50,000 D.) $32,000

(A) $37,500 Reason: 80% of the property value ($125,00) is $100,000. $75,000 (Insurance carried) divided by $100,000 is .75. .75xthe $50,000 loss is $37,500.

Which of the following types of insurance was designed to cover domestic shipments, means of transportation, personal property floater risks, and commercial property floater risks? A.) Inland Marine B.) Business personal Property C.) Ocean Marine D.) Auto liability

(A) Inland Marine Reason: Statement of fact.

Mary has an HO3 policy with replacement cost coverage on the insured buildings. The cost of replacement on the dwelling is $100,000, and the other structure (a garage) is $20,000. To be certain of replacement cost coverage on a partial loss to either structure, she must carry a minimum of: A.) $80,000 on the dwelling; $16,000 on the garage B.) $80,000 on the dwelling, $8,000 on the garage C.) $100,000 on the dwelling; $20,000 on the garage D.) $100,000 on the dwelling; $10,000 on the garage

(A) $80,000 on the dwelling; $16,000 on the garage Reason: She must carry a minimum of 80% of the cost of replacement. This is the coinsurance requirement.

Under a Builders Risk form, how much insurance is required to pay any loss without a penalty for underinsurance? A.) 100% of the completed value B.) 100% of the value at the time of the loss C.) 80% of the value at the time of the loss D.) 80% of the completed value

(A) 100% of the completed value Reason: The Builder's Risk Coverage Form is referred to as a completed value form since it is written for an amount equal to a projected completed value of the building.

What is a self-insured retention under an Umbrella Policy? A.) A deductible applicable to losses excluded by the underlying coverage and covered by the umbrella B.) A deductible applicable to all covered losses C.) The limits of liability of the Umbrella Policy D.) The amount of the underlying limits of liability

(A) A deductible applicable to losses excluded by the underlying coverage and covered by the umbrella Reason: The retention deductible is a clause in an umbrella liability policy which stipulates that in the event of loss where there are no underlying policies providing coverage, the deductible will apply.

The amount to replace an insured's damaged property, less depreciation, is known as the: A.) Actual cash value B.) Stated amount C.) Replacement value D.) Agreed amount

(A) Actual cash value Reason: This is the definition of ACV.

What perils are insured against under the "additional coverage - property removed" of a Homeowners Policy? A.) All perils B.) Broad form perils C.) Perils of transportation D.) Basic form perils

(A) All Perils Reason: This provides insurance to property while it is removed from the residence premises to protect it from a covered peril.

Section 770 of the Insurance Code refers to which of the following? A.) An entity cannot demand that insurance be placed with a particular agency B.) The penalties for misrepresentation of policies C.) The restrictions on the activities of incorporated insurers D.) A travel insurance agent cannot refer business to unincorporated insurers

(A) An entity cannot demand that insurance be placed with a particular agency Reason: For example, a lender can require that a borrower purchase insurance, but can NOT demand a particular insurance company.

The measure of loss potential which is used for pricing of insurance is known as: A.) An exposure unit B.) A claim C.) A covered loss D.) Loss transfer

(A) An exposure unit Reason: Statement of fact.

Which of the following is not required when electing continuation of coverage under COBRA? A.) An insurability statement B.) A qualifying event C.) A completed application D.) Premium payment

(A) An insurability statement Reason: Insurability is not an issue under COBRA.

Under the "examination of your books and records" condition of a commercial policy, when may an insurer examine an insured's books and records? A.) At any time during the policy period and up to three years afterwards B.) Only when authorized by the insured C.) At any time D.) Only upon receiving a court order allowing the inspection

(A) At any time during the policy period and up to three years afterwards Reason: This must be memorized.

Under a Personal Umbrella Policy, what underlying coverages must an insured typically maintain? A.) Auto and personal liability only B.) Auto, personal liability, and professional liability C.) Personal liability only D.) Auto only

(A) Auto and personal liability only Reason: If the insured doesn't maintain the required primary coverage, the primary limits become the insured's deductible.

How are the HO3 and the HO5 similar? A.) Both provide open peril coverage for the dwelling B.) Both are designed to cover condominiums C.) Both provide named peril coverage for personal property D.) Both provide replacement cost coverage for contents

(A) Both provide open peril coverage for the dwelling Reason: They both provide the same all risk coverage for the dwelling. The difference is that the HO5 upgrades the personal property coverage to be all-risk as well.

What additional coverage is provided in a DP3 that is not included in a DP1? A.) Collapse B.) World -wide coverage C.) Fire department service charge D.) Other structures

(A) Collapse Reason: Statement of fact.

In the business of insurance, the act of concealment is defined by all of the following statements, except: A.) Concealment does not occur if no inquiry is made B.) Concealment is grounds for declination by the insurer C.) Concealment can be unintentional D.) Concealment can be intentional

(A) Concealment does not occur if no inquiry is made Reason: Concealment is the intention to withhold or secrete material information - whether an inquiry is made or not.

Jack, a condo owner, wants a fire and allied lines coverage for personal property, liability coverage for himself and family members, and protection for assessments or damage for the building structure and other common areas. Which homeowners form would you recommend? A.) HO6 B.) HO3 C.) HO2 D.) HO4

(A) HO6 Reason: HO6 is ideal for condominiums.

In the state of CA, no rate will remain in effect if it is considered to be any of the following, except: A.) Impartial B.) Unfairly discriminatory C.) Excessive D.) Inadequate

(A) Impartial Reason: The insurance department in each state regulates policy rates to ensure that they are fair, reasonable, and not discriminatory.

Abstracts , maps and mortgages are covered under under which of the following? A.) Inland Marine B.) Commercial General Liability C.) Businessowners Policy D.) Builders Risk Policy

(A) Inland Marine Reason: Although inland marine is normally associated with transportation insurance to cover the damage or liability of property under the care and control of others, there is a specialty coverage which includes valuable papers (records) insurance.

The Personal Auto Policy territory limits include: A.) Tokyo, Japan B.) London, England C.) Mexico City, Mexico D.) Montreal, Canada

(D) Montreal, Canada Reason: Canada is included but Mexico is not.

A possibility of financial loss resulting from the ownership of property is known as: A.) Insurable interest B.) Valuation C.) Indemnity D.) Legal Liability

(A) Insurable interest Reason: Although insurable interest varies according to the type of policy, there is always an expectation of a monetary loss that can be covered by insurance.

What would be the most likely action taken by the Insurance Commissioner if a licenses includes a client to co-sign a loan? A.) License suspension B.) $1,000 Fine C.) Licensee to complete an approved ethics course D.) Licensee required to repay the loan with interest

(A) License Suspension Reason: The Commissioner can suspend or revoke licenses. This action by a licensee would most likely result in loss of license. Other actions may also occur, but the most likely is choice "a".

Under a commercial property coverage form, all of the following properties are included in the definition of "building", except: A.) Patio B.) Outdoor fixtures C.) Permanently installed fixtures D.) Personal property used to maintain the permises

(A) Patio Reason: A policy does not cover damage to patios for the same reasons that damage to walkways, path and land are not covered. Coverage "A" does cover personal property used to maintain the premises, however.

