IA Test 13 Flashcards
Which of the following businesses would be eligible for a Businessowners policy?
I. Donut shop.
II. Wholesale florist.
III. Barber shop.
IV. Taxidermist.
Answer Choices: Select the Correct Answer I, II, III, and IV I and III only II and III only I, II, and III only
Question 1 of 100
Your answer: I, II, III, and IV is correct.
EXPLANATION:
Generally, Businessowners policies are written to cover light businesses with limited locations and size. Most insurers would cover all of the ones in this question. The Donut shop will probably be required to install the proper fire extinguishing equipment if the donuts are made on the premises.
Question 1 of 100
The insured owns the following properties. Which one of them would be considered to be “business property” by the personal umbrella liability policy?
Answer Choices: Select the Correct Answer
A farm used for personal use
An apartment building
A cabin at a lake where the insured spends occasional weekends
A single-family home used only as residence by the insured
Question 2 of 100
Your answer: An apartment building is correct.
EXPLANATION:
In this case the apartment building would be considered “business property”.
Question 2 of 100
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 3 of 100
Your answer: $2,000. is correct.
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 3 of 100
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 4 of 100
Your answer: Almost all commercial risks are eligible for coverage under the Commercial Package Policy. is incorrect. The correct answer is: Commercial Package Policies can include Ocean Marine and Aviation Insurance coverage. .
EXPLANATION:
Ocean Marine and/or Aviation insurance are “specialty” policies that cannot be packages together with other commercial risks into a package policy.
Question 4 of 100
An insured purchased business auto physical damage coverage against specified causes of loss. Protection applies to all of the following perils, except:
Answer Choices: Select the Correct Answer Theft Fire Falling objects Vandalism
Question 5 of 100
Your answer: Theft is incorrect. The correct answer is: Falling objects.
EXPLANATION:
This is named peril coverage (specified causes of loss) and is not nearly as broad as comprehensive coverage. This coverage form names the perils that will be covered and falling objects is not a named peril. Comprehensive covers anything other than collision.
Question 5 of 100
Which of the following bests describes the process of mediation?
Answer Choices: Select the Correct Answer
A summons to give testimony
Estoppel because of certain acts of others
Both parties present their dispute to a person usually in the legal profession; nothing is binding on either party
All parties submit their differences to a disinterested third party; the result is binding on both parties
Question 6 of 100
Your answer: All parties submit their differences to a disinterested third party; the result is binding on both parties is incorrect. The correct answer is: Both parties present their dispute to a person usually in the legal profession; nothing is binding on either party .
EXPLANATION:
In mediation, both opposing parties present their dispute to an impartial third party, usually a trial lawyer or retired judge, who helps the parties analyze their dispute and devise a compromise. Nothing is binding on either party until an agreement is formulated and agreed to by the opposing parties.
Question 6 of 100
In commercial property insurance, how would the insured receive replacement cost lost settlement on damage (as a result of a covered peril) to the personal property of others left in the insured’s care custody and control?
Answer Choices: Select the Correct Answer
Request a separate replacement cost endorsement on the Personal Property of Others coverage on the policy.
Request the replacement cost endorsement on Business Personal Property
Insure the property of others for at least 100% of the cost to replace it.
Send in periodic reports to the insurer on the value of the property of others left in the insured’s care custody and control
Question 7 of 100
Your answer: Request the replacement cost endorsement on Business Personal Property is incorrect. The correct answer is: Request a separate replacement cost endorsement on the Personal Property of Others coverage on the policy..
EXPLANATION:
Even if the replacement cost endorsement is attached to the building and business personal property coverage, a separate endorsement is necessary for replacement cost settlement on the property of others left in the insured’s care custody and control.
Question 7 of 100
QUESTION:
The Discovery clause in a commercial crime policy states that losses are covered if they are discovered by the insured:
I. During the policy period.
II. Within 60 days of the termination or cancellation date if no other insurance is obtained.
Answer Choices: Select the Correct Answer Both I and II. I only. II only. Neither I nor II.
Question 8 of 100
Your answer: I only. is incorrect. The correct answer is: Both I and II. .
