IA Test 24 Flashcards
The Homeowners policy on Dylan’s $110,000 home is voided when he intentionally burns the house to the ground. Consequently, he does not receive the settlement check he was hoping to when he committed the arson, but he still has an outstanding mortgage balance of $76,000. How does this event affect the mortgage lender?
Answer Choices: Select the Correct Answer
The insurer pays the mortgage lender $110,000.
The insurer pays the mortgage lender $76,000.
The insurer pays the mortgage lender $55,000 - half the total amount of the loss.
Because the arson voided the policy, the mortgage lender is paid nothing.
Question 1 of 100
Your answer: The insurer pays the mortgage lender $76,000. is correct.
EXPLANATION:
The insured cannot intentionally jeopardize the mortgage lender’s rights. Therefore, the insurer will pay the mortgage lender the $76,000 mortgage balance.
Question 1 of 100
Which statement best describes “defense” coverage under the Section II - Liability coverage of the Businessowners policy?
Answer Choices: Select the Correct Answer
Defense costs are not subject to a limit.
Defense costs are included in the aggregate limit of insurance.
Defense costs are paid but limited to claims submitted during the policy period.
Defense costs are paid at twice the limit of the policy.
Question 2 of 100
Your answer: Defense costs are not subject to a limit. is correct.
EXPLANATION:
Defense coverage is not subject to a policy limit. The insurer can spend whatever it desires in the defense of a claim and it has no effect on the policy limit.
Question 2 of 100
Which of the following would be covered under employee dishonesty?
Answer Choices: Select the Correct Answer Money lost on the way to the bank Inventory shortages Embezzlement Robbery of the employee
Question 3 of 100
Your answer: Inventory shortages is incorrect. The correct answer is: Embezzlement.
EXPLANATION:
Embezzlement is a dishonest act by an employee, and thus would be covered by Employee dishonesty. The other answer choices are excluded or are not dishonest acts of an employee.
Question 3 of 100
Which of the following is a type of “voluntary loss” taken to save the property from further loss?
Answer Choices: Select the Correct Answer General Average Loss Partial Average Loss Actual Total Loss Constructive Total Loss
Question 4 of 100
Your answer: Partial Average Loss is incorrect. The correct answer is: General Average Loss.
EXPLANATION:
A “General Average Loss” is a partial loss that is “voluntary”. This type of loss is taken to save the property from further loss, such as an insured who uses a garden hose to extinguish a fire that has started on her couch. The water damage is “voluntary” but it prevented further loss to the house.
Question 4 of 100
What insurers must participate in accepting business under the California FAIR Plan?
Answer Choices: Select the Correct Answer
All insurers licensed to write basic property insurance or any component of property insurance in multi-peril policies.
Companies who specialize in difficult or hard to place property insurance.
Only those property insurers holding a certificate of authority for 5 years or less in California.
Only those insurers wanting to enter California and have received approval from their board of directors.
Question 5 of 100
Your answer: All insurers licensed to write basic property insurance or any component of property insurance in multi-peril policies. is correct.
EXPLANATION:
The purpose of the FAIR Plan is designed to provide a market for those property owners who are unable to obtain insurance through the normal market. Therefore, the California legislature enacted legislation requiring the participation of admitted insurers licensed to write property insurance to participate.
Question 5 of 100
Each of the following is true about Builders Risk Coverage, EXCEPT:
Answer Choices: Select the Correct Answer
Coverage terminates the day after construction is completed.
The amount at risk increases over time.
Land, lawns and trees are not covered.
In effect, the coverage has a 100% coinsurance requirement.
Question 6 of 100
Your answer: In effect, the coverage has a 100% coinsurance requirement. is incorrect. The correct answer is: Coverage terminates the day after construction is completed. .
EXPLANATION:
Coverage normally terminates 90 days after the work has been completed or has been accepted. In addition, coverage will cease once the building has been put to its intended use.
Question 6 of 100
What is the purpose of freight insurance?
Answer Choices: Select the Correct Answer
Covers shipper fees.
Covers loss to the cargo.
Covers the insurable interest of the shipper due to jettison of the cargo.
Covers the cargo until it reaches the warehouse.
Question 7 of 100
Your answer: Covers the insurable interest of the shipper due to jettison of the cargo. is incorrect. The correct answer is: Covers shipper fees..
EXPLANATION:
Freight insurance is designed to cover the shipper’s fees charged to the shipper. It is the indirect loss/business interruption coverage which comes into play after a direct loss to the vessel.
Question 7 of 100
Which of the following policies does not include coverage for flood?
Answer Choices: Select the Correct Answer
An HO-3 Policy
A Personal Auto policy with “other than collision” coverage
A Personal Articles Floater
A floater covering fine arts
Question 8 of 100
Your answer: An HO-3 Policy is correct.
EXPLANATION:
A homeowner policy specifically excludes flood coverage.
Question 8 of 100
Which of the following statements does NOT describe the major purpose of commercial umbrella liability insurance?
Answer Choices: Select the Correct Answer
To provide supplementary insurance.
To provide excess insurance in addition to the underlying policy.
To provide additional coverage to the underlying insurance policy.
To protect the insured from catastrophic losses by providing additional insurance.
Question 9 of 100
Your answer: To provide additional coverage to the underlying insurance policy. is correct.
EXPLANATION:
In commercial umbrella insurance the insurer will require the insured to carry “underlying” insurance. Underlying policies pay first for claims covered by the underlying coverage and then the umbrella continues to pay according to its policy provisions.
Which of the following would not be addressed by a court in the determination of a declaratory judgment?
Answer Choices: Select the Correct Answer
Determine if a particular exclusion would apply
Determine if a particular insuring agreement would apply
Determine fault or monetary damages
Determine if other insurance policies apply
Question 10 of 100
Your answer: Determine fault or monetary damages is correct.
EXPLANATION:
The court would not determine the fault or monetary judgment in the determination of a declaratory judgment.
Question 10 of 100
The three parties to a contract bond are:
Answer Choices: Select the Correct Answer Principal, obligee, surety. Obligor, principal, surety. Principal, obligee, employee. Employee, obligor, principal.
Question 11 of 100
Your answer: Principal, obligee, surety. is correct.
EXPLANATION:
The three parties to a contract bond are the principal (contractor), obligee (the protected party) and the surety (the guarantor) who pays the loss to the obligee because the principal failed to perform.
Question 11 of 100
Sarah is shopping at a grocery store and wants to purchase a bottle of juice. The aisle is marked off with a rope awaiting the clerk to clean up a previously broken bottle and spill on the floor. Sarah moves the rope to get the item and slips and falls on the floor, cutting her face on the scattered glass. Which of the following would be the defense that the insurance company would most likely use in this situation?
Answer Choices: Select the Correct Answer
Breach of duty on the part of the customer.
