IA Test 3

Question 1

The insured has a communication failure at his premises due to a lightning strike at the phone company. The insured’s phone system is damaged and he is out of business for four days. Which endorsement is necessary to provide coverage for the loss of business income?

Answer Choices:	Select the Correct Answer
Non owned and Hired Auto	
Earthquake	
Utility Services - Time Element	
Utility Services - Direct Damage	

Question 1 of 100

Answer 1

The correct answer is: Utility Services - Time Element.

EXPLANATION:
The Utility Services - Time Element endorsement would cover the loss of business income in this example if the phone system was listed on the endorsement and the cause of the loss was covered by the policy.

Question 1 of 100

Question 2

All of the following are true regarding the “write your own” program under flood insurance, EXCEPT:

Answer Choices: Select the Correct Answer
Insurers are required to participate in the program.
Rates are determined by the NFIP.
The WYO Program operates as part of the NFIP, and is subject to its rules and regulations.
Participation in the program is voluntary.

Question 2 of 100

Answer 2

The correct answer is: Insurers are required to participate in the program..

EXPLANATION:
Insurers voluntarily participate in the program; they are not required to do so.

Question 2 of 100

Question 3

Mr. Jones has a contracting business in his state. He has been the successful bidder on a construction job in another state. What should he do to properly provide worker compensation benefits for his employees while working outside his state?

Answer Choices: Select the Correct Answer
Maintain general liability coverage
Nothing
Add the other states to his workers compensation policy
Purchase an umbrella policy

Question 3 of 100

Answer 3

Your answer: Add the other states to his workers compensation policy is correct.

EXPLANATION:
The purpose of the other states coverage is to provide worker compensation coverage that complies with another states workers compensation benefits. The state must be listed on the policy for coverage to apply. Separate payroll records must be maintained for these employees for premium computation purposes.

Question 3 of 100

Question 4

QUESTION:
St. Michael’s Church is having their annual rigatoni dinner. Mary is volunteering to serve the guests. Which of the following situations would be covered by the CGL for the church?

Answer Choices: Select the Correct Answer
Mary spills hot coffee on another volunteer worker.
Mary spills hot coffee on a guest.
Mary damages the church coffee maker while cleaning it.
Mary damages her watch while cleaning the coffee maker.

Question 4 of 100

Answer 4

The correct answer is: Mary spills hot coffee on a guest..

EXPLANATION:
As a volunteer, Mary is considered to be an insured under the church CGL policy. Injury caused to a guest by her actions would be covered under the policy.

Question 4 of 100

Question 5

QUESTION:
Under what circumstances may an adjuster contact a claimant who is represented by an attorney?

Answer Choices: Select the Correct Answer
If permission is granted by the attorney.
If permission is granted by the claimant.
If permission is granted by the insurance company.
If permission is granted by the court.

Question 5 of 100

Answer 5

Your answer: If permission is granted by the attorney. is correct.

EXPLANATION:
Permission to contact a claimant represented by an attorney must be granted by the attorney representing the claimant.

Question 5 of 100

Question 6

UESTION:
A Commercial Package Policy (CPP) always includes:

I. A single Declarations page common to all coverages.
II. A single Conditions section common to all coverages.
III. A single Exclusions section common to all coverages.

Answer Choices:	Select the Correct Answer
I only	
I, II and III	
I and II only	
II and III only	

Question 6 of 100

Answer 6

The correct answer is: I and II only.

EXPLANATION:
A Commercial Package Policy (CPP) always includes a common Declarations page and Conditions section. It does not include a common Exclusions section, as the items excluded would be specific to the coverage part.

Question 6 of 100

Question 7

QUESTION:
Under the commercial property condominium association form, coverage is based on:

Answer Choices:	Select the Correct Answer
The commercial property form	
The association agreement and bylaws	
The special cause of loss form	
State and local ordinances	

Question 7 of 100

Answer 7

Your answer: The association agreement and bylaws is correct.

EXPLANATION:
The coverage provided by the form will be based on the condominium association agreement and by laws.

Question 7 of 100

Question 8

QUESTION:
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 8 of 100

Answer 8

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 8 of 100

Question 9

QUESTION:
Which of the following Commercial Inland Marine coverage forms covers payments that are due to the insured from customers when these payments cannot be collected due to loss or damage of records?

Answer Choices:	Select the Correct Answer
Accounts Receivable	
Equipment Dealers	
Electronic Data Processing	
Valuable Papers and Records	

Question 9 of 100

Answer 9

The correct answer is: Accounts Receivable.

EXPLANATION:
The purpose of accounts receivable coverage is to protect the insured when their records have been destroyed or damaged by a peril insured against. It pays to reconstruct the records and it also pays for the losses sustained by the insured due to the destruction of the accounts receivable records.

Question 9 of 100

Question 10

The CGL policy contains coverage for:

Answer Choices:	Select the Correct Answer
Directors and Officers Liability.	
Errors and Omissions Liability.	
Completed Operations Liability.	
Liquor Liability.	

Question 10 of 100

Answer 10

The correct answer is: Completed Operations Liability..

EXPLANATION:
The Products and Completed Operations hazard is covered under Coverage A- Bodily Injury and Property Damage Liability of the CGL. The other three choices are all excluded.

Question 10 of 100

Question 11

QUESTION:
With Commercial Property Insurance, replacement cost coverage may be written for:

Answer Choices: Select the Correct Answer
Buildings and personal property of the insured.
Buildings only.
Buildings, personal property of the insured, and property of others.
Any property which may be insured.

Question 11 of 100

Answer 11

The correct answer is: Buildings, personal property of the insured, and property of others..

EXPLANATION:
Replacement cost coverage for building, contents and personal property of others is optional. However, if the insured chooses this option, coverage equal to at least 80% of the replacement cost value must be carried.

Question 11 of 100

Question 12

QUESTION:
Two customers are injured when a fire sweeps through a hardware store. Medical expense costs were $3,000 for Customer A and $8,000 for Customer B. A lawsuit against the hardware store results in an award of $40,000 damages to one customer and $25,000 the other. The hardware store’s CGL policy has a per occurrence limit of $50,000, medical payments of $5,000 each person, and a general aggregate of $100,000. How much will the insurer pay?

Answer Choices:	Select the Correct Answer
$50,000	
$76,000	
$73,000	
$65,000	

Question 12 of 100

Answer 12

The correct answer is: $50,000.

EXPLANATION:
The per occurrence limit for liability is only $50,000. This is all the insurer can pay in the lawsuit. This amount will then be subtracted from the aggregate limit of $100,000 and leave the insured only $50,000 left to pay future claims during the policy period. The “medical payments” coverage will pay for the $3,000 in medical bills for Customer A, but will pay only $5,000 of the medical bills for Customer B, because the medical payments limit “per person” is $5,000. The fact that Customer B’s medical bills amounted to $8,000, does not change the amount that will be paid under the policy, because the policy can only pay up to its limit of liability.

