Insurance Contracts and Processes: Perils, Agents, and Liability, Exams of Advanced Education

Download Insurance Contracts and Processes: Perils, Agents, and Liability and more Exams Advanced Education in PDF only on Docsity! P a g e 1 | 36 1 California Personal Lines Broker Test verified 2024 A-1. Insurance is a contract whereby one undertakes to indemnify another against: - ANS>> Damage A-2. A peril is: - ANS>> The actual cause of a loss. A-3. The uncertainty or chance of a loss occurring is known as: - ANS>> Risk A-4. Which are the main types of risks? - ANS>> Pure and Speculative A-5. A hazard is best defined as: - ANS>> Anything that increases the chance of loss or severity of loss due to a peril. A-6. A hazard that deals with a person`s mental attitude, behavior and habits is an example of: - ANS>> A Moral hazard. A-7. The law of large numbers is a principal that basically says: - ANS>> The larger the amount of information gathered, the more reliable that information will be. A-8. The term loss exposure refers to: - ANS>> The possibility of a loss. A-9. The degree of loss a person/organization faces from suits brought by a third party refers to: - ANS>> Liability loss exposure. A-10. Which of the following is NOT required for a risk to be ideally insurable? The loss must be an accident. The loss must be definite and measurable. The loss must occur on the insured`s property. The loss must create economic hardship. - ANS>> The loss must occur on the insured's property. A-11. Any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest or create a liability against him/her, may be insured against. The more unpredictable a loss becomes: - ANS>> The more insurable it becomes. A-12. Restoring the insured back to the condition he or she was in before the loss occurred is known as: - ANS>> Indemnification A-13. The process of reviewing applications for insurance and the information on the application is: - ANS>> Underwriting P a g e 2 | 36 2 A-14. Which of the following is NOT a known private insurer? Reciprocal Insurance Exchanges Mutual Insurance Companies Bond Insurance Companies Stock Insurance Companies - ANS>> Bond Insurance companies are not considered insurers. A-15. Bob is thinking about obtaining insurance because he just found out he needs extensive surgery that will require several days in the hospital. This situation of waiting until the last minute to obtain insurance is known as: - ANS>> Adverse selection A-16. Loss control refers to: - ANS>> Taking the necessary precautions that will reduce the risk of a loss. A-17. Which of the following is the amount of money the insured pays before the insurer pays for the rest of the claim? - ANS>> Deductible A-18. What is reinsurance? - ANS>> Reinsurance is the process whereby the insurer transfers all or part of the risk to another company. A-19. Which of the following is defined as `an agreement between two or more parties enforceable by law?` - ANS>> A contract. A-20. What are the two types of torts? - ANS>> Intentional and Unintentional. A-21. What is the binding force of a contract? - ANS>> Consideration A-22. What is fraud? - ANS>> When one party intentionally gives the other party false information in order to benefit from the unlawful gain. A-23. When a right or privilege has been given up, a party cannot reassert that right or privilege. The process of preventing the party from reasserting that right or privilege is known as: - ANS>> Estoppel A-24. Either party may rescind a contract for what reasons? - ANS>> Once signed a contract can never be rescinded. A-25. Examples of tort law include all of the following EXCEPT: Libel and slander Bodily injury Personal injury Breach of contract - ANS>> Breach of contract. A-26. Substitution of a small certain loss for a large uncertain loss is: - ANS>> Insurance P a g e 5 | 36 5 An agent or broker cannot transact as a solicitor, but a solicitor can transact as a broker or agent. A solicitor may give premium quotes over the phone, just like an agent. - ANS>> An agent or broker cannot transact as a solicitor, but a solicitor can transact as a broker or agent. B-10. The application is the document that: - ANS>> States the name of the insured, the premium, and other facts that help the insurer decide whether to accept or reject it. B-11. If an agent gives incorrect advice or unknowingly provides incorrect information to the client, which of the following liability insurance policies for nonmedical professionals is available to pay for losses or defend lawsuits that might be filed against him? Liability insurance Errors and Omissions Medical Insurance Nonadmitted - ANS>> Errors and Omissions. B-12. Errors and omissions is a type of liability insurance: - ANS>> That agents use to protect themselves if they give incorrect advice or information to a client. B-13. The following acts are unlawful and are misdemeanors in California except when performed by a surplus lines broker EXCEPT: In any manner, advertising for a nonadmitted insurer in this state. In any manner, advertising for an admitted insurer in this state. In any other manner, aiding a nonadmitted insurer to transact insurance business in this state. Acting as agent for a nonadmitted insurer in the transaction of insurance business in this state. - ANS>> In any manner, advertising for an admitted insurer in this state. B-14. Which of the