IA Test 12

Question 1

Under a self-insured workers compensation plan, what coverage should be purchased to cover a claim that is more than the insured’s self-insured limits?

Answer Choices:	Select the Correct Answer
Excess coverage	
Catastrophic coverage	
Umbrella coverage	
A surety bond	

Question 1 of 100

Answer 1

Your answer: Umbrella coverage is incorrect. The correct answer is: Excess coverage.

EXPLANATION:
Excess coverage should be purchased by a self-insured workers compensation plan to cover claims in excess of the self-insured limits of coverage.

Question 1 of 100

Question 2

An “uninsured motor vehicle” under a personal auto policy does not include:

Answer Choices: Select the Correct Answer
An abandoned car used as a residence.
A “hit and run” driver.
A vehicle carrying liability insurance in an amount less than required by a state’s financial responsibility law.
A car whose bodily injury liability coverage has expired.

Question 2 of 100

Answer 2

Your answer: An abandoned car used as a residence. is correct.

EXPLANATION:
This is one of the exceptions of eligibility for coverage. The personal auto form states that an “uninsured motor vehicle” does not include any vehicle or equipment while located for use as a residence or premises.

Question 2 of 100

Question 3

A covered loss has damaged the property belonging to the owner. Property belonging to a customer is also damaged. The customer brings suit against the insured for this damage. The insurer may do which of the following?

Answer Choices: Select the Correct Answer
Pay the defense costs incurred in the suit against the insured
Negotiate the settlement of the property of others directly with the owners of that property
Negotiate the settlement of the property of others directly with the owners of that property and pay the defense costs incurred in the suit against the insured
Only pay the expense cost and not negotiate a settlement

Question 3 of 100

Answer 3

Your answer: Negotiate the settlement of the property of others directly with the owners of that property is incorrect. The correct answer is: Negotiate the settlement of the property of others directly with the owners of that property and pay the defense costs incurred in the suit against the insured.

EXPLANATION:
The insurer may negotiate the settlement of the property of others directly with the owner of that property. The will also pay the defense costs incurred in defending the insured in the suit brought by the customer.

Question 3 of 100

Question 4

Standard Homeowners policies have “special limits of liability” for losses to all of the following types of property, EXCEPT:

Answer Choices:	Select the Correct Answer
Fire damage to guns.	
Theft of coins.	
Theft of silverware.	
Theft of furs.	

Question 4 of 100

Answer 4

Your answer: Fire damage to guns. is correct.

EXPLANATION:
The special limit of liability for guns applies only to the peril of theft. Guns are not limited to a certain amount of coverage by the peril of fire.

Question 4 of 100

Question 5

Which of the following is not a duty of an insurer in case of a loss?

Answer Choices: Select the Correct Answer
Conduct a thorough investigation
Establish claim procedures and methods of documentation
Acknowledge receipt of a claim in a timely fashion
Separate the damaged property from the undamaged property and protect the property from further loss

Question 5 of 100

Answer 5

Your answer: Separate the damaged property from the undamaged property and protect the property from further loss is correct.

EXPLANATION:
The insurance company is not required to separate the damaged property from the undamaged property nor to protect the property from further loss. This is the responsibility of the insured.

Question 5 of 100

Question 6

Insurance that guarantees or indemnifies owners of real or personal property, or the holders of liens or encumbrances on that property, is classified in California as which of the following types of insurance?

Answer Choices:	Select the Correct Answer
Title insurance.	
Surety insurance.	
Credit insurance.	
Mortgage Guaranty insurance.	

Question 6 of 100

Answer 6

Your answer: Title insurance. is correct.

EXPLANATION:
Insurance that guarantees or indemnifies owners of real or personal property, or the holders of liens or encumbrances on that property, is classified in California as Title insurance.

Question 6 of 100

Question 7

While in England an insured has her purse stolen and files a claim for $500 of cash, $1,000 in airline tickets, $250 for miscellaneous items and $50 for the value of the purse. How much of this loss would be covered under a DP-1 dwelling form?

Answer Choices:	Select the Correct Answer
Nothing	
$1,050	
$1,800	
$1,750	

Question 7 of 100

Answer 7

Your answer: $1,800 is incorrect. The correct answer is: Nothing.

EXPLANATION:
None of the dwelling forms provide theft coverage of personal property unless the theft coverage endorsement is purchased.

Question 7 of 100

Question 8

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 8 of 100

Answer 8

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 8 of 100

Question 9

As a prerequisite to receive an adjuster license in California, the applicant must have at least two years of claims adjusting experience. The California Insurance Code defines one year of experience as:

Answer Choices: Select the Correct Answer
Not less than 1,000 hours of actual compensated work performed by an applicant, completed prior to submitting the license application.
Not less than 2,000 hours of actual compensated work performed by an applicant, completed prior to submitting the license application.
Not less than 2,000 hours of actual compensated work performed by an applicant, completed after submitting the license application.
Not less than 1,000 hours of actual compensated work performed by an applicant, completed after submitting the license application.

Question 9 of 100

Answer 9

Your answer: Not less than 2,000 hours of actual compensated work performed by an applicant, completed prior to submitting the license application. is correct.

EXPLANATION:
The CIC defines “one year of experience” as not less than 2,000 hours of actual compensated work performed by an applicant, completed prior to submitting the license application. Therefore, if an applicant must have the equivalent of two years of experience, they would need a total of 4,000 hours of compensated work.

Question 9 of 100

Question 10

The base deductible of 5% under the Earthquake Endorsement can be converted to a specific dollar amount by:

Answer Choices: Select the Correct Answer
Multiplying the greater of Coverage A or C, by the deductible percentage scheduled on the policy.
Scheduling a dollar amount on the endorsement form.
Multiplying the limit of liability for Coverage A by the deductible percentage.
Multiplying the limit of liability for Coverage C by the deductible percentage.

Question 10 of 100

Answer 10

Your answer: Scheduling a dollar amount on the endorsement form. is incorrect. The correct answer is: Multiplying the greater of Coverage A or C, by the deductible percentage scheduled on the policy..

EXPLANATION:
The deductible for an Earthquake Endorsement is converted to a specific dollar amount by multiplying the greater of Coverage A or C limit of liability, by the deductible percentage.

Question 10 of 100

Question 11

Which of the following is NOT considered to be a consequential loss coverage under Commercial Property insurance?

Answer Choices:	Select the Correct Answer
Replacement Cost Coverage	
Business Income Coverage	
Leasehold Interest Coverage	
Extra Expense Coverage	

Question 11 of 100

Answer 11

Your answer: Leasehold Interest Coverage is incorrect. The correct answer is: Replacement Cost Coverage.

EXPLANATION:
A consequential loss occurs as the result of a direct loss to the insured property. Replacement cost coverage is used to determine the amount of the loss. If replacement cost coverage is not selected then actual cash value applies.

