IA Test 17 Flashcards
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 1 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 1 of 100
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 2 of 100
Your answer: An insurer must conduct a full investigation before it pursues subrogation is correct.
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 2 of 100
With surety bonds, who is to be protected under a performance bond?
Answer Choices: Select the Correct Answer The Obligee The Surety The Sub-contractors The Contractor
Question 3 of 100
Your answer: The Obligee is correct.
EXPLANATION:
The obligee is protected by the bond in case the contractor defaults under the contract for the work to be performed. The surety issuing the bond is the guarantor under the bond.
Question 3 of 100
The Now Company carries a special BOP policy with a liability limit of $500,000. The company is involved in an accident causing $200,000 bodily injury damage and $200,000 property damage. The total amount collectible under the policy is:
Answer Choices: Select the Correct Answer $500,000 $400,000 $200,000 $100,000
Question 4 of 100
Your answer: $200,000 is incorrect. The correct answer is: $400,000.
EXPLANATION:
BOP policies provide a single limit of liability. Both bodily injury and property damage coverage is provided. Since the amounts for bodily injury and property damage combined do not exceed the 500,000 occurrence limit, the total amount of the claim would be covered.
Question 4 of 100
Of the following physical damage losses, which would be covered by a BAP providing comprehensive and collision coverage?
Answer Choices: Select the Correct Answer
The engine is damaged when water in the cooling system freezes. The insured failed to add antifreeze.
A front wheel bearing burns out after 70,000 miles of use.
Among other items of damage, the front tires are blown out in a high- speed head-on collision.
None of the losses would be covered.
Question 5 of 100
Your answer: The engine is damaged when water in the cooling system freezes. The insured failed to add antifreeze. is incorrect. The correct answer is: Among other items of damage, the front tires are blown out in a high- speed head-on collision..
EXPLANATION:
Damage to tires as a result of road damage is excluded. The tires were damaged in a collision and would therefore be covered.
Question 5 of 100
Coverage for all reasonable expenses incurred by an insured in order to continue as nearly as practicable the normal operation of his/her business after a loss is:
Answer Choices: Select the Correct Answer Operations Expense Coverage Extra Expense Coverage Additional Expense Coverage Loss of Use Coverage
Question 6 of 100
Your answer: Extra Expense Coverage is correct.
EXPLANATION:
Extra expenses include those incurred as a result of a covered loss that is required in order to continue the normal operation of the business. Example: Temporary re-location expenses, overtime expenses etc.
Question 6 of 100
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 7 of 100
Your answer: A truck-tractor is correct.
EXPLANATION:
A truck-tractor is not considered an instrumentality of transportation or communication under the nationwide inland marine definition.
Question 7 of 100
In the rating of Workers Compensation coverage, what is the purpose of the experience modification factor?
Answer Choices: Select the Correct Answer
To determine the base rates charged an employer.
To provide a method of either surcharging the rates or provide a credit in the rates.
To establish payroll classifications based on job description.
To factor in the years the business has been in existence.
Question 8 of 100
Your answer: To factor in the years the business has been in existence. is incorrect. The correct answer is: To provide a method of either surcharging the rates or provide a credit in the rates..
EXPLANATION:
In determining the experience mod, the individual employer is compared with other employers within the classification based upon the frequency of accidents and severity of injuries. The more accidents an employer has had in the past, the higher the modification rating. Therefore, it is an experience modification factor to either surcharge or credit the rates charged for the coverage.
Question 8 of 100
The inception and expiration dates of an insured’s underlying commercial liability polices and commercial umbrella liability policy should be the same in order to:
Answer Choices: Select the Correct Answer
Assure non-concurrency
Relieve the paperwork load for the insurer.
Align the reporting periods.
Avoid gaps in coverage.
Question 9 of 100
Your answer: Avoid gaps in coverage. is correct.
EXPLANATION:
It is better to have the policies issued with the same inception and expiration dates to avoid gaps in coverage.
Question 9 of 100
Which of the following NFIP forms provides replacement cost coverage if the building meets the other eligibility requirements for RCV?
Answer Choices: Select the Correct Answer
The Dwelling form only.
The Dwelling and RCBAP forms only.
The Dwelling, RCBAP, and General Property forms.
