CA Adjuster Exam Flashcards
1
Q
Basic benefits available under a typical workers compensation policy include which of the following?
I. Medical expenses. II. Loss of income. III. Rehabilitation. IV. Pain and suffering. Answer Choices: Select the Correct Answer I, II, and III only. I and II only. I, III, and IV only. I, II, III and IV.
A
I, II, and III only. is correct.
EXPLANATION:
Workers compensation indemnifies an injured or ill worker for direct expenses resulting from the cause with rehabilitation provided to encourage a worker to return to productivity.
2
Q
How is personal property of a dwelling covered under a farm policy?
Answer Choices: Select the Correct Answer
Actual Cash Value Basis
Stated Amount Basis
Agreed Amount Basis
Replacement Cost Basis
A
The correct answer is: Actual Cash Value Basis.
EXPLANATION:
The property is covered on an actual cash value basis. Like a homeowner policy, the replacement cost endorsement may be attached for an additional premium.
3
Q
An insured is reimbursed by his insurance company for the cost of a new sofa after a 10-year-old sofa is destroyed by fire. Which of the following best describes this situation?
Answer Choices: Select the Correct Answer
Replacement Cost
Coinsurance
Actual Cash Value
Excess Loss Coverage
A
Replacement Cost is correct.
EXPLANATION:
Replacement cost pays for new to replace old.
4
Q
Which of the following is covered by a flood policy?
Answer Choices: Select the Correct Answer
Overflow of inland or tidal water
Vehicles
A broken water main
Livestock
A
Overflow of inland or tidal water is correct.
EXPLANATION:
Overflow of inland or tidal water is the prime coverage under flood insurance. Mudflow is also covered. Mudslides are not. The coverage does not include damage or loss of livestock or roads.
5
Q
Under the Personal Automobile policy, the definition of a “covered auto” for Coverage A (liability)includes:
I. Private passenger autos the named insured acquires during the policy period.
II. Trailers owned by the named insured.
III. Autos or trailers not owned by the named insured that is being used as a temporary substitute.
IV. Farm wagons or implements towed by a covered vehicle.
I, II, III, and IV I, II, and III only I and III only I and II only Your answer: I, II, III, and IV is correct.
A
Your answer: I, II, III, and IV is correct.
EXPLANATION:
Coverage A (liability) includes coverage for those vehicles shown in the declaration page of the policy. It also includes coverage for non-owned vehicles. Trailers, whether owned or non-owned are covered provided they are designed to be pulled by a private passenger type vehicle, pickup truck or van. Usually the policy excludes ‘business use’ but farming and ranching are two types of businesses that can be covered under the PAP policy. Newly acquired vehicles are covered for a period of 14 days after acquisition under most policies for liability coverage. Temporary substitute vehicles are insured when the insured vehicle is damaged, destroyed or disabled.
6
Q
Other structures are excluded from coverage under the HO-3 when they are:
Smaller than 100 square feet or larger than 1,000 square feet
Smaller than 100 square feet or larger than 500 square feet
Used for storage purposes
Used for business purposes
A
Used for business purposes is correct.
EXPLANATION:
When the other structures are used for business purposes they are not covered under the homeowner form. This structure and its contents could be covered under a commercial property policy. An exception would be a detached structure used to store business property of a non-flammable, non-gaseous nature.
7
Q
An insurance company must give how many days notice of cancellation for a vacancy of more than 60 days, when the government has ordered demolition, or when fixed items are being removed and not replaced?
5
21
10
30
A
5 is correct.
EXPLANATION:
The cancellation changes endorsement is the “mandatory endorsement” referred to in the question. In California, the endorsement must be included in every commercial property policy. It allows cancellation by the insurer with 5 days’ notice for several reasons: vacancy or unoccupancy for 60 or more days; damages from a prior covered loss haven’t been started; the government has ordered demolition or to vacate; fixed items are being removed and not replaced; and, utilities are shut off for 30 or more days, or property taxes are more than one year past due.
8
Q
Upon request made by the consumer, a person who procures an investigative consumer report on the consumer must make a complete and accurate disclosure to the consumer of the nature of the report and investigation within:
In writing and mailed to the consumer within 30 days of the request.
In writing and mailed to the consumer within 15 days of the request.
In writing and mailed to the consumer within 10 days of the request.
In writing and mailed to the consumer within 5 days of the request.
A
In writing and mailed to the consumer within 5 days of the request..
EXPLANATION:
This disclosure must be made in writing and mailed or otherwise delivered to the consumer no later than five days after the date on which the request for the disclosure was received from the consumer.
9
Q
The insured has primary bodily injury and property damage liability coverage with a $100,000 limit, and a $1 million umbrella liability policy with a $5,000 self-insured retention limit. In which one of the following situations would the insured’s umbrella liability policy typically not provide defense coverage?
Answer Choices: Select the Correct Answer
Five people sued the insured for property damage arising out of one occurrence. One of the cases was settled out of court for $100,000.
The insured was sued for $150,000 in personal injury damages.
The insured was sued for $10,000 in bodily injury damages.
The umbrella liability policy would provide a defense in all three cases.
A
The correct answer is: The insured was sued for $10,000 in bodily injury damages.
EXPLANATION:
The claim would fall under the underlying coverage and not the umbrella because the underlying coverage has sufficient limits in place.
10
Q
The BAP liability exclusion pertaining to pollution removes coverage for each of the following, except:
Answer Choices: Select the Correct Answer
The cost of governmentally ordered clean-up of pollutants.
The escape of pollutants while being transported by a covered auto.
The escape of pollutants caused by damage to the property containing them when the damage results from the use of a covered auto.
The escape of pollutants before they are accepted by the insured for movement onto a covered auto.
A
The escape of pollutants caused by damage to the property containing them when the damage results from the use of a covered auto. is correct.
EXPLANATION:
If the insured’s vehicle causes an accident with another vehicle or other property (owned by a third party) containing the pollutants, the loss is covered.
11
Q
Which of the following would not be covered under the specified cause of loss physical damage coverage under the commercial auto form?
Glass breakage
Fire
Lightning
Flood
A
The correct answer is: Glass breakage.
EXPLANATION:
The specified cause of loss form covers the following perils: fire, lighting, explosion, theft, windstorm, hail, earthquake, flood, vandalism or mischief, transportation by a conveyance. The coverage does not include glass breakage, hitting a bird or animal nor falling objects or missiles.
12
Q
All of the following events are considered acts of terrorism, EXCEPT:
Acts of riot and civil commotion.
Acts considered dangerous to human life, property or infrastructure.
Acts resulting in damage within or outside the United States.
Acts at the premises of any United States mission.
A
The correct answer is: Acts of riot and civil commotion. .
EXPLANATION:
Acts of riot and civil commotion are not covered by the Act. These are perils that are covered by property insurance policies.
13
Q
A company or staff adjuster represents the interests of:
The insurer.