Assumption of risk and contributory negligence on the part of the customer.
Trespassing on non-entry areas by the customer.
Comparative negligence.
Question 12 of 100
Your answer: Assumption of risk and contributory negligence on the part of the customer. is correct.
EXPLANATION:
Business owners are only liable for negligence if a failure to carry out their duty caused the accident. For strict liability cases against manufacturers or sellers of defective products, the injury must result from a defect. In this case the grocery store attempted to keep the premises safe and was not negligent and no breach of duty occurred. The customer assumed the risk which contributed to the injuries.
Question 12 of 100
All of the following are exclusions under Section I - Forms HO-2 and HO-3, EXCEPT:
Answer Choices: Select the Correct Answer Collapse. Water including flood. Power failure. Earth movement.
Question 13 of 100
Your answer: Power failure. is incorrect. The correct answer is: Collapse..
EXPLANATION:
The HO-8 form does not include the peril of collapse. However, the broader forms HO-2 and HO-3 include collapse. The other 3 answers are excluded under all of the HO forms.
Question 13 of 100
An insurance company in California has cancelled a Homeowners policy for a reason acceptable by law. How long does the insurer have to return the unearned premium to the insured?
Answer Choices: Select the Correct Answer
The unearned premium must be returned along with the notice provided to the insured that the policy is being cancelled.
Within 30 days of the date of cancellation.
Within 25 days of the date of cancellation.
The unearned premium must be returned within 10 days of mailing the notice of cancellation to the insured.
Question 14 of 100
Your answer: Within 30 days of the date of cancellation. is incorrect. The correct answer is: Within 25 days of the date of cancellation..
EXPLANATION:
When a Homeowners policy is cancelled in California, any unearned premium must be returned to the insured within 25 days of the cancellation date of the policy.
Question 14 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 15 of 100
Submit
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 15 of 100
A Personal Automobile policy provides liability coverage on a single limit basis for $100,000. A covered accident caused by Mr. Jones involves a $75,000 liability judgment to Mr. Allen for his injuries and $25,000 liability judgment for the damage to his car. In addition, $20,000 in legal bills are incurred defending the insured. The company will pay:
Answer Choices: Select the Correct Answer $120,000. $25,000. $75,000. $100,000.
Your answer: $120,000. is correct.
EXPLANATION:
Legal expenses are in addition to the limit of liability. The single limit covers both bodily injury and property damage liability. Therefore, the policy will pay the $100,000 in damages and the cost to defend the insured in the lawsuit for a total of $120,000.
Question 16 of 100
The attempt to restore an insured to his or her previous financial condition before a loss occurred is BEST described as:
Answer Choices: Select the Correct Answer Indemnification. Subrogation. Coinsurance. Self-insurance.
Question 17 of 100
Your answer: Indemnification. is correct.
EXPLANATION:
An insurance policy is not designed for an insured to profit from a loss. The intent is to restore the insured to the same financial condition before the loss subject to policy limits.
Question 17 of 100
The liberalization clause of a Businessowners policy automatically applies favorable expansions of coverage, for which a premium is not charged if the changes are made during the policy period or within ______ prior to the effective date of the policy.
Answer Choices: Select the Correct Answer 45 days Six months Three months 30 days
Question 18 of 100
Your answer: 30 days is incorrect. The correct answer is: 45 days.
EXPLANATION:
A liberalization condition states that the insurer will automatically and immediately apply to the policy any revisions made during the policy period or within 45 days prior to the effective or renewal date if those revisions broaden the coverage without additional premium.
Question 18 of 100
Which of the following are qualifications of an applicant for an independent insurance adjuster license in California?
I. Be at least 18 years of age.
II. Must not have committed acts or crimes constituting grounds for denial of a license.
III. Must have had at least 6 months of experience in adjusting insurance claims or the equivalent as determined by the Commissioner.
IV. Must pay the required fees.
Answer Choices: Select the Correct Answer I, II, III and IV I, II and IV only I, II and III only II, III and IV only
Question 19 of 100
Your answer: I, II and IV only is correct.
EXPLANATION:
An applicant must have two years of experience. All the other statements are correct.
Question 19 of 100
The California Insurance Code (CIC) further details the items required on a valid insurance contract. All of the following are required, EXCEPT:
Answer Choices: Select the Correct Answer The parties to the contract. The insured's mailing address. The objects of insurance. The policy period.
Question 20 of 100
Your answer: The objects of insurance. is incorrect. The correct answer is: The insured’s mailing address..
EXPLANATION:
The California Insurance Code (CIC) requires six specific items of information be included in an insurance policy issued in California. The insured’s mailing address is not one of them.
Question 20 of 100
What coverage under the BOP automatically applies if a customer slips and falls on the named insured’s premises, regardless of legal liability?
Answer Choices: Select the Correct Answer Business liability coverage Personal injury coverage Medical expense coverage Advertising injury coverage
Question 21 of 100
Your answer: Personal injury coverage is incorrect. The correct answer is: Medical expense coverage.
EXPLANATION:
Medical expense coverage pays regardless of the insured’s legal liability. It is a “good will” type of coverage where negligence is not a factor in the claim.
Question 21 of 100
Under a Commercial Property policy, the coinsurance clause does all of the following, EXCEPT:
Answer Choices: Select the Correct Answer
Grants the insured a reduction in premiums for accepting a condition that the insured maintain insurance at a specified percentage of either the actual cash value or replacement cost of the covered property.
The insured could become a co-insurer to a partial loss if the insured is in violation of the clause.
The coinsurance clause does not operate in the event of a total loss.
There are no exceptions, all of the responses are correct.
Question 22 of 100
Submit
Your answer: There are no exceptions, all of the responses are correct. is correct.
EXPLANATION:
There are no exceptions, all of the responses are correct.
Question 22 of 100
The crew of a ship is guilty of fraud with the intention of reaping gains at the expense of the owner. In ocean marine coverage, what is this called?
Answer Choices: Select the Correct Answer Perils of the sea Jettison General average Barratry
Question 23 of 100
called?
Your answer: Barratry is correct.
EXPLANATION:
Barratry means fraud by the master or the crew with the intention of reaping gains at the expense of the owner. Examples include setting the ship on fire, diverting the ship from its course, or embezzlement of the cargo.
Question 23 of 100
Under the CGL coverage part as it relates to products liability coverage, which of the following would apply?
Answer Choices: Select the Correct Answer
Worldwide coverage is provided as long as the product is manufactured or sold in the covered territory and the claim is brought within the coverage territory
Products are covered while being manufactured anywhere in the world
Products made in the USA if a suit is brought in a foreign country
Must be consumed or used within the United States and Canada for coverage to apply
Question 24 of 100
Your answer: Worldwide coverage is provided as long as the product is manufactured or sold in the covered territory and the claim is brought within the coverage territory is correct.