The General Property form only.
Question 10 of 100
Your answer: The Dwelling, RCBAP, and General Property forms. is incorrect. The correct answer is: The Dwelling and RCBAP forms only..
EXPLANATION:
The NFIP Dwelling and RCBAP forms provide loss settlement at replacement cost value only on single-family dwellings.
Question 10 of 100
If an insured carries Coverage C (contents) under a dwelling (not homeowners) form, how much coverage applies on a worldwide basis?
Answer Choices: Select the Correct Answer 10% of the coverage C limit 25% of the coverage C limit 40% of the coverage C limit 50% of the coverage C limit
Question 11 of 100
Your answer: 25% of the coverage C limit is incorrect. The correct answer is: 10% of the coverage C limit.
EXPLANATION:
The DP Forms have a 10% limitation of the Coverage C amount when personal property is OFF the premises. The homeowners forms provide the full limit of Coverage C anywhere in the world for personal property.
Question 11 of 100
If an employee is killed as a result of a violation of the “serious and willful conduct” rule, there is an exception regarding a reduction in benefits when:
I. The injury is caused by the employer’s failure to comply with safety laws when the disability from the injury sustained is 70% or more
II. The injured employee is under 16 years of age at the time of injury.
Answer Choices: Select the Correct Answer I only II only Neither I nor II Both I and II
Question 12 of 100
Your answer: Both I and II is correct.
EXPLANATION:
Both of these situations are exceptions regarding a reduction of benefits when an employee violates the serious and willful conduct rule.
Question 12 of 100
Which of the following is true about “open peril” coverage?
Answer Choices: Select the Correct Answer
It provides coverage for all perils, unless that peril is specifically excluded.
It provides coverage for scheduled risks.
It provides coverage for the named perils.
It does not exclude any perils from coverage.
Question 13 of 100
Your answer: It does not exclude any perils from coverage. is incorrect. The correct answer is: It provides coverage for all perils, unless that peril is specifically excluded. .
EXPLANATION:
On a “named peril” cause of loss form, the covered perils are named or specified. If the peril is not listed, then coverage does not apply. Conversely, on an “open peril” cause of loss form, ALL perils are covered unless the peril(s) is/are specifically excluded. “Open peril” cause of loss forms contain more exclusions than named peril forms for obvious reasons.
Question 13 of 100
Rita’s house has an 80% replacement cost value of $200,000. She has it insured for $100,000 under an HO-3 form and suffers a fire loss of $50,000. How much will Rita receive for the loss?
Answer Choices: Select the Correct Answer $100,000 $50,000 $25,000 $10,000
Question 14 of 100
Your answer: $50,000 is incorrect. The correct answer is: $25,000.
EXPLANATION:
Rita is 50% insured per the terms of the policy so she will receive only 50% of the loss or $25,000. The company could also offer to pay the claim on an “actual cash value” basis.
Question 14 of 100
Adverse selection occurs when:
Answer Choices: Select the Correct Answer
Applicants are accepted by the insurer with little or no attention given to underwriting.
The insurer experiences negative financial results due to unforeseen catastrophes.
The insurer accepts some applicants who are opposed to rate increases.
Only low risk applicants are accepted by the insurer.
Question 15 of 100
Your answer: The insurer experiences negative financial results due to unforeseen catastrophes. is incorrect. The correct answer is: Applicants are accepted by the insurer with little or no attention given to underwriting. .
EXPLANATION:
Insurers must carefully underwrite all risks to avoid being the victim of adverse selection. With adverse selection, the insurer is confronted with the probability of loss due to risks not factored in at the time of sale.
Question 15 of 100
Under the HO-3 policy, if an insured’s car is stolen from the driveway of his home and recovered in another city with his clothing and business property stolen from the trunk, what property will be covered?
Answer Choices: Select the Correct Answer
The clothing will be covered by the auto policy up to $2,000.
The business property will be covered up to a limit of $1,500.
The vehicle will be covered
Only a special floater will cover these personal property losses.
Question 16 of 100
Your answer: Only a special floater will cover these personal property losses. is incorrect. The correct answer is: The business property will be covered up to a limit of $1,500..