The insured.
The claimant.
The public.
A
The insurer. is correct.
EXPLANATION:
Company or staff adjusters are individuals employed by a property and casualty insurance company to settle on its behalf claims brought by insureds. They work directly for the insurance company as year-round salaried employees. Staff adjusters evaluate the merits of each claim and make recommendations to the insurance company.
14
Q
Under the Personal Auto Policy the Supplementary Payments coverage is:
Answer Choices: Select the Correct Answer
In addition to the limit of liability.
Added by endorsement.
Included in the limit of liability.
Not available under the personal auto policy.
A
In addition to the limit of liability. is correct.
EXPLANATION:
Supplementary Payments are in addition to the Limits of Liability.
15
Q
When a first party claim is made, what must be listed on the payment draft?
Answer Choices: Select the Correct Answer
Type of coverage under which payment is made
Details of the accident
Application of the deductible
Drivers license number
A
Type of coverage under which payment is made is correct.
EXPLANATION:
When a claim payment is made, an indication of the type of coverage under which the payment is made must be stated on the draft payment.
16
Q
Under the Commercial Property Policy, the Pro-rata Liability Clause means:
Answer Choices: Select the Correct Answer
Each insurer pays its limits under the policy.
Neither Insurer Pays
Each insurer pays in accordance to the percentage of its coverage bears to the total amount of insurance.
A Form of Coinsurance Clause
A
Each insurer pays in accordance to the percentage of its coverage bears to the total amount of insurance. is correct.
EXPLANATION:
The insurer will not be liable for a greater proportion of a loss than the amount insured will bear to the whole insurance covering the property against the peril involved, whether collectible or not. This is often referred to as the “Other Insurance” clause.
17
Q
David has damaged his vehicle by striking a tree. He can:
I. Take the car to a repair garage recommended by the insurer.
II. Take the car to a garage of his choice.
III. Accept payment based on the adjuster’s estimate.
Answer Choices: Select the Correct Answer
I, II and III
I and II only
I and III only
I only
A
I, II and III is correct.
EXPLANATION:
The choice belongs to the David, the insured.
18
Q
Under a farm policy, which of the following would be covered under Coverage A?
Answer Choices: Select the Correct Answer
A structure attached to the dwelling
A structure detached from the dwelling
Dwelling Contents
Livestock
A
A structure attached to the dwelling is correct.
EXPLANATION:
Coverage A covers the dwelling and any attached structures such as a garage.
19
Q
Which of the following coverages is included in a Personal Auto Policy without having to issue an endorsement?
Answer Choices: Select the Correct Answer
Transportation Expenses
Towing and Labor Costs
Miscellaneous Type Vehicles
Named Nonowner
A
Transportation Expenses.
EXPLANATION:
Transportation expenses are part of the Physical Damage coverage. Some auto policies still provide this coverage only if the vehicle has been stolen.
20
Q
Which of the following is NOT included in the California Code of Regulations (CCR)?
Answer Choices: Select the Correct Answer
Selling techniques.
Specific requirements for different types of insurance.
Procedural issues related to agent and insurance company practices.
Conduct hearings and investigations.
A
The correct answer is: Selling techniques. .
EXPLANATION:
Selling techniques are not issues for the California Department of Insurance unless the techniques violate insurance law.
21
Q
Which commercial property form provides the broadest coverage?
Answer Choices: Select the Correct Answer
Basic form
Broad form
Special form
Deluxe form
A
Special form is correct.
EXPLANATION:
In commercial property insurance, the insured selects from three different “causes of loss” forms - basic, broad, or special. There is no deluxe form. Basic and broad forms provide named peril protection; special form is all-risk (open-perils), and is therefore the broadest.
22
Q
The authority the public believes the agent has based on the agent’s actions is known as:
Answer Choices: Select the Correct Answer
Fiduciary Authority
Expressed Authority
Apparent Authority
Implied Authority
A
Apparent Authority.
EXPLANATION:
Apparent authority is the authority the public believes the agent has which seems to be apparent by the agent’s actions.
23
Q
In legal terms, the written explanation of how a loss occurred is called a:
Answer Choices: Select the Correct Answer
Loss notification.
Deposition.
Statement.
Proof of loss.
A
Statement. is correct.
EXPLANATION:
This is a statement. A proof of loss lists the damage for which the insured desires reimbursement.
24
Q
Under Workers Compensation rules, for an employee to receive Temporary Disability Compensation for the first three (3) days of his disability, his disability period must extend:
Answer Choices: Select the Correct Answer
21 days
30 days
45 days
60 days
A
21 days is correct.
EXPLANATION:
Benefits are retroactive to the day of the injury if the disability lasts 21 days.
25
Under the conditions section of the BOP, which of the following would not be considered vacant?
Answer Choices: Select the Correct Answer
A 100 unit apartment building of which 70 units are not rented
An office building containing two empty units and these two empty suites represent 25% of the total floor space.
A mercantile building with a print shop on the ground floor but the second and third floors are not being utilized
A new building which has not been rented out at all
An office building containing two empty units and these two empty suites represent 25% of the total floor space. is correct.
EXPLANATION:
A building is considered vacant when 65% or more of the total floor space is not being utilized or rented out. The office building with two empty suites is only 25% vacant.
26
A ship has negligently collided with another ship and caused severe damage. What coverage would apply to cover this claim?
Answer Choices: Select the Correct Answer
Hull insurance with the "running down clause".
Protection and Indemnity.
Inchmaree clause.
Towage clause.
Hull insurance with the "running down clause". is correct.
EXPLANATION:
Hull insurance with the "running down clause" would respond to cover this claim.
27
A license issued by the Commissioner that contains certain conditions is called:
Answer Choices: Select the Correct Answer
A restricted license.
A temporary license.
A surplus lines license.
A non-restricted license.
A restricted license. is correct.
EXPLANATION:
A restricted license is a license that is issued by the Commissioner with reasonable restrictions on the license and license holder.
28
An insured has $500 cash stolen from her home. How much can she collect under a standard homeowner policy?
Answer Choices: Select the Correct Answer
$500
$200
0
$100
The correct answer is: $200.
EXPLANATION:
The standard homeowner policy limits coverage for cash to only $200.
29
All the following are reasons that a driver would be insured under the assigned risk plan, EXCEPT:
Answer Choices: Select the Correct Answer
They desire to save premium
They are uninsurable in the standard markets
They have had too many claims
They cannot show evidence of satisfying the financial responsibility law of the state
They desire to save premium is correct.
EXPLANATION:
Those drivers with a poor driving records or DUI charges are usually declined by the standard insurance markets. The only auto insurance market for them is the assigned risk plan. The plan is never used to save premium.