Question 12 of 100

Question 13

QUESTION:
Which of the following watercraft would be covered under the liability section (Section II) of the HO form?

Answer Choices: Select the Correct Answer
Watercraft with a 40 horsepower outboard motor
A 28 foot sailboat
A kayak
Watercraft with a 100 horsepower inboard motor

Question 13 of 100

Answer 13

The correct answer is: A kayak.

EXPLANATION:
A kayak would be covered with no endorsement or additional premium under Section II of a homeowner policy.

Question 13 of 100

Question 14

QUESTION:
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 14 of 100

Answer 14

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 14 of 100

Question 15

QUESTION:
The loss settlement provision of the California Special Provisions Homeowners form requires that payment be made within _______ after settlement is reached.

Answer Choices:	Select the Correct Answer
30 days.	
45 days.	
60 days.	
90 days.	

Question 15 of 100

Answer 15

The correct answer is: 30 days..

EXPLANATION:
The standardized Homeowners forms require payment be made within 60 days after settlement is reached. The California Special Provisions forms amend this to require payment be made within 30 days after settlement is reached.

Question 15 of 100

Question 16

QUESTION:
When a liability policy is contested, which of the following entities ultimately determines legal liability?

I. The insurance company.
II. A court of law.
III. The claimant.

Answer Choices:	Select the Correct Answer
I or II	
I only	
II only	
III only	

Question 16 of 100

Answer 16

he correct answer is: II only.

EXPLANATION:
In cases of litigation it is the court/jury/judge that determines legal liability.

Question 16 of 100

Question 17

QUESTION:
Which of the following is the first duty of the insured after suffering a property loss?

Answer Choices: Select the Correct Answer
Take steps to protect the property from further loss.
Have the damaged property appraised.
Hire an outside claims adjuster.
Increase his coverage.

Question 17 of 100

Answer 17

Your answer: Take steps to protect the property from further loss. is correct.

EXPLANATION:
The insured is required to protect the property from further loss. The insurance company will pay all reasonable costs involved in protecting the property from further loss or damage.

Question 17 of 100

Question 18

QUESTION:
Standards for determining eligibility of applicants for insurance under the California Automobile Assigned Risk Plan include all the following, EXCEPT:

Answer Choices: Select the Correct Answer
Driving record of the applicant.
Mental, physical and moral characteristics which pertain to the applicant’s ability to safely and lawfully operate an automobile.
Education of the applicant.
The condition or use of the automobile.

Question 18 of 100

Submit

Answer 18

Your answer: Education of the applicant. is correct.

EXPLANATION:
According to the California Insurance Code (CIC 11624), the education of the applicant is not an eligibility requirement under the California Automobile Assigned Risk Plan.

Question 18 of 100

Question 19

QUESTION:
The “additional coverage” section of the HO-3 form pays for all of the following expenses, EXCEPT:

Answer Choices: Select the Correct Answer
The cost to remove volcanic ash from a building
Loss resulting from the unauthorized use of a credit card
Sudden cracking of a hot water heating system
Damage to glass that is part of a covered building

Question 19 of 100

Answer 19

The correct answer is: Sudden cracking of a hot water heating system .

EXPLANATION:
The loss to the hot water heating system is not an “additional coverage”. This type of damage is covered elsewhere in the cause of loss forms under the peril of “sudden and accidental tearing apart, cracking, burning or bulging.” Additional coverages include debris removal from covered perils, reasonable repairs, trees, shrubs and other plants, fire department service charges, property removed, credit card coverage, loss assessment, collapse and a few others.

Question 19 of 100

Question 20

QUESTION:
An insured has purchased a Businessowners Policy. He insures both the real and personal property. Assuming no endorsements apply, will property losses be adjusted on an actual cash value basis or on a replacement cost basis?

Answer Choices:	Select the Correct Answer
Replacement Cost Basis	
Actual Cash Value Basis	
Market Value	
Functional Replacement Cost Basis	

Question 20 of 100

Answer 20

Your answer: Replacement Cost Basis is correct.

EXPLANATION:
Unless endorsed to the contrary the BOP adjusts property losses on a replacement cost basis.

Question 20 of 100

Question 21

QUESTION:
Which of the following is not an “insured” under a Homeowners policy?

Answer Choices: Select the Correct Answer
A neighbor moves into the named insured’s house with all of his belongings.
A neighbor who has custody of the named insured’s dog while the named insured is on vacation.
The named insured’s sister moves into the named insured’s house.
The new spouse of the named insured who moves all of her furniture into the husband’s house.

Question 21 of 100-

Answer 21

The correct answer is: A neighbor moves into the named insured’s house with all of his belongings. .

EXPLANATION:
Insureds under a Homeowners policy include any person responsible for the named insured’s domestic animals as well as the named insured’s relatives and spouses who reside with the named insured.

Question 21 of 100

Question 22

QUESTION:
Which of the following best describes the reason for using various work classifications in the calculation of Workers Compensation premiums?

Answer Choices: Select the Correct Answer
To prevent discrimination by employers
To assure a proper profit margin for insurers
To accurately reflect the risks of each employer
To encourage safety in the workplace

Question 22 of 100

Answer 22

Your answer: To accurately reflect the risks of each employer is correct.

EXPLANATION:
There are hundreds of different work classifications which are used in the calculation of Workers Compensation premiums, with a different rate for each one. By classifying an employer’s payroll according to work classification, the premiums charged more accurately reflect the actual risk of loss for each employer.

Question 22 of 100

Question 23

QUESTION:
Which statement is correct under the Commercial General Liability policy?

Answer Choices: Select the Correct Answer
The insured generally has the right to settle a claim for damages.
The insurer generally has the right to settle a claim for damages.
Both the insured and the company must agree before a claim for damages can be settled.
The insurer and the third-party claimant must agree before a claim for damages can be settled.

Question 23 of 100

Answer 23

The correct answer is: The insurer generally has the right to settle a claim for damages..

EXPLANATION:
Generally, only the insurer has the right to settle a claim under the CGL policy.

Question 23 of 100

Question 24

QUESTION:
What is the definition of “custom farming”?

Answer Choices: Select the Correct Answer
Sharecropping.
Raising genetically modified crops.
Farming for others.
Placing farm equipment for hire by other farms.

Question 24 of 100

Answer 24

Your answer: Farming for others. is correct.

EXPLANATION:
Custom farming is a “neighborly exchange of services”. A special endorsement is required to cover “custom farming” if the receipts are in excess of $5,000 per year.

Question 24 of 100

Question 25

QUESTION:
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 25 of 100

Answer 25

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 25 of 100

Question 26

QUESTION:
According to the commercial auto policy definitions, an “accident:”

Answer Choices: Select the Correct Answer
Includes continuous or repeated exposure to the same conditions.
Must be sudden and unexpected.
Must be unexpected and unpreventable.
Is any event that causes injury or damage.