EXPLANATION:
The products must be manufactured within the coverage territory. This includes the US, its possessions, Canada and Puerto Rico. The suit must also be brought within the coverage territory, unless otherwise agreed to by the insurer.
Question 24 of 100
Miranda’s home is covered under a Homeowners policy with an Earthquake Endorsement attached. She has selected the base deductible of 5% and her limit of liability under Coverage C is greater than Coverage A. Her Coverage C limit of liability is $1,000. What is the deductible that Miranda will have to pay?
Answer Choices: Select the Correct Answer $50 $5 $5,000 $500
Question 25 of 100
Your answer: $500 is correct.
EXPLANATION:
Although 5% multiplied by $1,000 is $50, the endorsement states that the deductible will never be less than $500.
Question 25 of 100
A monopolistic state in regards to Workers Compensation insurance is a state in which:
Answer Choices: Select the Correct Answer
Coverage may be purchased from either the state or a private insurance company.
Coverage may only be purchased from a private insurance company.
Workers compensation coverage is not required.
Coverage must be purchased from the state.
Question 26 of 100
Your answer: Coverage must be purchased from the state. is correct.
EXPLANATION:
In a monopolistic state, the state writes all of the coverage (except those that are self-insured) and private insurers are not permitted to provide coverage.
Question 26 of 100
Under “pollution cleanup and removal” coverage under the standard ISO BOP form, when must a loss be reported?
Answer Choices: Select the Correct Answer Within 180 days Within 60 days Immediately Within 90 days
Question 27 of 100
Your answer: Within 60 days is incorrect. The correct answer is: Within 180 days.
EXPLANATION:
The expenses will be paid only if they are reported to the insurer within 180 days of the date of the direct loss or by the end of the policy period, whichever is earlier.
Question 27 of 100
Meg has filed a claim with her insurance company. Conrad, the staff adjuster assigned to her claim, feels there is not coverage under the policy to address Meg’s claim, but he is not sure because he has not investigated the claim. The next step that Conrad will most likely take is to:
Answer Choices: Select the Correct Answer
Issue a non-waiver agreement to Meg.
Issue a reservation of rights letter to Meg.
Request a declaratory judgment.
Begin the claims investigation.
Question 28 of 100
Your answer: Issue a reservation of rights letter to Meg. is correct.
EXPLANATION:
A reservation of rights letter would be issued before the claims investigation would begin. This letter would explain to the claimant that the insurance company intends to investigate the claim, but reserves the right to deny the claim if coverage does not apply under the policy.
Question 28 of 100
The insured was working with a subcontractor installing wiring in an office building the insured was remodeling for a customer. The insured accidentally caused a fire when he crossed some wires. Two of the offices were damaged, and the wiring had to be replaced. Which of the damages will the insured’s commercial umbrella liability policy likely cover if it is needed?
Answer Choices: Select the Correct Answer
The damages to the two offices and the wiring
The damages to the two offices only
The damages to the wiring only
The damages to one of the offices only
Question 29 of 100
our answer: The damages to the two offices only is correct.
EXPLANATION:
The coverage would only apply to the damage to the two offices only. The wiring is not covered. It is part of their work.
Question 29 of 100
Which of the following statements BEST describes the reason it was necessary to create a federal flood insurance program in 1968?
Answer Choices: Select the Correct Answer
Because other property policies routinely exclude flood from coverage.
Because people were building their homes closer and closer to large bodies of water than ever before.
Because the United States was experiencing more flooding than ever before.
Because the flood insurance policies that were being issued at the time, did not provide adequate coverage for contents.
Question 30 of 100
Your answer: Because other property policies routinely exclude flood from coverage. is correct.
EXPLANATION:
It was necessary to create a federal flood insurance program because other property policies routinely exclude flood from coverage. Many citizens were losing everything because they could not purchase insurance to cover their home and their belongings in case of flood.
Question 30 of 100
Which of the following would be considered a “collision” peril under auto physical damage coverage?
Answer Choices: Select the Correct Answer Riot Striking an animal Missiles or falling objects Hitting a pot hole
Question 31 of 100
Your answer: Striking an animal is incorrect. The correct answer is: Hitting a pot hole .
EXPLANATION:
Hitting a pot hole and causing damage to the vehicle (other than the tires) would be a collision peril. The other perils are covered under “other than collision” coverage.
Question 31 of 100
Which of the following statements is correct regarding pollution caused by smoke released from an industrial operation covered under the Commercial Property Policy?
Answer Choices: Select the Correct Answer
Always covered
A gradual release of pollution from industrial operations is not covered
Covered on an “excess basis”
Covered if caused by a covered cause of loss peril
Question 32 of 100
Your answer: Covered if caused by a covered cause of loss peril is correct.
EXPLANATION:
The Commercial Property Policy will not pay for loss or damage caused by or resulting from the discharge, dispersal, seepage, migration, release or escape of pollutants unless the discharge, dispersal, seepage, migration, release or escape was caused by a covered cause of loss.Therefore if a fire or explosion causes the release of pollution, the loss would be covered. The gradual release of smoke from normal agricultural and industrial operations is not a covered cause of loss.
Question 32 of 100
Isaac owns a home with an older furnace in need of repair. He leaves his home for a month to avoid the cold weather. He returns to find that the furnace had stopped working. Water pipes have frozen and burst and his property has been damaged. Since the water ran for almost a month, his water bill is extremely high. What will the adjuster pay?
Answer Choices: Select the Correct Answer
The water damage.
The increased cost of the water bill.
The cost to replace the particular part in the plumbing system that busted and caused the damage.
The furnace repairs and/or replacement.
Question 33 of 100
Your answer: The water damage. is correct.
EXPLANATION:
One could argue that this was caused by neglect, but the damage cannot be tied to the neglect exclusion. This exclusion applies post-loss and not before a loss has occurred. The company would have to prove intent on the part of the insured to damage his own property. Even if the furnace caused a fire, the company would have to prove an intentional act such as arson. Water is not considered covered property so the value of its loss (the water bill) is not covered.
Question 33 of 100
A landlord has wrongfully evicted a tenant. A lawsuit is brought by the tenant against the landlord. The landlord would need:
Answer Choices: Select the Correct Answer Premises liability coverage Bodily injury coverage Personal injury coverage Contractual coverage
Question 34 of 100
Your answer: Contractual coverage is incorrect. The correct answer is: Personal injury coverage.
EXPLANATION:
The landlord would need personal injury liability coverage which is included in the CGL policy.
Question 34 of 100
Hannah must take time away from work to help assist in the investigation of a claim that was made against her BOP policy. The policy will pay for Hannah’s actual loss of earnings up to:
Answer Choices: Select the Correct Answer $150 per day $250 per day $200 per day $500 per day
Question 35 of 100
Your answer: $250 per day is correct.