In a commercial lines program policy, common policy conditions do not include which of the following as a condition? A.) Perils insured B.) Cancellation C.) Inspections and surveys D.) Examination of your books and records

(A) Perils insured Reason: The conditions part of a policy states the rights and duties of the insurance company and the insured.

Medical payment coverage in a Boatowners Policy covers injuries to: A.) Permissive occupants of the insured's boat B.) Fare-paying passengers on the insured's boat C.) Passengers on another boat struck by the insured's boat D.) Employee's of the insured

(A) Permissive occupants of the insured's boat Reason: This policy does not cover commercial passengers or liability for passengers on another boat.

All of the following expenses are covered in addition to the limits of liability under Coverage A of a personal Auto Policy, except: A.) Pre-judgment interest B.) Premium for appeal bonds C.) Loss of earnings to attend trails at the company's request D.) Cost of bail bonds related to a covered accident

(A) Pre-judgment interest Reason: The PAP includes pre-judgment interest as part of the limit for coverage "A". Most liability policies feature pre-Judgment interest as part of the supplementary coverage.

The Liability coverage in a Yacht Policy is referred to as: A.) Protection and indemnity B.) Personal liability protection C.) Hull Coverage D.) Inchmaree Clause

(A) Protection and indemnity Reason: P&I insurance is a broad type of marine legal liability coverage. Hull marine insurance is limited to an insured ship.

An insured's Business Auto Policy specifies that the liability coverage applies to covered autos - symbol 7. This means: A.) Specifically described autos are covered B.) Only owned autos, other than private passenger autos are covered C.) All owned autos, including trucks not larger than two tons are covered D.) Only owned, private passenger autos are covered, with the exception of those private passenger autos driven by youthful operators

(A) Specifically described autos are covered Reason: The numbers, or symbols are used in the Business Auto coverage form to identify which vehicles are "covered autos" and which coverage applies.

What would the Commissioner likely do if an agent induces a client to co-sign a loan? A.) Suspend the agent's license B.) Force the agent to pay the loan back with interest C.) Impose a $1,000 fine D.) Force the agent to attend a state ethics course

(A) Suspend the agent's license Reason: Statement of fact.

Under a major medical plan, coinsurance equals a percentage. A.) The employee pays after the deductible is met B.) The plan pays after the deductible is met C.) The employer pays after the deductible D.) The spouses' insurance company pays after the deductible

(A) The employee pays after the deductible is met Reason: Medical coinsurance amounts are paid by the patient

All of the following contribute to the rising cost of Worker's Compensation Insurance, except: A.) The growing population B.) Employers who fail to secure the payment of workers compensation as required by law C.) Under-reported payroll by employers D.) Fraudulent claims

(A) The growing population Reason: A growing population may, in fact, lower the cost of workers compensation insurance.

Which is a valid reason for an applicant to purchase a HO3 policy instead of a Dwelling Policy? A.) The insured desires broader coverage B.) The insured wants to pay a lower premium C.) The insured does not want to have personal liability coverage D.) The property is a six-unit building with the owner occupying one of the units.

(A) The insured desires broader coverage Reason: The Homeowner's HO3 covers more than the standard Dwelling Policy.

The CA Insurance Code requires property insurance policies specify all of the following, except: A.) The insured's address B.) The insured's risks or perils C.) The policy period D.) A description of the insured property

(A) The insured's address Reason: The insured's address will be on the application, but there is no Code requirement that it be on the policy.

A plate glass coverage form is needed by some insureds. Which of the following statements about the coverage for the peril of glass breakage in commercial property for a "building and personal property" basic, broad and special causes of loss forms is true? A.) There is limited glass breakage coverage in both of the broad and special forms B.) There is limited glass breakage coverage in the basic form C.) No policy limits apply to glass breakage coverage in the special form, all named perils D.) There is no glass breakage coverage in the broad or special forms

(A) There is limited glass breakage coverage in both of the broad and special forms. Reason: This is true for earlier Building and Personal Property forms.

The medical expense coverage in a Worker's Compensation Policy A.) Does not have a time limit, but has a maximum dollar limit B.) Does not have a dollar limit nor a time limit C.) Does not have a dollar limit, but has a maximum time limit D.) Has both a maximum dollar and time limit

(B) Does not have a dollar limit nor a time limit Reason: Statement of fact for test purposes.

Coverage on an annual transit policy is usually provided on which of the following basis? A.) Theft only B.) Extended Coverage C.) Open Peril D.) Named peril

(D) Named Peril Reason: For test purposes this statement is correct.

A reporting form is used for property insurance A.) To maintain the correct limits of coverage without over or under insuring when the value or volume of the property varies during the policy term B.) To report losses and adjust insurance in force to conform C.) When the insured's premises are subject to periodic safety inspections D.) To establish a guaranteed amount of insurance based upon a report of values submitted before the beginning of the policy term.

(A) To maintain the correct limits of coverage without over or under insuring when the value or volume of the property varies during the policy term. Reason: This endorsement is for a business owner who has widely fluctuating inventory values. The purpose of this endorsement is to allow the limit of insurance to "float" based on the actual inventory level reported by the business owner. This endorsement helps avoid costly over-insurance problems with underinsurance.

Which of the following does not have a standard coverage form? A.) Umbrella Policy B.) Claims made Commercial General Liability C.) Professional Liability D.) Homeowners Policy

(A) Umbrella Policy Reason: There are generally no "standard" umbrella policies, as the policies will vary from company to company in terms of perils insured.

Carmen is driving her own car on behalf of her employer. Carmen's negligent operation of her car injures a member of the public. The employer may be held liable because of what is called: A.) Vicarious Liability B.) Gross negligence C.) Absolute liability D.) Contributory negligence

(A) Vicarious Liability Reason: Also known as contingent liability, the employer gave directions or exercised control over the action.

If the vacancy permit endorsement is added to a building and personal property coverage form, the vacancy conditions under the basic policy is: A.) Waived only for designated perils during the permit period B.) Waived during the permit period C.) Waived during the policy period D.) Waived only for designated perils during the policy period

(A) Waived only for designated perils during the permit period Reason: The vacancy permit allows the named insured to "buy back" certain perils for a vacant building for the duration of the permit.

The limited Mexico endorsement applies to trips to Mexico with a duration of: A.) 7 days or less B.) 10 days or less C.) 2 days or less D.) 14 days or less

(B) 10 days or less Reason: Mexico Coverage endorsement covers accidents that occur in Mexico when the insured will be in Mexico for 10 days or less.

Which of the following is commonly found in liability policies, thus creating the need for inland marine coverage? A.) A coinsurance clause B.) A care, custody, control exclusion C.) A valuation clause D.) A debris removal coverage

(B) A care, custody, control exclusion Reason: Inland marine is used when property is in the care, custody or control of others.....such as cargo.