Question 11 of 100

Question 12

An interline endorsement used in a Commercial Package Policy (CPP):

I. May be mandatory or optional.
II. Is an endorsement that applies to more than one line of insurance.

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

Question 12 of 100

Answer 12

Your answer: Both I and II is correct.

EXPLANATION:
Interline endorsements are used in the CPP to simplify coverages and conditions among many different forms. Many of the same policy conditions apply to the various coverage parts.

Question 12 of 100

Question 13

In a contract, something of value exchanged between the parties is referred to as:

Answer Choices:	Select the Correct Answer
An offer.	
The acceptance of an offer.	
Consideration.	
The legal basis.	

Question 13 of 100

Answer 13

Your answer: An offer. is incorrect. The correct answer is: Consideration..

EXPLANATION:
Consideration is something of value exchanged between the parties. The insured pays a premium, known as consideration and the insurer promises a larger amount in the event of a claim.

Question 13 of 100

Question 14

Which of the following people does NOT have an insurable interest in an insured property?

Answer Choices: Select the Correct Answer
A homeowner’s interest in the local town water pipes that deliver water to his home.
A mechanic’s interest in a customer’s convertible, which is sitting in his garage overnight.
A tenant’s interest in the premium wood flooring that she had installed in her apartment.
A bank’s interest in the new minivan they just financed for a young couple.

Question 14 of 100

Answer 14

Your answer: A tenant’s interest in the premium wood flooring that she had installed in her apartment. is incorrect. The correct answer is: A homeowner’s interest in the local town water pipes that deliver water to his home..

EXPLANATION:
The homeowner has no insurable interest in the town’s water pipes as he does not own them. The other choices are all examples of insurable interest.

Question 14 of 100

Question 15

In crime insurance, which of the following terms is defined as “any unlawful taking of property to the deprivation of the insured”?

Answer Choices:	Select the Correct Answer
Theft.	
Mysterious disappearance.	
Burglary.	
Robbery.	

Question 15 of 100

Answer 15

Your answer: Burglary. is incorrect. The correct answer is: Theft. .

EXPLANATION:
“Theft” is a very broad term encompassing any type of stealing, whether it is robbery, burglary, or some other type of unlawful taking like embezzlement or shoplifting.

Question 15 of 100

Question 16

All the following statements are true regarding earthquake insurance under residential property coverage in California, EXCEPT:

Answer Choices: Select the Correct Answer
Earthquake insurance must be offered with any new policy, or policy renewal.
The offer of earthquake insurance may be made by mail or electronically.
A separate earthquake policy must be issued; an endorsement is not permitted.
The offer may be made prior to, concurrent with, or within 60 days following the policy effective date.

Question 16 of 100

Answer 16

Your answer: A separate earthquake policy must be issued; an endorsement is not permitted. is correct.

EXPLANATION:
According to the California Insurance Code (CIC 10081), earthquake coverage may be provided in the policy of residential property insurance itself, either by specific policy provision or endorsement, or in a separate policy or certificate of insurance which specifically provides coverage for loss or damage caused by the peril of earthquake alone or in combination with other perils.

Question 16 of 100

Question 17

The term “time element coverage” is used when the amount of loss depends on:

Answer Choices: Select the Correct Answer
The time it takes to repair, rebuild or restore damaged property.
The time between the effective date and date of loss.
The time between the date of loss and expiration date.
The time of year when a seasonal business suffers a loss.

Question 17 of 100

Answer 17

Your answer: The time between the effective date and date of loss. is incorrect. The correct answer is: The time it takes to repair, rebuild or restore damaged property. .

EXPLANATION:
This is called the restoration period.

Question 17 of 100

Question 18

Medical Payments on a CGL will pay for all of the following EXCEPT:

Answer Choices:	Select the Correct Answer
Ambulance services.	
Funeral expenses.	
In-hospital medical charges.	
Pain and suffering.	

Question 18 of 100

Answer 18

Your answer: Pain and suffering. is correct.

EXPLANATION:
Medical payments pays for the tangible economic damages incurred as a result of the injury. It does not pay for non-economic intangible damages such as pain and suffering.

Question 18 of 100

Question 19

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 19 of 100

Answer 19

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 19 of 100

Question 20

Rudy, a licensed California independent 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.	

Question 20 of 100

Answer 20

Your answer: 10 days. is incorrect. The correct answer is: 15 calendar days..

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.

Question 20 of 100

Question 21

Which of the following would be covered under the Commercial Property Builders Risk Coverage Form?

Answer Choices: Select the Correct Answer
All of the responses are correct
Buildings under construction
Foundation of a building under construction
Fixtures, machinery and equipment used to service the building if they become a permanent part of the building and are located within 100 feet of the premises

Question 21 of 100

Answer 21

Your answer: All of the responses are correct is correct.

EXPLANATION:
All of the responses are correct as regards the builders risk coverage.

Question 21 of 100

Question 22

A Property Value Reporting form is used to:

Answer Choices: Select the Correct Answer
Present a new claim to the insurer
Report a property theft to police
List and valuate business personal property at an insured location
Present home appraisal value to the insurance company

Question 22 of 100

Answer 22

Your answer: Report a property theft to police is incorrect. The correct answer is: List and valuate business personal property at an insured location.

EXPLANATION:
Property value reporting forms are provided to business owners so that they can accurately list and insure their business personal property to value.

Question 22 of 100

Question 23

The physical damage coverage for an auto dealer’s vehicles held for sale is covered under the dealer’s Garage policy:

Answer Choices:	Select the Correct Answer
Blanket basis.	
Scheduled basis.	
All owned autos.	
All owned and non owned autos.	

Question 23 of 100

Answer 23

Your answer: Blanket basis. is correct.

EXPLANATION:
The physical damage coverage is provided on a blanket basis for the auto dealer’s owned vehicles because it would be difficult to list each vehicle on the Declarations page. This coverage will NOT pay for damage to customers’ cars left with the dealer for repair or service.

Question 23 of 100

Question 24

All of the following are exceptions to the workers’ compensation exclusive remedy, EXCEPT:

Answer Choices: Select the Correct Answer
Failure of the employer to provide benefits.
Third-party-over actions.
An on-the-job injury caused by worker fatigue from working an excessive number of over-time hours.
The fellow worker doctrine.

Question 24 of 100

Answer 24

Your answer: Failure of the employer to provide benefits. is incorrect. The correct answer is: An on-the-job injury caused by worker fatigue from working an excessive number of over-time hours..

EXPLANATION:
An on-the-job injury would be covered, whether or not it was caused by worker fatigue. All of the other answer choices are exceptions to the exclusive remedy provided by workers’ compensation.

