WB insurance & nasdaq dows only: October 2008

all fire casualty prelicesningtrainning francisha2007@yahoo cz12XX 40hrs

1. Insurance is a contract whereby one undertakes to indemnify another against:
Physical hazard
Exposure
Uncertainty
Damage

D-According to the California Code of Insurance, insurance is a contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event. Pg. 33

2. A peril is:
anything that increases the chance of loss or severity of loss.
a possibility of a loss.
the actual cause of the loss.
pure and speculative.

C- A Peril is the actual cause of the loss. Some examples of common perils are fire, wind, hail, collision with another car, theft, etc.

3. The uncertainty or chance of a loss occurring is known as:
risk management.
risk.
pure risk.
speculative risk.

B- Risk is the uncertainty or chance of a loss occurring.

4. Which of the following are the main types of risks?
Avoidance and Retention
Pure and Transfer
Speculative and Pure
Sharing and Transfer

C- There are two main types of risk: pure risk and speculative risk.

5. A hazard is best defined as:
any action from a court that increases the likelihood or size of a loss.
anything that increases the chance of loss or severity of loss due to a peril.
a possibility of a loss.
risk shifted from one to another.

B- A Hazard is anything that increases the chance of loss or severity of loss due to a peril.

6. A hazard that deals with a person`s mental attitude, behavior and habits is an example of:
Legal hazard
Physical hazard
Moral hazard
Morale hazard

C- Moral hazards deal with a person`s mental attitudes, behaviors, and habits. Some examples of moral hazards are drug abuse, dishonest claims, alcoholism, smoking, driving over the speed limit.

7. The law of large numbers is a principal that basically says:
the larger the number of people in an insurance company, the more stable it is.
the more insurance you have, the more protected you are.
the larger the possibility of a loss, the greater the exposure.
the larger the amount of information gathered, the more reliable that information will be.

D- The law of large numbers is a principle that basically says, the larger the amount of information gathered, the more reliable that information will be.

8. The term loss exposure refers to:
the increase in the possibility of a loss.
the possibility of a loss.
the actual cause of the loss.
the uncertainty of a loss occurring.

B- Exposure means there is a possibility of a loss. Loss Exposure is the degree to which a person or their property is at risk for loss.

9. The degree of loss a person/organization faces from suits brought by a third party refers to:
Liability Loss Exposure
Loss Exposure
Property Exposure
Human Personnel Loss Exposure

A- Liability Loss Exposure is the degree of loss a person/organization faces from suits brought by a third party.

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.

C- A loss may not occur on the insured`s property, such as a liability claim.

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:
the more insurable it becomes.
the less insurable it becomes.
the more it becomes insurable interest.
the less it becomes insurable interest.

A-The more predictable a loss becomes, the less insurable it becomes. The more unpredictable a loss becomes, the more insurable it becomes.

12. Restoring the insured back to the condition he or she was in before the loss occurred is known as:
Insurable Interest
Indemnification
Loss Retention
Restoration

Restoring the insured back to the condition he or she was in before the loss occurred is known as:

13. The process of reviewing applications for insurance and the information on the application is:
Field Underwriting
Application Evaluation
the job of the agent before accepting or rejecting an application
Underwriting

D-Underwriting is the process of reviewing applications for insurance and the information on the application.

14. Which of the following is NOT a known private insurer?
Reciprocal Insurance Exchanges
Mutual Insurance Companies
Bond Insurance Companies
Stock Insurance Companies

C-Bond insurance companies are not considered insurers.

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:
Spread of Risk
Adverse Selection
Cost Effective Insurance
Ideally Insurable Risk

B-Adverse selection is when people seek insurance at the last minute when they really need it.

16. Loss control refers to:
a combination of risk control techniques with risk financing techniques.
taking the necessary precautions that will reduce the risk of a loss.
preventing a loss from becoming catastrophic.
taking measures to prevent further damage during a loss.

B-Loss control refers to taking necessary precautions to reduce the risk of a loss.

17. Which of the following is the amount of money the insured pays before the insurer pays for the rest of the claim?
Premium
Coinsurance
Subrogation
Deductible

D-A deductible is the amount of money the insured pays before the insurer (company) pays the rest of the claim.

18. Which of the following statements is true about reinsurance?
Property and casualty insurers use reinsurance, life insurers do not.
Reinsurance is when the insured allows a policy to lapse for nonpayment. Later, if the insured makes the payment, the policy is reinsured.
When an insurer obtains reinsurance, it has sold the contract to another insurer, and no longer has direct responsibility for the policy.
Reinsurance is the process whereby the insurer transfers all or part of the risk to another company.

D- Reinsurance is the process of the insurer transferring all or part of D- Reinsurance is the process whereby the insurer transfers all or part of the risk to another insurer so they share the risk together.

19. Which of the following is defined as `an agreement between two or more parties enforceable by law?`
Contract
Insurance Policy
Tort
Agreement Clause

A-A contract is defined as an agreement between two or more parties enforceable by law.

20. What are the two types of torts?
Pure & Speculative
Legal & Non-Legal
Intentional & Unintentional
Broad & Basic

C-Torts are classified as intentional or unintentional (referred to as negligence).

21. Which of the following elements of a contract is/are the binding force?
Competent Parties
Legal Purpose
Consideration
Offer & Acceptance

C-Consideration is the binding force of a contract. What each party considers valuable is the consideration.

22. Which of the following describes when one party intentionally gives the other party false information in order to benefit from the unlawful gain.
Theft
Misrepresentation
Concealment
Fraud

D-Fraud occurs when one party intentionally gives the other party false information in order to benefit from the unlawful gain.

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:
Estoppel
Waiver
Indemnity
Pro-rata

A-This process of preventing a party from reasserting that right or privilege is known as estoppel.

24. According to the California insurance law, either party may rescind a contract for any of the following reasons EXCEPT:
If a representation is false in a material point, whether affirmative or promissory, the injured party is entitled to rescind the contract.
One party intentionally or unintentionally hides material information.
One party intentionally omits information from the other party.
Once a contract is signed, it can never be rescinded.

D-Never? Always beware of this word.

1. In which of the following marketing distribution systems does the agent represent more than one insurer and more than one company?
Direct mailing system
Direct writing system
Exclusive agency
Independent agency

D- An independent agency operates with a broker or brokers with several appointments at different companies. This broker is able to `shop` for the best prices and coverage.

2. Which of the following is a responsibility of the insured in an insurance contract?
Complete the application.
Give true statements and information on the application.
Send the application to the underwriting department.
Fully explain the policy to the client.

B-The insured`s responsibilities are to give true statements and information to the agent so a proper and complete application can be sent to the company.

3. Which of the following is NOT a type of authority given to agents?
Express authority
Implied authority
Customary authority
Apparent authority

C - There is no such thing as customary authority.

4. In a legal relationship, which authority does a principal (company) give the agent in writing?
Express authority
Implied authority
Customary authority
Apparent authority

A- Express authority is the specific authority a principal gives to the agent in writing.

5. Which of the following is NOT a source of information an underwriter might use to investigate an application in order to approve or reject it? application for approval or rejection?
Medical Information Bureau
Department of Industrial Relations
Department of Motor Vehicles
Financial Reports

B- The DIR is a department used to monitor labor, health, workers compensation, etc.

6. A broker can transact all of the following EXCEPT:
Life insurance
Property insurance
Casualty insurance
Disability insurance

A- A broker is any person who transacts insurance, other than life insurance, with insurance companies on behalf of clients.

7. Which of the following is NOT an action a person performs when transacting insurance?
Calling an insurer for a price quote
Solicitation of insurance
The actual execution of a contract
Any transactions that later result from the operation of the contract

A- When a person performs any of the following actions, he/she is transacting insurance: actual execution of a contract; negotiations preliminary to the execution of a contract; solicitation of insurance.

8. A person licensed as a broker/agent shall be deemed to be:
responsible for deciding if an application should be approved or rejected
acting as an insurance agent in the transaction of insurance placed with those for whom a notice of appointment has been filed with the Commissioner
involved in the business of financing the purchase of real estate
acting with the same authority granted a managing general agent

B- A person licensed as a broker-agent shall be deemed to be acting as an insurance agent in the transaction of insurance placed with those insurers for whom a notice of appointment has been filed with the Commissioner.

9. Which of the following is not true about the relationship between an agent and a solicitor?
An agent represents the company, whereas the solicitor is an assistant to an agent and has no binding authority.
A solicitor cannot be employed by more than one fire and casualty broker/agent at the same time.
An agent or broker cannot transact as a solicitor, but a solicitor can transact as a broker or agent.
A solicitor my give premium quotes over the phone, just like an agent.

C- An agent or broker cannot transact as a solicitor and a solicitor cannot transact as a broker or agent.

10. The application is the document that:
states the name of the insured, the premium, and other facts that help the insurer decide whether to accept or reject it.
is a temporary contract that usually lasts 30 days.
shows the insured has coverage currently in force.
shows proof of insurance.

A- The application is the document on which the applicant states facts and answers questions regarding the insurance he wants to purchase.

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

B- Errors and omissions is a type of liability insurance for non-medical professionals. It will pay for losses or the defense of lawsuits that might be filed against them.

12. Errors and omissions is a type of liability insurance:
for insured`s to use to protect themselves against a claim loss.
that agents use to protect themselves if they give incorrect advice or information to a client.
that indemnifies a client.
for protection against misrepresentation when filing a declaration page.

B- Errors and omissions is a type of coverage of liability insurance for nonmedical professionals that pays for losses or the defense of suits that might be filed against them.

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.

B- Advertising for an admitted carrier is acceptable for anyone appointed with that carrier.

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.

A- No person involved in the business of financing the purchase of real estate or personal property may require the purchase of insurance through a specific agent as part of the requirements in the purchase.

15. When dealing with insurance in connection with sales or loans, violating the legal provisions specified by California law is considered a:
felony
misdemeanor
fine
penalty

B- This violation is a misdemeanor.

16. It is against the law for an insurance licensee to offer free insurance to:
anyone, regardless the reason.
those who cannot afford it.
family and other relatives.
anyone as an incentive to acquire some other type of business.

D- It is against the law for an insurance licensee to offer free insurance to anyone as an incentive to acquire some other type of business.

17. 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 names gives the impression the licensee is authorized to conduct a type of business which 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.

D-Some companies take a political stand and are still granted the use of a name.

18. All Fire and Casualty Broker/Agents are required by law to display to the public:
The institution of education where they received their degree.
Their license to sell insurance displayed in their training room.
The types of insurance they are licensed to sell displayed in their personal office.
Their license to sell insurance, displayed in a place where it can be easily seen.

D- All Fire 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.

19. Agents must keep good records and make them available to the DOI for a period of:
1 year
2 years
3 years
5 years

D- All this information must be kept on file for a period of five years from the application date, following policy delivery.

20. When should a licensee notify the Commissioner of a change in address?
within the 30 day grace period
within the 10 day grace period
after notifying the company the licensee is employed with
immediately

D- Always immediately! Never as soon as possible, etc. as that would indicate a lack of importance.
1. An agent or broker may charge an extra fee for services that go above and beyond what are considered normal duties. Which of the following is NOT considered an extra service?
Application paperwork
Services performed as a convenience to the insured that result in extra expense to the broker or agent
Additional activities
Additional research

A- The extra services may include: a) Additional research; b) Additional activities; c) Services performed as a convenience to the insured that result in extra expense to the broker or agent.

2. After providing an opportunity for a hearing, the Commissioner may deny an application for a license based on the following reasons EXCEPT:
the applicant lied on the application
the applicant has acted as a licensed person before the license was issued
the applicant is disabled
the applicant was convicted of a felony

C-No disabled person may have an application denied strictly due to being disabled.

3. Every applicant for a license to act as an agent must have filed with the Commissioner:
a notice of appointment to do business in the state.
an application for employment with the company employed with.
a request for application prior to being licensed in the state.
a license number to be approved prior to receiving a license.

A- Every applicant for a license to act as an agent must have filed with the Commissioner a notice of appointment to do business in the state of California.

4. When can a partnership continue if a new partner joins?
After the Commissioner is notified and a new license is issued.
After the department is notified within 30 days and the changes are approved.
After the new partner is issued a license by the department and the old license is terminated.
After all the partners file a written notice with the Commissioner within 45 days.

B- The paperwork for this change needs to be submitted and received within 30 days of the change.

5. All of the following are examples of fiduciaries EXCEPT:
Executors
Administrators
Corporate directors
Vendor

D- A vendor doesn`t handle the affairs and funds of clients, but typically works as a retail service.

6. A Fire and Casualty Agent of more then 4 years is required to continue their education by completing:
a total of 55 hours during the first 2 years of licensing.
a total of 30 hours per license term.
a total of 50 hours during the first 2 years of licensing.
a total of 100 hours during the first 4 years of licensing.

B- Fire and Casualty agents or more then four years are required to complete 30 hours of continuing education. FC agents of less then 4 years are required to complete 25 hours per year.

7. To handle long term care insurance, an agent of more then four years must satisfy the continuing education requirement of:
8 hours of LTC training each license term.
an 8 hour course in each of the first 4 years of licensing.
a 4 hour course in each of the first 4 years of licensing.
a 4 hour course in each of the first 2 years of licensing.

A- 8 hours of LTC training each license term is required. (terms are 2 years)

8. Which of the following is NOT true about the California Insurance Code and the California Code of Regulations.
The CIC is written, updated, and changed by the California State legislature.
The CIC gives the Commissioner the power to institute rules and regulations which are called the California Code of Regulations.
The CIC and the CCR are a complete guide to ethical behavior.
The Department of Insurance implements, enforces and monitors the CIC.

