IA Test 5

Question 1

Which of the following is a reason that insurance companies include exclusions in the homeowner forms?

To avoid financial catastrophe for the insured
To properly rate nonstandard risks
To limit coverage of nonfortuitous events
To provide broader protection to more insured’s

Question 1 of 100

Answer 1

Your answer: To properly rate nonstandard risks is incorrect. The correct answer is: To limit coverage of nonfortuitous events.

EXPLANATION:
Insurance companies desire to cover only fortuitous events. These are sudden and unexpected. Insurers also desire to exclude certain catastrophe types of losses such as flood, war and earthquakes.

Question 1 of 100

Question 2

Farm liability coverages include each of the following, EXCEPT:

Bodily injury and property damage.
Personal injury and advertising injury.
Medical payments to others.
Professional liability.

Question 2 of 100

Answer 2

Your answer: Personal injury and advertising injury. is incorrect. The correct answer is: Professional liability..

EXPLANATION:
Professional liability coverage is provided by other types of policies, but not under farm liability coverage.

Question 2 of 100

Question 3

What does an insurer do when the insured has possibly waived his or her rights in a liability claim?

Send a “reservation of rights” letter.
Deny the claim.
Pay only a portion of the proven liability claim.
Insist the insured obtain his or her own legal counsel.

Question 3 of 100

Answer 3

Your answer: Send a “reservation of rights” letter. is correct.

EXPLANATION:
There are situations where the insured has waived the right to coverage under a liability policy. Failure to report a claim in a timely fashion could cause the insured to waive coverage. The insurer will normally issue a reservation of rights letter to the insured advising that it will investigate the claim but will not commit to pay the claim.

Question 3 of 100

Question 4

An independent adjuster may satisfy the security requirement in California by providing:

I. A $2,000 surety bond
II. A $2,000 property bond
III. A $2,000 cash deposit with the state of California
IV. Proof of the sum of $2,000 deposited in a bank authorized to do business in California

I, II, III and IV
I, III and IV only
I and II only
I, II and III only

Question 4 of 100

Answer 4

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

EXPLANATION:
An independent adjuster may satisfy the security requirement with a $2,000 surety bond; by depositing with the State of California the sum of $2,000 in cash; providing evidence of deposit of the sum of $2,000 in banks authorized to do business in this state and insured by the Federal Deposit Insurance Corporation; providing investment certificates or share accounts in the amount of $2,000 issued by a savings association doing business in this state and insured by the Federal Deposit Insurance Corporation; or providing evidence of a certificate of funds or share account of the sum of $2,000 in a credit union whose share deposits are guaranteed by the National Credit Union Administration. A property bond is not a method of satisfying the requirement.

Question 4 of 100

Question 5

Insurance that guarantees or indemnifies owners of real or personal property, or the holders of liens or encumbrances on that property, is classified in California as which of the following types of insurance?

Title insurance.
Surety insurance.
Credit insurance.
Mortgage Guaranty insurance.

Question 5 of 100

Answer 5

Your answer: Title insurance. is correct.

EXPLANATION:
Insurance that guarantees or indemnifies owners of real or personal property, or the holders of liens or encumbrances on that property, is classified in California as Title insurance.

Question 5 of 100

Question 6

Jim drives Linda’s car. Both Jim and Linda have a personal auto policy. Which of the following statements is CORRECT concerning coverage if Jim causes an accident?

The policy Linda owns is primary and the policy Jim owns is excess.
Only the policy Jim owns will pay for damages.
Only the policy Linda owns will pay for damages.
The policy Jim owns is primary and the policy Linda owns is excess.

Question 6 of 100

Answer 6

Your answer: The policy Jim owns is primary and the policy Linda owns is excess. is incorrect. The correct answer is: The policy Linda owns is primary and the policy Jim owns is excess. .

EXPLANATION:
Insurance follows the car. Therefore, Linda’s policy would pay first and Jim’s policy would be excess. Assume that Linda did not have physical damage coverage but Jim did. If Jim had an at fault accident with Linda’s car, the physical damage to Linda’s car would be paid under Jim’s policy.

Question 6 of 100

Question 7

Assume a commercial umbrella liability policy is in effect and all conditions are met. Identify the correct statement.

An individual claims the insured made libelous statements that have damaged the individual’s career. This damage would be covered under the policy’s Bodily Injury and Property Damage Liability coverage.
An individual suffered embarrassment after tripping over a brick someone had left in the insured’s walkway. This damage would be covered under the policy’s Personal and Advertising Injury Liability coverage.
A customer’s leg was fractured by a fall in the insured’s warehouse. This damage would be covered under the policy’s Personal and Advertising Injury Liability coverage.
An insured is responsible for damaging a client’s million dollar shipment of products. This damage would be covered under the policy’s Bodily Injury and Property Damage Liability coverage.

Question 7 of 100

Answer 7

Your answer: An individual claims the insured made libelous statements that have damaged the individual’s career. This damage would be covered under the policy’s Bodily Injury and Property Damage Liability coverage. is incorrect. The correct answer is: An insured is responsible for damaging a client’s million dollar shipment of products. This damage would be covered under the policy’s Bodily Injury and Property Damage Liability coverage. .

EXPLANATION:
Only the damage done to the client’s property is covered. Libelous statements are covered by personal injury and not bodily injury and property damage, embarrassment is not covered and the fractured leg is bodily injury and not personal or advertising injury.

Question 7 of 100

Question 8

During a tornado, Natalie’s house is destroyed when a section of a wall is blown down, knocking over a heater, which sets the house on fire and creates smoke. The proximate cause of this loss is:

The tornado.
The fire.
The collapse of the wall.
The heater.

Question 8 of 100

Answer 8

Your answer: The fire. is incorrect. The correct answer is: The tornado. .

EXPLANATION:
The proximate cause of a loss is an unbroken chain of events, that leads to the loss. In this question, the tornado started the chain of events that lead up to the fire and smoke loss.

Question 8 of 100

Question 9

Which of the following is an example of an “assumption of risk”?

George suffered a broken leg when he was walking into the locker room after playing a game of basketball and he slipped in a pool of liquid soap left by a janitor.
Fred was in a hurry to get to work. He took a shortcut over a bridge marked “condemned,” which collapsed under his weight.
Diana was seriously injured in an auto accident. She learned that the driver has no operator’s license.
Henry was walking to his mailbox when he was hit by a baseball, thrown accidentally in his direction, by the neighbor’s son.

Question 9 of 100

Answer 9

Your answer: George suffered a broken leg when he was walking into the locker room after playing a game of basketball and he slipped in a pool of liquid soap left by a janitor. is incorrect. The correct answer is: Fred was in a hurry to get to work. He took a shortcut over a bridge marked “condemned,” which collapsed under his weight..