Both the commercial General Liability Policy and the Business Auto Policy have definitions of the term "automobile" and mobile equipment. These definitions: A.) Are the same, showing the policy writers are not very imaginative. This has no effect on gaps or overlaps between the two policies B.) Are the same, thus avoiding overlaps or gaps in coverage between the two policies C.) Are very different; thus avoiding overlaps or gaps in coverage between the two policies D.) Are very different; however, this has no effect on gaps or overlaps between the two policies

(B) Are the same, thus avoiding overlaps or gaps in coverage between the two policies Reason: It is important to avoid the gaps in coverage between the two policies.

When is a fire and casualty agent required to inform an insured of any conditions which may be precedent to coverage regarding a Personal Auto Policy? A.) At proposal B.) At application C.) At renewal D.) At policy delivery

(B) At application Reason: Although an agent "Should" inform the insured of conditions at the proposal stage, the agent is "required" to do so at he application stage.

Under a scheduled personal property endorsement, loss to stamps are excluded when they are: A.) Located in Canada B.) Being shipped with a freight company C.) Being shipped by registered mail D.) While the insured is temporarily in Japan

(B) Being shipped with a freight company Reason: The freight company would carry commercial inland marine insurance.

Which of the following types of policies pays for bodily injury or property damage which occurs or is discovered during the policy period? A.) Pollution liability policy B.) Claims made commercial liability policy C.) Auto liability policy D.) Occurrence general liability policy

(B) Claims made commercial liability policy Reason: You need to know the difference between "Occurrence" and "Claims made" (see textbook) The key phrase is "Or discovered".

All Workers' Compensation policies provide A.) Major medical coverage with 20% co-payment; co-payment has an annual stop-loss of $1,500 B.) Compensation for worker related injuries without regard to fault C.) Adequate retirement benefits D.) 24-hour on and off the job coverage for workers

(B) Compensation for worker related injuries without regard to fault Reason: This relieves the burden of determining fault in an employment situation.

Which of the following types of coverage would be needed to cover a contractor's bulldozers which are used in the contractor's business but are not held for sale? A.) Older truck cargo floater B.) Contractor's equipment floater C.) Annual transit policy D.) Installment sales floater

(B) Contractor's equipment floater Reason: Statement of fact.

What is the primary difference between an HO3 and an HO5? A.) Coverage A and B perils B.) Coverage C perils C.) Coverage A Property D.) Coverage D limits

(B) Coverage C perils Reason: Coverage C is personal property coverage. The HO5 upgrades the personal property coverage to be open perils.

The collision coverage of a Personal Auto Policy covers: A.) A desert sand storm pitting the car windshield B.) Damage caused by the insured by driving into a tree that had fallen during a recent storm C.) A vandal making a deep scratch on the car with a screwdriver D.) Collision coverage does not cover any of these losses

(B) Damage caused by the insured by driving into a tree that had fallen during a recent storm Reason: A collision is defined as including any of the following events: an impact with another vehicle, impact with another object, (such as a wall, tree, telephone pole etc.), or upset (rolling the car over).

Self-funding of employee benefit plans cannot be used for: A.) Short-term disability benefits B.) Death benefits C.) Hospital benefits D.) Health benefits

(B) Death benefits Reason: Statement of fact.

Which of the following statements is not true? A fire and casualty managing agent: A.) Has the power to accept or decline risks B.) Does not have the authority to collect premiums from producing broker-agents C.) Has the power to appoint, supervise and terminate the contracts of agents D.) Holds a license as a fire and casualty agent

(B) Does not have the authority to collect premiums from producing broker-agents Reason: A managing agent has this authority.

If an insured's employee embezzles $10,000 from the company's bank account, which of the following coverages would need to be in force for the loss to be covered? A.) Inside the premises - theft of money and securities B.) Employee theft C.) Forgery and alteration D.) Money orders and counterfeit paper currency

(B) Employee theft Reason: Statement of fact.

What must a life agent, travel agent, or fire and casualty insurance agent do in order to act as an agent of a particular insurer? A.) File proof of licensure with the state B.) File a notice of appointment with the commissioner C.) Have the agent listed with the appropriate department of the insurer D.) There are no legal requirements as long as the agent is legally licensed

(B) File a notice of appointment with the commissioner Reason: Statement of fact.

The applicant wants a Homeowners Policy that has open peril coverage on his home (building structure). Assuming he is eligible for the policy, which policy would you recommend? A.) HO2 B.) HO3 C.) HO6 D.) HO8

(B) HO3 Reason: Statement of fact.

Yacht policies typically provide for: A.) Property, liability, and contingent medical payments B.) Hull, protection and indemnity C.) Physical damage, liability, and contingent medical payments D.) Hull and collision

(B) Hull, protection and indemnity Reason: Coverage for liability for bodily injury and loss of life is available through Ocean Marine Protection.

Which of the following describes an insurer who has enough financial resources only to provide for all of its liabilities and for all reinsurance of all outstanding risks? A.) Non-participating B.) Insolvent C.) Guaranteed D.) Solvent

(B) Insolvent Reason: In order to be solvent, an insurer must not only be able to provide for its liabilities and reinsure capital risks, but must also possess additional assets equivalent to the required paid-in capital.

What factor supports the principle of indemnity? A.) Utmost good faith B.) Insurable interest C.) Reasonable expectations D.) Contract of adhesion

(B) Insurable interest Reason: An insured needs to have an insurable interest in order to be "made whole" by the policy proceeds.

Kim's car is insured with a Personal Auto Policy. The coverage includes medical payments with $2,000 limits. Which of the following is a true statement about the medical payment coverage for necessary medical expenses? A.) Kim's daughter is struck by a car while crossing the street. Kim's policy will pay nothing because Kim's daughter was not in a car at the time of the accident B.) Kim gives her neighbor a ride to the store in the insured car. She has an auto accident in which they each incur over $2,000 in medical expenses. The maximum amount that Kim's policy will pay is $2,000 to her neighbor C.) Kim is injured in an accident while riding in her neighbor's car. The neighbor's policy covers $2,000 in medical payments. The maximum amount that would be paid by both policies for Kim's injuries is a total of $2,000 D.) Kim's daughter is struck by a car. Kim's policy will pay nothing because she was riding her bicycle in the street.

(B) Kim gives her neighbor a ride to the store in the insured car. She has an auto accident in which they each incur over $2,000 in medical expenses. The maximum amount that Kim's policy will pay is $2,000 to her neighbor Reason: In Part B of the PAP, the medical payments coverage limit is applied separately for each person injured in the accident.

Max's Personal Auto Policy (PAP) has liability and collision coverage. His neighbor's car has liability coverage only. Max borrows his neighbor's car to go to the store and has an accident that is his fault. He damages his neighbor's car and another car. Max's PAP provides: A.) Collision coverage because the neighbor does not have this coverage. Liability coverage does not apply B.) Liability coverage that is excess of his neighbor's liability coverage. His collision coverage also applies, but on a primary basis C.) Collision and liability coverages on a primary basis D.) Liability coverage that is excess of his neighbor's liability coverage; the collision coverage does not apply

(B) Liability coverage that is excess of his neighbor's liability coverage. His collision coverage also applies, but on a primary basis Reason: Statement of fact. In addition, his collision coverage also applies, but on a primary basis.