30
All the following are included in the definition of insolvency, EXCEPT:
Answer Choices: Select the Correct Answer
impairment of minimum "paid-in capital" required in the aggregate of an insurer.
the inability of the insurer to meet its financial obligations when they are due.
the revocation of an insurer's certificate of authority.
the inability of the insurer to fully reinsure all outstanding risks.
the revocation of an insurer's certificate of authority. is correct.
EXPLANATION:
According to the California Insurance Code (CIC 985), revocation of an insurer's certificate of authority is not included in the definition of insolvency.
31
A method of replacing damaged property with something not exactly like the damaged item, but will perform the same is known as:
Answer Choices: Select the Correct Answer
Agreed Replacement Value.
Stated Amount Value.
Functional Replacement Cost.
Replacement Cost.
The correct answer is: Functional Replacement Cost..
EXPLANATION:
Functional replacement cost will replace the damaged item, but with something that might not be exactly the same.
32
Ocean marine protection and indemnity (P&I) coverage usually insures the ship owner against liability for all of the following EXCEPT:
Answer Choices: Select the Correct Answer
Damage to or loss of another ship caused by a negligent collision.
Injuries to seamen
Cargo lost or damaged through negligence.
Damage to piers.
Damage to or loss of another ship caused by a negligent collision. is correct.
EXPLANATION:
Hull coverage is required to cover the damage to the ship. P&I provides legal liability coverage for injuries and certain types of damages. Damage to another ship is not covered under the P&I coverage. Coverage can be provided under the hull coverage form for this coverage to other vessels. This is called the "running down clause".
33
The insured carries a BOP policy with a sprinkler system. If the system becomes inoperative the insured must advise the insurance company of the problem within ______ if the system cannot be restored.
Answer Choices: Select the Correct Answer
60 hours
48 hours
30 hours
75 hours
48 hours is correct.
EXPLANATION:
The insured must advise the insurance company within 48 hours of a protective device becoming inoperable.
34
Rudy, a licensed California adjuster, has received a letter from a claimant requesting information about a claim. Rudy is required to respond within:
Answer Choices: Select the Correct Answer
30 calendar days.
15 working days.
15 calendar days.
10 days.
15 calendar days. is correct.
EXPLANATION:
Upon receiving any communication from a claimant, regarding a claim, that reasonably suggests that a response is expected, every licensee must immediately, but in no event more than 15 calendar days after receipt of that communication, furnish the claimant with a complete response based on the facts as then known by the licensee.
35
The "when more than one coverage applies" condition in crime insurance is designed to:
Answer Choices: Select the Correct Answer
Specifies how a claim would be allocated among the different insurers.
Allow the insured to choose the company that will pay the claim.
Provide for subrogation of a claim.
Avoid overpayment of a claim.
Specifies how a claim would be allocated among the different insurers. is correct.
EXPLANATION:
The purpose of the clause is to specify how a claim would be allocated among the different insurers.
36
A large tree has fallen into Paul's yard caused by wind. The claims service representative advises Paul to call a contractor to remove the tree and send the insurance company the bill. The bill is $1,200. However, the policy coverage for the debris removal of a tree that has fallen by wind is only $500 unless the tree hits the house, which was not the case. What should the adjuster do?
Answer Choices: Select the Correct Answer
Pay only $500
Pay the $1,200
Explain the policy provisions and ask to insured to reimburse the insurer for the difference
Negotiate
Pay the $1,200 is correct.
EXPLANATION:
The consumer relied on the statements of the claims representative so the insurance company would be estopped from denying the claim. The insurer had already waived its right to deny full payment of the claim because of the statements of the claims representative. Therefore, the $1,200 should be paid.
37
Under the commercial general liability policy, medical payment expenses must be:
Answer Choices: Select the Correct Answer
Reported within one year of the accident.
Paid within one year of the accident.
Reported within two year of the accident.
Paid within three years of the accident
Reported within one year of the accident. is correct.
EXPLANATION:
It is required in the policy that the expenses are incurred and reported to the insurer within one (1) year of the date of the accident.
38
Which of the following perils are covered under Section I of the homeowners form?
Answer Choices: Select the Correct Answer
Physical injury to a guest hurt on the residence premises
First Aid expenses
Theft of credit or funds transfer cards
Intentional damage to the property of others
The correct answer is: Theft of credit or funds transfer cards.
EXPLANATION:
Section I coverages are the property coverages. Section II provides liability and medical payments coverage. The theft of the credit or funds transfer cards are covered property up to a limit of $500.
39
John Smith has just made his last car payment which concludes his contract. The finance company, for reasons not immediately apparent, has the car repossessed. If Mr. Smith brings a suit, the court will allow Mr. Smith to retake possession of the car pending the court's final ruling as to ownership if Mr. Smith provides the court a:
Answer Choices: Select the Correct Answer
Attachment bond.
Indemnity bond.
Performance bond.
Replevin bond.
The correct answer is: Replevin bond..
EXPLANATION:
A replevin bond guarantees that if property is in the possession of party A is determined to belong to party B and the court orders its return to party B, party A will do so. Party A would first have to obtain an attachment bond, also required by the court, in case the property was wrongfully repossessed.
40
For how long must an adjusting firm maintain its claim files?
Answer Choices: Select the Correct Answer
For as long as any statute of limitations
For the current year and 10 prior years
For the current year and 4 prior years
For the current year only
For the current year and 4 prior years is correct.
EXPLANATION:
Per the California DOI, adjusting firms must maintain files for the current policy year and the preceding four years, at the company's principal place of business.
41
The focus of the Equipment Breakdown coverage is:
Answer Choices: Select the Correct Answer
Prevention of loss
Protection from loss
To provide extra coverage over the property policy
To reinforce the explosion and fire perils
The correct answer is: Prevention of loss.
EXPLANATION:
The main focus of this coverage is to prevent loss rather then protection from loss. Proper maintenance of the equipment is required and inspections will be performed to help prevent losses.
42
How are crop insurance premiums calculated?
Answer Choices: Select the Correct Answer
Number of fields
Number of crops
Number of acres
Per farm
Number of acres is correct.
EXPLANATION:
Crop insurance is based on acreage for each crop.
43
Which of the following is not an implied warranty under an ocean marine policy?
Answer Choices: Select the Correct Answer
Seaworthiness of the vessel
Legality
No deviation in the voyage
Protection and indemnity
Protection and indemnity is correct.
EXPLANATION:
Protection and indemnity is a form of ocean marine liability coverage and is not an implied warranty.
44
In California a lawsuit for bodily injury must be brought within:
Answer Choices: Select the Correct Answer
Five years from the date of the loss
180 days from the date of the loss
Two years from the date of the loss
Three years from the date of the loss
Two years from the date of the loss is correct.
EXPLANATION:
The lawsuit must be brought within two years of the date of the loss.
45
A business owner who is careless about property left in his care may be guilty of which of the following hazards:
Answer Choices: Select the Correct Answer
Morale.
Moral.
Catastrophic.
Occupational.
Morale. is correct.
