State Practice Test
When may a representation be altered or withdrawn? a. Before the insurance is effected. b. After the insurance is effected. c. At the time of contract renewal d After a contract has been interpreted
a. Before the insurance is effected.
How long after the expiration date may a licensee who has met all the requirements to renew a license be allowed to operate under the existing license: a. One year b. Sixty days c. Two weeks d. Three months
b. Sixty days
which is considered nonpublic personal information as defined by the California Financial Code? a. property taxes b. tax return c. residence address d. telephone number
b. tax return
Which of the following shall every property broker-agent and casualty broker-agent disclose prior to arranging premium financing for the purchase of a policy a. financing options available b. the broker-agent's financial status c. prices from three different financing companies d. the length of time the agent has been licensed to sell
b. the broker-agent's financial status
Which of the following is TRUE regarding a concurrent cause involving perils both covered and non covered? a. Both perils are covered b. both policies pay in equal amounts c. only the peril specified in the policy is covered d. A concurrent cause invalidates the coverage; neither peril is covered
c. only the peril specified in the policy is covered
Which of the following is an insurer allowed to do in the event of a claim? a. request or require an insured to submit to a polygraph examination when the claimant has a criminal record b. discriminate based upon the claimant's territory of the property insured c. request a medical examination for the purpose of determining liability under a policy provision d. attempt to settle a claim by a making a settlement offer that is unreasonably low
c. request a medical examination for the purpose of determining liability under a policy provision
The following are all penalties for unlawfully acting as an insurer without a certificate of authority EXCEPT: a. the individual will be fined with a charge for a misdemeanor b. the individual may be charged a fine not to exceed $50,000 c. the individual will be banned from practicing insurance for a period of 5 years d. the individual may be sentenced to county jail for a period not to exceed one year
c. the individual will be banned from practicing insurance for a period of 5 years
A "personal lines" agent or broker is allowed to transact what type of insurance coverage? a. Airplane and aviation b. commercial automotive c. Corporate real estate liability d. noncommercial automobile and residential property
d. noncommercial automobile and residential property
All of the following are examples of open policies EXCEPT: a. market value b. agreed value c. actual cash value (ACV) d. replacement value
b. agreed value
What is the required rate discount under a Good Driver Discount Policy: a. 20% below the rate the insured would have been otherwise charged for the same coverage b. 10% below the rate the insured would have been otherwise charged for the same coverage. c. 20% below the insurer's average premium rate d. 10 % below the insurer's average premium rate
c. 20% below the insurer's average premium rate
All of the following include the way the agency name must be worded and show the relationship between the corporation and agent EXCEPT: a. "representing" (name of company). b. "owned and operated by" (name of company) c. "a stockholder of" (name of company) d "placing business through" (name of Company)
b. "owned and operated by" (name of company)
Who is legally capable to estimate the replacement value of a structure and discuss homeowners policy coverage levels? a. An agent or broker b. An appraiser or architect c. an insurer underwriter or actuary d. A member of the insurance committee
c. an insurer underwriter or actuary
When can a rate be denied by the department? a. when it is inadequate and excessive b. when the rate is 50% higher than the average rate for that line of coverage c. when the insurer has a repeated history of rate increases d. When the insurer has not fully documented the reason for the rate increase
a. when it is inadequate and excessive
How many days prior to policy expiration is an insurer required to mail a nonrenewal notice to the name insured? a. 20 days b. 30 days c. 45 days d. 60 days
b. 30 days
All of the following are designated as private passenger vehicles EXCEPT a. a six wheel recreational vehicle b. a privately owned limousine used exclusively by the owner c. a four wheel vehicle used as a taxi by an individual and not a company d. a personally owned four wheel station wagon used to deliver groceries as a volunteer
c. a four wheel vehicle used as a taxi by an individual and not a company
in conducting the business and affairs of the state compensation insurance fund, the president of the fund may do any of the following EXCEPT: a. enter into contracts of workers' compensation insurance b. sell annuities covering compensation benefits c. sell life insurance covering compensation benefits d. reinsurance any risk or any part thereof
c. sell life insurance covering compensation benefits
All of the following are PRINCIPAL rating factors in determining automobile insurance premiums EXCEPT: a. the insured's driving safety record b the number of miles driven annually c. the zip code where the vehicle is housed d. the years of driving experience the insured has
c. the zip code where the vehicle is housed
what 2 different types of areas are served by the California Fair Access to Insurance Responsibilities plan? a. Poor and alien b. Earthquake prone and rural c. War zones and high crime d. Brush fire risk and inner city
d. Brush fire risk and inner city
Except in a case where the property is being held as a carrier or depository, what is the insurable interest is measured by? a. the size of the premium b. fair market value of the property c. the contingent or expectant value to the insured d. the extent to which the insured would be damnified by loss or injury to the property
d. the extent to which the insured would be damnified by loss or injury to the property
All of the following are duties of a Managing General Agent EXCEPT: a. delivering policies to the insured b. accepting or declining risk of applicants c appointing, supervising and terminating agents within the territory d. Collecting premiums from brokers and agents and remitting them to the insurer.
