IA Test 10

Question 1

Under a commercial property policy, once the insured has submitted a properly executed proof of loss within 60 days of a loss as required by the policy, how long does the company have to pay the claim?

Answer Choices:	Select the Correct Answer
45 days	
60 days	
30 days	
10 days	

Question 1 of 100

Answer 1

Your answer: 30 days is correct.

EXPLANATION:
The insurer is required to pay the claim within 30 days. Note: This clause is in the form but the number of days may vary per state based on their laws.

Question 1 of 100

Question 2

Under the comprehensive coverage of a business auto policy, which of the following would not be a covered loss?

Answer Choices: Select the Correct Answer
After sliding on an icy pavement, a driver hits a guardrail.
Electrical wiring in the vehicle catches fire when the ignition is turned on.
All four tires are removed and a truck is put on blocks while it is parked over the weekend, even though there is no evidence of forcible entry into the company parking lot.
A vehicle has its tires slashed by an undetermined person.

Question 2 of 100

Answer 2

Your answer: Electrical wiring in the vehicle catches fire when the ignition is turned on. is incorrect. The correct answer is: After sliding on an icy pavement, a driver hits a guardrail..

EXPLANATION:
Since the vehicle sustained damage by hitting the guard rail, it is considered a collision claim. This is because the definition of collision includes the upset of a vehicle, its impact with another vehicle or object; anything else would be other than collision and thus be covered by comprehensive coverage.

Question 2 of 100

Question 3

The insured is covered under a standard BOP for $200,000 on his building. The risk is completely destroyed by fire. It will cost $225,000 to replace the building. The cost to remove the debris is $25,000. How much, if any, will the company pay in total for this loss?

Answer Choices:	Select the Correct Answer
$200,000	
$225,000	
$210,000	
$190,000	

Question 3 of 100

Answer 3

Your answer: $190,000 is incorrect. The correct answer is: $225,000.

EXPLANATION:
The company will pay the $200,000 policy limit, although the loss was more than that, plus another $25,000 for the debris removal. The policy provides a maximum payout of $25,000 for debris removal when the cost to rebuild or replace the building exhausts the limits of coverage.

Question 3 of 100

Question 4

A covered auto requires $700 in repairs because of damage done by a limb from a dead tree that fell on it. The auto’s BAP coverage has a $100 comprehensive deducible and a $250 collision deductible. Assuming that the ACV and replacement cost of the vehicle is $700, the insurer will pay:

Answer Choices:	Select the Correct Answer
-0-	
$450	
$600	
$700	

Question 4 of 100

Answer 4

Your answer: $600 is correct.

EXPLANATION:
Falling objects is a comprehensive loss and the deductible of $100.00 would apply.

Question 4 of 100

Question 5

Personal Excess Liability coverage provides all of the following, EXCEPT:

Answer Choices: Select the Correct Answer
Injuries sustained by a third party on the insured’s property.
Personal injury or property damage sustained by a third party due to an at-fault accident by the insured.
Damage to an insured’s property due to fire.
Injuries to a neighbor while riding in the insured’s covered boat.

Question 5 of 100

Answer 5

Your answer: Damage to an insured’s property due to fire. is correct.

EXPLANATION:
Personal Excess Liability provides higher limits, but does not broaden coverage like an umbrella policy would.

Question 5 of 100

Question 6

An insured has ONE limit of insurance covering all buildings and contents at three different locations. Coverage written in this manner is referred to as:

Answer Choices:	Select the Correct Answer
Blanket coverage.	
Specific coverage.	
Scheduled coverage.	
Extended coverage.	

Question 6 of 100

Answer 6

Your answer: Blanket coverage. is correct.

EXPLANATION:
This approach can be used to cover all buildings and their contents under one single limit of coverage. It can also be used to cover either buildings or contents at different locations. Often times, this helps to avoid underinsurance at a particular location.

Question 6 of 100

Question 7

If an employee becomes injured due to serious and willful misconduct on his or her behalf, what level of workers compensation benefits is he or she entitled to?

Answer Choices: Select the Correct Answer
A level reduced by his or degree of misconduct
None
A maximum of 25% of the normal benefits
50% of the normal benefits

Question 7 of 100

Answer 7

Your answer: 50% of the normal benefits is correct.

EXPLANATION:
Employees who are injured as a result of their own serious and willful misconduct will have any workers compensation benefits reduced by 50%.

Question 7 of 100

Question 8

The limit of liability for business auto coverage may be paid:

Answer Choices:	Select the Correct Answer
For each separate accident.	
Only once during the policy term.	
Until the aggregate limit is exhausted.	
Only once for each involved automobile.	

Question 8 of 100

Answer 8

Your answer: For each separate accident. is correct.

EXPLANATION:
The entire liability limit applies per accident. The commercial auto policy does not have an aggregate limit so no matter how many claims occur during the policy period the entire per accident limit applies per accident.

Question 8 of 100

Question 9

An insured carries a Personal Property Replacement Cost endorsement attached to his Homeowners policy. He has suffered a loss to his personal property. He submits a claim for actual cash value (ACV) at the time of the loss, but notifies the insurer that he intends to make a claim for replacement cost later. The insurer will honor the insured’s request, but only if the cost to repair or replace the property is:

Answer Choices:	Select the Correct Answer
More than $500.	
Less than $500.	
More than $1,000.	
Less than $5,000.	

Question 9 of 100

Answer 9

Your answer: More than $1,000. is incorrect. The correct answer is: More than $500..

EXPLANATION:
If the cost to repair or replace the property is more than $500, the insurer will pay the actual cash value for the loss, until the actual repair or replacement is made.

Question 9 of 100

Question 10

A sandblaster becomes very sick after working for his current employer for 6 months. The employer did not know that the employee was suffering from a respiratory disease caused by similar work done over the past 20 years. How much responsibility, if any, would the current employer have for workers compensation?

Answer Choices: Select the Correct Answer
None, since this is a pre-existing condition
A portion of the responsibility, to be shared will all employers within the past year.
Maximum 50% responsibility
Full responsibility

Question 10 of 100

Answer 10

Your answer: A portion of the responsibility, to be shared will all employers within the past year. is correct.

EXPLANATION:
Responsibility for workers compensation benefits for occupational diseases is apportioned to all of a worker’s employers during the last year which exposed the worker to the hazards associated with the occupational disease. Employers beyond one year in the past are absolved of responsibility to pay workers compensation benefits.

Question 10 of 100

Question 11

Collin suffered a work-related injury on the morning of February 5th and was off work completely until he returned to work on full duty on February 19th. Collin had worked for his employer for four years and was paid $42,125 per year. Collin’s state sets the TTD rate at 66 2/3rd percent of the average weekly wage. The state sets the maximum compensation rate at $420 per week and the waiting period at 3 days retroactive after 10 days. Collin was not paid for working on February 5th. Collin’s average weekly wage is approximately:

Answer Choices:	Select the Correct Answer
$810.	
$770.	
$534.	
$420.	

Question 11 of 100

Answer 11

retroactive after 10 days. Collin was not paid for working on February 5th. Collin’s average weekly wage is approximately:

Your answer: $420. is incorrect. The correct answer is: $810..

EXPLANATION:
Collins average weekly wage is approximately $810. We arrive at this number by dividing Collin’s annual salary of $42,125 by 52 weeks.

Question 11 of 100

Question 12

How is personal property of a dwelling covered under a farm policy?

Answer 12

Your answer: Replacement Cost Basis is incorrect. 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.

Question 12 of 100

Question 13

Under the discovery clause in a loss sustained bond, which of the following is covered?

Answer Choices: Select the Correct Answer
A loss discovered up to one year after the policy expired but that occurred during the policy period.
A loss that is discovered after the policy has expired.
A loss that occurred prior to the inception date of the policy.
A loss that occurred during the policy period but was not discovered until five years after the expiration date.

Question 13 of 100

Answer 13

Under the discovery clause in a loss sustained bond, which of the following is covered?

Your answer: A loss that occurred prior to the inception date of the policy. is incorrect. The correct answer is: A loss discovered up to one year after the policy expired but that occurred during the policy period. .