Which of the following types of coverage would pay for losses which occurred during the policy period and are found for up to one year after policy termination? A.) Occurrence B.) Loss Sustained C.) Claims made D.) Discovery

(B) Loss Sustained Reason: Crime insurance written under the Loss Sustained form covers losses that are sustained during the policy period, or up to one year after the policy expires. Discovery Form, (answer D) is incorrect, as the normal time to discover loss is 60 days. The one year only applies to losses related to employee benefit plans.

What type of crime form covers losses that occur during the policy period regardless of when the loss is discovered? A.) Discovery form B.) Loss sustained form C.) Commercial crime form D.) Robbery and safe burglary form

(B) Loss sustained form Reason: Statement of fact. Similar to the CGL Occurrence form.

All of the following are characteristics of an "ideally insurable loss exposure," except A.) Losses that are accidental B.) Losses that are catastrophic C.) Losses that are definite and measurable D.) Large number of exposure units

(B) Losses that are Catastrophic Reason: Catastrophic losses are of high severity (ex. hurricane) which does not lend itself to accurate prediction, and thus is not an ideally insurable loss exposure.

Which coverage protects physicians, surgeons, and dentists for their professional activities? A.) Commercial general liability B.) Malpractice Coverage C.) Employer's liability D.) Errors and omissions coverage

(B) Malpractice Coverage Reason: Malpractice insurance covers medical-related institutions such as hospitals and nursing homes, and medical professionals such as doctors and dentists, where the exposure is bodily injury to a client. Errors and Omissions insurance covers other types of professions, such as architects, insurance agents, accountants and others where the exposure is primarily financial damages.

What do the initials S.T.A.R.R. represent? A.) Types of standard policies B.) Methods of risk management C.) A government program designating outstanding insurance companies D.) Types of coverage forms

(B) Methods of risk management Reason: The methods of risk management are: Sharing, Transfer, Avoid, Retain and Reduce.

If an Inland Marine Policy provides coverage for any loss unless it is specifically excluded, it would be considered which of the following? A.) Named peril B.) Open perils C.) Controlled D.) Uncontrolled

(B) Open Perils Reason: This is the definition of open perils.

Which of the following is also known as a human loss exposure? A.) Personnel loss exposure B.) Personal loss exposure C.) Indirect loss exposure D.) Liability loss exposure

(B) Personal loss exposure Reason: A type of exposure that can be defined as a condition or situation where the exposure to financial loss is presented to an individual or family from causes such as injury, disability, death, sickness, or unemployment.

Which type of loss is a business exposed to death, retirement or disability of a key employee? A.) Human loss exposure B.) Personnel loss exposure C.) Personal loss exposure D.) Workers' Compensation exposure

(B) Personnel loss exposure Reason: Another name for employees is "Personnel."

All of the following would be considered benefits of insurance, except: A.) They can be a source of investment funds B.) Retention of the loss by the insured C.) Redemption of the financial uncertainty of the insured D.) Payment for the cost of covered losses

(B) Retention of the loss by the insured Reason: This is the opposite of insurance.

Which of the following loss exposures is not covered by Section II of Ron's Homeowners Policy? A.) Ron's activities while rebuilding a car for fun in his garage at home. The car does not have an engine. B.) Ron's registered/licensed personal auto while used on his own property which includes 10 acres of undeveloped land. C.) Ron's use of a motorized golf cart, while playing golf on a golf course D.) Ron's use of a riding lawnmower while he is mowing his lawn

(B) Ron's registered/licensed personal auto while used on his own property which includes 10 acres of undeveloped land. Reason: Section II of the Homeowner's policy is concerned with personal liability (not auto liability), covering risks for the insured and family members living with them.

Which of the following losses would be covered under Dick's Personal Auto Policy other than collision coverage? A.) Dick's suitcase is stolen from his car while the car is parked at the airport B.) Someone shoots Dick's car rear window while the car is parked on the street overnight C.) The sides and top of Dick's car is damaged when it rolls over on an icy curve D.) Dick locks his keys in the car, and then breaks a window to gain quick access

(B) Someone shoots Dick's car rear window while the car is parked on the street overnight Reason: Other than collision covers any damage to the vehicle that is not considered a collision loss and that is not excluded by the policy.

Why would an insured need an Inland Marine Policy if she is shipping stock on her own trucks? A.) Stock is only covered if it is being shipped through an insured delivery service B.) Stock is only covered if it is in the building or within 100ft. of the building premises C.) An Inland Marine Policy is not needed; insured stock is covered anywhere within the coverage territory D.) Stock is never covered under a business personal property form

(B) Stock is only covered if it is in the building or within 100ft. of the building premises. Reason: The Motor Truck Cargo policy, one of the Inland Marine forms, covers stock in transit.

Your HO3 insured wants to make sure he has liability protection against claims for false arrest, libel and slander. You should: A.) Tell him this coverage is not available under a Homeowners Policy. He must buy a commercial liability coverage B.) Tell him he should add the personal injury endorsement C.) Suggest he add the ordinance or law coverage D.) Tell him not to worry; there is coverage in the policy

(B) Tell him he should add the personal injury endorsement Reason: The personal injury endorsement covers wrongful conduct causing false arrest, invasion of privacy, libel, slander and defamation of character.

The Personal Auto Policy towing and labor endorsement pays for: A.) The expense of towing a disabled car to a garage nearest the insured's home B.) The cost of labor only if the labor is performed at the place of disablement C.) Towing and labor charges up to $1,000 per year D.) The cost of towing the disabled car to the garage, and up to two hours of labor expenses at the garage

(B) The cost of labor only if the labor is performed at the place of disablement Reason: This coverage is for the cost of towing a disabled vehicle OR the cost of labor conducted at the scene of a breakdown. If towing is chosen, it is not necessarily to a garage close to the insured's home.

Extra Expense insurance covers: A.) Increased expense of repairing property to appreciated assets B.) The extra expense that a business incurs to continue a business while damage to the premises are being restored. C.) The loss of profit a business incurs when it is shut down after a loss by a covered peril D.) Payroll and other overhead incurred when a business is shut down after a loss

(B) The extra expense that a business incurs to continue a business while damage to the premises are being restored. Reason: Extra Expense coverage insures any necessary extra costs incurred during a period of restoration, which would not have been incurred if there had not been a covered property loss.

Under the building and personal property coverage form, if the insured building has been vacant for more than 60 consecutive days. What effect will this have on a vandalism loss? A.) There is no effect B.) The loss is excluded C.) The amount of the loss will be reduced by 60% D.) The amount of the loss will be reduced by 15%

(B) The loss is excluded Reason: The building and personal property coverage form will not pay for vandalism under these conditions even if it is normally a covered cause of loss.

The CA Insurance code: A.) Prohibits agents from receiving compensation for premium financing B.) Sets the percentage of interest that may be charged in a premium finance contract C.) Requires agents to keep records of any compensation they may have received for their services involved with premium financing. D.) Requires agents to provide premium financing services

(C) Requires agents to keep records of any compensation they may have received for their services involved with premium financing. Reason: Recordkeeping is one of the main Code requirements.