Question 24 of 100

Question 25

Under an unendorsed commercial building and personal property form, loss valuation is based on: ``` Answer Choices: Select the Correct Answer Actual cash value. Market value. Original cost. Replacement cost. ``` Question 25 of 100

Answer 25

Your answer: Actual cash value. is correct. EXPLANATION: Losses are settled at ACV (Actual Cash Value). If the insured desires replacement cost settlement, a separate endorsement must be purchased. Question 25 of 100

Question 26

In California, which of the following is an untrue statement regarding the adjustment of a total auto physical damage loss? Answer Choices: Select the Correct Answer The insurer may elect a cash settlement that is based upon the actual cost of a "comparable automobile" less any deductible provided in the policy. A cash settlement does not include sales taxes. The cash settlement includes one-time fees incident to transfer of evidence of ownership of a comparable automobile. The cash settlement must also include the license fee and other annual fees to be computed based upon the remaining term of the loss vehicle’s current registration. Question 26 of 100

Answer 26

Your answer: The cash settlement includes one-time fees incident to transfer of evidence of ownership of a comparable automobile. is incorrect. The correct answer is: A cash settlement does not include sales taxes.. EXPLANATION: The cash settlement amount must include all applicable taxes, license fees and other one-time fees incident to transfer of evidence of ownership of a comparable automobile. This amount must also include the license fee and other annual fees to be computed based upon the remaining term of the loss vehicle’s current registration. Question 26 of 100

Question 27

Which of the following statements is correct? I. Unendorsed DP-2 and DP-3 settle all losses to personal property at actual cash value. II. Unendorsed DP-2 and DP-3 settle all partial losses to dwellings at replacement cost if insured 80% to value. ``` Answer Choices: Select the Correct Answer I only II only Both I and II Neither I nor II ``` Question 27 of 100

Answer 27

Your answer: II only is incorrect. The correct answer is: Both I and II. EXPLANATION: Both DP-2 and DP-3 settle all personal property losses on an ACV basis. They settle partial dwelling losses at replacement value ONLY if adequate limits are carried. That is, the dwelling limit must be at least 80% of a dwelling's replacement value in order to receive a replacement cost settlement for a partial dwelling loss. Question 27 of 100

Question 28

The fee for a duplicate copy of an insurance adjuster's license in California is: ``` Answer Choices: Select the Correct Answer $7 $12 $5 $10 ``` Question 28 of 100

Answer 28

Your answer: $12 is incorrect. The correct answer is: $10. EXPLANATION: The fee for a duplicate copy of an insurance adjuster's license is $10 (CCR 2691.23) Question 28 of 100

Question 29

All of the following are acceptable methods to satisfy the motor vehicle financial responsibility requirement in California, EXCEPT: Answer Choices: Select the Correct Answer A certificate of self-insurance issued by the Department of Motor Vehicles. A motor vehicle liability insurance policy. A cash deposit of $35,000 with the Department of Motor Vehicles. A personal savings account with a consistent balance of $50,000. Question 29 of 100

Answer 29

Your answer: A personal savings account with a consistent balance of $50,000. is correct. EXPLANATION: A personal savings account is not an acceptable method to satisfy the California financial responsibility requirement. Question 29 of 100

Question 30

Which part of the personal auto policy will contain a deductible? Answer Choices: Select the Correct Answer The "other than collision" coverage. The "collision". Neither "other than collision" nor the "collision". Both the "other than collision" coverage and the "collision" coverage. Question 30 of 100

Answer 30

Your answer: Both the "other than collision" coverage and the "collision" coverage. is correct. EXPLANATION: Both "collision" and "other than collision" coverage will be subject to a deductible. The deductible amount does not have to be the same for both coverages. Question 30 of 100

Question 31

Claims filed against the insurance company by the insured are known as: ``` Answer Choices: Select the Correct Answer First-party claims. Third-party claims. Self-insured claims. Subrogation claims. ``` Question 31 of 100

Answer 31

Your answer: First-party claims. is correct. EXPLANATION: Claims filed against the insurance company by the insured are known as first-party claims. Question 31 of 100

Question 32

Which of the following is not considered an instrumentality of transportation or communication under the nationwide inland marine definition? ``` Answer Choices: Select the Correct Answer A toll bridge A truck-tractor Electric transmission lines A television transmitter ``` Question 32 of 100

Answer 32

Your answer: A television transmitter is incorrect. The correct answer is: A truck-tractor. EXPLANATION: A truck-tractor is not considered an instrumentality of transportation or communication under the nationwide inland marine definition. Question 32 of 100

Question 33

Which of the following individuals is most likely to have a valid Workers Compensation claim? Answer Choices: Select the Correct Answer A retiree injured while visiting his former workplace. An employee who suffers a diabetic coma from failure to take prescribed medicine. A sole proprietor injured in an auto accident while driving to a friend’s house. An employee injured while performing an operation for which he had not received training. Question 33 of 100

Answer 33

Your answer: An employee injured while performing an operation for which he had not received training. is correct. EXPLANATION: Workers Compensation laws apply to covered employees whose injuries arise out of and in the course of employment—regardless of who is at fault, including operations for which an employee has received insufficient training. Question 33 of 100

Question 34

Mr. Vickers lives close to a river that has, on occasion, flooded. On Friday morning he is watching the weather station and notes that there is a flood warning in his area. He calls his agent and asks the agent to bind flood coverage immediately. Which of the following is true? Answer Choices: Select the Correct Answer The application for coverage requires a 30-day waiting period before coverage applies. The agent can bind the coverage immediately. There is a seven-day waiting period before the agent can bind coverage. The agent can bind the coverage in 14 days. Question 34 of 100

Answer 34

Your answer: The agent can bind the coverage in 14 days. is incorrect. The correct answer is: The application for coverage requires a 30-day waiting period before coverage applies. . EXPLANATION: Flood insurance requires a 30-day waiting period. The exception to this rule is when the insured is required to provide coverage required by a mortgagee. Question 34 of 100

Question 35

Dan has coverage under an HO-3. He borrows Mike's scuba diving equipment for a trip to Puerto Rico. While in Puerto Rico, Mike's scuba diving equipment is stolen. Mike's property is: Answer Choices: Select the Correct Answer Excluded by the care, custody and control rule. Covered anywhere in the world at the insured's request. More appropriately turned in under Mike's HO policy. Covered for up to $500. Question 35 of 100

Answer 35

Your answer: Covered anywhere in the world at the insured's request. is correct. EXPLANATION: Coverage C -- Personal Property includes property owned or used by the insured anywhere in the world. The scuba diving equipment was being used by the insured and it would be covered under Dan's HO-3 policy. Question 35 of 100