a. delivering policies to the insured
which type of coverage protects against loss caused by earth movement? a. Federal Emergency management Agency provides all homeowners with this type of protection b. a stand alone earthquake insurance policy specifically insuring against loss caused by land subsidence c. a natural disaster insurance encompassing all types of natural disasters covering earthquakes, floods, tornados, ect. d. all homeowners insurance policies include specified sections of earthquake coverage
b. a stand alone earthquake insurance policy specifically insuring against loss caused by land subsidence
which of the following is TRUE regarding who qualifies for coverage under the California Fair Access to Insurance Requirements plan? a. An person who is unable to obtain basic property insurance through normal channels b. any person who qualifies will receive superior coverage to other forms of property insurance c. Any person who dies NOT have an insurable interest in a property can participate in the FAIR Plan d. Any person who qualifies will have the inspection automatically waived if they are a FAIR plan participant
a. An person who is unable to obtain basic property insurance through normal channels
Which of the following is TRUE regarding continuing education requirements of an agent or broker? a. Any licensee shall satisfactorily complete 24 hours of instruction prior to license renewal b. Any licensee in good standing for 10 years may apply for exemption to the continuing education requirement if reputation has been proven c. An agent or broker licensed in life and health requires more continuing education hours than an agent or broker licensed in property and casualty d. A licensee who is 65 years or older shall be exempt from continuing education hours if reputation of agent or broker is in good standing for 25 years
a. Any licensee shall satisfactorily complete 24 hours of instruction prior to license renewal
Which of the following can the insurer do if the insured intentionally conceals or misrepresents a material fact concerning any coverage part? a. Rescind the contract b. charge a penalty fee c. modify coverage d. sue the insured
a. Rescind the contract
When shall a life agent, a property broker-agent or a casualty broker-agent provide to all insured's or applicants the effective date of coverage? a. at the time of application or receipt of premium moneys b. at the time that the insurance company approves the application c. at the time the insurance company verifies receipt of the application d. at the time that the insurance company issues the policy
a. at the time of application or receipt of premium moneys
if fiduciary funds are received by any licensee, the funds shall be maintained in any of the following EXCEPT: a. bonds issued in all 50 states of the US b. US government bonds and treasury certificates c. certificates of deposit of banks or savings and loan associations licensed by any state d. repurchase agreements collateralized by securities issued by the US government.