EXPLANATION:
When Fred took the shortcut across a condemned bridge, he assumed the risk.

Question 9 of 100

Question 10

An insured carries a Personal Property Replacement Cost endorsement attached to his Homeowners policy. He has suffered a loss to his personal property. He submits a claim for actual cash value (ACV) at the time of the loss, but notifies the insurer that he intends to make a claim for replacement cost later. The insurer will honor the insured’s request, but only if the cost to repair or replace the property is:

More than $500.
Less than $500.
More than $1,000.
Less than $5,000.

Question 10 of 100

Answer 10

Your answer: Less than $500. is incorrect. The correct answer is: More than $500..

EXPLANATION:
If the cost to repair or replace the property is more than $500, the insurer will pay the actual cash value for the loss, until the actual repair or replacement is made.

Question 10 of 100

Question 11

Jerusha has her business automobiles covered under a Business Auto policy. She has purchased a new business automobile recently but was not required under her policy provisions to report her newly acquired auto. Based on this information, which BAP symbol is listed on the Declarations page of Jerusha’s policy?

Symbol 1.
Symbol 7.
Symbol 5.
Symbol 3.

Question 11 of 100

Answer 11

Jerusha has her business automobiles covered under a Business Auto policy. She has purchased a new business automobile recently but was not required under her policy provisions to report her newly acquired auto. Based on this information, which BAP symbol is listed on the Declarations page of Jerusha’s policy?

Your answer: Symbol 3. is incorrect. The correct answer is: Symbol 1..

EXPLANATION:
When Symbol 1 is listed on the Declarations page, the insured is not required to report “newly acquired autos” to the insurer. This is because Symbol 1 covers “any auto”.

Question 11 of 100

Question 12

An HO-5 form provides which of the following coverages for dwellings and their contents?

Broad form perils for buildings and open peril coverage for personal property.
Open peril coverage for buildings and personal property.
Open peril coverage for buildings and broad form coverage for personal property.
Name peril coverage for both buildings and personal property.

Question 12 of 100

Answer 12

An HO-5 form provides which of the following coverages for dwellings and their contents?

Your answer: Open peril coverage for buildings and personal property. is correct.

EXPLANATION:
The HO-5 form is the broadest HO form and provides open peril coverage on both covered buildings and the insured’s personal property.

Question 12 of 100

Question 13

What does the phrase “free on board destination” mean?

Makes the seller responsible to the buyer until the goods have been delivered as agreed.
An ocean term referring to jettison.
The title to the goods to be shipped is transferred to the buyer at the shipping point.
The term is in reference to a cruise ship agreement for passengers.

Question 13 of 100

Answer 13

Your answer: Makes the seller responsible to the buyer until the goods have been delivered as agreed. is correct.

EXPLANATION:
The term is used in two common phrases, “FOB shipping point” and “FOB destination,” to distinguish when the title of goods passes from the seller to the buyer. Under the terms of “FOB shipping point,” the title of the goods passes to the buyer at the shipping point. Similarly, under the terms of “FOB destination,” the title of the goods passes to the buyer when the goods arrive at their destination. The distinction is important because it determines who pays for the shipping costs of the merchandise - whoever holds the title to the merchandise at the time of its shipping pays for its transportation costs unless otherwise noted (e.g., freight prepaid or freight collect). Also, it is important that if the shipment is damaged while traveling the owner must file the freight claim.

Question 13 of 100

Question 14

Tea is applying for a new adjuster license in California. What is the fee she will need to submit with her license application?

$47
$56
$72
$29

Question 14 of 100

Answer 14

Your answer: $72 is correct.

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

Question 14 of 100

Question 15

A Commercial Property Policy on a mortgaged property specifies which of the following responsibilities as a duty of the insured?

To provide a sworn proof of loss statement following a loss if requested by the company
To return the policy if it is canceled by the insurance company
To pay the mortgagee in full in the event of a total loss
Hire a public adjuster to appraise damages

Question 15 of 100

Answer 15

Your answer: To pay the mortgagee in full in the event of a total loss is incorrect. The correct answer is: To provide a sworn proof of loss statement following a loss if requested by the company.

EXPLANATION:
The insured is required to provide a proof of loss to the insurer. If the insured refuses to provide a proof of loss, the mortgagee has this option. In case of a loss, the mortgagee can be paid the amount owed, subject to the policy limit.

Question 15 of 100

Question 16

Before an application for an independent adjuster license is granted, the applicant must meet all of the following requirements, EXCEPT:

The applicant must be at least 21 years of age.
The applicant must have at least two years of experience in insurance claims adjusting.
The applicant must not have committed acts constituting grounds for denial of a license.
Payment of the application fee.

Question 16 of 100

Answer 16

Your answer: The applicant must be at least 21 years of age. is correct.

EXPLANATION:
The applicant must be at least 18 years of age.

Question 16 of 100

Question 17

Sally Roe’s vehicle is rear-ended by John Doe. Sally and John are good friends. Sally tells John not to worry about the damage. She says she has insurance and will tell her insurance company to pay for the damage. She will waive her subrogation right so that John won’t have to pay anything. Her insurer will:

Honor the waiver.
Not honor the waiver.
Proceed with subrogation against John Doe and will not honor the waiver.
Refuse to pay the claim because of the waiver of subrogation.

Question 17 of 100

Answer 17

Your answer: Not honor the waiver. is incorrect. The correct answer is: Proceed with subrogation against John Doe and will not honor the waiver..

EXPLANATION:
Sally does not have to file a claim. She can pay for the damage herself if she chooses. However, she cannot ask her insurance company to pay for her damage without allowing it the right to subrogate. With insurance, subrogation is the substitution of one party (insurer) for another party (insured) to pursue any rights the insured may have against a third party liable for the loss paid by the insurer. Once the insurer has paid for the insured’s (Sally’s) damage, it has the contractual right to recover not only Sally’s deductible, but also the money it paid for Sally’s repairs from the at-fault party (John). Sally cannot “waive” this contractual right.

Question 17 of 100

Question 18

The definition of collapse under the Homeowners program includes:

A gradual falling down of the structure.
Damage caused by vermin known to exist by the insured when the structure collapsed.
An abrupt falling down or caving in of the structure or a part of the structure.
A gradual caving in of the structure.

Question 18 of 100

Answer 18

Your answer: An abrupt falling down or caving in of the structure or a part of the structure. is correct.

EXPLANATION:
The definition defines collapse as an “abrupt falling down or caving in of the structure or a part of the structure.”

Question 18 of 100

Question 19

What is the purpose of an installation floater?

To cover property belonging to a contractor or others that is intended to become a part of a structure
To cover property to be installed at the insured’s location
To cover property that has been installed when the contractor has completed the job and the work has been accepted
To cover the insured’s machinery, tools and other equipment used to install property to become a part of a building

Question 19 of 100

Answer 19

Your answer: To cover property to be installed at the insured’s location is incorrect. The correct answer is: To cover property belonging to a contractor or others that is intended to become a part of a structure.