Question 36

A Building and Personal Property Coverage form provides coverage for all of the following types of property, EXCEPT: ``` Answer Choices: Select the Correct Answer Growing crops and lawns. Tenants improvements and betterments. Yard fixtures. Business personal property. ``` Question 36 of 100

Answer 36

Your answer: Business personal property. is incorrect. The correct answer is: Growing crops and lawns. . EXPLANATION: The Building and Personal Property Coverage Form specifically lists these as not covered property. Crop Insurance is available as a separate coverage. Question 36 of 100

Question 37

In cases involving the repair of an auto covered under a policy in California, no insurer may: Answer Choices: Select the Correct Answer Require that an automobile be repaired at a specific repair shop. Require a claimant to travel an unreasonable distance to inspect a replacement automobile, to conduct an inspection of the vehicle or to obtain a repair estimate. Suggest or recommend that an automobile be repaired at a specific repair shop. All of the responses are correct. Question 37 of 100

Answer 37

Your answer: All of the responses are correct. is correct. EXPLANATION: All of the responses are correct. Question 37 of 100

Question 38

Under the liability coverage of the commercial auto policy, which of the following would NOT be covered? Answer Choices: Select the Correct Answer A third-party claim occurred a week after products were finally delivered to a customer. A third-party claim that occurred in a warehouse as an employee was using a hand truck to load a delivery truck. A third-party claim that occurred while the truck was being loaded by the use of a mechanical device attached to the truck. A third-party claim as a result of a truck being unloaded by hand. Question 38 of 100

Answer 38

Under the liability coverage of the commercial auto policy, which of the following would NOT be covered? Your answer: A third-party claim occurred a week after products were finally delivered to a customer. is correct. EXPLANATION: Commercial auto liability extends to "loading and unloading" of covered autos. It does not include products liability for a faulty product. Question 38 of 100

Question 39

Other structures are excluded from coverage under the HO-3 when they are: Answer Choices: Select the Correct Answer 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 Question 39 of 100

Answer 39

Your answer: 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. Question 39 of 100

Question 40

Font Masters Printing Company has a printing press that suffers a covered total loss. The company paid $25,000 ten years ago for the press. Actual cash value is $40,000 and the replacement cost is $55,000. The company has had to cancel several contracts for printing due to the loss of the press and they are anxious to resume full production. ABC Company is covered under a Businessowner's Policy (BOP). How much will the insurer pay for this claim? ``` Answer Choices: Select the Correct Answer $25,000 $55,000 $40,000 $20,000 ``` Question 40 of 100

Answer 40

Your answer: $55,000 is correct. EXPLANATION: The Businessowners policy settles property claims on a replacement cost basis. The insurer will pay $55,000 to Font Masters for this claim as that is the replacement cost of the damaged property. The price the insured paid for it 10 years ago as well as the actual cash value of the press are not considered in settling the loss. Question 40 of 100

Question 41

The Homeowners "Additional Residence Rented to Others" endorsement will provide coverage for an additional structure, used as a residence, that is rented by the insured as a: ``` Answer Choices: Select the Correct Answer A one-family dwelling. A two-family dwelling. A one to four-family dwelling. A one to two-family dwelling. ``` Question 41 of 100

Answer 41

Your answer: A one to four-family dwelling. is correct. EXPLANATION: The Homeowners "Additional Residence Rented to Others" endorsement provides coverage for an additional structure, used as a residence, for one to four families. Question 41 of 100

Question 42

What is the main purpose of government regulation of the insurance industry? Answer Choices: Select the Correct Answer To provide a better understanding to the general public of the importance of insurance. To keep insurance losses from falling to the government for payment. To help insurance companies make a profit. To protect the insurance consuming public. Question 42 of 100

Answer 42

Your answer: To protect the insurance consuming public. is correct. EXPLANATION: The purpose of government regulation of the insurance industry is to protect insurance consumers. Question 42 of 100

Question 43

In the ocean marine insurance policy, the term "average" means: Answer Choices: Select the Correct Answer Loss or damage. The ACV of the ship. The average value of the claim insured against by the perils of the sea . That coverage is written on a named peril basis. Question 43 of 100

Answer 43

Your answer: The average value of the claim insured against by the perils of the sea . is incorrect. The correct answer is: Loss or damage. . EXPLANATION: The term "average" in ocean marine insurance refers to loss or damage. In order to protect the ship, its cargo and passengers, some of the cargo may be jettisoned (thrown overboard) to save the ship and cargo. Particular average means only one party pays for the loss. General average means all parties share in the loss. Question 43 of 100

Question 44

The term "undamaged stock", as defined in an Equipment Breakdown policy, applies to which of the following situations? Answer Choices: Select the Correct Answer Refers to stock that has not suffered a reduction in value. Refers to the salvage value of the stock after a total loss. Refers to the reduction in the value of the stock as a result of damage to other stock. Losses are not adjusted on a replacement cost basis. Question 44 of 100

Answer 44

Your answer: Refers to stock that has not suffered a reduction in value. is incorrect. The correct answer is: Refers to the reduction in the value of the stock as a result of damage to other stock.. EXPLANATION: This term applies to the reduction in value of undamaged stock parts that become unmarketable or obsolete. If an item cannot be sold because of a loss to other stock, it loses value. Therefore, if there is damage as a result of a direct loss, the insurer limits its liability for unmarketable or obsolete stock. The maximum limit payable is $25,000. As an example, ABC Manufacturing manufactures and sells cutlery sets. A mechanical breakdown loss results in the knives being destroyed. The forks and spoons in the warehouse are undamaged. All cutlery parts are made from the same batch of metal and cannot be properly matched to create a new batch of knives. The forks and spoons are sold as separates at a deep discount because they cannot be marketed as a set. The value of this loss is the reduction in value between the price as separate items and what ABC could have been received as part of a set. Question 44 of 100

Question 45

The agent or insurer must obtain the applicant's signature acknowledging receipt of the California Residential Property Insurance disclosure form within ____ of the date of the application. ``` Answer Choices: Select the Correct Answer 10 days 20 days 60 days 90 days ``` Question 45 of 100

Answer 45

Your answer: 60 days is correct. EXPLANATION: No policy of residential property insurance may be issued in this state by any insurer unless the named insured is provided a copy of the California Residential Property Insurance disclosure statement. The agent or insurer must obtain the applicant’s signature acknowledging receipt of the disclosure form within 60 days of the date of the application. Question 45 of 100

Question 46

A public adjuster represents the interest of: ``` Answer Choices: Select the Correct Answer The insurer The insured The employer The interest of the general public ``` Question 46 of 100

Answer 46

Your answer: The insured is correct. EXPLANATION: The public adjuster represents the interests of the insured and not the insurer. Question 46 of 100

