IA Test 15 Flashcards
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 1 of 100
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 1 of 100
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 2 of 100
Your answer: Multiplying the greater of Coverage A or C, by the deductible percentage scheduled on the policy. is correct.
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 2 of 100
All of the following items would be covered under a Personal Property Replacement Cost Endorsement attached to a Homeowners policy, EXCEPT:
Answer Choices: Select the Correct Answer
A refrigerator in the covered home.
Jewelry that is described in the policy and subject to an agreed value loss settlement.
Carpeting that was damaged inside the covered dwelling.
An awning covering the front porch of the insured home.
Question 3 of 100
Your answer: Jewelry that is described in the policy and subject to an agreed value loss settlement. is correct.
EXPLANATION:
If the property is already subject to an “agreed value” loss settlement under the Homeowners policy, it will not be covered by the Personal Property Replacement Cost Endorsement.
Question 3 of 100
Farm liability coverages include each of the following, EXCEPT:
Answer Choices: Select the Correct Answer Bodily injury and property damage. Personal injury and advertising injury. Medical payments to others. Professional liability.
Question 4 of 100
Your answer: Personal injury and advertising injury. is incorrect. The correct answer is: Professional liability..
EXPLANATION:
Professional liability coverage is provided by other types of policies, but not under farm liability coverage.
Question 4 of 100
What is the term used to describe the circumstance when a state requires its employers to buy coverage from a state-designated Workers Compensation program?
Answer Choices: Select the Correct Answer Compulsory Elective Competitive Monopolistic
Question 5 of 100
Your answer: Compulsory is incorrect. The correct answer is: Monopolistic.
EXPLANATION:
In four states, Ohio, North Dakota, Wyoming, and Washington, private insurance companies are not allowed to sell Workers Compensation insurance. Employers in those states have to buy coverage from a state designated program or qualify to be self-insured. These states are known as “monopolistic” states.
Question 5 of 100
Which of the following losses would be paid under the “Other than Collision” coverage of the Personal Auto policy?
Answer Choices: Select the Correct Answer
Gradual corrosion of the grillwork on the insured automobile due to continuous exposure to salty air.
The insured automobile was stolen and never recovered.
The insured automobile skidded on icy pavement and overturned.
The insured automobile was damaged when it was hit by another car that failed to stop at a red traffic light.
Question 6 of 100
Your answer: The insured automobile was stolen and never recovered. is correct.
EXPLANATION:
Comprehensive coverage provides theft coverage including damages that occur as a result of the theft. The corrosion is excluded as “wear and tear” and the other two choices are “collision” losses.
Question 6 of 100
What limit of liability would be needed for a risk that transports radio active materials as required by the Motor Carrier Act under the MCS-90 endorsement?
Answer Choices: Select the Correct Answer $500,000 $750,000 $1,000,000 $5,000,000
Question 7 of 100
Your answer: $5,000,000 is correct.
EXPLANATION:
The MCS-90 endorsement requires the insured to carry a minimum of $5,000,000 in liability coverage. The endorsement provides for environmental restoration coverage as a result of pollution damages. The higher limit is required if transporting extra hazardous material.
Question 7 of 100
Under the personal auto policy the “supplementary payments” coverage is:
Answer Choices: Select the Correct Answer
In addition to the limit of liability.
Added by endorsement.
Included in the limit of liability.
Not available under the personal auto policy.
Question 8 of 100
Your answer: In addition to the limit of liability. is correct.
EXPLANATION:
Supplementary payments are in addition to the limits of liability.
Question 8 of 100
The form used to report the insured’s actual and estimated business income under an Equipment Breakdown policy is called:
Answer Choices: Select the Correct Answer Report of net income form Earnings reporting form Estimated income form Business income—Report of Values
Question 9 of 100
Your answer: Business income—Report of Values is correct.
EXPLANATION:
This endorsement gives information to the insurer as to the actual values and estimated values of the insured’s business income. This enables the insurer to charge a proper premium for the business income exposures that are covered under the boiler and machinery program.
Question 9 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 10 of 100
Your answer: $1,000 is correct.
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 10 of 10
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 11 of 100
Your answer: The cost to comply with any ordinance or law regulating or enforcing the clean up and removal of pollutants. is correct.