Question 26 of 100

Answer 26

The correct answer is: Includes continuous or repeated exposure to the same conditions. .

EXPLANATION:
The auto forms of the past used to simply cover the term “accident.” It did not include continuous or repeated exposure to the same conditions. Many claims were denied because of this restriction. The current forms now include the broader definition and provide better coverage.

Question 26 of 100

Question 27

QUESTION:
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 27 of 100

Answer 27

he correct answer is: 25% increments, up to 100% coverage. .

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 27 of 100

Question 28

QUESTION:
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 28 of 100

Answer 28

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 28 of 100

Question 29

QUESTION:
What type of injury is usually not covered by commercial umbrella liability policies if the insured’s business is advertising, publishing, broadcasting or telecasting?

Answer Choices:	Select the Correct Answer
Slander or libel only	
Advertising injury only	
Personal injury only	
Violation of right of privacy only	

Question 29 of 100

Answer 29

The correct answer is: Advertising injury only.

EXPLANATION:
Coverage for advertising injury is not covered if the insured is in the business of advertising, publishing or telecasting.

Question 29 of 100

Question 30

QUESTION:
Which of the following coverage endorsements under commercial crime and bonding would cover an ATM machine?

Answer Choices: Select the Correct Answer
Automated Teller Machine Coverage
On premises burglary and robbery
Off Premises Money and Securities Coverage
Employee Fidelity ATM Coverage

Question 30 of 100

Answer 30

The correct answer is: Automated Teller Machine Coverage.

EXPLANATION:
The automated teller machine endorsement provides coverage for the loss of money except by employees.

Question 30 of 100

Question 31

QUESTION:
An insured owns very old equipment. Much of it is no longer manufactured but is still functional. The insurer may wish to insure the equipment under an Equipment Breakdown policy by attaching the:

Answer Choices:	Select the Correct Answer
Functional replacement cost endorsement	
Replacement cost endorsement	
Market value endorsement	
Actual cash value endorsement	

Question 31 of 100

Answer 31

The correct answer is: Actual cash value endorsement .

EXPLANATION:
The insurer may wish to cover the equipment on an actual cash value basis. The endorsement that converts the coverage from replacement cost to actual cash value is called the actual cash value endorsement.

Question 31 of 100

Question 32

QUESTION:
The most common method of settling liability insurance claims is through:

Answer Choices:	Select the Correct Answer
ADRs.	
Arbitration.	
Mediation.	
Negotiated settlement.	

Question 32 of 100

Answer 32

The correct answer is: Negotiated settlement..

EXPLANATION:
The most common method of settling liability insurance claims is through negotiated settlement.

Question 32 of 100

Question 33

QUESTION:
Mr. Smith’s bicycle shop enters into many written and oral agreements with customers. Mr. Smith’s agent informs him that the liability on his BOP contains:

Answer Choices: Select the Correct Answer
Products and Completed Operations Liability
Contractual Liability
Fidelity Bond
Premises and Operations Liability

Question 33 of 100

Answer 33

Your answer: Contractual Liability is correct.

EXPLANATION:
Like the CGL policy, the liability section of the BOP contains coverage for the written and oral agreements for “insured contracts” in which the insured enters. This coverage is known as “Contractual Liability”.

Question 33 of 100

Question 34

QUESTION:
Which of the following would be covered under the Commercial Property Builders Risk Coverage Form?

Answer Choices: Select the Correct Answer
All of the responses are correct
Buildings under construction
Foundation of a building under construction
Fixtures, machinery and equipment used to service the building if they become a permanent part of the building and are located within 100 feet of the premises

Question 34 of 100

Answer 34

Your answer: All of the responses are correct is correct.

EXPLANATION:
All of the responses are correct as regards the builders risk coverage.

Question 34 of 100

Question 35

QUESTION:
You own an independent adjusting company in California. In order to open a second office in a different location you must obtain:

Answer Choices: Select the Correct Answer
Written permission from the Department of Insurance.
A branch manager’s license.
A fidelity bond.
A branch office certificate.

Question 35 of 100

Answer 35

Your answer: A branch office certificate. is correct.

EXPLANATION:
According to the California Insurance Code, “If the licensee intends to conduct business from any location in California other than the principal place of business, a Branch Office Certificate must be obtained by submitting an Application for Branch Office Certificate along with the appropriate fee.”

Question 35 of 100

Question 36

QUESTION:
In California, the class of insurance that provides coverage against loss of property and liability for damage to persons or property from explosion of, or accident to, boilers, tanks, pipes, pressure vessels, engines, wheels, electrical machinery, or apparatus connected them, is known as:

Answer Choices:	Select the Correct Answer
Marine insurance.	
Fire insurance.	
Mechanical Breakdown insurance.	
Boiler & Machinery insurance.	

Question 36 of 100

Answer 36

Your answer: Boiler & Machinery insurance. is correct.

EXPLANATION:
In California, the class of insurance that provides coverage against loss of property and liability for damage to persons or property from explosion of, or accident to, boilers, tanks, pipes, pressure vessels, engines, wheels, electrical machinery, or apparatus connected them, is known as Boiler & Machinery insurance. In most states, this type of insurance is now referred to as Equipment Breakdown insurance. Mechanical Breakdown insurance covers automobile breakdowns.

Question 36 of 100

Question 37

QUESTION:
Which of the following would be covered under Part II - Employer’s Liability of a Workers Compensation policy?

Answer Choices: Select the Correct Answer
Contractual Liability
The employee sues the employer from emotional stress due to termination
The spouse of the injured employee sues the employer for loss of consortium
Injury to an employee working after working too much overtime

Question 37 of 100

Answer 37

The correct answer is: The spouse of the injured employee sues the employer for loss of consortium.

EXPLANATION:
Part II - Employer’s Liability under a Workers Compensation policy excludes coverage for injuries outside the coverage territory, employment practices and contractual liability. Coverage would apply, however, to a claim against the employer brought by a related third party, alleging loss-of-services due to a work-related injury to an employee.

Question 37 of 100

Question 38

QUESTION:
Rudy, a licensed California independent adjuster, has received a letter from a claimant requesting information about a claim. Rudy is required to respond within:

Answer Choices:	Select the Correct Answer
30 calendar days.	
15 working days.	
15 calendar days.	
10 days.	

Question 38 of 100

Answer 38

The correct answer is: 15 calendar days..

EXPLANATION:
Upon receiving any communication from a claimant, regarding a claim, that reasonably suggests that a response is expected, every licensee must immediately, but in no event more than 15 calendar days after receipt of that communication, furnish the claimant with a complete response based on the facts as then known by the licensee.

Question 38 of 100

Question 39

QUESTION:
Which of the following coverages is NOT provided by the Business Income Coverage Form?

Answer Choices:	Select the Correct Answer
Leasehold Interest Coverage	
Coverage for loss of net income	
Coverage for continuing expenses	
Extra Expense Coverage	

Question 39 of 100

Answer 39

The correct answer is: Leasehold Interest Coverage.

