Practice Exam Questions V

Question 1

A road construction contractor has mobile equipment that is used in his business. The state has changed the law and now requires some of the equipment to carry liability insurance to comply with the financial responsibility laws of the state. What symbol will the insurance company use to add these items to the insured’s commercial auto policy?

Answer Choices: Select the Correct Answer
Symbol 1.
Symbols 8 and 9.
Symbol 7.
Symbol 19.

Answer 1

Symbol 19. is correct.

The insurance company will use Symbol 19, “mobile equipment subject to compulsory auto financial responsibility.”

Question 2

The Home Business Insurance Endorsement is available to cover certain businesses, when attached to a Homeowners policy. Which of the following coverages is NOT included on this endorsement form?

Answer Choices: Select the Correct Answer
Professional liability coverage.
Coverage for business personal property.
Business liability including the products and completed operations coverage.
Business income and extra expense coverage.

Answer 2

The correct answer is: Professional liability coverage.

EXPLANATION:
Professional Liability coverage must be insured under a separate policy.

Question 3

The limit of liability for the additional coverage under the standardized Homeowners forms for “Credit Card, Electronic Fund Transfer Card or Access Device, Forgery and Counterfeit Money” is:

Answer Choices: Select the Correct Answer
$250.
$500.
$1,000.
$1,500.

Answer 3

The correct answer is: $500.

EXPLANATION:
The standardized Homeowners policies provide $500 of additional coverage for “credit card, electronic fund transfer card or access device, forgery and counterfeit money”. Some states’ statutory forms may increase this coverage, but you are required to know the limits of coverage for both standardized and statutory forms for your state licensing exam.

Question 4

Which of the following statements is NOT TRUE regarding Part B of the personal automobile policy?

Answer Choices: Select the Correct Answer
The coverage limit applies per person.
The coverage limit applies to any one accident.
The coverage includes split limits to cover more than one person, per accident.
The coverage provides for a single limit of liability.

Answer 4

The correct answer is: The coverage includes split limits to cover more than one person, per accident.

EXPLANATION:
Part B of the personal automobile policy does not provide for split limits to cover more than one person per accident.

Question 5

If the insured dies, which of the following is automatically transferred under a Commercial General Liability policy?

Answer Choices: Select the Correct Answer
Premiums.
Rights and duties.
Inspections and surveys.
The liability of the business.

Answer 5

Rights and duties. is correct.

EXPLANATION:
When an insured dies, the rights and duties of that insured are automatically transferred.

Question 6

All of the following are items of information requested on an application for an adjuster license in California, EXCEPT:

Answer Choices: Select the Correct Answer
Two recent photographs.
A verified statement of qualifications.
The full name and business address of the individual applicant.
A list of prior employers.

Answer 6

The correct answer is: A list of prior employers.

EXPLANATION:
A list of prior employers is not requested on an adjuster license application in California.

Question 7

Upon acceptance of a claim in whole or in part and, when necessary, upon receipt of a properly executed release, every insurer, except as otherwise specified in the California Insurance Code (CIC), tender payment of the claim within:

Answer Choices: Select the Correct Answer
15 calendar days.
21 calendar days.
30 calendar days.
45 calendar days.

Answer 7

30 calendar days. is correct.

EXPLANATION:
The claim must be paid within 30 calendar days.

Question 8

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.

Answer 8

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.

Question 9

In California, Surety claims must be accepted or denied within ________ after receipt of the proof of loss.

Answer Choices: Select the Correct Answer
15 days
21 days
35 days
40 days

Answer 9

The correct answer is: 40 days

EXPLANATION:
In California, surety claims must be accepted or denied within 40 days after receipt of the proof of loss.

Question 10

The standardized Dwelling forms allow the insured to bring legal action against the insurer if they have complied with all policy provisions and the action is brought within:

Answer Choices: Select the Correct Answer
2 years after the proof of loss was filed.
2 years after the date of the loss.
3 years after the proof of loss was filed.
1 year after the loss.

Answer 10

The correct answer is: 2 years after the date of the loss.

EXPLANATION:
The standardized Dwelling forms allow the insured to bring legal action against the insurer if they have complied with all policy provisions and the action is brought within 2 years after the date of the loss.

Question 11

The optional coverage for “Employee Dishonesty” under a standard Businessowners policy provides a “discovery period” for the insured to discover the dishonest act and have coverage still apply. Which of the following statements best describes the “discovery period” for this optional coverage?

Answer Choices: Select the Correct Answer
The “discovery period” is three-years from the end of the policy period.
The “discovery period” is one year from the date the dishonest act took place.
The “discovery period” is two years from the date the dishonest act took place.
The “discovery period” is one year from the end of the policy period.