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 11 of 100
Each of the following is a comprehensive loss under the physical damage coverage of a Commercial Auto policy, EXCEPT:
Answer Choices: Select the Correct Answer
Damage to a covered auto caused by hail during a thunderstorm.
Damage caused when the auto overturned on a sharp curve.
Damage to the auto caused by flood waters.
Damage caused when vandals spray-painted graffiti on the auto.
Question 12 of 100
Your answer: Damage caused when the auto overturned on a sharp curve. is correct.
EXPLANATION:
Damage caused by overturn is considered to be a “collision” claim. The other three answer choices are all “comprehensive” or “other than collision” losses.
Question 12 of 100
Which of the following losses would be covered under a crime policy’s “Inside the Premises - Robbery or Safe Burglary of Other Property?”
Answer Choices: Select the Correct Answer
Broken windows and damage to a door
Theft of money and securities
Fire damage to the insured building caused by a burglar
Vandalism to a trailer on the insured premises caused by a burglar
Question 13 of 100
Your answer: Theft of money and securities is incorrect. The correct answer is: Broken windows and damage to a door.
EXPLANATION:
This question deals with robbery or safe burglary of “other property” which means, in crime insurance “other than money and securities”. There is another crime form to cover money and securities. Property insurance on the building/contents, would cover the fire loss if caused by burglars to conceal evidence of fingerprints, etc. Vandalism is another property peril. Burglary covers the damage when there are “signs” of forceful entry or exit. Damage to the doors and windows is a prime example of the damage covered by burglary insurance but not fire. Assume a burglar is upset that he cannot break into the building. He damages the doors and windows trying to break in. He sprays red paint all over the building. The damage caused by his attempt to break in is covered under burglary. The spray painting is vandalism and covered under property insurance.
Question 13 of 100
Which section of the Commercial Package Policy varies based on the lines of coverage included?
Answer Choices: Select the Correct Answer
Coverage Part.
Common Policy Conditions.
Common Policy Declarations.
None of the responses listed are correct.
Question 14 of 100
Your answer: Coverage Part. is correct.
EXPLANATION:
Each line of insurance that is eligible for the Commercial Package Policy has its own coverage part consisting of a variety of mandatory and optional forms that are used to provide the coverage desired.
Question 14 of 100
Which of the following perils is NOT covered by the commercial property causes of loss basic form?
Answer Choices: Select the Correct Answer Falling objects Vandalism Sinkhole collapse Sprinkler leakage
Question 15 of 100
Your answer: Sprinkler leakage is incorrect. The correct answer is: Falling objects.
EXPLANATION:
Only the broad and special forms provide falling object coverage.
Question 15 of 100
The Building and Personal Property Coverage Form includes which of the following Coverage Extensions?
Answer Choices: Select the Correct Answer Newly Acquired Property Outdoor Signs Replacement Cost Rental Value
Question 16 of 100
Your answer: Replacement Cost is incorrect. The correct answer is: Newly Acquired Property.
EXPLANATION:
There are five Coverage Extensions under this form. They are: Newly acquired or constructed property; personal effects and property of others; valuable papers and records; property off-premises, and outdoor property. Note that these are very limited in scope of coverage.
Question 16 of 100
What does the phrase “free on board destination” mean?
Answer Choices: Select the Correct Answer
Makes the seller responsible to the buyer until the goods have been delivered as agreed.
An ocean term referring to jettison.
The title to the goods to be shipped is transferred to the buyer at the shipping point.
The term is in reference to a cruise ship agreement for passengers.
Question 17 of 100
Your answer: Makes the seller responsible to the buyer until the goods have been delivered as agreed. is correct.
EXPLANATION:
The term is used in two common phrases, “FOB shipping point” and “FOB destination,” to distinguish when the title of goods passes from the seller to the buyer. Under the terms of “FOB shipping point,” the title of the goods passes to the buyer at the shipping point. Similarly, under the terms of “FOB destination,” the title of the goods passes to the buyer when the goods arrive at their destination. The distinction is important because it determines who pays for the shipping costs of the merchandise - whoever holds the title to the merchandise at the time of its shipping pays for its transportation costs unless otherwise noted (e.g., freight prepaid or freight collect). Also, it is important that if the shipment is damaged while traveling the owner must file the freight claim.
Question 17 of 100
Loss of rental income on an apartment building caused by an insured peril is best described as:
Answer Choices: Select the Correct Answer
A direct loss.