Question 47

What is the purpose of the Nationwide Definition for inland marine exposures outlined in specific detail: Answer Choices: Select the Correct Answer The coverage that marine insurers could write. The classes of property not eligible for inland marine coverage. What types of insurance companies could issue inland marine policies. The role of the National Association of Insurance Commissioners. Question 47 of 100

Answer 47

Your answer: The role of the National Association of Insurance Commissioners. is incorrect. The correct answer is: The coverage that marine insurers could write.. EXPLANATION: This defines the types of coverage that inland marine insurers could provide. Question 47 of 100

Question 48

Which of the following statements are true regarding eligibility for "low cost automobile insurance" in California? Answer Choices: Select the Correct Answer All of the Statements Listed are True Low cost automobile is now available in all the counties of California as the need is determined by the Commissioner. Eligibility is Based on Income Gross annual income of the household is equal to or less than 250% of the federal poverty level. Question 48 of 100

Answer 48

Your answer: Eligibility is Based on Income is incorrect. The correct answer is: All of the Statements Listed are True. EXPLANATION: All of the statements are true regarding eligibility for low cost automobile insurance in California. Question 48 of 100

Question 49

In order for coverage to apply under an occurrence commercial umbrella liability policy: Answer Choices: Select the Correct Answer A claim for actual damages must be made before the retroactive date. The occurrence causing the injury or damage must take place during the policy period. First notice of the claim must be made during the policy period. The injury must take place before the policy period. Question 49 of 100

Answer 49

Your answer: The occurrence causing the injury or damage must take place during the policy period. is correct. EXPLANATION: The occurrence causing the injury must take place during the policy period. Question 49 of 100

Question 50

Under the livestock coverage form, within how many days must newly acquired livestock be added to the policy? ``` Answer Choices: Select the Correct Answer Within 30 days of purchase Immediately Within 10 days of purchase With 5 days of purchase ``` Question 50 of 100

Answer 50

Your answer: Within 30 days of purchase is correct. EXPLANATION: Newly acquired livestock must be reported to the insurance company within 30 days of acquisition, at which time an additional premium will be charged the insured. Question 50 of 100

Question 51

An insured has a $1,000 claim and is able to prove his loss and its value. The adjuster offers $500 knowing that the claimant would probably take the amount because of incurring the cost of an attorney. This is considered Answer Choices: Select the Correct Answer Misrepresenting the policy provisions False advertising of the insurance product An unfair trade An unfair claims practice Question 51 of 100

Answer 51

Your answer: An unfair claims practice is correct. EXPLANATION: This is considered to be an unfair claims settlement act. Question 51 of 100

Question 52

Under a Commercial Auto policy, which coverage symbol indicates that a car is subject to mandatory no-fault insurance? ``` Answer Choices: Select the Correct Answer 5 9 7 2 ``` Question 52 of 100

Answer 52

Your answer: 7 is incorrect. The correct answer is: 5. EXPLANATION: Symbol #5 in commercial auto insurance covers vehicles subject to no-fault insurance laws. Question 52 of 100

Question 53

Which of the following is a true statement regarding crime insurance with computer fraud coverage? Answer Choices: Select the Correct Answer Applies to criminal activity wherein the perpetrator gave false electronic instructions to remove insured’s funds from a bank account Covers acts of employees Covers losses that occur as the result of a messenger of the insured Does not provide coverage on a "worldwide basis" Question 53 of 100

Answer 53

Your answer: Applies to criminal activity wherein the perpetrator gave false electronic instructions to remove insured’s funds from a bank account is correct. EXPLANATION: Computer fraud covers loss of or damage to money, securities and other property due to the use of a computer to fraudulently transfer that property from inside the premises of a banking premises to a place or person (other than a messenger) outside the premises. Question 53 of 100

Question 54

Under a surety bond, the "principal" is the party that: Answer Choices: Select the Correct Answer Agrees to fulfill an obligation. Agrees to pay damages if default occurs. Provides the bond in exchange for a fee. Will be paid damages if default occurs. Question 54 of 100

Answer 54

Your answer: Provides the bond in exchange for a fee. is incorrect. The correct answer is: Agrees to fulfill an obligation. . EXPLANATION: The bond guarantees the performance of the principal. A building contractor would be an example of a principal under a performance bond. Question 54 of 100

Question 55

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 55 of 100

Answer 55

Your answer: An insured farmer who unknowingly disparaged the crops grown by another farm. is correct. 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 55 of 100

Question 56

Theft generally means: Answer Choices: Select the Correct Answer The unlawful taking of money, securities or other property to the deprivation of the insured. Any act of stealing, other than burglary or robbery. Burglary and robbery only. Employee dishonesty only. Question 56 of 100

Answer 56

Your answer: The unlawful taking of money, securities or other property to the deprivation of the insured. is correct. EXPLANATION: The newer forms have re-defined the term of theft. It is now defined as: the unlawful taking of money, securities or other property to the deprivation of the insured. This includes burglary, safe burglary and robbery. Theft also includes the taking of property by stealth (action designed to escape notice). Question 56 of 100

Question 57

Once the adjuster is appointed by the insurer to represent the insurer, the adjuster has the power to do all of the following, EXCEPT: Answer Choices: Select the Correct Answer Bind additional coverage. Make advance payments. Determine coverage. Make statements that the insured can assume the adjuster has the authority to make. Question 57 of 100

Answer 57

Your answer: Bind additional coverage. is correct. EXPLANATION: The adjuster does not have the power to bind additional coverage when adjusting a claim. Question 57 of 100

Question 58

When will an insurance company pay damages on behalf of an insured under a CGL policy? Answer Choices: Select the Correct Answer When the company determines that the insured is legally liable. Only when a court of law determines that the insured is legally liable. When an insured feels morally obligated to make a settlement. Whenever a third party is injured on the insured’s premises. Question 58 of 100

Answer 58

Your answer: When the company determines that the insured is legally liable. is correct. EXPLANATION: The purpose of the CGL policy is to pay on behalf of the insured all sums for which the insured can be held legally liable if coverage applies for that particular type of claim. The claim can be settled by the insurer out of court if the insurer feels the insured is legally liable. A court ruling is not mandatory. Question 58 of 100

Question 59

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 59 of 100

Answer 59

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 59 of 100

Question 60

Which common exclusion is intended to prevent duplicate coverage for a loss under a Commercial General Liability policy? Answer Choices: Select the Correct Answer The care, custody and control exclusion. The automobile exclusion. The pollution or contamination exclusion. The sistership exclusion. Question 60 of 100

Answer 60

Your answer: The sistership exclusion. is incorrect. The correct answer is: The automobile exclusion.. EXPLANATION: Accidents causing bodily injury and/or property damage involving licensed automobiles, are excluded under the CGL policy because the coverage is intended to be on the policy for the automobile. This exclusion prevents the claimant from collecting on the CGL and trying to collect on the auto policy as well, for the damages sustained in the accident. Question 60 of 100