EXPLANATION:
The discovery clause in a loss sustained form states that losses that occur during the policy period, but are not discovered for up to one year after the bond has expired, can be covered under the expired bond. The discovery clause in the discovery form provides coverage during the policy period or within 60 days after the bond expires for coverage to apply.

Question 13 of 100

Question 14

Under a Commercial Property policy, which of the following is not a covered peril under the Basic Cause of Loss form?

Answer Choices:	Select the Correct Answer
Water damage	
Explosion	
Sinkhole collapse	
Smoke	

Question 14 of 100

Answer 14

Your answer: Sinkhole collapse is incorrect. The correct answer is: Water damage.

EXPLANATION:
Water damage to extinquish a fire and the accidental leakage of water from a sprinker system would be covered. Other types of water damage would be excluded.

Question 14 of 100

Question 15

A tornado blows over a wall of a barn which, in turn, knocks over a lamp and starts a fire. What is the proximate cause of loss?

Answer Choices:	Select the Correct Answer
Tornado	
Smoke	
Fire	
Water Damage	

Question 15 of 100

Answer 15

Your answer: Tornado is correct.

EXPLANATION:
The proximate cause of loss would be the tornado (wind).

Question 15 of 100

Question 16

Miranda’s home is covered under a Homeowners policy with an Earthquake Endorsement attached. She has selected the base deductible of 5% and her limit of liability under Coverage C is greater than Coverage A. Her Coverage C limit of liability is $1,000. What is the deductible that Miranda will have to pay?

Answer Choices:	Select the Correct Answer
$50	
$5	
$5,000	
$500	

Question 16 of 100

Answer 16

Your answer: $5 is incorrect. The correct answer is: $500.

EXPLANATION:
Although 5% multiplied by $1,000 is $50, the endorsement states that the deductible will never be less than $500.

Question 16 of 100

Question 17

Which of the following are covered under the Homeowners “Additional Residence Rented to Others” endorsement?

I. Personal Liability (Injury)
II. Medical Payment to Others
III. Dwelling
IV. Personal Property

Answer Choices:	Select the Correct Answer
I and II only.	
I, II, III and IV.	
I and IV only.	
III and IV only.	

Question 17 of 100

Answer 17

Your answer: I, II, III and IV. is incorrect. The correct answer is: I and II only..

EXPLANATION:
The “Additional Residence Rented to Others” endorsement provides personal liability (injury) and medical payments to others coverage to cover the insured’s liability arising out of the ownership of a residence regularly rented to others.

Question 17 of 100

Question 18

Under workers compensation rules, for an employee to receive temporary disability compensation for the first three days of his disability, his disability period must extend:

Answer Choices:	Select the Correct Answer
14 days.	
30 days.	
45 days.	
60 days.	

Question 18 of 100

Answer 18

Your answer: 14 days. is correct.

EXPLANATION:
Benefits are retroactive to the day of the injury if the disability lasts 14 days.

Question 18 of 100

Question 19

When the insured or the insurance company disputes the amount of a loss settlement, either may resolve their differences through the:

Answer Choices:	Select the Correct Answer
Appraisal Clause	
Arbitration Clause	
Subrogation Clause	
Liberalization Clause	

Question 19 of 100

Answer 19

Your answer: Arbitration Clause is incorrect. The correct answer is: Appraisal Clause.

EXPLANATION:
When the insured and the insurer disagree on the value of the damaged property, either can demand an appraisal of the property.

Question 19 of 100

Submit

Question 20

If a building insured under a BOP has been vacant or unoccupied beyond _____ the insurer can send the insured a notice of cancellation.

Answer Choices:	Select the Correct Answer
60 days	
30 days	
45 days	
90 days	

Question 20 of 100

Answer 20

Your answer: 60 days is correct.

EXPLANATION:
If the risk has been vacant or unoccupied beyond 60 consecutive days, the insurer can send the insured a notice of cancellation. Buildings that have 65% or more of their rental units or floor area vacant or unoccupied, are considered vacant under this provision. For the tenant, the rented space is considered vacant if there is not enough contents in the space to conduct normal operations.

Question 20 of 100

Question 21

The Section I - Property conditions of the California Homeowners Special Provisions form states that if loss or damage relates to a state of emergency under California law, the insured has an extended amount of time after the insurer’s payment of actual cash value, to notify the insurer of the intent to make a replacement cost claim under the HO-2, HO-3, and HO-5 forms. How long is this extended period of time?

Answer Choices:	Select the Correct Answer
12 months.	
24 months.	
36 months.	
9 months.	

Question 21 of 100

Answer 21

Your answer: 24 months. is correct.

EXPLANATION:
When the loss or damage related to a state of emergency under California law, the insured has 24 months following the insurer’s payment of actual cash value, to make a claim for replacement cost settlement. If the loss or damage results from a cause other than a declared state of emergency, the California Special Provisions form requires that the insured make the replacement cost claim within 12 months.

Question 21 of 100

Question 22

The aggregate limit on a liability policy can be expressed as:

Answer Choices: Select the Correct Answer
Per occurrence
Premises/operations
Products and Completed Operations
Both Premises/operations and products/completed operations

Question 22 of 100

Answer 22

Your answer: Per occurrence is incorrect. The correct answer is: Both Premises/operations and products/completed operations.

EXPLANATION:
The aggregate is the most the policy will pay for all claims submitted during the policy period. The policy will establish a general aggregate for all claims submitted in the policy period and a separate aggregate for products and completed operations type of claims for the entire year.

Question 22 of 100

Question 23

The limit under the ISO Standardized Homeowners policy, the additional coverage for “credit card, electronic fund transfer card or access device, forgery and counterfeit money” is:

Answer Choices:	Select the Correct Answer
$250	
$500	
$1,000	
$1,500	

Question 23 of 100

Answer 23

Your answer: $500 is correct.

EXPLANATION:
The standardized ISO Homeowners policies provide $500 of additional coverage for “credit card, electronic fund transfer card or access device, forgery and counterfeit money”. Some states’ statutory forms may increase this coverage, but you are required to know the limits of coverage for both standardized and statutory forms for your state licensing exam.

Question 23 of 100

Question 24

The California Code states that standard fire policies must be written on the standard form with very limited omissions. Which of the following modifications are permitted to be made under a Standard Fire policy in California?

Answer Choices: Select the Correct Answer
The coverage can be substantially equivalent to or more favorable to the insured.
The insured can sign a waiver and accept lesser coverage.
The Commissioner can approve any variance in coverage.
The insurer can offer lesser coverage at a lower premium.

Question 24 of 100

Answer 24

Your answer: The coverage can be substantially equivalent to or more favorable to the insured. is correct.

EXPLANATION:
According to the California Insurance Code (CIC 2070), the coverage can be substantially equivalent to or more favorable to the insured than that contained in the Standard Fire insurance policy.

Question 24 of 100

Question 25

Personal property that is covered under the Personal Property Replacement Cost Endorsement is damaged and a claim has been filed. The replacement cost of the property at the time of the loss is $2,500. The full cost to repair the property is $2,000. The Coverage C limit of the Homeowners policy is $8,000. No special limits apply to this property and there is no limit applied to the type of property being claimed. Which of the following is the amount that will be paid under the endorsement?

Answer Choices:	Select the Correct Answer
$2,500.	
$2,000.	
$8,000.	
$500.	

Question 25 of 100

Answer 25

Your answer: $2,500. is incorrect. The correct answer is: $2,000..

EXPLANATION:
The endorsement will pay the smallest amount of the replacement cost at the time of the loss, the full repair cost, the Coverage C limit, any applicable special limits, or the limit that applies to the type of property being claimed.

Question 25 of 100

Question 26

All of the following would be covered under a Builders Risk Policy, EXCEPT:

Answer Choices:	Select the Correct Answer
Prospective buyer.	
Contractor.	
Owner.	
Sub-contractor.	

Question 26 of 100

Answer 26

Your answer: Contractor. is incorrect. The correct answer is: Prospective buyer..