EXPLANATION:
A morale hazard is one created by carelessness or indifference, the failure to exercise due care. A moral hazard is one deliberately created by an insured party willing to trade a loss for a claim payment.
46
With an Equipment Breakdown policy, the loss settlement is:
Answer Choices: Select the Correct Answer
ACV all of the time
Replacement cost all of the time
Replacement cost if the repair or replacement is made within 18 months
Replacement cost if the repair or replacement is made within 24 months
The correct answer is: Replacement cost if the repair or replacement is made within 24 months.
EXPLANATION:
The insured must repair or replace the damaged property within 24 months after the date of the breakdown (unless the time period is extended by the insurer in writing), or recovery of the loss is limited to the lesser of the cost it would have taken to repair the damaged property or the actual cash value of the property at the time of the breakdown. Usually coverage is on a replacement cost basis unless the insured or company endorses the policy to cover losses on an Actual Cash value bases. If replacement cost coverage applies, then the 24-month period is a factor if the insured is to receive replacement cost coverage for the loss.
47
Under Coverage F - Medical Payments of the homeowners program, what is the time limit for expenses to be covered following an accident?
Answer Choices: Select the Correct Answer
Three years
Six months
One year
Two years
The correct answer is: Three years.
EXPLANATION:
Coverage F - Medical Payments pays without regard to the negligence of the insured. It will pay for covered expenses as long as they are claimed within three years of the date of the accident, and the loss occurs to a guest, other individuals (not an insured), or to residence employees while they are working and are not covered by workers compensation coverage.
48
The phrase "doctrine of subrogation" means:
Answer Choices: Select the Correct Answer
The policy allows the insurer to subrogate at its discretion
Explains the types of claims for which subrogation interests may arise
Explains that an insurance company must only subrogate when it so chooses and then must have the insured's written authority to do so
Having paid an insured, the insuer is entitled to seek recovery from the responsible party via an assignment from the insured
The correct answer is: Having paid an insured, the insuer is entitled to seek recovery from the responsible party via an assignment from the insured.
EXPLANATION:
The insured grants to the insurer permission to recover from the responsible third party reimbursement for any monies the insurer has paid out on the insured's behalf.
49
What is the purpose of an installation floater?
Answer Choices: Select the Correct Answer
To cover property belonging to a contractor or others that is intended to become a part of a structure
To cover property to be installed at the insured's location
To cover property that has been installed when the contractor has completed the job and the work has been accepted
To cover the insured's machinery, tools and other equipment used to install property to become a part of a building
To cover property belonging to a contractor or others that is intended to become a part of a structure is correct.
EXPLANATION:
The policy is used to supplement coverage provided by the commercial property forms. It covers property off an insured's location and in transit or at the job site awaiting installation or when it has been installed. Coverage ceases when the property has been accepted by the purchaser.
50
When a lawsuit is filed and served, the defendant generally has 30 days to file a:
Answer Choices: Select the Correct Answer
Cross complaint.
Responsive pleading.
Request for dismissal.
Request to set aside.
Responsive pleading. is correct.
EXPLANATION:
A responsive pleading is, in essence, a written answer by the defendant to the allegations set forth in the plaintiff's lawsuit.
51
The clause in an ocean marine policy that refers to "particular average" means:
Answer Choices: Select the Correct Answer
Only one party shares in the loss.
Damage to cargo losses will be shared by all parties.
Payment must be made under the freight insurance coverage.
Payment must be made under the 'running down clause'.
Only one party shares in the loss. is correct.
EXPLANATION:
The particular average clause means only one party shares in the loss.
52
Dwelling forms include a liberalization clause. It says that any revision of coverage which broadens the insurance without an additional premium charge will be automatically applied to existing policies, if the revision is adopted during the policy period or within:
Answer Choices: Select the Correct Answer
60 days prior to the effective date.
30 prior to the effective date.
45 prior to the effective date.
90 days prior to the effective date.
60 days prior to the effective date. is correct.
EXPLANATION:
This provision is slightly broader on personal lines than on commercial coverages. On most commercial policies, the time period is 45 days. Except where a state exception applies, 60 days is correct for dwelling forms.
53
Which of the following are additional coverages under a Businessowners policy with the named peril form attached?
```
I. Debris removal.
II. Pollutant cleanup and removal.
III. Exterior glass.
IV. Collapse.
Answer Choices: Select the Correct Answer
I, II, and III only
I and II only
III and IV only
I, II, III and IV
```
I, II, and III only is correct.
EXPLANATION:
All are additional coverages, but collapse and water or other liquid, powder or molten materials are available only under the BOP Special form. The named peril form endorsement which coverts open peril coverage to named peril coverage does not include collapse as an additional coverage.
54
To determine the actual cash value of property, one would use:
Answer Choices: Select the Correct Answer
The actual cash cost of rebuilding the structure
The government's appraised value
The price paid for the property less depreciation
The fair market value
The correct answer is: The fair market value.
EXPLANATION:
While neither commercial property nor HO forms gives particulars on how to determine ACV, it is an accepted industry principle to relate "actual cash value" to "fair market value." Note that the first answer choice is closer to "replacement cost" as one assumes the cost of rebuilding included new, undepreciated material and labor costs.
55
An insured has reported a claim late that occurred over one year ago and now seeks defense representation and coverage under his automobile policy. What should the adjuster do?
Answer Choices: Select the Correct Answer
Deny the claim
Investigate the claim
Issue a reservation of rights letter to the insured
Advise the insured to seek his own legal counsel
Issue a reservation of rights letter to the insured is correct.
EXPLANATION:
In this case since the facts are not clear and probably no witnesses or police reports and a lack of physical evidence, the adjuster should issue a "reservation of rights" letter to the insured.
56
Under the insuring agreements relevant to Equipment Breakdown coverage, which of the following applies?
Answer Choices: Select the Correct Answer
Boiler machinery only
First party property damage only
First party coverages, property damage and bodily injury
Damages caused solely by explosion
First party coverages, property damage and bodily injury is correct.
EXPLANATION:
The policy provides first party coverage, property damage to property of others as well as bodily injury.
57
All of the following are considered to be an unfair claims practice act, EXCEPT:
Answer Choices: Select the Correct Answer
Misrepresenting or concealing the benefits, coverages, time limits or other provisions of a bond.
Requiring a first party claimant to submit duplicative proofs of claim where coverage may exist under more than one policy issued by that insurer.
Request that a claimant sign a release that extends beyond the subject matter which gave rise to the claim payment without full disclosure as to the reasons.
Failing to pay an uncovered claim after conducting a through investigation.
Failing to pay an uncovered claim after conducting a through investigation. is correct.
EXPLANATION:
Failing to pay an uncovered claim is not an unfair claims practice.
58
In California, a person who acts, offers to act, or assumes to act in a capacity for which an insurance license is required but does not actually hold a license, is guilty of:
Answer Choices: Select the Correct Answer
A misdemeanor.
