IA Test 20 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: 20 days is incorrect. The correct answer is: 60 days.
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
An insured carries a Personal Property Replacement Cost endorsement attached to his Homeowners policy. He has suffered a loss to his personal property. He submits a claim for actual cash value (ACV) at the time of the loss, but notifies the insurer that he intends to make a claim for replacement cost later. The insurer will honor the insured’s request, but only if the cost to repair or replace the property is:
Answer Choices: Select the Correct Answer More than $500. Less than $500. More than $1,000. Less than $5,000.
Question 2 of 100
Your answer: More than $500. is correct.
EXPLANATION:
If the cost to repair or replace the property is more than $500, the insurer will pay the actual cash value for the loss, until the actual repair or replacement is made.
Question 2 of 100
Byron has submitted his application for a California Adjuster license, and then begins studying a course that will allow him to take the state licensing exam. Byron is working 40 hours a week, so he feels satisfied that he finished the course and passed the state licensing exam only 14 months after submitting his application. Which of the following is the response Byron will receive from the California Department of Insurance?
Answer Choices: Select the Correct Answer
He will receive notice that his license application is denied because he was required to fulfill all licensing requirements within 12 months of submitting his application.
He will receive his license from the Department because he fulfilled all the requirements for licensing.
He will receive notice that his license application is denied because he was required to fulfill all licensing requirements within 6 months of submitting his application.
He will receive notice that his license application has been approved and he will receive it within 60 days.
Question 3 of 100
Your answer: He will receive notice that his license application is denied because he was required to fulfill all licensing requirements within 12 months of submitting his application. is correct.
EXPLANATION:
He will receive notice that his license application is denied because he was required to fulfill all licensing requirements within 12 months of submitting his application. (CCR 2691.9)
Question 3 of 100
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 4 of 100
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 4 of 100
Under the Physical Damage portion of a Personal Auto Policy, if the insured’s car is stolen, transportation expenses will be provided after a waiting period of:
Answer Choices: Select the Correct Answer 36 hours. 12 hours. 48 hours. 24 hours.
Question 5 of 100
Your answer: 48 hours. is correct.
EXPLANATION:
When the vehicle is stolen transportation expenses are not paid until a 48-hour waiting period has passed.
Question 5 of 100
In an application for marine insurance, a yacht owner states that the yacht will only be sailed on inland waters. If the insured subsequently sails the yacht on the seas, coverage may be denied because the insured has breached:
Answer Choices: Select the Correct Answer A warranty. The Inchmaree clause. The policy clause. A representation.
Question 6 of 100
Your answer: A representation. is incorrect. The correct answer is: A warranty. .
EXPLANATION:
In marine insurance, and more often in ocean marine, the statement made by the insured may be a guarantee that all the information is correct. Warranties are much more restrictive than representations. Incidentally, Inchmaree was the name of a ship that suffered an uncovered machinery loss.
Question 6 of 100
What is the difference between replacement cost and actual cash value?
Answer Choices: Select the Correct Answer
Replacement cost does not make a deduction for depreciation, while actual cash value does.
Actual cash value is the amount one is willing to pay in cash for an item of property while replacement value equals market value.
They are substantially similar in the context of insurance policies.
Replacement cost takes market appreciation into account, while actual cash value does not.
Question 7 of 100
Your answer: Replacement cost does not make a deduction for depreciation, while actual cash value does. is correct.
EXPLANATION:
Actual cash value is defined as replacement cost less depreciation.
Question 7 of 100
When can an adjuster in California use a fictitious name while conducting business?
Answer Choices: Select the Correct Answer
Never
When authorized by the Commissioner to do so
When it does not conflict with another’s name in the same business
Anytime
Question 8 of 100
Your answer: When authorized by the Commissioner to do so is correct.
EXPLANATION:
No licensee may conduct a business under a fictitious or other business name unless and until he or she has obtained the written authorization of the Commissioner to do so.
Question 8 of 100
Which of the following is not an HO policy form?