EXPLANATION:
A prospective buyer could not be added to the policy as an insured. They would not have an insurable interest in the property.

Question 26 of 100

Question 27

The insured has several locations and desires to insure his contents coverage. His agent advises him to complete a statement of values form and issues a policy with one limit to cover all locations. This is an example of:

Answer Choices:	Select the Correct Answer
Specific coverage.	
Reporting form coverage.	
Blanket coverage.	
Location basis.	

Question 27 of 100

Answer 27

Your answer: Blanket coverage. is correct.

EXPLANATION:
This is an example of “blanket” coverage where all locations are covered under one limit.

Question 27 of 100

Question 28

What insurers must participate in accepting business under the California FAIR Plan?

Answer Choices: Select the Correct Answer
All insurers licensed to write basic property insurance or any component of property insurance in multi-peril policies.
Companies who specialize in difficult or hard to place property insurance.
Only those property insurers holding a certificate of authority for 5 years or less in California.
Only those insurers wanting to enter California and have received approval from their board of directors.

Question 28 of 100

Answer 28

Your answer: All insurers licensed to write basic property insurance or any component of property insurance in multi-peril policies. is correct.

EXPLANATION:
The purpose of the FAIR Plan is designed to provide a market for those property owners who are unable to obtain insurance through the normal market. Therefore, the California legislature enacted legislation requiring the participation of admitted insurers licensed to write property insurance to participate.

Question 28 of 100

Question 29

The claimant relinquishes his or her right to sue by settling the claim under which of the following?

Answer Choices:	Select the Correct Answer
Scheduled Payment Release	
Advance Payment	
Full Release Settlement	
Structured Settlement	

Question 29 of 100

Answer 29

Your answer: Full Release Settlement is correct.

EXPLANATION:
After a claimant signs a Full Release Settlement, he or she waives the right to sue.

Question 29 of 100

Question 30

Which of the following dwelling forms provides broad perils coverage for personal property?

Answer Choices:	Select the Correct Answer
DP-2 and DP-3 only	
DP-1, DP-2, and DP-3	
DP-3 only	
DP-2 only	

Question 30 of 100

Answer 30

Your answer: DP-2 only is incorrect. The correct answer is: DP-2 and DP-3 only.

EXPLANATION:
The DP-1 includes only the perils of fire, lightning, and internal explosion. A DP-1 policyholder can add the extended coverage and vandalism perils by indicating this choice on the declarations page, but the broad perils (damage by burglars, etc) is NOT available. Both the DP-2 and the DP-3 forms automatically provide fire, lightning, EC, vandalism, and the broad perils for personal property.

Question 30 of 100

Question 31

A claim is made on an excess liability policy. It is discovered during the claims investigation, that the underlying liability policy and the excess liability policy have different inception and expiration dates. The adjuster finds that the different dates has created a situation where the underlying policy was not in effect at the time of the occurrence, and therefore cannot trigger the excess liability policy to pay the claim. This situation is known as:

Answer Choices:	Select the Correct Answer
Contribution by Equal Shares.	
Nonconcurrency.	
Liability Discrepancy.	
Split Limits.	

Question 31 of 100

Answer 31

Your answer: Nonconcurrency. is correct.

EXPLANATION:
“Nonconcurrency” is a situation where an underlying policy and an excess liability policy, have different inception and expiration dates, creating a situation where the underlying policy is not in force to trigger coverage under the excess liability policy.

Question 31 of 100

Question 32

Which of the following claims would be covered by the Commercial General Liability Policy?

Answer Choices: Select the Correct Answer
Hotel bellhop cuts his finger trying to steal change from a soda machine.
Insured’s premises sustains damage when the owner accidentally strikes the loading dock with the company van.
Insured’s customer is injured when he slips on spilled milk on the insured’s premises.
Manufacturer’s employee is hurt while on a coffee break at the plant.

Question 32 of 100

Answer 32

Your answer: Hotel bellhop cuts his finger trying to steal change from a soda machine. is incorrect. The correct answer is: Insured’s customer is injured when he slips on spilled milk on the insured’s premises..

EXPLANATION:
The CGL provides bodily injury and property damage coverage but not for an injury to the insured or their employees or any damage to the insured’s own property, caused by the insured.

Question 32 of 100

Question 33

Difference in Conditions insurance is written to provide:

Answer Choices: Select the Correct Answer
Coverage for the gaps in coverage left by other property insurance forms.
Open peril coverage only.
Flood coverage only.
Earthquake coverage only.

Question 33 of 100

Answer 33

Your answer: Coverage for the gaps in coverage left by other property insurance forms. is correct.

EXPLANATION:
This form is used to cover the gaps left by other property insurance policies. This could include flood and earthquake.

Question 33 of 100

Question 34

Which of the following statements does NOT describe the major purpose of commercial umbrella liability insurance?

Answer Choices: Select the Correct Answer
To provide supplementary insurance.
To provide excess insurance in addition to the underlying policy.
To provide additional coverage to the underlying insurance policy.
To protect the insured from catastrophic losses by providing additional insurance.

Question 34 of 100

Answer 34

Your answer: To provide supplementary insurance. is incorrect. The correct answer is: To provide additional coverage to the underlying insurance policy..

EXPLANATION:
In commercial umbrella insurance the insurer will require the insured to carry “underlying” insurance. Underlying policies pay first for claims covered by the underlying coverage and then the umbrella continues to pay according to its policy provisions.

Question 34 of 100

Question 35

Which of the following most accurately describes reinsurance?

Answer Choices: Select the Correct Answer
When an insurance company buys insurance for some of the risks for which it has issued coverage.
When two separate policies are used to cover the same building.
When an insured switches coverage to a different insurer before the original policy expires.
When the risk is split between two or more insurance companies.

Question 35 of 100

Answer 35

Your answer: When an insurance company buys insurance for some of the risks for which it has issued coverage. is correct.

EXPLANATION:
Reinsurance is insurance for insurers. Rather than retain all of a risk, companies have established reinsurance contracts with reinsurance companies. Part of the risk is ceded to the reinsurer, therefore, some of the risk is the responsibility of the reinsurer.

Question 35 of 100

Question 36

Byron has submitted his application for a California Adjuster license, and then begins studying a course that will allow him to take the state licensing exam. Byron is working 40 hours a week, so he feels satisfied that he finished the course and passed the state licensing exam only 14 months after submitting his application. Which of the following is the response Byron will receive from the California Department of Insurance?

Answer Choices: Select the Correct Answer
He will receive notice that his license application is denied because he was required to fulfill all licensing requirements within 12 months of submitting his application.
He will receive his license from the Department because he fulfilled all the requirements for licensing.
He will receive notice that his license application is denied because he was required to fulfill all licensing requirements within 6 months of submitting his application.
He will receive notice that his license application has been approved and he will receive it within 60 days.

Question 36 of 100

Answer 36

Your answer: He will receive notice that his license application is denied because he was required to fulfill all licensing requirements within 12 months of submitting his application. is correct.

EXPLANATION:
He will receive notice that his license application is denied because he was required to fulfill all licensing requirements within 12 months of submitting his application. (CCR 2691.9)

Question 36 of 100

Question 37

Which of the following property is excluded under Homeowner’s Personal Property Coverage?

Answer Choices: Select the Correct Answer
A suitcase full of clothes while the named insured is vacationing in Russia.
A suitcase full of clothes while the named insured is vacationing in Mexico.
A valuable baseball card collection owned by the named insured’s son that is covered under a separate personal articles floater.
A valuable baseball card collection that the named insured’s young son owns, but the agent is unaware of.

Question 37 of 100

Answer 37

Your answer: A valuable baseball card collection that the named insured’s young son owns, but the agent is unaware of. is incorrect. The correct answer is: A valuable baseball card collection owned by the named insured’s son that is covered under a separate personal articles floater..

EXPLANATION:
Personal property more specifically insured elsewhere is specifically excluded in homeowner’s personal property coverage. Homeowner’s personal property coverage covers insured’s personal property anywhere in the world.

Question 37 of 100

Question 38

Under a dwelling policy what is the maximum that would be paid for one month for additional living expenses if Coverage A was $75,000?