A loss that can never be covered under a Commercial Property policy.
A consequential loss.
A loss that would be covered only if the fire was friendly.
Question 18 of 100
Your answer: A direct loss. is incorrect. The correct answer is: A consequential loss..
EXPLANATION:
Consequential losses include time element losses. This coverage provides loss of income incurred by a business that is caused by a direct loss from an insured peril.
Question 18 of 100
All of the following are considered to be family members on the PAP, EXCEPT:
Answer Choices: Select the Correct Answer
Insured’s son who lives in the household.
Insured’s foster child who lives in the household.
Insured’s mother who doesn’t live in the household.
Insured’s step-son residing in the home.
Question 19 of 100
Your answer: Insured’s mother who doesn’t live in the household. is correct.
EXPLANATION:
The insured’s mother although a relative by blood is not living in the household so therefore is not considered to be a family member. A family member is related to the insured by blood, marriage or adoption and resides in the household.
Question 19 of 100
Claims adjusters have a close relationship to the legal profession, but must be careful not to become involved in the unauthorized practice of law. Which of the following would be an example of an adjuster who is engaged in the unauthorized practice of law?
Answer Choices: Select the Correct Answer
The adjuster has transmitted settlement offers on behalf of the principal.
The adjuster has managed claims in compliance with their state’s adopted Unfair Claim Settlement laws.
The adjuster has expressed an opinion, formed from a factual analysis, regarding the extent of damage or injury.
The adjuster has drafted the legally binding settlement papers on a claim.
Question 20 of 100
Your answer: The adjuster has drafted the legally binding settlement papers on a claim. is correct.
EXPLANATION:
Adjuster are not permitted to draft any document that is intended to have a legally binding effect.
Question 20 of 100
Which of the following is considered robbery?
Answer Choices: Select the Correct Answer
Taking someone else’s property by use of violence
Taking someone else’s property by use of fear of violence
Taking the property of another by any overt, felonious act committed in the victim’s presence
All of the responses are correct
Question 21 of 100
Your answer: All of the responses are correct is correct.
EXPLANATION:
All of the responses are correct because they fit the definition of a threat of violence or injury in the taking of property.
Question 21 of 100
Tea is applying for a new adjuster license in California. What is the fee she will need to submit with her license application?
Answer Choices: Select the Correct Answer $47 $56 $72 $29
Question 22 of 100
Your answer: $72 is correct.
EXPLANATION:
The application fee for an original license is: $72. (CIC 14097)
Question 22 of 100
The amount it would cost to repair or replace property minus depreciation is the definition of:
Answer Choices: Select the Correct Answer Actual cash value. Replacement cost. Market value. Functional replacement cost.
Question 23 of 100
our answer: Replacement cost. is incorrect. The correct answer is: Actual cash value. .
EXPLANATION:
This is the definition of actual cash value (ACV) - the cost new at the time of the loss, less depreciation equals actual cash value.
Question 23 of 100
If a bond is called upon for payment, which party pays out the face amount of the bond?
Answer Choices: Select the Correct Answer Principal Surety Obligee Insured
Question 24 of 100
Your answer: Surety is correct.
EXPLANATION: The surety (the insurer) pays out the face amount of the bond to the obligee in the event that the bond is called. In that event, the surety will have “right of recourse” against its own principal.
Question 24 of 100
The California Code states that standard fire policies must be written on the standard form with very limited omissions. Which of the following modifications are permitted to be made under a Standard Fire policy in California?
Answer Choices: Select the Correct Answer
The coverage can be substantially equivalent to or more favorable to the insured.
The insured can sign a waiver and accept lesser coverage.
The Commissioner can approve any variance in coverage.
The insurer can offer lesser coverage at a lower premium.
Question 25 of 100
Your answer: The Commissioner can approve any variance in coverage. is incorrect. The correct answer is: The coverage can be substantially equivalent to or more favorable to the insured. .
EXPLANATION:
According to the California Insurance Code (CIC 2070), the coverage can be substantially equivalent to or more favorable to the insured than that contained in the Standard Fire insurance policy.
Question 25 of 100
In commercial property what is the effect of exercising the “agreed value” option?
