Practice Exam Questions I Flashcards
If an adjusting firm intends to add a new branch office in California, what action must be taken to comply with the state insurance code?
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.
The correct answer is: Must first obtain a branch office certificate.
EXPLANATION:
Adjusters cannot conduct business from any location other than that shown on the records of the Commissioner as his/her place of business unless he or she has received a branch location certificate for that location.
Under which of the following scenarios would damage to a watercraft be covered under a Homeowners policy?
Answer Choices: Select the Correct Answer
The insured’s covered watercraft is located in an storage facility with three walls surrounding it, and excessive wind enters the facility and causes damage to the boat.
The insured’s covered watercraft is located in an enclosed building, but the wind blows off the roof and rain enters the boat and ruins the dashboard.
The insured’s covered watercraft is stored in the insured’s garage, the insured leaves the garage door up and a large thunderstorm comes through the area, causing water and wind damaged to the boat.
The insured’s covered watercraft was damaged while tied to the insured’s dock when large waves bring water into the boat and ruin the dashboard.
The correct answer is: The insured’s covered watercraft is located in an enclosed building, but the wind blows off the roof and rain enters the boat and ruins the dashboard.
EXPLANATION:
Watercraft is covered under a Homeowners policy for the perils of “windstorm or hail” but only if the boat is located inside a fully enclosed building when the damage occurs.
Part One of the NCCI standard workers’ compensation policy specifies the:
Answer Choices: Select the Correct Answer
The schedule showing the dollar limit of the policy coverage.
Amount of coverage that federal programs will pay.
Statutory provisions of the policy.
The schedule showing the dollar amount paid for exemplary damages.
Statutory provisions of the policy. is correct.
EXPLANATION:
Part One of the standard workers’ compensation policy specifies the statutory (state-specific) provisions of the policy.
Temporary total disability benefits are paid under which section of the NCCI standardized workers’ compensation policy?
Answer Choices: Select the Correct Answer
Part Two.
Part Four.
Part One.
Part Three.
Part One. is correct.
EXPLANATION:
Part One of the standardized workers’ compensation policy is the part of the policy where you will find the statutory benefits paid. Temporary total disability benefits are statutory benefits.
Which of the following statements BEST describes how coverage will apply under a Commercial General Liability policy when a product is manufactured in the United States and a claim occurs in Italy?
The correct answer is: The policy will pay the claim but only if the lawsuit is brought within the policy’s coverage territory.
An insured has his dwelling covered under a DP-2 policy. A 100-year snow storm hit the area where his covered dwelling is located and the weight of the ice and snow caused the roof to cave in. This caused extensive damage to the roof, the personal property inside the dwelling, the foundation of the home, the walkway leading to the outdoor swimming pool, and the pool itself. Which of the following damaged property would be covered by the policy?
Answer Choices: Select the Correct Answer
The roof and the personal property located inside the covered dwelling.
The roof and the foundation of the home. All other damaged items are specifically excluded.
The roof, personal property, and swimming pool. The foundation of the home and the walkway are excluded.
The roof, the foundation, and the walkway are all covered as part of the structure.
The correct answer is: The roof and the personal property located inside the covered dwelling.
EXPLANATION:
The roof and the personal property inside the home are covered. All the other answer choices include items that are specifically excluded under the broad form peril “Weight of Ice, Snow or Sleet”.
Under a standardized Identity Fraud Expense endorsement, what is the maximum amount that will be paid, PER DAY, for lost income?
Answer Choices: Select the Correct Answer
$250
$500
$200
$150
The correct answer is: $200
EXPLANATION:
The maximum amount that will be paid for the income lost for time taken to meet with law enforcement officials, or to complete affidavits is $200.
Which of the following coverages is included as “no-fault” coverage on the standardized Personal Auto policy?
The correct answer is: Medical Payments and Physical Damage.
EXPLANATION:
Part B - Medical Payments and Part D - Physical Damage coverage are both “no-fault” coverages provided by the standardized Personal Automobile policies.
The insuring agreement of a Personal Umbrella policy provides coverage for all of the following, EXCEPT:
Answer Choices: Select the Correct Answer
Personal injury damages for which the insured is legally liable for personal injury in excess of the retained limit.
Damages for which the insured is legally liable for bodily injury and property damage in excess of the retained limit.
Postjudgment interest that accrues after the entry of a judgment.
Defense costs in addition to the policy limits.
The correct answer is: Postjudgment interest that accrues after the entry of a judgment.
EXPLANATION:
Postjudgment interest is NOT covered under the insuring agreement of a Personal Umbrella policy.
All of the following statements are TRUE regarding an interline endorsement used in a Commercial Package policy (CPP), EXCEPT:
Answer Choices: Select the Correct Answer
It can apply to one or more coverage parts.