Answer Choices:	Select the Correct Answer
$1,250	
$500	
$1,000	
$750	

Question 38 of 100

Answer 38

Your answer: $750 is incorrect. The correct answer is: $1,250.

EXPLANATION:
The form provides 20% of Coverage A for additional living expense under the DP-2 and DP-3. Therefore, $75,000 X 20% = $15,000. This amount divided by 12 months = $1,250/month.

Question 38 of 100

Question 39

What coverage under the BOP automatically applies if a customer slips and falls on the named insured’s premises, regardless of legal liability?

Answer Choices:	Select the Correct Answer
Business liability coverage	
Personal injury coverage	
Medical expense coverage	
Advertising injury coverage	

Question 39 of 100

Answer 39

Your answer: Medical expense coverage is correct.

EXPLANATION:
Medical expense coverage pays regardless of the insured’s legal liability. It is a “good will” type of coverage where negligence is not a factor in the claim.

Question 39 of 100

Question 40

All of the following statements regarding the Commercial Package Policy are correct, EXCEPT:

Answer Choices: Select the Correct Answer
Commercial Package Policies can include Ocean Marine and Aviation Insurance coverage.
Almost all commercial risks are eligible for coverage under the Commercial Package Policy.
The insured can choose a variety of eligible commercial coverages to tailor the package to specific business insurance needs.
A complete Commercial Package Policy (CPP) includes a common policy Declarations page, a common policy Conditions sections, and two or more coverage parts.

Question 40 of 100

Answer 40

Your answer: Commercial Package Policies can include Ocean Marine and Aviation Insurance coverage. is correct.

EXPLANATION:
Ocean Marine and/or Aviation insurance are “specialty” policies that cannot be packages together with other commercial risks into a package policy.

Question 40 of 100

Question 41

Which of the following policies would cover an insured’s $15,000 inventory loss discovered during a semi-annual inventory?

Answer Choices: Select the Correct Answer
None of these policies would cover the loss
Businessowner’s Policy
Building and Personal Property form with Special Causes of Loss
Employee Theft Coverage

Question 41 of 100

Answer 41

Your answer: Businessowner’s Policy is incorrect. The correct answer is: None of these policies would cover the loss.

EXPLANATION:
When the only proof of a loss is an inventory or accounting computation, insurance will typically NOT pay for the loss. There needs to be more evidence of wrongdoing, such as physical evidence of a break-in or proof that an employee covered under a dishonesty bond caused the loss.

Question 41 of 100

Question 42

The commercial property Business Income Coverage Form covers all of the following, EXCEPT:

Answer Choices:	Select the Correct Answer
Non-continuing operating expenses.	
Actions of a civil authority.	
Loss of business income.	
Continuing operating expenses.	

Question 42 of 100

Answer 42

our answer: Actions of a civil authority. is incorrect. The correct answer is: Non-continuing operating expenses. .

EXPLANATION:
The business income forms would not cover those expenses that would discontinue if a loss occurred. Only those expenses that continue are covered. The insured can also elect, in some cases, to exclude ordinary payroll.

Question 42 of 100

Question 43

What is “break-bulk” cargo as respects ocean marine cargo coverage?

Answer Choices:	Select the Correct Answer
Loose cargo, such as cartons.	
Containerized cargo.	
Bulk shipments.	
Tanker cargo.	

Question 43 of 100

Answer 43

Your answer: Containerized cargo. is incorrect. The correct answer is: Loose cargo, such as cartons. .

EXPLANATION:
Break bulk cargo refers to loose cargo, such as cartons or boxes, that are stowed directly (or placed on pallets) in the ship’s hold, as opposed to containerized cargo or bulk shipments.

Question 43 of 100

Question 44

The DP-3 dwelling form provides:

Answer Choices: Select the Correct Answer
Open peril coverage on structures and broad form peril coverage on contents.
Broad form peril coverage on buildings and contents.
Basic peril coverage only.
Fire, lightning, extended coverage and vandalism & malicious mischief coverage only.

Question 44 of 100

Answer 44

Your answer: Broad form peril coverage on buildings and contents. is incorrect. The correct answer is: Open peril coverage on structures and broad form peril coverage on contents..

EXPLANATION:
The DP-3 provides open peril coverage on structures and broad form peril coverage on contents. The other forms are named peril forms and are not as broad as the open peril form.

Question 44 of 100

Question 45

Which of the following coverages is NOT provided by the Farm Employers Liability and Farm Employees Medical Payments insurance endorsement?

Answer Choices: Select the Correct Answer
Pays statutory workers’ compensation benefits.
Pays medical payments to an injured farm employee.
Provides employers legal liability coverage where a bodily injury has occurred to an employee.
Provides defense coverage to the farm owner as a result of an injured employee who brings a legal action.

Question 45 of 100

Answer 45

Your answer: Pays statutory workers’ compensation benefits. is correct.

EXPLANATION:
This endorsement offers farm employers liability coverage and farm employees medical payments insurance. It can be attached to FL 00 20 or to the CGL form. FL 04 65 offers to pay those sums that the insured becomes legally obligated to pay as damages because of BI sustained by a farm employee arising out of and in the course of employment by the insured. And, the endorsement offers to pay to or for each farm employee who sustains BI caused by an accident, all reasonable medical expenses to which the insurance applies. FL 04 65 basically combines the employers liability coverage from a workers comp policy with med pay coverage. This endorsement does not provide statutory workers compensation benefits.

Question 45 of 100

Question 46

The standard Equipment Breakdown policy provides automatic coverage to equipment in use, or connected for use, at newly acquired or existing locations for ______ if the insured reports it to the insurer in writing.

Answer Choices:	Select the Correct Answer
120 days	
30 days	
90 days	
60 days	

Question 46 of 100

Answer 46

Your answer: 30 days is incorrect. The correct answer is: 90 days.

EXPLANATION:
Automatic coverage is provided for 90 days if the newly acquired property is reported in writing to the insurer.

Question 46 of 100

Question 47

Your insurance company pays for the damages to your auto and for your bodily injury after your car is struck by a hit and run driver. The accident is witnessed by several individuals who can describe the car and its driver but who failed to get a license number. A year after the accident, the owner of the hit and run vehicle turns himself in. It is determined that he was fully insured at the time of the accident but fled because he had been drinking. Pursuant to the California Insurance Regulations, your insurance company can:

Answer Choices: Select the Correct Answer
Do nothing as a full year has passed since the accident occurred
Subrogate against the other insurance company to recover only for the damages to your vehicle
Subrogate against the other driver to recover all sums paid for your vehicle repair and your bodily injury
File a lawsuit to waive the statute of limitations then proceed with subrogation

Question 47 of 100

Answer 47

Your answer: Subrogate against the other driver to recover all sums paid for your vehicle repair and your bodily injury is correct.

EXPLANATION:
Payments made under both your Uninsured Motorist Bodily Injury and Uninsured Motorist Property Damage coverages can be recovered from the responsible party by subrogation if his/her identity is later confirmed.

Question 47 of 100

Question 48

St. Michael’s Church is having their annual rigatoni dinner. Mary is volunteering to serve the guests. Which of the following situations would be covered by the CGL for the church?

Answer Choices: Select the Correct Answer
Mary spills hot coffee on another volunteer worker.
Mary spills hot coffee on a guest.
Mary damages the church coffee maker while cleaning it.
Mary damages her watch while cleaning the coffee maker.

Question 48 of 100

Answer 48

Your answer: Mary spills hot coffee on a guest. is correct.

EXPLANATION:
As a volunteer, Mary is considered to be an insured under the church CGL policy. Injury caused to a guest by her actions would be covered under the policy.

Question 48 of 100

Question 49

In California, the class of insurance that provides coverage against loss of property and liability for damage to persons or property from explosion of, or accident to, boilers, tanks, pipes, pressure vessels, engines, wheels, electrical machinery, or apparatus connected them, is known as:

Answer Choices:	Select the Correct Answer
Marine insurance.	
Fire insurance.	
Mechanical Breakdown insurance.	
Boiler & Machinery insurance.	