EXPLANATION:
The BOP policy will pay for actual loss of earnings, $250 per day, if the insured is asked by the insurance company to take time away from work to assist in the investigation and/or defense of a claim.
Question 35 of 10
What is the procedure for an insured to refuse uninsured motorist coverage in California?
Answer Choices: Select the Correct Answer
The insured must advise the insurer in writing that he or she does not want the coverage.
The insured may advise the Insurance Department that he or she does not want the coverage.
The insured may phone the insurance agent and decline the coverage.
The insured may phone the insurance company and decline the coverage.
Question 36 of 100
Your answer: The insured may phone the insurance agent and decline the coverage. is incorrect. The correct answer is: The insured must advise the insurer in writing that he or she does not want the coverage..
EXPLANATION:
According to the California Insurance Code (CIC 11580.2), prior to issuance or renewal of the policy the insured must state in writing that he or she does not want the coverage.
Question 36 of 100
Which of the following best describes the concept of risk?
Answer Choices: Select the Correct Answer Uncertainty of Loss Result of Loss Amount of Loss Cause of Loss
Question 37 of 100
Your answer: Cause of Loss is incorrect. The correct answer is: Uncertainty of Loss.
EXPLANATION:
Risk is the chance that a loss might occur. It is not the cause of the loss.
Question 37 of 100
A customer deposits items in a safe deposit box at the bank. These items are missing the next time the customer opens the box. What crime coverage is necessary to cover this loss?
Answer Choices: Select the Correct Answer Safe Depository Guests Property Lessees of Safe Deposit Boxes Extortion-Commercial Entities
Question 38 of 100
Your answer: Safe Depository is correct.
EXPLANATION:
If the bank is legally liable for the loss, the “Safe Depository” coverage form will cover the loss.
Question 38 of 100
A commercial building worth $400,000 is insured under a Commercial Property policy for $240,000, and an 80% coinsurance clause applies. A $20,000 loss to the building has occurred. How much will the insured receive when a claim is filed?
Answer Choices: Select the Correct Answer $14,000 $10,000 $12,000 $15,000
Question 39 of 100
Your answer: $12,000 is incorrect. The correct answer is: $15,000.
EXPLANATION:
The insured should have carried $320,000 to be in compliance with the 80% coinsurance clause, therefore the building is 25% underinsured, penalizing the insured. $240,000 (the amount carried) divided by $320,000 (the amount required) multiplied by $20,000 loss, equals $15,000.
Question 39 of 100
An insured carries a general liability policy and has hired a trucking company to transport equipment to the business location. The trucking company carries a commercial auto policy. The insured loads a piece of machinery onto the truck and fails to secure it properly. The trucking company is transporting the cargo and it falls off the truck and hits another car. Which policy or policies would cover this claim?
Answer Choices: Select the Correct Answer
The trucking company’s commercial auto policy would cover the claim.
The trucking company’s general liability policy would cover the claim.
Both the commercial auto and the general liability policies would cover the claim. This is because the owner of the equipment was negligent in securing the cargo improperly and the trucking company’s general liability policy should also share in the claim because they were transporting the unsecured cargo.
Neither the commercial auto policy nor the general liability would pay the claim because both parties were negligent.
Question 40 of 100
Your answer: Both the commercial auto and the general liability policies would cover the claim. This is because the owner of the equipment was negligent in securing the cargo improperly and the trucking company’s general liability policy should also share in the claim because they were transporting the unsecured cargo. is incorrect. The correct answer is: The trucking company’s commercial auto policy would cover the claim..
EXPLANATION:
The commercial auto policy would respond to cover the claim for damages to the damaged party. The damage to the cargo itself would not be covered. The trucking company and the insured should both carry Inland Marine cargo coverage.
Question 40 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 41 of 100
Your answer: A cash settlement does not include sales taxes. is correct.
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 41 of 100
A non-waiver agreement issued by an insurance company is:
Answer Choices: Select the Correct Answer A loss or damage issue. A coverage issue. A cause of loss issue. An exclusion issue.
Question 42 of 100
Your answer: A coverage issue. is correct.
EXPLANATION:
Non-waiver agreements and reservation of rights letters both serve the following general purposes: 1. To advise the insured that any action taken by the insurance company in investigating the cause of loss or in ascertaining the amount of loss is not intended to waive or invalidate any policy condition, and 2. To clarify that the intent of the agreement is to permit an investigation of the claim and that neither the insured nor the insurer will thereby waive any respective rights or obligations.
Question 42 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 43 of 100
our 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 43 of 100
Kelly, Vince, Ed, and Ginny are all staff adjusters. Which of these adjusters is acting appropriately as a fiduciary agent?
Answer Choices: Select the Correct Answer
Kelly tries to calm an angry claimant by telling him that she’s sure his claim will be covered, even though she has not yet determined the cause of loss.
Vince finds additional damage that seems to be related to the claim, but he leaves it off of his estimate because the claimant didn’t notice it in the first place.
Ed knows the claimant can’t possibly afford to pay for their extensive damages, but he denies the claim anyway because the cause of loss was not covered by the policy.
Ginny investigates the claim and determines the loss is not covered, but writes up her estimate in such a way that it would appear to be covered so she can pay the claimant anyway.
Question 44 of 100
Your answer: Ed knows the claimant can’t possibly afford to pay for their extensive damages, but he denies the claim anyway because the cause of loss was not covered by the policy. is correct.
EXPLANATION:
If a claim is not covered by the policy, the staff adjuster has a fiduciary responsibility to protect the financial interest of the insurer and deny the loss. The fact that the claimant can’t afford to pay for the damages has nothing to do with the coverage issue.
Question 44 of 100
The Commercial Building and Personal Property Coverage form:
Answer Choices: Select the Correct Answer
Describes the property to be insured.
Delineates the perils to be insured.
Describes the excluded perils.
Delineates the perils to be insured and describes the exclusions to coverage.
Question 45 of 100
Your answer: Delineates the perils to be insured and describes the exclusions to coverage. is incorrect. The correct answer is: Describes the property to be insured. .
EXPLANATION:
The purpose of this form is to define building, business personal property and property of others. The form does not contain the perils.
Question 45 of 100
What does the term “comparative negligence” refer to?
Answer Choices: Select the Correct Answer
The percentage of fault is shared by each driver in an accident in which both contribute to causing the accident.
The one who is most negligent receives no payment when the claim is settled.
The one who is the least negligent receives no payment when the claim is settled.
If both parties have contributed to causing the accident, neither party receives any payment when the claim is settled.
Question 46 of 100
Your answer: The percentage of fault is shared by each driver in an accident in which both contribute to causing the accident. is correct.