EXPLANATION:
Leasehold interest coverage is a separate coverage to cover the value of a favorable lease when the premises have been damaged by an insured peril.

Question 39 of 100

Question 40

QUESTION:
Whose responsibility is it to see that a ship is seaworthy?

Answer Choices:	Select the Correct Answer
The Ship Owner	
The Shipper	
The Captain	
Both the Captain and the Crew	

Question 40 of 100

Answer 40

Your answer: The Ship Owner is correct.

EXPLANATION:
The ship owner is ultimately responsible to see that the ship is sea worthy. This is an implied warranty in ocean marine insurance.

Question 40 of 100

Question 41

QUESTION:
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 41 of 100

Answer 41

The correct answer is: $500.

EXPLANATION:
Although 5% multiplied by $1,000 is $50, the endorsement states that the deductible will never be less than $500.

Question 41 of 100

Question 42

QUESTION:
Which of the following is NOT covered by liability coverage under a Homeowner policy?

Answer Choices:	Select the Correct Answer
A snowmobile in a park.	
A golf cart on a golf course.	
A runaway lawnmower.	
Motorized wheelchair.	

Question 42 of 100

Answer 42

The correct answer is: A snowmobile in a park..

EXPLANATION:
The only owned recreational vehicle that is covered while off the insured’s covered location, is a golf cart while playing golf. Vehicles pertaining to the service of the premises, or for use by the handicapped (such as a wheelchair) are covered.

Question 42 of 100

Question 43

QUESTION:
Which of the following losses would be covered under a “Robbery and Safe Burglary” coverage?

Answer Choices: Select the Correct Answer
Rare manuscripts are stolen from a locked safe that shows signs of forced entry
Valuables kept in a locked safe are destroyed by fire
Cash disappears from a locked safe, with no explanation
Jewelry is stolen from a locked safe that shows no signs of forced entry

Question 43 of 100

Answer 43

The correct answer is: Rare manuscripts are stolen from a locked safe that shows signs of forced entry.

EXPLANATION:
To collect on a safe burglary loss, there must be signs of forcible entry. The use of the term burglary in the name of the form automatically indicates the need for signs of forcible entry or exit.

Question 43 of 100

Question 44

QUESTION:
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 44 of 100

Answer 44

The correct answer is: A one to four-family dwelling..

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 44 of 100

Question 45

QUESTION:
Which of the following people is committing “hard fraud”?

Answer Choices: Select the Correct Answer
After a wind storm rips a few shingles off his roof, Stan climbs up and rips off several more before filing a claim.
Dan’s doctor keeps him in the hospital for an extra day in order to charge Dan’s insurer a little more.
Ally wants her insurer to buy her a new truck, so she pushes her current truck off a cliff and files an auto accident claim.
After her purse is stolen, Paige files a claim and states that her $1,000 watch was in her purse when it was stolen, even though it really wasn’t.

Question 45 of 100

Answer 45

The correct answer is: Ally wants her insurer to buy her a new truck, so she pushes her current truck off a cliff and files an auto accident claim..

EXPLANATION:
Ally intentionally pushing her truck off a cliff in order to file an auto claim and get a new vehicle is an example of “hard fraud” because it was a fraudulent activity from start to finish and it took planning. The other choices are all legitimate claims that have been exaggerated or enhanced to increase payment, which is the definition of “soft fraud”.

Question 45 of 100

Question 46

QUESTION:
An insured with auto limits of 10/20/10 causes bodily injuries to a third party of $8,000. After losing in court he has defense costs of $5,000. What is the insurance company’s responsibility to pay?

Answer Choices:	Select the Correct Answer
$8,000	
$5,000	
$13,000	
$10,000	

Question 46 of 100

Answer 46

The correct answer is: $13,000.

EXPLANATION:
Defense costs are in addition to the limits of coverage. The insurer would be obligated to pay the $8,000 and the $5,000 in defense costs.

Question 46 of 100

Submit

Question 47

QUESTION:
Harry runs a stop sign and hits Sue’s vehicle causing $5,000 in damage. It is determined that Sue was speeding and was 20% responsible for the accident. Harry was only 80% responsible. How much can Sue collect under the doctrine of comparative negligence?

Answer Choices: Select the Correct Answer
Sue will get $4,000.
Since Sue was 20% negligent, she gets nothing.
Sue will get $5,000 because Harry hit her and was mainly at fault.
Since both were at fault their individual policies will pay the damage to each ones vehicle.

Question 47 of 100

Answer 47

Your answer: Sue will get $4,000. is correct.

EXPLANATION:
Under the comparative negligence law in California, a plaintiff’s damages are reduced in proportion to his/her own negligence. Therefore, Sue will have her damage amount reduced by 20%.

Question 47 of 100

Question 48

QUESTION:
When an insured suffers a property loss, he or she is obligated by the terms of the policy to do all of the following, EXCEPT:

Answer Choices: Select the Correct Answer
Separate the damaged from the undamaged property.
Mitigate the loss.
Produce books and records relevant to the claim.
Hire a public adjuster to represent them in the claims process.

Question 48 of 100

Answer 48

Your answer: Hire a public adjuster to represent them in the claims process. is correct.

EXPLANATION:
The insured is not obligated to employ a ‘public adjuster” to assist in the claim against the insurance company. It is an option on the part of the insured.

Question 48 of 100

Question 49

QUESTION:
If a ship’s captain must jettison a disproportionate amount of his policyholder’s cargo in order to save the ship, there is a provision in Ocean Marine policies that will spread that lost among all of the insureds involved with the ship. What is this provision called?

Answer Choices:	Select the Correct Answer
Free of Particular Average clause.	
Cost in Freight clause.	
General Average clause.	
Free on Board clause.	

Question 49 of 100

Answer 49

The correct answer is: General Average clause..

EXPLANATION:
A “general average” is a claim that is shared by all the parties involved in the trip because the jettison of the cargo saved the ship from sinking and saved the other cargo.

Question 49 of 100

Question 50

QUESTION:
The standard deductible on the Commercial Property Earthquake Causes of Loss form is:

Answer Choices:	Select the Correct Answer
A percentage of the loss.	
$1,000.	
$5,000.	
A percentage of the building value.	

Question 50 of 100

Answer 50

Your answer: A percentage of the building value. is correct.

EXPLANATION:
The deductible will be the percentage shown in the Declarations times the limit of insurance for each type of covered property.

Question 50 of 100

Question 51

A 40-year old commercial building is insured for $300,000 and has suffered a partial loss as a result of a hot water heater explosion. It will cost $17,000 for the increased cost of construction to comply with the building codes and $20,000 for all other covered damages. The building is covered under a standard Commercial Property policy, with the special cause of loss form attached. The insured submits the proof of loss for all of the repairs, including the increased costs to comply with the new building codes. Which of the following describes how this claim will be paid?

