P+C practice test cards
An application for a rate change is regarded as being approved sixty days after public notice under all of the following conditions EXCEPT
when the Department's consumer ombudsman finds the rate increase to be unreasonable.
When is a representation false?
when the facts fail to correspond with its assertions or stipulations
Misrepresentation
you lie about a material fact
If an insurer you represent terminates your appointment,
you may not continue to write new policies for existing clients with that insurer.
resident insurance license
you may only have a resident insurance license in one state. You may, however have as many as 49 non-resident licenses.
assignment provision
you may transfer the ownership of your property insurance policy to the new owner of the property.
What is the maximum fine for a person who transacts insurance without a valid license?
$50,000 and/or imprisonment for a period not exceeding one year.
expense ratio
% of annual premiums that paid out in expenses other than claims
4 elements of contract
1. Consideration 2. Offer 3. Acceptance 4. Legal Purpose and capacity (no signature necessary)
4 parts of a policy and what they contain:
1. Declarations: names of parties, location of property, policy limit, and premium. 2. Insuring Agreement: Specifies that coverage is provided in accordance with the terms of the policy in exchange for premium payment. 3. Conditions: apply to both parties, the insurer and insured. 4. Exclusions: specify the perils that are never covered, such as a flood, etc.
How does an "open" policy differ from a "valued" policy?
An open policy has a value to be determined, while a valued policy protects for a specific amount.
Which of the following is TRUE regarding continuing education requirements of an agent or broker?
Any licensee shall satisfactorily complete 24 hours of instruction prior to license renewal.
Who is eligible to be an insurer?
Any person, company, organization, or corporation that is capable of making a contract.
Insurance
Defined as transfer of risk
Who is authorized to adjust or pay claims in excess of an amount determined by the commissioner?
The Managing General Agent
What is the method used for placing business with the California Automobile Assigned Risk Program?
The percentage of CAARP policies required is equal to the percentage of regular insurance policies the insurer has issued within the State.
Which of the following may be insured against?
Wagering losses.
Endorsement
added to the P/C policy that modifies the terms of the policy. In life or health, endorsements are known as riders.
law of large numbers
the concept that states that the greater the number of similar exposures a company insures, the easier it will be to predict future claims.
All of the following are reasons earthquake policy deductibles are MORE FAVORABLE than commonly used property deductibles EXCEPT
the earthquake deductible is often 10 to 15 percent higher than for other types of property coverage.
All of the following are taken into consideration for California Automobile Assigned Risk Program eligibility for applicants EXCEPT
the education of the applicant.
All of the following are to be specified in an insurance policy EXCEPT
the financial rating of the insured.
Who must be able to inspect records of insurance transactions made available by agent-brokers at any time?
the insurance commissioner
To which person or organization does a public insurance adjuster promote and represent?
the insured
fraud
the intent to deceive
All of the following include the way the agency name must be worded and show the relationship between the corporation and agent EXCEPT
"owned and operated by" (name of company).
Which of the following describes a contract of reinsurance?
A first insurer issues insurance to compensate another insurer for losses on contracts issued by that second insurer.
Property and Casualty Guarantee Fund or Association
All property and casualty insurers selling insurance in this state except for surplus lines carriers must be members of the Property and Casualty Fund or Association.
Insurance Broker
Managing General Agent
Broaden
expand to encompass more people, ideas, or things.
perils
the cause of the loss
pure risk
the chance of loss with no chance of gain = insurable
speculative risk
the chance of loss with the chance of gain (gambling) - UNINSURABLE
pure risk
the chance of loss without the possibility for gain
All of the following apply to "Approval of Insurance Rates" EXCEPT
the commissioner shall notify the public of a rate change after it has been approved.
All of the following are TRUE regarding basic property insurance EXCEPT
the comprehensive plan covers both automobiles and risks associated with farming.
All of the following are requirements for determining an area that qualifies for Low Cost Automobile Insurance EXCEPT
the number of automobile accidents that occur within the county.
Unless otherwise specified in the insurance contract, all of the following are TRUE regarding return of premium EXCEPT
the premium is forfeited if the policy is cancelled.
When cancelling a P/C insurance policy for non-payment of premium, the insurer must give at least ___ days' advance notice
10 days advanced notice
What is the required rate discount under a Good Driver Discount policy?
20% below the rate the insured would have been otherwise charged for the same coverage.
Whether admitted or nonadmitted, how does a "foreign" insurer differ from an "alien" or "domestic" insurer?
A "foreign" insurer is organized under the laws of another state within the United States.