C- These codes are not a complete guide for ALL ethical behavior.

9. In order to update, add or change a statute a bill must be passed by the legislature and then presented to the governor. If the statute is passed, it will go into effect:
immediately
on the next fiscal year
on the next January 1st
on the next August 1st

C- On the next January first if there are 90 days prior to the first of January. If not, the bill must wait until the following January first.

10. A licensee may surrender his/her license:
after notifying the Commissioner and a mandatory 30 day waiting period.
upon written notice to the Department of Insurance at any time.
after the termination of employment with an insurer.
after written notice to the Department and the Commissioner after the next January 1.

B- There is no requirement other than sending a written notice to the DOI.

11. If a license is in the possession of the insurer or the licensee`s employer, the licensee may surrender his/her license:
after notifying the Commissioner and a mandatory 30 days waiting period.
at any time.
after the termination of employment with an insurer.
after written notice is delivered to the Commissioner.

D- The most correct answer will include written notice.

12. An organization ceases to exist as an entity eligible to hold a license upon all of the following EXCEPT:
upon dissolution of a co partnership or upon any change in membership of a co partnership.
upon the termination of an association.
upon the termination of a key employee.
upon dissolution of a corporation.

C- Key employees do not affect the existence of an entity or its ability to retain a license.

13. What is the difference between an admitted and a non-admitted insurer?
An admitted insurer is a company that has met most of the qualifications designed by the DOI and has received a Certificate of Authority from the DOI to transact insurance in California, whereas a non-admitted insurer has not applied or has been denied.
An admitted insurer is a company that has met all of the qualifications designed by the DOI and received a Certificate of Authority from the DOI to transact insurance in California, whereas a non-admitted insurer has not complied or been denied.
An admitted insurer has met all the qualifications designed by the DOI but hasn`t received a Certificate of Authority because they are not licensed in the state of California and a non-admitted insurer is licensed in the state of California.
A non-admitted insurer is a company that has met all of the qualifications designed by the DOI and has received a Certificate of Authority from the DOI to transact insurance in California, whereas an admitted insurer has not complied or been denied.

B- Remember, admitted is `admitted` in California.

14. The marketing/sales department is responsible for:
receiving applications for insurance and then deciding if the company should approve or reject the application.
receiving claim requests, evaluating them, and paying those claims that are covered by the terms of the contract and rejecting those that are not.
advertising, promoting and distributing an insurer`s products to the public.
using claims history, statistics, and computer data to predict losses.

C- The marketing department doesn`t handle claims, applications, or premiums.

15. The actuarial department is responsible for:
receiving applications for insurance and then deciding if the company should approve or reject the application.
receiving claim requests, evaluating them and paying those claims that are covered by the terms of the contract and rejecting those that is not.
advertising, promoting and distributing an insurer`s products to the public.
using claims history, statistics and computer data to predict losses.

D- The actuarial department deals with `actual` facts and data to help in ratemaking, etc.

16. According to the qualifications of an insurer under the California Code a `person` can be any of the following EXCEPT:
a human being at least age 16 who is competent and not intoxicated
a corporation
a trust
an estate of a deceased person

A- Age limit is 18.

17. Insolvency means:
a company has more earned premium than claims made
a company has more claims than earned premium to pay for those claims
an insurer`s inability to meet its financial obligations when they are due
an insurer`s inability to meet the standards set by the DOI

C- Earned Premium is not typically a factor in the financial strength of a company. It involves premiums collected, expenses, and losses absorbed.

18. What is the role of the Commissioner and the Department of Insurance in relation to consumers?
The Commissioner and the DOI are responsible for regulating the conduct of agents and insurers.
The Commissioner and the DOI are responsible for making sure the public is given the opportunity to purchase insurance.
The Commissioner and the DOI are responsible for making sure companies bring in more income than claims paid out.
The Commissioner and the DOI are responsible for advertising to the public the roles and responsibilities of insurance.

A- Protection, regulation, and conduct of insurance companies and agents.

19. What is the significance of the SEUA case of 1944?
The court decided the federal government should regulate insurance.
The court exempted the insurance industry from the federal regulation required for most interstate commerce industries.
The court gave authority to the federal government to apply antitrust laws to the insurance business that was not being regulated by the state level.
The court established the right of the states, instead of the federal government, to regulate insurance.

A- This law overturned the Paul vs. Virginia legislation.

20. Which court case reversed the Paul vs. Virginia case of 1868?
McCarren-Ferguson Act of 1945
Public Law 15
SEUA case of 1944
Houghton-Mifflin case of 1938

C- No further explanation is needed here.

1. 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:
Commissioner
Governor
State Senate
Congress

B-The governor is the last to see and reject or approve the proposed bill.

2. Who administers the California Administrative Code of Regulations?
Commissioner
Governor
State Senate
Congress

A- The commissioner does not create the code, but administers it.

3. How is the Insurance Commissioner put into office?
Appointed by the previous Commissioner
Elected by the council
Elected by the citizens
Appointed by the governor

C- The commissioner is elected by the citizens of California.

4. Which of the following is a responsibility of the Commissioner?
To form and appoint a council that will regulate the code.
To write the law of insurance.
To change the law of insurance.
To enforce the law of insurance.

D- The commissioner enforces the code, but does not write it or change it.

5. 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.

A-The Unfair Practices regulation was designed to protect and regulate, but not to create a punishment. Punishments are typically determined by the courts.

6. 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.

C- Even though an agent/broker is required to display his license in a clearly visible place, not doing so does not constitute an unfair practices violation.

7. 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

D- The civil penalties that may be assessed for violations of unfair trade practices are $5,000 for each act in violation of the Code, whether intentional or not. However, if the act or practice is determined to be a willful violation the penalty increases to a maximum of $10,000 per violation.

8. 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
$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

C-$50,000 if the violations are committed with a regularity showing they are a general business practice.

9. 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.

D- Every insurance company in California is required to report its financial condition to the Commissioner every year, on or before March 1.

10. When the Commissioner takes over a company that is insolvent, his/her first responsibility is to:
sell all the company assets and pay any open claims.
liquidate the company and appoint new officers.
attempt to restore the company if possible.
shut down the company`s operations and start a full investigation.

C- The Commissioner`s first responsibility is to attempt to restore the company, if at all possible.

11. The State of California requires that all admitted insurers be a member of the:
Insurance Board Council
California Insurance Guaranty Association
California Code and Ethics Board
Privacy Protection Committee

B-The State of California requires that all admitted insurers be members of the California Insurance Guaranty Association.

12. 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.

D- An insurer cannot escape the condition of insolvency by being able to provide for its liabilities and reinsurance of all outstanding risks.

13. All of the following are efforts the Department of Insurance is taking 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.

C- This is not an accurate statement of efforts to combat insurance fraud.

14. If convicted of insurance fraud:
the fine can be up to $10,000.
the fine can be up to $50,000.
the fine can be up to $10,000 and up to 5 years in state prison.
the fine can be up to $50,000 and up to 5 years in state prison.

D-If a person is convicted of insurance fraud, the fine can be up to $50,000 (or as much as twice the amount of the fraud, if greater) and up to five years in state prison.

15. All of the following are penalties for unfair discrimination EXCEPT:
$2,500 for first violation
$5,000 for subsequent violations
$15,000-$100,000 for frequent violations
prison

D- Prison is not a penalty for a violation of the unfair discrimination laws.

16. Which of the following is NOT a type of rating law?
Legal Competition
Prior approval
File and use
Use and file

A- There is no such rating law as Legal Competition.

17. Which of the following describes use and file as a type of rating laws?
An insurance company must file rates with the commission, but can then use those rates until they hear back from the commission.
An insurance company uses the rate they determine appropriate first, and then file that rate with the commission.
Insurers compete with one another by quickly changing rates without review by the state regulators.
The insurer files policy rate information with the Department of Insurance. After filing, the insurer delivers evidence that the rates proposed are reasonable and fair. Then the insurer waits (30-60 days) for approval.

B- Some companies use the rate that they determine appropriate first and then file that rate with the commission.

18. Which of the following describes prior approval as a type of rating law?
An insurance company must file the rates with the commission, but can then use those rates until they hear back from the commission.
An insurance company uses the rate they determine appropriate first and then file that rate with the commission.
Insurers compete with one another by quickly changing rates without review by the state regulators.
The insurer files policy rate information with the Department of Insurance. After filing, the insurer delivers evidence that the rates proposed are reasonable and fair. Then the insurer waits (30-60 days) for approval.

D- With Prior Approval laws, the insurer must wait for approval before using the rates requested.

19. According to the Code, the word "person" means:
the client seeking insurance.
the insurer in an insurance contract.
any person, association, organization, partnership, business trust, limited liability company, or corporation.
any person capable of binding an insurance contract.

C- The term “person” can mean an individual, organization, etc.

20. Unless expressly otherwise provided, any personal notice required by any provision of the insurance code may be given by any of the following EXCEPT:
a third party
postage prepaid
mailing notice
notification at his residence or principal place of business

Unless expressly otherwise provided, any notice required to be given to any person by a provision of the code may be given by mailing a notice, postage prepaid, addressed to the person to be notified, at his residence or principal place of business in this State.

1. Insurance that cannot be procured through admitted insurers may, under certain circumstances, be placed with nonadmitted insurers. This is known as:
Non-standard lines
Surplus lines
Special surplus lines
Tort lines

B-Remember, special surplus lines is for special lines of insurance, such as aircraft and railroads.

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

C- Farm and ranch risks may be placed through any licensed agent/broker and are not considered special lines of insurance.

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:
LESLI
Commissioner`s list of surplus lines
OSHA
the SEUA

A- LESLI stands for: List of Eligible Surplus Lines Insurers

4. All of the following are categorized torts EXCEPT:
Intentional
Negligence
Adverse selection
Absolute/Strict

C- Adverse selection has to do with the tendency of people who are higher risks to purchase insurance, such as sick people who buy health insurance.

5. Before determining liabilty based on negligence, the following requirements must be met EXCEPT:
gross negligence
unbroken chain
duty
breach

A- Gross negligence, such as driving while intoxicated, is not required to prove negligence occurred. The act does not have to be intentional.

6. Proximate cause refers to:
an individual`s negligent behavior does not mean he will be held legally liable
an uninterrupted chain of events, resulting from negligence, causes injury or damage
a product causes bodily injury or property damage
a person should have acted a certain way in that circumstance, but did not.

B- The key phrase in this definition is “an uninterrupted chain of events”.

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:
Absolute liability
Slander
Libel
Misrepresentation

C- Because the damage was a result of WRITTEN material, this is called libel. Remember, Libel/Letter. A letter must be written, right? Slander/Spoken.

8. Punitive damages are:
a form of punishment imposed by the court upon the individual responsible for a loss.
amounts paid for actual loss or injury sustained.
losses of property or injuries resulting in medical bills.
losses that are not easily measured in dollar amounts.

A-Punitive damages are a punishment to make an example of a person. They are usually awarded so others will think twice before making the same mistake.

9. Amounts paid for actual loss or injury are known as:
Punitive damages
Compensatory damages
Specific damages
General damages

B-Compensatory damages compensate for the actual amount of monetary loss sustained by the damaged party. Pg. 82

10. Comparative negligence is best described as:
the injured party is partly responsible for the claim and the damages are reduced accordingly
part of the claim is paid for by the insured`s own insurance company; however, modification is made to the settlement amounts based on the idea of relative negligence, which assigns a percentage of carelessness to each party involved.
the injured party must be completely free of fault in order to collect.
people seeking insurance at the last minute when they need it.

A- Comparative negligence allows for comparison of responsibility between the parties involved.

11. In computing the loss payment for contributory negligence, the claim would:
be reduced by the percentage of fault for which the client is found responsible
pay the full amount of the claim under all circumstances.
pay nothing if the injured party didn`t meet the standard of self-protection
pay out the amount of the claim, minus the deductible.

C-Under the contributory negligence law, if I drove my car with worn brakes and got into an accident because I couldn’t stop in time, I could end up with nothing.

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.

A- Assumption of risk is when a person voluntarily places himself in a potentially dangerous situation.

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?
The California Worker`s Compensation Inspection Rating Bureau (WCIRB)
The Insurance Service Office (ISO)
Department of Insurance (DOI)
Department of Data and Statistics (DDS)

B-This is the function of the ISO, and it is more widely used than any other source in California.

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 purpose to furnish to the insurer upon request of the employer.

C- This description is an ISO function, not a WCIRB function.

15. All of the following are methods of managing risk EXCEPT:
Avoidance
Retention
Transfer
Rescission

D- Rescission is the act of canceling a policy from its inception.

16. Which method of managing risk is described as not purchasing insurance at all, or paying part of a loss when it occurs?
Avoidance
Retention
Reduction
Transfer

B- Retention means a person chooses 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.

17. Loss of rent, profits, and expenses necessary to keep a business running until the damage can be fixed are examples of:
Indirect loss
Direct loss
Loss exposure
Named perils

A- An indirect loss is caused by the effects of a direct loss.

18. Loss is defined as:
reduction, decline, or disappearance of value of the person or property insured in a policy, by a peril insured against.
Reduction of a company`s cost of operations including overhead, marketing, and commissions.
the percentage of each premium dollar a company spends on claims and expenses.
the amount of money an insurer pays for operation of the business.

A- A loss is any reduction of quantity, quality, or value of the insured property due to a covered loss.

19. Combined ratio is defined as:
the reduction, decline, or disappearance of value of the person or property insured in a policy, by a peril insured against.
The company`s cost of operations, including overhead, marketing, and commissions.
the percentage of each premium dollar a company spends on claims and expenses.
the amount of money an insurer pays out for operation of the business.