Question 49 of 100

Answer 49

Your answer: Boiler & Machinery insurance. is correct.

EXPLANATION:
In California, the class of insurance that provides coverage against loss of property and liability for damage to persons or property from explosion of, or accident to, boilers, tanks, pipes, pressure vessels, engines, wheels, electrical machinery, or apparatus connected them, is known as Boiler & Machinery insurance. In most states, this type of insurance is now referred to as Equipment Breakdown insurance. Mechanical Breakdown insurance covers automobile breakdowns.

Question 49 of 100

Question 50

An insured has an HO-3 policy. They have insured the wife’s diamond ring and the husband’s gun collection on a personal articles floater. All of the items are stolen. What policy and deductibles would apply?

Answer Choices: Select the Correct Answer
The homeowner policy would not pay and the personal articles floater would pay without a deductible.
The homeowner policy would pay excess over the personal articles floater with a deductible.
Each policy would pay its pro-rata portion of the loss.
The homeowner policy would pay its limits specified for these types of property and the floater would pay as “excess” coverage.

Question 50 of 100

Answer 50

Your answer: Each policy would pay its pro-rata portion of the loss. is incorrect. The correct answer is: The homeowner policy would not pay and the personal articles floater would pay without a deductible..

EXPLANATION:
Once coverage is purchased on a more specific basis the coverage no longer applies under the homeowner policy. The floater would pay the claim. Floaters seldom contain deductibles.

Question 50 of 100

Question 51

When can an adjuster in California use a fictitious name while conducting business?

Answer Choices: Select the Correct Answer
Never
When authorized by the Commissioner to do so
When it does not conflict with another’s name in the same business
Anytime

Question 51 of 100

Answer 51

Your answer: Never is incorrect. The correct answer is: When authorized by the Commissioner to do so.

EXPLANATION:
No licensee may conduct a business under a fictitious or other business name unless and until he or she has obtained the written authorization of the Commissioner to do so.

Question 51 of 100

Question 52

What type of coverage would a heating and cooling contractor need when work has been done on a newly renovated building but not yet accepted by the owner?

Answer Choices:	Select the Correct Answer
An Installation Floater	
A Builder’s Risk Policy	
A Bailee Form of Coverage	
A Transportation Floater	

Question 52 of 100

Answer 52

Your answer: A Builder’s Risk Policy is incorrect. The correct answer is: An Installation Floater.

EXPLANATION:
The contractor would need an installation floater that provides property coverages for work performed until accepted by the owner.

Question 52 of 100

Question 53

An insured sells heavy equipment to contractors. He needs coverage for the inventory on the premises and while it is off the premises on a trial basis. What type of policy would fit the insured’s needs?

Answer Choices:	Select the Correct Answer
An Equipment Dealers Inland Marine Form	
A Contractors Equipment Policy	
A Commercial Property Form	
A Businessowners Policy	

Question 53 of 100

Answer 53

Your answer: An Equipment Dealers Inland Marine Form is correct.

EXPLANATION:
The broadest form for this business is the equipment dealers inland marine form.

Question 53 of 100

Question 54

A blanket employee dishonesty bond will:

Answer Choices:	Select the Correct Answer
Name the individuals	
Does not name the individuals	
Excludes certain individuals	
Excludes certain types of occupations	

Question 54 of 100

Answer 54

Your answer: Does not name the individuals is correct.

EXPLANATION:
Blanket employee bonds do not list the names of the employees. They are all covered under the form.

Question 54 of 100

Question 55

What costs are paid under an Umbrella policy?

Answer Choices: Select the Correct Answer
The policy limit and any defense costs minus any applicable retained limit (deductible).
The policy limit that includes the defense costs.
The policy limit minus any retained limit (deductible).
Only the required underlying limits and the defense costs.

Question 55 of 100

Answer 55

Your answer: The policy limit and any defense costs minus any applicable retained limit (deductible). is correct.

EXPLANATION:
The Umbrella policy, like most liability policies, pays up to the limit of liability for covered claims. In addition, it pays defense costs incurred by the company in the defense of the insured. When the underlying coverage does not cover a claim and the Umbrella policy DOES cover the claim there is usually a retained limit, otherwise known as a deductible, that the insured must pay.

Question 55 of 100

Question 56

Gordon’s Carpentry built a garage for a client. Two weeks after the work was completed, the garage collapsed and damaged the client’s car, equipment in the garage, and caused bodily injury to the client. Gordon’s CGL policy would not apply to:

Answer Choices:	Select the Correct Answer
The damage to the car.	
The damage to the other equipment.	
The damage to the garage.	
Bodily injury to the client.	

Question 56 of 100

Answer 56

Your answer: The damage to the garage. is correct.

EXPLANATION:
The garage is Gordon’s work and the policy would not cover damage to his work. The other damage, along with the bodily injury would be covered by the CGL.

Question 56 of 100

Question 57

The insured has purchased a new building and has yet to advise the agent of the acquisition. The building is covered on a limited basis because of the “newly acquired building coverage” clause. This coverage is found in the ________ section of the commercial property form.

Answer Choices:	Select the Correct Answer
Additional coverage	
Extensions of coverage	
Other insurance clause	
Supplementary payments clause	

Question 57 of 100

Answer 57

Your answer: Other insurance clause is incorrect. The correct answer is: Extensions of coverage.

EXPLANATION:
This clause is found under the “extensions of coverage” in the commercial property form.

Question 57 of 100

Question 58

Cameron has his home covered under a Homeowners policy and his limit for bodily injury is $100,000. He also purchased a Personal Umbrella policy with a $1,000,000 limit of liability. Cameron is sued and a judgement was made against him for $500,000. To trigger his Umbrella policy, his Homeowners policy must pay $100,000, but he finds that the insurance company from which he purchased his Homeowners policy has become insolvent. How will the Umbrella insurer pay the claim (disregarding any retention limit)?

Answer Choices: Select the Correct Answer
The Umbrella policy will become primary when the underlying insurer becomes insolvent, and will pay the $100,000, plus the remaining $400,000 due under the Umbrella policy.
The Umbrella policy will pay nothing. The underlying insurance must be kept in place for the Umbrella policy to pay any amount.
The Umbrella policy will not become primary when the underlying insurance when that insurer becomes insolvent, but will pay the $400,000 as if the underlying insurer had paid its $100,000 limit of liability.
The Umbrella policy will become primary when the underlying insurer becomes insolvent, but will only pay the underlying policies limit of $100,000, and only $300,000 of the remaining judgement, for a total of $400,000.

Question 58 of 100

Answer 58

Your answer: The Umbrella policy will not become primary when the underlying insurance when that insurer becomes insolvent, but will pay the $400,000 as if the underlying insurer had paid its $100,000 limit of liability. is correct.

EXPLANATION:
The Umbrella policy will not replace the underlying insurance when that insurer becomes insolvent, but will pay the $400,000 as if the underlying insurer had paid its $100,000 limit of liability.

Question 58 of 100

Question 59

Under the ISO standard BOP form, how much would be paid for any one tree, shrub, or plant in case of a covered cause of loss?

Answer Choices:	Select the Correct Answer
$1,500	
$1,000	
$300	
$500	

Question 59 of 100

Answer 59

Your answer: $500 is incorrect. The correct answer is: $1,000.

EXPLANATION:
The policy provides a limit of no more than $1,000 on any one tree, shrub, or plant with a total limit of $2,500.

Question 59 of 100

Question 60

The Ordinance or Law Endorsement can be added to a Homeowners form to increase the amount of coverage in ______ increments, up to ______ coverage.

Answer Choices:	Select the Correct Answer
20% increments, up to 80% coverage.	
25% increments, up to 100% coverage.	
30% increments, up to 70% coverage.	
15% increments, up to 95% coverage.	

Question 60 of 100

Answer 60

Your answer: 25% increments, up to 100% coverage. is correct.

EXPLANATION:
Coverage for Ordinance or Law is already included on all Homeowners forms except the HO-8. The Ordinance or Law Endorsement can be attached to the form, increasing the coverage in 25% increments, up to 100% coverage.