Surplus Lines Broker
A broker who is licensed to place coverage with nonadmitted insurers (insurers not licensed to do business in a given state). Surplus lines insurers can write coverage through a surplus lines broker if the broker is licensed in the state where coverage is being written.
When can a person who sells real property require the use of a specific insurance agent, broker or solicitor?
A buyer is always able to choose their own insurance representative.
Abandonment
A clause in a property insurance contract that, under certain circumstances, permits the property owner to abandon lost or damaged property and still claim a full settlement amount.
What document must be provided to the insured prior to any residential insurance policy being issued or renewed?
A copy of the California Residential Property disclosure statement.
Legal reserves
A measurement of the insurers ability to pay future claims
Arbitration
A provision found in liability policies that applies when the insurer and insured disagree about whether or not the insured is legally entitled to recover damages; or as to the amount of damages which are recoverable.
Which is TRUE regarding a "valued" policy?
A valued policy specifies the coverage amount of the policy.
Liability without fault or negligence
Absolute (strict) liability
Which of the following is TRUE regarding nonadmitted insurers?
Acting as an agent for a nonadmitted insurer is considered a misdemeanor
Special Provisions Endorsement
Added to policies to add provisions required by state law. All I.S.O. coverage forms are the same in all states, so you automatically add CA's Special Provisions Endorsement to the general form to account for laws specific to CA.
Who is eligible to submit applications under the California Fair Access to Insurance Requirements?
All insurers authorized to transact basic property insurance in California are able to participate.
The Law of Agency
An agent's responsibility to their principal or insurer
nonadmitted insurer
An insurance company not licensed to do business in a certain state or country. In U.S. jurisdictions, such insurers can nevertheless write coverage through an excess and surplus lines broker licensed in that jurisdiction.
Who is legally capable to estimate the replacement value of a structure and discuss homeowners policy coverage levels?
An insurer underwriter or actuary.
What criteria must a person meet in order to be qualified to purchase a Good Driver Discount policy?
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.
How can a licensee surrender any license for cancellation?
By submitting written notice or by delivering the license to the commissioner.
Doctrine of Reasonable Expectations
Client's assumption that coverage will apply
Which is NOT a duty of the Workers Compensation Bureau?
Determine which claims are approved and which are denied.
Bankruptcy
Does not invalidate a claim
Which is an ACCURATE statement regarding the List of Approved Surplus Lines Insurers?
Eligible carriers do not need to file documents with the California Department of Insurance.
Declaration page contains:
For car ins.: Your name & address Address of property Name of your car insurance provider Policy number Policy term Types of coverage you have elected Limit for each coverage Cost for each coverage Specified vehicles covered by the policy and information describing those vehicles
Prerequisite to an enforceable insurance contract
Having an Insurable Interest
short rate
If the insured decides to cancel their own policy early, they would get a refund calcualated at a short rate percentage. The insurer charges a penalty of a certain percentage for their extra work.
Casualty Insurance
Includes coverages that are not properly classified in other types of classes.
ISO
Insurance Services Office
Which statement describes the intent of the California Financial Information Privacy Act?
It provides greater privacy protections than those provided in the federal Gramm-Leach-Bliley Act.
Which of the following provisions of free insurance offered as an incentive to purchase or rent property is TRUE?
It requires a separate charge or fee.
MGA
Managing General Agent
Reciprocal Insurer
Not actually corporations. They sell only P/C and are managed by an Attorney in Fact, which is another name for the Chief Executive Officer (CEO). The subscribers are actually insuring each other.
Which of the following is TRUE regarding a concurrent cause involving perils both covered and non covered?
Only the peril specified in the policy is covered.
What is the procedure for refusing uninsured motorist coverage in a liability policy?
Prior to issuance or renewal, the insured may state in writing that they do not want the coverage.
Purpose of Federal Fair Credit Reporting Act
Protect consumer privacy
Concealment, whether intentional or unintentional, entitles the injured party to?
Rescind insurance.
Lloyds Organization
Sell surplus lines of insurance such as ocean, marine, and aviation insurance. Lloyds organizations do not need a Certificate of Authority from the commissioner, and are considered to be "unauthorized" insurers. Do not have to file their rates or policy forms with the state, but must transact all business through their Surplus Lines Broker, who must have a special license and be bonded.
Liberalization
The "liberalization" clause or condition offers a policyholder (without additional premium) enhanced benefits that are adopted by the insurer under a new edition of identical insurance.
What is the coverage limit offered by the California Earthquake Authority for condominiums?