a. bonds issued in all 50 states of the US
When may a surplus line broker solicit and place insurance for a home state insured with a nonadmitted insurer? a. if the same insurance coverage cannot be procured from an admitted insurer b. if the nonadmitted insurer is a domestic rather than an alien or foreign company c. only when the nonadmitted insurer signs an agreement to become an admitted insurer d. only when the proposed insured petitions for the right to be offered the coverage by the broker
a. if the same insurance coverage cannot be procured from an admitted insurer
All of the following are taken into consideration for California Automobile Assigned Risk Program eligibility for applicants EXCEPT a. the education of the applicant b. the driving record of the applicant c. the mental and physical health of the applicant d. any criminal history or convictions of the applicant
a. the education of the applicant
to which person or organization does a public insurance adjuster promote and represent? a. the insured b. the insurance company c. the insurance commissioner d. the insurance agent
a. the insured
The managing general agent negotiates and binds ceding insurance on behalf of whom? a. the insurer b. their own behalf c. the individual applying for reinsurance d. the ceding Insurance committee with their authority
a. the insurer
All of the following are requirements for determining an area that qualifies for low cost Automobile Insurance EXCEPT: a. the number of automobile accidents that occur within the country b. the number or percentage of low income people within the county. c. the number or percentage of uninsured motorists within the country d. the availability of affordable insurance through private insurers within the country
a. the number of automobile accidents that occur within the country
Unless otherwise specified in the insurance contract, all of the following are TRUE regarding return of premium EXCEPT: a. the premium is forfeited if the policy is rescinded or rejected b. the premium is refunded if a policy is rescinded or rejected c. the whole premium is returned if the insurer has not been exposed to loss d. any cancellation fees must be disclosed in writing within 5 days of the request to cancel
a. the premium is forfeited if the policy is rescinded or rejected
which type of protection can a casualty licensee offer in addition to protecting against loss or damage of property? a. they can provide coverage to protect against legal liability b. they can provide life insurance to protect against casualties c. they can provide coverage in the event of unexpected unemployment d. they can provide extra coverage against direct or major damage to property
a. they can provide coverage to protect against legal liability
Which of the following describes a contract of reinsurance: a. Protection is purchased to insure against an insurance company's stated insolvency. b. A first insurer issues insurance to compensate another insurer for losses on contracts issued by that second insurer. c. A contract provides an additional coverage amount to the insured in the event of a major catastrophic event. d. A contract is obtained by an insurer to cover unexpected fluctuations in their expressed loss ratio
b. A first insurer issues insurance to compensate another insurer for losses on contracts issued by that second insurer.
Which is TRUE regarding a "valued" policy? a. A market value policy is an example of a valued policy b. A valued policy specifies the coverage amount of the policy c. A valued policy is the only type of policy that builds a cash value. d. A valued policy generally costs more than replacement value because it has a specific amount
b. A valued policy specifies the coverage amount of the policy
Which of the following is the method wherein a contract of insurance is finalized as relates to the sales process? a. Negotiations as result of execution of a contract b. Execution of a contract of insurance c. preparation of a contract d. settlement of contract warranties
b. Execution of a contract of insurance
Which is TRUE regarding expectant or contingent interest? a Expectant or contingent interest constitutes insurable interest b. Expectant or contingent interest does NOT constitute insurable interest c. Expectant interest or contingent interest qualifies for insurable interest with a waiver d. Both are considered insurable interest, but for only 50% of the value
b. Expectant or contingent interest does NOT constitute insurable interest
Which would permit an insurer to escape insolvency? a. demonstration of paid-in capital required in the aggregate in excess of the minimum. b. Possession of assets equal to the total paid-in capital after all liabilities and reinsurance c. ability of the insurer to meet its financial obligations when they are due d. ability of the insurer to fully reinsure all outstanding risks
b. Possession of assets equal to the total paid-in capital after all liabilities and reinsurance
Concealment, whether intentional or unintentional, entitles the injured party to? a. Modify insurance b. Rescind insurance c. Supplemental benefits d. Reduce cost Insurance
b. Rescind insurance
When examination of an insurer shows the insurer to be insolvent and a danger to the public, which authority is granted to the commissioner by the CIC? a. The commissioner must make application to the Superior Court and obtain a court order. b. The commissioner may take possession of offices, books and property immediately without court order. c. the Superior court shall authorize a receiver at the request of the commissioner without delay d. the commissioner shall file a petition with the US Secretary of the Treasury for appointment of a receiver.
b. The commissioner may take possession of offices, books and property immediately without court order.
which of the following is TRUE regarding nonadmitted insurers? a. a felony is committed by the agent in the state of a nonadmitted insurer b. acting as an agent for a nonadmitted insurer is considered a misdemeanor. c. the agent shall pay $1,000 in addition to any fees involving the commission of a felony d. specific penalties shall be determined by the insurance commissioner on a case by case basis
b. acting as an agent for a nonadmitted insurer is considered a misdemeanor.
