IA Test 30 Flashcards
All Homeowner policies provide “Property Removed” coverage for up to how many days?
Answer Choices: Select the Correct Answer 10 days 60 days 30 days 20 days
Question 1 of 100
Your answer: 30 days is correct.
EXPLANATION:
These 30 days are standard for all homeowner forms. There are differences in the dwelling forms. For example, the basic dwelling form DP-1 provides only 5 days to cover property removed to protect it from the perils insured against.
Question 1 of 100
Which of the following is excluded on the commercial property special causes of loss form?
Answer Choices: Select the Correct Answer
Personal property less than 100 feet from the premises
Smoke from industrial operations
Fire damage if the building has been vacant more than 60 days
Fire damage if the building has been unoccupied more than 60 days
Question 2 of 100
Your answer: Fire damage if the building has been unoccupied more than 60 days is incorrect. The correct answer is: Smoke from industrial operations.
EXPLANATION:
Smoke, vapor, or gas from industrial operations is excluded on the special causes of loss form. Personal property is a subject of the building and personal property coverage form. Fire damage is fully covered when a building is unoccupied. When a building is vacant 60 or more days, fire damage is covered, but settlement will be reduced by 15%.
Question 2 of 100
You and your son, who lives with you, are crossing the street when both of you are struck by a drunk driver. The medical payments coverage under your auto policy will:
Answer Choices: Select the Correct Answer
Provide coverage for you, but not your son.
Provide coverage for both you and your son.
Will not apply as you were pedestrians when struck.
Will be deferred to the driver of the vehicle that struck you.
Question 3 of 100
Your answer: Will not apply as you were pedestrians when struck. is incorrect. The correct answer is: Provide coverage for both you and your son..
EXPLANATION:
Auto medical payments cover the insured and members of the household who are relatives.
Question 3 of 100
Which section of the Commercial Package Policy varies based on the lines of coverage included?
Answer Choices: Select the Correct Answer
Coverage Part.
Common Policy Conditions.
Common Policy Declarations.
None of the responses listed are correct.
Question 4 of 100
Your answer: None of the responses listed are correct. is incorrect. The correct answer is: Coverage Part. .
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 4 of 100
What is the purpose of the Nationwide Definition for inland marine exposures outlined in specific detail:
Answer Choices: Select the Correct Answer
The coverage that marine insurers could write.
The classes of property not eligible for inland marine coverage.
What types of insurance companies could issue inland marine policies.
The role of the National Association of Insurance Commissioners.
Question 5 of 100
Your answer: The classes of property not eligible for inland marine coverage. is incorrect. The correct answer is: The coverage that marine insurers could write..
EXPLANATION:
This defines the types of coverage that inland marine insurers could provide.
Question 5 of 100
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 6 of 100
Your answer: Utility Services - Time Element is correct.
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 6 of 100
Which endorsement must be attached to a BOP policy for coverage to apply to a freezer that was damaged by the interruption of a power source?
Answer Choices: Select the Correct Answer
Flood insurance endorsement
Earthquake endorsement
Utility Services - Time Element endorsement
Utility Services - Direct Damage endorsement
Question 7 of 100
Your answer: Utility Services - Direct Damage endorsement is correct.
EXPLANATION:
The Utility Services - Direct Damage endorsement would cover the direct damage to the freezer caused by the power interruption, as long as the freezer was specifically listed on the endorsement.
Question 7 of 100
All of the following are reasons the federal government encouraged private insurance carriers to participate in the WYO program, EXCEPT:
Answer Choices: Select the Correct Answer
To use the private carriers marketing and customer databases to sell more policies.
To increase the number of flood policies sold over a larger geographic area.
To outsource the servicing of policies to the private insurance carrier.
To provide federal government jobs to insurance agents who would be in charge of selling the WYO policies.
Question 8 of 100
Your answer: To provide federal government jobs to insurance agents who would be in charge of selling the WYO policies. is correct.
EXPLANATION:
The federal government does not hire agents to sell their flood insurance policies.
Question 8 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 9 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 9 of 100
If an adjusting firm intends to add a new branch office, what action must be taken?
Answer Choices: Select the Correct Answer
Report the new location to the Commissioner immediately
Report the new location within 30 days
Must first obtain a branch office certificate
No action needs to be taken
Question 10 of 100
Your answer: Must first obtain a branch office certificate is correct.