A felony.
A federal crime.
Is not guilty of anything.
The correct answer is: A misdemeanor. .
EXPLANATION:
California law specifically classifies transacting insurance without an insurance license as a misdemeanor offense.
59
When would a commercial property insured request the Value Reporting endorsement?
Answer Choices: Select the Correct Answer
For fluctuating levels of personal property
To report the value of a claim
To add a building within 30 days of taking title
To increase limits by 25% during the peak season
For fluctuating levels of personal property is correct.
EXPLANATION:
A fixed limit for personal property coverage is not appropriate for an insured with fluctuating inventory values. To avoid being over or under-insured, the Value Reporting endorsement allows an insured to periodically report actual values to the insurance company within the policy term, and coverage limits automatically adjust with the values reported. Premiums are calculated after policy expiration based upon the reported values.
60
All of the following make a property insurance policy an indemnity contract, EXCEPT:
Answer Choices: Select the Correct Answer
Liberalization.
Insurable interest.
Actual cash value.
Subrogation.
The correct answer is: Liberalization. .
EXPLANATION:
Liberalization is a clause that automatically upgrades an insured's policy when the company has made a change without a premium charge that broadens coverage on the same types of policies issued after the insured's policy was issued.
61
A guest on vacation deposits cash and traveler's checks in the hotel safe deposit box located behind the front desk. When the guest attempts to retrieve them, the box is empty. What coverage is required to cover this loss for the hotel?
Answer Choices: Select the Correct Answer
Funds Transfer Fraud
Safe Depository
Guests property
Kidnap/ransom Extortion
Guests property is correct.
EXPLANATION:
Guests' property in Safe deposit boxes are covered by the crime form called Guests Property.
62
Which of the following would be considered an automobile comprehensive (other than collision) claim?
Answer Choices: Select the Correct Answer
A shopping cart hitting the vehicle
A load of bricks falling from an apartment building onto the car
A hit and run driver striking the vehicle
An uninsured motorist colliding with the vehicle
A load of bricks falling from an apartment building onto the car is correct.
EXPLANATION:
A load of bricks falling onto the vehicle would be an "other than a collision" loss. This would be considered a falling objects claim. The others are considered collision losses. The term "comprehensive" is used in commercial auto coverage and the term "other than collision"is used in personal auto coverage. The coverage is the same.
63
A dwelling insured under an HO-3 form has been vacant for 61 consecutive days. The dwelling has been vandalized. The vandals decide to set fire to the dwelling to conceal any evidence of their presence. The insurer will:
Answer Choices: Select the Correct Answer
Deny the loss.
Pay the fire loss and not the vandalism damage.
Apply the deductible to the vandalism damage.
Pay only the actual cash value less the deductible.
Deny the loss. is correct.
EXPLANATION:
The insurer will deny the loss because the fire is a result of vandalism. Since the dwelling has been vacant for longer than the 60-day limit, coverage will not apply. (Note: In New York the provisions that restrict coverage for vacant dwellings is 30 days.)
64
All the following are exclusions under a DP-2, dwelling form, EXCEPT:
Answer Choices: Select the Correct Answer
Tornado.
Flood.
Earthquake.
Mudslide.
The correct answer is: Tornado. .
EXPLANATION:
Flood, earthquake and mudslides are excluded perils. Coverage for flood and mudslides can be covered by purchasing a separate flood policy. Earthquake coverage can be purchased separately. Tornados are covered by the wind peril.
65
A main street business has suffered an explosion loss from a hot water heating boiler. The civil authorities have blocked off the street and the insured's customers cannot get to his store. The insured carries a Businessowners Policy. He sustains a loss of income. Before his policy will pay any loss of income there is a ______hour waiting period and the policy will then pay for loss of income up to _____weeks.
Answer Choices: Select the Correct Answer
72/four
24/two
12/four
48/three
72/four is correct.
EXPLANATION:
The policy has a 72 hour waiting period before coverage will pay. It will pay for loss of income for up to four weeks or until the expiration date of the policy. The previous form provided for three weeks of coverage. The newer forms also require that the business suffering the damage must be located one mile or less from the insured's location.
66
Which of the following basic workers compensation benefits compensates for the cost of medical treatment resulting from a work-related injury?
Answer Choices: Select the Correct Answer
Disability benefits
Medical benefits
Survivor benefits
Rehabilitation benefits
Medical benefits is correct.
EXPLANATION:
Medical benefits provide for the cost of treatment resulting from a work-related injury.
67
In the Commercial Property Cause of Loss Forms, which of the following perils is covered by broad form but is not covered by the basic form?
Answer Choices: Select the Correct Answer
Weight of ice and snow
Vandalism
Riot
Sinkhole collapse
The correct answer is: Weight of ice and snow.
EXPLANATION:
The basic form does not include loss coverage for the weight of ice and snow.
68
The California Standard Form Fire Insurance Policy contains all the following, EXCEPT:
Answer Choices: Select the Correct Answer
name of the insurance company.
the amount of coverage.
the address of the insured.
the premium being charged.
The California Standard Form Fire Insurance Policy contains all the following, EXCEPT:
Answer Choices: Select the Correct Answer
name of the insurance company.
the amount of coverage.
the address of the insured.
the premium being charged.
69
All of the following are excluded under the CGL coverage for bodily injury and property damage liability, EXCEPT:
Answer Choices: Select the Correct Answer
Bodily Injury or Property Damage caused by the operation of mobile equipment
An injury to an employee of the insured that is work related
Damage to property rented to the named insured
Liability resulting from intentional acts of the insured
Bodily Injury or Property Damage caused by the operation of mobile equipment is correct.
EXPLANATION:
Mobile equipment is defined in the policy. The operation of this type of equipment is usually covered under a CGL policy. However, certain states require some types of mobile equipment to be licensed. In that case they must be covered under the Business Auto Policy. For example if a piece of road construction equipment is required to be licensed it must be covered under an auto policy and coverage is then eliminated from the CGL policy. Injuries to employees is a workers compensation claim. Intentional acts are never covered under a liability policy. The CGL policy excludes damage to property in the insured's care, custody and control including damage to property the insured has rented.
70
Which of the following is considered an insured under the HO-5 form?
Answer Choices: Select the Correct Answer
You and residents of your household who are relatives
Other persons under age 21 in the care of you or relatives residing with you
A college student who is 24 or younger, is your relative and lived with your prior to college
All of the responses are correct
All of the responses are correct is correct.
EXPLANATION:
Though typically "insured" refers to the policyholder and his or her spouse, relatives by blood, marriage or adoption who reside in the named insured's household are also covered. Also included are wards or foster children under the age of 21 as well as resident relatives who are attending college away from home and are under 24 years of age.
71
Wages lost as a result of auto accident where a third party was at fault are considered:
Answer Choices: Select the Correct Answer
Special Damages
Punitive Damages
Other Damages
General Damages
Special Damages is correct.