It may be a mandatory endorsement.
It may be an optional endorsement.
It can apply to two or more coverage parts.
The correct answer is: It can apply to one or more coverage parts.
EXPLANATION:
Interline endorsements are used in the CPP to simplify coverages and conditions among many different forms and apply only to two or more coverage parts.
Corinne has submitted her California Adjuster license application and fee. Now, she is required to pay the fee for an original license. The amount of this fee is:
The correct answer is: $188.
EXPLANATION:
The fee for the original license fee is $188.
Farmer Alex has his credit card stolen while he is at the farmer’s market one day. The thief charges $2,000 to the card before Alex can cancel the card. Which of the following statements best describes how Alex’s loss would be covered under his Farm Property policy?
The correct answer is: His loss would be covered under the additional coverages.
EXPLANATION:
Alex’s loss would be covered under the Additional Coverage - Credit Card and Electronic Fund Transfer Cards or Other Access Devices; Forgery; or Counterfeit Currency.
In California, for an injured employee to receive temporary disability workers compensation for the first three days of disability, the disability period must extend beyond:
The correct answer is: 14 days.
EXPLANATION:
Total disability compensation for the first three days of disability is not payable unless the disability continues for more than 14 days.
Gavin, the named insured under a Personal Auto policy, his daughter Tabitha, and two of her friends are riding in the covered auto when Gavin accidentally runs a stop sign, striking another vehicle. Everyone in Gavin’s vehicle was injured as well as the driver and two passengers in the other car. How long do Tabitha’s friends have to submit their medical expense claims for coverage under Part B of Gavin’s standardized Personal Auto policy?
Answer Choices: Select the Correct Answer
Within six months of the date of the accident.
Within two years of the date of the accident.
Within three years of the date of the accident.
Within 18 months of the date of the accident.
The correct answer is: Within three years of the date of the accident.
EXPLANATION:
Reasonable medical and funeral expenses will be paid under Part B - Medical Payments if they are submitted within three years of the date of the accident.
Which of the following statements is TRUE regarding the “Indentity Fraud Expense” endorsement to a Homeowners policy?
Answer Choices: Select the Correct Answer
It provides $5,000 to cover the expenses incurred as the direct result of any one “identity fraud” event first discovered during the policy period.
It provides $15,000 to cover the expenses incurred as the direct result of any number of “identity fraud” events occurring during the policy period.
It provides $5,000 to cover the expenses incurred as the direct result of any number of “identity fraud” events occurring during the policy period.
It provides $15,000 to cover the expenses incurred as the direct result of any one “identity fraud” event first discovered during the policy period.
The correct answer is: It provides $15,000 to cover the expenses incurred as the direct result of any one “identity fraud” event first discovered during the policy period.
EXPLANATION:
The Identity Fraud Expense endorsement provides $15,000 to cover the expenses incurred as the direct result of any one “identity fraud” event first discovered during the policy period.
An insured has purchased BAP physical damage coverage against specified causes of loss. Protection applies to all of the following perils, EXCEPT:
The correct answer is: Falling objects.
EXPLANATION:
This is named peril coverage (specified causes of loss) and is not nearly as broad as comprehensive coverage. This coverage form names the perils that will be covered and falling objects is not a named peril. Comprehensive covers anything other than collision.
Which of the following would be considered compensatory special damages paid to an injured party when the insured is negligent and causes the injury?
Answer Choices: Select the Correct Answer
Pain and suffering.
Loss of services.
Lost wages.
Disfigurement.
Lost wages. is correct.
EXPLANATION:
Compensatory special damages are awarded to an injured party for the economic losses such as lost wages caused by a negligent party.
The deductible under the NFIP Emergency Program for coverage over $100,000 is:
Answer Choices: Select the Correct Answer
$1,500.
$2,000.
$1,250.
$1,000.
$2,000. is correct.
EXPLANATION:
$2,000 is the standard deductible for NFIP coverage over $100,000.
Rick lives in a major metropolitan city and does not own a car because he takes public transportation. However, when Rick leaves the city to visit his friend Bob, he often drives Bob’s car. Rick feels he should have some type of liability insurance to provide coverage when he is driving. Rick should purchase:
Answer Choices: Select the Correct Answer
Drive Other Car coverage.
Named Nonowner coverage.
Individual Named Insured coverage.
Extended Nonowned coverage.
The correct answer is: Named Nonowner coverage.
EXPLANATION:
The Named Nonowner Coverage endorsement would provide Rick with liability coverage (along with Medical Payments & Uninsured Motorist) while driving a nonowned (borrowed or rented) vehicle.
Which of the following statements is NOT true regarding the insurer’s request for an “examination under oath” when investigating a claim?