C- Combined ratio in insurance means the percentage of each premium dollar a company spends on claims and expenses.

20. When two or more perils happen at the same time, in sequence, and cause a loss, this is referred to as:
Open peril
Concurrent causation
Named peril
All-risk

B- Concurrent causation occurs when two or more perils happen at the same time or in immediate sequence and cause a loss.

21. Short rate cancellation is described as:
The termination of an insurance contract or bond with the premium charge adjusted in proportion to the exact time the protection has been in force.
A type of policy the insured can cancel without penalty. The insured receives a 100% refund of the premium.
A policy is terminated because the premiums have not been paid.
The method used when a policy is canceled by the insured before it reaches the expiration date.

D- Short rate cancellations only occur when an INSURED cancels the policy in the middle of a policy period.

22. Flat rate cancellation is referred to as:
Termination of an insurance contract or bond with the premium charge adjusted in proportion to the exact time the protection has been in force.
A type of cancellation whereby the insured can cancel without penalty. The insured receives a 100% refund of Premium.
A policy is terminated because the premiums have not been paid.
The method used when a policy is canceled by the insured before it reaches the expiration date.

B- With a flat rate cancellation, the policy is cancelled with no coverage given. All premiums are returned to the client as if a policy was never written. A policy may be rescinded and cancelled flat.

23. Lapse refers to:
terminating one`s insurance policy
continuance of an insurance policy beyond its original term
discontinuance of an insurance policy beyond its original term
a policy is terminated because the premiums have not been paid.

D- Non-pay cancellations are considered lapsed, since coverage was given for the period of time during which money was collected.

24. When someone willingly gives up the right to sue a person who was at fault, this is known as:
Arbitration
Mediation
Subrogation
Causation

C- Subrogation refers to the giving up of a right to sue a negligent party and allowing another party (usually the insurer) to pursue reimbursement for payments made to the insured.

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

D- A loss reserve is the estimated amount an insurer must set aside for potential, unknown claim payments.

1. If two or more perils occur at the same time and cause a loss, coverage may or may not be in effect if either of the perils is excluded. This is described as:
Subrogation
Direct loss
Concurrent Causation
Indirect loss

C- Coverage in a concurrent causation situation is typically determined by the courts. The damage done by a covered peril could be covered, but the damage from the excluded peril could be the responsibility of the insured.

2. In an insurance policy, which page contains information such as the insured`s name, information about risk, the date coverage begins, the premium, location of the property being insured, etc.?
Declarations
Conditions
Insuring Agreement
Exclusions

A- The declarations page, DECLARES who is covered, etc.

3. In an insurance policy, any modifications made to the regular contract are known as:
Conditions
Exclusions
Endorsements
Additional coverage

C- Endorsements change the normal policy language and restrict or expand coverage, depending upon the endorsement itself.

4. Property insurance policies contain many items EXCEPT:
Insured`s gender
Name of the insurer
Date the policy is effective
Perils insured against

A- The insured`s gender is not typically listed on the policy itself, but is part of the normal underwriting information gathered for the application.

5. What method of valuation means the company will decide the replacement cost of a lost item, then subtract depreciation from it and pay the rest?
Replacement Cost
Actual Cash Value
Market Value
Agreed Value

B- ACV is replacement cost minus depreciation.

6. When an insurer pays the full amount of a claim, based on an appraisal made at the time of the contract and the value determined before the loss occurs, this is referred to as:
Replacement Cost
Actual Cash Value
Market Value
Stated Value

D- A stated value amount is based on a written appraisal and description of the item insured.

7. In a standard mortgage clause, what happens in the event of a total loss?
The insurer pays the insured the full amount and the insured is expected to pay the lienholder.
The insurer pays the lienholder the full amount and the lienholder pays the insured the remaining amount.
The insurer pays the insured first and then the lien holder.
The insurer pays the lienholder first and then the insured.

D- The lienholder is paid first, unless the amount is very small. This amount is determined by each company.

8. When an insured holds more than one identical policy for the same property, but the policies differ in coverage amount or length of coverage period, this is known as:
Concurrent Policy Coverage
Standard Mortgage Clause
Special Lines Surplus Lines
Standard Policy Coverage

A- Concurrent policy coverage occurs when an insured holds more than one identical policy for the same property, but the policies may differ in coverage amount or length of coverage period.

9. The stipulations for non-renewing a policy include a notice of cancellation of the policy in writing to the insured at least _________ before the effective date of cancellation.
10 days
20 days
45 days
60 days

C- The insurer must notify the insured 45 days prior to the effective date of a non-renewal. Pg. 94

10. What is the main difference between the Standard Fire Policy (SFP) and the California Standard Form Fire Policy?
The SFP is standard for all companies in the U.S.
The SFP is standard for all companies in the U.S. except California.
The SFP has 165 lines of text and the California Standard Form Fire Policy has 158 lines of text.
The SFP is under federal laws, whereas the California Standard Form Fire Policy is under California state law.

C- The California Standard policy has been updated and revised to only 158 lines of text.

11. Under personal lines insurance, dwelling insurance, which of the following perils is NOT covered on a standard fire policy?
Earthquake
Fire
Lightning
Removal

A- Earthquake insurance is a separate policy or endorsement and is not covered as part of any Dwelling or Homeowners policy.

12. Which of the following is NOT a difference between the Dwelling policy and Homeowners policy?
In Dwelling forms, personal property coverage is optional, whereas in Homeowners it is included.
In Dwelling forms, only 10% of the Coverage C limit is available for personal property away from the residence premises, whereas in Homeowners it is covered worldwide.
In Dwelling forms, the liability coverage is available only by endorsement, whereas in Homeowners it is always included.
In Dwelling forms, theft is a broad form peril, whereas in Homeowners it is not.

D- Theft is NOT a broad form peril in Dwelling forms.

13. Which of the following is NOT a reason a home would be insured under a Dwelling policy rather than a Homeowners policy?
The dwelling is a seasonal dwelling and not used all the time.
The dwelling has only one unit.
The dwelling is a rental property.
The insured doesn`t want theft or liability coverage.

B- Homes that are one unit may be insured under the Dwelling program OR the Homeowners program.

14. What is the difference between an HO 2 and an HO 4?
With an HO 2 the applicant must be the homeowner and all perils are covered unless they are excluded, whereas in an HO 4 the insured must be the owner of a dwelling, only broad form perils are covered, and personal property may also be insured.
An HO 4 is for condominium owners and an HO 2 is for tenants of the condominium.
An HO 2 is written on a broad form basis and covers the owner of dwelling, whereas an HO 4 is a renter`s insurance policy.
An HO 2 is written on a basic form and an HO 4 is the special or open peril form.

C- An HO4 is a renter`s policy and an HO2 is a broad form homeowners policy.

15. What is the difference between an HO 3 and an HO 3 with an HO 15 endorsement?
An HO 3 is a policy that covers all risks, except those excluded, on both dwelling and personal property, whereas an HO 3 with an HO 15 endorsement is a policy that covers all risks on the dwelling.
An HO 3 is a policy that covers all risks, except those excluded, on the dwelling. Personal property is covered with broad form perils, whereas an HO 3 with an HO 15 endorsement covers all perils, inlcuding dwelling and person property.
An HO 3 covers the building under renter`s insurance, while an HO 3 with an HO 15 endorsement covers the building and all the property inside the building in renter`s insurance.
An HO 3 covers only broad form perils on a broad form, whereas the HO 3 with an HO 15 endorsement covers all perils.

B-The HO5, which is the HO3 with a 15 endorsement, covers the dwelling and personal property on an all risk basis.

16. Which of the following homeowners policies covers renter`s insurance?
HO 1
HO 2
HO 4
HO 8

C-The HO 4 is for tenants to cover their personal property.

17. Which of the following homeowners policies covers condominium units?
HO 6
HO 4
HO 2
HO 8

A- The HO 6 is for condominium unit owners.

18. What is the difference between an HO 2 and an HO 3?
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.
An HO 2 has dwelling coverage on a special form and personal property on a broad form, while an HO 3 has coverage for both dwelling and personal property on a broad form.
Both an HO 2 and an HO 3 have dwelling and personal property on a broad peril form.
An HO 2 has both dwelling and personal property on a special peril form, while an HO 3 has dwelling and personal property on a broad form.

A- The HO2 only covers broad form perils on both dwelling and personal property.

19. 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

D-The HO5 is a policy with all perils covered, HO4 is personal property no dwelling on a broad peril and HO8 form covers basic named perils.

20. What is the major similarity between an HO 2, HO 4, and an HO 6?
They are covered under an all-risk/open peril form.
They all insure against the same perils under coverage C.
They all insure against the same perils insured under coverage B.
They all insure against the same perils under coverage A.

Each of these forms has broad form perils on personal property, coverage C. The HO4 is a renter`s policy and has no dwelling coverage.

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.

D- This answer has nothing to do with broad form coverage.

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 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.
Coverage for accidental discharge or overflow of water or steam that occurs off the insured premises on the special form.

A- The broad form also requires 80% insurance to value.

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.

B- A relative must live in the same household or be a named insured on the policy to have coverage.

4. Under property coverage, which of the following is covered under coverage A?
Personal property
Garage
Dwelling
Other structures

C- The dwelling is coverage A.

5. In property coverage, what is specifically covered under coverage B?
all attached structures and outdoor personal property or equipment used to maintain or service the premises.
personal property commonly found in homes owned by the insured or other family members living with the insured.
the dwelling unit and all personal property located inside the premises.
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.

D- Coverage B is for other structures not attached to the dwelling.

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.

C- Loss of use is determined by a percentage of the dwelling limit of insurance.

7. Under HO property additional coverages, what is covered for debris removal expense?
after the 10% share cost fee, all costs to remove debris after a covered loss
80% cost to remove debris after a covered loss
Reasonable cost to remove debris after a covered loss
All cost to remove debris after a covered loss, unless excluded in the policy.

C-There must be a covered loss, or there is no coverage for debris removal.

8. Under HO property additional coverages, what is covered for removal?
Property that is removed from the insured`s premises to protect it from damage due to a covered loss.
Debris removed after a covered loss to property.
Earth removal after total loss of a dwelling due to an earthquake or landslide.
Any and all removal due to loss from a covered peril.

A-Only the removal of property to protect it from further loss is covered under Removal.

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?
HO 2
HO 3
HO 4
HO 6

B- The HO3 has removed the exclusion for perils that work in tandem; an earthquake causes a fire.

10. In the event of a loss, the insured has the responsibility to do all of the following EXCEPT:
Provide a copy of the police report to the insurer.
Notify the police if the loss is a result of theft.
Protect the property from further damage.
Report the loss as soon as possible.

A- The insurer generally obtains a copy of the police report but may request the insured provide one. However, this is not a responsibility of the insured in the event of a loss.

11. Under Section 1 Condition - Loss Settlement on an HO3, which of the following situations shows the insured is covered adequately in the event of a loss?
The insured has $70,000 coverage on property worth $100,000.
The insured has $40,000 coverage on property worth $90,000.
The insured has $170,000 coverage on property worth $300,000.
The insured has $80,000 coverage on property worth $100,000.

D- The HO3 has an 80% coinsurance clause.

12. Under Section 1 Condition - Loss Settlement, which of the following formulas is used to determine payment to an insured in the event of a loss?
Insurance carried, divided by the loss, times the insurance required, equals the loss payment.
Insurance required, divided by the loss, times the insurance carried, minus the deductible, equals the loss payment.
Insurance carried, divided by the insurance required, times the loss, minus the deductible, equals the loss payment.
Insurance required, divided by the insurance carried, times the loss, minus the deductible, equals the loss payment.

C- Carried over required, multiplied by the loss amount, minus the insured`s deductible equals the amount the insurer will pay. This is the coinsurance formula.

13. According to the ordinance or law exclusion, which of the following does NOT apply?
This coverage can be added by endorsement.
This coverage is required by state law.
This exclusion also applies to the California requirement to provide restroom facilities compliant with the American Disability Act (ADA).
The coverage applies to upgrades to a property due to building code changes by the city.

B- This coverage should always be recommended, but is not required. Pg. 108

14. Which of the following is NOT an option of the California Residential Property Insurance Disclosure Statement?
Actual Cash Value
Fair Market Value Cost Coverage
Guaranteed Replacement Coverage
Extended Replacement Cost Coverage

B-The fair market value amount is paid in an Actual Cash Value settlement, but there is no coverage called "Fair Market Value Cost."

15. Liability and Medical Payments are the two major coverages provided in:
Section I of the Homeowners form
Section II of the Homeowners form
Section 1 of the Commercial form
Section II of the Commercial form

B- Section II of the Homeowners policy is defined by two coverages; Liability and Medical.

16. Under Section II of the Homeowners form, what does coverage E (personal liability) cover?
This coverage will take affect if the insured is injured and needs medical attention.
This coverage will take affect if the insured`s business is sued.
This coverage will take affect if a claim is made against the insured for damages due to bodily injury or damage to the property caused by the insured’s negligent acts.
This coverage will take affect if the insured is hurt at work and needs medical attention.

C- The Personal Liability policy will pay for damages the insured is legally obligated to pay due to negligent acts committed by an insured.

17. Under Section II - Additional Coverages, which of the following is NOT included?
Medical Payments to Others
Loss Assessment Coverage
Damage to the Property of Others
First Aid to Others

A-Medical Payments to Others is part of Section II, but not as an additional coverage.