Question 60 of 100

Question 61

When an insured suffers a property loss, he or she is obligated by the terms of the policy to do all of the following, EXCEPT:

Answer Choices: Select the Correct Answer
Separate the damaged from the undamaged property.
Mitigate the loss.
Produce books and records relevant to the claim.
Hire a public adjuster to represent them in the claims process.

Question 61 of 100

Answer 61

Your answer: Hire a public adjuster to represent them in the claims process. is correct.

EXPLANATION:
The insured is not obligated to employ a ‘public adjuster” to assist in the claim against the insurance company. It is an option on the part of the insured.

Question 61 of 100

Question 62

A non-waiver agreement issued by an insurance company is:

Answer Choices:	Select the Correct Answer
A loss or damage issue.	
A coverage issue.	
A cause of loss issue.	
An exclusion issue.	

Question 62 of 100

Answer 62

Your answer: An exclusion issue. is incorrect. The correct answer is: A coverage issue..

EXPLANATION:
Non-waiver agreements and reservation of rights letters both serve the following general purposes: 1. To advise the insured that any action taken by the insurance company in investigating the cause of loss or in ascertaining the amount of loss is not intended to waive or invalidate any policy condition, and 2. To clarify that the intent of the agreement is to permit an investigation of the claim and that neither the insured nor the insurer will thereby waive any respective rights or obligations.

Question 62 of 100

Question 63

Surety bonds deal with which of the following?

Answer Choices: Select the Correct Answer
The performance by another party of an obligation or undertaking.
On-premises Employee Dishonesty.
The theft of a third party’s goods by an employee.
Loss as a result of an inventory shortage.

Question 63 of 100

Answer 63

Your answer: The performance by another party of an obligation or undertaking. is correct.

EXPLANATION:
Surety bonds are issued to guarantee the obligee for the performance of the principal under the bond.

Question 63 of 100

Question 64

According the California Insurance Code, upon receiving notice of a claim, an adjuster must transmit notice of claim to the insurer:

Answer Choices:	Select the Correct Answer
within five working days.	
immediately.	
within 48 hours.	
within 10 days.	

Question 64 of 100

Answer 64

Your answer: immediately. is correct.

EXPLANATION:
Upon receiving notice of claim, every licensee or adjuster must immediately transmit notice of claim to the insurer. Failure of the licensee or claims agent to immediately transmit notice of claim to the insurer will constitute a separate and distinct violation of California Insurance Code.

Question 64 of 100

Question 65

The Homeowners policy provides a special limit for Damage to Property of Others in the Section II (liability) Additional Coverages of:

Answer Choices:	Select the Correct Answer
$500.	
$250.	
$1,000.	
$2,000.	

Question 65 of 100

Answer 65

Your answer: $2,000. is incorrect. The correct answer is: $1,000..

EXPLANATION:
This coverage has been increased to $1,000.

Question 65 of 100

Question 66

How soon must a change in the qualified manager of an adjusting firm be reported to the California Department of Insurance?

Answer Choices:	Select the Correct Answer
Within one year	
Within 30 days	
Immediately	
Does not have to be reported	

Question 66 of 100

Answer 66

Your answer: Within 30 days is correct.

EXPLANATION:
A change in the qualified manager, branch manager, officer or partner must be reported to the DOI within 30 days of the change.

Question 66 of 100

Question 67

Which of the following would not be covered by a Garage Liability policy?

Answer Choices: Select the Correct Answer
The costs incurred by the insured to recall defective products.
A customer falls down and breaks an arm while visiting the dealership building.
Poor workmanship when installing new brakes to a customer’s vehicle causes that customer to be involved in an auto accident.
While driving a dealership-owned pickup, an employee has an accident, injuring another person.

Question 67 of 100

Answer 67

Your answer: A customer falls down and breaks an arm while visiting the dealership building. is incorrect. The correct answer is: The costs incurred by the insured to recall defective products. .

EXPLANATION:
Garage Liability insurance includes automobile liability and general liability as well, but products being recalled are excluded from the ISO Garage Liability form. This is because liability insurance is used to cover occurrences and products are recalled to prevent an occurrence.

Question 67 of 100

Question 68

The insured carries a Commercial Crime policy with Insuring Agreement 4 - Inside the Premises-Robbery or Safe Burglary of Other Property coverage. A night watchperson and a janitor are carrying around some of the property belonging to the store and they are robbed. Will this insuring agreement provide coverage?

Answer Choices: Select the Correct Answer
Only money and securities are covered.
Neither a night watchperson nor a janitor is considered a custodian and the loss would be denied.
The loss would be paid.
There must be signs of forcible entry.

Question 68 of 100

Answer 68

Your answer: The loss would be paid. is incorrect. The correct answer is: Neither a night watchperson nor a janitor is considered a custodian and the loss would be denied..

EXPLANATION:
“Other property” is the focus of this question. This defined term includes just about any tangible property other than money or securities that have intrinsic value. As an example, if the insured has a diamond ring in his safe at work and someone breaks into the safe and steals the ring; coverage for the loss is provided. And, if the “other property” is being carried around inside the insured’s premises by a “custodian” and that person is robbed, coverage is again provided. “Custodian” is a defined term and it includes the named insured and his employees, but not a watchperson or janitor.

Question 68 of 100

Question 69

Which of the following is true regarding Uninsured Motorist Coverage in California?

Answer Choices: Select the Correct Answer
The coverage may be waived in writing by an insured.
The insurer does not have to offer the coverage to the insured.
The coverage must be added to all existing auto liability policies.
The coverage protects occupants of an auto which strikes the insured auto.

Question 69 of 100

Answer 69

Your answer: The coverage may be waived in writing by an insured. is correct.

EXPLANATION:
UM coverage must be offered by the insurer but the insured can reject the coverage.

Question 69 of 100

Question 70

Which of the following is an ideal form of protection for the frequent shipper of goods?

Answer Choices:	Select the Correct Answer
Annual Transit Policy	
Trip Transit Policy	
Monthly Transit Policy	
Common Carrier Motor Truck Cargo Policy	

Question 70 of 100

Answer 70

Your answer: Common Carrier Motor Truck Cargo Policy is incorrect. The correct answer is: Annual Transit Policy.

EXPLANATION:
The annual transit policy is written to cover the goods shipped by the insured on a regular basis throughout the year. A trip transit policy is designed to cover only a single shipment of goods.

Question 70 of 100

Question 71

Insurers conducting business in California must establish an operate a “Special Investigative Unit” to investigate suspected insurance fraud. Employees of the SIU must:

I. Have the ability to conduct effective investigations of suspected insurance fraud.
II. Be familiar with insurance and related laws.
III. Have knowledge or experience in general claims practices.
IV. Have knowledge of current trends in insurance fraud.

Answer Choices:	Select the Correct Answer
I, II and III only	
I, III and IV only	
I, II, III and IV	
I and IV only	

Question 71 of 100

Answer 71

Your answer: I, II, III and IV is correct.

EXPLANATION:
A Special Investigative Unit must be composed of employees who have knowledge and/or experience in general claims practices, the analysis of claims for patterns of fraud, and current trends in insurance fraud, education and training in specific red flags, red flag events, and other criteria indicating possible fraud. They must have the ability to conduct effective investigations of suspected insurance fraud and be familiar with insurance and related law and the use of available insurer related database resources.

Question 71 of 100

Question 72

In the case of a first-party automobile physical damage claim in California, the auto insurance company must exercise its right to inspect the damaged vehicle:

Answer Choices: Select the Correct Answer
Within 48 hours of receiving the claims notice.
Anytime within 30 days of receiving the claims notice.
Within 7 business days after receiving the notice of claim.
Within 6 business days after receiving the notice of claim.

Question 72 of 100

Answer 72

Your answer: Within 7 business days after receiving the notice of claim. is incorrect. The correct answer is: Within 6 business days after receiving the notice of claim..

EXPLANATION:
The California Fair Claims Settlement Practices Regulations state that if an insurer chooses to exercise its right to inspect the damaged vehicle on a first-party claim, it must do so within 6 business days of receiving the claims notice.