EXPLANATION:
Normally, losses must be discovered during the policy period in order to be covered. However, the form provides for an extended period of 60 days beyond the termination or cancellation date to discover losses that were sustained during the policy period.
Question 8 of 100
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 9 of 100
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 9 of 100
Robert is retired and lives in an older home in Maine. He has an old floor furnace to heat his home that is in need of repair and he forgets to have it checked. In the winter he stays in Florida for a month with his daughter. While Robert is away, the furnace malfunctions and all his water pipes freeze and burst causing massive water damage. The furnace is also destroyed. His house is covered under a Homeowners broad cause of loss form, that includes water damage from a heating or plumbing system. How will the adjuster handle this claim?
Answer Choices: Select the Correct Answer
Pay for all damage except the furnace.
Deny the entire claim because of neglect of the insured.
Pay for the furnace and the resulting water damage only.
Pay for the water damage and depreciate the payment for the replacement of the furnace.
Question 10 of 100
Your answer: Pay for all damage except the furnace. is correct.
EXPLANATION:
In this case, most insurers would pay for all damage except the destroyed furnace. The policy does not pay for the wear and tear of a heating or air conditioning system. Even though the insured was neglectful, the ensuing damage resulting from the frozen pipes would be covered. If the insured had been advised by a contractor that the furnace needed immediate repairs and the insured failed to make them, most adjusters would deny the entire claim. This would then be considered an increased hazard not known to the insurer and intentional neglect on the part of the insured.
Question 10 of 100
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 11 of 100
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 11 of 100
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 12 of 100
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 12 of 100
A weather report would be considered what type of evidence?
Answer Choices: Select the Correct Answer Documentary Demonstrative Interrogatory Material
Question 13 of 100
Your answer: Documentary is correct.
EXPLANATION:
A weather report is a documentary report that is considered to be an official report. It is in a list of other official reports such as police reports, fire department reports, autopsy reports and court records showing previous convictions of crimes.
Question 13 of 100
A franchised auto dealership would need:
Answer Choices: Select the Correct Answer Business Auto coverage. Common carrier coverage. Garage Liability coverage. General Liability coverage.
Question 14 of 100
Your answer: Garage Liability coverage. is correct.
EXPLANATION:
A franchised auto dealership would need Garage liability because it includes auto liability as well as Commercial General Liability coverage.
Question 14 of 100
An independent adjuster may satisfy the security requirement in California by providing:
I. A $2,000 surety bond
II. A $2,000 property bond
III. A $2,000 cash deposit with the state of California
IV. Proof of the sum of $2,000 deposited in a bank authorized to do business in California
Answer Choices: Select the Correct Answer I, II, III and IV I, III and IV only I and II only I, II and III only
Question 15 of 100
Your answer: I, III and IV only is correct.
EXPLANATION:
An independent adjuster may satisfy the security requirement with a $2,000 surety bond; by depositing with the State of California the sum of $2,000 in cash; providing evidence of deposit of the sum of $2,000 in banks authorized to do business in this state and insured by the Federal Deposit Insurance Corporation; providing investment certificates or share accounts in the amount of $2,000 issued by a savings association doing business in this state and insured by the Federal Deposit Insurance Corporation; or providing evidence of a certificate of funds or share account of the sum of $2,000 in a credit union whose share deposits are guaranteed by the National Credit Union Administration. A property bond is not a method of satisfying the requirement.
Question 15 of 100
Which of the following amounts would be paid on a covered auto suffering a total loss? The retail value is $1,250 and the average trade in value is $1,000.
Answer Choices: Select the Correct Answer $1,000 plus applicable taxes $1,500 plus applicable taxes $1,250 plus applicable taxes $2,995 plus applicable taxes
Question 16 of 100
Your answer: $1,250 plus applicable taxes is correct.
EXPLANATION:
In case of a total loss to a covered vehicle the insurer is required to pay the retail value of the vehicle plus any applicable sales taxes.
Question 16 of 100
Which of the following statements about Equipment Breakdown protection coverage is FALSE?
Answer Choices: Select the Correct Answer
It would cover the mechanical failure of a bottle-making machine in a glass factory.
It would cover hail damage to industrial air conditioning units on the roof of an insured business.