18. Which of the following would NOT be covered under Section II of Medical Payment to Others?
A person injured on the insured`s property who was granted permission to be there by the insured.
The insured`s family member not living on the property with the insured and not a named insured.
The insured`s pets that were injured on the insured`s property.
Someone who trips over a water hose on the insured`s property.

C- An injured pet is not covered, but any injury they cause is covered.

19. Which of the following is true regarding vehicles covered and not covered under Section II?
All the insured's vehicles are covered.
All the insured's vehicles are excluded, except trailers being towed by the vehicles.
All the insured's vehicles and trailers towed by the insured are excluded from coverage.
All the insured's vehicles are excluded, except the primary vehicles listed on the policy.

C- A Personal Auto Policy needs to be purchased for any coverage to apply in or on a vehicle. Pg. 111

20. Which of the following properties are NOT included in insured locations and residence premises under Section II of the Homeowner`s policy?
Vacant land
Land on which a residence is being constructed
Insured`s cemetery plot
Insured`s work office

D- Remember, this is Section II Liability and Medical. Business operations may be covered by endorsement, but are not INCLUDED as a covered location.

21. The Homeowners Watercraft Endorsement under Section II includes all the following EXCEPT:
Use of a boat in a racing competition.
Coverage for liability exposure on scheduled boats.
Coverage for medical payments exposure on scheduled boats.
Property damage for the boat itself is not covered.

A- Racing of watercraft is specifically excluded for Section II liability and medical.

1. 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.

D-The Mobile home endorsement is available for the purpose of covering the structure as a personal dwelling. Pg. 111-112

2. Which HO endorsement covers loss due to personal injury (false arrest, libel, slander, defamation of character and invasion of privacy?
Scheduled Personal Property endorsement
Guaranteed and Extended Replacement Cost Options
Personal Injury endorsement
Personal Property - Replacement Cost endorsement

C-The Personal Injury endorsement is used when a policy does not include this coverage under the Liability portion of the policy.

3. In an Inland Marine policy, which of the following is NOT an advantage of filed lines?
They have standardized forms.
The ability to be included in a commercial package policy.
The simplified rating (discounts).
They include Electronic Data Processing and Contractors Equipment floaters.

D-These two floaters are non-filed lines floaters.

4. 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

D- 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.

5. Why is mobility a common characteristic of many types of property insured under Inland Marine contracts?
Mobility covers property while it is in transit from one location to another.
Mobility covers the expense of transporting goods from one location to another.
Mobility covers moveable property, whether or not it is actually moved.
Mobility covers the vehicles used to transport property from one location to another.

C-Mobility means moveable property and doesn`t identify anything else. It is a criteria for Inland Marine floaters. Property must be moveable.

6. In an Inland Marine policy, an annual transit policy is usually provided:
on an open peril basis.
on a named peril basis.
on an open peril basis with a few exceptions.
on a special form.

B- Named perils is all that can be purchased on an Annual Transit policy.

7. In an Inland Marine policy, what is the difference between the Personal Articles Floater (PAF) and the Homeowners Scheduled Personal Property Endorsement?
The PAF must have an appraisal and the Scheduled may not.
The PAF provides more coverage than the Homeowners Scheduled Personal Property Endorsement.
The Homeowners Scheduled Personal Property Endorsement provides more coverage than the PAF.
The PAF provides coverage for all perils and the Homeowners Scheduled Personal Property Endorsement provides coverage for perils included in the policy.

A- The Personal Articles Floater covers mysterious disappearance and must have an appraisal to value it.

8. 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

D- A DVD collection does not have a limit of insurance on it, other than the Coverage C limit.

9. The Watercraft endorsement provides __________ coverage for Liability and Medical Payments to Others for scheduled boats.
full
extended
moderate limits of
very limited

C- “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.

10. 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
Ocean Marine

A- The boat owners policy is for personal watercraft and can cover damage done to the boat itself.

11. In a boat owner`s policy, which of the following is NOT considered typical coverage?
Liability
Medical Payments
Physical damage coverage
Hull

D- Hull coverage is not for personal watercraft, but is used when a commercial vessel is owned.

12. Which of the following is not covered under a yacht policy?
Trailer
Hull
P and I (protection and indemnity)
Liability

D-Liability in a yacht policy is included in the P & I coverage. Protection and indemnity is for liability, and workers compensation is for workers on a vessel.

13. Which of the following provides coverage for injured crewmembers? This coverage is also known as Jones Act coverage.
Personal Articles Floater
P & I (protection and indemnity)
Workers Compensation
Longshoreman and Harbor Workers

B- Protection & Indemnity combines Liability and Workers Compensation coverage, but the Longshoreman and Harbor Workers coverage is specifically for Workers Compensation coverage.

14. Which organization was created to help create earthquake coverage?
ISO
NFIP
CEA
FEMA

C- California Earthquake Authority.

15. Which of the following is NOT a provision provided by the California Earthquake Authority?
$2500 coverage on pools, fences, driveways, landscaping, and other structures.
Dwelling coverage with a deductible equal to 15% of the dwelling limit.
$5000 Personal Property coverage.
Optional coverage: $10000 building code upgrades.

A- Pools, etc. are not covered for earthquake damage.

16. All of the following are disadvantages of using the earthquake endorsement, EXCEPT:
The coverage usually costs more than a separate policy.
The deductible may be lower
The deductible, typically 15% of the dwelling limit, applies to each coverage separately.
The deductible applies only once on a separate policy.

B-The deductible on an endorsement may be lower, depending on the loss. If a contents only claim is filed, the deductible for the contents is the same percentage as the dwelling. On a separate policy, the dwelling deductible must be satisfied before the policy pays anything, and that can be a significant amount of damage.

17. The FAIR plan does all of the following, EXCEPT:
Establish a list of all surplus line insurers that have met the recognized requirements for such title and shall issue a master list at least semiannually.
Assures stability in the property insurance market for property located in California.
Provides for equitable distribution among admitted insurers of the responsibility for insuring qualified property for which basic property insurance cannot be obtained through the normal insurance market by the establishment of a FAIR plan.
Encourages maximum use of the normal insurance market provided by admitted insurers and licensed surplus line brokers.

A-This list is the LESLI list and has nothing to do with the FAIR plan.

18. Which of the following describes a person eligible for insurance through the FAIR plan?
Any person who has insurable interest in real or tangible personal property.
Any person who cannot afford insurance through the insurer of their choice.
Any person who has insurable interest in personal property and currently has insurance that cannot afford extended coverage from insurers in the standard market.
Any person who has insurable interest in real or tangible personal property who, after diligent effort, has been unable to obtain basic property insurance through normal channels from an admitted insurer or licensed surplus lines broker.

D-The individual or agent must show efforts to place the risk through an admitted or non-admitted carrier before going to the FAIR plan. It is designed only for high risk properties.

19. Any licensed agent or broker may submit risks to the FAIR plan:
but there is no binding authority.
and authority is granted upon submission.
but authority is not in affect until after a 30-day grace period.
with immediate authority in affect.

A-An agent never has binding authority with the FAIR plan.

20. Insurance against direct loss to real or touchable personal property at a permanent location in those urban areas chosen by the commissioner, from perils insured under the standard fire policy, extended coverage endorsement, vandalism and malicious mischief and such other insurance coverages that can be added in regard to such property by the industry placement facility with the approval of the commissioner, but will not include insurance on automobile or farm risks is known as:
Indemnity
Insurance
Broad Property Insurance
Basic Property Insurance

D- Basic Property insurance is all that is offered with a FAIR plan policy. Some other coverage may be added but it is a very “basic” fire policy.

21. What is the difference between the NFIP Emergency Program limits and the NFIP Regular Program limits?
The Emergency Program limits cover more for building and contents than the Regular Program limits.
The Emergency Program limits and the Regular Program limits cover the same amount for building and contents.
The Emergency Program limits cover less for building and contents than the Regular Program limits.
The amount of coverage for contents is greater than coverage for the building in the Emergency Program limits.

C- The Emergency program limits with the NFIP are more restricted due to community safeguards still being implemented.

1. All of the following are ways to show financial responsibility according to the Financial Responsibility Law EXCEPT:
Purchase a surety bond for $25,000 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.

A- A Surety Bond will not be sufficient for proof of financial responsibility.

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.

C-Personal autos must not be commercially owned.

3. What is the difference between "share-the-expense car pools" and "for-hire" situations?
“Share-the-expense car pools” are not covered in a personal auto policy and “for-hire” are.
“Share-the-expense car pools” are covered in a personal auto policy and “for-hire” are not.
Each person is covered in a "for-hire" situation, whereas each person in a "share-the-expense car pools"
There is no difference between the two because both carry the same coverage.

B-A Taxi or driver for a fee is not covered under personal auto policies as they become livery conveyance, which is excluded on the PAP. Pg. 122

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.

B- 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.

5. How many days advance notice of cancellation due to non-renewal does an insurer need to give an insured?
10 days
15 days
20 days
30 days

D- 30 days written notice due to non-renewal of an auto policy.

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?
10 days
15 days
20 days
30 days

C-20 days advance notice is required if an insured is being cancelled for an increased hazard, etc.

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?
3 days
4 days
5 days
6 days

B- 4 days of collision coverage is awarded to a current insured for any newly acquired car when the insured carries liability coverage only.

8. What is California`s minimum requirement for coverages A, B, C (Liability, Medical, Uninsured Motorist) in an auto policy?
100/300/500
100/150/100
15/30/5
15/30/10

C- Hope they don’t hit my car! $5000 property damage won`t be enough!

9. In an auto policy, coverage A, B, and C respectively represent:
Liability, Uninsured Motorist, and Medical
Liability, Medical, and Uninsured Motorist
Medical, Liability, and Uninsured Motorist
Uninsured Motorist, Liability, and Medical

B- These coverage sections are also referred to as Parts.

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

A-Loss of Income is paid to a damaged party at $50 per day.

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.

C- Liability coverage is for the insured`s acts to another party.

12. Under Coverage B - Medical Payments in a Personal Auto Policy, if the Medical Payments coverage limit is $8,000 and 4 people are injured, what is the maximum that may be payed to each person?
$8,000 to each person.
$2,000 to each person for a total $8000 paid out.
$8,000 to each person, if his name is on the policy.
$2,000 to each person, if his name is on the policy.

A- The Medical limit stated on the policy is a per person limit.

13. All of the following are true about Uninsured Motorists coverage, EXCEPT:
Uninsured Motorists coverage only applies to bodily injury.
The other driver does not have to be liable for the injuries or damage to property.
The owner of the vehicle that is responsible for the loss has purchased Liability insurance, but the company is insolvent.
The limit for property damage when an insured has no collision coverage is $3,500.

B- Another party must cause the damage or injury and have no insurance to sue against, in order to prove that Uninsured Motorist coverage applies.

14. Which of the following situations is a personal auto policy excess?
The insured lets a neighbor borrow his car.
The insured lets a family member who does not have a license or auto insurance use the car.
The insured leaves her car at a facility (such as a garage, parking lot, or valet) and it is involved in an accident.
The insured violates the law with his vehicle and the car is impounded.

C- In this instance, the garage or parking facility could be held liable.

15. Under a Personal Auto policy, if the deductible for collision is $500 and $250 for Other Than Collision, what would the insurer pay if he had a covered collision totaling $3,000 in which glass was also broken?
$2,500
$500
$3,500
$3,000

A- The most the insured is responsible is the higher of the deductibles. Two separate deductibles would not have to be paid.

16. When are personal effects that are transported in the vehicle covered?
When the loss was caused by another driver.
When the personal effects are listed in the policy.
They are not covered unless listed on an endorsement.
They are not covered.

D- Personal items are covered under a home or renters policy.

17. Which of the following is NOT covered under collision coverage?
Impact with an animal.
Impact with another vehicle.
Impact with another flying object (wall, tree, pole, etc.).
Upset (flipping the vehicle over).

A- This would be considered a comprehensive loss.

18. What is the purpose of Named Non-owner Coverage?
This endorsement is for people who don`t own a vehicle but still drive (rented, public transportation, company vehicle, etc.)
This endorsement allows nonowned vehicles furnished for the insured`s regular use (company car).
This endorsement allows the PAP to cover vehicles such as motorcycles, ATVs, dune buggies, and motor homes.
This endorsement covers expenses incurred in the event of a total theft.

A- This is designed to cover an individual who owns no vehicles but temporarily drives the vehicles of others.

19. What is the purpose of Extended Nonowned Liability Coverage?
This endorsement is for people who don`t own a vehicle but still drive (rented, public transportation, company vehicle, etc.)
This endorsement allows nonowned vehicles furnished for the insured`s regular use (company car).
This endorsement allows the PAP to cover vehicles such as motorcycles, ATV`s, dune buggies, and motor homes.
This endorsement covers expenses incurred in the event of a total theft.

B- The key is “regular use.” This endorsement is needed if an insured regularly uses another person`s vehicle.

20. Which of the following coverages would be useful if you bought a new car, and a month later you lose control of the car and total it?
P & I (protection and indemnity)
New Auto Coverage
GAP Coverage
Liability Coverage

C- GAP coverage will help pay the difference between Blue Book value and the loan amount.

21. Which of the following is NOT true of a policy with Non-standard Physical Damage coverage?
This coverage is for people who have a less than favorable driving record.
This coverage is for people who have an excellent driving record.
This coverage typically covers only the driver on the policy.
This coverage is often purchased when an insured needs a physical damage policy but only qualifies for the CAARP plan.

B-This policy is more expensive due to the driving record of a person and would not be chosen if you have an excellent record.

22. Which of the following organizations provide auto insurance for motorists who are unable to obtain coverage in the conventional market due to their driving records or extraordinary circumstances?
FEMA
NFIP
CAARP
CEA

C- CAARP is California Assigned Auto Risk Plan and is designed to assist those who may find it difficult to purchase insurance at a reasonable rate.