following statements about insurance in connection with sales or loans is TRUE? No person involved in the business of financing the purchase of real estate may require the purchase of insurance through a specific agent as part of the requirements in the purchase. No person involved in the business of financing the purchase of real estate may require the purchase of insurance through a specific agent as part of the requirements in the purchase except an agent licensed with the state of California. A person involved in the business of financing the purchase of real estate may require the purchase of insurance through a specific agent if the agent is employed by that company. A person approved by the Commissioner may be required to be involved in the business of financing the purchase of real estate. This person would act as the agent in purchasing insurance for the real estate. - ANS>> No person involved in the business of financing the purchase of real estate may require the purchase of insurance through a specific agent as part of the requirements in the purchase. P a g e 6 | 36 6 B-15. When dealing with insurance in connection with sales or loans, violating the legal provisions specified by California law is considered a: - ANS>> A misdemeanor. B-16. The underwriting process consists of all of the following basic steps except: Issue the rate Gather necessary information Implement the decision Monitor the decision - ANS>> Issuing the rate. B-17. Which of the following actions would not be considered transacting insurance? Emailing a prospect a auto quote. Handing a prospect a business card and asking them for information. Giving a price quote over the phone. Collecting premium for a policy - ANS>> Handing a prospect a business card and asking them for information. B-18. A lender does have the right to provide insurance or renew the insurance and charge a transaction fee if the borrower fails to deliver proof of insurance at least ____ days before the policy expires. - ANS>> 30 days. B-19. A _____________ licensee is authorized to transact ONLY the following lines of insurance: Automobile, recreational vehicles (noncommercial purposes), personal watercraft, residential property, earthquake, flood, inland marine, umbrella (excess liability). - ANS>> Personal Lines B-20. Any person who transacts insurance without a valid license is guilty of a misdemeanor, punishable by a fine not exceeding ______. - ANS>> $50,000 B-21. Which marketing system does the insurer not own the expiration list? - ANS>> An Independent agency owns its own expiration list. B-22. In which system is the agent considered an employee? Direct writing system A direct response system Exclusive agency system None of these - ANS>> A direct writing system. B-23. Law of agency is the relationship between: - ANS>> Between the agent and principal. B-24. Monitoring of existing risks is: - ANS>> Post-selection. B-25. An insurance agent is appointed to transact: all lines of insurance all classes of insurance P a g e 7 | 36 7 all lines except 24hr care all are incorrect - ANS>> Insurance agents transact all lines/classes except life and disability. Life and Disability are classes of insurance. 24hr care coverage is a product that can only be transacted by A&H Agents. B-26. A solicitor holds which license? - ANS>> A solicitor can be licensed as either a P&C or Personal lines broker-agent. B-27. Binders can be extended how many additional days? - ANS>> 90 days. B-28. There are no binders issued in: life insurance in health insurance excess of 1 million Any of the above - ANS>> Binders are not issued in the class of life or disability or in excess of 1 million. B-29. An insurer not authorized to conduct business in California would be: - ANS>> An unauthorized insurer or a non-admitted insurer. B-30. Which of the following would not require a license? Independent Adjuster Insurance Adjuster Public Adjuster All require a license - ANS>> Insurance adjuster. C-1. It is against the law for an insurance licensee to offer free insurance to: - ANS>> Anyone as an incentive to acquire some other type of business. C-2. Which of the following is NOT a valid reason for the Commissioner to deny the use of a name when filing with the Insurance Commissioner? The name gives the impression the licensee is authorized to conduct a type of business it cannot legally conduct. The name would lead the public in the wrong direction. The name would interfere or is too similar to the name of another agency already licensed by the Commission. The name is politically connected to the government. - ANS>> Some companies take a political stand and are still granted the use of a name. C-3. All Property and Casualty Broker/Agents are required by law to display to the public: - ANS>> All Property and Casualty Broker-Agents are required by law to display licenses in a place where the license can be clearly seen and inspected by everyone to determine whether it is valid. C-4. Agents must keep good records and make them available to the DOI for a period of: - ANS>> 5 years. P a g e 10 | 36 10 C-24. If someone has a Life Agent Combo and a Property/Casualty license for 10 years, then how many CE hours would be required in the current license term? - ANS>> 24 hours. C-25. ________ refers to the inability of the insurer to meet its financial obligations when they are