Answer Choices: Select the Correct Answer
An EUO is usually requested by the insurer while investigating a first-party claim.
An EUO is requested by an insurance company only when they feel the insured’s account of the claim circumstances are questionable.
The insured has a duty under their policy to submit to an EUO if the insurer requests it.
An EUO is usually requested by the insurer while investigating third-party claims to determine the truthfulness of the claimant’s account of their injuries.
The correct answer is: An EUO is usually requested by the insurer while investigating third-party claims to determine the truthfulness of the claimant’s account of their injuries.
EXPLANATION:
The statement: “An EUO is usually requested by the insurer while investigating third-party claims to determine the truthfulness of the claimant’s account of their injuries.” is not true because EUOs are used only with first-party claims.
The Watercraft Endorsement to the Homeowners policy provides:
Answer Choices: Select the Correct Answer
Workers Compensation coverage for the crew of a scheduled sailing vessel.
Watercraft Physical Damage coverage.
Liability and Medical Payments coverage that would otherwise be excluded under the Homeowners policy.
Coverage for small canoes and kayaks
The correct answer is: Liability and Medical Payments coverage that would otherwise be excluded under the Homeowners policy.
EXPLANATION:
The Watercraft Endorsement provides Liability and Medical Payments coverage that would otherwise be excluded under the Homeowners policy for watercraft.
Which of the following statements is NOT TRUE regarding the Valuable Papers and Records coverage extension of the Businessowners policy?
Answer Choices: Select the Correct Answer
The insurance must be covered for business personal property before the coverage extension for valuable papers and records will apply.
The coverage will apply at each location described in the Declarations.
Coverage will apply to research, replace, or restore the information contained on/in valuable papers or electronic or magnetic records.
The maximum amount that will be paid for the valuable papers and records extension is $5,000 of coverage at each location.
The correct answer is: The maximum amount that will be paid for the valuable papers and records extension is $5,000 of coverage at each location.
EXPLANATION:
The statement that is NOT TRUE is: “The maximum amount that will be paid for the valuable papers and records extension is $5,000 of coverage at each location.” The amount is $10,000.
Noemi is a fashion designer who owns a company that sells her designs to high-end boutiques. She has her company automobiles covered by a standard Business Auto policy. Noemi has decided to rent a villa in the south of France for two months so she can work with some French designers to create a new line of handbags. When Noemi arrives in France, she rents a cute convertible that she drives for the duration of her stay. Noemi is driving the car back to the airport to return it and catch her flight back to the United States when she has an “at-fault” accident and injures several people. The injured people file a lawsuit against Noemi in a French court. Which of the following statements best describes how coverage will apply under Noemi’s Business Auto policy?
Answer Choices: Select the Correct Answer
Coverage will apply because Section II of the BAP provide world-wide liability coverage for private passenger autos that the insured hires, leases, rents, or borrows without a driver.
Coverage will not apply because the policy only covers automobiles while they are being driving in the coverage territory.
Coverage will not apply because Section II of the BAP only provides world-wide liability coverage for private passenger autos that the insured hires, leases, rents, or borrows without a driver, for 30 days or less.
Coverage will apply for the rented automobile on a world-wide basis and the insurer has the duty to defend Noemi no matter where the suit is brought.
The correct answer is: Coverage will not apply because Section II of the BAP only provides world-wide liability coverage for private passenger autos that the insured hires, leases, rents, or borrows without a driver, for 30 days or less.
EXPLANATION:
Coverage will not apply because Section II of the BAP only provides world-wide liability coverage for private passenger autos that the insured hires, leases, rents, or borrows without a driver, FOR 30 DAYS OR LESS, and the question states that Noemi was in France for two months and her accident occurred on the final day of her stay. There would be no duty to defend because coverage does not apply.
Which of the following common law defenses of employers with regard to workers’ compensation claims is specifically barred from use by the laws of some states?
The correct answer is: Negligence of a fellow worker.
EXPLANATION:
The negligence of a fellow worker is a common law defense of employers that the laws of several states bar it from being used.
Lawrence’s business is covered by a Business Auto policy and carries the required liability limit for his state of $30,000 for bodily injury to all persons. Lawrence drives the truck to another state where the financial responsibility limit is $50,000 for bodily injury to all persons. While in the other state, Lawrence has an at-fault accident and injures 3 people who sue for $60,000 in total damages. How much will Lawrence’s Business Auto policy pay on this claim?
The correct answer is: $50,000.
EXPLANATION:
Lawrence’s policy will automatically pay the financial responsibility limit for the state in which Lawrence was driving, which would be $50,000. Lawrence would have to pay the remaining $10,000 out of pocket. This is due to the coverage extension that modify’s the policy’s liability coverage limit to meet another states’ minimum required limits when the covered auto is being driven in that state.