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.
Except in a case where the property is being held as a carrier or depository, what is the insurable interest is measured by?
The extent to which the insured would be damnified by loss or injury to the property.
Concealment
The failure to disclose a material fact that is important to the underwriter.
Which of the following is TRUE regarding the application and renewal of the limited lines automobile insurance agent license?
The fees and process are the same as for a personal lines licensee.
Who is responsible for notifying the public of a proposed rate increase?
The insurance commissioner.
The Managing General Agent negotiates and binds ceding insurance on behalf of whom?
The insurer
What does concealment, whether intentional or unintentional, entitle the injured party to?
The insurer may rescind the contract on the basis of misrepresentation, concealment, or fraud by the insured.
Apparent Authority
The legal doctrine that states that an agent has whatever authority a reasonable person would expect them to have.
Aleatory contact
The outcome depends upon chance
Materiality is to be solely determined by which of the following?
The probable and reasonable influence of the facts upon the party to whom the communication is due.
Which type of protection can a casualty licensee offer in addition to protecting against loss or damage of property?
They can provide coverage to protect against legal liability.
Which of the following may an insurer do in an automobile claim?
They can recommend that an automobile be repaired at a specific repair shop unless other requirements have been met.
Which is an INACCURATE statement regarding the non-standard coverage provide by surplus line brokers?
They must provide notice to the commissioner within 14 days of providing non-standard coverage for a home state insured.
What is a solicitor employed to do for a policy other than life?
To aid a property and casualty agent or broker in transacting insurance.
Which circumstances in a pretext interview determine if the questions are permissible?
When an insured is consulted by a person who hides his true identity on purpose when fraud for a claim is suspected.
Subrogation
You give your insurance company the right to sue another party on your behalf after they have paid out your claim. If your neighbor causes your house to catch on fire, your ins. policy will cover it, but then through Subrogation, your insurance co. will sue your neighbor.
All of the following are designated as private passenger vehicles EXCEPT
a four wheel vehicle used as a taxi by an individual and not a company.
Agent
a person employed to sell insurance policies.
Insurer
a person or company that underwrites an insurance risk; the party in an insurance contract undertaking to pay compensation.
Insured
a person or organization covered by insurance
A claimant can be any of the following EXCEPT
a person who is conducting an investigation of a claim on behalf of an insurer.
All of the following are requirements to offer earthquake insurance with residential property coverage EXCEPT
a separate policy to cover the earthquake is required, an endorsement is insufficient.
What possible consequences are faced from the insurance commissioner by an agent or broker who does not within 60 days comply with an order to establish and complete records?
a suspension or revocation of license
Estoppel
after you voluntarily give up a legal right you cannot get it back
ALL of the following are examples of open policies EXCEPT
agreed value.
Other insurance clause
allows insurers to proportionately share claims when more than one policy covers the loss
contributory negligence
an older form of negligence that says if you are partly at fault in an accident, you cannot recover anything at all from the other party. Even if you're only 5% at fault. This has been replaced by comparative negligence in most states.
Where must the address be printed for the principal office that is required for every broker agent and resident insurance casualty broker-agent?
applications for license and renewals
When should an agent provide an applicant the effective date of coverage, if known, or the circumstances under which coverage will be effective?
at the time of application or receipt of premium
The following are valid insurance classes under California Insurance Law EXCEPT
certainty, precious metals, and gems.
risk
chance or uncertainty of loss, if a risk is certain to produce a loss, it is uninsurable.
If your agent's appointment is terminates by your insurer, the policies you have sold to date will
continue in force
Which is TRUE regarding expectant or contingent interest?
expectant or contingent interest does NOT constitute insurable interest.
What must an individual do in order to act as an agent for a business entity or insurer offering limited lines automobile coverage?
file a notice of appointment with the commissioner
If an agent's contract specifies that he represents the insurer in the sale of insurance, but does not address his ability to collect premiums
his authority to collect premiums is implied.
When is it possible for a commercial vehicle to be eligible for coverage under the California Automobile Assigned Risk Program?
if it is a privately owned lightweight commercial vehicle used for local service or retail deliveries within a specific geographic area
On property insurance, notice of claim must be submitted to the insurer
immediately
Vicarious LIability
imposed on one party as the result of the actions of another.
Insurance Soliciter
insurance salesperson who contacts potential customers and handles clerical responsibilities but has no authority to make insurance contracts.
Assumed liabilty
liability assumed by contract. I.E. tenant assuming landlord will maintain elevator.