due. - ANS>> Insolvency C-26. Records must be made available to the Commissioner: - ANS>> At all times. C-27. Informational records must be kept a minimum of: - ANS>> 18 months, bank records 5 years. C-28. A subsidiary formed to insure the parent company is called a(n): - ANS>> Captive insurer. C-29. Commissioner may give an order that records be brought current within: - ANS>> 60 days of the order. C-30. Transacting via internet with a California resident would not require: - ANS>> License expiration date. C-31. Commissioner can suspend a permanent license without a hearing, except: - ANS>> Client co-signing a loan. C-32. Appointments are terminated: by either agent or insurer termination of license license fees paid late any of these - ANS>> Any of these. C-33. Which of the following is not a person under the Code? - ANS>> A family. C-34. For an agent or solicitor to be valid to transact requires: - ANS>> Both are required to be licensed and appointed. C-35. In lieu of denying an application for a license the Commissioner can: - ANS>> Issue a restricted license. D-1. What is the role of the Commissioner and the Department of Insurance in relation to consumers? - ANS>> The Commissioner and the DOI are responsible for regulating the conduct of agents and insurers. D-2. What is the significance of the SEUA case of 1944? - ANS>> The court decided the federal government should regulate insurance. P a g e 11 | 36 11 D-3. Which court case reversed the Paul vs. Virginia case of 1868? - ANS>> SEUA case of 1944 D-4. To change the California Insurance Code a bill is brought before the Assembly and the Senate. After both parties vote on the bill and it is approved, it moves on to the: - ANS>> The Governor. D-5. Who administers the California Administrative Code of Regulations? - ANS>> The Commissioner. D-6. How is the Insurance Commissioner put into office? - ANS>> Elected by the citizens. D-7. Which of the following is a responsibility of the Commissioner? - ANS>> To enforce the laws of insurance. D-8. Which of the following is NOT a purpose of the Unfair Practices Article? To determine the punishment for an agent found guilty of unfair practices in insurance. To keep agents honest when selling insurance. To regulate trade practices in the insurance business. To protect the public from agents who practice bad methods of selling insurance. - ANS>> To determine the punishment for an agent found guilty of unfair practices in insurance. D-9. Which of the following is NOT considered an unfair practice? Making false statements that mislead the public. Filing false financial documents. Failing to display the license in a clearly visible place for the public to see. Unfairly discriminating against classes of insured`s. - ANS>> Failing to display the license in a clearly visible place for the public to see. D-10. All of the following are incorrect penalties for violating the Unfair Practices article EXCEPT: $5,000 fine for each act in violation; $15,000 fine for willful violation $10,000 fine for each act in violation; $15,000 fine for willful violation $15,000 fine for the first offense; Minimum of 3 years in prison $5,000 fine for each act in violation; $10,000 fine for willful violation - ANS>> $5,000 fine for each act in violation; $10,000 fine for willful violation. D-11. Which of the following is a penalty for violating the Insurance Information and Privacy Protection Act? $5,000 fine for violations committed with regularity showing they are a general business practice $20,000 fine for violations committed with regularity showing they are a general business practice P a g e 12 | 36 12 $50,000 fine for violations committed with regularity showing they are a general business practice $100,000 fine for violations committed with regularity showing they are a general business practice - ANS>> $50,000 fine for violations committed with regularity showing they are a general business practice. D-12. Every company in California is required to report its financial condition to the Commissioner every year: on or before January 1. on or before April 15. on or before December 31. on or before March 1. - ANS>> On or before March 1st. D-13. When the Commissioner takes over a company that is insolvent, his/her first responsibility is to: - ANS>> Attempt to restore the company if possible. D-14. The State of California requires that all admitted insurers be a member of the: - ANS>> California Insurance Guaranty Association D-15. Which of the following statements about insolvency is TRUE? An insurer cannot escape the condition of insolvency except by permission from the Commissioner. An insurer can escape the condition of insolvency by meeting its financial obligations when they are due. An insurer can escape the condition of insolvency by being able to provide for its liabilities and reinsurance of all outstanding risks. An insurer cannot escape the condition of insolvency by being able to provide for its liabilities and reinsurance of all outstanding risks. - ANS>> An insurer cannot escape the condition of insolvency by being able to provide for its liabilities and reinsurance of all outstanding risks. D-16. All of the following are efforts the Department of Insurance takes to combat insurance fraud EXCEPT: Each company in California is required to have a fraud detection unit. Every insurer pays an annual fee to fund the fraud