What is the difference between the per accident limit in a split limits policy and the single limits? A.) The per accident limit applies to all claims, and the single limit applies only to bodily injuries. B.) The per accident limit applies only to bodily injuries, and the single limit applies to all claims C.) There is no difference D.) The per accident limit applies to property damage, and the single limit applies to all claims.

(B) The per accident limit applies only to bodily injuries, and the single limit applies to all claims. Reason: The difference between the per accident limit in a split limit policy and a single limit policy is that in a split limit policy, the BI per accident limit applies only to bodily injury and the single limit applies to all claims (i.e., BI and PD).

What is the primary difference between a HO2 and a HO3 policy? A.) The liability coverage B.) The perils insured against C.) The property covered D.) The policy territory

(B) The perils insured against Reason: Under the HO2 policy, the dwelling and personal property are covered by the "Broad form" perils. Under the HO3 policy, the dwelling is covered for all risks except those excluded. Personal property is the same as for HO2.

What is the primary difference between umbrella and excess liability policies? A.) The umbrella has fewer supplementary features and is less expensive than the excess policy B.) The umbrella covers most liability exposures; the excess liability may cover only one line C.) The umbrella covers intentional acts; the excess liability does not D.) The umbrella affords defense costs; the excess liability does not

(B) The umbrella covers most liability exposures; the excess liability may cover only one line. Reason: Statement of fact.

A newly acquired motorcycle is not automatically covered under a Personal Auto Policy (PAP) because: A.) Motorcycles are insured under a Homeowners Policy B.) The unendorsed policy does not cover two-wheeled vehicles C.) Motorcycles are too dangerous to insure D.) Motorcycles cannot be insured under the PAP

(B) The unendorsed policy does not cover two- wheeled vehicles Reason: With the proper endorsement, a motorcycle can sometimes be insured under a PAP.

The equipment dealer's coverage form covers all of the following types of property, except: A.) Dealer's used stock B.) Motor vehicles designed for highway use C.) Customer's equipment in for service D.) Dealer's new stock

(B) This statement describes an automobile, which is not a covered vehicle. Mobile equipment, such as tractors, backhoes and graders, etc., are covered. Reason: This statement describes an automobile, which is not covered vehicle. Mobile equipment, such as tractors, backhoes and graders, etc., are covered.

The intentional relinquishment of a known right is: A.) Warranty B.) Waiver C.) Concealment D.) Estoppel

(B) Waiver Reason: In fire and casualty insurance, a waiver means the act of giving up or surrendering a right or privilege that is known to exist.

Under a standard ISO Homeowners HO3, real property and personal property are covered for the perils of: A.) Broad form named perils - coverage applies to both B.) "All risks" - Coverage applies to both C.) "All risks" coverage applies to real property. Broad form named perils coverage applies only to personal property. D.) Broad form named perils - Coverage applies to personal property. There is no coverage for real property, since this is a tenant's form

(C) "All risks" coverage applies to real property. Broad form named perils coverage applies only to personal property. Reason: This answer describes the coverages under a standard ISO homeowner's HO-3.

The Commercial General Liability (CGL) contract contains an exclusion for liquor liability. The purpose of this exclusion is to exclude coverage for law liability losses arising from: A.) An insured serving alcohol at such functions as company picnics and holiday office parties B.) The illegal manufacture, sale, or possession of alcoholic beverages C.) An insured's special loss exposure resulting from the insured being involved in the alcoholic beverage business. D.)The serving of alcoholic beverages by any insured at any business function

(C) An insured's special loss exposure resulting from the insured being involved in the alcoholic beverage business. Reason: The CGL policy does not cover a person involved in the alcoholic beverage business. Choice "b" is wrong because it states "illegal" manufacture. The purpose of the exclusion has nothing to do with illegal activities, which are never covered by insurance.

The medical expense plan designed to cover a hospital visit for a hernia repair operation is known as which of the following? A.) Supplemental medical B.) Indemnity medical C.) Basic medical D.) Surgical medical

(C) Basic medical Reason: A Basic Surgical plan would typically cover such a surgery (there is no "surgical medical" plan).

Which of items of real property under HO3 are valued on an actual cash value basis? A.) Wallpaper B.) Roofing C.) Built - in appliances D.) Exterior paint

(C) Built - in appliances Reason: Statement of fact.

A Dwelling fire policy's coverage is to a Homeowners Policy, as a commercial property policy's coverage is to a: A.) Business Auto Policy B.) Commercial General Liability Policy C.) Businessowners Policy D.) Business Income - Extra Expense Policy

(C) Businessowners Policy Reason: A dwelling fire policy covers liability as an endorsement, just like the commercial property policy. The Homeowner's policy includes liability coverage, just like a Business Owner's policy.

If an insured with a Personal Auto Policy has an accident in a state with personal injury protection (PIP), how does the policy respond? A.) The insured may apply for the additional PIP coverage within 10 days of the accident B.) PIP coverage is provided only for medical providers in the state C.) Coverage automatically is broadened to provide PIP D.) Coverage remains as written

(C) Coverage automatically is broadened to provide PIP Reason: Where available, Personal Injury Protection includes first party benefits for the insured, including funeral costs, essential services etc.

What course of action does a party to a contract have if the other party is found to be in breach of that contract? A.) Nothing, unless the injured party can prove the damages are substantial B.) Reasonable attorney fees and costs only C.) Damages for breach, reasonable attorney fees and costs D.) Damages caused by the breach only

(C) Damages for breach, reasonable attorney fees and costs Reason: Breach of contract is a legal concept in which a binding agreement or bargained-for exchange is not honored by one of the parties to the contract by non-performance or interference with the other party's performance. A material breach is a breach so fundamental that it excuses the aggrieved party from further performance and entitles that party to sue for damages.

A Self-Insured group qualifies for stop-loss after claims: A.) Equal the anticipated loss per month B.) Meet the out-of- pocket expense during the policy period C.) Exceed a specified limit in a set period of time D.) Average the maximum amount stated on the master policy

(C) Exceed a specified limit in a set period of time Reason: In the event that claims are higher than expected, most businesses that are using a Self-funded plan will also establish a Stop-Loss contract. This Agreement is designed to limit the employer's total liability to a specified dollar amount in the event that claims are so high they would bankrupt the employer. Any claims over the stop-loss amount are paid under the agreement. The Stop-Loss agreement can be thought of as a very large deductible, and is usually underwritten by a commercial insurer, Blue Cross/Shield, or an HMO.

You are to meet with a small furniture manufacturer and make property and liability insurance recommendations. You have insured many risks of this type in the past and have a good idea of what their needs may be. There are several popular ways of determining business loss exposures. Which of the following ways are the least professional and the least likely to correctly identify the loss exposures? You: A.) Take a walk through the business to observe operations and work flow, and ask their key people about the company and its operations. B.) Meet with key people and complete a loss exposure questionnaire developed for their general type of risk. C.) Get a copy of all current policies and determine what coverage they have been carrying and how much they have been paying D.) None of the above

(C) Get a copy of all current policies and determine what coverage they have been carrying and how much they have been paying Reason: This is a current risk assessment. It is important not to rely solely on past history.