EXPLANATION:
Adjusters cannot conduct business from any location other than that shown on the records of the Commissioner as his or her place of business unless he or she has received a branch location certificate for that location. A licensee must notify the Commissioner in writing within 10 days after the closing or changing the location of a branch office.
Question 10 of 100
All of the following are reasons an independent adjuster may be hired, EXCEPT:
Answer Choices: Select the Correct Answer
The insured may retain an independent adjuster if negotiations with their insurer are not progressing forward.
An insurer may contract with an independent adjuster in a location where the insurer does not have claims offices set up.
Due to a catastrophe, an insurer may not have enough adjusters on staff to process all of the claims, and would contract with additional independent adjusters temporarily.
An insurer may contract with an independent adjuster who has special knowledge or expertise to adjust specialized claims.
Question 11 of 100
Your answer: The insured may retain an independent adjuster if negotiations with their insurer are not progressing forward. is correct.
EXPLANATION:
Retaining an adjuster to assist in negotiating a claim with the insurer would be a reason to hire a PUBLIC adjuster, not an INDEPENDENT adjuster.
Question 11 of 100
Under a commercial inland marine form, which of the following is true regarding the appraisal clause?
Answer Choices: Select the Correct Answer
The insurer is bound by the decision of the appraisers or umpire
It is not binding to all parties
The insurer is not bound by the appraisal clause
The insurer must seek legal action under the appraisal clause to enforce the terms and conditions
Question 12 of 100
Your answer: The insurer is bound by the decision of the appraisers or umpire is correct.
EXPLANATION:
The insurer is bound by the outcome of a an appraisal on the damaged property as to it’s value. They still reserve the right to deny the claim if there is a coverage, rather than a valuation question.
Question 12 of 100
According to the Definitions section of a homeowner policy, the term best described by the phrase an “unforeseen and unintended” event is a/an:
Answer Choices: Select the Correct Answer Accident Peril Hazard Risk
Question 13 of 100
Your answer: Accident is correct.
EXPLANATION:
This is the definition of an accident.
Question 13 of 100
Submit
Which statement is true concerning auto Physical Damage coverage in a Personal Auto Policy?
Answer Choices: Select the Correct Answer
Can be endorsed to pay on a replacement cost basis.
It can cover owned and nonowned automobiles.
Applies only when the insured is at fault in an accident.
Excludes physical damage to cars over 10 years old.
Question 14 of 100
Which statement is true concerning auto Physical Damage coverage in a Personal Auto Policy?
Answer Choices: Select the Correct Answer
Can be endorsed to pay on a replacement cost basis.
It can cover owned and nonowned automobiles.
Applies only when the insured is at fault in an accident.
Excludes physical damage to cars over 10 years old.
Question 14 of 100
Mark is injured at work in a state that provides a TTD benefit at 66 2/3%, the state minimum is $40 and the state maximum is $540. The waiting period is 3 days and the retroactive period is 15 day. Mark earns $15 per hour and usually works 20 hours per week. He was injured on December 4th and returned to work on December 12th. Which of the following is the amount of TTD benefit he would have received?
Answer Choices: Select the Correct Answer $172.00 $200.00 $114.29 $166.29
Question 15 of 100
Your answer: $172.00 is incorrect. The correct answer is: $114.29.
EXPLANATION:
$15 X 20 = $300 (average weekly wage). 66 2/3% X $300 = $200 (lower than the maximum). December 5th to December 11th = 7 days = 1 week. The 3-day waiting period applies, and only 4 days (4/7th of a week) is compensable. 4/7 X $200 = $114.29.
Question 15 of 100
How much additional coverage under a Commercial Property Policy is provided for debris removal?
Answer Choices: Select the Correct Answer
The policy will pay an additional limit of $25,000
The insured can only rely on the total limit of the property covered
The insured can only rely on 25% of the covered property for debris removal expense
The policy will pay an additional limit of $15,000
Question 16 of 100
Your answer: The policy will pay an additional limit of $15,000 is incorrect. The correct answer is: The policy will pay an additional limit of $25,000.