detection units Each company in California is required to submit a complete record of fraudulent claims made to the business each year. Every automobile insured in California is assessed about $1 per year to fund automobile insurance fraud task force activities. - ANS>> Each company in California is required to submit a complete record of fraudulent claims made to the business each year. D-17. If convicted of insurance fraud: - ANS>> The fine can be up to $50,000 and up to 5 years in state prison. D-18. All of the following are penalties for unfair discrimination EXCEPT: P a g e 15 | 36 15 D-35. Rates shall remain in effect if they are: all of the following reasonable not discriminatory adequate - ANS>> All of the following. E-1. Insurance that cannot be procured through admitted insurers may, under certain circumstances, be placed with nonadmitted insurers. This is known as: - ANS>> Surplus lines. E-2. A special surplus line broker may transact Special Surplus Lines. All of the following are special surplus lines EXCEPT: Insurance on property or operations of railroads engaged in interstate commerce Reinsuring the liability of an admitted insurer Farm or cattle ranch Aircraft insurance - ANS>> Farm or cattle ranch. E-3. The Commissioner shall establish a list of all surplus line insurers who have met the recognized requirements for such title and shall issue a master list at least semiannually. This list is known as: - ANS>> LESLI: List of Eligible Surplus Lines Insurers E-4. All of the following are categorized torts EXCEPT: Intentional Negligence Adverse selection Absolute/Strict - ANS>> Adverse selection. E-5. Before determining liability based on negligence, the following requirements must be met EXCEPT: gross negligence unbroken chain duty breach - ANS>> Gross negligence. E-6. Proximate cause refers to: - ANS>> An uninterrupted chain of events resulting from negligence causes injury or damage. E-7. The Tyler-Star Newspaper wrote an article about Jim`s Bakery that made Jim look like a racist. This type of injury to Jim`s character is known as: - ANS>> The fact that the damage was a result of WRITTEN material, this is called libel. E-8. Punitive damages are: - ANS>> A form of punishment imposed by the court upon the individual responsible for a loss. P a g e 16 | 36 16 E-9. Amounts paid for actual loss or injury are known as: - ANS>> Compensatory damages. E-10. Comparative negligence is best described as: - ANS>> the injured party is partly responsible for the claim and the damages are reduced accordingly E-11. In computing the loss payment for contributory negligence the claim would: - ANS>> Pay nothing if the injured party didn`t meet the standard of self-protection in any form. E-12. Which of the following is NOT an example of assumption of risk? The driver of a limousine service. A spectator at a baseball game. A guest passenger in an automobile. A passenger on a helicopter tour of an exotic island. - ANS>> The driver of a limousine service. Assumption of risk is when a person voluntarily places himself in a potentially dangerous situation. E-13. Which organization is the leading source of information about property and liability risk and is the property/casualty insurance industry`s leading supplier of statistical, actuarial, underwriting, and claims data? - ANS>> The Insurance Service Office (ISO) E-14. Which of the following is NOT a description of what the California Worker`s Compensation Inspection Rating Bureau (WCIRB) does? Provides reliable statistics and rating information regarding worker`s compensation and employer`s liability insurance. Collects and tabulates information and statistics for the purpose of developing pure premium rates to be submitted to the commissioner for issuance or approval. Develops information about property and liability risk and the property/casualty insurance industry`s leading supplier of statistical, actuarial, underwriting, and claims data. Inspects risks for classification or rate purposes to furnish to the insurer and upon request of the employer. - ANS>> Develops information about property and liability risk and the property/casualty insurance industry`s leading supplier of statistical, actuarial, underwriting, and claims data. This is a function of the (ISO) not the (WCIRB) E-15. All of the following are methods of managing risk EXCEPT: Avoidance Retention Transfer Rescission - ANS>> Rescission is the act of canceling a policy from its inception. E-16. Which method of managing risk is described as not purchasing insurance at all, or paying part of a loss when it occurs? - ANS>> Retention means a person chooses P a g e 17 | 36 17 not to purchase insurance and pays for ALL of the loss, or a person pays a portion of the loss by way of a deductible. E-17. Loss of rent, profits, expenses necessary to keep a business running until the damage can be fixed are examples of: - ANS>> An indirect loss. E-18. Loss is defined as: - ANS>> The reduction, decline, or disappearance of value of the person or property insured in a policy, by a peril insured against. E-19. Combined ratio is defined as: - ANS>> Combined ratio in insurance means the percentage of each premium dollar a company spends on claims and expenses. E-20. When two or more perils happen at the same time, in sequence, and cause a loss, this is referred to as: - ANS>> Concurrent