EXPLANATION:
Lost wages are considered to be special damages in that they can be readily determined.
72
All of the following are included under the HO-3 "additional coverages", EXCEPT:
Answer Choices: Select the Correct Answer
Debris removal
Fire department charge
Loss from specified perils to trees, shrubs and plants
Loss of a good renter or a favorable lease arrangement
Loss of a good renter or a favorable lease arrangement is correct.
EXPLANATION:
Loss of a good renter or a favorable lease agreement is not included in the HO-3 additional coverage section of the form.
73
The home day care endorsement will exclude which of the following?
Answer Choices: Select the Correct Answer
Corporal punishment
Physical abuse
Sexual Molestation
All the responses listed are correct. None of these acts would be covered.
All the responses listed are correct. None of these acts would be covered. is correct.
EXPLANATION:
An insured involved in caring for children in his or her home needs this endorsement, but none of the situations referred to would be covered.
74
A person acting in a catastrophe or emergency situation and registered with the insurance commissioner for that purpose:
Answer Choices: Select the Correct Answer
Does not have to obtain an adjuster's license.
Must obtain an independent adjuster's license.
May only adjust property losses.
May only adjust casualty losses.
The correct answer is: Does not have to obtain an adjuster's license. .
EXPLANATION:
A person acting in a catastrophe or emergency situation does not have to obtain an adjuster's license. Such a person is usually authorized to act in these situations for a specified number of days depending on the state where catastrophe or emergency has been declared.
75
Mary has insured her one-family home under an HO-3 form with a limit of $100,000. What limit is she automatically entitled to for damage to her unattached garage on the premises?
Answer Choices: Select the Correct Answer
$10,000
$5,000
$7,500
$15,000
The correct answer is: $10,000.
EXPLANATION:
The HO-3 form provides 10% of the dwelling limit that applies to unattached structures. The most the insurance company will pay is $10,000 (10% of $100,000).
76
All of the following are covered under the supplementary payments section of a general liability policy, EXCEPT:
Answer Choices: Select the Correct Answer
Court costs.
Costs incurred by the insurer in investigating the claim.
Costs of repair service performed on personal property at the scene of the accident.
Insured's loss of earnings incurred at insurer's request.
Costs of repair service performed on personal property at the scene of the accident. is correct.
EXPLANATION:
Supplementary payments do not include bodily injury or property damage coverages.
77
All the following are true regarding a warranty, EXCEPT:
Answer Choices: Select the Correct Answer
A certain order of words, written or spoken, is necessary to create a warranty.
A warranty can be expressed or implied.
A warranty can refer to the past, present or future.
A warrranty is guaranteed to be true.
A certain order of words, written or spoken, is necessary to create a warranty. is correct.
EXPLANATION:
No particular order of words, written or spoken, is necessary to create a warranty.
78
Bob and Pete's Used Cars has purchased a garage policy with dealers physical damage on the cars owned by the dealership at its location. Pete goes to an auto auction 150 miles away, purchases vehicles and drives them back to the dealership. Which endorsement, if any, is necessary to cover this exposure?
Answer Choices: Select the Correct Answer
Drive Other Car Coverage
Hired auto specified as Covered Autos You Own
Non Owned Auto Coverage
Dealers Drive Away Collision
The correct answer is: Dealers Drive Away Collision.
EXPLANATION:
The "dealers drive away collision" endorsement eliminates the 50 miles coverage limitation on dealers physical damage provided that the points of origin, destination, and value must be stated on the last inventory report submitted to the insurer and the value on the report needs to be significant enough to cover the value of the cars being transported over the 50 mile coverage radius.
79
For all but small employers, premiums in a standard worker compensation policy include an adjustment, upwards or downwards, based upon how the employer's actual loss experience compares to that expected of employers which do similar work. What is the name of the factor that accounts for this adjustment?
Answer Choices: Select the Correct Answer
The scheduled rating factor
The loss constant
The loss ratio adjustment factor
The experience modification factor
The correct answer is: The experience modification factor.
EXPLANATION:
The experience modification factor (EMF, or E-mod) is a number calculated each year by the National Council on Compensation Insurance (NCCI) for all workers compensation policyholders except small employers. The E-mod is based on how the employer's actual losses (with certain adjustments for fairness) during the "experience period" compare to the expected losses for employers doing the same type(s) of work. An E-mod greater than 1.00 means that actual losses exceeded expected losses, and an E-mod lower than 1.00 means that actual losses were below those expected. The E-mod is multiplied against an employer's standard, or "manual" premium to arrive at the Estimated Annual Premium.
80
The reason to purchase an umbrella liability policy is:
Answer Choices: Select the Correct Answer
To provide higher liability limits and broader coverage.
To provide coverage to cover everything that the underlying coverage might exclude.
To avoid deductibles on liability claims.
To reduce insurance costs.
The correct answer is: To provide higher liability limits and broader coverage..
EXPLANATION:
Umbrella policies provide excess limits over primary coverages and provides broader coverage than underlying policies.
81
Which of the following dwelling forms provides coverage for loss of rental income?
Answer Choices: Select the Correct Answer
The Basic, Broad and Special Form
The Basic and Broad Forms only
The Broad and Special Forms only
The Special Form only
The correct answer is: The Basic, Broad and Special Form.
EXPLANATION:
All of the forms provide for rental value coverage. In the DP-2 and DP-3, it is 20% of the Coverage A limit and is additional coverage. With the DP-1, the 20% coverage reduces the available Coverage A amount on the dwelling. (Note: in North Carolina the percentage is 10%.)
82
When a worker is unable to return to work within _______ days of his/her injury or illness, he/she is entitled to temporary benefits.
Answer Choices: Select the Correct Answer
Seven
Five
Three
Four
Three is correct.
EXPLANATION:
The benefits begin after three days of the injury.
83
Under a "claims-made" CGL policy, which of the following events would eliminate coverage:
Answer Choices: Select the Correct Answer
Injury or damage which occurred prior to the retroactive date.
Injury or damage which occurred during the policy period.
An occurrence first reported 20 days into an extended reporting period.
A claim made more than five years into a supplemental extended reporting period.
Injury or damage which occurred prior to the retroactive date. is correct.
EXPLANATION:
With claims-made insurance, only claims that occur AFTER the retroactive date are covered.
84
Extra expense coverage under the commercial property insurance provides:
Answer Choices: Select the Correct Answer
Costs incurred by the insured
Allows continued production eliminating loss of profits
Allows continued production conserving expenses to insurance company. Covers all insured's expenses incurred in continuing normal operation
All of the responses are correct
All of the responses are correct is correct.
EXPLANATION:
All of the responses are correct. Extra Expense coverage is designed to indemnify the insured for any additional costs he/she incurs during the normal operation of the business that result from a covered peril.