All of the following are authorized activities for the limited lines automobile insurance agent EXCEPT if the agent a. provides all necessary disclosures b. charges and collects a broker's fee for service c. transacts insurance on behalf of the consumer d. sells automobile property and liability policies
b. charges and collects a broker's fee for service
Which is NOT a duty of the workers Compensation Bureau? a. inspect risks for classification or rating purposes. b. determine which claims are approved and which are denied c. provide reliable statistics and rating information used to help establish premiums d. Examine policies and other evidences of insurance to check for compliance with the law
b. determine which claims are approved and which are denied
When should an insurer provide for the continuous operation of a unit or division to investigate possible fraudulent claims? a. at the time the potentially fraudulent claim occurs b. if admitted to do business in this state, except those otherwise exempted c. After the insurer has received notice from the state to set up such a unit d. if admitted to do business in any state, when the claim occurs in this state
b. if admitted to do business in this state, except those otherwise exempted
Which of the following provisions of free insurance offered as an incentive to purchase or rent property is TRUE? a. It is permitted with no charge b. it requires a separate charge or fee c. if offered as a guarantee of the performance of goods, it is prohibited d. if issued by credit unions or with newspaper subscriptions, it is limited under statute 777.2.
b. it requires a separate charge or fee
while both work with an insurer, how does an "insurance broker" differ from an "insurance agent"? a. the broker gets paid by commission, but the agent does not b. the broker does not transact on behalf of an insurer while the agent does c. the broker has to b licensed but the agent meets less stringent requirements d. the broker is unable to provide the same competitive prices that an agent provides
b. the broker does not transact on behalf of an insurer while the agent does
What is the maximum coverage allowed through the California Automobile Assigned Risk Program for bodily injury and death? a. the maximum coverage is limited to value of the insured's vehicle b. the maximum coverage per accident is limited to $30,000 of all persons as a result of any one accident c. it is unlawful to set a maximum limit, because there could be a large number of people involved d. the maximum coverage is $5,000 per person, regardless of the number of people involved in an accident
b. the maximum coverage per accident is limited to $30,000 of all persons as a result of any one accident
According to CIC Section 1711, an organization ceases to exist as an entity eligible to hold a license EXCEPT: a. upon dissolution of a corporation b. upon the termination of all contracts c. upon dissolution of a copartnership d. upon the termination of an association
b. upon the termination of all contracts
which circumstances in a pretext interview determine if the questions are permissible? a. when an insured is questioned prior to the application to determine the best recommendations for coverage b. when an insured is consulted by a person who hides his true identity on purpose when fraud for a claim is suspected. c. when questions are asked to help underwriting decide on coverage for the insured when health problems are suspected. d. when questions are posed by a person who refuses to identify himself or his relation to the company prior to a policy being underwritten
b. when an insured is consulted by a person who hides his true identity on purpose when fraud for a claim is suspected.
An application for a rate change is regarded as being approved sixty days after public notice under all of the following conditions EXCEPT: a. when the commissioner on his or her own motion determines to hold a hearing b. when the department's consumer ombudsman finds the rate increase to be unreasonable c. the proposed rate adjustment exceeds 7% of the hen applicable rate for personal lines or 15% for commercial lines d. when a consumer or a representative requests a hearing within forty-five days of public notice and the commissioner grants or does not grant the hearing
b. when the department's consumer ombudsman finds the rate increase to be unreasonable
What is the maximum fine for a person who transacts insurance without a valid license? a. $10,000 and/or probation for 1 year b. $25,000 and/or imprisonment for a period not exceeding 6 months c. $50,000 and/or imprisonment for a period not exceeding one year d. $100,000 and/or imprisonment for a period not exceeding three years
c. $50,000 and/or imprisonment for a period not exceeding one year
When can a person who sells real property require the use of a specific insurance agent, broker or solicitor? a. as a condition percent to the sale of such real property b. when a buyer's credit score is below the lender's threshold c. A buyer is always able to choose their own insurance representative d. when it is required by local municipal regulation
c. A buyer is always able to choose their own insurance representative
What document must be provided to the insured prior to any residential insurance policy being issued or renewed? a. A cost analysis of the insurance industry b. A statement from the better Business Bureau c. A copy of the California Residential Property disclosure statement d. At least three quotes by competitors for the same coverage offered by the insurer
c. A copy of the California Residential Property disclosure statement
when should an agent provide an applicant the effective date of coverage, if known, or the circumstances under which coverage will be effective? a. when a proposal is presented b. at the time underwriting has been completed c. at the time of application or receipt of premium d. when applicant has verbally committed to applying for coverage
c. at the time of application or receipt of premium
Which of the following must be prominently displayed so that it can be readily inspected on the license? a. accuracy b. safety and security c. currency and capacity d. years of service and age of licensee
c. currency and capacity
All of the following are a duty of an insurer in regards to claims on file and record documentation EXCEPT: a. maintaining claim data so that an insurer shall be able to provide the claim number, line of coverage, and other pertinent data b. recording the date the licensee received, date(s) the licensee processed and date the licensee transmitted or mailed every material and relevant document in the file c. maintaining any sales material which had a material impact on the claims process d. maintaining claim files that are accessible, legible, and claim of duplication
c. maintaining any sales material which had a material impact on the claims process
Who is able to place business through the California Automobile Assessed Risk Program? a. any agent licensed in property and casualty insurance b. only insurers with operating headquarters based in California c. only agent/brokers licensed in fire and casualty who have also been certified through CAARP. d. any agent who has been licensed in the State of California for a minimum of 5 years and is certified by CAARP
c. only agent/brokers licensed in fire and casualty who have also been certified through CAARP.