EXPLANATION:
Comparative negligence establishes the percentage of fault shared by each driver in an accident in which both contribute to causing the accident. Comparative negligence laws vary by state.
Question 46 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 47 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 47 of 100
An insured’s house and its contents are damaged by fire. Under the conditions section of a Homeowner policy, the insured is required to take all of the following actions in order to collect from his or her insurance company, EXCEPT:
Answer Choices: Select the Correct Answer
Protect the property from further damage.
Separate the damaged property from the undamaged property.
Replace the damaged property within 60 days after the loss.
Submit a sworn statement of loss to the insurer within 60 days after the loss.
Question 48 of 100
our answer: Submit a sworn statement of loss to the insurer within 60 days after the loss. is incorrect. The correct answer is: Replace the damaged property within 60 days after the loss..
EXPLANATION:
The policy does not contain a provision that the property must be replaced within 60 days after a loss.
Question 48 of 100
As an independent adjuster in California, your investigation of a two-car traffic accident indicates that both drivers are equally at fault. After speaking with the claimant’s adjuster the two of you agree that both drivers are equally to blame. Your subrogation demand would be for:
Answer Choices: Select the Correct Answer
100% of your insured’s damages as your analysis does not affect what is owed by the other party.
75% of your insured’s damages as each side’s 25% totals 50%.
50% of your insured’s damage, because the insured and the other driver were both 50% at fault.
Nothing. Because both drivers were 50% at fault, each insurance company will pay 100% of the claim on their own insured’s damages.
Question 49 of 100
Your answer: 50% of your insured’s damage, because the insured and the other driver were both 50% at fault. is correct.
EXPLANATION:
California is a “comparative negligence” state. In California the person most at fault is deemed to be the primary cause of the accident. If investigation either by law enforcement or the insurance adjuster determines that there was “comparative negligence” on the part of the other driver(s), all damages owed are subject to apportionment.
Question 49 of 100
Which of the following types of losses will NOT be excluded by Ace Building and Materials Company’s CGL policy?
Answer Choices: Select the Correct Answer
Bodily injury to a customer arising out of a forklift being used by the insured
Damage to a forklift owned by others which was in the custody of the insured
Property damage caused to the water system when a forklift dropped a drum of caustic chemicals owned by the insured
Bodily injury to an employee driving a forklift
Question 50 of 100
Your answer: Bodily injury to an employee driving a forklift is incorrect. The correct answer is: Bodily injury to a customer arising out of a forklift being used by the insured.
EXPLANATION:
The use of mobile equipment on or off the insured’s premises is covered under the CGL policy. Property in the insured’s care, custody or control is excluded. Pollution is also excluded as well as injuries to employees.
Question 50 of 100
The liability coverage of a personal auto policy does not apply to persons who:
Answer Choices: Select the Correct Answer
Are engaged in work for the insured as an employee of a business.
Unintentionally cause bodily injury and property damage.
Engage in car pools.
Damage to a residence garage not owned by the insured.
Question 51 of 100
Your answer: Are engaged in work for the insured as an employee of a business. is correct.
EXPLANATION:
This is a business exposure and as such should be covered under a commercial insurance type policy such as workers compensation.
Question 51 of 100
On the basic dwelling policy all of the following perils are excluded, EXCEPT:
Answer Choices: Select the Correct Answer War Landslide Earthquake Volcanic eruption
Question 52 of 100
Your answer: Volcanic eruption is correct.
EXPLANATION:
Under the DP-1 basic form, war, earthquake and landslide are not named perils and are, therefore, excluded.
Question 52 of 100
The Extended Business Income provision covers the first 60 days after the loss for reimbursement of earnings for the insured business:
Answer Choices: Select the Correct Answer
Immediately after the loss has occurred.
After a waiting period of 72 hours.
After the repairs have been made to the insured property.
Only applies if the insured is forced to relocate.
Question 53 of 100
Your answer: After a waiting period of 72 hours. is incorrect. The correct answer is: After the repairs have been made to the insured property..
EXPLANATION:
Extended Business Income pays for any additional loss of business after the property is actually repaired and operations are resumed, with reasonable speed, until the operation generates the business income amount that would have existed had no loss occurred. This coverage is usually limited to 60 days. An endorsement can be used to extend the period of time and an additional premium is charged.
Question 53 of 100
Which of the following is covered by the NFIP?
Answer Choices: Select the Correct Answer Overflow of inland or tidal water. Vehicles. A broken water main. Livestock.
Question 54 of 100
our answer: Overflow of inland or tidal water. is correct.
EXPLANATION:
Overflow of inland or tidal water is the prime coverage under the NFIP. Mudflow is also covered, mudslides are not. The coverage does not include damage or loss to livestock, vehicles or roads.
Question 54 of 100
A person insured under the basic dwelling form DP-1 causes damage to the fence on his property amounting to $200 while driving his own auto. The policy will:
Answer Choices: Select the Correct Answer
Pay the $200 as a supplementary payment
Deny the claim
Pay the claim after applying the appropriate deductible
Subrogate against the auto insurer
Question 55 of 100
Your answer: Pay the claim after applying the appropriate deductible is incorrect. The correct answer is: Deny the claim.
EXPLANATION:
The basic DP-1 dwelling form does not provide coverage for the insured’s property caused by his own vehicle.
Question 55 of 100
The fee for a duplicate copy of an insurance adjuster’s license in California is:
Answer Choices: Select the Correct Answer $7 $12 $5 $10
Question 56 of 100
Your answer: $10 is correct.
EXPLANATION:
The fee for a duplicate copy of an insurance adjuster’s license is $10 (CCR 2691.23)
Question 56 of 100
All of the following describe one of the four elements of a negligent act, EXCEPT:
Answer Choices: Select the Correct Answer
The defendant had a legal duty to perform in a given manner but did not.
The loss or injury to the plaintiff was a direct result of the breach of duty by the defendant.
The defendant entered into a legal contract with the plaintiff.
The plaintiff suffered actual loss of injury due to the defendant’s action or inaction.
Question 57 of 100
Your answer: The defendant entered into a legal contract with the plaintiff. is correct.
EXPLANATION:
There would be nothing negligent about the defendant and claimant entering into a legal contract.
Question 57 of 100
Which of the following is the correct description of the “AMA Guide to the Evaluation of Permanent Impairment”?
Answer Choices: Select the Correct Answer
The guide has an extensive listing of the physical requirements of various job functions and the maximum level of impairment a person could have and still perform that function.
The guide has a listing of possible job functions that can be performed by individuals with given impairments, listed in a chart.
The guide has a set of symptoms that are typically associated with given impairments to assist physicians in determining whether to declare that a person is impaired.
The guide lists a set of medical criteria used by physicians to form the basis for established medical ratings of permanent impairment.