EXPLANATION:
The policy provides for up to 25% of the limit of the property for debris removal. If this limit is not sufficient, the policy will pay an additional $25,000. (this was increased from $10,000)
Question 16 of 100
When completing an application for an independent claims adjuster license in California, one year of experience consists of not less than _____ hours of actual compensated work performed by the applicant.
Answer Choices: Select the Correct Answer 1,000 500 2,000 750
Question 17 of 100
Your answer: 2,000 is correct.
EXPLANATION:
One year of experience consists of not less than 2,000 hours of actual compensated work performed by each applicant preceding the filing of the application. Applicants must substantiate claimed years and hours of qualifying experience and the exact details as to the character and nature by written certifications from employers, subject to independent verification by the Commissioner.
Question 17 of 100
The FAIR Plan is designed to serve hazardous and inner city areas and property being insured must be in a designated plan area (brush area). Both commercial and personal risks may be placed through the plan but farm risks and automobiles are not eligible. All of the perils can be purchased, EXCEPT:
Answer Choices: Select the Correct Answer Theft. Fire and lightning. Riot and civil commotion. Windstorm.
Question 18 of 100
Your answer: Theft. is correct.
EXPLANATION:
The coverage is for very basic perils similar to the DP-1 perils. Theft is not covered.
Question 18 of 100
Robert is retired and lives in an older home in Maine. He has an old floor furnace to heat his home that is in need of repair and he forgets to have it checked. In the winter he stays in Florida for a month with his daughter. While Robert is away, the furnace malfunctions and all his water pipes freeze and burst causing massive water damage. The furnace is also destroyed. His house is covered under a Homeowners broad cause of loss form, that includes water damage from a heating or plumbing system. How will the adjuster handle this claim?
Answer Choices: Select the Correct Answer
Pay for all damage except the furnace.
Deny the entire claim because of neglect of the insured.
Pay for the furnace and the resulting water damage only.
Pay for the water damage and depreciate the payment for the replacement of the furnace.
Question 19 of 100
Your answer: Pay for all damage except the furnace. is correct.
EXPLANATION:
In this case, most insurers would pay for all damage except the destroyed furnace. The policy does not pay for the wear and tear of a heating or air conditioning system. Even though the insured was neglectful, the ensuing damage resulting from the frozen pipes would be covered. If the insured had been advised by a contractor that the furnace needed immediate repairs and the insured failed to make them, most adjusters would deny the entire claim. This would then be considered an increased hazard not known to the insurer and intentional neglect on the part of the insured.
Question 19 of 100
What is the limit that is paid for water damage under an Equipment Breakdown policy?
Answer Choices: Select the Correct Answer $10,000 $15,000 $25,000 Nothing
Question 20 of 100
Your answer: Nothing is incorrect. The correct answer is: $25,000.
EXPLANATION:
The limit is $25,000.
Question 20 of 100
Nixon Construction Company carries a CGL policy that has a $500,000 per occurrence limit, $1,000,000 general aggregate limit and a per person medical payments limit of $25,000. Employees cause $200,000 property damage and $400,000 bodily injury when persons are injured and property is damaged in connection with a construction project. Two of the employees suffer medical expenses of $15,000 each. How much will the insurer pay on behalf of Nixon Construction?
Answer Choices: Select the Correct Answer $500,000 $630,000 $610,000 $600,000
Question 21 of 100
Your answer: $500,000 is correct.
EXPLANATION:
The most the policy can pay is the occurrence limit of $500,000. The employees are not covered under medical payments. They would collect under workers compensation coverage. Remember that the policy cannot pay more than the per occurrence on any one claim. Therefore, in this question the insured would have to pay the remaining $100,000 of this claim because the insurer will only pay $500,000 of this $600,000 claim.
Question 21 of 100
Which of the following would not be covered by a Garage Liability policy?
Answer Choices: Select the Correct Answer
The costs incurred by the insured to recall defective products.
A customer falls down and breaks an arm while visiting the dealership building.
Poor workmanship when installing new brakes to a customer’s vehicle causes that customer to be involved in an auto accident.
While driving a dealership-owned pickup, an employee has an accident, injuring another person.
Question 22 of 100
Your answer: The costs incurred by the insured to recall defective products. is correct.