Which of the following modification can be made under a standard fire policy? a. the insured can sign a waiver accepting lesser coverage. b. the insurance commissioner can approve the variance in coverage c. the coverage can substantially be equal to or more favorable to the insured d. the insurer can offer the proposed insured lesser coverage, for a lower premium rate
c. the coverage can substantially be equal to or more favorable to the insured
What is the coverage limit offered by the California Earthquake Authority for condominiums? a. there is no limit b. the coverage is equal to the fair market value c. the coverage is limited to $25,000 if the value is $135,000 or less, and $50,000 if the value is over $135,000 d. the total limit for coverage is $500,000 the same as any other type of residential property protected by the California Earthquake Authority
c. the coverage is limited to $25,000 if the value is $135,000 or less, and $50,000 if the value is over $135,000
All of the following are reasons earthquake policy deductibles are MORE FAVORABLE than commonly used property deductibles EXCEPT a. the personal property deductible is waived one the dwelling deductible is met. b. only the earthquake policy will cover for damages due to an earthquake once the deductible is met c. the earthquake deductible is often 10 to 15 percent higher than for other types of property coverage d. no deductible is required for eligibility to be triggered if the earthquake policy claim exceeds the deductible by 100%
c. the earthquake deductible is often 10 to 15 percent higher than for other types of property coverage
All of the following are examples of misrepresentations that may not be made by an insure, officer or agent thereof or an insurance broker or solicitor EXCEPT: a. the terms of a policy issued b. the future dividends payable c. the specific contract language d. the benefits or privileges promised
c. the specific contract language
How many classes of insurance are defined under California Insurance Law, including "miscellaneous" and "reserved"? a. there is just 1 class of insurance defined under California Law, with may sub-classes b. there are 5 classes of insurance as defined by California Insurance Law c. there are a total of 20 classes of insurance defined under California Insurance Law, with sub classes d. there are 42 classes of insurance defined under california
c. there are a total of 20 classes of insurance defined under California Insurance Law, with sub classes
Which is an INACCURATE statement regarding the non-standard coverage provide by surplus line brokers? a. they must prove that 3 domestic insurers have declined the risk b. they must show that a thorough search has been made to provide coverage with an admitted insurer c. they must provide notice to the commissioner within 14 days of providing non-standard coverage for a home state insured d. they must not place with a non admitted insurer coverage just to procure a rate lower than that provided by the lowest admitted insurer
c. they must provide notice to the commissioner within 14 days of providing non-standard coverage for a home state insured
What is the primary function of the California Automotive Assigned Risk Plan (CAARP)? a. to serve ass an insurer to provide automobile coverage for low income people b. to monitor the rates of automobile insurers to make sure the prices remain competitive c. to put people who have trouble obtaining insurance in touch with insurers who at be required by law to insure them d. to provide training for agents, and to determine which agents and automobile insurers are able to place business through the program
c. to put people who have trouble obtaining insurance in touch with insurers who at be required by law to insure them
At which point is a person licensed as a broker-agent deemed to be acting as an insurance agent? a. when they pass their licensing test b. when they write their first insurance application c.when a notice of appointment is filed with the insurance commissioner d. when they have completed 12 hours of training, and have been licensed at least one year
c. when a notice of appointment is filed with the insurance commissioner
What criteria must a person meet in order to be qualified to purchase a Good Driver Discount Policy? a. Being licensed to drive a motor vehicle for the previous 5 years and has not had more than one violation point count as determined by the CIC. b. Being licensed to drive a motor vehicle for the previous 3 years and has not had more than two violation point count as determined by the CIC. c. Being licensed to drive a motor vehicle for the previous 3 years and able to meet the standards of an insurer's applicable Good Driver Program. d. Being licensed to drive a motor vehicle for the previous 3 years and has not had more than one violation point count as determined by the CIC