Question 58 of 100
Your answer: The guide lists a set of medical criteria used by physicians to form the basis for established medical ratings of permanent impairment. is correct.
EXPLANATION:
There are several different editions of this guide and states use different editions to make the impairment determination.
Question 58 of 100
Under the HO-3 form, an “insured location” includes all of following, EXCEPT:
Answer Choices: Select the Correct Answer
A furnished garage used as a residence
A hotel room where the insured is temporarily residing
Family cemetery plots
Property in an apartment rented to others away from the insured’s residence premises.
Question 59 of 100
Your answer: Property in an apartment rented to others away from the insured’s residence premises. is correct.
EXPLANATION:
An insured location does not include property in an apartment rented to others that is away from the insured’s residence premises.
Question 59 of 100
After completing an inspection of an insured’s pressure equipment and fire suppression systems, the inspector determines that the pressure equipment needs to be repaired and the suppression systems have not been cleaned and inspected in the time frame required by the policy. The insurer will:
Answer Choices: Select the Correct Answer
Give notice to the insured to make the repairs within 24 hours
Require the insured to send copies of the cleaning and repairs to the underwriter
Suspend coverage immediately by red tagging the items until they are repaired, cleaned and pass reinspection
Reduce coverage in case of loss by 25%
Question 60 of 100
Your answer: Suspend coverage immediately by red tagging the items until they are repaired, cleaned and pass reinspection is correct.
EXPLANATION:
The items will be immediately suspended from coverage and considered to be “red tagged” until they are reinspected and found to be in correct working order.
Question 60 of 100
The insured is the principal in a construction endeavor in California. As principal, the insured may be held liable for the actions of an independent contractor if:
I. The insured (the principal) fails to exercise due care in the selection of a reasonable competent individual.
II. The work to be performed by the independent contractor is inherently dangerous in nature.
III. Where the negligent act or omission involves a violation of a duty imposed upon the insured (the principal) either by common law or statute.
Answer Choices: Select the Correct Answer I only I and III only II only I, II, and III
Question 61 of 100
Your answer: I, II, and III is correct.
EXPLANATION:
I, II, and III are correct as they are all reasons that the principal can be held legally liable for the acts of independent contractors
Question 61 of 100
Under the commercial auto policy providing physical damage, which of the following offers the broadest coverage?
Answer Choices: Select the Correct Answer Comprehensive. Specified cause of loss. Named perils. Broad named perils.
Question 62 of 100
Your answer: Broad named perils. is incorrect. The correct answer is: Comprehensive..
EXPLANATION:
Comprehensive coverage would be the broadest because it covers loss that is not defined as collision. The specified cause of loss is a named peril form and thus, is more limited.
Question 62 of 100
An independent adjuster must complete ___ hours of continuing education during each license renewal cycle.
Answer Choices: Select the Correct Answer 12 20 24 36
Question 63 of 100
Your answer: 24 is correct.
EXPLANATION:
An individual who holds an insurance adjuster license and who is not exempt must satisfactorily complete a minimum of 24 hours, of which three hours are to be in ethics, of continuing education courses pertinent to the duties and responsibilities of an insurance adjuster license reported to the Insurance Commissioner on a biennial basis in conjunction with his or her license renewal cycle.
Question 63 of 100
Which of the following is an ideal form of protection for the frequent shipper of goods?
Answer Choices: Select the Correct Answer Annual Transit Policy Trip Transit Policy Monthly Transit Policy Common Carrier Motor Truck Cargo Policy
Question 64 of 100
Your answer: Common Carrier Motor Truck Cargo Policy is incorrect. The correct answer is: Annual Transit Policy.
EXPLANATION:
The annual transit policy is written to cover the goods shipped by the insured on a regular basis throughout the year. A trip transit policy is designed to cover only a single shipment of goods.
Question 64 of 100
QUESTION:
In the newest edition of the Commercial Property form, which of the following is now considered part of the building?
Answer Choices: Select the Correct Answer Signs permanently attached Vegetated Roofs Outdoor Property Detached signs
Question 65 of 100
Your answer: Vegetated Roofs is correct.
EXPLANATION:
Vegetated roofs are now part of the building and not subject to the tree, shrubs and plants exclusion under covered property nor the tree, shrubs and plants extension of coverage.
Question 65 of 100
The Homeowners “Additional Residence Rented to Others” endorsement will provide coverage for an additional structure, used as a residence, that is rented by the insured as a:
Answer Choices: Select the Correct Answer A one-family dwelling. A two-family dwelling. A one to four-family dwelling. A one to two-family dwelling.
Question 66 of 100
Your answer: A one to four-family dwelling. is correct.
EXPLANATION:
The Homeowners “Additional Residence Rented to Others” endorsement provides coverage for an additional structure, used as a residence, for one to four families.
Question 66 of 100
An insured has suffered a property loss and reported the claim promptly. Which of the following is NOT an immediate duty of the adjuster who received the claim?
Answer Choices: Select the Correct Answer
Immediately seek subrogation rights against a third party.
Verify the effective date of the coverage.
Verify the proximate cause of loss.
Determine those that have insurable interests in the property.
Question 67 of 100
Your answer: Immediately seek subrogation rights against a third party. is correct.
EXPLANATION:
Subrogation of a claim occurs after the claim has been paid. Afterwards, the adjuster may seek subrogation against a third party who may have caused the loss.
Question 67 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 68 of 100
Your answer: 180 days. is correct.
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 68 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 69 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 69 of 100
Under the farm forms, theft of certain types of property has a theft coverage limitation. The theft limitation on firearms and other related equipment is:
Answer Choices: Select the Correct Answer $1,500. $500. $3,000. $5,000.
Question 70 of 100
Your answer: $3,000. is correct.
EXPLANATION:
The theft limitation on firearms and other related equipment is $3,000.
Question 70 of 10
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 71 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 71 of 100
George Wilson has a personal auto policy. Select the coverage that would apply when a deer leaps onto Mr. Wilson’s car and causes extensive damage.
Answer Choices: Select the Correct Answer
Comprehensive (other than collision)
Bodily Injury and Property Damage Liability
Collision
Medical Payments
Question 72 of 100
Your answer: Comprehensive (other than collision) is correct.
EXPLANATION:
Contact with a bird or animal is considered to be an “other than collision” loss.
Question 72 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 73 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 73 of 100
What is the minimum limit for Coverage L of the Personal Liability Supplement that can be attached to a Dwelling Property policy?
Answer Choices: Select the Correct Answer $100,000 $1,000 There is no limit. $10,000
Question 74 of 100
Your answer: $1,000 is incorrect. The correct answer is: $100,000.
EXPLANATION:
The usual minimum limit for Coverage L of the Personal Liability Supplement that can be attached to a Dwelling policy is $100,000.