Answer Choices: Select the Correct Answer
The insurer will pay $15,000 for the increased cost of construction, plus $20,000 for the cost of all other covered damages.
The claims investigation will determine if the claim should be settled at “Actual Cash Value” or “Replacement Cost”, and pay the entire amount accordingly.
The insurer will pay $10,000 for the increased cost of construction, plus $20,000 for the cost of all other covered damages.
The insurer will pay only $20,000 under the “Replacement Cost” provision of the form, and deny the “Increased Cost of Construction” costs.

Question 51 of 100

Answer 51

The correct answer is: The insurer will pay $10,000 for the increased cost of construction, plus $20,000 for the cost of all other covered damages. .

EXPLANATION:
The insurer will pay $10,000 because this is the limit of liability specified in the additional coverage, for the “Increased Cost of Construction”, plus the $20,000 for the cost of all other covered damages is covered under the policy.

Question 51 of 100

Question 52

QUESTION:
Under a Businessowners policy, the “Hired Non-Owned” coverage endorsement would cover:

Answer Choices: Select the Correct Answer
The employer who uses his/her auto for personal use.
Vehicles borrowed by the insured.
The employee who uses his/her vehicle on personal business.
The owner of a hired or non-owned vehicle.

Question 52 of 100

Answer 52

The correct answer is: Vehicles borrowed by the insured..

EXPLANATION:
This endorsement is used with the BOP when the insured does not carry Business Auto coverage. The “Hired Non-Owned” endorsement provides two coverages. The first covers the insured’s legal liability for bodily injury or property damage that arises out of the maintenance, or use, of a hired auto by the insured or the insured’s employees, in the course of the insured’s business. The second purpose of this endorsement is to provide bodily injury or property damage that arises out of the use any non-owned auto in the insured’s business by any person. This endorsement would not cover the employee personally when driving their own auto on either company or personal time.

Question 52 of 100

Question 53

QUESTION:
A building with an actual cash value of $240,000 is insured for $200,000. The policy has an 80% coinsurance requirement. If there are no deductibles, how much would be paid for a $60,000 loss?

Answer Choices:	Select the Correct Answer
$60,000	
$48,000	
$57,600	
$62,500	

Question 53 of 100

Answer 53

Your answer: $60,000 is correct.

EXPLANATION:
The insured needs to be covered for at least 80% x $240,000 or $192,000 to avoid a penalty in case of a partial loss. In this case, the insured carries more than is required, and therefore, all the loss is covered.

Question 53 of 100

Question 54

QUESTION:
Which of the following statements describes an action that the adjuster cannot take after a claimant has hired an attorney to represent him/her in handing a claim?

Answer Choices: Select the Correct Answer
Negotiate with the attorney.
Write the draft for payment of the claim directly to the claimant.
Contact the claimant without the consent of the attorney.
Have an attorney prepare releases.

Question 54 of 100

Answer 54

Your answer: Contact the claimant without the consent of the attorney. is correct.

EXPLANATION:
Once the claimant has hired an attorney to represent the claimant, the adjuster may not contact the claimant directly without the consent of the attorney.

Question 54 of 100

Question 55

QUESTION:
All of the following are “evidence of financial responsibility” as outlined in the California Insurance Code, EXCEPT:

Answer Choices: Select the Correct Answer
A certificate of self-insurance or the assignment of deposit letter issued by the Insurance Department.
An insurance form or certificate from an insurance company or charitable risk pool.
The title to the automobile issued by a financial institution.
An insurance “covering letter” or “binder” that complies with the California Insurance Code.

Question 55 of 100

Answer 55

Your answer: The title to the automobile issued by a financial institution. is correct.

EXPLANATION:
The title to the automobile issued by a financial institution would only provide evidence that the driver is the owner of the vehicle. It would not provide evidence that the proper amount of insurance is carried to cover the vehicle.

Question 55 of 100

Question 56

QUESTION:
What commercial auto policy form would be used to cover a company that transports their own property and property of others?

Answer Choices:	Select the Correct Answer
The Motor Carrier form.	
The Business Auto form.	
The Truckers form.	
The Garage Liability form.	

Question 56 of 100

Answer 56

Your answer: The Motor Carrier form. is correct.

EXPLANATION:
A motor carrier is anyone who transports property by auto in a commercial enterprise, regardless of whether he or she was hired for that purpose. The BAP can be used to cover an insured when transporting his or her own property. However, if an insured is transporting property of others and his or her own property, the Motor Carrier form should be used. Damage to the cargo itself would be covered under a Commercial Inland Marine form.

Question 56 of 100

Question 57

QUESTION:
A manufacturing company is sending two U.S. employees to Russia to discuss their products and visit a Russian plant. They have volunteered for the trip. What coverage would be needed for injuries they may occur in a work-related accident while abroad?

Answer Choices: Select the Correct Answer
Nothing. The workers compensation coverage applicable in their home state would apply.
Purchase travel accident insurance.
Federal insurance would apply while traveling to foreign countries.
Add the Foreign Coverage Endorsement to the company’s workers compensation policy.

Question 57 of 100

Answer 57

Your answer: Add the Foreign Coverage Endorsement to the company’s workers compensation policy. is correct.

EXPLANATION:
The Foreign Coverage Endorsement should be added to the company’s workers compensation policy. However, this endorsement applies for a period of no longer than 90 days.

Question 57 of 100

Question 58

QUESTION:
According the California Insurance Code, upon receiving notice of a claim, an adjuster must transmit notice of claim to the insurer:

Answer Choices:	Select the Correct Answer
within five working days.	
immediately.	
within 48 hours.	
within 10 days.	

Question 58 of 100

Answer 58

The correct answer is: immediately..

EXPLANATION:
Upon receiving notice of claim, every licensee or adjuster must immediately transmit notice of claim to the insurer. Failure of the licensee or claims agent to immediately transmit notice of claim to the insurer will constitute a separate and distinct violation of California Insurance Code.

Question 58 of 100

Question 59

QUESTION:
Brian Hendricks is adequately insured with a Homeowner Policy containing a requirement to carry at least 80% of replacement cost value. If he suffered a partial loss to his dwelling structure he would be able to collect which of the following percentages of loss?

Answer Choices:	Select the Correct Answer
75%	
90%	
100%	
80%	

Question 59 of 100

Answer 59

Your answer: 100% is correct.

EXPLANATION:
Since the insured is complying with the 80% clause, Brian is entitled to be paid for the entire loss less the deductible.

Question 59 of 100

Question 60

QUESTION:
An insured has a HO-5 Homeowner Policy; they have insured the wife’s diamond ring and the husband’s guns on a personal articles floater. All of the items are stolen. What policy and deductibles would apply?

Answer Choices: Select the Correct Answer
The homeowner policy would not pay and the personal articles floater would pay without a deductible.
The homeowner policy would be primary insurance with a deductible.
The homeowner would pay excess over the personal articles floater with a deductible.
Each policy would pay its pro-rata proportion of the loss.