Question 72 of 100

Question 73

The Forgery and Alteration Coverage Form protects the insured from losses resulting from forgery or alteration of:

I. Outgoing checks.
II. Drafts.
III. Promissory notes.
IV. Instruments drawn against the insured.

Answer Choices:	Select the Correct Answer
I, II, III and IV	
I and II only	
I and III only	
I, II, and III only	

Question 73 of 100

Answer 73

Your answer: I, II, and III only is incorrect. The correct answer is: I, II, III and IV.

EXPLANATION:
All four of the instruments listed above are covered. This form is meant to protect the insured from loss through theft by these instruments drawn against them.

Question 73 of 100

Question 74

Before an application for an independent adjuster license is granted, the applicant must meet all of the following requirements, EXCEPT:

Answer Choices: Select the Correct Answer
The applicant must be at least 21 years of age.
The applicant must have at least two years of experience in insurance claims adjusting.
The applicant must not have committed acts constituting grounds for denial of a license.
Payment of the application fee.

Question 74 of 100

Answer 74

Your answer: The applicant must be at least 21 years of age. is correct.

EXPLANATION:
The applicant must be at least 18 years of age.

Question 74 of 100

Question 75

When an applicant for auto insurance has been rejected by several admitted insurers in California due to a poor driving record, the applicant may obtain coverage through:

Answer Choices: Select the Correct Answer
The California Assigned Risk Automobile Insurance Plan
Through a non-admitted auto insurer
California’s Low Cost Auto Insurance Program
Through the Federal Assigned Risk Plan

Question 75 of 100

Answer 75

Your answer: The California Assigned Risk Automobile Insurance Plan is correct.

EXPLANATION:
If a licensed driver is denied coverage in the standard markets he or she can apply for a High-Risk Auto Insurance policy under the California Assigned Risk Automobile Insurance Plan for coverage.

Question 75 of 100

Question 76

The insured’s deliberate failure to reveal material facts that would affect the insurer’s decision to issue an insurance policy is called:

Answer Choices:	Select the Correct Answer
Rebating	
Material concealment	
Over indemnity	
Fraud	

Question 76 of 100

Answer 76

Your answer: Fraud is incorrect. The correct answer is: Material concealment.

EXPLANATION:
Concealment would be a material misrepresentation and the insurer could cancel the policy.

Question 76 of 100

Question 77

A dead tree beside Jerry’s home is best described as which of the following types of hazards?

Answer Choices:	Select the Correct Answer
Physical hazard.	
Proximate hazard.	
Moral hazard.	
Morale hazard.	

Question 77 of 100

Answer 77

Your answer: Proximate hazard. is incorrect. The correct answer is: Physical hazard..

EXPLANATION:
This is obviously a physical hazard to the house. Broken branches or a downed tree can cause injuries.

Question 77 of 100

Question 78

Which of the following would be covered by the “advertising injury” coverage of the Farm insurance forms?

Answer Choices: Select the Correct Answer
An insured farmer who unknowingly disparaged the crops grown by another farm.
Advertising the wrong price of the goods.
Advertising the wrong description of the goods.
Intentionally making disparaging remarks about another’s farm products.

Question 78 of 100

Answer 78

Your answer: Intentionally making disparaging remarks about another’s farm products. is incorrect. The correct answer is: An insured farmer who unknowingly disparaged the crops grown by another farm..

EXPLANATION:
“Advertising injury” would cover a farmer who unknowingly disparages the crops grown by another farmer when advertising his own crops. Intentional acts, advertising incorrect prices or descriptions are not covered.

Question 78 of 100

Question 79

Uninsured Motorist (UM) coverage claims are:

Answer Choices: Select the Correct Answer
Third-party claims.
Processed by the state government.
First-party claims.
Must be litigated in a court of law to determine coverage.

Question 79 of 100

Answer 79

Your answer: Third-party claims. is incorrect. The correct answer is: First-party claims..

EXPLANATION:
Uninsured Motorist coverage claims are first-party claims because the party injured in an automobile accident files the claim against their own insurance policy.

Question 79 of 100

Question 80

Fred owns two commercial buildings and carries NFIP coverage on them. The area where the buildings are located is a full-risk zone in the Regular Program. Both buildings are 30 years old and when they are damaged by flood, Fred finds that the cost to comply with the new Floodplain Management Ordinance will be quite expensive. What is the total amount of coverage Fred could receive for the Increased Cost of Compliance?

Answer Choices:	Select the Correct Answer
$59,000.	
$58,000.	
$60,000.	
$30,000.	

Question 80 of 100

Answer 80

Your answer: $58,000. is incorrect. The correct answer is: $60,000..

EXPLANATION:
The amount of coverage for ICC under the policy is $30,000 per building and no deductible applies. Therefore, Fred could receive $60,000.

Question 80 of 100

Question 81

Mr. York had his pickup truck stolen while it was parked in a “no parking” zone outside his office. The value of the truck was $18,500. In addition, tools valued at $200, extra tires and hubcaps for the truck valued at $550 and a tarp worth $50 were in the truck. Mr. York has a collision deductible of $500 and a comprehensive deductible of $250. The insurance company will pay what amount?

Answer Choices:	Select the Correct Answer
$18,000	
$18,250	
$19,050	
$18,800	

Question 81 of 100

Answer 81

Your answer: $18,250 is incorrect. The correct answer is: $18,800.

EXPLANATION:
The loss of the truck plus the extra tires and hubcaps would be considered in this claim. These total $19,050 less the deductible of $250 equals $18,800.

Question 81 of 100

Question 82

Which of the following would qualify for the Transportation Expense coverage:

I. Car rental fees incurred by the insured due to physical damage to his covered auto.
II. Loss of use expenses for which the insured is liable because of physical damage to his covered auto.

Answer Choices:	Select the Correct Answer
Both I and II	
Neither I nor II	
I only	
II only	

Question 82 of 100

Answer 82

Your answer: Both I and II is correct.

EXPLANATION:
Under Coverage D – Transportation Expenses are paid directly to the insured at a rate of $20 a day, up to a maximum of $600. If the vehicle is stolen there is a 48-hour waiting period. The insured can used these funds to offset his/her transportation expenses he is now incurring because he/she cannot use the car due to a covered loss.

Question 82 of 100

Question 83

A “full release settlement” when properly prepared, should include:

Answer Choices: Select the Correct Answer
The name of the attorney of record.
The name of the insurance company.
The names of the releasee and releasor.
The name of the adjuster resolving the claim.

Question 83 of 100

Answer 83

Your answer: The names of the releasee and releasor. is correct.

EXPLANATION:
Both the full legal names of the releasee and the releasor should be included in a release of all claims.

Question 83 of 100

Question 84

Under a personal auto policy, what is Coverage D?

Answer Choices:	Select the Correct Answer
Coverage for Damage to Your Auto	
Property Damage	
Bodily Injury	
Medical Payments	

Question 84 of 100

Answer 84

Your answer: Medical Payments is incorrect. The correct answer is: Coverage for Damage to Your Auto.

EXPLANATION:
Coverage D includes collision and other than collision (comprehensive) coverage. The insured selects one or both of these coverages, and they are indicated on the declarations page.

Question 84 of 100

Question 85

The premium charged for a standard workers compensation policy is based primarily on a company’s:

Answer Choices:	Select the Correct Answer
Payroll.	
Gross sales.	
Federal tax.	
Employee population.	

Question 85 of 100

Answer 85

Your answer: Payroll. is correct.

EXPLANATION:
Payroll is used to determine the premium for this coverage. The base rate for each job classification is multiplied by the amount of payroll for each “class” of employee.

Question 85 of 100

Question 86

Amelia has suffered a covered collision loss to her vehicle. The insurer requires that her vehicle be repaired at a repair shop of the insurer’s choice. The insurer:

Answer Choices: Select the Correct Answer
Is guilty of an unfair claims practice act.
Can make this request.
Waives the deductible, if any, in this case.
Can usually get the work done for less and can help to reduce insurance costs.