Answer Choices: Select the Correct Answer
Negates coinsurance
Pays replacement cost
The insurer and insured must agree on the value of all insured property after a loss
The insured reports values at an agreed upon date
Question 26 of 100
Your answer: The insurer and insured must agree on the value of all insured property after a loss is incorrect. The correct answer is: Negates coinsurance.
EXPLANATION:
Agreed value is an option on the Building and Personal Property Coverage form. If selected and indicated on the Declaration page, the coinsurance condition does not apply.
Question 26 of 100
Under the California Insurance Frauds Prevention Act (IFPA), facts, circumstances or events which singly, or in combination, support(s) an inference that insurance fraud may be been committed is called:
Answer Choices: Select the Correct Answer A suspected fraud occurrence. A red flag event. A reasonable belief occurrence. A willful event.
Question 27 of 100
Your answer: A reasonable belief occurrence. is incorrect. The correct answer is: A red flag event..
EXPLANATION:
Facts, circumstances or events which singly, or in combination, support(s) an inference that insurance fraud may be been committed is called a “red flag” or a “red flag event” in California.
Question 27 of 100
Your insurance company pays for the damages to your auto and for your bodily injury after your car is struck by a hit and run driver. The accident is witnessed by several individuals who can describe the car and its driver but who failed to get a license number. A year after the accident, the owner of the hit and run vehicle turns himself in. It is determined that he was fully insured at the time of the accident but fled because he had been drinking. Pursuant to the California Insurance Regulations, your insurance company can:
Answer Choices: Select the Correct Answer
Do nothing as a full year has passed since the accident occurred
Subrogate against the other insurance company to recover only for the damages to your vehicle
Subrogate against the other driver to recover all sums paid for your vehicle repair and your bodily injury
File a lawsuit to waive the statute of limitations then proceed with subrogation
Question 28 of 100
Your answer: Subrogate against the other driver to recover all sums paid for your vehicle repair and your bodily injury is correct.
EXPLANATION:
Payments made under both your Uninsured Motorist Bodily Injury and Uninsured Motorist Property Damage coverages can be recovered from the responsible party by subrogation if his/her identity is later confirmed.
Question 28 of 100
When is it appropriate for an adjuster to secure a non-waiver agreement with an insured?
Your answer: If the adjuster senses the claim may be fraudulent in nature. is incorrect. The correct answer is: If there is a question of coverage. .
EXPLANATION:
A properly executed non-waiver agreement allows the insurance company to complete a thorough investigation without implying that coverage is available for the loss.
Question 29 of 100
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 30 of 100
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 30 of 100
A worker who suffers an injury during recreational activities is most likely to be compensable when which of the following circumstances exists?
Answer Choices: Select the Correct Answer
The recreational activities are one-time or first-time activity without the knowledge of the employer.
The recreational activities occur on the employer’s premises during a lunch-break, work-break, or other recreational time period.
The recreational activities are off-premises and participation is not required.
The recreational activities are voluntary and sponsored by the employer off-premises.
Question 31 of 10
Your answer: The recreational activities occur on the employer’s premises during a lunch-break, work-break, or other recreational time period. is correct.
EXPLANATION:
An injury that occurs during work hours and on the work premises are more likely to be covered.
Question 31 of 100
QUESTION:
Under what circumstances does an insurer allow the transfer of an insured’s rights and duties under a Commercial Package Policy without the permission of the insurer?
Answer Choices: Select the Correct Answer
When the named insured dies.
When the named insured is in the hospital.
When the named insured is out of the United States.
When the named insured is informed of a terminal illness.
Question 32 of 100
Your answer: When the named insured dies. is correct.
EXPLANATION:
If the named insured dies his or her rights and duties are transferred to the deceased’s legal representative. This occurs automatically, the insurer’s permission is not required.
Question 32 of 100
The FAIR Plan is designed to serve hazardous and inner city areas and property being insured must be in a designated plan area (brush area). Both commercial and personal risks may be placed through the plan but farm risks and automobiles are not eligible. All of the perils can be purchased, EXCEPT:
Answer Choices: Select the Correct Answer Theft. Fire and lightning. Riot and civil commotion. Windstorm.
Question 33 of 100
Your answer: Theft. is correct.
EXPLANATION:
The coverage is for very basic perils similar to the DP-1 perils. Theft is not covered.