d. Being licensed to drive a motor vehicle for the previous 3 years and has not had more than one violation point count as determined by the CIC
Which is an ACCURATE statement regarding the List of Approved Surplus Lines Insurers? a. Participation in LASLI is mandatory and all approved non admitted insurers are on the list. b. Surplus lines insurers that are not on the list are unapproved for broker use c. the same rules apply for US domiciled and non US domiciled carriers d. Eligible carriers do not need to file documents with the California Department of Insurance
d. Eligible carriers do not need to file documents with the California Department of Insurance
According to the Administrative procedures Act, what is required to make changes to the California Insurance Code? a. the proposal must first pass through the house and senate before being put to a vote by the commission. b. the insurance commissioner must originate any changes and make most changes through executive order c. the governor acknowledges the need for the change before any proposed changes are put to vote by the commission d. The department of insurance is required to publish proposed changes at least 45 days prior to the hearing or decision to adopt the change
d. The department of insurance is required to publish proposed changes at least 45 days prior to the hearing or decision to adopt the change
How does an "open" policy differ from a "valued" policy? a. an open policy is able to protect against perils not specified in the policy b. a valued policy is designed to have a greater monetary value than an open policy c. the terms of an open policy are open to interpretation, while a valued policy is very precise. d. an open policy has a value to be determined, while a valued policy protects for a specific amount
d. an open policy has a value to be determined, while a valued policy protects for a specific amount
When is it possible for a commercial vehicle to be eligible for coverage under the California automobile assigned risk program? a. if the commercial vehicle is part of a large corporate fleet that moves products serving the under privileged b. when the commercial vehicle is used strictly for the transportation of those suffering fro a terminal illness c. when the commercial vehicle is licensed to operate in an area officially declared as either a disaster or poverty zone d. if it is a privately owned lightweight commercial vehicle used for local service or retail deliveries within a specific geographic area
d. if it is a privately owned lightweight commercial vehicle used for local service or retail deliveries within a specific geographic area
Insurance is which type of contract? a. An individual undertakes to provide protection against a known risk b. A company seeks to protect against the loss of profits from competition risk c. One seeks to reduce the risk of loss of investment in a business venture with new partners d. one agrees to indemnify against loss, damage or liability arising from a contingent or unknown risk
d. one agrees to indemnify against loss, damage or liability arising from a contingent or unknown risk
In order for an insurer to contract with the State Compensation Insurance Fund it must meet all of the following criteria EXCEPT: a. the insurer has a minimum surplus of on hundred million dollars ($1,000,000) b. the insurer has an A minus (A-) rating or better from AM Best c. the insurer has substantial prior experience in transacting worker's compensation business on another insurer's behalf. d. the insurer has met all ratio requirements for risk based capital (RBC)
d. the insurer has met all ratio requirements for risk based capital (RBC)
A policy shall specify all of the following EXCEPT: a. the property or life insured b. the parties between whom the contract is made c. the period during which the insurance is to continue d. the method in which the coverage amount was calculated
d. the method in which the coverage amount was calculated
No rate shall be approved or remain in effect for the following reasons EXCEPT: a. the rate is excessive b. the rate is unfairly discriminatory c. the rate is inadequate d. the rate is based on actuary principles
d. the rate is based on actuary principles
What is the purpose of the California Fair Access to Insurance Requirements programs? a. to provide superior coverage for California property owners b. to ensure comparable rates between insurance companies c. to manage taxpayer monies set aside to subsidize insurance for the poor d. to help property owners who are unable to obtain coverage through the private sector on their own
d. to help property owners who are unable to obtain coverage through the private sector on their own