EXPLANATION:
The policy is used to supplement coverage provided by the commercial property forms. It covers property off an insured’s location and in transit or at the job site awaiting installation or when it has been installed. Coverage ceases when the property has been accepted by the purchaser.

Question 19 of 100

Question 20

If a dwelling insured under an HO-3 is destroyed by fire, what amount should the insured expect to be paid for their loss?

A depreciated value of the dwelling.
The assessed value of the dwelling.
Up to the policy limits.
The market value of the dwelling.

Question 20 of 100

Answer 20

Your answer: Up to the policy limits. is correct.

EXPLANATION:
An insurance company cannot pay in excess of the policy limits. There are 22 states that have a valued policy law in which the company is required to pay the full limit in case of a total loss. For partial losses the insurance company can only pay up to the limits of the policy. The insured would have to prove their loss for the contents damage.

Question 20 of 100

Question 21

If a bond is called upon for payment, which party pays out the face amount of the bond?

Principal
Surety
Obligee
Insured

Question 21 of 100

Answer 21

Your answer: Surety is correct.

EXPLANATION:
The surety (the insurer) pays out the face amount of the bond to the obligee in the event that the bond is called. In that event, the surety will have “right of recourse” against its own principal.

Question 21 of 100

Question 22

All of the following are excluded under the Commercial Crime “Inside the Premises - Theft of Money and Securities” insuring agreement, EXCEPT:

Dishonest acts of customers.
Fire.
Vandalism.
Accounting errors.

Question 22 of 100

Answer 22

Your answer: Fire. is incorrect. The correct answer is: Dishonest acts of customers. .

EXPLANATION:
Fire, vandalism, and accounting errors are specifically excluded in this insuring agreement.

Question 22 of 100

Question 23

Under the CGL policy, all of the following are “insured contracts” as defined by the policy, EXCEPT:

Land and mine surveyor agreements.
Lease of premises agreements.
Railroad sidetrack agreements.
Elevator maintenance agreements.

Question 23 of 100

Answer 23

Your answer: Railroad sidetrack agreements. is incorrect. The correct answer is: Land and mine surveyor agreements..

EXPLANATION:
The CGL policy contains a contractual liability exclusion, which eliminates coverage for risks of others that the insured assumes in any written contract except an “insured contract.” A land and mine surveyor agreement is not an “insured contract.” The other three are covered as “insured contracts.”

Question 23 of 100

Question 24

Losses caused by all of the following are covered under the National Flood Insurance Program, EXCEPT:

Sewer backup.
Overflow of tidal waters.
Mudflow.
Rapid accumulation or runoff of surface water.

Question 24 of 100

Answer 24

Your answer: Sewer backup. is correct.

EXPLANATION:
Flood insurance covers loss caused by an overflow of surface waters. Water that backs up from a sewer or drain or seeps in through foundations and basement walls is not considered a “flood loss”. Most insurance carriers now offer sewer backup coverage as an endorsement on a Homeowners policy.

Question 24 of 100

Question 25

The policy territory under the Commercial General Liability policy is found in which section of the policy?

On the Declarations page.
In the Definitions section.
Under the Limits of Insurance.
In the list of perils insured against.

Question 25 of 100

Answer 25

Your answer: On the Declarations page. is incorrect. The correct answer is: In the Definitions section..

EXPLANATION:
The policy territory is found in the Definitions section of the policy.

Question 25 of 100

Question 26

An insured has her business automobiles covered under a Business Auto policy with Symbol 7 specified on her Declarations page. She has purchased a trailer with a load capacity of 2,500 pounds and hitched it to a covered van. While she is driving the van, the trailer breaks free and crashes into another vehicle, causing bodily injury. Which of the following statements is true regarding this insured’s situation?

Liability coverage is extended under Symbol 7 for a trailer with a load capacity of less than 5,000 pounds, therefore coverage will apply.
Liability coverage is not extended under Symbol 7 for a trailer with a load capacity of more than 2,000 pounds, therefore coverage will not apply.
Liability coverage is excluded for all trailers under the Business Auto Coverage form.
Liability coverage will not apply for the trailer, but coverage for the van will pay the damages awarded under the lawsuit.

Question 26 of 100

Answer 26

Your answer: Liability coverage is extended under Symbol 7 for a trailer with a load capacity of less than 5,000 pounds, therefore coverage will apply. is incorrect. The correct answer is: Liability coverage is not extended under Symbol 7 for a trailer with a load capacity of more than 2,000 pounds, therefore coverage will not apply..

EXPLANATION:
Liability coverage is not extended under Symbol 7 for a trailer with a load capacity of more than 2,000 pounds, therefore coverage will not apply because the load capacity of the trailer in the question is listed at a load capacity of 2,500 pounds.

Question 26 of 100

Question 27

In the event of an emergency situation, a non-licensed independent adjuster must register with the Commissioner within:

48 hours.
30 days.
7 working days.
15 working days.

Question 27 of 100

Answer 27

Your answer: 15 working days. is correct.

EXPLANATION:
In the event of an emergency situation as declared by the Commissioner, claims arising out of the emergency, catastrophe, disaster, or other similar occurrence may be adjusted by a non-licensed adjuster upon registration with the Commissioner. Registration must occur within 15 working days.

Question 27 of 100

Question 28

The Commercial Building & Personal Property coverage form includes an Additional Coverage for property removed from the premises because of being endangered by an insured peril. The coverage lasts for:

30 days after the property is first moved.
5 days after the property is first moved.
10 days after the property is first moved.
15 days after the property is first moved.

Question 28 of 100

Answer 28

Your answer: 30 days after the property is first moved. is correct.

EXPLANATION:
Property removed is covered for up to 30 days after being removed to another location. Removed property is covered for any direct physical loss.

Question 28 of 100

Question 29

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

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

Question 29 of 100

Answer 29

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 29 of 100

Question 30

The “when more than one coverage applies” condition in Commercial Crime insurance is designed to:

Specify how a claim would be allocated among the different insurers.
Allow the insured to choose the company that will pay the claim.
Provide for subrogation of a claim.
Avoid overpayment of a claim.

Question 30 of 100

Answer 30

Your answer: Specify how a claim would be allocated among the different insurers. is correct.

EXPLANATION:
The purpose of the clause is to specify how a claim would be allocated among the different insurers.

Question 30 of 100

Question 31

The insured has suffered roof damage as a result of a tornado. He makes temporary repairs until permanent repairs can be made. He spends $1,500 for this work. How much, if any, will the DP-2 dwelling policy pay?