Answer 11

The correct answer is: The “discovery period” is one year from the end of the policy period.

EXPLANATION:
The “discovery period” is one year from the end of the policy period.

Question 12

Which of the following is NOT TRUE regarding the law of agency?

Answer 12

The correct answer is: An agent can act on behalf of a third party to negotiate a contract with the principal.

EXPLANATION:
The law of agency defines a relationship between an agent and their principal. It does not define an agent as someone who negotiates with the principal on behalf of a third party.

Question 13

Mitch is covered by a Personal Auto policy. One night a cow breaks through a fence and is standing on the roadway. Mitch does not see the cow until it is too late and he hits it with his vehicle. Coverage for the damage to Mitch’s vehicle:

Answer 13

The correct answer is: Is provided under Part D - Other Than Collision.

EXPLANATION:
This loss is provided by Part D - Other Than Collision. Although, the definition of the “collision” coverage states that it will cover an impact of the insured’s vehicle with another vehicle or object, the perils specifically listed in the “Other Than Collision” section determines that direct loss by contact with a bird or animal is covered under “Other Than Collision”.

Question 14

The Limited Fungi, Wet or Dry Rot, or Bacteria Coverage endorsement to a Homeowners policy amends Section II in all of the following ways, EXCEPT:

Answer Choices: Select the Correct Answer
The additional coverages of Section II are amended to cover bodily injury to a third party due to an “occurrence” involving fungi, bacteria, and wet or dry rot.
The coverage limit for this endorsement is scheduled on the declarations page of the policy.
The limit of liability for this endorsement is a sub-limit within the total Coverage E limit of the Homeowners policy.
The coverage limit for this endorsement is scheduled on the endorsement form.

Answer 14

The correct answer is: The coverage limit for this endorsement is scheduled on the declarations page of the policy.

EXPLANATION:
The answer choice that is NOT correct is: “The coverage limit for this endorsement is scheduled on the declarations page of the policy.” The coverage limit is scheduled on the endorsement form. Coverage is provided on an aggregate basis.

Question 15

To provide coverage for bodily injury to his farm employees incurred while they are working, Farmer Bill may:

Answer Choices: Select the Correct Answer
Add a Farm Employers Liability endorsement to his Farm Liability policy.
Add a Farm Liability form to his Farm Property form to create a package policy.
Purchase a separate workers’ compensation policy.
Purchase a separate Commercial General Liability policy.

Answer 15

The correct answer is: Add a Farm Employers Liability endorsement to his Farm Liability policy.

EXPLANATION:
To provide coverage for bodily injury to his farm employees incurred while they are working, Farmer Bill may purchase an Farm Employers Liability endorsement to add to his Farm Liability policy.

Question 16

Which of the following is the rule that requires both parties to a loss share the financial burden of the bodily injury or property damage according to their degree of fault?

Answer Choices: Select the Correct Answer
Contributory negligence.
Strict negligence.
Comparative negligence.
Imputed negligence.

Answer 16

The correct answer is: Comparative negligence.

EXPLANATION:
The comparative negligence rule requires both parties to a loss share the financial burden of the claim by each party’s percentage of fault.

Question 17

The insured has suffered a severe storm and some of his trees, shrubs, and plants are heavily damaged by the wind. How much coverage could the insured expect to receive for his claim under his DP-3 Dwelling policy?

Answer Choices: Select the Correct Answer
$500 for each plant, subject to 5% of the Coverage A limit.
$0.
5% of the Dwelling limit.
A total of $500.

Answer 17

The correct answer is: $0.

EXPLANATION:
The Dwelling policy provides an additional coverage for trees, shrubs, and plants. However, the coverage applies for specified perils and “wind” is a peril that is NOT covered for the loss to trees, shrubs, and plants. The insured will not collect anything for this loss.

Question 18

Which of the following statements is TRUE concerning Part A - Liability coverage on a standard Personal Automobile policy?

Answer Choices: Select the Correct Answer
The coverage is “excess” for owned automobiles.
The coverage is provided only for accidents caused by those who are “insureds” under the policy.
It provides for unlimited wage loss coverage.
The minimum required for financial responsibility to cover property damage is $7,000.

Answer 18

The coverage is provided only for accidents caused by those who are “insureds” under the policy. is correct.

EXPLANATION:
Part A of the policy provides third-party coverage for those who are injured in an accident or property damage caused by an “insured” under the policy.

Question 19

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.

Answer 19

The correct answer is: Within 30 days of reaching an agreement with the insured.

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.

Question 20

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

Answer Choices: Select the Correct Answer
Symbol 8.
Symbol 2.
Symbol 5.
Symbol 4.