It would cover the clean-up costs after a refrigeration unit experienced a sudden pressure failure of the vacuum system and sprayed hazardous refrigerant everywhere.
It would cover the damage to a company’s computer server after an electrical failure shorted out many of its internal components.
Question 17 of 100
Your answer: It would cover hail damage to industrial air conditioning units on the roof of an insured business. is correct.
EXPLANATION:
Equipment Breakdown protection does not cover damage caused by the peril of hail. Damage to the industrial air conditioning units caused by hail would be covered by the Commercial Property policy.
Question 17 of 100
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 18 of 100
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 18 of 100
What does the Small Business Administration (SBA) surety bond program provide?
Answer Choices: Select the Correct Answer
Reimburses the sureties that provide the bonds a percentage of the losses sustained if the contractor defaults.
Bonding for small contractors.
Guarantees a bond will be issued.
Pays premiums for surety bonds.
Question 19 of 100
Your answer: Bonding for small contractors. is incorrect. The correct answer is: Reimburses the sureties that provide the bonds a percentage of the losses sustained if the contractor defaults. .
EXPLANATION:
SBA guarantees bid, performance, payment and ancillary bonds issued by surety companies for construction, service and supply contracts and reimburses the sureties a percentage of the losses sustained if the contractor defaults.
Question 19 of 100
Commercial Insurance coverage under the broad and special forms covers which of the following types of water damage?
Answer Choices: Select the Correct Answer
Flood
Surface waters
Water below the ground which surfaces and causes damage
A water pipe that bursts
Question 20 of 100
Your answer: A water pipe that bursts is correct.
EXPLANATION:
The broad and special cause of loss forms provide coverage for all types of water related damage except that caused by flood, from surface water or water below ground which surfaces.
Question 20 of 100
A licensed independent adjuster has received a written or oral request from the California Department of Insurance concerning a claim. How many days does this adjuster have to respond to the inquiry?
Answer Choices: Select the Correct Answer 30 days 15 working days 21 calendar days 10 calendar days
Question 21 of 100
Your answer: 15 working days is incorrect. The correct answer is: 21 calendar days.
EXPLANATION:
This adjuster must respond immediately, but no later than 21 calendar days from the date of the request.
Question 21 of 100
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 22 of 100
Your answer: Material concealment is correct.
EXPLANATION:
Concealment would be a material misrepresentation and the insurer could cancel the policy.
Question 22 of 100
In case of a loss, how many days notice does the insured have after notification of a claim to submit the claim to the underwriters of the ocean marine coverage?
Answer Choices: Select the Correct Answer 180 days. 90 days. 60 days. 120 days.
Question 23 of 100
Your answer: 60 days. is incorrect. The correct answer is: 180 days..
EXPLANATION:
In case of a loss, the insured must notify the lead insurance company before it takes any action. There is no coverage for the loss unless the notification is made within 180 days after the loss occurs, unless the insurance company has agreed to a different notification period.
Question 23 of 100
Adele Sullivan’s car is hit from the rear by Clarence Brown’s car. Mrs. Sullivan’s insurance company pays her claim under her physical damage coverage and makes a claim against Mr. Brown’s insurance company for the same amount. This process is called:
Answer Choices: Select the Correct Answer Subrogation. Matriculation. Reciprocity. Arbitration.
Question 24 of 100
Your answer: Subrogation. is correct.
EXPLANATION:
Mr. Brown was at fault. Mrs. Sullivan’s insurer paid the loss and is entitled to seek reimbursement from Mr. Brown or Mr. Brown’s insurance company via subrogation.
Question 24 of 100
Under California law, an “automobile insurance policy” means an automobile liability, automobile physical damage, or automobile collision policy, issued to an individual that covers all of the following types of vehicles, EXCEPT:
Answer Choices: Select the Correct Answer
Private passenger type vehicles, pick-up trucks and vans
A 6-wheel RV
A motorcycle
A public or livery conveyance for passengers
Question 25 of 100
Your answer: A public or livery conveyance for passengers is correct.
EXPLANATION:
Vehicles used for public or livery conveyance for passengers are not eligible for personal auto coverage. An endorsement must be used for some of the other types of vehicles.
Question 25 of 100
How is property covered under an unendorsed BOP form?