Answer Choices: Select the Correct Answer DP-1 HO-4 HO-6 HO-8
Question 9 of 100
Your answer: DP-1 is correct.
EXPLANATION:
The DP-1 form is a dwelling form.
Question 9 of 100
A “full release settlement” when properly prepared, should include:
Answer Choices: Select the Correct Answer
The name of the attorney of record.
The name of the insurance company.
The names of the releasee and releasor.
The name of the adjuster resolving the claim.
Question 10 of 100
Your answer: The names of the releasee and releasor. is correct.
EXPLANATION:
Both the full legal names of the releasee and the releasor should be included in a release of all claims.
Question 10 of 100
In crime insurance terminology, an officer of the company, having custody of insured property off the insured premises, is known as a/an:
Answer Choices: Select the Correct Answer Messenger. Custodian. Scheduled executive. Insured property executive.
Question 11 of 100
Your answer: Messenger. is correct.
EXPLANATION:
A messenger means the named insured, any of the insured’s partners or employees, while having care and custody of the property outside the premises.
Question 11 of 100
Joseph Jones purchased a new car stereo system from Dailey’s Auto Enhancements. Daily’s permanently installed the stereo system in Joseph’s car in an area of the dashboard not typically used by the automobile manufacturer for such installations. One week after installation, Joseph’s car was broken into and the stereo was stolen. Under Part D of the personal auto form, what would be the limit of coverage?
Answer Choices: Select the Correct Answer
$1,000
$1,200
$2,000
Because the stereo was not permanently installed in the location used by the auto manufacturer, the loss would not be covered.
Question 12 of 100
Your answer: Because the stereo was not permanently installed in the location used by the auto manufacturer, the loss would not be covered. is incorrect. The correct answer is: $1,000.
EXPLANATION:
The auto form provides for a limit of $1,000 for electronic equipment that reproduces, receives or transmits audio, visual or data signals that is permanently installed in an auto, but not in the location used by the auto manufacturer.
Question 12 of 100
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 13 of 100
Your answer: 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. 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 13 of 100
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 14 of 100
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 14 of 100
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 15 of 100
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 15 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 16 of 100
Your answer: It provides coverage for the named perils. 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 16 of 100
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 17 of 100
Your answer: The policy limit and any defense costs minus any applicable retained limit (deductible). is correct.
EXPLANATION:
The Umbrella policy, like most liability policies, pays up to the limit of liability for covered claims. In addition, it pays defense costs incurred by the company in the defense of the insured. When the underlying coverage does not cover a claim and the Umbrella policy DOES cover the claim there is usually a retained limit, otherwise known as a deductible, that the insured must pay.
Question 17 of 100
Commercial Property Insurance usually imposes a penalty if, at the time of loss, the insured failed to maintain a minimum amount of coverage. This penalty may apply because of the:
Answer Choices: Select the Correct Answer Coinsurance clause. Valuation clause. Deductible provision. Value policy law.
Question 18 of 100
Your answer: Valuation clause. is incorrect. The correct answer is: Coinsurance clause. .
EXPLANATION:
Commercial property forms contain an 80% coinsurance clause. This means the insured must insure the property for 80% of its value or risk a penalty in case of a partial loss.
Question 18 of 100
While repairing a stairway for a customer, an employee of Mike’s Construction Company accidentally drops a hammer and injures someone passing by. What coverage under Mike’s CGL policy would respond to cover the claim?
Answer Choices: Select the Correct Answer
Premises and Operations Liability
Products and Completed Operations Liability
Contractual Liability
Owners and Contractors Protective Liability
Question 19 of 100
Your answer: Owners and Contractors Protective Liability is incorrect. The correct answer is: Premises and Operations Liability.
EXPLANATION:
This is clearly an operations claim. The claim occurred during the operations of the insured.
Question 19 of 100
Steve has removed the rear seat in the company car and installed stereo equipment and two speakers. The maximum the physical damage coverage will pay for damage to the items in an accident is:
Answer Choices: Select the Correct Answer
The actual cash value of the equipment since it is permanently installed in the car.