23. Which of the following is NOT a requirement for CAARP?
Certified Producer in any state in the U.S.
Nonresidents who own a vehicle registered in California.
California residents.
Members of the military stationed in California.

A- CAARP producers are licensed and appointed to sell in California but this is not considered a requirement to purchase insurance.

24. Which of the following is NOT a difference between a Personal Auto Policy and a Motorcycle endorsement?
Driving experience
Medical coverage
Liability coverage
Extra Payments coverage

B- Medical coverage is not a variable in these two policies.

25. Which of the following is NOT a benefit of having an Umbrella or Excess policy?
The Umbrella coverage provides a minimum of $1,000,000 in additional coverage.
The extra coverage provided adds protection for a higher amount of coverage at an inexpensive rate.
An Umbrella policy will cover all perils and medical payments in an auto accident.
Umbrella coverage policies can provide excess protection over Personal Liability coverage as well as other types of liability programs.

C- “All perils” is the key phrase here. No policy covers all perils.

26. To be eligible to receive the Low Cost Auto Insurance Program a driver must meet all of the following, EXCEPT:
Have no more than one property-damage-only accident in which he was at fault.
Have no felony or misdemeanor vehicle code violations on record.
The vehicles insured cannot be valued at more than $12,000 by the DMV.
Be at least 16 years of age.

D- The insured must be at least 19 years old to be eligible.

27. 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.

B- This bureau protects the public, but does not assist them in buying insurance.

28. Which of the following is NOT true of Proposition 103?
Prop. 103 allows insurers to refuse a Good Driver Discount to an insured if the insured has had 3 or more auto claims in a one-year time period.
Prop. 103 states that all rating information provided to the commissioner must be available for public inspection.
Prop. 103 eliminated rating organizations.
Advisory organizations which still exist must file loss costs and forms with Rate Regulation Division.

A- The insured cannot have more than one point in an auto accident and no bodily injury or death in order to receive the good driver discount.

29. Which of the following is NOT true of the Good Driver Discount according to Proposition 103?
Prop. 103 states that an insurer cannot refuse to write an applicant who qualifies for a good driver discount.
A good driver discount should be at least 20% below the rate the insured would otherwise have charged for the same coverage.
Prop. 103 requires that the insured purchase homeowners insurance to be eligible for the good driver discount.
A good driver discount applies if the following criteria are met: licensed driver has not had one violation point during the past three years, was not the driver of a motor vehicle involved an accident that resulted in death or in total loss.

No requirement to purchase other insurance can be dictated.
1. Which of the following would be considered a "module"?
Conditions
Business Auto
Exclusions
Declarations

A-Modules are the coverage parts that make up a package policy, such as GL or Auto.

2. All of the following are true about the cancellation of a commercial policy, EXCEPT:
10 days notice must be given for non-payment of premium and 45 days notice for all other reasons.
The insurer must be able to prove the delivery of a notice of cancellation.
The first named insured may cancel the policy at any time.
All refunds will be mailed to the first named insured on the policy.

B-No proof of delivery is needed. Only proof of mailing.

3. The insurer may examine books and records of an insured:
Annually.
Only after a 30 day notification to the insured.
Only with the consent of the insured.
At any time and for up to three years after the policy expires.

D-The insurer may examine books and records at any time and for up to 3 years, as premiums are determined based on the audit information provided by the insured.

4. In a commercial property policy, concealment, misrepresentation or fraud could cause a policy to:
Be voided, denied or cancelled.
Pay only a portion of a covered loss.
Cancel, effective the next renewal.
No changes would be made.

A-This is a common condition in the commercial property policy.

5. Which of the following is NOT considered subrogation?
The rights to sue a third party are transferred to the insurer.
An insured assists an insurer in seeking recovery for payments made.
The insured collects damages from the responsible party.
The insurer collects damages from the responsible party.

C- Subrogation is the transferring of rights to recover damages from a third party to the insurer.

6. The declarations page of a commercial policy will state which of the following:
Premium amount and coverage limits.
Named insureds.
Covered property.
All of the above.

D-All of the above are included on the declarations page.

7. All of the following may be written on a monoline basis, EXCEPT:
General Liability
Inland Marine
Ocean Marine
Boiler & Machinery

C-Ocean Marine is a completely separate policy type.

8. On a commercial package policy, "You" and "Your" refers to:
Any person with financial interest in the property.
The named insured and resident spouse.
An individual, corporation, or other entity.
All of the above.

B-Not just anyone can be considered covered on the policy. They must be NAMED or be a resident spouse.

9. When a covered loss occurs and two policies are in force for the same property, with the same terms and conditions, how will the loss be settled?
One will be Primary and the other Excess.
The policy with the highest coverage will pay first.
Each company will pay their share of the loss on a pro rata basis.
Neither policy will pay.

C-Only when the policies have the SAME terms and conditions will they pay their portion on a pro rata basis. If the terms and conditions of the two policies are DIFFERENT, then one is primary and the other excess. Payment is determined by the companies involved, considering inception dates, coverage, etc.

10. Which of the following is NOT covered property under a Builders Risk form?
Scaffoldings.
Lumber and other building supplies.
Temporary structures on the premises.
Trees, plants and shrubs.

D-There is no coverage on the Builders Risk policy for any trees, plants or shrubs.

11. Coverage on a Builders Risk policy ceases when:
The insured`s interest in the property ceases.
90 days after construction is completed or 60 days after the property is occupied by the purchaser
Only B is true.
Both A & B are true.

D-When the builder no longer has financial interest or has ownership more than 90 days after its completion, the policy ceases.

12. The modular concept refers to:
Parts of a package policy.
Endorsements within a package policy.
The declarations and conditions sections of a package policy.
A monoline policy.

A-Modules are the coverage parts that make up a package policy. (Ex. GL, Auto) Pg.139

13. Coverage A of the Commercial Building and Personal Property coverage form covers which of the following:
Buildings and Separate Structures
Personal Property
A riding lawn mower.
Both A & C are true.

D-A riding lawn mower is considered pert of Coverage A, as it is used to maintain/service the property.

14. Coverage B of the Commercial Building and Personal Property coverage form covers all of the following EXCEPT:
Furniture and office supplies
Copy Machines
Property off the premises
Postage Meters

C-Property off premises is not included in the policy but added with an extension of coverage. This need would be expressed by the insured and added by way of extension. An additional premium charge would apply.

15. A Builder's Risk policy:
Must reflect a Coverage A limit of 100% of the value of the property.
Must reflect a Coverage A limit of 80% of the value of the property.
May be insured for any limit.
None of the above.

A-The Builder's Risk policy has a 100% coinsurance clause. Pg. 145

16. Coverage C of the Commercial Building and Personal Property coverage form does NOT cover:
Property at a dry cleaners
Property being transported in a vehicle.
Property on consignment
Property at a repair shop

B-Property in a vehicle must be within 100 feet of the building or the property must be covered on a Motor Truck Cargo form.

17. Which of the following is a coverage extension on the Commercial Building and Personal property coverage form?
Indoor and Outdoor fixtures
Stock or Inventory
Improvements and Betterments
Debris Removal

D-Debris removal is a coverage extension with no extra premium charge and does not reduce the limit of insurance.

18. All of the following are true regarding the Commercial Building and Personal Property form EXCEPT:
Property at a fair or exhibit is not covered.
The coverage extension for Fire Department Service charges are identical to that of the Homeowners policy.
The coinsurance clause must be met for any coverage extensions to apply.
Pollution Cleanup is a coverage extension.

B-The extension for Fire Department Service Charges is double the amount for Homeowners policies. ($1000)

19. Under the Building and Personal Property coverage form, vacancy means:
To be completely void of property.
Insufficient business property present to conduct customary operations.
100% of the building is not rented or occupied.
A property left unattended for more than 60 days.

B-The premises does not need to be completely empty to be considered vacant.

20. The normal vacancy condition under a commercial lines policy can be waived by:
Supplying written notice to the insurer at least 30 days prior to a loss.
Adding a Vacancy Permit endorsement.
Occupying at least 80% of the property being insured.
This condition cannot be waived.

B-A vacancy permit is needed in order to waive the condition of vacancy under a Building and Personal Property coverage form.

21. If a building has been vacant for 90 consecutive days prior to a loss, which of the following is false?
The loss will not be covered if due to vandalism.
If the loss is due to a fire it will be covered, but payment is reduced by 15%.
The loss will not be covered if due to theft or attempted theft.
All of the above are true.

D-The policy states if a property is vacant for more than 60 days and the loss is due to vandalism, theft, attempted theft, sprinkler leakage, glass breakage or water damage, there is no coverage. All other losses are reduced in payment by 15%.

22. An apartment building is insured for $300,000 with an 80% coinsurance clause. The property is valued at $500,000. A covered loss occurs in the amount of $200,000. How much will the insurance company pay?
$200,000
$120,000
$150,000
Nothing.

C Apply the coinsurance formula: 80% of the value of the home ($500,000) is $400,000, which is what they should have carried. Divide the limit they carried ($300,000) by what they should have carried ($400,000). Multiply that figure by the loss amount. When there is no known deductible, figure it as zero.

23. Which of the following is NOT considered a duty of the insured after a loss occurs?
Supply written notice of a loss within 60 days.
Repair the damaged property and submit invoices to the insurer for payment.
Protect the property from further damage.
Allow the insurer or its representatives to inspect the property.

B It is not a duty of the insured to do repairs and be reimbursed.

24. Tenant improvements and Betterment Losses are valued at:
Actual Cash Value
Replacement Cost
Replacement Cost minus Depreciation
Tenant Improvements and Betterments is not covered.

A-Tenant Improvements & Betterments is written on an ACV basis, but RC is available.

25. Which of the following is a disadvantage of having a coinsurance clause on a commercial policy?
Keeping up with property replacement values.
Premiums are generally higher.
Small
None of the above.

A-Keeping informed of building cost increases is sometimes a difficult thing for the insured to do.

1. Which Commercial Property Causes of Loss form has the broadest coverage?
Basic Causes of Loss
Specified Causes of Loss
Special Causes of Loss
None of the above are Commercial Causes of Loss forms.

C-Special Causes of Loss is an All Risk form.

2. Which of the following forms is NOT considered a Named Perils form?
Basic form
Broad form
Special form
Specified form

C -The Special Form does not name any perils, since "everything is covered unless it`s excluded."

3. The Commercial Broad Form Causes of Loss include all of the following EXCEPT:
Breakage of Glass
Collapse
Ordinance or Law
All of the above are included.

C-Ordinance or Law is a common exclusion in all 3 Causes of Loss forms.

4. Glass Breakage under a Broad Form Causes of Loss is covered for up to:
$500 per occurrence
$1,000 per occurrence
$300 per plate or pane
There is no coverage under the Broad form.

A-Without a glass endorsement, the policy limits glass breakage to $500 per occurrence.

5. Which of the following is NOT an excluded loss under the Commercial property forms?
Contractual Liability
Earth Movement
Mechanical breakdown
Volcanic Action

D-Volcanic Action is a covered peril under the commercial property form. Contractual Liability referrs "liability," not property. Earth Movement is always covered by endorsement or a separate policy, and Mechanical Breakdown is covered through a Boiler & Machinery policy.

6. All of the following are exclusions on the Commercial Causes of Loss Special form policy EXCEPT:
Wear & Tear
Insects, Birds, Rodents and other animals
Sinkhole collapse
Faulty workmanship

C-Sinkhole Collapse is covered on all 3 Causes of Loss forms, but the cost to fill the hole is not covered. Pg. 153

7. Which of the following is NOT a covered peril under the Specified Causes of Loss form?
Water damage from accidental discharge of water or steam
Falling Objects
Volcanic Action
Leaking from fire extinguishers and equipment

A-Water damage is not a Specified Cause of Loss. Pg.154

8. Business Income and Extra Expense coverage would be necessary in which of the following cases?
A dry cleaners has a fire and must relocate temporarily to avoid losing customers.
A contractor has his tools stolen from a job site.
A grocery store suffers damage to stock when an earthquake collapses a shelf.
A restaurant owner forgets to order enough product and suffers a loss of business income.

A-Business Income and Extra Expense only applies after a covered peril and is designed for businesses that would not be able to operate for a period of time if a loss occurred.

9. Business Income from Dependent Properties covers:
a loss that occurs at a property the insured does not own, but one in which they have a financial interest.
a loss that occurs to a property the insured owns, but rents to a business operation.
a loss that occurs at a property the insured does not own, but depends upon to run their business.
All of the above would need Business Income from Dependent Properties coverage.

C-There must be a direct dependency on the other location for supplies, services, storage, advertising, etc.

10. Which of the following perils are NOT covered under the Glass Coverage form?
Breakage
Chemical Damage
Ornamentation
Fire Damage

D-Fire damage is already covered under all three Causes of Loss forms on the CPP.

11. The Glass Coverage form pays:
Actual Cash Value without limitation per plate or pane.
Replacement cost up to the specified limit on the policy.
Actual Cash Value with a limit of $100 per plate or pane and $500 per occurrence.
Actual Cash Value without limitation per plate or pane, unless stated as replacement cost on the policy.

D-The Glass Coverage form can be written with replacement cost coverage, but this must be stated on the policy. There is no limit of insurance on this endorsement.