Nothing
$1,000
$1,500
$500

Question 31 of 100

Answer 31

Your answer: $500 is incorrect. The correct answer is: $1,500.

EXPLANATION:
The policy will pay all of the costs due to the “reasonable repairs” clause in the policy. This pays for the cost to make reasonable repairs in order to protect the property from further loss.

Question 31 of 100

Question 32

After an auto collision loss an insurance company may elect to pay the insured’s claim and take possession of the vehicle. This practice is referred to as:

Salvage.
Subrogation.
Warranty.
Deductible.

Question 32 of 100

Answer 32

Your answer: Salvage. is correct.

EXPLANATION:
Once the insurer has paid a total loss on an auto the salvage belongs to the insurer.

Question 32 of 100

Question 33

Under California law, the degree of care owed to a trespasser by a property owner is not which of the following?

To warn of hidden dangers
Ordinary care
To not set traps
Guarantee safe passage on and off the premises

Question 33 of 100

Answer 33

Your answer: Guarantee safe passage on and off the premises is correct.

EXPLANATION:
Guaranteeing safe passage is not required.

Question 33 of 100

Question 34

Under the California Insurance Frauds Prevention Act (IFPA), facts, circumstances or events which singly, or in combination, support(s) an inference that insurance fraud may be been committed is called:

A suspected fraud occurrence.
A red flag event.
A reasonable belief occurrence.
A willful event.

Question 34 of 100

Answer 34

Your answer: A suspected fraud occurrence. is incorrect. The correct answer is: A red flag event..

EXPLANATION:
Facts, circumstances or events which singly, or in combination, support(s) an inference that insurance fraud may be been committed is called a “red flag” or a “red flag event” in California.

Question 34 of 100

Question 35

If building coverage is provided under the BOP, the coverage will automatically increase each renewal by what percentage?

25%
The current rate of inflation
8%
15% unless a different percentage limit is shown on the declarations page.

Question 35 of 100

Answer 35

Your answer: 15% unless a different percentage limit is shown on the declarations page. is incorrect. The correct answer is: 8%.

EXPLANATION:
The building limit automatic increase is 8% unless a different percentage amount is shown on the declarations page.

Question 35 of 100

Question 36

A licensed independent adjuster has received a written or oral request from the California Department of Insurance concerning a claim. How many days does this adjuster have to respond to the inquiry?

30 days
15 working days
21 calendar days
10 calendar days

Question 36 of 100

Answer 36

Your answer: 15 working days is incorrect. The correct answer is: 21 calendar days.

EXPLANATION:
This adjuster must respond immediately, but no later than 21 calendar days from the date of the request.

Question 36 of 100

Question 37

All of the following statements about HO-8 are correct, EXCEPT:

The policy form is designed for older or historical homes with replacement values that exceed market values.
HO-8 covers the dwelling, other structures, and personal property on a named perils basis.
HO-8 covers the same named perils as the HO-2.
HO-8 is also known as the Modified Coverage Form.

Question 37 of 100

Answer 37

All of the following statements about HO-8 are correct, EXCEPT:

The policy form is designed for older or historical homes with replacement values that exceed market values.
HO-8 covers the dwelling, other structures, and personal property on a named perils basis.
HO-8 covers the same named perils as the HO-2.
HO-8 is also known as the Modified Coverage Form.

Question 37 of 100

Question 38

The insured, who is a chair manufacturer, produced a new line of lift chairs with electric heat and massage for people who are disabled. After the chairs had been on the market for several months, it was discovered that the control panel had been designed with a glitch in it that could be powerful enough to cause injury. The chairs were withdrawn from the market. The retailer who had purchased the chairs lost a great deal of money because of the recall. Under what circumstances, if any, will the insured’s commercial umbrella liability policy cover those losses?

Under no circumstances.
If it is discovered there was no glitch in the control panels.
If it is discovered why there was a glitch in the control panels.
If the manufacturer voluntarily withdrew the chairs from the market.

Question 38 of 100

Answer 38

Your answer: Under no circumstances. is correct.

EXPLANATION:
Product recall is excluded in the policy for product liability. All recall costs must be absorbed by the insured.

Question 38 of 100

Question 39

What is a Reporting Form policy?

The form that must be filled out to report a loss of personal property to the insurer
A policy that requires the insured to report the value of the property insured at certain time intervals
The same as a personal articles floater in that it specifically lists each jewelry item
None of the responses are correct

Question 39 of 100

Answer 39

Your answer: The form that must be filled out to report a loss of personal property to the insurer is incorrect. The correct answer is: A policy that requires the insured to report the value of the property insured at certain time intervals.

EXPLANATION:
A “Reporting Form” policy is one in which the policyholder is required to report the values of insured property to the company at certain intervals. A provisional (deposit) premium is charged initially and the final premium is determined by applying the rate to the average of the values reported. The insured is required to insure the property 100% to value. The insured is also required to report 100% of the value of the insured property.

Question 39 of 100

Question 40

The insured is covered under a HO-5 Policy. What coverage does the insured have for contents coverage?

Broad Form Peril Coverage
Replacement Cost Coverage
Open Peril Coverage
Named Peril Coverage

Question 40 of 100

Answer 40

Your answer: Open Peril Coverage is correct.

EXPLANATION:
The HO-5 Form provides Open Peril Coverage on both structures and contents.

Question 40 of 100

Question 41

What is the purpose of establishing loss reserves?

To determine the exact amount the company expects to pay.
To establish an estimate of the total amount the insurer expects to pay on a claim.
To determine ultimate legal liability.
To estimate the legal expenses to be incurred in a claim situation.

Question 41 of 100

Answer 41

Your answer: To establish an estimate of the total amount the insurer expects to pay on a claim. is correct.

EXPLANATION:
When a loss occurs the insurance company establishes reserves representing what the adjuster estimates will be the total amount that will be paid on the claim. Reserves are constantly reviewed as the claim progresses. Under-reserving of a claim could put the insurance company in financial jeopardy if the practice is routine.

Question 41 of 100

Question 42

All the following are cause for cancellation of an automobile policy in California, EXCEPT:

A subtantial increase in the hazard insured against.
Discovery of a criminal record for a felony.
Nonpayment of premium.
The suspension of the primary insured’s driver’s license.

Question 42 of 100

Answer 42

Your answer: A subtantial increase in the hazard insured against. is incorrect. The correct answer is: Discovery of a criminal record for a felony..

EXPLANATION:
According to the California Insurance Code (CIC 661), discovery of a criminal record for a felony is NOT a reason for cancellation of an auto policy.

Question 42 of 100

Question 43

A Commercial Auto policy can be used to cover which of the following?

A snow mobile.
A semi-trailer.
Mobile equipment that is not subject to compulsory auto financial responsibility.
An unlicensed three-wheeler.