EXPLANATION:
Garage Liability insurance includes automobile liability and general liability as well, but products being recalled are excluded from the ISO Garage Liability form. This is because liability insurance is used to cover occurrences and products are recalled to prevent an occurrence.
Question 22 of 100
The amount it would cost to repair or replace property minus depreciation is the definition of:
Answer Choices: Select the Correct Answer Actual cash value. Replacement cost. Market value. Functional replacement cost.
Question 23 of 100
our answer: Actual cash value. is correct.
EXPLANATION:
This is the definition of actual cash value (ACV) - the cost new at the time of the loss, less depreciation equals actual cash value.
Question 23 of 100
A person takes bank deposits to the bank every day. In crime insurance terminology, this person is known as a:
Answer Choices: Select the Correct Answer Messenger. Custodian. Cashier. Manager.
Question 24 of 100
Submit
Your answer: Custodian. is incorrect. The correct answer is: Messenger. .
EXPLANATION:
This person is called a messenger. A messenger has custody of the insured’s property outside the insured’s premises.
Question 24 of 100
Which of the following is not a purpose of interviewing witnesses in adjusting losses?
Answer Choices: Select the Correct Answer
To assess how the witness will hold up if a formal trial is needed
To determine coverage issues
To determine the relationship between the witness and the insured
To delay payment of a claim
Question 25 of 100
Your answer: To delay payment of a claim is correct.
EXPLANATION:
Witness interviews are not to be used to delay payment of a claim in any circumstance.
Question 25 of 100
Under the terms of a Homeowners policy, which of the following is a mortgagee permitted to do if the insured fails to pay his or her Homeowners policy premium?
Answer Choices: Select the Correct Answer
Cancel the Homeowners policy.
Pay the premium for the insured.
Issue a new Homeowners policy for the insured.
Foreclose on the insured’s property.
Question 26 of 100
Your answer: Pay the premium for the insured. is correct.
EXPLANATION:
The mortgagee has the right to pay the premium if the insured fails to do so.
Question 26 of 100
An independent adjuster acts on behalf of his or her principal. Which of the following is the principal for an independent adjuster?
Answer Choices: Select the Correct Answer The court. The lawyer. The insurer. The insured.
Question 27 of 100
Your answer: The insurer. is correct.
EXPLANATION:
The “principal” for an independent adjuster is the insurer. Independent adjusters work on behalf of the insurance company against which, the claim is being made.
Question 27 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 28 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 28 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 29 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 29 of 100
Under a business auto policy, which of the following types of physical damage loss is not covered?
Answer Choices: Select the Correct Answer
Collision with an animal
Loss to radar detection equipment
Transportation expenses following theft of an entire private passenger auto
Glass breakage caused by vandals
Question 30 of 100
Your answer: Loss to radar detection equipment is correct.
EXPLANATION:
This type of equipment is usually excluded for physical damage coverage because it is normally not legal in most states to use them.
Question 30 of 100
The Commercial Building and Personal Property coverage form provides five extensions of coverage, but only if:
Answer Choices: Select the Correct Answer
An 80% or higher coinsurance percentage is shown on the Declarations page, and the property amount of coverage, based on that percentage, is purchased.
The extensions are listed on the Declarations page of the policy, and an additional premium is paid.
The coverage for buildings is written on a replacement cost basis.
All coverages under the policy are written on a blanket basis.
Question 31 of 100
Your answer: An 80% or higher coinsurance percentage is shown on the Declarations page, and the property amount of coverage, based on that percentage, is purchased. is correct.
EXPLANATION:
The property must be insured for 80% of its value. The 5 extensions are: newly acquired or constructed property, personal effects and property of others, valuable papers and records, property off premises, and outdoor property.
Question 31 of 100
A power surge sparks a small electrical fire in an office building. The electrical fire triggers the automatic sprinkler system and the water from the sprinklers, soaks the carpet and shorts-out all the computers, causing thousands of dollars in damage. The office must close for two months during repairs. The cost of renting a temporary office space while the physical damage to the office building is repaired is considered:
Answer Choices: Select the Correct Answer An indirect loss. A physical loss. A direct loss. An occurrence.
Question 32 of 100
Your answer: An indirect loss. is correct.
EXPLANATION:
An indirect loss is created when a direct loss has created a situation when damaged property cannot be used. The cost of renting temporary office space because the damaged space is unusable, is an indirect loss, sometimes known as a consequential loss.