Answer 20

Symbol 8.

Question 21

The “Employee Theft” insuring agreement of a Crime policy provides coverage for loss to all of the following, EXCEPT:

Answer Choices: Select the Correct Answer
Securities.
Property.
Completed work.
Money.

Answer 21

The correct answer is: Completed work.

EXPLANATION:
The “Employee Theft” insuring agreement does not provide coverage for loss of work.

Question 22

On the way to Europe, heavy seas place a cargo ship in danger of sinking. The crew decides that if they dispose of the heavy equipment they are hauling the ship will not sink. They toss overboard 10 tractors owned by John Deere. The cartons of tissues owned by Kleenex Corporation are safe as is the whipped marshmallow cream being shipped for Kraft Foods. When they get to Europe, Kleenex and Kraft are asked to share in the loss that John Deere sustained. This is an example of:

Answer Choices: Select the Correct Answer
Demurrage.
Jettison.
Free of Particular Average Clause.
General Average Clause.

Answer 22

General Average Clause. is correct.

EXPLANATION:
This would be an example of the use of the “general average clause” where everyone shares in the loss to save and preserve the ship and its cargo.

Question 23

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.

Answer 23

The roof and the personal property located inside the covered dwelling. is correct.

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”.

Question 24

The California Insurance Adjuster Act requires that all nonlicensed adjusters must complete the reading of the handbook no later than ___________ from the date on which they began claims adjusting activity in the state.

Answer Choices: Select the Correct Answer
15 business days
180 business days
15 calendar days
180 calendar days

Answer 24

15 calendar days is correct.

EXPLANATION:
The California Insurance Adjuster Act requires that all nonlicensed adjusters must complete the reading of the handbook no later than 15 calendar days from the date on which they began claims adjusting activity in the state.

Question 25

All of the following statements are true regarding state Guaranty Associations, EXCEPT:

Answer Choices: Select the Correct Answer
The Association covers the claims of insurers that become insolvent in the state.
The Association assesses admitted insurers a percentage of net premiums written in the state to finance the fund.
The fund assists insurers in gaining new insurance business by allowing them to advertise their membership in the Guaranty Association.
The fund pays the workers compensation claims of an insolvent insurance in full with no limit.

Answer 25

The correct answer is: The fund assists insurers in gaining new insurance business by allowing them to advertise their membership in the Guaranty Association.

EXPLANATION:
The fund does NOT assists insurers in gaining new insurance business by allowing them to advertise their membership in the Guaranty Association. In fact, the Association prohibits insurers from advertising that they are a member of the Guaranty Association.

Question 26

Which of the following endorsements must be attached to a standard Businessowners policy for coverage to apply to a businesses freezer that was damaged by the interruption of a power source?

Answer Choices: Select the Correct Answer
Business Personal Property endorsement.
Protective Safeguards endorsement.
Utility Services - Time Element endorsement.
Utility Services - Direct Damage endorsement.

Answer 26

Utility Services - Direct Damage endorsement. is correct.

EXPLANATION:
The Utility Services - Direct Damage endorsement would cover the direct damage to the freezer caused by the power interruption, as long as the freezer was specifically listed on the endorsement.

Question 27

Mason has suffered a $42,000 loss to his commercial building due to fire. The building is covered under the Building & Personal Property coverage form and had been vacant for 74 days. The insurer would have paid the entire loss if the building had been occupied, but what will they pay because the insured building was considered vacant?

Answer Choices: Select the Correct Answer
$28,980.
$42,000.
$6,300.
$35,700.

Answer 27

$35,700. is correct.

EXPLANATION:
For a loss that would otherwise be covered for the full amount, a reduction of 15% is taken off the claims payment because the building was considered vacant. 15% of $42,000 is $6,300. If $6,300 is subtracted from $42,000, the insured would receive $35,700.

Question 28

Which of the following statements is TRUE regarding the peril of theft under the Homeowners policies?

Answer Choices: Select the Correct Answer
Theft from a dwelling being rented is covered.
The HO-8 form specifies a limit of $1,000 for theft.
Theft of watercraft off the insured premises is covered for up to $5,000.
All of the HO forms provide coverage for the broader definition of theft known as “mysterious disappearance”.

Answer 28

The HO-8 form specifies a limit of $1,000 for theft. is correct.

EXPLANATION:
The only true statement in the answer choices is: “The HO-8 form specifies a limit of $1,000 for theft.” Theft from any part of the dwelling that is being rented is not covered, theft of watercraft is not covered except with a special limit of liability under Coverage C, which is less than $5,000. Only the HO-5 provides coverage for mysterious disappearance.