Question 43 of 100

Answer 43

Your answer: A semi-trailer. is correct.

EXPLANATION:
The semi-trailer is the only one that fits the definition of a “vehicle” under a Commercial Auto policy. Mobile equipment must be added by endorsement. The three-wheeler and the snow mobile should be covered under a Recreational Vehicle policy.

Question 43 of 100

Question 44

The Commercial Building and Personal Property Coverage form:

Describes the property to be insured.
Delineates the perils to be insured.
Describes the excluded perils.
Delineates the perils to be insured and describes the exclusions to coverage.

Question 44 of 100

Answer 44

Your answer: Delineates the perils to be insured and describes the exclusions to coverage. is incorrect. The correct answer is: Describes the property to be insured. .

EXPLANATION:
The purpose of this form is to define building, business personal property and property of others. The form does not contain the perils.

Question 44 of 100

Question 45

Which of the following is considered an uninsured motorist under a standard personal automobile policy:

I. A hit and run in which the driver cannot be identified.
II. The insured’s neighbor who backs out of his driveway into the fender of the insured’s car.

I only
II only
Neither I nor II
Both I and II

Question 45 of 100

Answer 45

Your answer: Neither I nor II is incorrect. The correct answer is: I only.

EXPLANATION:
This is one of the items that defines coverage under uninsured motorist coverage. Note that it includes “hit” meaning physical contact. The neighbor backing out of the driveway has insurance for the damage to the insured’s fender. The question does not say the neighbor is uninsured.

Question 45 of 100

Question 46

Which of the following businesses is NOT eligible to be covered by a Businessowners policy?

A credit union.
A commercial office building.
An apartment building with rental units.
A small retail gift shop.

Question 46 of 100

Answer 46

Your answer: An apartment building with rental units. is incorrect. The correct answer is: A credit union..

EXPLANATION:
Credit unions, banks and savings and loan companies are not eligible for the BOP because the crime exposure would be too large for the Businessowners policy to cover. The office building, small gift shop, and apartment building are all acceptable risks for a BOP policy.

Question 46 of 100

Question 47

Which of the following relieves the financial burden on the claimant by making certain payments to the claimant even before the claim is negotiated?

Advance Payment
Rehabilitative Payment
Partial Release Payment
Conditional Partial Release Payment

Question 47 of 100

Answer 47

Your answer: Advance Payment is correct.

EXPLANATION:
Most adjusters are given the authority to make advance payments when liability is clear. This relieves the financial burden on the claimant when funds are needed immediately. The remainder of the claim is negotiated and settled at a later date.

Question 47 of 100

Question 48

Who is not an insured under the CGL form?

The spouse of an individual proprietorship
Spouses of the partners in a partnership
A volunteer hospital candy striper
A person who helps an employee load a truck as a favor

Question 48 of 100

Answer 48

Your answer: A person who helps an employee load a truck as a favor is correct.

EXPLANATION:
Employees, spouses of individual proprietorships, and spouses of partners are insureds while acting in the performance of duties in the named insured’s business. Volunteer workers (a defined term) are also insureds while they are performing duties related to the conduct of the named insured’s business. A person who helps an employee load a truck is not an employee.

Question 48 of 100

Question 49

Under a commercial inland marine form, which of the following is true regarding the appraisal clause?

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 49 of 100

Answer 49

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 49 of 100

Question 50

Commercial Glass Coverage is suspended if, at the time of loss, the building has been vacant for more than:

60 consecutive days.
90 consecutive days.
30 consecutive days.
20 consecutive days.

Question 50 of 100

Answer 50

Your answer: 30 consecutive days. is incorrect. The correct answer is: 60 consecutive days. .

EXPLANATION:
60 days is somewhat the standard for vacancy in commercial insurance.

Question 50 of 100

Question 51

A homeowner who moves into a new house and discovers that it has several major defects, may seek a claim against the contractor’s:

I. Products and completed liability coverage.
II. Owner’s and contractor’s protective liability coverage.

Neither I nor II
I only
II only
Both I and II

Question 51 of 100

Answer 51

Your answer: II only is incorrect. The correct answer is: Neither I nor II.

EXPLANATION:
Although the homeowner may have a valid claim against the contractor, neither liability coverage applies because the damages do not involve either bodily injury and/or property damage.

Question 51 of 100

Question 52

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

Written permission from the Department of Insurance.
A branch manager’s license.
A fidelity bond.
A branch office certificate.

Question 52 of 100

Answer 52

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 52 of 100

Question 53

Under the livestock coverage form, within how many days must newly acquired livestock be added to the policy?

Within 30 days of purchase
Immediately
Within 10 days of purchase
With 5 days of purchase

Question 53 of 100

Answer 53

Your answer: Within 10 days of purchase is incorrect. The correct answer is: Within 30 days of purchase.

EXPLANATION:
Newly acquired livestock must be reported to the insurance company within 30 days of acquisition, at which time an additional premium will be charged the insured.

Question 53 of 100

Question 54

Tamika has her dwelling covered under an HO-8 form in California. She suffers damage to her dwelling by a covered peril. The limit of liability of her HO-8 policy is $60,000. Tamika hires a contractor to make the repairs to her dwelling using common or functionally equivalent materials. The cost of the materials used to repair the dwelling amount to $75,000. Three months following the loss, Tamika submits a claim to recoup the amount she spent to repair her dwelling. How much will her insurance company pay on this claim?

Actual Cash Value (ACV)
$15,000
$75,000
$60,000

Question 54 of 100

Answer 54

Your answer: $60,000 is correct.

EXPLANATION:
The standard HO-8 forms pays only ACV, however the California mandatory special provisions form requires the insurance company to pay the lesser of the limit of liability, or the necessary amount actually spent to repair or replace using common or functionally equivalent materials. Because the limit of liability under Tamika’s HO-8 policy is $60,000, this is the total amount that the insurance company will pay.

Question 54 of 100

Question 55

Under the Section II – Personal Liability of a Homeowner policy, a cemetery plot is considered to be:

An insured location.
The insured premises.
A non-insured location.
A non-insured premises.

Question 55 of 100

Answer 55

Your answer: A non-insured premises. is incorrect. The correct answer is: An insured location. .

EXPLANATION:
In the definitions of the HO policy, a cemetery plot is defined as an insured location.

Question 55 of 100

Question 56

Which of the following businesses would not be affected by the liquor liability exclusion?

A European wine distributor.
Triple-A Liquor Store.
An insurance company offering wine at an open-house for agents.
A grocery store that sells wine.

Question 56 of 100

Answer 56

Your answer: A European wine distributor. is incorrect. The correct answer is: An insurance company offering wine at an open-house for agents..

EXPLANATION:
The policy only provides “host liquor liability” coverage and is not intended to cover any business involved in the manufacturing, sale, or distribution of alcohol.