causation. E-21. Short rate cancellation is described as: - ANS>> The method used when a policy is canceled by the insured before it reaches the expiration date. E-22. Flat rate cancellation is described as: - ANS>> A type of cancellation whereby the insured can cancel without penalty. The insured receives a 100% refund of Premium. E-23. Lapse refers to: - ANS>> A policy is terminated because the premiums have not been paid. E-24. When someone willingly gives up the right to sue a person who was at fault, this is known as: - ANS>> Subrogation E-25. Which of the following terms describes an estimate of the amount an insurer will pay for a claim? Manual rate Merit rate Rescission Loss Reserve - ANS>> Loss reserve E-26. A legal right of recovery can be based on which of the following? Torts Contracts Statutes Any one of these - ANS>> Any of these. E-27. Which would not be a tort? Negligence Any legal wrong Keeping a pet rattle snake P a g e 20 | 36 20 The insured doesn`t want theft or liability coverage. - ANS>> The dwelling has only one unit. Homes that are one unit may be insured under the Dwelling program OR the Homeowners program. F-13. What is the difference between an HO 2 and an HO 4? - ANS>> An HO 2 is written on a broad form basis and covers the owner of a dwelling, whereas an HO 4 is a renter`s insurance policy. F-14. What is the difference between an HO 3 and an HO 3 with an HO 15 endorsement? - ANS>> An HO 3 is a policy that covers all risks, except those excluded, on the dwelling, and personal property is covered with broad form perils, whereas an HO 3 with an HO 15 endorsement covers all perils with both dwelling and personal property. F-15. Which of the following homeowners policies covers renter`s insurance? - ANS>> HO 4 insurance. F-16. Which of the following homeowners policies covers condominium units? - ANS>> HO 6 insurance. F-17. What is the difference between an HO 2 and an HO 3? - ANS>> An HO 2 has dwelling and personal property coverage on a broad peril form, while an HO 3 has dwelling coverage on a special form and personal property on a broad peril form. F-18. Which of the following homeowners policies have both dwelling and personal property on a broad peril form? HO 2, HO 4, HO 5 HO 2, HO 5, HO 8 HO 4, HO 5, HO 6 HO 2 and HO 6 - ANS>> HO 2 and HO 6 insurances. F-19. Property and casualty policies are made up of the following parts except: Declarations Conditions Definitions Additional Claim Form - ANS>> Additional Claim Form. F-20. This Standard Mortgage clause states that a __________ has the right to file a claim, make premium payments, and be notified of any cancellations or non-renewals. - ANS>> Lienholder F-21. The part of the policy that contains the description of coverages provided is: - ANS>> The insuring agreement. F-22. Mid-termination of a policy is known as: - ANS>> Mid-termination or termination of a policy is a cancellation. P a g e 21 | 36 21 F-23. Policy revision that provides broader coverage, no premium or endorsement: - ANS>> Liberalization occurs when a policy is broadened without additional premium. F-24. Cancellation for property and casualty policies for other than nonpayment is: - ANS>> Cancellation for other than nonpayment is 30 days, except auto is 20 days. F-25. Homeowner form(s) that do not provide any dwelling coverage (Coverage A)? - ANS>> HO-4 only. F-26. A fire that is intentionally set and remains within its intended limits is: - ANS>> Not covered as this is the definition for a "friendly fire". F-27. Two policies from different insurers otherwise identical are known as: - ANS>> Identical policies covering the same property are considered concurrent policies. F-28. Policy provision that gives the insurer the right to repair or replace: - ANS>> Our option provision gives the insurer the right to repair, replace, or settle ACV. F-29. How are HO-8, HO-2, HO-3 and HO-5 different? Coverage A, B, and C Perils insured against Liability coverages All of these - ANS>> Perils insured against. F-30. Which HO form(s) provide open peril coverage for personal property? HO-3 HO-5 Both HO-3 and HO-5 Requires endorsement - ANS>> Only the HO-5 Comprehensive form provides open perils on personal property. G-1. All of the following are true of a broad coverage form EXCEPT: Coverage must equal at least 80% of the dwelling replacement cost. The broad coverage form covers more perils than a basic coverage form. Seven extra perils are insured in a broad form. No minimum amount of insurance is required for the basic form. - ANS>> No minimum amount of insurance is required for the basic form. G-2. All of the following are major differences between the broad form and the special form EXCEPT: The broad form doesn`t require the 80% coinsurance and the special form does. Theft of property that is a part of the dwelling or other structure is covered in the special form. There is no exclusion for antennas, outdoor equipment, fences, or awnings from the peril of falling objects in the special form. P a g e 22 | 36 22 Coverage for accidental discharge or overflow of water or steam that occurs off the insured premises on the special form. - ANS>> The broad form doesn`t require the 80% coinsurance and the special form does G-3. All of the following are considered an "insured" under Section 1 of the HO 3 EXCEPT: Named insured and his or her spouse. Relatives who share the