Question 32 of 100
The Equipment Breakdown policy (formerly called Boiler & Machinery) provides for replacement cost coverage in case of a covered claim. Under what conditions would the insurer only pay actual cash value in case of a loss?
Answer Choices: Select the Correct Answer
Only if the policy is endorsed to provide ACV coverage
The policy pays replacement only if the repairs are made within twenty four months of the accident.
The policy will pay replacement cost as long as the repairs are expedited regardless of a time limit.
The policy always provides replacement cost coverage in case of a covered claim.
Question 33 of 100
Your answer: The policy will pay replacement cost as long as the repairs are expedited regardless of a time limit. is incorrect. The correct answer is: The policy pays replacement only if the repairs are made within twenty four months of the accident. .
EXPLANATION:
The valuation clause provides for replacement cost coverage on all property, except if repair or replacement is not made within 24 months of the date of the accident, actual cash value will be paid. (The 2013 Equipment Breakdown forms increased this time limit from 18 months to 24 months.)
Question 33 of 100
Under the workers compensation guidelines, permanent total disability is rated at what percent?
Answer Choices: Select the Correct Answer 50% 60% 90% 100%
Question 34 of 100
Your answer: 100% is correct.
EXPLANATION:
Permanent total disability is rated at 100%.
Question 34 of 100
The California Code states that standard fire policies must be written on the standard form with very limited omissions. Which of the following modifications are permitted to be made under a Standard Fire policy in California?
Answer Choices: Select the Correct Answer
The coverage can be substantially equivalent to or more favorable to the insured.
The insured can sign a waiver and accept lesser coverage.
The Commissioner can approve any variance in coverage.
The insurer can offer lesser coverage at a lower premium.
Question 35 of 100
Your answer: The coverage can be substantially equivalent to or more favorable to the insured. is correct.
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 35 of 100
Which of the following is NOT covered by the extra expense coverage of the standardized Commercial Property insurance policy?
Answer Choices: Select the Correct Answer Rent payments at a temporary location. Moving expenses. Overtime pay required to make repairs. Loss of income.
Question 36 of 100
Your answer: Overtime pay required to make repairs. is incorrect. The correct answer is: Loss of income..
EXPLANATION:
Extra Expense Coverage is a form of Business Interruption Coverage. It covers all reasonable extra expenses incurred by the insured in order to continue as nearly as practical the normal operation of a business that has been damaged by an insured peril. It does not cover the loss of income a business may suffer. Other forms like the “loss of income” forms would cover the loss of income.
Question 36 of 100
Which of the following is the definition of “person” according to the California Adjuster Act?
Answer Choices: Select the Correct Answer
Any individual, firm, company, association, organization, partnership, limited liability company, and corporation.
The individual under whose direction, control, charge, or management of the business of a licensee is operated.
A person licensed under the insurance laws of the state of California.
An attorney who is an active member of the State Bar of California.
Question 37 of 100
Your answer: Any individual, firm, company, association, organization, partnership, limited liability company, and corporation. is correct.
EXPLANATION:
According to the California Insurance Code, a “person” is defined as: “Any individual, firm, company, association, organization, partnership, limited liability company, and corporation.”
Question 37 of 100
Coverage D - Loss of Use on a farm policy will include coverage for: I. Additional living expenses incurred by the resident family. II. Loss of rental income of the owner for tenants who cannot live there due to a covered loss.
Answer Choices: Select the Correct Answer I only II only Both I and II Neither I nor II
Question 38 of 100
Your answer: I only is incorrect. The correct answer is: Both I and II.
EXPLANATION:
Similar to the loss of use coverage on the homeowner policy, Coverage D on the farm policy will pay both the additional living expenses of the owner occupant and any loss of rental income if a tenant is also unable to live there after a covered loss.
Question 38 of 100
The HO-3 form insures for direct physical loss to covered property involving collapse of a building caused by all of the following, EXCEPT:
Answer Choices: Select the Correct Answer Hidden decay Settling Weight of contents Use of defective materials
Question 39 of 100
Your answer: Settling is correct.
EXPLANATION:
Settling or earth movement is excluded under the policy.
Question 39 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 40 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 40 of 100