Question 56 of 100

Question 57

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?

Non owned and Hired Auto
Earthquake
Utility Services - Time Element
Utility Services - Direct Damage

Question 57 of 100

Answer 57

Your answer: Utility Services - Direct Damage is incorrect. 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 57 of 100

Question 58

A couple has volunteered to do the cooking at special events for their church. The church is concerned that one of these volunteers might be injured in the kitchen and wants to protect them in case of an accident. The church maintains workers compensation coverage for its maintenance personnel. What should the church do to provide coverage?

Nothing, as they are covered as employees.
Purchase an accident and health policy.
Add the Voluntary Compensation Endorsement to the workers compensation policy.
Consider them as fully covered under the CGL policy.

Question 58 of 100

Answer 58

Your answer: Consider them as fully covered under the CGL policy. is incorrect. The correct answer is: Add the Voluntary Compensation Endorsement to the workers compensation policy..

EXPLANATION:
In certain states it is not mandatory to cover certain classes of employees. The Voluntary Compensation Endorsement added to the workers compensation coverage would provide the coverage for this exposure. A general liability policy would not cover accidents that occur unless there is negligence on the part of the church.

Question 58 of 100

Question 59

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

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 59 of 100

Answer 59

Your answer: The owner of a hired or non-owned vehicle. is incorrect. 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 59 of 100

Question 60

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?

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 60 of 100

Answer 60

Your answer: The insurer can offer lesser coverage at a lower premium. is incorrect. 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 60 of 100

Question 61

In situations where the insured and the insurer may disagree on the value of an item, it would be best to insure that item as:

Agreed Value
Listed Property
Replacement Cost
Actual Cash Value

Question 61 of 100

Answer 61

Your answer: Replacement Cost is incorrect. The correct answer is: Agreed Value.

EXPLANATION:
An item insured with an “agreed value” eliminates the disagreements between the parties as to the value of an item at the time of a loss.

Question 61 of 100

Question 62

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:

A one-family dwelling.
A two-family dwelling.
A one to four-family dwelling.
A one to two-family dwelling.

Question 62 of 100

Answer 62

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

EXPLANATION:
The Homeowners “Additional Residence Rented to Others” endorsement provides coverage for an additional structure, used as a residence, for one to four families.

Question 62 of 100

Question 63

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

Earthquake endorsement.
Volcanic eruption endorsement.
Collapse endorsement.
Explosion endorsement.

Question 63 of 100

Answer 63

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 63 of 100

Question 64

Which of the following is covered by the NFIP?

Overflow of inland or tidal water.
Vehicles.
A broken water main.
Livestock.

Question 64 of 100

Answer 64

Your answer: Overflow of inland or tidal water. is correct.

EXPLANATION:
Overflow of inland or tidal water is the prime coverage under the NFIP. Mudflow is also covered, mudslides are not. The coverage does not include damage or loss to livestock, vehicles or roads.

Question 64 of 100

Question 65

The theft of money and securities is automatically covered under which of the coverages listed below?

Inside the Premises - Theft of Money and Securities.
Robbery and Safe Burglary.
Premises Burglary.
Business Burglary.

Question 65 of 100

Answer 65

Your answer: Inside the Premises - Theft of Money and Securities. is correct.

EXPLANATION:
Robbery and safe burglary, as well as premises burglary require signs of forcible entry or exit. Theft does not. Remember theft is the broadest definition of criminal activity.

Question 65 of 100

Question 66

What is the purpose of the “sue and labor clause” in ocean marine insurance?

Pertains to protecting the ship and other property from further damage.
Affects the benefits payable to injured crew members.
Provides defense costs from suits from passengers.
A clause in a labor contract with the crewmembers.

Question 66 of 100

Answer 66

Your answer: Affects the benefits payable to injured crew members. is incorrect. The correct answer is: Pertains to protecting the ship and other property from further damage..

EXPLANATION:
The clause provides that in the event of a loss, the insured must immediately take all reasonable steps to minimize the loss and protect the property from further loss. Failure to do so may invalidate the coverage or reduce the amount of any claims.

Question 66 of 100

Question 67

In cases involving the repair of an auto covered under a policy in California, no insurer may:

Require that an automobile be repaired at a specific repair shop.
Require a claimant to travel an unreasonable distance to inspect a replacement automobile, to conduct an inspection of the vehicle or to obtain a repair estimate.
Suggest or recommend that an automobile be repaired at a specific repair shop.
All of the responses are correct.

Question 67 of 100

Answer 67

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

EXPLANATION:
All of the responses are correct.

Question 67 of 100

Question 68

Policies issued under the National Flood Insurance Program provide removal coverage for property which is moved to another location to protect it from a flood. This coverage applies for up to:

45 days.
10 days.
30 days.
60 days.

Question 68 of 100

Answer 68

Your answer: 30 days. is incorrect. The correct answer is: 45 days. .

EXPLANATION:
Removal coverage is designed to avoid loss if the property can be moved elsewhere for protection against flood damage. This coverage is provided for up to 45 days.

Question 68 of 100

Question 69

An insured submits a claim. The adjuster acknowledges receipt of the claim. Nothing more is heard from the adjuster after repeated attempts by the claimant to contact the adjuster. This is considered to be:

An unfair trade practice act
An unfair claims practice act
Misrepresentation of the conditions clause in the policy
An act of discrimination

Question 69 of 100

Answer 69

Your answer: An unfair claims practice act is correct.

EXPLANATION:
Failing to acknowledge with reasonable promptness pertinent communications with respect to a claim is considered an unfair claims practice.

Question 69 of 100

Question 70

An insured has a $2 million limit of insurance under a Personal Umbrella policy with a $2,000 self-insured retention limit. The insured is sued for $1 million in personal injury damages and $1.5 million in property damages arising from the same occurrence. The insured’s underlying liability policies exclude coverage in this case, but the claim is covered under the Umbrella policy. In this case, the umbrella policy will pay:

$1 million of the damages.
$1,998,000 of the damages.
$2 million of the damages.
$2,500,000 of the damages.

Question 70 of 100

Answer 70

Your answer: $2,500,000 of the damages. is incorrect. The correct answer is: $1,998,000 of the damages..

EXPLANATION:
Since the underlying coverage does not apply the insured must pay the $2,000 self-insured retention limit and the Umbrella insurer must pay the rest of the claim.

Question 70 of 100

Question 71

Which of the Commercial Property causes of loss forms provides theft coverage?

I. The Basic form.
II. The Broad form.
III. The Special form.

II only
III only
I, II and III
II and III only

Question 71 of 100

Answer 71

Your answer: I, II and III is incorrect. The correct answer is: III only.

EXPLANATION:
The basic and broad forms are “named perils” forms and do not include the peril of theft. The special form covers all loss unless excluded, and theft is not excluded.