The Homeowners “additional coverages” includes coverage up to __________ for grave markers including mausoleums on or away from the residence premises by a peril insured against.
Answer Choices: Select the Correct Answer
$5,000.
$1,000.
$2,500.
$1,500.
$5,000. is correct.
EXPLANATION:
The Homeowners policies provide as an additional coverage, up to $5,000 for this coverage. The perils insured against are listed in Coverage C.
Under “Coverage A - Building” of the BOP form, which of the following is NOT covered?
Answer Choices: Select the Correct Answer
Completed additions, and additions under construction.
All permanently installed fixtures, machinery and equipment.
Outdoor fixtures.
Valuable papers and records.
The correct answer is: Valuable papers and records.
EXPLANATION:
Valuable papers and records are NOT included in Coverage A - Building. If business personal property is insured there is a limited amount of coverage ($10,000) provided under the extensions of coverage. Permanently installed fixtures, machinery, and equipment, outdoor fixtures, and completed additions and additions under construction are all considered “buildings” by definition.
The limit of liability under an HO-4 form is based on the primary amount of insurance for:
Answer Choices: Select the Correct Answer
Coverage A.
Coverage B.
Coverage C.
Coverage D.
The correct answer is: Coverage C.
EXPLANATION:
The limit of liability for all coverages under an HO-4 form are based on the primary amount of insurance for Coverage C because the HO-4 form provides coverage for personal property.
When an insured submits a claim under a Commercial Inland Marine policy, the insurer must pay the claim:
Answer Choices: Select the Correct Answer
Within 15 days of reaching an agreement with the insured.
Within 30 days of reaching an agreement with the insured.
Within 45 days of reaching an agreement with the insured.
Within 60 days of reaching an agreement with the insured.
Within 30 days of reaching an agreement with the insured. is correct.
EXPLANATION:
When an insured submits a claim under a Commercial Inland Marine policy, the insurer must pay the claim within 30 days of reaching an agreement with the insured.
All of the following statements are correct regarding the insurer’s right to “examine under oath” as specified in the Building and Personal Property coverage form, EXCEPT:
Answer Choices: Select the Correct Answer
The insurer has the right to examine any insured under oath, while not in the presence of any other insured.
The insurer has the right to examine any insured under oath, but only if the claimant has brought a lawsuit against the insurer.
The insurer has the right to examine the related books and records of the insured, as part of the examination under oath.
All answers provided in an “examination under oath” must be signed by the insured.
The insurer has the right to examine any insured under oath, but only if the claimant has brought a lawsuit against the insurer. is correct.
EXPLANATION:
The answer choice that is NOT TRUE regarding an “examination under oath” is: “The insurer has the right to examine any insured under oath, but only if the claimant has brought a lawsuit against the insurer.” The insurer can request an examination under oath at a time and place that is agreeable to both parties.
Which of the following businesses can cover their private passenger and commercial automobile exposures with a Business Auto policy?
Answer Choices: Select the Correct Answer
An auto dealership.
A trucking company.
A grocery store.
A motor carrier company that delivers cargo.
The correct answer is: A grocery store.
EXPLANATION:
The grocery store is the only type of business listed in the answer choices that can be covered by the Business Auto policy.
Which of the following would be covered by the Earthquake Endorsement to a Homeowners policy?
The correct answer is: Tremors that accompany a volcanic eruption.
EXPLANATION:
Damage caused by tremors that accompany a volcanic eruption are covered. All of the other answer choices are specifically excluded.
Nina has the “Preservation of Property” additional coverage included in her standard Businessowners policy. How long does coverage apply while the property is being stored at another location?
Answer Choices: Select the Correct Answer
45 days from the day the property was first moved.
30 days from the day the claim was filed.
60 days from the day the claim was filed.
30 days from the day the property was first moved.
The correct answer is: 30 days from the day the property was first moved.
EXPLANATION:
The additional coverage provides open peril coverage for 30 days when property is removed to protect it from damage from a covered peril such as fire.
Claims adjusters have a close relationship to the legal profession but must be careful not to become involved in the unauthorized practice of law. Which of the following would be an example of an adjuster who is engaged in the unauthorized practice of law?
Answer Choices: Select the Correct Answer
The adjuster has transmitted settlement offers on behalf of the principal.
The adjuster has managed claims in compliance with their state’s adopted Unfair Claim Settlement laws.
The adjuster has expressed an opinion, formed from a factual analysis, regarding the extent of damage or injury.
The adjuster has drafted the legally binding settlement papers on a claim.
The correct answer is: The adjuster has drafted the legally binding settlement papers on a claim.
EXPLANATION:
Adjuster are not permitted to draft any document that is intended to have a legally binding effect.