Question 74 of 100
Under the Farm insurance liability coverage, which of the following would be covered?
Answer Choices: Select the Correct Answer
Aircraft spraying.
Pollution.
Products Liability for the insured’s farm produce sold.
Injury to a farm employee.
Question 75 of 100
Your answer: Injury to a farm employee. is incorrect. The correct answer is: Products Liability for the insured’s farm produce sold..
EXPLANATION:
Products liability for the insured’s products would be covered. The others are specifically excluded.
Question 75 of 100
The purpose of the California Fair Access to Insurance Requirements (FAIR Plan) is to:
Answer Choices: Select the Correct Answer
Assure the availability of automobile liability insurance.
Assure the availability of basic property insurance.
Guarantee the issue of basic property insurance to any applicant.
Pay the obligations of insolvent insurers in California.
Question 76 of 100
our answer: Guarantee the issue of basic property insurance to any applicant. is incorrect. The correct answer is: Assure the availability of basic property insurance..
EXPLANATION:
The FAIR Plan assures the availability of basic property insurance in California.
Question 76 of 100
Maggie Mae is a cleaning professional who works for Maid My Day household cleaning services. Maggie Mae is traveling in her own vehicle, to a client’s home when she strikes and hits a pedestrian. Maggie Mae is liable as the owner and operator of the vehicle, but Maid My Day could be held _______ liable, because Maggie Mae was acting on their behalf.
Answer Choices: Select the Correct Answer Vicariously Contingently Contributorily Absolutely
Question 77 of 100
Your answer: Vicariously is correct.
EXPLANATION:
Maid My Day could be held vicariously liable, because Maggie Mae was acting on their behalf.
Question 77 of 100
How soon must a change in the qualified manager of an adjusting firm be reported to the California Department of Insurance?
Answer Choices: Select the Correct Answer Within one year Within 30 days Immediately Does not have to be reported
Question 78 of 100
Your answer: Within 30 days is correct.
EXPLANATION:
A change in the qualified manager, branch manager, officer or partner must be reported to the DOI within 30 days of the change.
Question 78 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?
Your answer: Permanent, partial is correct.
EXPLANATION:
A rating between 1% and 99% indicates a permanent, partial disability.
Question 79 of 100
Which of the following is true regarding the dealers’ physical damage coverage under the Garage policy?
Answer Choices: Select the Correct Answer
The coverage is provided by a blanket limit for covered autos.
The coverage extends to customers’ autos.
The coverage provides an annual maximum limit for comprehensive and collision losses.
The coverage sets a maximum limit per auto.
Question 80 of 100
Your answer: The coverage extends to customers’ autos. is incorrect. The correct answer is: The coverage is provided by a blanket limit for covered autos. .
EXPLANATION:
The dealers’ physical damage limit would be set up on a blanket limit basis. This would apply to comprehensive and collision losses to the auto inventory of the dealership. A blanket limit is used because it is simply not practical to schedule each dealer-owned vehicle for physical damage coverage. Additionally, the amount of the coverage is adjusted by the use of a monthly reporting form.
Question 80 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 81 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 81 of 100
Adjusters have a relationship to the legal profession, and must exercise care to avoid the unauthorized practice of law. In California, the insurance code states that nothing in the code will be construed as entitling any person to practice law in the state, UNLESS:
Answer Choices: Select the Correct Answer
He/she is a licensed independent adjuster.
He/she has graduated from an accredited law school.
He/she is an active member of the State Bar of California.
He/she is a licensed public adjuster.
Question 82 of 100
Your answer: He/she is an active member of the State Bar of California. is correct.
EXPLANATION:
In California, the insurance code states that nothing in the code will be construed as entitling any person to practice law in the state, UNLESS he/she is an active member of the State Bar of California.
Question 82 of 100
What is the primary purpose of the California Automobile Assigned Risk Plan (CAARP)?
Answer Choices: Select the Correct Answer
To guarantee coverage for low-income applicants.
To monitor automobile rates of insurers in this state.
To provide availability of coverage for applicants who are unable to obtain it through ordinary methods.
To train agents to place coverage through the Plan.
Question 83 of 100
Your answer: To provide availability of coverage for applicants who are unable to obtain it through ordinary methods. is correct.
EXPLANATION:
According to the California Insurance Code (CIC 11620), the purpose of the California Automobile Assigned Risk Plan is to provide availability of coverage to applicants for automobile bodily injury and property damage liability insurance who are in good faith entitled to coverge but are unable to procure that insurance through ordinary methods.
Question 83 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 84 of 100
Your answer: $72 is correct.
EXPLANATION:
The application fee for an original license is: $72. (CIC 14097)
Question 84 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 85 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 85 of 100
Paul had his roof inspected by a local contractor, after a strong storm with high winds and hail, passed through his neighborhood. The contractor found damage to the roof and gave Paul an estimate of $9,850 to replace it. Paul filed a claim with his insurance company, and the company promptly sent an adjuster to inspect the roof. The adjuster’s estimate to repair the roof came to $9,650. How will the adjuster likely attempt to settle this claim?
Answer Choices: Select the Correct Answer
Negotiate the claim in an attempt to persuade Paul to agree to the lesser amount.
Let the claim go to court because it is non-negotiable.
Accept the estimate of Paul’s contractor, because the difference between the two amounts is small enough to settle in Paul’s favor.
Reject the claim because the amount of the adjuster’s estimate is the limit that the insurer will pay.
Question 86 of 100
Your answer: Accept the estimate of Paul’s contractor, because the difference between the two amounts is small enough to settle in Paul’s favor. is incorrect. The correct answer is: Negotiate the claim in an attempt to persuade Paul to agree to the lesser amount..
EXPLANATION:
Even though the difference in the two amounts is small, it is the responsibility of an adjuster to negotiate the settlement, keeping in mind their fiduciary responsibilities to the insurer.
Question 86 of 100
Under California law, the degree of care owed to a trespasser by a property owner is not which of the following?
Answer Choices: Select the Correct Answer
To warn of hidden dangers
Ordinary care
To not set traps
Guarantee safe passage on and off the premises
Question 87 of 100
Your answer: Guarantee safe passage on and off the premises is correct.
EXPLANATION:
Guaranteeing safe passage is not required.
Question 87 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 88 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 88 of 100
Other structures are excluded from coverage under the HO-2 when they are:
Answer Choices: Select the Correct Answer
Smaller than 100 square feet or larger than 1,000 square feet.
Smaller than 100 square feet or larger than 500 square feet.
Used for storage purposes for insured’s personal property.
Used for business purposes (except as provided by the policy exceptions).
Question 89 of 100
Your answer: Used for business purposes (except as provided by the policy exceptions). is correct.