Answer Choices: Select the Correct Answer
Coverage is written on a named peril basis
Coverage is written on a broad peril form
Coverage is written on an open peril basis
Coverage is written on a basic peril bases
Question 26 of 100
Your answer: Coverage is written on a broad peril form is incorrect. The correct answer is: Coverage is written on an open peril basis.
EXPLANATION:
The forms were revised to provide open peril coverage on buildings and contents. Coverage can be amended to named peril basic coverage by endorsement.
Question 26 of 100
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 27 of 100
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 27 of 100
What type of bond is required when a person dies without leaving a will?
Answer Choices: Select the Correct Answer Surety bond Fidelity bond Administrator’s bond Estate bond
Question 28 of 100
Your answer: Administrator’s bond is correct.
EXPLANATION:
The court will appoint an administrator for the estate and that person is required to obtain an administrator’s bond.
Question 28 of 100
Anywhere Computer Care specializes in building customer websites. They purchase a CGL policy. It should be pointed out to the insured that:
Answer Choices: Select the Correct Answer
Damage to a customer’s computer left for repair at the business is excluded.
Personal and Advertising Injury Liability is excluded for website design exposures.
Damage to the insured’s own property is excluded under the CGL.
All of the listed answers are correct.
Question 29 of 100
Your answer: All of the listed answers are correct. is correct.
EXPLANATION:
Each answer choice would be excluded for coverage under the CGL. Coverage for damage to the customer’s computer could be covered if the damage was by fire, smoke or explosion but the answer choice does not mention that.
Question 29 of 100
Which of the following statements is true about additional coverages under a Homeowners policy?
Answer Choices: Select the Correct Answer
They are automatically included only if medical payments coverage is purchased.
They are optional on the part of the insured.
They are included at no extra cost.
They are included for a minimum premium.
Question 30 of 100
Your answer: They are optional on the part of the insured. is incorrect. The correct answer is: They are included at no extra cost..
EXPLANATION:
An example would be the collapse hazard included in both the broad and special cause of loss forms at no extra charge.
Question 30 of 100
A commercial umbrella liability policy would usually cover which of the following situations?
Answer Choices: Select the Correct Answer
The insured claimed in a TV ad that the company’s product will allow dieters to lose five pounds per week for four weeks without changing their eating habits. Several dissatisfied customers sued the insured when the product did not cause weight loss.
The insured was sued for knowingly allowing its advertising agency to make untrue statements about a competitor in an advertisement for the insured’s product.
The insured owns and rents out a number of subsidized housing units. Feeling justified that he has the right to know what goes on in the rented units, he regularly uses a passkey to let himself in and look around the units. One day he did this while a tenant was sleeping. The tenant woke up, saw the insured and ordered him to leave. The insured refused. Later, the tenant sued the insured for wrongful entry.
The insured borrowed a bulldozer from a friend and damaged it while using the machine.
Question 31 of 100
Your answer: The insured owns and rents out a number of subsidized housing units. Feeling justified that he has the right to know what goes on in the rented units, he regularly uses a passkey to let himself in and look around the units. One day he did this while a tenant was sleeping. The tenant woke up, saw the insured and ordered him to leave. The insured refused. Later, the tenant sued the insured for wrongful entry. is correct.
EXPLANATION:
The owner of the housing unit committed an act covered under personal injury liability coverage.
Question 31 of 100
When an insurance agent is writing a CGL policy and he/she has a choice of using an “occurrence” form or a “claims-made” form, he/she should be aware that the main difference between the two forms is:
Answer Choices: Select the Correct Answer The coverage trigger. The policy period. The exclusions. The definitions in the policy.
Question 32 of 100
Your answer: The coverage trigger. is correct.
EXPLANATION:
A coverage “trigger” is something that clearly defines when coverage begins and ends under a policy. The two forms differ as to when coverage is “triggered.”
Question 32 of 100
When the insurer makes a change that broadens coverage under an existing policy without additional premium, this is known as the:
Answer Choices: Select the Correct Answer Broadened Coverage Clause. Betterment Clause. Liberalization Clause. Improvement Clause.