Which of the following would be used for a new single-family dwelling? A.) HO8 B.) HO6 C.) HO5 D.) HO4

(C) HO5 Reason: The HO5 policy form provides a comprehensive approach in terms of all-risk perils for both the dwelling and personal property.

A commercial property policy can provide coverage for all of the following, except: A.) Tangible losses B.) Indirect losses C.) Intangible losses D.) Direct losses

(C) Intangible losses Reason: Intangible losses are not insurable by property insurance.

What does a release bill of lading do for a common carrier? A.) Provides insurance coverage to the customer by the shipper B.) Releases the customer from all responsibility C.) Limits the carriers liability on the shipment D.) Releases the carrier from all responsibility

(C) Limits the carriers liability on the shipment Reason: A bill of lading documents that the goods were under the care, custody, or control of the shipper at the time the loss occurred. Once signed by the recipient the release limits the shipper's liability.

A Personal Auto Policy is written for Lisa providing liability coverage. Which of the following auto liability situations would not be covered unless Lisa had an endorsement attached and paid an additional premium? A.) Lisa trades in her car, and runs over a pedestrian while driving her new car home from the dealership. She did not let her agent know of the new car at the time of the accident B.) Lisa's car is being repaired. She drives into a telephone pole while driving a "temporary substitute" auto C.) Lisa destroys a mailbox while driving a (non-owned) company car furnished for Lisa's regular use D.) Lisa has an accident while towing her rowboat trailer. The trailer breaks loose and damages a parked car.

(C) Lisa destroys a mailbox while driving a (non-owned) company car furnished for Lisa's regular use Reason: This liability situation requires a special endorsement for coverage.

If a motor home is scheduled on a miscellaneous type vehicle endorsement, all of the following property is covered, except: A.) Awnings B.) Refrigeration Facilities C.) Luggage D.) Cabanas

(C) Luggage Reason: The miscellaneous type vehicle endorsement covers motorcycles and recreational vehicles. Luggage is personal property and not covered.

Inland marine policies nearly always provide _________________ coverage. A.) Broad peril B.) Basic Peril C.) Open peril D.) Standard peril

(C) Open peril Reason: Statement of fact.

If an armored car carrying an insured's bank deposit is robbed, what insurance would the insured need to be covered? A.) Money orders and counterfeit money B.) Funds transfer fraud C.) Outside the premises - theft of money and securities D.) Employee theft

(C) Outside the premises-theft of money and securities Reason: Statement of Fact.

What items of personal property are included in Coverage A under a HO3 policy? A.) Detached fences B.) Lawnmover used to maintain the exterior premises C.) Paint on the premises to be applied to the interior D.) Decorative fountains

(C) Paint on the premises to be applied to the interior Reason: Coverage A insures the dwelling and attached structures described in the declarations on a replacement cost basis as long as the coinsurance requirement is met. The Coverage A limit is determined by the insurer's estimate of the expense of the expense to replace the structure based on current costs for labor and materials.

Which type of exposure can be best defined as a condition or situation where the exposure to financial loss is presented to an individual or family from causes such as injury, disability, death, sickness, or unemployment? A.) Personnel loss exposure B.) Personal property loss exposure C.) Personal loss exposure D.) Liability loss exposure

(C) Personal loss exposure Reason: Personnel losses relate to employees; personal property loss relates to property and liability loss relates to harm that insureds inflict upon others.

What is the primary difference between a HO2 and a HO4 policy? A.) Perils insured against under Coverage C B.) Inside limits of liability for specified personal property C.) Property insured under Coverage A D.) Description of an insured premises

(C) Property insured under Coverage A Reason: The HO4 is for tenants or renters, individuals who have no insurable interest in the dwelling. Their insurable interest is in their own personal property (contents). The policy covers only the insured's personal property, whereas the HO2 insures the dwelling as a well as personal property.

The amount to replace property with "Like property of the same quality and construction" is the property's: A.) Actual Cash Value B.) Market Value C.) Replacement cost D.) Stated Value

(C) Replacement Cost Reason: The market value is what the property would sell for on the open market, whereas the replacement cost answer is the definition stated in the question.

Mitchell's (unendorsed) Personal Auto Policy Liability coverage would pay for: A.) Mitchell's broken windshield caused by a rock thrown by the tire of a passing car B.) Mitchell's rental car expense, when his car is unusable due to a collision that was not his fault C.) The cost of repairing the neighbor's fence that Mitchell damaged due to the negligent operation of his car D.) Damage or injury caused intentionally by Mitchell

(C) The cost of repairing the neighbor's fence that Mitchell damaged due to the negligent operation of his car Reason: Liability insurance covers all sums which the insured becomes legally obligated to pay because of bodily injury or property damage. Choice "d" is no good because insurance does not cover intentional acts.

It is a violation of the CA Insurance Code to act as a producer for a non-admitted carrier unless: A.) The producer is an insurance solicitor B.) It is always a violation, no matter what type of producer C.) The producer is dually licensed in at least two states D.) The producer is a surplus lines broker

(C) The producer is dually licensed in at least two states Reason: Unless a person is licensed as a Surplus Lines Broker, they may not transact any insurance on property located or operations conducted within, or on the lives of residents within the State of California with nonadmitted insurers.

Which exclusion in the "causes of loss - special form" excludes coverage for mudflow? A.) Ordinance or law B.) Utility service C.) Water (flood) D.) Governmental action

(C) Water (flood) Reason: Statement of fact.

If a tenant is insured under a Building and Personal Property coverage form, when is the property considered vacant? A.) When the structure is being renovated as the result of a fire B.) When the insured's operation is halted due to a strike C.) When there is insufficient business personal property present to conduct customary operations D.) When less than 31% of the total building space is rented to others or in use by the insured

(C) When there is insufficient business personal property present to conduct customary operations Reason: Be careful on this one. The question relates to the tenant, not the property owner.

What is the minimum discount percentage for the "good driver" discount? A.) 5% B.) 10% C.) 25% D.) 20%

(D) 20% Reason: Statement of fact.

What else must an applicant for a fire and casualty license, life agent license, or personal lines agent license complete in addition to pre-licensing classroom study? A.) A diversity awareness course provided by the State of CA B.) A contract law course at any approved college location C.) A sales training course provided by the insurance department D.) A 12-hour course on ethics and the CA code

(D) A 12-hour course on ethics and the CA code Reason: This 12-hour course is added to the 40-hours course for Life or Fire & Casualty, or the 20-Hour course for Personal Lines for the total needed for licensure. If you have taken the 12-hour course for one license, it does not need to be repeated for another license within several years.

In California, excess and surplus lines coverage needs to be placed through: A.) An admitted insurer B.) An excess and surplus lines solicitor C.) Lloyds of London D.) A surplus lines broker

(D) A surplus lines broker Reason: Surplus lines relates to specialized property or liability coverage provided by a nonadmitted insurer in instances where it is unavailable from insurers licensed by the state.