Question 71 of 100

Question 72

An application for an independent adjuster license in California must include:

I. The full name and business address of the applicant.
II. A recent photograph of the applicant and one classifiable set of his or her fingerprints.
III. A verified statement of his or her experience qualifications.
IV. A statement as to the classification or classifications under which the applicant desires to be qualified.

I, II, III and IV
I, II and III only
I, III and IV only
I and II only

Question 72 of 100

Answer 72

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

EXPLANATION:
Two recent photographs of the applicant, of a type prescribed by the Commissioner, and two classifiable sets of his or her fingerprints is required.

Question 72 of 100

Question 73

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

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 73 of 100

Answer 73

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

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

Question 73 of 100

Question 74

Under what circumstances does an insurer allow the transfer of an insured’s rights and duties under a Commercial Package Policy without the permission of the insurer?

When the named insured dies.
When the named insured is in the hospital.
When the named insured is out of the United States.
When the named insured is informed of a terminal illness.

Question 74 of 100

Answer 74

Your answer: When the named insured dies. is correct.

EXPLANATION:
If the named insured dies his or her rights and duties are transferred to the deceased’s legal representative. This occurs automatically, the insurer’s permission is not required.

Question 74 of 100

Question 75

Which of the following perils is not covered under the Commercial Property Basic Cause of Loss form:

Collapse (other than sinkhole collapse).
Sprinkler leakage
Explosion
Sinkhole collapse

Question 75 of 100

Answer 75

Your answer: Sinkhole collapse is incorrect. The correct answer is: Collapse (other than sinkhole collapse)..

EXPLANATION:
The Basic Form does not cover collapse except sinkhole collapse.

Question 75 of 100

Question 76

Commercial property insurance essentially provides protection for: (choose the best answer)

Physical loss
Direct or indirect loss
Intangible loss
Tangible loss

Question 76 of 100

Answer 76

Your answer: Direct or indirect loss is correct.

EXPLANATION:
The commercial property forms can provide direct or indirect loss coverage separately or both together.

Question 76 of 100

Question 77

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

$20,000
$5,000
$2,000
$25,000

Question 77 of 100

Answer 77

Your answer: $2,000 is correct.

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

Question 77 of 100

Question 78

Which of the following statements is correct?

I. Both DP-2 and DP-3 settle losses to covered personal property at actual cash value (ACV).
II. Both DP-2 and DP-3 settle partial losses to covered dwellings at replacement value in all situations.

I only
II only
Both I and II
Neither I nor II

Question 78 of 100

Answer 78

Your answer: I only is correct.

EXPLANATION:
Both DP-2 and DP-3 cover partial dwelling losses at replacement value only if adequate insurance to value is in force. (Adequate insurance to value must be 80% or more of the replacement cost value of the structures.)

Question 78 of 100

Question 79

An insured auto dealer has purchased a Garage policy with physical damage coverage against specified causes of loss. Which of the following losses will not be covered by the policy?

Flood damage to a covered auto.
Vandalism damage to a covered auto.
Damage resulting from the collision of the truck carrying a covered auto with another vehicle.
Explosion.

Question 79 of 100

Answer 79

Your answer: Damage resulting from the collision of the truck carrying a covered auto with another vehicle. is correct.

EXPLANATION:
A specified cause of loss is named perils coverage and collision is not one of the named perils. Collision is a separate physical damage coverage requiring the upset of the covered vehicle, or its impact with another vehicle or object.

Question 79 of 100

Question 80

Which of the following are covered under the Homeowners “Additional Residence Rented to Others” endorsement?

I. Personal Liability (Injury)
II. Medical Payment to Others
III. Dwelling
IV. Personal Property

I and II only.
I, II, III and IV.
I and IV only.
III and IV only.

Question 80 of 100

Answer 80

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

EXPLANATION:
The “Additional Residence Rented to Others” endorsement provides personal liability (injury) and medical payments to others coverage to cover the insured’s liability arising out of the ownership of a residence regularly rented to others.

Question 80 of 100

Question 81

Amelia has suffered a covered collision loss to her vehicle. The insurer requires that her vehicle be repaired at a repair shop of the insurer’s choice. The insurer:

Is guilty of an unfair claims practice act.
Can make this request.
Waives the deductible, if any, in this case.
Can usually get the work done for less and can help to reduce insurance costs.

Question 81 of 100

Answer 81

Your answer: Is guilty of an unfair claims practice act. is correct.

EXPLANATION:
The insurer can recommend a repair shop, but cannot require that a particular shop be used.

Question 81 of 100

Question 82

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.

1,000
500
2,000
750

Question 82 of 100

Answer 82

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 82 of 100

Question 83

The focus of Equipment Breakdown coverage is:

Prevention of loss
Protection from loss
To provide extra coverage over the property policy
To reinforce the explosion and fire perils

Question 83 of 100

Answer 83

Your answer: To provide extra coverage over the property policy is incorrect. The correct answer is: Prevention of loss.

EXPLANATION:
The main focus of this coverage is to prevent loss rather than protection from loss. Proper maintenance of the equipment is required and inspections will be performed to help prevent losses.

Question 83 of 100

Question 84

An adjuster’s report that contains all the facts, evidence and disposition of the claim and is considered to be the final report is known as the:

Full Report.
Field Report.
Interim Report.
Settlement Report.

Question 84 of 100

Answer 84

Your answer: Full Report. is correct.

EXPLANATION:
The “full report” is the third and final report containing all the information gathered.

Question 84 of 100

Question 85

All of the following are common-low duties of an employer under a Workers’ Compensation policy, EXCEPT:

Warn workers of inherent dangers.
Provide a safe working environment.
Assumption of risk.
Provide an adequate number of competent fellow workers.

Question 85 of 100

Answer 85

Your answer: Provide an adequate number of competent fellow workers. is incorrect. The correct answer is: Assumption of risk..

EXPLANATION:
Assumption of risk is a common-law defense if a claim is filed. All of the other three answer choices are common-law duties.

Question 85 of 100

Question 86

What symbol is used for a hired auto in a commercial automobile policy?

Symbol 8.
Symbol 2.
Symbol 5.
Symbol 4.

Question 86 of 100

Answer 86

Your answer: Symbol 8. is correct.

EXPLANATION:
Symbol 8 is used to provide hired auto coverage in a commercial automobile policy. It also includes leased, rented or borrowed.

Question 86 of 100

Question 87

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

Coverage Part.
Common Policy Conditions.
Common Policy Declarations.
None of the responses listed are correct.

Question 87 of 100

Answer 87

Your answer: Common Policy Declarations. 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 87 of 100

Question 88

What type of bond might an executor of an estate be required to purchase?

Cost bond
Completion bond
Fiduciary bond
Performance bond

Question 88 of 100

Answer 88

Your answer: Fiduciary bond is correct.