Question 33 of 100
Your answer: Betterment Clause. is incorrect. The correct answer is: Liberalization Clause..
EXPLANATION:
This is called the “liberalization clause.” Under the dwelling forms, this implementation date must fall within 60 days prior to or during the policy period stated in the declarations.
Question 33 of 100
Under an HO form with replacement cost coverage, what is the maximum amount that will be paid in case of a covered loss?
Answer Choices: Select the Correct Answer The limit of coverage Limit of liability Actual cash value Depreciated value less the deductible
Question 34 of 100
Your answer: The limit of coverage is correct.
EXPLANATION:
In property insurance, the maximum the insurer will pay in case of a covered claim is the limit of the coverage. Deductibles are subtracted from the loss and not the limit of the coverage.
Question 34 of 100
Under the CGL policy which of the following is true?
I. Employees in the course of their employment are “insureds.”
II. The coverage is always written on a claims-made basis.
III. The coverage is always written on an occurrence basis.
IV. The coverage can be written on either a claims-made or an occurrence basis.
Answer Choices: Select the Correct Answer I and IV I and II III and IV I only
Question 35 of 100
Your answer: I and IV is correct.
EXPLANATION:
CGL policies include as “insureds” the named insured, employees in the course of their employment, and others, depending on whether the named insured is a sole proprietorship, partnership, or corporation. The Liability coverage of the CGL policy can be written on an occurrence OR a claims-made basis.
Question 35 of 100
Under California workers compensation rules, an employee who suffers a work-related accident and loses 95% use of an arm would be eligible for what type of disability?
Answer Choices: Select the Correct Answer Temporary, partial Temporary, total Permanent, partial Permanent, total
Question 36 of 100
Your answer: Permanent, partial is correct.
EXPLANATION:
A rating between 1% and 99% indicates a permanent, partial disability.
Question 36 of 100
Which of the following is excluded under the Ordinance or Law Endorsement form?
Answer Choices: Select the Correct Answer
The cost to comply with any ordinance or law requiring a higher grade of pipe to be used in a home’s plumbing system.
The cost to comply with any ordinance or law regulating or enforcing the type of insulation that may be used in the attics of homes located in the jurisdiction.
The cost to comply with any ordinance or law requiring that handrails be installed on any porch that is greater than 2 feet in height, and is attached to the covered dwelling.
The cost to comply with any ordinance or law regulating or enforcing the clean up and removal of pollutants.
Question 37 of 100
Your answer: The cost to comply with any ordinance or law requiring a higher grade of pipe to be used in a home’s plumbing system. is incorrect. The correct answer is: The cost to comply with any ordinance or law regulating or enforcing the clean up and removal of pollutants. .
EXPLANATION:
The cost to comply with any ordinance or law regulating or enforcing the clean up and removal of pollutants is excluded under the Ordinance or Law endorsement.
Question 37 of 100
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 38 of 100
Your answer: A loss discovered up to one year after the policy expired but that occurred during the policy period. is correct.
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 38 of 100
A deductible usually applies to which of the following automobile policy coverages?
Answer Choices: Select the Correct Answer Physical Damage Bodily Injury Liability Property Damage Liability Medical Payments
Question 39 of 100
Your answer: Physical Damage is correct.
EXPLANATION:
Deductibles are never used with medical payment coverage and very seldom used for bodily injury and property damage. Deductibles usually apply only to physical damage coverage.
Question 39 of 100
The coinsurance clause in commercial property policies encourages the insured to carry insurance:
Answer Choices: Select the Correct Answer
At the full value, or at least 80% to value of the property.
At 70% of the full value of the property.
At 60% of the full value of the property.
At one-half the full value of the property.
Question 40 of 100
Your answer: At the full value, or at least 80% to value of the property. is correct.
EXPLANATION:
The coinsurance clause encourages the insured to insure at full value or to at least 80% of the value of the property. In exchange, the insured will receive a discount in the property insurance rates. Failure to comply with this clause reduces payments for a loss to the insured for partial losses. The insured will be penalized the same percentage as the percentage that he was underinsured. If he would insure the property for 70% to value instead of 80% to value he would receive 10% less on his partial loss. The coinsurance clause does not apply to total losses.
Question 40 of 100