Nothing, because the equipment was not factory equipment.
$1,000 because the equipment was permanently installed in a place where the auto maker would normally not have it put it minus deductible.
$1,500 for the equipment but nothing for the labor to install it.
Question 20 of 100
Your answer: $1,000 because the equipment was permanently installed in a place where the auto maker would normally not have it put it minus deductible. is correct.
EXPLANATION:
For any electronic equipment that reproduces audio, video or data signals that are permanently installed in the auto in a place where the auto maker would not normally install is covered up to a total of $1,000 per loss.
Question 20 of 100
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 21 of 100
Your answer: $1,500. is incorrect. The correct answer is: $1,000..
EXPLANATION:
The coverage limit for Coverage M of the Personal Liability Supplement is $1,000 per person.
Question 21 of 100
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 22 of 100
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 22 of 100
A basic extended reporting period of a commercial umbrella liability policy can:
Answer Choices: Select the Correct Answer
Provide coverage to the insured for occurrences that happen after the policy expiration.
Provide coverage to the insured for claims reported after the policy expiration.
Increase the limits of liability.
Provide coverage to the insured for occurrences that happen and for claims reported after the policy expiration.
Question 23 of 100
Your answer: Provide coverage to the insured for claims reported after the policy expiration. is correct.
EXPLANATION:
The basic extended reporting period is part of the umbrella policy without additional premium. It is a provision that provides very limited coverage to the insured for claims reported after the policy expiration.
Question 23 of 100
Robert boards his dog at a kennel while he is on vacation. While at the kennel, the dog bites a meter reader. How would Robert’s HO-3 policy respond to the meter reader’s request for repayment of his emergency room costs?
Answer Choices: Select the Correct Answer
The insurer will pay for necessary emergency room expenses under the Medical Payments to Others provision.
The insurer will pay for the emergency room fees only if Robert is found negligent in leaving his dog at the kennel.
The insurer will not pay for the loss because the injuries occurred away from the insured location.
The insurer will not pay for the loss because it arose out of the kennel owner’s failure to render professional services.
Question 24 of 100
Your answer: The insurer will pay for necessary emergency room expenses under the Medical Payments to Others provision. is correct.
EXPLANATION:
The policy stipulates that “Medical Payments to Others” applies if caused by an animal owned or in the care of the insured either on or off the insured’s premises. This could also develop into a liability claim if the insured is brought into a law suit.
Question 24 of 100
A claims dispute where a disinterested third party who has decision making authority has been asked to intervene is known as:
Answer Choices: Select the Correct Answer Mediation Resolution Arbitration Settlement
Question 25 of 100
Your answer: Mediation is incorrect. The correct answer is: Arbitration.
EXPLANATION:
Arbitration involves a disinterested third party (the arbitrator) who helps to resolve a disputed claim.
Question 25 of 100
Which worker would be covered under Longshoreman’s coverage?
Answer Choices: Select the Correct Answer
Injury to a worker loading a ship at the dock.
Injury to a seaman who works on the ship out at sea.
Injury sustained by a designer working for a beach and shoreline restoration firm.
Injury to a truck driver in Long Island, NY.
Question 26 of 100
Your answer: Injury to a worker loading a ship at the dock. is correct.
EXPLANATION:
Longshoreman’s coverage applies to workers who load and unload, build and repair ships.
Question 26 of 100
Which of the following statements is correct?
I. Both DP-2 and DP-3 settle losses to covered personal property at actual cash value (ACV).
II. Both DP-2 and DP-3 settle partial losses to covered dwellings at replacement value in all situations.
Answer Choices: Select the Correct Answer I only II only Both I and II Neither I nor II
Question 27 of 100
Your answer: Both I and II is incorrect. The correct answer is: I only.
EXPLANATION:
Both DP-2 and DP-3 cover partial dwelling losses at replacement value only if adequate insurance to value is in force. (Adequate insurance to value must be 80% or more of the replacement cost value of the structures.)