Question 60 of 100

Answer 60

Your answer: The homeowner policy would not pay and the personal articles floater would pay without a deductible. is correct.

EXPLANATION:
Once coverage is purchased on a more specific basis, the coverage no longer applies under the homeowner policy. The floater would pay the claim. Floaters seldom contain deductibles.

Question 60 of 100

Question 61

QUESTION:
Which section of the Commercial Package Policy varies based on the lines of coverage included?

Answer Choices: Select the Correct Answer
Coverage Part.
Common Policy Conditions.
Common Policy Declarations.
None of the responses listed are correct.

Question 61 of 100

Answer 61

Your answer: Coverage Part. is correct.

EXPLANATION:
Each line of insurance that is eligible for the Commercial Package Policy has its own coverage part consisting of a variety of mandatory and optional forms that are used to provide the coverage desired.

Question 61 of 100

Question 62

QUESTION:
Under the Homeowners Coverage C, business personal property is covered for:

Answer Choices: Select the Correct Answer
$2,500 on and off the premises.
$2,500 off the premises and $500 on the premises.
$2,500 on the premises and $1,500 off the premises.
$2,500 anywhere in the world.

Question 62 of 100

Answer 62

The correct answer is: $2,500 on the premises and $1,500 off the premises..

EXPLANATION:
Business personal property is covered for $2,500 for losses on the premises and $1,500 off the premises.

Question 62 of 100

Question 63

QUESTION:
A commercial auto policy can be endorsed to cover medical payments. Which of the following would not be a likely candidate for this coverage?

Answer Choices:	Select the Correct Answer
A trucking company	
A taxi company	
A bus company	
An individual proprietorship	

Question 63 of 100

Answer 63

The correct answer is: A trucking company.

EXPLANATION:
Although auto medical payments coverage can be added by endorsement to a business auto, garage, or truckers coverage form, most commercial insureds do not purchase it as commonly as personal auto insureds. There are at least two reasons. Commercial auto medical payments coverage provides no coverage for injury to employees in most instances, and, when the named insured’s business organization is other than a sole proprietorship, any coverage the form provides for “you” and “family members” has no apparent applicability. Auto medical payments coverage is therefore more likely to be purchased by an individual named insured or by a firm that routinely carries passengers in its automobiles or allows customers to drive its automobiles—taxi or bus companies, car dealers, car rental firms, etc.

Question 63 of 100

Question 64

QUESTION:
What is the “retained limit” of a Personal Umbrella policy?

Answer Choices: Select the Correct Answer
The cost of defending the insured in a lawsuit.
Supplementary Payments coverage.
A deductible that the insured pays when the Personal Umbrella policy covers a claim that was excluded by the underlying liability policy.
A percentage of the policy limits.

Question 64 of 100

Answer 64

The correct answer is: A deductible that the insured pays when the Personal Umbrella policy covers a claim that was excluded by the underlying liability policy..

EXPLANATION:
This is the deductible that the insured pays under the Personal Umbrella policy when the underlying liability coverage does not apply on a claim, but the Personal Umbrella policy will cover the claim.

Question 64 of 100

Question 65

QUESTION:
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 65 of 100

Answer 65

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 65 of 100

Question 66

QUESTION:
When filing for an adjuster license in California, an independent adjuster candidate must post a bond in the amount of:

Answer Choices:	Select the Correct Answer
$20,000	
$5,000	
$2,000	
$25,000	

Question 66 of 100

Answer 66

The correct answer is: $2,000.

EXPLANATION:
For independent adjuster candidates, the bond amount is $2,000.

Question 66 of 100

Question 67

QUESTION:
The insured has a one family dwelling with a detached garage. The dwelling is insured for $200,000. How much coverage applies to the garage?

Answer Choices:	Select the Correct Answer
$10,000	
$15,000	
$20,000	
None	

Question 67 of 100

Answer 67

Your answer: $20,000 is correct.

EXPLANATION:
The policy provides for 10% of the dwelling limit. Therefore, the garage is insured for $20,000 for the same perils that apply to the dwelling.

Question 67 of 100

Question 68

QUESTION:
Which of the following is a not a common exclusion in inland marine insurance?

Answer Choices:	Select the Correct Answer
Earth movement	
Loss of use	
Unauthorized instructions	
Dishonest acts by the insured	

Question 68 of 100

Answer 68

The correct answer is: Earth movement.

EXPLANATION:
Common exclusions in commercial inland marine include government action, nuclear hazard, war, loss of use and loss of market, dishonest acts by an insured or its employees, voluntary parting of property by false pretense, and unauthorized instructions to transfer property.

Question 68 of 100

Question 69

QUESTION:
Which one of the following situations would be considered an example of strict liability?

Answer Choices: Select the Correct Answer
Wayne keeps a large police-trained dog in his jewelry store as a deterrent to burglars. During the time the store is open for business, the dog is confined to a back room. One day, the dog escaped, ran into the showroom and bit a customer.
The roof of a grocery store blew off during a tornado. Pieces of the roof struck the side of the store next door, damaged the siding and broke several windows.
Carl thinks of himself as a master handyman but is careless with his tools. A trespasser tripped on a hammer and was injured.
Alice deliberately hit Fred over the head with her heavy leather handbag after he remarked that she was overweight.

Question 69 of 100

Answer 69

The correct answer is: Wayne keeps a large police-trained dog in his jewelry store as a deterrent to burglars. During the time the store is open for business, the dog is confined to a back room. One day, the dog escaped, ran into the showroom and bit a customer..

EXPLANATION:
In strict liability there is little if any defense. In most jurisdictions where strict liability is imposed, the defendant is held responsible whether or not he or she is negligent. Wayne had a duty to keep the dog restrained when open for business.

Question 69 of 100

Question 70

QUESTION:
Mr. York had his pickup truck stolen while it was parked in a “no parking” zone outside his office. The value of the truck was $18,500. In addition, tools valued at $200, extra tires and hubcaps for the truck valued at $550 and a tarp worth $50 were in the truck. Mr. York has a collision deductible of $500 and a comprehensive deductible of $250. The insurance company will pay what amount?

Answer Choices:	Select the Correct Answer
$18,000	
$18,250	
$19,050	
$18,800	

Question 70 of 100

Answer 70

The correct answer is: $18,800.

EXPLANATION:
The loss of the truck plus the extra tires and hubcaps would be considered in this claim. These total $19,050 less the deductible of $250 equals $18,800.

Question 70 of 100

Question 71

QUESTION:
No policy covering residential property can be issued in California unless coverage is offered for:

Answer Choices:	Select the Correct Answer
Earthquakes.	
Mudslides.	
Hurricanes and hail storms.	
Wild fires.	

Question 71 of 100

Answer 71

Your answer: Earthquakes. is correct.