same last name as the insured. Guests and employees of the house (optional upon request). Family members who live with the insured. - ANS>> Relatives who share the same last name as the insured. A relative must live in the same household or be a named insured on the policy to have coverage. G-4. Under property coverage, which of the following is covered under coverage A? Personal property Garage Dwelling Other structures - ANS>> The dwelling. G-5. In property coverage, what is specifically covered under coverage B? - ANS>> Other structures/ separate structures at the same location, such as garages, sheds and birdhouses on the described location that are separated from the dwelling by a clear space or connected only by a fence or utility line. G-6. Coverage D, loss of use, depends on which of the following for a limit of insurance to be applied? How long the dwelling has been occupied. Who is occupying the dwelling How much coverage is placed on the dwelling? Where the dwelling is located. - ANS>> How much coverage is placed on the dwelling? G-7. Under HO property additional coverages, what is covered for debris removal expense? - ANS>> Reasonable cost to remove debris after a covered loss. G-8. Under HO property additional coverages, what is covered for removal? - ANS>> Property removed from the insured`s premises to protect it from damage due to a covered loss. G-9. Under HO property coverage earth movement is a general exclusion. Which homeowners policy has done away with the exclusion for concurrent causation regarding this peril? - ANS>> B- The HO3 has removed the exclusion for perils that work in tandem; an earthquake causes a fire. G-10. In the event of a loss, the insured has the responsibility to do all of the following EXCEPT: P a g e 25 | 36 25 Property damage for the boat itself is not covered. - ANS>> Racing of watercraft is specifically excluded for Section II liability and medical. G-22. According to Section II of the Homeowners policy (selected homeowners endorsements), which of the following is true of the mobile home endorsement? The mobile home is a moveable structure and therefore cannot be covered as a dwelling. The mobile home is covered under the separate structure endorsement. The mobile home is a moveable structure and is covered under the commercial policy. The mobile home is considered the dwelling being insured when it is endorsed on the policy - ANS>> The mobile home is considered the dwelling being insured when it is endorsed on the policy. G-23. Which HO endorsement covers loss due to personal injury (false arrest, libel, slander, defamation of character, and invasion of privacy? - ANS>> Personal injury endorsement. G-24. The following properties are included as an insured location and/or residence premises for Liability and Medical except: Vacant Land Apartment Borrowed beach home Insured's relative cemetery plot - ANS>> Insured's relative cemetery plot. G-25. All of the following are general exclusions to the HO 3 policy except: Loss Assessment Earth Movement Flood Building Ordinance - ANS>> Loss assessment. This coverage provides $1,000 in extended coverage due to a loss assessed to all members of a Homeowners Association. G-26. Coverage not provided without endorsement on a DP-1/Basic is: - ANS>> Coverage E Additional Living Expense must be endorsed on a DP-1/Basic. G-27. Which DP policies insure Coverage C for broad form perils? - ANS>> Personal property Coverage C is insured for broad form perils on both DP-2 and 3. G-28. Volcanic eruption excludes: lava dust and ash airborne shockwaves none are excluded - ANS>> None are excluded. G-29. Which is not an "other coverage" in the dwelling forms? Collapse P a g e 26 | 36 26 Volcanic eruption Breakage of glass Tenant improvement - ANS>> Volcanic eruptions. G-30. Difference between DP-2 Broad form and the DP-3 Special form is: - ANS>> Damage to insured's property from neighbors plumbing is covered by a DP-3 only. G-31. Which is not an exclusion under Coverage A on an HO-3? Damage by a deer Damage by insured's dog Damage by vermin Damage by insects - ANS>> Damage by a deer to the structure would be covered, but not to personal property. G-32. Which is excluded under Section I and covered under Section II? Animals, birds, or fish Firearms Hobby aircraft Ride on lawn mower - ANS>> Pets are excluded as property but covered for liability (dog bites neighbor). G-33. Jewelry valued at $30,000 is destroyed in a hotel fire in Paris, the HO would: - ANS>> Cover up to Coverage C limit. Jewelry is only limited for the peril of theft. Fire would not be limited. G-34. The correct statement regarding landlord furnishings would be: not covered in HO forms covered up to $2500 excludes the peril of theft Both B and C are correct - ANS>> Coverage is up to $2500 for landlord furnishings however excludes the peril of theft. G-35. Which is not a liability endorsement on the HO forms? Business pursuits Personal injury Mobilehome Watercraft - ANS>> Mobilehome endorsement amends the definition of resident premise. H-1. In an Inland Marine policy, which of the following is NOT an advantage to filed lines? There have standardized forms. The ability to be included in a Commercial Package policy. The simplified rating (discounts). P a g e 27 | 36 27 They include Electronic Data Processing and Contractors Equipment floaters. - ANS>> They