85
Agent Rice informs the insured that he needs to secure motor vehicle records on all of the drivers in the household based on company requirements. This is an example of Agent Rice's:
Answer Choices: Select the Correct Answer
Fiduciary Authority
Expressed Authority
Apparent Authority
Implied Authority
The correct answer is: Implied Authority.
EXPLANATION:
Implied authority is the authority the agent believes he has in order to do his job properly. In order to write auto insurance, the agent needs to know what is on the motor vehicle driving record of all the drivers in the household.
86
In California an adjuster must post a surety bond. The bond payable to:
Answer Choices: Select the Correct Answer
The people of the State of California
The Insurance Commissioner
The State of California
The insurance company the adjuster works for
The correct answer is: The people of the State of California.
EXPLANATION:
The bond is made payable to the people of the State of California.
87
Dwelling forms may be used to insure residential structures which:
Answer Choices: Select the Correct Answer
Contain no more than 4 occupancy units.
Have no more than 8 apartments.
Are used as residences and for small retail sales operations.
Are located on farms if no other business is conducted there.
Contain no more than 4 occupancy units. is correct.
EXPLANATION:
This will vary to some extent by state. The industry standard is no more than 4 occupancy units.
88
Which is not true regarding the California FAIR Plan?
Answer Choices: Select the Correct Answer
Producers may bind coverage if they already write the applicant's homeowner's insurance.
All admitted insurers writing basic property insurance in California are required to participate in it.
Only properties located in designated brush hazard areas and/or designated urban areas are eligible for coverage.
Farm risks are not eligible for coverage.
The correct answer is: Producers may bind coverage if they already write the applicant's homeowner's insurance.
89
CGL policies are often referred to as "third party" contracts. Which company would be considered the "third party" in General Construction Company's policy?
Answer Choices: Select the Correct Answer
Inferno Heating Company, a claimant
We Rip-Em-Off Insurance Company, the insurer
General Construction Company, the insured
We Rip-Em-Off Insurance Company, the insurer and General Construction Company, the insured
Inferno Heating Company, a claimant is correct.
EXPLANATION:
The claimant is always the third party in a liability claim.
90
Which of the following would include a "superseded suretyship rider?"
Answer Choices: Select the Correct Answer
Fidelity bond
Commercial general liability
Bank package
Commercial package
Fidelity bond is correct.
EXPLANATION:
Superseded suretyship riders are used in fidelity bonding
91
Which of the following would be considered uninsured vehicles?
Answer Choices: Select the Correct Answer
An unidentified car that backs into your car at the supermarket, injures you and takes off
A vacationing motorist who hits your car and whose liability coverage is below the required limit for the state you live in, and below that required to cover the damage and injuries
A motorist who hits your car and has no insurance or bonding
All of the responses would be considered "uninsured" vehicles
All of the responses would be considered "uninsured" vehicles is correct.
EXPLANATION:
All of the responses would be considered uninsured vehicles.
92
Which of the following would not be eligible for coverage under a livestock floater?
Answer Choices: Select the Correct Answer
Poultry
Cattle
Sheep
Swine
Poultry is correct.
EXPLANATION:
Poultry is not eligible property under the livestock floater.
93
Which of the following would be covered under the mobile equipment endorsement?
Answer Choices: Select the Correct Answer
Fork lift.
A motorcycle.
A company car.
A company truck with a snow removal plow attached.
The correct answer is: Fork lift. .
EXPLANATION:
Some types of mobile equipment that operates in a given state must be licensed, and evidence of liability insurance provided. Sometimes these are added to the commercial auto policy by using the mobile equipment endorsement.
94
The insurance industry in the United States is regulated primarily by:
Answer Choices: Select the Correct Answer
The U.S. Congress
The President
The states
The Supreme Court
The states is correct.
EXPLANATION:
For the most part the regulation of insurance rests with the states.
95
Which of the following would be covered by flood insurance?
Reasonable expenses to protect the property when endangered by flood
Water spray damage
Interior damage caused by frozen pipes
Mudslides
The correct answer is: Reasonable expenses to protect the property when endangered by flood.
EXPLANATION:
Flood insurance written through the National Flood Insurance Program covers direct damage caused by "flood" as defined in the policy. Coverage extends to certain costs an insured incurs to protect the property, when flood is imminent. Mudflow is covered and mudslides are not.
96
Mrs. Vincent is covered on a PAP policy which covers her 2012 Ford SUV. She carries liability and full physical damage coverage. Her neighbor owns a 2002 Chevrolet pick up truck with liability coverage only. Mrs. Vincent borrows the truck to pick up lawn furniture, parks the truck at Home Depot and leaves the keys in the ignition. The truck is stolen and later found wrecked. Which of the following would apply?
The loss is covered under Mrs. Vincent's "other than collision coverage."
The loss would be covered under her neighbor's policy.
The loss is covered under Mrs. Vincent's collision coverage.
The loss would be covered under her neighbor's homeowners coverage.
The correct answer is: The loss is covered under Mrs. Vincent's "other than collision coverage.".
EXPLANATION:
The loss is covered under Mrs. Vincent's policy under the "Other Than Collision" coverage because the damage resulted from the theft. Since the neighbor did not carry Physical Damage coverage Mrs. Vincent's policy would be primary. If the neighbor carried full Physical Damage coverage then Mrs. Vincent's policy would be excess.
97
Under "additional coverages" of Section II of a homeowners policy, damage to property of others will not be covered if it is caused intentionally by an insured who is at least:
13 years of age.
15 years of age.
16 years of age.
18 years of age.
The correct answer is: 13 years of age. .
EXPLANATION:
If the child is under age 13 the policy will cover the intentional acts. This coverage is only for property damage and not bodily injury.
98
Under Workers Compensation guidelines, Permanent Partial Disability is any rating of:
50% or more
60% or more
Any rating under 100%
90% or more
Your answer: Any rating under 100% is correct.
EXPLANATION:
Permanent Partial Disability is any rating under 100%.
99
Money and securities are best covered under which of the following?
Inside the Premises Theft of Money and Securities
Robbery and safe burglary.
Premises burglary.
Theft coverage only.
Your answer: Inside the Premises Theft of Money and Securities is correct.
EXPLANATION:
This coverage provides theft, disappearance and destruction and is the best method to insure the theft of money and securities inside the premises. The other responses are more restrictive in coverage.
100
A Private Passenger Auto Policy may be canceled after the effective date for which of the following reasons?
Drivers license suspension of the insured.
A change in the insured's occupation.
The addition of a teenage driver to the policy.
A change in the insured's marital status.
Your answer: Drivers license suspension of the insured. is correct.
EXPLANATION:
Most states have enacted laws that restrict the insurer's ability to cancel, restrict or non-renew coverage. Certainly suspension of a driver's license is a justified reason.
101
In ocean marine, what is covered by protection and indemnity coverage?
All of the responses are correct.
Loss of life, injury and illness.