Question 61

All of the following statements regarding medical payments under the general liability policy are true, EXCEPT: Answer Choices: Select the Correct Answer This coverage can pay some medical expenses of a person whose injuries arise out of the named insured’s premises or operations. Loss of earnings as a result of injuries caused by a product of the named insured. Medical payments coverage will cover expenses incurred up to one year from the accident date. Medical payments coverage can be provided even when an insured is clearly not responsible for the injury. Question 61 of 100

Answer 61

Your answer: Loss of earnings as a result of injuries caused by a product of the named insured. is correct. EXPLANATION: Medical payments coverage does not apply to product liability claims causing bodily injury and the subsequent loss of earnings by the injured party. Question 61 of 100

Question 62

When is a value reporting best used? Answer Choices: Select the Correct Answer To provide an appraisal to the insurer To report a theft of property to law enforcement To provide fluid limits of coverage for fluctuating values of property at risk To prove a loss Question 62 of 100

Answer 62

Your answer: To provide an appraisal to the insurer is incorrect. The correct answer is: To provide fluid limits of coverage for fluctuating values of property at risk. EXPLANATION: The value reporting form is an option for commercial property insureds, used when insured values fluctuate frequently. The insured reports values periodically to the insurer, and policy limits are automatically adjusted to the values reported. This eliminates the chance of being underinsured, and also allows the insured to pay premiums commensurate with the changing values. Question 62 of 100

Question 63

Protection and indemnity coverage contained in an ocean marine policy covers: I. Liability against injuries to seamen. II. Injury to stevedores, longshoreman and harbor workers. III. Cargo, if lost or damaged through negligence. ``` Answer Choices: Select the Correct Answer I, II and III. I and II only. II and III only. I and III only. ``` Question 63 of 100

Answer 63

Your answer: I, II and III. is correct. EXPLANATION: Protection and indemnity coverage would apply to all of these types of losses. Question 63 of 100

Question 64

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 64 of 100

Answer 64

Your answer: The costs incurred by the insured to recall defective products. is correct. 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 64 of 100

Question 65

ABC Office Temps and Clean-Rite Dry Cleaning are both located in a strip mall and share a common party wall. Fire begins in the dry cleaners and damages the party wall. Clean-Rite decides to go out of business. How will the BOP policy of ABC Office Temps respond regarding the party wall? Answer Choices: Select the Correct Answer Each policy will split the cost of the repair to the party wall Clean-Rite will be responsible for the entire loss ABC’s policy will repair the party wall and subrogate against Clean-Rite ABC will be responsible for the entire loss Question 65 of 100

Answer 65

Your answer: Clean-Rite will be responsible for the entire loss is incorrect. The correct answer is: ABC’s policy will repair the party wall and subrogate against Clean-Rite. EXPLANATION: Normally, when there is loss to a party wall, the companies will share the loss in the cost to repair. If one party chooses not to make the repair, then the insurer for the other party will pay the entire cost of the loss and maintain subrogation rights against the other party. Question 65 of 100

Question 66

Which of the following is a true statement regarding subrogation in California? Answer Choices: Select the Correct Answer An insurer must conduct a full investigation before it pursues subrogation An insurer does not have to conduct an investigation after it has paid a claim before it pursues subrogation against another party An insurer is not required to determine as to whether subrogation is appropriate Subrogation is a judgment call on the part of the insurer/adjuster without regard to regulations Question 66 of 100

Answer 66

Your answer: An insurer does not have to conduct an investigation after it has paid a claim before it pursues subrogation against another party is incorrect. The correct answer is: An insurer must conduct a full investigation before it pursues subrogation. EXPLANATION: California law requires that an insurer notify a first-party claimant if it intends to pursue subrogation of a claim. Regulations also require every insurer that makes a subrogation demand to include the first-party claimant's deductible. Furthermore, no insurer may pursue a claim for subrogation unless it has first conducted a thorough, fair, and objective investigation as to whether subrogation is appropriate. Question 66 of 100

Question 67

All of the following are EXCLUDED under the Earthquake Endorsement to a Homeowners policy, EXCEPT: ``` Answer Choices: Select the Correct Answer Flood and tidal wave. Land shock waves. Waves and tsunami. The cost of filling land. ``` Question 67 of 100

Answer 67

Your answer: Land shock waves. is correct. EXPLANATION: All of the items listed are excluded under the Earthquake Endorsement to a Homeowners policy, EXCEPT: Land shock waves, they are covered. Question 67 of 100

Question 68

An insured has purchased "replacement cost coverage" endorsement for her personal property under an HO-3 homeowner policy. After the purchase of this endorsement, which of the following types of property would now be covered on a replacement cost basis that were previously covered only on an actual cash value basis? ``` Answer Choices: Select the Correct Answer Household appliances Carpeting Outdoor antennas All of the responses are correct ``` Question 68 of 100

Answer 68

Your answer: All of the responses are correct is correct. EXPLANATION: This endorsement adds replacement cost coverage to all of these items whereas without this endorsement the property would be covered on an actual cash value basis. This endorsement eliminates the deduction for depreciation for these types of property. Question 68 of 100

Question 69

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 69 of 100

Answer 69

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 69 of 100

Question 70

For all but small employers, premiums in a Workers 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 ``` Question 70 of 100

Answer 70

Your answer: The scheduled rating factor is incorrect. 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. Question 70 of 100

Question 71

With a "full release settlement" of an insurance claim: Answer Choices: Select the Correct Answer The claimant does not have to sign a release. The insurer can make payments over 90 days. The insurer has 60 days to make payment. All damages are paid immediately in one lump sum. Question 71 of 100

Answer 71

Your answer: All damages are paid immediately in one lump sum. is correct. EXPLANATION: A "full release settlement" is also known as a "final release" and all sums due have been paid and the file is closed. Question 71 of 100

Question 72

Under the farm policy, which of the following is not considered livestock? ``` Answer Choices: Select the Correct Answer Pack mule Sheep Poultry Cattle grazing in a field ``` Question 72 of 100

Answer 72

Your answer: Poultry is correct. EXPLANATION: Poultry have two legs, whereas livestock has four legs. Therefore, poultry is not eligible under the generic livestock form and would require a special endorsement to be covered. Question 72 of 100

Question 73

Wyatt is a blasting contractor who set off a blasting charge, damaging several buildings in the area and causing severe bodily injury to several people. Which of the following types of liability applies in this scenario? ``` Answer Choices: Select the Correct Answer Comparative liability Contingent liability Absolute liability Vicarious liability ``` Question 73 of 100