include Electronic Data Processing and Contractors Equipment floaters. These two floaters are non-filed lines floaters. H-2. Inland Marine policies are generally written on an open peril basis. All of the following are the most common exclusions EXCEPT: indirect loss government action nuclear hazard collision - ANS>> Collision is not a common exclusion on the Inland Marine policies as it is not generally an issue. Collision has to do with auto insurance. H-3. Why is mobility a common characteristic of many types of property insured under Inland Marine contracts? - ANS>> Mobility covers moveable property, whether or not it is actually moved. H-4. In an Inland Marine policy, an annual transit policy is usually provided: - ANS>> On a named peril basis. H-5. In an Inland Marine policy, what is the difference between the Personal Articles Floater (PAF) and the Homeowners Scheduled Personal Property Endorsement? - ANS>> The Personal Articles Floater covers mysterious disappearance and must have an appraisal to value it. H-6. With regard to the Unscheduled Personal Property endorsement, each of the following items has only a limited amount of coverage and requires an endorsement to have full coverage EXCEPT: Coins Golf equipment Cameras DVD collection - ANS>> A DVD collection does not have a limit of insurance on it, other than the Coverage C limit. H-7. The Watercraft endorsement provides __________ coverage for Liability and Medical Payments to Others for scheduled boats. full extended moderate limits of very limited - ANS>> ''Moderate limits'' of coverage refers to the fact that it may not be all an individual needs and is better covered by a Boatowners policy. H-8. In regard to personal watercraft, to receive coverage for physical damage payments the insured would need which of the following policies? Boat owners Yacht Hull P a g e 30 | 36 30 Hull E & O P & I - ANS>> Errors and Omissions is not contained in a Yacht Policy. The five coverages are Trailer, Longshoreman, Hull, P&I, and Medical payments. H-20. Agents may bind flood insurance coverage after receiving what? - ANS>> Agents do NOT have binding authority. There is NO BINDING of coverage on Flood Insurance. Flood Insurance coverage is effective thirty (30) days after the agent completes the application and receives payment for the policy, provided the application is received by the processing center within ten days after the signature date of the application. H-21. Marine policies that are not regulated are known as: - ANS>> Non-filed forms. H-22. "Mobile in nature" or "goods in transit" refer to which type of policies? Ocean Marine Inland Marine Transportation Both A and B - ANS>> Ocean Marine and Inland Marine. These are phrases that apply to both ocean and inland marine insurance. H-23. The inland marine form known as Personal Articles is similar to: - ANS>> SPP endorsement in HO's. PAF is similar to the Schedule Personal Property (SPP) HO endorsement. H-24. Uninsured loss exposures on HO forms are due to: susceptibility to loss items difficult to value uniqueness Any one of these - ANS>> All of these loss exposures make property difficult to insure or uninsurable. H-25. Insures watercraft over 50 horsepower that can be towed behind a car: endorsed HO policy boatowner policy yacht policy any watercraft policy - ANS>> A boatowner policy is the best answer. H-26. A yacht policy provides this protection but the boatowner policy does not: hull coverage medical payments workers' compensation none of these - ANS>> Protection & Indemnity provides Longshoreman & Harbor Workers Compensation. H-27. Must be offered with every residential property policy in California: P a g e 31 | 36 31 flood insurance earthquake insurance both neither - ANS>> Earthquake coverage must be offered along with every residential property policy. H-28. Type of policy or policies that do not normally exclude catastrophic losses: personal auto policy marine policies neither both - ANS>> Both auto and marine policies do not normally exclude flood and earthquake. H-29. Which licensee can sell flood and earthquake coverage? - ANS>> Any licensee with a broker-agent license can write government programs. H-30. Broker fees can be charged for which type of policy or policies? None of these Flood insurance Earthquake insurance HO's or DP's - ANS>> HO's and DP's. Broker fees can charged on policies, except for government programs. I-1. All of the following are ways to show financial responsibility according to the Financial Responsibility Law EXCEPT: Purchase a surety bond for $89,000 from a California licensed insurer. Purchase auto liability insurance with a minimum of 15/30/5 coverage. Deposit $35,000 in cash per vehicle with the DMV. Obtain a DMV issued self-insurance certificate. - ANS>> Purchase a surety bond for $89,000 from a California licensed insurer. A Surety Bond will not be sufficient for proof of financial responsibility. I-2. Which of the following is NOT an ISO eligibility requirement for a Personal Auto Policy (PAP)? Any pickup or van with a gross weight less than 10,000 pounds that is NOT used in any business other than farming. Any private passenger auto. Any commercial vehicle used during business hours. Vehicles owned by a person or married couple. - ANS>> Any commercial vehicle used during business hours. Personal autos must not be commercially owned. I-3. What