12. What is the formula for calculating the coinsurance penalty?
Amount required, divided by actual amount carried, multiplied by loss, minus deductible
Amount carried, divided by required amount, multiplied by loss, minus deductible
Amount of the loss, divided by the actual amount carried, minus the deductible
Amount carried, divided by required amount, divided by loss, minus deductible

B - Carried = $60,000 X Loss $10,000 - ded.= Loss Pmt. -------------------- $7,500 Required = $80,000

13. How much would you receive if you carried $60K, rthe equirement was $80K, your loss was $20K, and the deductible was $1K?
$7,500
$15,000
$14,000
$20,000

C - $60,000 divided by the required $80,000 X $20,000 - $1000 = Loss Pmt. of $14,000

14. How much would you receive if you carried $40K, the requirement was $30K, the loss was $10K, and the deductible was $1K?
$12,333.33
$10,000
$9,000
$6,500

C – First look at the amount required and see if the amount carried was enough. If it meets the 80% coinsurance, then the full amount is paid for a covered loss., minus any deductible.

15. Which one of the following is not a time limit for an insurer to notify a lender by written notice?
10 days before the effective date on a non-payment of premium notice
10 days before the expiration date of a non-renewal
20 days before the effective date for any other reason other than non-payment or non-renewal
30 days before the effective date for any other reason other than non-payment or non-renewal

C – 30 days is required for anything other than non-pay or non-renewal. Pg. 151

16. Which form would you buy if you wanted a Contingent Business Interruption form?
Business Income Coverage Form
Leasehold Property Damage Coverage Form
Mortgage Holders Interest Coverage Form
Business Income from Dependent Properties Form

D – Business Income from Dependent Properties Form is available for insureds who are likely to incur extra expenses because of loss or damage to dependent properties.

17. What form would cover tenants for financial loss resulting from the cancellation of a lease due to property damage?
Business Income and Extra Expense Form
Leasehold Property Damage Coverage Form
Mortgage Holders Interest Coverage Form
Leasehold Interest Coverage Form

D – This covers tenants for financial loss that results from cancellation of a lease following direct damage to the leased premises.

18. Which of the following statements are true regarding Blanket Insurance?
There is no specific limit of insurance on any particular item or property.
Coverage amount would apply to each location individually
Coverage A & B are specific dollar amounts
There is a single limit of insurance for property at various locations or several types of property at one location.

D - Blanket insurance is a single limit of insurance for property at various locations or several types of property at one location.

19. The Ordinance or Law endorsement can be added to allow for:
Coverage in the event of a building ordinance upgrade requirement.
Coverage in the event of a penalty for faulty construction.
Coverage in the event of a coinsurance penalty.
Coverage in the event of loss due to a uncovered peril.

A - This coverage would allow for payment in the event an insured had a covered loss in which there was a building ordinance upgrade requirement.

20. What is the limit for glass coverage under the Glass Coverage Form/endorsement?
$100 per plate & $500 per occurrence.
$500 per plate & $1,000 per occurrence.
Coverage provided without limitation and settled on an ACV basis.
Coverage provided without limitation and settled on a replacement cost basis.

C – There is no limitation per plate or occurrence with this endorsement, but it is settled on ACV unless specified otherwise.

1. Aggregate limit refers to:
The limit of insurance per loss.
The most an insurer will pay in any one policy period.
A per article limit.
Agricultural loss limit.

B-Aggregate limit is the most an insurer will pay for all losses within the policy period. This limit refreshes at renewal.

2. Coverage A of the CGL policy covers:
Bodily Injury and Property Damage the insured is legally obligated to pay due to a covered loss.
Damage to buildings and business personal property as indicated on the declarations page.
Injury to an employee.
Bodily injury, sickness, disease or death.

A-Coverage A is for Bodily Injury and Property Damage Liability the insured is legally obligated to pay. Any injury to an employee would be covered under Workers Compensation.

3. Coverage B of the CGL includes coverage for:
Personal Property of Others
Buildings and Business Property
Personal and Advertising Injury
Medical Payments

C-Personal and Advertising Injury is Coverage B of the Commercial General Liability policy.

4. Personal Injury means:
Bodily Injury to a third party.
Bodily Injury to an employee.
Bodily Injury while on the insured`s premises.
Slander, libel, defamation of character.

D-Personal Injury is a "you hurt my feelings, reputation ..." coverage; not bodily injury coverage.

5. Coverage C of the CGL policy would cover all of the following EXCEPT:
Bodily Injury to a customer due to employee negligence.
Damage to a customer`s property while left in the care, custody and control of the insured.
A trip and fall on the insured property, but not the fault of the insured.
Emergency treatment for a customer who burns himself on a hot cup of coffee.

B-Coverage C is for Medical payments and pays regardless of fault of the insured.

6. In a Commercial General Liability policy, Supplementary Payments covers which of the following?
Loss of earnings for up to $100 per day.
Rental Car Expense.
Damage to the property of others in the insured`s care.
Copyright Infringement.

A-Supplementary Payments includes loss of earnings, bail bonds, defense costs, taxes and interest assessed to the insured or insurer.

7. In the Definitions Section of a Commercial General Liability policy, "occurrence" means:
A one time event.
An accident involving continuous or repeated exposure to the same general harmful conditions.
An event that is not discovered until years later.
All of the above.

D-Occurrence can mean any of the above incidents.

8. The Commercial General Liability policy "territory" includes:
The United States.
The United States and its territories and possessions.
The United States, its territories and possessions, Puerto Rico and Canada.
Only the geographical area in which the policy is written.

C-The territory description for the CGL is the same as for the Personal Auto Policy.

9. In which of the following events would coverage be provided under the CGL?
An Insurance Agent neglects to advice and retain a waiver from an insured regarding Uninsured Motorist coverage.
Mobile Equipment being transported to a job site falls off and hits a vehicle on the highway.
An employer exposes an employee to hazardous chemicals, damaging his lungs.
A grocery store sells liquor to a customer and the customer, driving while intoxicated, injures another party.

B-Liability for injury or damage caused by mobile equipment is covered under the CGL, but there is no coverage for physical damage to the mobile equipment itself. A Contractor`s Equipment floater would provide coverage for this.

10. All of the following are exclusions under the CGL policy EXCEPT:
Auto Liability coverage.
Liquor Liability coverage.
Professional liability coverage.
Products and Completed Operations coverage.

D-Products and Completed Operations coverage is provided under the CGL policy and would be necessary coverage for someone like a contractor.

11. In the CGL policy, who is NOT an "insured?"
Any person with financial interest.
Officers & Directors.
The named insured and resident spouse.
Employees.

A-Persons with financial interest must be disclosed on the policy to have coverage.

12. Professional Liability coverage is designed to cover:
Errors on a contract drawn by of a real estate agent for a client.
Criminal acts of a financial advisor.
Injuries from an auto accident when a doctor runs a red light.
A general contractor installs faulty wiring in a home.

A-Professional Liability is designed to cover the negligent acts or omissions of individuals who cause bodily injury to another when rendering or failing to render professional services.

13. Directors and Officers coverage does not protect directors and officers of a corporation for:
Breach of Duty
Wrongful acts while acting in an official capacity for the corporation.
Punitive damages, fines and penalties against a director or officer.
All of the above.

C-Directors & Officers insurance does not pay punitive damages. If a suit were to filed against the GL policy, it might cover this.

14. Errors & Omissions insurance would be needed for which of the following:
A volunteer at a church picnic who forgets to bring the pickles.
An attorney who provides legal advice online for a fee.
An accountan`s assistant who makes an error.
A real estate agent who provides services free of charge.

B-Errors & Omissions insurance is purchased by professionals who provide advice or services for a fee.

15. A Claims Made reporting form states that:
Any covered loss reported within the policy period is covered.
Any claims that occur within the policy period are covered, regardless of when they are reported.
Claims made within the policy period must be reported and occur within the policy period to be covered.
Covered claims are those reported within the policy period and occur no earlier than the retroactive date.

D-Remember, a Claims Made form most always has a retroactive date in which claims can still be covered prior to the inception date of the policy.

16. Which of the following is NOT a common advantage of the Claims Made form?
Eliminates stacking of limits.
Minimizes gaps in coverage.
Minimizes inflation effects on policyholders.
Eliminates the possibility of a loss due to the insured`s negligence.

D- There is no way to eliminate the possibility of a loss or claim when the insured is negligent.

17. Which of the following is false about the Supplemental Extended Reporting Period (SERP):
It may cost up to 200% of the annual premium for this tail coverage.
This tail coverage must be requested in writing at least 60 days prior to the termination of a policy.
There is no additional charge for this coverage.
It provides an unlimited time for reporting claims that occurred after policy expiration.

C-There is an additional charge for this tail coverage, but it may not be in excess of 200% of the annual premium.

18. Commercial Excess Liability policies are unlike Personal Umbrellas in that:
They cover commercial business risks.
Their deductibles are typically much higher.
There may not be an underlying policy that pays primary.
All of the above.

D-All of the above are true statements about an Excess Liability policy.

19. Under the Commercial Crime insurance policy, "occurrence" is defined as:
An incident in which a person other than the insured commits a crime involving money.
An act or series of acts that may not involve people.
An act that causes bodily injury or property damage to the insured.
A confrontation in which robbery or burglary is involved.

B-Crime insurance protection is for safe burglary and other acts that may or may not involve people.

20. "Theft" on the Commercial Crime coverage form includes all of the following EXCEPT:
Burglary
Robbery
Hold-up of an armored car
Theft of stock or inventory

D-Coverage for theft of stock or merchandise is covered under the CPP Coverage B, Business Personal Property.

1. If a boiler in a church building were to blow up and cause property damage and injury, which coverage would be necessary to cover this loss?
Building and Personal Property coverage
Non-Profit Extended Liability coverage
Equipment Breakdown (Boiler & Machinery) coverage
There would be no coverage under any of these form because it is a church.

C-Boiler & Machinery coverage is excluded on the BPP form and only covered through a B & M policy. Non-profit entities may purchase this as well.

2. Which of the following is NOT a common exclusion on the Boiler & Mmachinery policy?
Leaking of valves, joints or fittings
Breakdown of refrigeration units
Loss due to safety devices not functioning properly
Property of Others, not in the insured`s care

B-Refrigeration units are covered for breakdown on the B & M policy.

3. What form would be used to cover a business that owns several laptop computers used by employees off premises?
Business Personal Property Coverage form
Inland Marine Computers Coverage form
Off Premises Inland Marine coverage form
Electronic Data Processing Equipment Coverage form

D-The Inland Marine form that covers this equipment is called an Electronic Data Processing coverage form.

4. The 2 types of Inland Marine policy forms are Filed and Non-filed. All of the following are true about the advantages of a Filed form, EXCEPT:
They can usually be added to a package policy.
They are regulated by the Department of Insurance.
The rates are cheaper than non-filed forms.
The forms are more standardized.

C-The rates are simplified due to being more "class" rated, but they are not necessarily cheaper.

5. Which of the following would be used to cover property of others left in a camera shop for repair?
A Camera & Musical Instrument Dealers/Commercial Articles coverage form
A Business Personal Property coverage form
An Equipment Dealers form
A Commercial General Liability (CGL) form

A-Some companies refer to it as a specific Camera & Musical Instrument Dealers form, and some use the generic term Commercial Articles coverage form because they also insure fine arts and similar property with this form.

6. The two types of transit coverage are:
Annual and Trip Transit coverage
Annual and Goods in Transit coverage
Trip Transit and Specific Transit coverage
Common Carrier Transit coverage and Trip Transit coverage

A-This covers the interest of the shipper for the goods transported. Annual Transit coverage is for business owners who ship items on a regular basis, while the Trip Transit is for those who may only ship goods occasionally.

7. A carrier of cargo is NOT liable for damage in all of the following situations, EXCEPT:
A collision due to a mechanical malfunction.
Negligence of the shipper
Acts of God/Nature
Inherent Vice

A-It is the obligation of the carrier to provide safe delivery of goods and see that the trucks are in proper operating condition. Remember, the coverage on a Common Carrier Cargo Liability form is for inland transportation, not ocean transportation. The Ocean Marine policy is used for water transportation.

8. Which of the following would purchase the Motor Truck Cargo form?
A pizza delivery person.
A grocery store that owns trucks and ships its own goods to its various owned locations.
A business that owns its own trucks and delivers goods to customers on behalf of another company.
A taxi company

B The Motor Truck Cargo form is designed to cover the interest of one who owns both the cargo and the truck. Hence, the term "Motor Truck Cargo" form.

9. A Bailee is defined in the insurance industry as:
One who receives the funds of another for the purpose of posting bail.
One who assists another in bailing water from a vessel to avoid sinking.
One who is entrusted with the property of others.
None of the above.

C- A Bailee is a person who has care, custody, or control of a customer`s property.

10. The Signs Coverage form is necessary when:
An insured has the business name painted or etched on a glass window.
An insured has more than a $1000 value in signs or has any detached sign on the premises.
An insured has more than one sign on the premises.
An insured with at least one business location worth $250,000 or more.

B-The Commercial Property policy doesn`t cover detached signs and typically has a limitation of $1000.

11. A Released Bill of Lading assures:
That the shipper of the product is fully responsible for any damage to the shipped property, as long as it is shipped in the U.S. or its territories and possessions.
That a common carrier will transport only goods that are not considered contraband or illegal.
That the shipper is released of any responsibility for product damage and will be paid a replacement value if a loss occurs.
That the carrier of goods will not be responsible for any more than the stated value on the contract.

D-A regular Bill of Lading doesn`t state a particular amount for which the carrier of the goods is responsible; the carrier must pay up to the invoice amount. The Released Bill of Lading states a specific dollar amount of responsibility, usually less than the invoice price, to reduce premium charges.