Answer 73

Your answer: Vicarious liability is incorrect. The correct answer is: Absolute liability. EXPLANATION: Absolute liability would be applied here without any need to prove negligence. Absolute liability (also known as strict liability) is imposed by law on those who participate in especially hazardous activities. Question 73 of 100

Question 74

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 74 of 100

Answer 74

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 74 of 100

Question 75

An insured has a vacation home covered under a Dwelling policy and he would like to add coverage to his policy for Personal Liability and Medical Payments. The insured purchased a Personal Liability Supplement with the minimum limits for Coverage M - Medical Payments. How much coverage for medical payments will the insured have for each person? ``` Answer Choices: Select the Correct Answer $1,000. $1,500. $2,000. $2,500. ``` Question 75 of 100

Answer 75

Your answer: $1,000. is correct. EXPLANATION: The coverage limit for Coverage M of the Personal Liability Supplement is $1,000 per person. Question 75 of 100

Question 76

If the insurer wishes to nonrenew the CGL policy, unless state law is different, how many days advance notice must be sent to the insured. ``` Answer Choices: Select the Correct Answer 30 45 60 90 ``` Question 76 of 100

Answer 76

Your answer: 60 is incorrect. The correct answer is: 30. EXPLANATION: The standard CGL policy requires a minimum of 30 days advance notice of the insurer's intention to non renew. Question 76 of 100

Question 77

Under a Commercial Property policy, the coinsurance clause does all of the following, EXCEPT: Answer Choices: Select the Correct Answer Grants the insured a reduction in premiums for accepting a condition that the insured maintain insurance at a specified percentage of either the actual cash value or replacement cost of the covered property. The insured could become a co-insurer to a partial loss if the insured is in violation of the clause. The coinsurance clause does not operate in the event of a total loss. There are no exceptions, all of the responses are correct. Question 77 of 100

Answer 77

Your answer: There are no exceptions, all of the responses are correct. is correct. EXPLANATION: There are no exceptions, all of the responses are correct. Question 77 of 100

Question 78

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 78 of 100

Answer 78

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 78 of 100

Question 79

If your insurance company cancels your commercial insurance, whom must they notify? Answer Choices: Select the Correct Answer They must notify all Insureds listed on the policy. They must notify whoever is listed first on the policy. They must notify the first named insured listed on the policy. They must notify whoever is responsible for premium payments. Question 79 of 100

Answer 79

Your answer: They must notify all Insureds listed on the policy. is incorrect. The correct answer is: They must notify the first named insured listed on the policy.. EXPLANATION: Only the first named insured listed on the policy is to receive any notices. Question 79 of 100

Question 80

An insured has a HO-5 Homeowner Policy; they have insured the wife's diamond ring and the husband's guns 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 be primary insurance with a deductible. The homeowner would pay excess over the personal articles floater with a deductible. Each policy would pay its pro-rata proportion of the loss. Question 80 of 100

Answer 80

Your answer: The homeowner policy would not pay and the personal articles floater would pay without a deductible. is correct. 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 80 of 100

Question 81

Which of the following statements describes an action that the adjuster cannot take after a claimant has hired an attorney to represent him/her in handing a claim? Answer Choices: Select the Correct Answer Negotiate with the attorney. Write the draft for payment of the claim directly to the claimant. Contact the claimant without the consent of the attorney. Have an attorney prepare releases. Question 81 of 100

Answer 81

Your answer: Contact the claimant without the consent of the attorney. is correct. EXPLANATION: Once the claimant has hired an attorney to represent the claimant, the adjuster may not contact the claimant directly without the consent of the attorney. Question 81 of 100

Question 82

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 82 of 100

Answer 82

Your answer: Only the required underlying limits and the defense costs. is incorrect. The correct answer is: The policy limit and any defense costs minus any applicable retained limit (deductible).. 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 82 of 100

Question 83

The function of the Standard Mortgage clause in a property insurance policy is all of the following, EXCEPT: Answer Choices: Select the Correct Answer Protects the rights (insurable interest) of the mortgagee, even if an insured intentionally causes a loss to the mortgaged property. Guarantees that the insured will make the mortgage payments on time. Allows the mortgagee to pay the premium if the insured refuses to do so. Allows the mortgagee to submit a proof of loss if the insured refuses to do so. Question 83 of 100

Answer 83

Your answer: Allows the mortgagee to submit a proof of loss if the insured refuses to do so. is incorrect. The correct answer is: Guarantees that the insured will make the mortgage payments on time.. EXPLANATION: The Standard Mortgage clause, does NOT guarantee that the insured will make the mortgage payments on time, therefore, this is the correct answer. Question 83 of 100

Question 84

Under the ISO Homeowner forms, how much will be paid under claims expense for loss of earnings by the insured to assist the insurer in the investigation or defense of a claim? ``` Answer Choices: Select the Correct Answer $250 per day $200 per day $300 per day $175 per day ``` Question 84 of 100

Answer 84

Your answer: $300 per day is incorrect. The correct answer is: $250 per day. EXPLANATION: This limit is $250 per day to appear at hearings or trials to assist the insurer in the defense of the insured. This is the amount under the ISO standardized form. Question 84 of 100

Question 85

The insured is a large super market and maintains a large checking account balance. An employee has a friend who was told in confidence the "transfer account" contained $200,000. The friend, without the employee’s knowledge, pretends that he is the employee with the authority to conduct transactions on behalf of the insured and sends a fraudulent electronic request to the bank to transfer the funds with the intent of stealing them. What coverage would the insured need to cover this claim? Answer Choices: Select the Correct Answer Insuring Agreement 3 “Inside the Premises Theft of Money and Securities." Employee dishonesty Insuring Agreement 7 "Funds Transfer Fraud" Insuring Agreement 5 “Outside the Premises” Coverage Question 85 of 100

Answer 85

Your answer: Insuring Agreement 7 "Funds Transfer Fraud" is correct. EXPLANATION: Insuring Agreement 7 is a new agreement that provides additional coverage that was previously available as an endorsement. Coverage is provided for a loss of funds as a result of a fraudulent instruction upon which an institution relied in order to transfer funds from the transfer account. A transfer account is an account kept at a financial institution for the purpose of being able to transfer funds as needed based on various forms of instructions from the named insured. Funds are defined as money and securities. A fraudulent instruction is a newly defined term in this policy. It is defined as an instruction supposedly transmitted by the named insured but was in fact transmitted by someone else without the named insured’s consent or knowledge. The instruction can be electronic, telegraphic, cable, telefascimile (fax), telephone or teletype. A forged written instruction is also considered fraudulent instruction, as is an instruction supposedly transmitted by an employee but which was fraudulently transmitted without the named insured’s or employee’s knowledge or consent. Question 85 of 100