Question 86 of 100

Answer 86

Your answer: Is guilty of an unfair claims practice act. is correct.

EXPLANATION:
The insurer can recommend a repair shop, but cannot require that a particular shop be used.

Question 86 of 100

Question 87

Businessowners policies provide several coverages without additional premium charge. Which of the following would require an additional premium charge?

Answer Choices:	Select the Correct Answer
Pollution Cleanup and Removal	
Earthquake Coverage	
Business Income	
Seasonal Increase in Contents Coverage	

Question 87 of 100

Answer 87

Your answer: Earthquake Coverage is correct.

EXPLANATION:
Earthquake insurance must be added separately to the policy and an additional premium paid. The other three answer choices list coverages that are built into the policy at no extra charge.

Question 87 of 100

Question 88

Cargo Shippers International is a major shipping company that transports goods both domestically and abroad. The company is looking for a new Ocean Marine insurer to cover its cargo all the way from the point of origin to its final inland destination. What type of coverage is Cargo Shippers looking for?

Answer Choices: Select the Correct Answer
Floating, Open or Long Term Cargo coverage.
Warehouse-to-Warehouse Cargo coverage.
Single-Risk Form coverage.
Hull coverage.

Question 88 of 100

Answer 88

Your answer: Warehouse-to-Warehouse Cargo coverage. is correct.

EXPLANATION:
Ocean Marine insurance is the oldest form of insurance in the world and was originally designed to cover the property from its point of origin to its final destination; otherwise known as “warehouse to warehouse” coverage.

Question 88 of 100

Question 89

Under a claims-made CGL, which of the following would not be covered?

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

Question 89 of 100

Answer 89

Your answer: Injury or damage which occurred prior to the retroactive date is correct.

EXPLANATION:
Only occurrences that occur AFTER the retroactive date are covered.

Question 89 of 100

Question 90

Which section of the Commercial Package Policy varies based on the lines of coverage included?

Answer Choices: Select the Correct Answer
Coverage Part.
Common Policy Conditions.
Common Policy Declarations.
None of the responses listed are correct.

Question 90 of 100

Answer 90

Your answer: Coverage Part. is correct.

EXPLANATION:
Each line of insurance that is eligible for the Commercial Package Policy has its own coverage part consisting of a variety of mandatory and optional forms that are used to provide the coverage desired.

Question 90 of 100

Question 91

All of the following are “advertisements” as defined by the California Code of Regulations (CCR), EXCEPT:

Answer Choices: Select the Correct Answer
Any written or printed communication for the purpose of soliciting, describing, or promoting the licensed business of the licensee, including a brochure, letter, pamphlet, newspaper, periodical, publication, or other writing.
A directory listing caused or permitted by the licensee that also indicates his licensed activity.
Any printing or writing on buildings used as the licensee’s place of business or branch office.
A radio, television or similar airwaves transmission that solicits or promotes the licensed business of the licensee.

Question 91 of 100

Answer 91

Your answer: Any printing or writing on buildings used as the licensee’s place of business or branch office. is correct.

EXPLANATION:
“Any printing or writing on buildings used as the licensee’s place of business or branch office” is actually listed as NOT being included in the definition of “advertisement”. All the other answer choices ARE considered “advertisements” according to the CCR. (CCR 2691.17)

Question 91 of 10

Question 92

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

Question 92 of 100

Answer 92

Your answer: Deny the claim is incorrect. The correct answer is: Issue a reservation of rights letter to the insured.

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.

Question 92 of 100

Question 93

Negligence can be characterized as all of the following, EXCEPT:

Answer Choices:	Select the Correct Answer
Intentional.	
Careless.	
Unintentional.	
Imprudent.	

Question 93 of 100

Answer 93

Your answer: Imprudent. is incorrect. The correct answer is: Intentional..

EXPLANATION:
The first exclusion in most liability policies is loss caused by intentional acts. Insurers refuse to accept this exposure under any insurance policy. They want to insure against unintentional acts of negligence.

Question 93 of 100

Question 94

The insured is the principal in a construction endeavor in California. As principal, the insured may be held liable for the actions of an independent contractor if:

I. The insured (the principal) fails to exercise due care in the selection of a reasonable competent individual.
II. The work to be performed by the independent contractor is inherently dangerous in nature.
III. Where the negligent act or omission involves a violation of a duty imposed upon the insured (the principal) either by common law or statute.

Answer Choices:	Select the Correct Answer
I only	
I and III only	
II only	
I, II, and III	

Question 94 of 100

Answer 94

Your answer: I, II, and III is correct.

EXPLANATION:
I, II, and III are correct as they are all reasons that the principal can be held legally liable for the acts of independent contractors

Question 94 of 100

Question 95

Coverage E under the farm forms covers which of the following?

Answer Choices:	Select the Correct Answer
Unscheduled personal property	
Scheduled personal property	
Scheduled real property coverage	
Blanket real property coverage	

Question 95 of 100

Answer 95

Your answer: Blanket real property coverage is incorrect. The correct answer is: Scheduled personal property.

EXPLANATION:
Coverage E covers scheduled farm personal property. Each item to be covered is listed and an amount of insurance is stated.

Question 95 of 100

Question 96

When can an adjuster in California operate under a fictitious name?

Answer Choices: Select the Correct Answer
Never.
Only when he or she has obtained written permission from the Commissioner.
For a 30 day period only.
For a 60 day period only.

Question 96 of 100

Answer 96

Your answer: Only when he or she has obtained written permission from the Commissioner. is correct.

EXPLANATION:
Only when he or she has obtained written permission from the Commissioner.

Question 96 of 100

Question 97

Which of the following best defines “insured”?

Answer Choices: Select the Correct Answer
Transfer of the risk of financial loss from one party to another.
A legally binding contract in which the insurance company agrees to pay for specified losses in exchange for premiums.
A company, group, or government agency offering financial protection.
An individual or entity that pays premiums in exchange for financial protection.

Question 97 of 100

Answer 97

Your answer: An individual or entity that pays premiums in exchange for financial protection. is correct.

EXPLANATION:
The “insured” is a person or entity that pays premiums in exchange for financial protection.

Question 97 of 100

Question 98

The insured carries an unendorsed DP-3 dwelling policy on his home and personal contents. While traveling abroad someone broke into the home and stole $200 in cash, a shotgun valued at $1,000, and other household items valued at $2,000. Damage caused by the burglars is $1,500. Assuming no deductible applies to their coverage how much would be paid?

Answer Choices:	Select the Correct Answer
$3,200	
$4,500	
$1,500	
$2,000	

Question 98 of 100

Answer 98

Your answer: $1,500 is correct.

EXPLANATION:
The DP-3 only provides damage to covered property caused by the burglars. Theft is excluded under the DP-3 unless endorsed with the theft endorsement.

Question 98 of 100

Question 99

What is the difference between arbitration and mediation in the adjusting of claims?

Answer Choices: Select the Correct Answer
Mediation is not binding whereas with arbitration, the decision is final and binding on the parties
Both involve a signed waiver
Arbitration usually involves a person in the legal profession
Only one involves the law of estoppel

Question 99 of 100

Answer 99

Your answer: Mediation is not binding whereas with arbitration, the decision is final and binding on the parties is correct.

EXPLANATION:
Arbitration is when the parties in a dispute submit their differences to a private body and the private body’s decision is usually final and binding to both parties. Mediation involves an impartial person, usually in the law profession, who helps the parties analyze their dispute and devise a compromise.

Question 99 of 100

Question 100

Which of the following are qualifications of an applicant for an independent insurance adjuster license in California?

I. Be at least 18 years of age.
II. Must not have committed acts or crimes constituting grounds for denial of a license.
III. Must have had at least 6 months of experience in adjusting insurance claims or the equivalent as determined by the Commissioner.
IV. Must pay the required fees.

Answer Choices:	Select the Correct Answer
I, II, III and IV	
I, II and IV only	
I, II and III only	
II, III and IV only	

Question 100 of 100

Answer 100

Your answer: I, II and IV only is correct.

EXPLANATION:
An applicant must have two years of experience. All the other statements are correct.

Question 100 of 100