EXPLANATION:
No policy of residential property insurance may be issued or delivered or initially renewed in this state by any insurer unless the named insured is offered coverage for loss or damage caused by the peril of earthquake.

Question 71 of 100

Question 72

QUESTION:
All of the following are covered under the Equipment Breakdown coverage form, EXCEPT:

Answer Choices: Select the Correct Answer
The breakdown of any structure or materials supporting the equipment.
A structure.
Business personal property.
Personal property of others.

Question 72 of 100

Answer 72

The correct answer is: The breakdown of any structure or materials supporting the equipment..

EXPLANATION:
The policy does not cover the structure or materials supporting the equipment.

Question 72 of 100

Question 73

QUESTION:
The custom farming endorsement should be attached to a farmowner policy when the annual receipts are at least _____for farming for others.

Answer Choices:	Select the Correct Answer
$5,000	
$4,000	
$10,000	
$7,500	

Question 73 of 100

Answer 73

The correct answer is: $5,000.

EXPLANATION:
The custom farming endorsement is used when a farmer is farming for others and the receipts exceed $5,000 per year.

Question 73 of 100

Question 74

QUESTION:
The California Code states that standard fire policies must be written on the standard form with very limited omissions. Which of the following modifications are permitted to be made under a Standard Fire policy in California?

Answer Choices: Select the Correct Answer
The coverage can be substantially equivalent to or more favorable to the insured.
The insured can sign a waiver and accept lesser coverage.
The Commissioner can approve any variance in coverage.
The insurer can offer lesser coverage at a lower premium.

Question 74 of 100

Answer 74

The correct answer is: The coverage can be substantially equivalent to or more favorable to the insured. .

EXPLANATION:
According to the California Insurance Code (CIC 2070), the coverage can be substantially equivalent to or more favorable to the insured than that contained in the Standard Fire insurance policy.

Question 74 of 100

Question 75

QUESTION:
The time period of coverage which is stated on the declarations is known as:

Answer Choices:	Select the Correct Answer
The policy territory.	
The time limit of coverage.	
The limits of liability.	
The policy period.	

Question 75 of 100

Answer 75

Your answer: The policy period. is correct.

EXPLANATION:
The policy period is stated on the declarations page representing the time limit coverage is in force as long as the premium is paid.

Question 75 of 100

Question 76

QUESTION:
Workers compensation benefits provided in California include:

I. Medical benefits, including first aid
II. Disability income benefits providing payments for lost wages
III. Rehabilitation benefits, including physical rehabilitation expenses or vocational training
IV. Death benefits payable to the dependent spouse and children

Answer Choices:	Select the Correct Answer
I, II, III and IV	
II, III and IV only	
I, II and III only	
I, II and IV only	

Question 76 of 100

Answer 76

The correct answer is: I, II, III and IV.

EXPLANATION:
All responses are examples of benefits provided by workers compensation.

Question 76 of 100

Question 77

QUESTION:
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 77 of 100

Answer 77

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 77 of 100

Question 78

QUESTION:
Why do insurers file declaratory judgment actions with the courts?

Answer Choices: Select the Correct Answer
To determine the merits of the case
To determine negligence
To determine the tortfeasor or joint tortfeasors
To determine if a claim falls within the insuring agreement of a policy

Question 78 of 100

Answer 78

Your answer: To determine if a claim falls within the insuring agreement of a policy is correct.

EXPLANATION:
A declaratory judgment action is a lawsuit seeking a judicial determination of whether policy coverage applies to a claim. Insurers usually file declaratory actions to determine whether a claim falls within the provisions of the insuring agreement of a policy.

Question 78 of 100

Question 79

QUESTION:
Theft generally means:

Answer Choices: Select the Correct Answer
The unlawful taking of money, securities or other property to the deprivation of the insured.
Any act of stealing, other than burglary or robbery.
Burglary and robbery only.
Employee dishonesty only.

Question 79 of 100

Answer 79

The correct answer is: The unlawful taking of money, securities or other property to the deprivation of the insured..

EXPLANATION:
The newer forms have re-defined the term of theft. It is now defined as: the unlawful taking of money, securities or other property to the deprivation of the insured. This includes burglary, safe burglary and robbery. Theft also includes the taking of property by stealth (action designed to escape notice).

Question 79 of 100

Question 80

QUESTION:
The National Flood Insurance Program provides coverage for losses caused by all of the following occurrences, EXCEPT:

Answer Choices:	Select the Correct Answer
Water-main breakage.	
Mudflow.	
Runoff from heavy rain.	
Overflow of tidal waters.	

Question 80 of 100

Answer 80

Your answer: Water-main breakage. is correct.

EXPLANATION:
It is not the intent of flood insurance to cover losses such as water-main breakage.

Question 80 of 100

Question 81

QUESTION:
The HO-6 policy provides full replacement cost coverage if it is rendered a total loss by fire, EXCEPT:

Answer Choices: Select the Correct Answer
The structure portion occupied by the insured as a residence
Improvements and betterments made to the structure by the insured
Structures owned by the insured other than the residence
Replacement cost coverage does not apply under the HO-6 form

Question 81 of 100

Answer 81

The correct answer is: The structure portion occupied by the insured as a residence.

EXPLANATION:
The HO-6 condominium policy does not provide coverage for the structure. It insures the interior furnishings and contents and provides liability protection to the condominium owner. Separate structures such as a private garage would be covered for replacement cost coverage if added to the policy. Replacement cost coverage would have to be added separately to cover the contents.

Question 81 of 100

Question 82

QUESTION:
Under a personal auto policy, what is Coverage D?

Answer Choices:	Select the Correct Answer
Coverage for Damage to Your Auto	
Property Damage	
Bodily Injury	
Medical Payments	

Question 82 of 100

Answer 82

The correct answer is: Coverage for Damage to Your Auto.

EXPLANATION:
Coverage D includes collision and other than collision (comprehensive) coverage. The insured selects one or both of these coverages, and they are indicated on the declarations page.

Question 82 of 100

Question 83

QUESTION:
The BOP provides liability coverages. Which of the following is a correct statement regarding the limits of coverage?

Answer Choices: Select the Correct Answer
The BOP only provides a Per Occurrence limit.
The BOP only provides Aggregate Limits of Liability coverage.
The BOP Liability section provides for Split Limits of Liability coverage.
The BOP contains two Aggregate limits, one for Premises and Operations Liability and one for Products and Completed Operations. The coverage also has a Per Occurrence limit.

Question 83 of 100

Answer 83

Your answer: The BOP contains two Aggregate limits, one for Premises and Operations Liability and one for Products and Completed Operations. The coverage also has a Per Occurrence limit. is correct.

EXPLANATION:
The BOP contains both a Per Occurrence Limit and Aggregate Limits for Premises/Operations and Products/Completed Operations.