Question 86

The insured is covered under a Businessowners Policy. He owns a hardware store that suffers a loss from a covered peril. His loss of income is $50,000. How will the loss be paid under the BOP? Answer Choices: Select the Correct Answer On an actual loss sustained basis ($50,000). No coverage unless separately added by endorsement. The policy will pay 50% of the loss. The policy will pay $50,000 for the loss of income less the deductible that applies to the building or contents coverage. Question 86 of 100

Answer 86

Your answer: On an actual loss sustained basis ($50,000). is correct. EXPLANATION: The policy pays for the actual loss of business income sustained due to the necessary suspension of "operations" during the "period of restoration." The suspension must be caused by direct physical loss of or damage to property at the described premises. The loss or damage must be caused by or result from a covered cause of loss. Question 86 of 100

Question 87

Which of the following is not an "additional coverage" under homeowner's liability Section II coverage? Answer Choices: Select the Correct Answer Interest accruing after a legal judgment is entered Damage to property of others Payments made by the insurer to settle a claim Insurer's costs in investigating a claim Question 87 of 100

Answer 87

Your answer: Damage to property of others is incorrect. The correct answer is: Payments made by the insurer to settle a claim. EXPLANATION: Settlements paid by the insurer come from the limits of liability shown on the declarations page and are not an additional coverage. Question 87 of 100

Question 88

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 Question 88 of 100

Answer 88

Your answer: I, II and III is correct. EXPLANATION: The choice belongs to the David, the insured. Question 88 of 100

Question 89

The liberalization clause of a Businessowners policy automatically applies favorable expansions of coverage, for which a premium is not charged if the changes are made during the policy period or within ______ prior to the effective date of the policy. ``` Answer Choices: Select the Correct Answer 45 days Six months Three months 30 days ``` Question 89 of 100

Answer 89

Your answer: 30 days is incorrect. The correct answer is: 45 days. EXPLANATION: A liberalization condition states that the insurer will automatically and immediately apply to the policy any revisions made during the policy period or within 45 days prior to the effective or renewal date if those revisions broaden the coverage without additional premium. Question 89 of 100

Question 90

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 90 of 100

Answer 90

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 90 of 100

Question 91

Which of the following statements is true regarding controlled forms? Answer Choices: Select the Correct Answer These forms are very flexible and can be manuscripted to meet the needs of individual insured’s. These forms are always issued by state insurance departments. Conditions and rates for these forms are determined solely on the basis of underwriting judgment. These forms are usually issued according to published rules and rates. Question 91 of 100

Answer 91

Your answer: These forms are usually issued according to published rules and rates. is correct. EXPLANATION: Controlled forms and their rates are filed for approval with the state insurance departments. They are usually issued according to published rules and rates. A jewelers block policy is an example. Question 91 of 100

Question 92

Which of the following is the provision in a liability policy that allows an insured to report incidents or circumstances that result in claims being filed in the future? ``` Answer Choices: Select the Correct Answer Defense Within Limits provision. Other Insurance provision. Supplementary Payments provision. Discovery provision. ``` Question 92 of 100

Answer 92

Your answer: Discovery provision. is correct. EXPLANATION: The Discovery provision allows an insured to report incidents or circumstances that may result in a claim being filed in the future. This provision is found mainly in liability policies with "claims-made" coverage triggers. Question 92 of 100

Question 93

The minimum liability amount per occurrence for bodily injury and property damage claims available under the BOP is: ``` Answer Choices: Select the Correct Answer $500,000 $1,000,000 $100,000 $300,000 ``` Question 93 of 100

Answer 93

Your answer: $100,000 is incorrect. The correct answer is: $300,000. EXPLANATION: $300,000 of liability per occurrence is automatically included on the BOP. Higher limits are available at the request of the insured and at the discretion of the company. Question 93 of 100

Question 94

Which party has the right to request information about a claim at any time? ``` Answer Choices: Select the Correct Answer The California Department of Insurance The plaintiff’s attorney Law enforcement The agent ``` Question 94 of 100

Answer 94

Your answer: The California Department of Insurance is correct. EXPLANATION: Only the California Department of Insurance (CDI) has the absolute right to request and be provided any claim information at any time. A plaintiff’s attorney may subpoena such information, but it may be considered private information. Law enforcement would also need a subpoena for claim information. Question 94 of 100

Question 95

Under California law, which of the following is NOT grounds for canceling a Homeowners policy? Answer Choices: Select the Correct Answer An insured files three large claims during the first six months of the policy period. An insured is convicted of intentionally burning insured property. An insured fails to pay the policy premium. An insured told his agent that he did not own any pets, when in fact he owns two champion fighting dogs. Question 95 of 100

Answer 95

Your answer: An insured files three large claims during the first six months of the policy period. is correct. EXPLANATION: Experiencing three claims in a short time span may be just bad luck, and therefore the California Code does not allow cancellation of Homeowners policies merely because of claims activity. The other choices are valid reasons for cancellation. Question 95 of 100

Question 96

Your car is damaged in an auto accident. While it is being repaired, the body shop loans you a replacement. From a coverage standpoint this replacement vehicle is known as: ``` Answer Choices: Select the Correct Answer A temporary substitute. A non-owned auto. A newly acquired auto. A replacement vehicle. ``` Question 96 of 100

Answer 96

Your answer: A temporary substitute. is correct. EXPLANATION: The auto policy provides coverage in this example. Since the vehicle owned by the insured is being repaired, a loaner would be covered by the insured's policy as a temporary substitute. Question 96 of 100

Question 97

You own an independent adjusting company in California. In order to open a second office in a different location you must obtain: Answer Choices: Select the Correct Answer Written permission from the Department of Insurance. A branch manager's license. A fidelity bond. A branch office certificate. Question 97 of 100

Answer 97

Your answer: A branch office certificate. is correct. EXPLANATION: According to the California Insurance Code, "If the licensee intends to conduct business from any location in California other than the principal place of business, a Branch Office Certificate must be obtained by submitting an Application for Branch Office Certificate along with the appropriate fee." Question 97 of 100

Question 98

Which of the following policies does not include coverage for flood? Answer Choices: Select the Correct Answer An HO-3 Policy A Personal Auto policy with "other than collision" coverage A Personal Articles Floater A floater covering fine arts Question 98 of 100

Answer 98

Your answer: An HO-3 Policy is correct. EXPLANATION: A homeowner policy specifically excludes flood coverage. Question 98 of 100

Question 99

The HO-3 provides coverage against how many perils on covered structures? ``` Answer Choices: Select the Correct Answer 17 perils 18 perils 24 perils None of the responses are correct ``` Question 99 of 100

Answer 99

Your answer: None of the responses are correct is correct. EXPLANATION: The HO-3 does not list the perils for structures. The form provides open peril coverage. The contents coverage does list the covered perils. Question 99 of 100

Question 100

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 100 of 100

Answer 100

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 100 of 100