12. Mayberry Construction has a Business Auto policy covering a 1995 pickup truck for liability and physical damage. At the time of an accident, the driver of the pickup truck was pulling a trailer carrying a bulldozer. If the bulldozer slips off and causes bodily injury to another party, there is coverage under which of the following policies?
The Business Auto Policy
A Mobile Equipment Floater
The Commercial General Liability Policy
There is no coverage for mobile equipment.

A-The BAP covers mobile equipment liability only if it is being towed or carried by a covered auto.

13. What coverage form has the sole purpose of insuring most types of industrial risks for direct damage by an accident?
Equipment Breakdown Coverage Form
Crime Insurance Coverage Form
Boiler and Machinery Coverage Form
Inland Marine Coverage Form

C – The sole purpose of the Boiler & Machinery coverage form is to insure most types of industrial risks for direct damage caused by an accident.

14. With Boiler and Machinery, insurance carriers place great emphasis on:
Loss control and premium audits
Loss control and inspections
Inspections and premium audits
Inspections and reports

B – Insurance carriers place a large emphasis on inspections and loss control, so the most of the premiums are used to pay for inspections.

15. When a claim is settled on an ACV basis, B & M equipment must be repaired or replaced within how many months?
6 months
12 months
18 months
24 months

C – "Claim" is the key here. A claim was opened and no repairs were made in a timely manner. Equipment must be repaired or replaced within 18 months or the claim is settled on an Actual Cash Value basis.

16. The valuation clause on Inland Marine forms states all of the following except:
The actual cash value of the property
The cost of restoring the property
The cost of replacing the property with substantially identical property
The values will be established based on the higher of the above

D – For all Inland Marine forms a Valuation Clause states that, in the event of a loss, values will be established based on the lesser amount.

17. The courts do not recognize the carrier as liable for a loss to another`s property by any of the following acts except:
Acts of God and Nature
Acts of a Public Enemy
Acts of Public Authority
Acts of faulty construction

D – It`s important to note that in certain instances the courts do not recognize the carrier as liable for a loss to another`s property while transporting: Acts of God or Nature, Exercise of Public Authority, Acts of a Public Enemy, Negligence of the Shipper, Inherent Vice, or Nature of the Property.

18. The Commercial Articles Coverage Form is provided on an:
Basic basis
Broad basis
ACV basis
All-risk basis

D – Coverage is provided on an All Risk basis.

19. A business auto is defined as all of the following except:
Private passenger auto
Truck
Golf cart used for business owned by the named insured
Trailer owned by the named insured

C – The Business Auto is defined as a private passenger auto, truck, or trailer owned by the named insured or used in connection with the business and only as defined in the declarations page.

==

1. Which of the following symbols used on a business auto policy offers the broadest coverage?
Symbol 1
Symbol 2
Symbol 7
Symbols 8 & 9 together

A-Symbol 1 represents any auto the insured owns (#2), specifically described autos (#7) and hired and non-owned autos (#8 & 9).

2. All of the following are common exclusions on the BAP, EXCEPT:
Premises and Completed Operations
Trailers the insured leases for business use.
Pollution Liability
Property of Others

B-Liability coverage for a trailer always follows the limit of insurance on the vehicle that pulls it.

3. Which of the following is NOT a Specified Cause of Loss?
Fire
Flood
Aircraft
Explosion

C-Remember, a company called VMM FLEW THE DC(10) By SF!

4. One of the major differences between a business auto policy and a personal auto policy are the endorsements. Which coverage listed below is considered an endorsement on the business auto policy?
Liability coverage
Uninsured Motorist and Medical coverage
Comprehensive & Collision coverage
Cost of legal defense

B-UM & Medical coverage are not automatic coverages on the BAP and are considered endorsements, not separate lines of insurance coverage.

5. What would be needed if a business owner had no personally owned vehicles, but wanted insurance on a rental car he personally rented on vacation?
A Non-Owner policy
A Drive Other Car Endorsement
A Rental Car Endorsement
A Business Auto Policy is all that is needed.

B-A Drive Other Car endorsement is needed because the insured requires coverage as an individual. The BAP would not provide coverage for this loss.

6. Which of the following statements is FALSE about the Motor Carrier Act of 1980?
All interstate common carriers must have a certificate of insurance filed with the Interstate Commerce Commission showing proof of insurance.
This act states that the minimum financial responsibility for carriers of radioactive materials is $5 million.
It states federal regulations regarding the minimum financial responsibility limits for carriers of hazardous and non-hazardous property.
This act makes purchasing of an insurance policy a requirement for anyone transporting hazardous materials.

D-The minimum financial responsibility laws may be satisfied by purchasing of a bond instead of an insurance policy.

7. All of the following are considered a Specified Cause of Loss under the Business Auto Policy EXCEPT:
Derailment while being transported
Earthquake
Vandalism
Mechanical Breakdown

D-Mechanical Breakdown is not one of the Specified Causes of Loss.

8. An owner of an auto repair business would be best covered under which of the following?
A Commercial General Liability form.
A Business Auto policy with Non-Owned Autos as a specified aymbol.
A Garage Liability Coverage form.
A Commercial Property coverage form.

C-The Garage Coverage form is specifically designed for a business with temporary care, custody, or control of customer vehicles.

9. Garage "Operations" refers to:
Ownership, maintenance, or use of a garage premises and autos in the insured`s care.
The sale of auto parts.
Repairs completed on vehicles in the insured1s care, custody, or control.
The liability exposure of an insured who has customers entering and exiting the property at various times.

A-"Operations" can mean the liability exposure of an owned premises, the repairs and use of customer vehicles, as well as the sale of parts at an insured premises.

10. The four major exposures to an auto-related business owner that are covered on a Garage plan are:
Liability, Property, Auto, and Workers Compensation
Premises Operations, Completed Operations, Product, and Auto Liability
Auto Liability, Products & Completed Operations, Liability, and Workers Compensation
Premises Operations, Completed Operations, Product Liability, and Professional Liability

B-These 4 areas are covered only on the Garage Coverage form.

11. A parking garage would be BEST insured under which form(s):
Garagekeepers Legal Liability
Garagekeepers Direct Coverage (Primary)
Garagekeepers Direct Coverage (Excess)
None of the above would adequately cover the exposures for this type of business.

B-Remember, the most correct answer is B, because it provides coverage whether or not the insured is legally liable, and it will pay before the customer`s own policy pays.

12. The Truckers Coverage form is most similar to what other form of coverage?
The Motor Truck Cargo Coverage form
The Garage Coverage form
The Business Auto Policy
The Non-Owner Personal Auto Policy

D. Truckers Coverage is similar to the Non-Owner Personal Auto policy in that it covers vehicles not owned by the insured.

13. What unique exposure is present in a farming business?
The need for coverage on agricultural equipment.
Risks involving livestock.
The risk of injury to employees.
The need for commercial and residential coverage on the same property.

D-The farming business is unique in that it not only has commercial business exposure, but also personal liability risk.

14. Which of the following would be covered by a crop insurance policy?
Loss to plants on which a crop would normally yield income to the farm owner.
Loss of crops due to hail damage.
Loss of growing crops normally given to a homeless shelter in town.
None of the above.

B Hail is a covered peril in the crop insurance program. Plants are not covered, and crops must be a main source of income.

15. All of the following are covered perils on a crop insurance policy, EXCEPT:
Insect Infestation
Drought
Tornado
Inherent Vice

D-Inherent Vice is the tendency of a product to self destruct. (Ex. Fruit)

16. The FCIC is an agency that sells flood insurance policies:
Through a select number of agents.
On an All Risk basis.
As a representative of the U.S. Department of Safety.
None of the above.

D-The FCIC is the Federal Crop Insurance Corporation and has nothing to do with flood insurance.
==

1. Which of the following is NOT true regarding the National Flood Insurance Program?
Any licensed agent or broker may place business with the NFIP.
Anyone desiring flood insurance pay purchase it through the NFIP directly.
The NFIP is administered by the federal government.
The NFIP has an endorsement that can be purchased for Business Income coverage.

B-You must be located in a flood zone to purchase flood insurance. Pg. 191

2. Which of the following is NOT a common exclusion in the Flood Insurance program?
Business Income
Fences
Contents
Money

C-Contents coverage can be purchased, but is optional. Pg. 191

3. The Businessowners Policy (BOP) is a package policy combining what types of coverages?
Liability and Property coverage
Liability, Property, Business Income & Extra Expense and Property of Others coverage
Liability , Property and Workers Compensation coverage
Liability, Property and Professional Liability coverage

B-The BOP package policy includes all of these additional coverages the Commercial Property policy would not . Pg. 191-192

4. All of the following are NOT eligible businesses under the BOP program, EXCEPT:
A 4 story apartment building with 60 total units.
A small family-owned auto body shop
An 8 story office building with less than 100,000 square feet.
A small liquor store.

A-Apartment buildings with 6 stories and up to 60 units is acceptable in the BOP program. Pg. 192

5. Which of the following is FALSE about the characteristics of a BOP policy?
It typically has no coinsurance clause.
Losses are valued at replacement cost.
The standard deductible is $500.
Loss of income is coverage for up to 12 months.

C-The standard deductible is $250. Pg. 192

6. The difference in perils covered on the Commercial Property policy and the Standard form Businessowners policy is:
The peril of Theft.
The peril of Transportation.
The peril of Robbery & Safe Burglary.
The peril of Earthquake.

B-Transportation (property in transit) is an added peril on the BOP and is a needed coverage for a business owner. Pg. 193

7. Transportation coverage on the BOP would apply to which of the following?
Property of the insured, while being transported by vehicle to a business location, is involved in an accident damaging the insured's property.
Property of a customer is damaged while being transported by vessel.
A vehicle owned by the insured is damaged when a bridge collapses.
A vessel is stranded while transporting property of others to the insured's business location.

A-Transportation coverage is for the insured's property only and may be in a vehicle, vessel or train at the time of loss. See Pg. 193 for further explanation of this coverage.

8. The four (4) components of the Section II, Business Liability coverage are:
Building, Personal Property, Liability and Medical
Building, Separate Structures, Personal Property and Liability
Bodily Injury, Property Damage, Professional Liability and Medical
Bodily Injury, Property Damage, Personal and Advertising Injury

D-These 4 components apply to third party (Liability) claims and are similar to the CGL. Pg. 194

9. Which of the following coverage is added by endorsement to the BOP policy?
Outdoor Signs
Earthquake
Boiler & Machinery
Money & Securities

B-The peril of Earthquake is the only peril added by endorsement. Others are considered optional coverages. Pg. 194

10. The oldest type of insurance in the world is:
Shipowners Liability insurance
Product Liability insurance
Ocean Marine insurance
Automobile Liability insurance

C-Ocean Marine insurance began in 1689 in the coffeehouses of England. (Lloyd's or Starbucks?) Pg. 194-195

11. The implied warranties understood by the ocean marine contract include all of the following, EXCEPT?
The seaworthiness of a vessel.
An agreed upon route with no deviation.
All crew members are experienced seamen.
Properly packed cargo.

C-There is no warranty (expressed or implied) regarding the experience of seamen. Pg. 195

12. If a shipowner who purchases an Ocean Marine policy on an All Risk form runs into a dock while transporting cargo for a customer, the policy would pay for:
Damages to the ship, dock and cargo.
Damages to the ship, dock, cargo and any resulting bodily injury.
Damages to the ship, dock, cargo and any resulting bodily injury; including that of injured employees.
There is no Collision coverage on an Ocean Marine policy.

C-The most right answer is the most complete answer. Pg. 195

13. Jettison is defined as:
Being thrown from a vehicle or vessel.
The act of flying threw the air.
Throwing cargo overboard to lighten a ship.
None of the above.

C-This is a term used to define the act of throwing cargo overboard to lighten the ship and may be necessary to reduce the amount of loss. Pg. 195

14. Barratry is defined as:
Intentional misconduct of a master or crew without the knowledge of the shipowner, resulting in damage or injury.
Intentional wrongful acts of a shipowner.
Damage or injury to a third party caused by intoxication of the master or crew.
Any of the above could be true.

A-This term is used only to indicate wrongful, intentional acts committed by a crew or master and without the owners knowledge. Pg. 195

15. A Named Peril policy in Ocean Marine insurance refers to "perils on the sea" and "perils of the sea". These perils do NOT include:
Jettison
Barratry
Sinking
Explosion

D-Explosion is not a named peril. Pg. 195

16. Protection & Indemnity coverage includes all of the following claims EXCEPT:
Ship Operator Negligence
Comprehensive & Collision
Shipping Costs that must be paid a second time.
Job-related injuries to employees

C-Shipping Costs are covered under the Freight coverage part of an Ocean Marine policy. Pg. 195

17. The three (3) parties to a Surety Bond contract are:
The Principal, Surety and Obligee.
Insured, Insurer and Principal
Obligor, Obligee and Insurer
None of the above, as there are only two (2) parties to a surety bond contract.

A-The Principal is the one who will fulfill an obligation, the Surety is the company vouching for the reputation, etc. of a Principal and the Obligee is the one to whom the promise is made. Never choose the answer with insurer in it. The surety contract is not insurance. Pg. 196

18. All of the following are differences between a Bond and Insurance EXCEPT:
A Bond is not insurance, only a financial guarantee.
There are only two (2) parties in an Insurance contract, but three (3) parties involved in a Bond.
With a Bond, the company can seek recovery for claims payments from the Principal.
A Bond is identical in nature to an Insurance contract.

D-A, B & C are all true about the differences between a Bond and Insurance. Pg 196

==
1. What kind of bond would an executor of an estate need?
Financial Guarantee Bond
Executor`s Bond
Fiduciary Bond
Trustee Bond

C-An individual who handles money or property of another is said to have a fiduciary responsibility.