Which of the following is most likely to be eligible for the CA Fair Plan? A.) An insured with a very bad driving record B.) A poorly maintained dwelling with faulty wiring C.) An insured who has had a drivers license for less than two years D.) A well-maintained dwelling located in a hazardous brush area

(D) A well-maintained dwelling located in a hazardous brush area. Reason: The California FAIR Plan creates a pool of risks to provide fire and extended coverage insurance to individuals unable to obtain coverage through regular channels mainly due to environmental hazards.

Which peril(s) is/are included in the vacancy permit endorsement? A.) Building glass breakage B.) Sprinkler leakage C.) Vandalism D.) All of the above

(D) All of the above Reason: Statement of fact.

Ordinance or law coverage provides protection for which of the following losses? A.) The residual property value of a home that must be demolished to comply with building code requirements B.) The cost of demolition and debris removal of undamaged property C.) The increased expense incurred for the insurer to repair or rebuild property according to building code specifications. D.) All of the above are covered

(D) All of the above are covered Reason: Statement of fact.

A representation in an insurance contract qualifies as which of the following? A.) An amendment B.) An express warranty C.) A policy Provision D.) An implied warranty

(D) An implied warranty Reason: Once the contract is agreed, material statements made by the applicant in the application can be assumed to be warranties (i.e., guaranteed to be true). Therefore, representations made prior to agreement are considered to be implied warranties.

An open peril policy protects against the loss from: A.) Perils found outside in the open B.) Only the perils openly named in the policy C.) Mainly, perils of the sea D.) Any peril, other than those specifically excluded

(D) Any peril, other than those specifically excluded Reason: This is the definition.

What additional coverages are available under the scheduled personal property endorsement that is not available under an unendorsed Homeowners Policy? A.) Vandalism to artwork B.) Theft C.) Damage to a camera in an auto accident D.) Breakage of glassware caused by an earthquake

(D) Breakage of glassware caused by an earthquake Reason: Earthquake is excluded on all HO forms. The scheduled personal property endorsement includes coverage for breakage of glassware for earthquake under Section C.b.3.

Which property coverage form is best suited for a structure under construction? A.) Standard Property policy B.) Reporting form C.) Building and Personal Property coverage form D.) Builders Risk coverage form

(D) Builders Risk coverage form Reason: Statement of fact.

Which of the following perils is insured against in the Special form but not in the Basic form? A.) Fire B.) Lightning C.) Internal explosion D.) Collapse

(D) Collapse Reason: Collapse is an additional coverage that is provided in a DP3, and is not included in a DP1.

A person with a commercial policy is burning leaves. The fire gets out of control causing smoke damage to a neighboring property. The loss is covered by: A.) Pollution liability B.) Not covered as it is not a direct loss C.) Building and Personal Property form D.) Commercial General liability

(D) Commercial General liability Reason: A CGL policy covers for general commercial liability including fire damage. Pollution is an exclusion in this policy and refers to seepage of noxious substances, not smoke from a hostile fire.

A bulldozer an insured is using to level a property for a customer overturns causing fuel to leak and pollute the ground. Where would this pollution loss be covered? A.) Inland marine B.) Professional liability C.) Auto liability D.) Commercial general liability

(D) Commercial general liability Reason: Normally, CGL policies exclude losses caused by such things as pollution liability, but this is an exception to the rule.

Which type of a crime policy will pay for a loss, which is found during the policy period, even if the loss occurred prior to the effective date of the policy? A.) Occurrence B.) Claims made C.) Loss sustained D.) Discovery

(D) Discovery Reason: The definition of Discovery Form states it "covers losses that are sustained at any time (including acts that occurred before the inception date of the current policy) and discovered either during the policy period or up to 60 days after the policy expires."

Grace has a Homeowners Policy that includes Section I coverage A, B and C. A, B and C provide coverage for: A.) Dwelling, additional living expenses and loss of use B.) Dwelling, personal property and loss of use C.) Medical payments, personal liability, and damage to property of others D.) Dwelling, other structures, and personal property

(D) Dwelling, other structures, and personal property Reason: Statement of fact.

Where would an insured who 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.) Alien Insurer D.) Excess and surplus lines insurer

(D) Excess and surplus lines insurer Reason: Imports and exports are a type of risk a surplus lines broker would handle.

Under a special cause of loss form, if a landslide is caused by an unnatural flow of water due to improper grading, the loss is: A.) Excluded under the governmental action exculsion B.) Covered; there are no exclusions for this type of loss C.) Excluded under the utility service exclusion D.) Excluded under the concurrent causation exclusion

(D) Excluded under the concurrent causation exclusion Reason: Concurrent means that there was more than one cause for the loss.

Which of the following perils is included in the broad form, but not in the basic form. A.) Volcanic Action B.) Sprinkler leakage C.) Sink-hole collapse D.) Falling objects

(D) Falling objects Reason: Statement of fact.

Which of the following is NOT one of the three main types of loss? A.) Property loss B.) Human and Personnel loss C.) Liability Loss D.) Financial Loss

(D) Financial Loss Reasons: The other choices in this question are considered "types" of loss. However, financial loss is not a "type" of loss, but merely a result of not having insurance, or having insufficient insurance.

What must an insurer do who accepts an application from an agent who is not specifically appointed by that insurer, and then issues a policy from that application? A.) The agent must become an employee of the company within 30 days of receiving the application B.) Name the agent to the list of the company's approved agents C.) Send the agent an appointment approval notice within 30 days of policy issuance D.) Forward to the Commissioner a notice of appointment within 14 days of receipt of application

(D) Forward to the commissioner a notice of appointment within 14 days of receipt of application. Reason: Statement of fact.

All of the following types of businesses would need a special inland marine coverage for their stock, except: A.) Jewelers B.) Stamp and coin collectors C.) Furriers D.) Grocers

(D) Grocers Reason: The other businesses are bailees that have high - value stock and are, therefore, considered to be special risk cases with specialized forms.

The ordinance and law exclusion/limitation found in property policies such as the commercial property coverage, and in the Homeowners Policy have the following effect: A.) It warrants that an insured has not knowingly violated an ordinance or law B.) The insured may not remove or modify the effect of the exclusion C.) It reduces the coverage on any loss if the loss was caused by the insured violating the ordinance or law. D.) It excludes that part of the loss resulting from the enforcement of a building ordinance or law

(D) It excludes that part of the loss resulting from the enforcement of a building ordinance or law. Reason: The insurer does not want to pay for changes in the building codes when settling on a claim.

Which of the following types of loss would result in a claim for monetary damages due to injury to another or damage to another's property? A.) Real property loss B.) Personal property loss C.) Physical loss D.) Liability loss

(D) Liability Loss Reason: This statement provides a definition of liability.