EXPLANATION:
The homeowner policy provides coverage for business personal property with a limit of $1,500 off the insured’s premises. The auto policy does not cover the theft of personal property such as clothing. The homeowner policy would cover these items.
Question 16 of 100
All of the following are considered a “community” under the NFIP, EXCEPT:
Answer Choices: Select the Correct Answer An incorporated city. A town. A county. A village.
Question 17 of 100
Your answer: A county. is correct.
EXPLANATION:
A county is not considered a “community” by the NFIP.
Question 17 of 100
A commercial building is insured for $150,000 and is worth $250,000. A $100,000 loss occurs. The policy contains an 80% coinsurance clause. How much will the insurer pay?
Answer Choices: Select the Correct Answer $75,000 $100,000 $150,000 $250,000
Question 18 of 100
Your answer: $75,000 is correct.
EXPLANATION:
To comply with the 80% coinsurance clause the insured should have carried $200,000 of coverage on the building. The insured is covered for 75% of what should have been carried and therefore, the insurer would pay $75,000.
Which of the following should be insured by an HO-6?
Answer Choices: Select the Correct Answer
The owners of condominiums and townhouses
A tenant who rents an apartment in a high-rise building
The owner of a ranch-style house
A person who wishes to schedule their valuable jewelry separately on a policy
Question 19 of 100
Your answer: The owners of condominiums and townhouses is correct.
EXPLANATION:
The HO-6 is for owners of condominiums and townhouses.
Question 19 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 20 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 20 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 21 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 21 of 100
Which of the following would be covered under Part II - Employer’s Liability of a Workers Compensation policy?
Answer Choices: Select the Correct Answer
Contractual liability.
The employee sues the employer from emotional stress due to termination.
The spouse of the injured employee sues the employer for loss of consortium.
Injury to an employee working after working too much overtime.
Question 22 of 100
Your answer: The spouse of the injured employee sues the employer for loss of consortium. is correct.
EXPLANATION:
Part II - Employer’s Liability under a Workers Compensation policy excludes coverage for injuries outside the coverage territory, employment practices and contractual liability. Coverage would apply, however, to a claim against the employer brought by a related third party, alleging loss-of-services due to a work-related injury to an employee.
Question 22 of 100
Which of the following does not have to be included in the inspection report required to participate in the California Fair Access to Insurance Requirements (FAIR) Plan?
Answer Choices: Select the Correct Answer Structural inspection Condition of surrounding structures Occupancy features Photographs of the occupants
Question 23 of 100
Your answer: Photographs of the occupants is correct.
EXPLANATION:
According to the California Insurance Code (CIC 10093(b)), the inspection must include, but need not be limited to, pertinent structural and occupancy features as well as the general condition of the building and surrounding structures. A representative photograph of the property may be taken as part of the inspection.
Question 23 of 100
Homeowner policies typically provide coverage for all of the following, EXCEPT:
Answer Choices: Select the Correct Answer Personal liability Personal injury Claim expenses Medical payments
Question 24 of 100
Your answer: Personal injury is correct.
EXPLANATION:
Personal injury covers libel, slander, wrongful eviction and several other coverages. The standard homeowner policy must be endorsed to provide personal injury coverage.
Question 24 of 100
The claimant relinquishes his or her right to sue by settling the claim under which of the following?
Answer Choices: Select the Correct Answer Scheduled Payment Release Advance Payment Full Release Settlement Structured Settlement
Question 25 of 100
Your answer: Full Release Settlement is correct.
EXPLANATION:
After a claimant signs a Full Release Settlement, he or she waives the right to sue.
Question 25 of 100
A department store has a large inventory of costume jewelry and watches. No single item is valued for more than $100.00. A customer steals most of the items and flees the scene. What theft coverage would be provided by an unendorsed ISO standardized BOP policy?
Answer Choices: Select the Correct Answer
$500
Full contents limit
$2,500
No coverage for the theft of jewelry and watches
Question 26 of 100
Your answer: $2,500 is incorrect. The correct answer is: Full contents limit.
EXPLANATION:
An unendorsed BOP provides theft of jewelry and watches up to the full contents limit if the value per item does not exceed $100.00. For high-end jewelry and watches, the policy provides a maximum theft limit of $2,500 for the entire theft loss. Please keep in mind that these limitations would not apply to losses from the other insured perils.