Question 83 of 100

Question 84

QUESTION:
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 84 of 100

Answer 84

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 84 of 100

Question 85

QUESTION:
A crew member has been injured on a ship. When his medical expenses are paid, this is known as:

Answer Choices:	Select the Correct Answer
Cure.	
Protection.	
Indemnity.	
Jones Act.	

Question 85 of 100

Answer 85

The correct answer is: Cure. .

EXPLANATION:
In ocean marine insurance this is called “cure” and is paid under the Protection and Indemnity coverage.

Question 85 of 100

Question 86

QUESTION:
Which of the following coverages does not have a limit of insurance listed on the CGL Declarations page?

Answer Choices:	Select the Correct Answer
Supplementary payments	
Fire damage	
Medical payments	
Personal injury	

Question 86 of 100

Answer 86

The correct answer is: Supplementary payments.

EXPLANATION:
Supplementary payments pay in addition to the limits of liability. While some do have their own individual limits such as the payment of bail bond premiums, the insurer can spend whatever it wants for certain other expenses to defend the insured. “Fire Damage”, “Medical Payments”, and “Personal Injury” all have a specific policy limit as stated on the Declarations page of the policy.

Question 86 of 100

Question 87

QUESTION:
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 87 of 100

Answer 87

The correct answer is: The California Department of Insurance .

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 87 of 100

Question 88

QUESTION:
In lieu of suspending or revoking a license, the Commissioner may impose of civil penalty of:

Answer Choices:	Select the Correct Answer
$500.	
$2,500.	
$1,000.	
$5,000.	

Question 88 of 100

Answer 88

The correct answer is: $500..

EXPLANATION:
The Commissioner, in lieu of suspending or revoking a license, may impose a civil penalty not to exceed $500 upon a licensee.

Question 88 of 100

Question 89

QUESTION:
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 89 of 100

Answer 89

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 89 of 100

Question 90

QUESTION:
Subrogation may follow which of the following events?

Answer Choices: Select the Correct Answer
An insured collects from her insurance company for damages caused by a third party.
Firefighters damage the insured’s property while fighting a fire.
Nature damages the insured’s property.
An insured causes damage to her own goods.

Question 90 of 100

Answer 90

Your answer: An insured collects from her insurance company for damages caused by a third party. is correct.

EXPLANATION:
First party claims refer to the insured. The second party is the insurance company. The third party is one claiming damage or injury by the insured or is the party who caused injury or damage to the insured. The company can seek reimbursement from a third party that caused the loss to the first party.

Question 90 of 100

Question 91

QUESTION:
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 91 of 100

Answer 91

The correct answer is: The insured..

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 91 of 100

Question 92

QUESTION:
Under the HO-3 form there is no coverage for loss resulting from “earth movement” except when endorsed by which of the following?

Answer Choices:	Select the Correct Answer
Earthquake endorsement.	
Volcanic eruption endorsement.	
Collapse endorsement.	
Explosion endorsement.	

Question 92 of 100

Answer 92

Your answer: Earthquake endorsement. is correct.

EXPLANATION:
An insured may add earthquake as an insured peril for Coverages A, B and C by adding the earthquake endorsement. This endorsement defines as a “single earthquake” all earthquake shocks occurring within a 72-hour period. The peril of earthquake is defined to include land shock waves or tremors accompanying a volcanic eruption.

Question 92 of 100

Question 93

QUESTION:
An insured carries a Personal Property Replacement Cost endorsement attached to her Homeowners policy and has suffered a loss to her personal property. The insured submits a claim for actual cash value (ACV) at the time of the loss, but she intends to make a claim for replacement cost later. What is the time frame in which the insured must notify the insurer that she intends to make the replacement cost claim later?

Answer Choices:	Select the Correct Answer
Within 120 days of the loss.	
Within 180 days of the loss.	
Within 90 days of the loss.	
Within 30 days of the loss.	

Question 93 of 100

Answer 93

The correct answer is: Within 180 days of the loss..

EXPLANATION:
The insured must notify the insured within 180 days of the loss of their intention to seek replacement cost coverage at a later date.

Question 93 of 100

Question 94

QUESTION:
When someone dies without a will, their assets will be handled by a court appointed:

Answer Choices:	Select the Correct Answer
Arbitrator.	
Executor.	
Testator.	
Administrator.	

Question 94 of 100

Answer 94

The correct answer is: Administrator..

EXPLANATION:
When an individual dies intestate, he or she left no will. An intestate death requires a person be appointed by the court to administer the estate and also requires that this administrator secure an administrator’s bond.

Question 94 of 100

Question 95

QUESTION:
A deductible usually applies to which of the following automobile policy coverages?

Answer Choices:	Select the Correct Answer
Physical Damage	
Bodily Injury Liability	
Property Damage Liability	
Medical Payments	

Question 95 of 100

Answer 95

The correct answer is: Physical Damage.

EXPLANATION:
Deductibles are never used with medical payment coverage and very seldom used for bodily injury and property damage. Deductibles usually apply only to physical damage coverage.

Question 95 of 100

Question 96

QUESTION:
Which of the garage policy coverages will pay for physical damage to a garage customer’s auto regardless of legal liability?

Answer Choices: Select the Correct Answer
Section II - Garage Liability coverage.
Section IV - Garage physical damage coverage.
Garagekeepers legal liability coverage.
Garagekeepers direct primary coverage.

Question 96 of 100

Answer 96

The correct answer is: Garagekeepers direct primary coverage..

EXPLANATION:
The Garagekeepers direct primary coverage pays for damages to a customer’s vehicle regardless of fault. The Garagekeepers legal liability form would require that the claimant prove negligence on the part of the garage.

Question 96 of 100

Question 97

QUESTION:
Under Coverage E - Scheduled Farm Property, how is the property covered?

Answer Choices: Select the Correct Answer
For the limit shown in the policy declarations
Unlimited
Blanket coverage
Replacement cost basis

Question 97 of 100

Answer 97

The correct answer is: For the limit shown in the policy declarations.

EXPLANATION:
The property is covered for the limit shown on the declarations page of the policy for the property specifically scheduled.

Question 97 of 100

Question 98

QUESTION:
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 98 of 100

Answer 98

Your answer: $72 is correct.

EXPLANATION:
The application fee for an original license is: $72. (CIC 14097)

Question 98 of 100

Question 99

QUESTION:
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 99 of 100

Answer 99

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 99 of 100

Question 100

QUESTION:
An insured has reported a claim late that occurred over one year ago and now seeks defense representation and coverage under his automobile policy. What should the adjuster do?

Answer Choices: Select the Correct Answer
Deny the claim
Investigate the claim
Issue a reservation of rights letter to the insured
Advise the insured to seek his own legal counsel

Question 100 of 100

Answer 100

The correct answer is: Issue a reservation of rights letter to the insured.

EXPLANATION:
In this case since the facts are not clear and probably no witnesses or police reports and a lack of physical evidence, the adjuster should issue a “reservation of rights” letter to the insured.

Question 100 of 100