The watercraft endorsement on a Homeowners Policy extends coverage for: A.) Physical damage and liability coverage for all owned watercraft B.) Liability coverage for all owned watercraft C.) Physical damage and liability coverage for watercraft listed on the schedule D.) Liability coverage for watercraft listed on the schedule

(D) Liability coverage for watercraft listed on the schedule Reason: This endorsement also provides medical coverage for damages resulting from the operation of motor boats too large to qualify for insurance under homeowners policies.

Th amount paid for property damage which is equal to the price for which it could have been sold is its: A.) Actual Cash Value B.) Replacement Amount C.) Stated amount D.) Market Value

(D) Market Value Reason: The market value is what a willing buyer and seller agree upon, i.e., sales price.

The state law that regulates insurer practices regarding underwriting, sales, rate-making, and claims handling are called: A.) Insurer Policing B.) Ethical standards surveillance C.) Standard regulation D.) Market conduct regulation

(D) Market conduct regulation Reason: The Market Conduct Bureau conducts examinations of California licensed insurer's claims-handling practices.

All of the following are principal rating factors under Proposition 103 for personal auto policies, except: A.) Years of driving experience B.) Annual miles driven C.) Driver's safety record D.) Number of listed drivers

(D) Number of listed drivers Reason: Statement of fact.

A commercial Building and Personal Property coverage form covers three kinds of property, one which has "your business personal property." "Your" refers to: A.) Only the first named insured shown in the declarations B.) Any party who has an insurable interest in the property located at the insured address C.) The named insured and others whose property is in the care, custody or control of the insured D.) Only the named insured(s) shown in the declarations

(D) Only the named insured(s) shown in the declarations Reason: Throughout the policy, the words "you" and "your" refer to the named insured in the declarations.

The adult day care coverage level of a LTC policy provides for: A.) Part-time home health care for the frail and elderly. B.) Full-time nursing at home for a convalescing (convalesce means: operation healing a period of time) elder. C.) Full- time nursing care for elders living in assisted living centers. D.) Part-time nursing at a facility for the elderly who live at home.

(D) Part-time nursing at a facility for the elderly who live at home. Reason: Statement of fact.

If an insured signs a claim form for a claim which is fraudulent, the insured may be guilty of: A.) Nothing, if the claim is never paid B.) Obstruction of justice C.) Misrepresentation D.) Perjury

(D) Perjury Reason: Perjury means lying under oath.

An Umbrella Policy: A.) Provides coverage for outdoor fairs and exhibitions in case of bad weather B.) Provides excess physical damage coverage C.) Provides broad primary coverage for most personal or commercial loss exposures D.) Provides broad excess liability coverage over one or more primary policies

(D) Provides broad excess liability coverage over one or more primary policies Reason: Statement of fact.

Which of the following losses is not covered by either the Personal Auto Policy collision or other than collision coverage? A.) Sean's car is severely damaged by a storm when a sign is blown off the roof of a building and hits his car B.) Sean's car is washed away during a flood C.) Sean's car is stolen when he leaves the keys in the ignition, and the doors and windows are unlocked while he runs into the grocery store. D.) Sean leaves his personal (non-business) laptop computer in his car overnight. His car is parked in the driveway in front of his house. The computer is stolen from his car.

(D) Sean leaves his personal (non-business) laptop computer in his car overnight. His car is parked in the driveway in front of his house. The computer is stolen from his car. Reason: This would be covered as a homeowner's loss.

What does it mean if an agent's license is inactive? A.) The agent can transact insurance business if it is done with another agents approval. B.) The agent can transact any insurance business for which the agent is licensed. C.) The agent can still transact insurance business in CA, but not in any other state until it is reactivated. D.) The agent cannot transact any insurance business for which a valid, active license is required.

(D) The agent cannot transact any insurance business for which a valid, active license is required. Reason: An inactive license does not permit its holder to transact any insurance for which an active license is required.

What is the primary medical payments coverage difference between a Boatowners Policy and a HO3 policy? A.) There is no difference B.) The HO3 excludes losses and that the boat owner's covers losses while the boat is on the water. C.) The HO3 has a lower limit of liability D.) The boat owners covers injuries to the insureds, and the HO3 covers injuries to others

(D) The boat owners covers injuries to the insureds, and the HO3 covers injuries to others Reason: Statement of fact.

If an insured rents an auto while on vacation, what coverage, if any, will be available for physical damage coverage under a Personal Auto Policy? A.) The least coverage on any auto shown on the declarations B.) No coverage available C.) The coverage of the last auto shown in the declarations D.) The broadest coverage on any auto shown in the declarations

(D) The broadest Coverage on any auto shown in the declarations Reason: As long as the physical damage is included in the insured's PAP, it is available for the rental car.

Which of the 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 C.) Commercial risks are not eligible for CAARP D.) The minimum liability for CAARP policies are $15,000/$30,000/$5,000

(D) The minimum liability for CAARP policies are $15,000/$30,000/$5,000 Reason: CAARP (California Automobile Assigned Risk Plan) minimums are the same as the standard state minimums.

Which of the following persons is not an insured under Section 1 of a Homeowners Policy? A.) The named insured B.) The named insured's (resident) spouse C.) The named insured's (resident) 25 year old nephew D.) The named insured's (non-resident) spouse

(D) The named insured's (non-resident) spouse Reason: Residence is an important factor.

If an insured borrows a neighbor's vehicle to run a personal errand, how do the policies respond in the event of an auto accident? A.) Both policies respond on a pro-rata basis B.) Only the neighbor's policy provides coverage; there is no coverage by the driver's policy C.) The driver's policy is primary and the neighbor's policy is excess D.) The neighbor's policy is primary and the driver's policy is excess

(D) The neighbor's Policy is primary and the driver's policy is excess Reason: For any auto, the PAP provides liability, uninsured motorists, and medical payments coverages on an excess basis.

What is one reason a person may purchase a Dwelling Policy instead of a Homeowners Policy? A.) The dwelling form provides greater flexibility in selecting coverage B.) The dwelling is occupied by two families C.) The dwelling form provides broader coverages D.) The owner does not reside in the dwelling

(D) The owner does not reside in the dwelling Reason: Dwelling forms are frequently used by non-resident owners.

Under the liability portion of an unendorsed Personal Auto Policy, what coverage is available if the named insured is operating a company car on a regular basis? A.) The coverage of the vehicle primarily operated by the named insured B.) The financial responsibility coverage limitations C.) The broadest coverage of any of the autos listed in the declarations D.) The policy excludes this usage

(D) The policy excludes this usage Reason: Liability coverage exclusions include vehicles owned by others that are furnished or available for the insured's regular use.

The commercial property conditions include a condition called "Liberalization." The effect of this condition is: A.) To protect the insured from policy cancellation once the policy has been in effect for 90 days B.) To require the insurer to liberally construe the other commercial property conditions in case of disagreement between the insurer and the insured C.) Allow the insurer to set property values based upon current data as long as it does not reduce the loss payment D.) To automatically apply broader coverage to the commercial property coverage part if a policy form revision would broaden coverage without an additional premium

(D) To automatically apply broader coverage to the commercial property coverage part if a policy form revision would broaden coverage without an additional premium Reason: This is the definition.