Question 33 of 100
If the insured carries a DP-2 dwelling form and insures the dwelling for 80% of its replacement cost value, what will he be paid if his 30 year old roof sustains $10,000 in damages (disregarding any deductible)?
Answer Choices: Select the Correct Answer $333 $5,000 $10,000 $8,000
Question 34 of 100
Your answer: $10,000 is correct.
EXPLANATION:
If the insured carries 80% to value he would be entitled to full replacement cost coverage for his damaged roof.
Question 34 of 100
The HO-3 provides _____ coverage on the dwelling and ____ coverage on personal property.
Answer Choices: Select the Correct Answer broad peril / open peril basic peril / basic peril open peril / broad peril named peril / open peril
Question 35 of 100
Your answer: broad peril / open peril is incorrect. The correct answer is: open peril / broad peril.
EXPLANATION:
The HO-3 (Special form) provides open peril coverage for loss to the dwelling and other structures. It provides broad peril coverage for personal property.
Question 35 of 100
A building insured under a Commercial Property policy suffers a fire and it is obvious that the building is underinsured. The policyholder demands payment for the entire loss on a replacement cost basis. The insurance company can:
Your answer: Pay only the actual cash value of the lost or damaged property or apply the coinsurance clause is correct.
EXPLANATION:
The insurer can pay the actual cash value of the loss or apply the coinsurance clause because the insured is underinsured.
Question 36 of 100
An inland marine coverage which covers the insured’s merchandise held for sale, such property that is sold but not delivered, customers property in the care and custody of the insured, and property being transported to or from the insured, is a:
Answer Choices: Select the Correct Answer Dealers form Commercial articles floater. Floor plan merchandise coverage form. Bailee's customers policy.
Question 37 of 100
Your answer: Bailee’s customers policy. is incorrect. The correct answer is: Dealers form.
EXPLANATION:
An equipment dealers form is an example.
Question 37 of 100
All of the following are reasons an independent adjuster may be hired, EXCEPT:
Answer Choices: Select the Correct Answer
The insured may retain an independent adjuster if negotiations with their insurer are not progressing forward.
An insurer may contract with an independent adjuster in a location where the insurer does not have claims offices set up.
Due to a catastrophe, an insurer may not have enough adjusters on staff to process all of the claims, and would contract with additional independent adjusters temporarily.
An insurer may contract with an independent adjuster who has special knowledge or expertise to adjust specialized claims.
Question 38 of 100
Your answer: The insured may retain an independent adjuster if negotiations with their insurer are not progressing forward. is correct.
EXPLANATION:
Retaining an adjuster to assist in negotiating a claim with the insurer would be a reason to hire a PUBLIC adjuster, not an INDEPENDENT adjuster.
Question 38 of 100
Which of the following is correct regarding the differences in coverage between an HO-3 and an HO-5?
Answer Choices: Select the Correct Answer
HO-3 covers personal property on a named peril basis, while personal property under an HO-5 is covered on an open peril basis.
HO-3 pays market value for dwelling losses while the HO-5 pays replacement cost.
HO-3 only covers personal property owned by the insured, while HO-5 can cover personal property owned or used by the insured.
HO-3 has more exclusions pertaining to the insured dwelling than the HO-5.
Question 39 of 100
Your answer: HO-3 covers personal property on a named peril basis, while personal property under an HO-5 is covered on an open peril basis. is correct.
EXPLANATION:
The HO-3 and the HO-5 are the same in terms of dwelling exclusions, valuation on dwelling losses, and the type of personal property insured. They are different in terms of perils insured against for personal property losses.
Question 39 of 100
If the insured suffers the loss of an article that is part of a pair or set, how will the insurance company typically settle the loss?
Answer Choices: Select the Correct Answer
Pay only for the value of the single item that was damaged or destroyed.
Pay for the current value of the total set.
Pay for the replacement cost of the entire pair or set.
Pay a fair proportion of the total value of the pair or set.
Question 40 of 100
If the insured suffers the loss of an article that is part of a pair or set, how will the insurance company typically settle the loss?
Your answer: Pay for the replacement cost of the entire pair or set. is incorrect. The correct answer is: Pay a fair proportion of the total value of the pair or set..
EXPLANATION:
The policy will not pay the value of the entire set. Instead, the policy will pay a reasonable and fair proportion of the total value of the pair or set.
Question 40 of 100