Question 27 of 100
Tamika has her dwelling covered under an HO-8 form in California. She suffers damage to her dwelling by a covered peril. The limit of liability of her HO-8 policy is $60,000. Tamika hires a contractor to make the repairs to her dwelling using common or functionally equivalent materials. The cost of the materials used to repair the dwelling amount to $75,000. Three months following the loss, Tamika submits a claim to recoup the amount she spent to repair her dwelling. How much will her insurance company pay on this claim?
Answer Choices: Select the Correct Answer Actual Cash Value (ACV) $15,000 $75,000 $60,000
Question 28 of 100
Your answer: $60,000 is correct.
EXPLANATION:
The standard HO-8 forms pays only ACV, however the California mandatory special provisions form requires the insurance company to pay the lesser of the limit of liability, or the necessary amount actually spent to repair or replace using common or functionally equivalent materials. Because the limit of liability under Tamika’s HO-8 policy is $60,000, this is the total amount that the insurance company will pay.
Question 28 of 100
Which of the following is NOT excluded under Section II - Liability of the Businessowners policy?
Answer Choices: Select the Correct Answer
Aircraft, auto or watercraft bodily injury
Professional services bodily injury
Pollution property damage
Valet services bodily injury
Question 29 of 100
Your answer: Pollution property damage is incorrect. The correct answer is: Valet services bodily injury.
EXPLANATION:
Coverage is included for valet service bodily injury claims. However, the coverage only applies to the ways and means of the insured’s premises that are owned or rented and not when the valet service is operating the vehicle on public roads. The vehicle must be one that is not owned, rented or loaned to the insured. Coverage is the same in the general liability form.
Question 29 of 100
Mark is injured at work in a state that provides a TTD benefit at 66 2/3%, the state minimum is $40 and the state maximum is $540. The waiting period is 3 days and the retroactive period is 15 day. Which of the following is Mark’s TTD benefit if he earns $20 per hour and usually works a 40-hour week. Mark is injured on July 14th and does not return to work until September 3rd. Which of the following is the amount of TTD benefit he would have received?
Answer Choices: Select the Correct Answer $2,666.65 $3,696.00 $3,809.50. $4,266.64
Question 30 of 100
Your answer: $4,266.64 is incorrect. The correct answer is: $3,809.50..
EXPLANATION:
$20 X 40 - $800 (This is the average weekly wage). 66 2/3% X $800 = $533.33 (Still lower than the maximum). July 15th to September 2nd = 50 days, which is 7 weeks and one day (7 1/7th) weeks. The waiting period does not apply because the disability exceeded 15 days. 7 1/7 X $533.33 = $3,809.50.
Question 30 of 100
When an insured is fulfilling the duty of proving a loss by taking an inventory of the damaged property, who pays the expenses incurred by the insured?
Answer Choices: Select the Correct Answer
The insured.
The insurer.
The adjuster will provide funds to pay for these expenses.
Who pays these expenses will be negotiated at the settlement of the claim.
Question 31 of 100
Your answer: The insured. is correct.
EXPLANATION:
The insured is instructed to “keep a record of your expenses for emergency and temporary repairs, for consideration in the settlement of the claim.” Reasonable expenses paid by the insured to protect the property from further loss are the obligation of the insurer. Thus any other expenses incurred by the insured are NOT paid by the insurer and the insurer will only pay the “reasonable expenses” to protect the property if the insured maintains an inventory of expenses paid. Until that time, the insured is responsible for all expenses.
Question 31 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 32 of 100
Your answer: 30 days is correct.
EXPLANATION:
The Insurance Department must be advised within 30 days.
Question 32 of 100
Under a Commercial Property Policy, what must the insured do to be covered for the peril of freezing?
Answer Choices: Select the Correct Answer
Maintain heat in the building or cut off the water and drain the lines.
Install a freezing sensor.
Inspect the water pipes on a regular basis.
Contract with a plumbing company to maintain the system.
Question 33 of 100
Your answer: Maintain heat in the building or cut off the water and drain the lines. is correct.