Absolute Liability (Strict Liability)
liability without regard to fault or negligence. Using explosives or keeping wild animals as pets. You know it's dangerous before you participate, so you're absolutely liable if your tiger kills someone.
An insurance agent is a person who transacts all of the following types of insurance EXCEPT
life insurance.
All of the following are a duty of an insurer in regards to claims on file and record documentation EXCEPT
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?
only agent/brokers licensed in fire and casualty who have also been certified through CAARP. (CAARP was designed to assist licensed resident drivers unable to secure auto insurance through the preferred companies due to a their driving history. Most household name brand companies must participate to satisfy state insurance mandates. The CA auto insurance Assigned Risk or CA High Risk Automobile Insurance often charges higher rates in your state, and is a last resort for licensed drivers that cannot obtain car insurance coverage elsewhere in the California preferred or voluntary automobile insurance marketplace)
dividends
paid to a policy holder at discretion of Board out of surplus (profit) funds, and are not guaranteed. Also not taxable.
Which would permit an insurer to escape insolvency?
possession of assets equal to the total paid-in capital after all liabilities and reinsurance
pro rata
proportionate refund granted is insurer decides to cancel the policy before the end of the term. Insured gets refund of whatever percentage of time he didn't get to use the ins.
Adverse selection
puts the insurer in a position where they are sure to have claims (flood insurance for a house next to river, wind insurance on coast of FL, earthquake ins. in CA)
Unincorporated insurer
reciprocal insurance exchanges
Self insuring is also known as
risk retention (driving a car w/o insurance, or a company keeping their workers comp in-house)
In conducting the business and affairs of the State Compensation Insurance Fund, the president of the fund may do any of the following EXCEPT
sell life insurance covering compensation benefits.
warranty
something the client guarantees to be true (like a homeowner saying they have fire alarms). If insured breaches warranty, the contract could be voided.
Conditions
spell out the duties of the parties. A claim might not be covered unless all conditions are satisfied.
exclusions
state what isn't covered in a policy
Principle of indemnity
states that you cannot recover more than you actually lost. The purpose of insurance is to restore you, but not to make a profit.
Which group of people is offered additional protection by the Unfair Practices Act that regulates trade practices in the business of insurance?
survivors of the Holocaust
breach of warrarnty
telling insurer you have fire sprinklers in order to get a lower rate, when you really don't.
Express Authority of an agent
that which is written down in their agent's contract with the insurer.
loss ratio
the % of annual premiums that an insurer pays in claims during the year
Limits of liability are found on...
the Declaration Page
ALL of the following are TRUE regarding the process to change the California Code of Regulations EXCEPT
the Office of Administrative Law (OAL) may substitute its own judgment for that of the rulemaking agency.
A standard fire insurance policy contains the following details EXCEPT
the address of the insured
The Insurance Commissioner may deny an application for any license issued for any of the following EXCEPT
the applicant is lacking in good judgment.
What are the requirements for notices required by any provision of the insurance code to a person unless expressly provided otherwise?
the applicant is lacking in good judgment.They should be sent to a mailing notice at their residence or place of business.
All of the following are PRINCIPAL rating factors in determining automobile insurance premiums EXCEPT
the zip code where the vehicle is housed.
What is the purpose of the California Fair Access to Insurance Requirements program?
to help property owners who are unable to obtain coverage through the private sector on their own
All of the following are reasons employers liability insurance is needed in addition to workers' compensation insurance EXCEPT
to pay medical bills.
What's the purpose of the P/C Guaranty Fund
to protect customers of insurers who become financially impaired (BK). The fund will cover unpaid claims up to certain max. limits except workers comp. claims, which are paid in full.
What is the primary function of The California Automotive Assigned Risk Plan (CAARP)?
to put people who have trouble obtaining insurance in touch with insurers who may be required by law to insure them
A Special Surplus Line Broker is allowed to place coverage with a non-admitted insurer for all the following EXCEPT
transportation involving bridges and tunnels.
comparative neglegence
type of negligence that reduces injury or damage awards proportionately when both parties are negligent. In order to recover anything from the other party, you must be 50% or less at fault. (i.e. car accident, you're found to be 40% at fault, and the other guy 60% at fault. If your medical expenses are $10,000, they other guy has to pay 60% of your expenses ($6,000).
combined ratio of losses and expenses... if less than 100%
underwriting profit
State laws pertaining to the advertisement of insurance prohibit insurers from:
using a deceptive name, publishing untrue statements, using misleading sales materials.
Waiver
voluntarily giving up a legal right