is the difference between "share-the-expense car pools" and "for-hire" situations? - ANS>> ''Share-the-expense car pools'' are covered in a personal auto policy and ''for-hire'' are not. P a g e 32 | 36 32 I-4. Which of the following is NOT a determining factor for eligibility for the Good Driver Discount? At least 3 years of driving experience. At least 30 years of age. No DUI in 7 years. Good driving record. - ANS>> At least 30 years of age. Three years experience is the criteria for the GD and you may or may not be 30 years old when you acquire 3 years experience. I-5. How many days advance notice of cancellation due to non-renewal does an insurer need to give an insured? - ANS>> 30 days written notice due to non-renewal of an auto policy. I-6. How many days advance notice must be given to an insured for mid term- cancellation due to any reason other than nonpayment or non-renewal? - ANS>> 20 days advance notice is required if an insured is being cancelled for an increased hazard, etc. I-7. How many days does an insured have to request collision coverage when a newly acquired auto replaces a covered auto that has liability coverage only? - ANS>> 4 days of collision coverage is awarded to a current insured for any newly acquired car when the insured carries Liability coverage only. I-8. What is California`s minimum requirement for coverages A, B, C (Liability, Medical, Uninsured Motorist) in an auto policy? - ANS>> 15k/30k/5k I-9. In an auto policy, coverage A, B, and C respectively represent: - ANS>> Liability, Medical, and Uninsured Motorist. I-10. Which of the following is NOT a supplementary payment under coverage A of a Personal Auto Policy? $500 a month loss of income $50 a day loss of earnings $250 maximum for bail bonds Postjudgement interest - ANS>> $500 a month loss of income. Loss of Income is paid to a damaged party at $50 per day. I-11. All of the following are exclusions that apply to liability coverage under a personal auto policy EXCEPT: Damage to property owned by the insured. Damage to property being transported by an insured. Bodily injury or property damage caused accidentally by the insured. Bodily injury to a company employee if Workers Compensation benefits are available. - ANS>> Bodily injury or property damage caused accidentally by the insured. Liability coverage is for the insured`s acts to another party. P a g e 35 | 36 35 The vehicles insured cannot be valued at more than $20,000 by the DMV. Be at least 16 years of age. - ANS>> Be at least 16 years of age. They must be at least 19 years old. I-25. Which of the following is NOT true of the Market Conduct Bureau? The Bureau conducts examinations of California licensed insurer`s claims-handling practices. The Bureau provides individuals and companies assistance in buying automobile liability insurance in California. The Bureau protects the public when they purchase insurance, make claims, etc. from insurance companies. The Bureau consists of the Field Claims Bureau and Field Rating and Underwriting Bureau. - ANS>> The Bureau provides individuals and companies assistance in buying automobile liability insurance in California. This bureau protects the public, but does not assist them in buying insurance. I-26. All are true, except which of the following concerning Part B of a PAP? The insured is covered Pays regardless of fault Applies to pedestrians Has a 3 year limitation - ANS>> Applies to pedestrians. It only applies to insured and family as pedestrians. I-27. Which of the following would be considered a named insured? Any resident relative Resident spouse Person away at school Only those named - ANS>> A resident spouse is also considered a Named Insured. I-28. Collision would pay for damages to the insured vehicle in which situation? Running over branches Vehicle upset during riot Hitting a deer Avalanche of rocks - ANS>> Running over branches. When the insured runs over something it is a collision, the others are OTC claims. I-29. The split limit of 15/30/5, the 5 refers to which of the following? Medical payments Property damage Per person limit None of these - ANS>> Property damage. I-30. The incorrect statement concerning transportation expense is: must be endorsed applies to Part D claims no deductible applies P a g e 36 | 36 36 available for bus fare - ANS>> Available for bus fare. This is not an endorsement. It is included as supplementary coverage to Part D. I-31. Coverage that could apply to a hit and run accident? - ANS>> UMBI does not required identification of the other operator to provide coverage. I-32. Coverage(s) that follow the insured and family members into any auto: - ANS>> Part B or Part C. Medical payments and UMBI follow the insured and family members into any auto. I-33. Which would not qualify as a covered trailer when being towed by an auto? Farm wagon or implement Sailboat U-Haul trailer All are covered trailers - ANS>> All would qualify as a covered trailer while being towed by an automobile. I-34. Insured has an accident in a modified no-fault state the policy responds by: - ANS>> Personal Injury Protection (PIP) would be added at no charge. I-35. The incorrect statement concerning qualification for the low cost program is: must be at least 19 can have one point licensed 2 years none are incorrect - ANS>> Low cost requires the person to be licensed at least 3 years, not 2.