EXPLANATION:
The policy specifies that the insured must either maintain heat in the building or turn off the water and drain the water lines.
Question 33 of 100
All of the following are covered under the definition of money in commercial crime insurance, except:
Answer Choices: Select the Correct Answer Proof of debt. Money. Currency. Coins.
Question 34 of 100
Your answer: Proof of debt. is correct.
EXPLANATION:
Proof of debt is not covered under the definition of money. This could be covered under an inland marine Accounts Receivable form.
Question 34 of 100
The California Insurance Commissioner, in lieu of suspending or revoking a license issued to an independent adjuster for a violation, may impose which of the following?
Answer Choices: Select the Correct Answer
Jail sentence for up to six months
$500 monetary penalty
Both a $500 penalty and a jail sentence of up to six months
$1,000 monetary penalty
Question 35 of 100
Your answer: $500 monetary penalty is correct.
EXPLANATION:
The monetary penalty is $500, but no jail time.
Question 35 of 100
Which of the following watercraft losses are excluded under a homeowner policy? I. Theft off the residence premises II. Windstorm damage while the insured’s boat is docked at the marina III. Fading of the canvas tarp which covers a boat IV. Earthquake damage
Answer Choices: Select the Correct Answer I and II only I, II, and IV only I, II, III, and IV I, II, and III only
Question 36 of 100
Your answer: I, II, III, and IV is correct.
EXPLANATION:
Homeowner policies have specific limits and exclusions applying to watercraft. Whereas earthquake damage to and fading of ANY property would be excluded (because fading is inevitable and not accidental)theft of watercraft off-premises and windstorm damage to a boat that is not in an enclosed building are specifically excluded.
Question 36 of 100
Before an application for an independent adjuster license is granted, the applicant must meet all of the following requirements, EXCEPT:
Answer Choices: Select the Correct Answer
The applicant must be at least 21 years of age.
The applicant must have at least two years of experience in insurance claims adjusting.
The applicant must not have committed acts constituting grounds for denial of a license.
Payment of the application fee.
Question 37 of 100
Your answer: The applicant must be at least 21 years of age. is correct.
EXPLANATION:
The applicant must be at least 18 years of age.
Question 37 of 100
The retroactive date on a claims-made CGL form specifies:
Answer Choices: Select the Correct Answer
The latest date in the policy to which coverage applies.
That losses occurring after the retroactive date will not be covered by the policy.
That losses occurring before the date will not be covered by the policy.
The dates between which coverage will apply.
Question 38 of 100
Your answer: The dates between which coverage will apply. is incorrect. The correct answer is: That losses occurring before the date will not be covered by the policy..
EXPLANATION:
The retroactive date is when claims-made coverage begins. Claims that occur before that date will not be covered.
Question 38 of 100
A 2 to 4-Family Dwelling is covered under the NFIP for incidental occupancies if it occupies less than:
Answer Choices: Select the Correct Answer
25% of the building’s replacement cost value.
25% of the building’s actual cash value.
25% of the building’s total floor area.
25% of the building’s common living areas.
Question 39 of 100
Your answer: 25% of the building’s common living areas. is incorrect. The correct answer is: 25% of the building’s total floor area..
EXPLANATION:
The NFIP provides coverage for incidental occupancies for a 2 to 4-Family Dwelling if it occupies less than 25% of the building’s total floor area.
Question 39 of 100
The limits of liability are found in which of the following sections of a casualty policy?
Answer Choices: Select the Correct Answer Declarations Insuring Agreement Definitions Conditions
Question 40 of 100
Your answer: Declarations is correct.
EXPLANATION:
The declarations section of a policy includes the identity and address of the named insured, the policy term or period, the amount of insurance or limits of liability, the policy premium, and any applicable deductibles. The conditions section spells out the duties of the insured in case of a loss. Insuring agreements are the promises and obligations of the insurer. Definitions are in the policy to add clarification to the meaning of certain important terms.
Question 40 of 100