EXPLANATION:
These are sometimes referred to as court bonds. They are filed in conjunction with court proceedings and are usually required. Some court bonds are referred to as fiduciary bonds and include: 1. Administrators - appointed by the court when a person dies and does not leave a will with an appointed executor. 2. Executors - executes the provisions of a will. 3. Guardians - when parents are deceased, a person is usually appointed by the court to manage and care for the minors and the estate. Sometimes a guardian is appointed for an adult who is incapacitated through mental illness or physical problems. An executor bond guarantees that the will is to be fulfilled in accordance with the desires of the deceased. All funds and other assets must be accounted for and if improperly handled the court will ask that the bond be forfeited.

Question 88 of 100

Question 89

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:

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 89 of 100

Answer 89

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 89 of 100

Question 90

Under workers compensation rules, for an employee to receive temporary disability compensation for the first three days of his disability, his disability period must extend:

14 days.
30 days.
45 days.
60 days.

Question 90 of 100

Answer 90

Your answer: 45 days. is incorrect. The correct answer is: 14 days..

EXPLANATION:
Benefits are retroactive to the day of the injury if the disability lasts 14 days.

Question 90 of 100

Question 91

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

I, II, III and IV
II, III and IV only
I, II and III only
I, II and IV only

Question 91 of 100

Answer 91

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

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

Question 91 of 100

Question 92

The insured is liable for $500,000 in damages for a personal injury claim that is covered under the insured’s primary liability policy. The primary liability policy has a $300,000 limit per occurrence. The insured also has a $1 million Umbrella policy with a $3,000 self-insured retention limit. How would this claim likely be settled?

The primary policy would pay $300,000 and the insured would pay $200,000.
The primary policy would pay $300,000, the insured would pay $3,000, and the Umbrella policy would pay $197,000.
The primary policy would pay nothing; the Umbrella policy would pay the full $500,000.
The primary policy would pay $300,000 and the Umbrella policy would pay $200,000.

Question 92 of 100

Answer 92

Your answer: The primary policy would pay $300,000 and the Umbrella policy would pay $200,000. is correct.

EXPLANATION:
Because the claim is covered with the underlying liability coverage policy, the Umbrella policy picks up and pays the remaining portion of the claim, without the application of the self-insured retention. If the Umbrella policy was required to pay first, the self-insured retention would apply.

Question 92 of 100

Question 93

Which of the following would qualify for the Transportation Expense coverage:

I. Car rental fees incurred by the insured due to physical damage to his covered auto.
II. Loss of use expenses for which the insured is liable because of physical damage to his covered auto.

Both I and II
Neither I nor II
I only
II only

Question 93 of 100

Answer 93

Your answer: Neither I nor II is incorrect. The correct answer is: Both I and II.

EXPLANATION:
Under Coverage D – Transportation Expenses are paid directly to the insured at a rate of $20 a day, up to a maximum of $600. If the vehicle is stolen there is a 48-hour waiting period. The insured can used these funds to offset his/her transportation expenses he is now incurring because he/she cannot use the car due to a covered loss.

Question 93 of 100

Question 94

In the case of a first-party automobile physical damage claim in California, the auto insurance company must exercise its right to inspect the damaged vehicle:

Within 48 hours of receiving the claims notice.
Anytime within 30 days of receiving the claims notice.
Within 7 business days after receiving the notice of claim.
Within 6 business days after receiving the notice of claim.

Question 94 of 100

Answer 94

Your answer: Within 7 business days after receiving the notice of claim. is incorrect. The correct answer is: Within 6 business days after receiving the notice of claim..

EXPLANATION:
The California Fair Claims Settlement Practices Regulations state that if an insurer chooses to exercise its right to inspect the damaged vehicle on a first-party claim, it must do so within 6 business days of receiving the claims notice.

Question 94 of 100

Question 95

Under which of the following claims settlements are the claim invoices presented and paid with no attempt to obtain a separate release?

A partial release.
A walk-away release.
An open-end release.
Structured settlement.

Question 95 of 100

Answer 95

Your answer: A partial release. is incorrect. The correct answer is: A walk-away release..

EXPLANATION:
Under a “walk-away” release, the bills presented are paid with no attempt to obtain a separate release, although the wording on the draft or check may also serve as a form of release. After a certain amount of time has passed with no further contact with the claimant, the file is considered closed.

Question 95 of 100

Question 96

Which of the following is used to minimize small property claims and help to keep insurance premiums low?

A deductible.
A valued policy.
Coinsurance.
Insurable interest.

Question 96 of 100

Answer 96

Your answer: A deductible. is correct.

EXPLANATION:
Deductibles represent the self-insured portion of a property claim. As deductibles increase, premiums decrease.

Question 96 of 100

Question 97

The Ordinance or Law Endorsement can be added to a Homeowners form to increase the amount of coverage in ______ increments, up to ______ coverage.

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 97 of 100

Answer 97

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

EXPLANATION:
Coverage for Ordinance or Law is already included on all Homeowners forms except the HO-8. The Ordinance or Law Endorsement can be attached to the form, increasing the coverage in 25% increments, up to 100% coverage.

Question 97 of 100

Question 98

Which of the following should be insured by an HO-6?

The owners of condominiums and townhouses
A tenant who rents an apartment in a high-rise building
The owner of a ranch-style house
A person who wishes to schedule their valuable jewelry separately on a policy

Question 98 of 100

Answer 98

Your answer: The owners of condominiums and townhouses is correct.

EXPLANATION:
The HO-6 is for owners of condominiums and townhouses.

Question 98 of 100

Question 99

Which of the following is NOT excluded under Section II - Liability of the Businessowners policy?

Aircraft, auto or watercraft bodily injury
Professional services bodily injury
Pollution property damage
Valet services bodily injury

Question 99 of 100

Answer 99

Your answer: Aircraft, auto or watercraft bodily injury is incorrect. The correct answer is: Valet services bodily injury.

EXPLANATION:
Coverage is included for valet service bodily injury claims. However, the coverage only applies to the ways and means of the insured’s premises that are owned or rented and not when the valet service is operating the vehicle on public roads. The vehicle must be one that is not owned, rented or loaned to the insured. Coverage is the same in the general liability form.

Question 99 of 100

Question 100

With Inland Marine insurance, each of the following would be classified as “Instrumentalities of Communication and Transportation,” EXCEPT:

Cargo on long-haul trucks.
Bridges and tunnels.
Power transmission lines.
Pipelines.

Question 100 of 100

Answer 100

Your answer: Power transmission lines. is incorrect. The correct answer is: Cargo on long-haul trucks. .

EXPLANATION:
Cargo in transit would fall under a different category of the nationwide marine definition called “domestic shipments.”

Question 100 of 100

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