2. Which of the following was NOT a responsibility of an employer under common law obligations for Workers Compensation in the early 1900s?
Providing a safe workplace
Assuming risk
Enforcing safety rules
Providing safe equipment

B-Assumption of risk was a common defense used by employers to reduce or eliminate claims payments.

3. The establishment of Workers Compensation laws:
Complicated the process of filing claims regarding work-related injuries.
Is not based on the concept of absolute liability.
Put the burden of proof of fault on the employer.
Was foundational to building a relationship between the employer and employee

D-The establishment of Workers Compensation laws made it possible for an employer and employee to maintain a working relationship free from hidden agendas.

4. Which of the following is NOT an exempt category under Workers Compensation insurance?
Volunteers for a non-profit organization.
A domestic employee who has earned only $90 total.
A student who is a pitcher for the school baseball team.
A small business with only one employee.

D-California law obligates an employer with one or more employees to purchase Workers Compensation, unless they are in an exempt category.

5. Workers Compensation statutory benefits means:
Every employer must purchase Workers Compensation for its employees.
An employer may stipulate the limit of insurance, and therefore control costs.
Minimum and maximum benefits, waiting periods, etc. are established by state law and all Workers Compensation policies sold in this state must meet these requirements.
The state of California offers benefits for work-related injuries to any employer who cannot afford or cannot procure a policy on their own.

C-The state of California requires employers who are not exempt from coverage to purchase Workers Compensation insurance and stipulates the benefits, etc. that are required by law.

6. All of the following are true about the State Fund, EXCEPT:
The State Fund competes for Workers Compensation business with the private sector.
State Fund sells its policies through brokers, as well as directly to the general public.
The State Fund may be used only as a last resort.
State Fund is operated by the state of California.

C-The State Fund may be used at any time as a Workers Compensation carrier, not only as a last resort.

7. The percentage of a deceased worker`s weekly wages payable to the spouse and dependent children is:
33 1/3 percent
66 2/3 percent
50 percent
100 percent

B-66 2/3 percent of a deceased worker`s weekly income is payable to the spouse up to a minimum and maximum dollar amount established by the state. Dependent children usually receive benefits to a specified age.

8. Under the Workers Compensation policy, disability income benefits are payable to a partially disabled worker when:
The injured worker can return to work, but is unable to earn the income once received.
The injured worker cannot return to work.
The injured worker has a loss of limb(s).
The injured worker will have medical and surgical treatment needs on an ongoing basis.

A-When the injured worker is able to return to employment of any sort, but cannot earn what was once received, he or she will receive disability income benefits as a partially disabled worker. Benefits are equal to the difference between full wages and those the injured worker is able to currently earn.

9. The Second Injury Fund is:
A fund issued by the state of California that assists in claims payments for totally disabled individuals who had a permanent pre-existing disability with their prior employment.
A Fund issued by the federal government, which assists in claims payments for totally disabled individuals who had a permanent pre-existing disability with their prior employment.
A fund regulated and supported by all Workers Compensation carriers in the state of California and payable only to employees who have lost a limb, sight or hearing due to a prior work-related injury.
There is no such fund.

A-The Second Injury Fund is not a federal program and is available for permanent pre-existing disabilities, not only loss of sight, hearing, or limbs.

10. Other States Insurance is Part Three (3) of the Workers Compensation policy and covers:
Employees who live in a state other than California, but are employed by a company organized in California.
Employees who travel out of state on work assignments and provides the statutory limits of the state in which they are working.
The employer who operates a business in multiple states.
None of the above are true.

B This part of the Workers Compensation policy allows extended coverage to employees who travel out of state on work assignments. The policy must disclose the other states that MAY need to be covered, and the insurer must be notified immediately if an employee is traveling.

11. Which of the following is NOT true regarding the voluntary workers compensation endorsement?
It can be added upon request by the insured at any time during the policy period.
It applies only to volunteers who are working for the business named on the Workers Compensation policy.
It protects a business owner from lawsuits that may arise, even from those who are exempt from coverage.
It provides workers compensation coverage when a regular employee of a business ALSO volunteers to work at business-sponsored events.

D-This endorsement is designed to cover volunteers who are normally exempt from any workers compensation coverage.

12. 24 Hour coverage is defined as:
Providing around-the-clock coverage through a joint Workers Compensation and Life insurance policy.
Providing around-the-clock coverage through a Workers Compensation, Medical and Life insurance policy.
Providing around-the-clock coverage through a Workers Compensation, Medical and Group Disability policy.
All of the above are options under the Health and Disabilites Act

C-There is NO Life insurance available in the 24 Hour coverage plan. Pg. 201-202

13. In 1995, the "open rating system" gave companies a competitive edge in that:
Workers Compensation benefits were reevaluated and new rates were formed.
Workers Compensation rates were increased to absorb the high cost of medical products and services.
Workers Compensation minimum rates were mandated.
Workers Compensation insurance companies no longer had to file their rates and wait for approval from the Department of Insurance and no minimum rates were mandated.

D-This open competition is believed to be healthier for the consumer as well as the insurer.

14. An insured who takes necessary precautions to reduce Workers Compensation claims or severity of losses, could receive a discount through:
Reporting Modification
Experience Modification
A Risk Manager
A “No Losses” modification

B-The Experience Rating discount allows an insured to reduce premium costs, due to a loss history that shows fewer claims or severity of claims.

15. OSHA was established to do all of the following, EXCEPT:
Organize American employees in support of an Occupational Safety Union.
Mandate that all employers who do not comply with health standards will be fined.
Create education and training for employers.
Promote and assure the safety and health standards for American workers.

A-There is no such thing as an OSHA union.

16. According to a new legal development, AB984 Chapter 439, if an Automobile Service Contract is considered an insurance policy:
It must have a standard deductible of $250 or less and be disclosed by a declarations entry.
It must be pre-approved by the Insurance Commissioner and the seller must be licensed.
It must be pre-approved by the Insurance Commissioner and the insurer providing coverage must be disclosed by a declarations entry.
None of the above, as there is no law regulating insurance sold through auto service contracts.

B-This bill was for the purpose of regulating the insurance written in auto service contracts and has certain requirements that must be met.

17. According to a new legal development, AB996 Chapter 647, regarding hate crimes against reproductive health facilities, all of the following are true, EXCEPT:
This bill states that all hate crime claims must also be reported to the Commissioner.
This bill helps to guarantee the availability of insurance to these types of facilities.
An insurer may cancel or non-renew a policy due to excessive hate crime claims with written notice to the insured no less than 45 days prior to the cancellation or non-renewal.
Insurers may not charge excessive or unfair premiums due to prior hate crime losses.

C-This bill states that a policy may not be cancelled or non-renewed due to claims made against the insured for hate crimes in the previous 5 years (60 months).

18. According to a new development, AB 227 Chapter 635 regarding Workers Compensation and the California Insurance Guaranty Association, which of the following is NOT true?
Fines for filing fraudulent Workers Compensation claims were increased to a minimum of $5,000.00
The term insolvency was expanded to include the inability to meet a company`s financial obligations.
This bill states that CIGA may be financed with a bond not to exceed $5 billion at any one time.
This bill also states that the Commissioner must publish the rates for the top 50 Workers Compensation carriers.

A-The fines for fraudulent claims was increased from $50,000 to $150,000.

19. According to the Department of Industrial Relations (DIR), which of the following are decreasing and increasing?
Workers Compensation rates; medical costs
Fatal accidents and injuries; overall costs for medical, defense, etc.
Overall costs for medical, defense, etc.; Workers Compensation rates
Fatal accidents and injuries; defense costs

B-According to an annual report from the DIR in 4/05, fatalities and injuries on the job are decreasing, but the overall cost to pay and defend Workers Compensation claims is increasing.
==
1. The probability of accident or sickness within a given group of people is known as:
Mortality
Law of Large Numbers
Morbidity
Indemnity

C-Morbidity refers to the chance of accidents or sicknesses occurring within a certain group or class of people. (Age ranges, occupations, etc)

2. If a health or disability policy is in the "grace period," the policy:
Has lapsed, but can be reinstated.
Has lapsed and must be re-written.
Will lapse if payment is not made within that grace period.
Is still in full force and effect until the end of the policy period.

C-The policy will lapse if prompt payment is not made before the grace period ends.

3. When coverage is terminated under a group plan, a totally disabled employee who submits a claim prior to the termination of the policy will:
Not have coverage beyond the termination date for any reason.
Be covered only for Life Insurance.
Be covered under a lifetime provision.
Be covered under the Extension of Benefits, for a specified period of time.

D-The Extension of Benefits coverage provides that benefits continue for up to 12 months for the reported claim of a totally disabled employee and the conditions of the policy apply as previously specified.

4. The Elimination Period is NOT:
The period of time when a sickness, disease or accident occurred prior to policy issuance.
A type of deductible.
A period of time that must expire after the onset of an accident or illness before benefits apply.
Gauged in expense by the length of time chosen.

A-The Elimination Period is a type of deductible. It is the period of time that must expire after the onset of an accident or illness before benefits apply. The longer the Elimination Period, the cheaper the premium.

5. The "stop-loss" provision limits what?
The annual deductible.
The annual co-pay.
The out-of-pocket expenses of the insured.
The total expenses of the insurer.

C-The "stop-loss" provision limits out-of-pocket expenses the insured must pay during a policy period. The insurance company is then responsible for 100% of expenses.

6. On a Major Medical Plan, the clause that provides for a percentage split of medical expenses paid by the insured and insurer is called:
Percentage Split Clause
Co-Payment Clause
Deductible Clause
Coinsurance clause

D-This sharing of the remaining expenses is called a coinsurance clause and is typically an80/20 split, with the insured paying 20% of the balance of expenses.

7. All of the following are true about COBRA, EXCEPT:
It requires that all employers with 20 or more employees offer this coverage to qualified employees.
It grants 18 - 36 months of group plan coverage for terminated employees who qualify.
It allows for an extension of Life insurance under the group plan, until such time as new coverage can be arranged by the terminated/qualified employee.
It restricts the increase in premium to no more than 102% of the normal group rate.

C-Life insurance coverage is not included under the COBRA plan.

8. The NAIC developed a model for protection of the consumers against questionable marketing strategies in selling Medicare Supplement policies. The Act which gave the NAIC this authority is known as:
OBRA
COBRA
ERISA
FEMA

A-OBRA is the Omnibus Budget Reconciliation Act of 1989, and through Congress gave authority to the NAIC to develop a standardized model for Medicare Supplement policies.

9. Which of the following is true about ERISA?
It is a federal standard that provides employees with additional retirement benefits.
It is a federal standard that protects a current employee`s benefit status.
It is a federal standard regarding protection of employee pensions, health plans, life insurance plans, stock bonuses and profit sharing plans.
It is an Act which protects employee benefits, pensions, etc. and is regulated at the state level.

C ERISA is the Employee Retirement Income Security Act of 1974. It is a federal standard whose main purpose is to protect employee pensions, etc.

10. Although a participant in a PPO plan has chosen a primary care physician, he/she may go outside the network to obtain medical treatment:
When the primary care physician is not available.
Only for surgical and emergency treatments.
Any time, after the waiting period.
At any time.

D-A PPO participant may go outside the "network" of physicians any time, but may incur an extra charge.

11. A self-funded health plan can qualify for stop-loss coverage when:
The operating capital used to pay claims reaches a specified amount.
They are backed by the California Guaranty Association.
Blue Cross/Blue Shield has reached its coverage limit.
There is a TPA (Third Party Administrator) involved.

A-A self-funded plan set-up by a business owner can be catastrophic in the event of a single loss where many employees are sick or injured. For this reason, a stop-loss provision would be helpful. These companies may or may not be reinsured with Blue Cross/Blue Shield, etc.

12. A Preferred Provider Organization:
Doesn`t worry about preventative care.
Always uses a TPA or other Administrator.
Utilizes a list of approved physicians for treatment.
Always has a nurse on call.

C-The PPO plan provides a list of approved physicians who agree upon a fixed fee for certain services and treatment. Utilizing a non-approved physician, may result in a partial or possibly, no benefit payment.

13. Which of the following is NOT considered a health provider?
Self-Funded Plan
Physicians and hospitals
Urgent Care and Surgicenters
Home Health Care Provider

A-Self-funded plans are not providers. They are plans under which benefits are outlined.

14. Which medical expense plan would cover "dreaded diseases" like cancer?
Dread Disease Expense plan
Basic Medical Expense plan
Major Medical Expense plan
Supplementary Major Medical Expense plan

C-The Major Medical Expense plan covers all diseases, including "dreaded" diseases like cancer.

15. Which of the following IS typically a feature of the Major Medical insurance policy?
A restriction of coverage to only catastrophic illnesses.
A low benefit limit.
A copayment requirement.
A Basic Medical plan must be purchased first.

C-The Major Medical policy is written to include a copay, deductible, and/or coinsurance requirement as a risk-sharing feature of the plan.

16. An individual who joins a medical group plan after the effective date of the policy, is subject to:
A waiting period for any pre-existing conditions.
Restricted coverage in certain areas.
A probationary period
A higher deductible.

C-The probationary period is for those who join a plan after the effective date of the policy and is the period of time between the policy effective date and the date when coverage begins.

17. What is meant by the term "Temporary and Permanent" Disability?
Being unable to return to work during the recovery period.
Being unable to perform at least two (2) of the normal job duties for the current occupation.
Being unable to return to work in any occupation.
Being unable to return to work in the same occupation as before the injury or illness.

A-If a person is unable to return to work during the recovery period, he/she is said to be "temporary and permanently" disabled.

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