EXPLANATION:
Other structures used for business purposes are specifically excluded. This exclusion does not apply to other structures used to store business personal property of the insured or a tenant provided the business property does not include gaseous or liquid fuel other than fuel in a permanently installed fuel tank of a vehicle or craft parked or stored in the structure.
Question 89 of 100
Under an HO-3, the limit for Coverage C – Personal Property for a one or two family dwelling:
Answer Choices: Select the Correct Answer
Must be arranged separately.
Is set at 50% of Coverage A unless a higher limit is requested.
Is set at 100% of Coverage A.
Depends on the rating territory.
Question 90 of 100
Your answer: Is set at 50% of Coverage A unless a higher limit is requested. is correct.
EXPLANATION:
Under an HO-2, HO-3, and HO-5, Coverage C is set at 50% of Coverage A - Dwelling, unless a higher limit is requested. This applies to a one or two family dwelling. The percentages are different for a three or four family dwelling.
Question 90 of 100
Bill’s business employs Meg to clean offices at night, and recently Meg slipped and fell at work, hurting her back. Bill understands that his Workers’ Compensation insurance will provide Meg with:
Answer Choices: Select the Correct Answer
Medical benefits and lost wages.
Psychological counseling.
A representative to help her get benefits from her union.
A lawyer to present her case in court.
Question 91 of 100
our answer: Medical benefits and lost wages. is correct.
EXPLANATION:
Workers’ Compensation insurance provides medical benefits and lost wages. The other choices are all incorrect regarding the benefits of Workers’ Compensation insurance.
Question 91 of 100
How are household personal property claims settled under the farm policy?
Answer Choices: Select the Correct Answer
Replacement cost
Market value
Replacement cost if insured 80% to value
Actual cash value
Question 92 of 100
Your answer: Replacement cost is incorrect. The correct answer is: Actual cash value.
EXPLANATION:
Claims under farm policies for household personal property will be settled on an actual cash value basis similar to the homeowner policy. An endorsement for replacement cost settlement is available for additional premium.
Question 92 of 100
Many stationary objects, such as bridges, tunnels and power lines fall within the nationwide marine definition because they are considered to be:
Answer Choices: Select the Correct Answer
Instrumentalities of transportation and communication.
Of substantially high values.
Capable of being transported.
Exposed to the same perils as vessels at sea.
Question 93 of 100
Your answer: Instrumentalities of transportation and communication. is correct.
EXPLANATION:
Items such as bridges, tunnels, power lines, pipelines, and radio transmission towers fall specifically under the nationwide marine definition category because they are “instrumentalities of transportation or communication.” They are not insured under typical commercial property insurance. They fall specifically under the nationwide marine definition category called “bridges, tunnels, and other instrumentalities of transportation and communication”.
Question 93 of 100
Under the commercial auto forms, what is the limit for transportation expenses when the insured has suffered a theft loss of a private passenger type vehicle?
Your answer: $20 per day subject to a maximum payment of $600. is correct.
EXPLANATION:
The current limit is $20 per day up to a maximum limit of $600. This coverage includes loss of use coverage for the rented vehicle which is now out of service because of a theft. This coverage only applies to autos of the private passenger type.
Question 94 of 100
Henry is the first named insured on a $1 million Umbrella policy. His wife, Dorothy, is also an insured. Both Henry and Dorothy were sued for $1 million in separate, unrelated suits by separate third parties. Both insureds lost their suits on the same day. In this possible but rare situation, if the Umbrella policy is applicable and the self-insured retention is not applicable:
Answer Choices: Select the Correct Answer
Henry will receive more protection from the policy than Dorothy because he is the first named insured.
The policy will pay $500,000 toward each award.
The policy will only honor Henry’s claim because he is the first-named insured.
Henry and Dorothy would receive the same amount of coverage, and the policy could ultimately pay a total of the $2 million amount for the two awards, subject to the “aggregate limit”.
Question 95 of 100
Your answer: Henry and Dorothy would receive the same amount of coverage, and the policy could ultimately pay a total of the $2 million amount for the two awards, subject to the “aggregate limit”. is correct.
EXPLANATION:
These are two separate unrelated third-party claims and each would be covered up to the policy limit provided the combined losses do not exceed the “aggregate” limit of the policy.
Question 95 of 100
Under workers compensation guidelines, permanent partial disability is any rating of:
Answer Choices: Select the Correct Answer A rating of 50% to 99%. A rating of 60% or more. Any rating under 100%. A rating of 90% or more.
Question 96 of 100
Your answer: Any rating under 100%. is correct.
EXPLANATION:
A rating between 1% and 99% indicates a permanent partial disability.
Question 96 of 100
Which of the following may cancel a Commercial Package Policy?
Answer Choices: Select the Correct Answer
The first named insured
Any named insured
The agent of record
None of the responses listed are correct
Question 97 of 100
Your answer: The first named insured is correct.
EXPLANATION:
The first named insured as well as the insurer may cancel a Commercial Package Policy.
Question 97 of 100
Under a CGL policy, personal and advertising injury liability coverage does NOT apply to damages resulting from:
Answer Choices: Select the Correct Answer
Slanderous statements made by an advertising firm.
Copyright infringement by a department store.
Harmful, truthful information published by a realtor.
Invasion of an individual’s privacy.
Question 98 of 100
Your answer: Harmful, truthful information published by a realtor. is incorrect. The correct answer is: Slanderous statements made by an advertising firm. .
EXPLANATION:
An offense committed by an insured whose business is advertising, broadcasting, publishing or telecasting is specifically excluded by the policy.
Question 98 of 100
Your answer: DP-1 is correct.
EXPLANATION:
The DP-1 form is a dwelling form.
Question 99 of 100
Which of the following is not an HO policy form?
Universal Foods buys the Chewy Cereal Company. After the purchase is completed, a well known actress sues Universal, claiming that her picture was used without her permission in a Chewy advertisement. The advertisement appeared some time before Universal acquired Chewy. Will Universal’s Commercial General Liability policy cover this claim?
Answer Choices: Select the Correct Answer
Yes. It is a claim for invasion of privacy, which is covered as personal injury.
No. Personal injury coverage with respect to newly acquired organizations does not apply to offenses committed before the acquisition.
Yes. Universal is liable for actions of Chewy before the purchase took effect as they are assuming all obligations of the previous owner.
No. There is no personal injury coverage under the policy with respect to newly acquired organizations before or after.
Question 100 of 100
Your answer: Yes. Universal is liable for actions of Chewy before the purchase took effect as they are assuming all obligations of the previous owner. is incorrect. The correct answer is: No. Personal injury coverage with respect to newly acquired organizations does not apply to offenses committed before the acquisition..
EXPLANATION:
The claim is not covered. Personal injury coverage with respect to newly acquired organizations does not apply to offenses committed before the acquisition.
Question 100 of 100