Question 26 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 27 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 27 of 100
Which of the following would be covered under Coverage C of form HO-3? I. Property normally kept at the insured residence but in transit to a new principal residence II. Personal Property in Switzerland while the insured is on vacation
Answer Choices: Select the Correct Answer II only Both I and II I only Neither I nor II
Question 28 of 100
Your answer: Both I and II is correct.
EXPLANATION:
Coverage C provides protection for personal property owned or used by the insured anywhere in the world - with some exceptions. One is personal property normally stored off the premises - although this can be added by endorsement. (Property of away-from-home students is not “stored”.)
Question 28 of 100
In crime insurance, which of the following individuals is NOT considered to be a custodian?
Answer Choices: Select the Correct Answer Janitor Employee Partner Insured
Question 29 of 100
Your answer: Janitor is correct.
EXPLANATION:
A janitor would not fit the definition of a custodian and would not have custody of the insured property. Only the insured, employee or partner fits into this position. A night watch person also would not be a custodian.
Question 29 of 100
The verdict in a personal injury liability suit was higher than the insured’s underlying liability policy’s limit of insurance. In this situation:
Answer Choices: Select the Correct Answer
The insured, the insurance company providing the insured’s underlying policy and the company providing the insured’s umbrella policy must agree on an appeal and share the expenses of that appeal.
Neither the insured’s underlying insurer nor the umbrella insurer may appeal without the insured’s agreement.
The insurance company providing the insured’s umbrella liability policy can appeal the case at its own expense even if the insured and the company providing the underlying policy do not appeal.
The case cannot be appealed by any of the parties.
Question 30 of 100
Your answer: The case cannot be appealed by any of the parties. is incorrect. The correct answer is: The insurance company providing the insured’s umbrella liability policy can appeal the case at its own expense even if the insured and the company providing the underlying policy do not appeal..
EXPLANATION:
The umbrella insurer has the option to appeal even though the underlying insurer and the insured chooses not to appeal.
Question 30 of 100
Which of the following dwelling forms provides coverage for loss of rental income?
Answer Choices: Select the Correct Answer The Basic, Broad and Special Form The Basic and Broad Forms only The Broad and Special Forms only The Special Form only
Question 31 of 100
Your answer: The Basic and Broad Forms only is incorrect. The correct answer is: The Basic, Broad and Special Form.
EXPLANATION:
All of the forms provide for rental value coverage. In the DP-2 and DP-3, it is 20% of the Coverage A limit and is additional coverage. With the DP-1, the 20% coverage reduces the available Coverage A amount on the dwelling. (Note: in North Carolina the percentage is 10%.)
Question 31 of 100
Which of the garage policy coverages will pay for physical damage to a garage customer’s auto regardless of legal liability?
Answer Choices: Select the Correct Answer
Section II - Garage Liability coverage.
Section IV - Garage physical damage coverage.
Garagekeepers legal liability coverage.
Garagekeepers direct primary coverage.
Question 32 of 100
Your answer: Garagekeepers direct primary coverage. is correct.
EXPLANATION:
The Garagekeepers direct primary coverage pays for damages to a customer’s vehicle regardless of fault. The Garagekeepers legal liability form would require that the claimant prove negligence on the part of the garage.
Question 32 of 100
Mr. Thompson carries the minimum auto limits in his state. He drives his car to New York which requires bodily injury limits of $25/50 and a wrongful death limit of $50/100 and no fault coverage. If he has an accident in New York what coverage would he have?
Answer Choices: Select the Correct Answer
The coverage will automatically be modified to comply with the New York requirements.
The insurance company will not raise the limits to those required in New York.
The insured must pay an additional premium to have their limits increased before entering the state.
Mr. Thompson will have to ask his company for higher limits before the trip.
Question 33 of 100
Your answer: The coverage will automatically be modified to comply with the New York requirements. is correct.
EXPLANATION:
Most insurance companies would automatically modify the coverage to comply with the requirements of the other state. No additional premium is required, nor does permission have to be obtained.
Question 33 of 100
Under the farm forms, a “half a head” of livestock is an animal that is:
Answer Choices: Select the Correct Answer
Under three years of age and the most coverage that will be paid for that animal under the policy is $3,000.