Crew member burial expense.
Damage to docks, buoys and other structures not owned, leased, or hired by the insured.
The correct answer is: All of the responses are correct. .
EXPLANATION:
The protection and indemnity coverage applies to all of the responses.
102
The program trigger for terrorist acts must cause collective damage in excess of:
$50,000,000
$100,000,000
$5,000,000
$1,000,000
The correct answer is: $100,000,000.
EXPLANATION:
From the year 2007 until December of 2015, a terrorist act must cause in excess of $100 million in damages to trigger the federal government involvement in paying claims. Insurers must absorb $100 million in covered losses before TRIA will pay. Note: The Act was extended in 2015 and is due to expire on December 31, 2020. The answer to this question is $100 million through 2015 but will increase by $20 million in 2016. Please check the outline from the testing vendor in your state to determine the version of the Act on which it will be testing.
103
All the following are covered under the homeowner policies, EXCEPT:
Erosion that causes the foundation to crack
Theft of a jacket left on the front porch overnight
Lightning damage to insured's garage
Vandalism caused by a neighbor's children
Your answer: Erosion that causes the foundation to crack is correct.
EXPLANATION:
Foundation damage is not covered under the homeowner policy.
104
Under the special dwelling policy (DP-3), which of the following would be covered?
Earthquake
Theft of outside lighting attached to the building
Vandalism in a building vacant for 89 days
Frozen plumbing in a dwelling with a disconnected furnace.
Your answer: Theft of outside lighting attached to the building is correct.
EXPLANATION:
The special DP-3 form provides open peril coverage on the structures. It does provide theft of equipment pertaining to the structure. It would not cover theft of equipment or building supplies for a dwelling under construction until it is completed and occupied. The DP-3 form does not provide theft of personal property not part of a structure. So in this question theft of outside lighting attached to the structure is the only item covered.
105
Under the commercial auto policy with respect to physical damage to a covered vehicle, which of the following is true regarding diminution of value?
It is specifically excluded.
It is covered.
The deductible is waived.
The renewal premium is reduced for physical damage coverages on the damaged vehicle.
The correct answer is: It is specifically excluded..
EXPLANATION:
A decrease in the value because of an accident is not a covered loss in most states. The policy excludes this decrease in value when a covered vehicle has been damaged and causes a decrease in value even though it has been repaired.
106
Which of the following coverages is NOT provided by the Business Income Coverage Form?
Leasehold Interest Coverage
Coverage for loss of net income
Coverage for continuing expenses
Extra Expense Coverage
Your answer: Leasehold Interest Coverage is correct.
EXPLANATION:
Leasehold interest coverage is a separate coverage to cover the value of a favorable lease when the premises have been damaged by an insured peril.
107
Upon discovering that an agent may have violated an insurance law, the state insurance department is required to take which of the following actions?
Hold a hearing on the infraction
Place the licensee on probation immediately
Publish notice of the violation
Revoke the agent's license
The correct answer is: Hold a hearing on the infraction.
EXPLANATION:
In most states, the head of the state's insurance department will hold a hearing and subpoena witnesses regarding a possible violation of insurance law. The agent would have the opportunity to present his or her side of the case at that the hearing. After the hearing is completed, the department head will issue an order/conclusion (similar to a verdict in a criminal case).
108
An equipment dealers coverage form is designed to provide insurance on:
Equipment owned by the insured dealer.
Equipment in the insured's custody for servicing or storage.
Equipment entrusted to the insured dealer for sale.
All of the responses are correct.
Your answer: All of the responses are correct. is correct.
EXPLANATION:
All of the risks listed may be covered.
109
What workers compensation benefits, if any, can dependent children of an employee killed in an industrial accident expect to receive in most states?
Income benefits for five years following the death
income benefits until reaching the age of 18
Income benefits until reaching the age of 18, or longer if enrolled in school
No benefits
Your answer: Income benefits until reaching the age of 18, or longer if enrolled in school is correct.
EXPLANATION:
Dependent children of an employee killed in an industrial accident generally receive income benefits until reaching the age of 18, or for a longer period (depending on the state) only while they remain enrolled in school.
110
An insured has a small fire in his home. He carries an HO-2 policy. The fire department extinguishes the fire. Since the dwelling is untenable because of the smoke, the insured leaves the premises and forgets to lock the doors and close the windows. Thieves come in and steal the insureds belongings. The adjuster advises the insured that all of the following damage is covered, EXCEPT:
Fire
Smoke damage
Water damage as a result of extinguishing the fire
Theft
Your answer: Theft is correct.
EXPLANATION:
The adjuster could refuse to cover the theft because of neglect. Neglect is excluded if the insured does not do all he can reasonably do to protect the damaged property AFTER a loss. In this case, the insured should have secured the premises.
111
A weather report would be considered what type of evidence?
Documentary
Demonstrative
Interrogatory
Material
Your answer: Documentary is correct.
EXPLANATION:
A weather report is a documentary report that is considered to be an official report. It is in a list of other official reports such as police reports, fire department reports, autopsy reports and court records showing previous convictions of crimes.
112
Which term is the closest to "stipulated authority" under the law of agency?
Expressed authority
Implied authority
Apparent authority
Accidental authority
The correct answer is: Expressed authority.
EXPLANATION:
Expressed authority, normally in writing, stipulates the authority under the law of agency.
113
In claims adjusting during the interviewing of a party involved in a liability claim, there are three types of questions. These are "direct" questions, "open-ended" questions and "leading" questions. A direct question is seeking brief answers about the facts; an open-ended question is seeking more elaboration of the facts and leading questions are suggesting to the person being interviewed that a particular answer would be what the adjuster would prefer. Which of the following would be considered a direct question?
Did the Pontiac skid before impact? How far?
What was the red car doing?
What did you see?
The red car stopped at the stoplight. Didn't it?
our answer: Did the Pontiac skid before impact? How far? is correct.
EXPLANATION:
This is considered a "direct" question. It is asking a brief question about the facts known by the interviewee without elaboration or leading the person being interviewed to answer the question the way the adjuster would prefer.
114
An applicant for an adjuster license must file with the Commissioner a surety bond in the amount of:
$10,000.
$5,000.
$2,500.
$2,000.
Your answer: $2,000. is correct.
EXPLANATION:
No license will be issued unless the applicant files with the Commissioner a surety bond executed by a surety company authorized to do business in the state in the sum of $2,000 conditioned for the faithful and honest conduct of business by the applicant. Such bond as to its form, execution, and sufficiency of the sureties must be approved by the Commissioner.
115
The home day care endorsement will exclude which of the following?
Corporal punishment
Physical abuse
Sexual Molestation
All the responses listed are correct. None of these acts would be covered.
Your answer: All the responses listed are correct. None of these acts would be covered. is correct.
EXPLANATION:
An insured involved in caring for children in his or her home needs this endorsement, but none of the situations referred to would be covered.