Under two yeara of age and the most coverage that will be paid for that animal under the policy is $2,500.
Under one year of age and the most coverage that will be paid for that animal under the policy is $1,000.
Is under six months of age and the most coverage that will be paid for that animal under the policy is $500.
Question 34 of 100
Your answer: Under one year of age and the most coverage that will be paid for that animal under the policy is $1,000. is correct.
EXPLANATION:
An animal under one year of age, is known as a “half a head.” Coverage F covers farm personal property on a blanket basis both on and off the insured premises. A blanket limit for livestock can be added, however, the most that will be paid for “half a head” of livestock (an animal under one year of age) is $1,000.
Question 34 of 100
The manager of an independent adjusting company in California leaves the business. The Department of Insurance requires notification of the manager’s departure within:
Answer Choices: Select the Correct Answer 10 days 30 days 60 days At license renewal
Question 35 of 100
Your answer: 60 days is incorrect. The correct answer is: 30 days.
EXPLANATION:
The Insurance Department must be advised within 30 days.
Question 35 of 100
Which of the following would be covered under the DP-1 dwelling form?
Answer Choices: Select the Correct Answer Fire and resultant water damage Freezing Falling objects Earthquake
Question 36 of 100
Your answer: Falling objects is incorrect. The correct answer is: Fire and resultant water damage.
EXPLANATION:
A fire loss and resultant water damage to extinguish the fire would be covered under the DP-1 form.
Question 36 of 100
Under HO medical expense coverage, necessary medical expenses will be paid by Medical Payments to Others for bodily injury medically certified within:
Answer Choices: Select the Correct Answer
30 days from the date of an accident.
Six months from the date of an accident.
One year from the date of an accident.
Three years from the date of an accident.
Question 37 of 100
Your answer: Three years from the date of an accident. is correct.
EXPLANATION:
Medical expenses are paid up to three years of the accident.
Question 37 of 100
Under a standard Equipment Breakdown policy, the loss settlement is:
Answer Choices: Select the Correct Answer
ACV for all covered losses if the the claim is reported within 24 months.
Replacement cost for all covered losses.
Replacement cost coverage, if the repair or replacement, is made within 18 months of the loss.
Replacement cost coverage, if the repair or replacement, is made within 24 months of the loss.
Question 38 of 100
Your answer: Replacement cost for all covered losses. is incorrect. The correct answer is: Replacement cost coverage, if the repair or replacement, is made within 24 months of the loss..
EXPLANATION:
The insured must repair or replace the damaged property within 24 months after the date of the breakdown (unless the time period is extended by the insurer in writing), or recovery of the loss is limited to the lesser of the cost it would have taken to repair the damaged property or the actual cash value of the property at the time of the breakdown. Usually coverage is on a replacement cost basis unless the insured or company endorses the policy to cover losses on an Actual Cash value bases. If replacement cost coverage applies, then the 24-month period is a factor if the insured is to receive replacement cost coverage for the loss.
Question 38 of 100
In California, a Homeowners policy may be cancelled during the 60-day underwriting period, and for the reasons acceptable by law, if a notice of _____ is provided to the insured.
Answer Choices: Select the Correct Answer 20 days. 30 days. 45 days. 10 days.
Question 39 of 100
Your answer: 20 days. is correct.
EXPLANATION:
In California, when a Homeowners policy is still within the 60-day underwriting period, the insurance company can cancel the policy if a 20-day notice is provided to the insured.
Question 39 of 100
Which of the following NFIP policies is required to include the Increased Cost of Compliance (ICC) coverage?
Answer Choices: Select the Correct Answer
An NFIP contents-only policy.
An NFIP Dwelling policy under the Emergency Program.
An NFIP Dwelling policy under the Regular Program.
An NFIP General Property policy under the Regular Program.
Question 40 of 100
Your answer: An NFIP General Property policy under the Regular Program. is incorrect. The correct answer is: An NFIP Dwelling policy under the Regular Program..
EXPLANATION:
ICC coverage is mandatory coverage that must be included on all NFIP policies, except those in the Emergency Program, or those policies insuring contents only. Therefore, an NFIP Dwelling policy under the Regular Program would be the only policy listed that be required to include ICC coverage.
Question 40 of 100
