Section 2 practice quiz

Question 1

There are no binders issued in:

Life policies in excess of 1 million
life insurance
in health insurance
Any of the above

Answer 1

Binders or not issued in the class of life insurance or disability insurance or in policiens in excess of 1 million. In life and disability insurance, the coverage becomes effective once issued by the company, and according to the terms of the conditional receipt, if any. Binders are issued in P ./C insurance when the agent accepts the premium and issues a binder that makes the policy in full force and effect that day. The company then has 60 days to investigate and either issue the policy or decline it.

“Any of the above”

Question 2

Which of the following is NOT an action a person performs when transacting insurance?
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Incorrect Answer
Any transactions that later result from the operation of the contract
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Calling an insurer for a price quote
Incorrect Answer
Solicitation of insurance
Incorrect Answer
The actual execution of a contract

Answer 2

Rationale - When a person performs any of the following actions, he/she is transacting insurance: actual execution of a contract; negotiations preliminary to the execution of a contract; solicitation of insurance.

Calling an insurer for a price quote

Question 3

In a legal relationship, which authority does a principal (company) give the agent in writing?

Customary authority
Correct AnswerYou Selected This Answer
Express authority
Incorrect Answer
Apparent authority
Incorrect Answer
Implied authority

Answer 3

Rationale - Express authority is the specific authority a principal gives to the agent in writing.

Question 4

A person licensed as a broker/agent shall be deemed to be:
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acting as an insurance agent in the transaction of insurance placed with those for whom a notice of appointment has been filed with the Commissioner
Incorrect Answer
responsible for deciding if an application should be approved or rejected
Incorrect Answer
involved in the business of financing the purchase of real estate
Incorrect Answer
acting with the same authority granted a managing general agent

Answer 4

Rationale - A person licensed as a broker-agent shall be deemed to be acting as an insurance agent in the transaction of insurance placed with those insurers for whom a notice of appointment has been filed with the Commissioner.

acting as an insurance agent in the transaction of insurance placed with those for whom a notice of appointment has been filed with the Commissioner

Question 5

A broker can transact all of the following EXCEPT:
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Life, health, and disability insurance
Incorrect Answer
Casualty insurance
Incorrect Answer
Personal Lines
Incorrect Answer
Property insurance

Answer 5

Rationale - A broker is any person who transacts insurance, other than life, disability, health and 24 hr. care coverage with insurance companies on behalf of clients.

Life, health, and disability insurance

Question 6

When dealing with insurance in connection with sales or loans, violating the legal provisions specified by California law is considered a:
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misdemeanor
Incorrect Answer
felony
Incorrect Answer
fine
Incorrect Answer
penalty

Answer 6

Rationale - This violation is a misdemeanor.

Question 7

The underwriting process consists of all of the following basic steps except:
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Incorrect Answer
Monitor the decision
Incorrect Answer
Gather necessary information
Incorrect Answer
Implement the decision
Correct AnswerYou Selected This Answer
Issue the rate

Answer 7

Rationale - The underwriting process consists of four basic steps: Gather any necessary underwriting information, make the underwriting decision, implement the decision and monitor the decision. Issuing the rate is not one of the steps in the underwriting process.

Question 8

Binders can be extended how many additional days?
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Incorrect Answer
90 days
Incorrect Answer
150 days
Correct AnswerYou Selected This Answer
60 days
Incorrect Answer
30 days

Answer 8

Rationale - Binders are good up to 90 days, can be extended 60 days for 150 days total.

Question 9

Which marketing system does the insurer not own the expiration list?
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Incorrect Answer
Direct writing system
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An independent agency
Incorrect Answer
A internet
Incorrect Answer
A direct mail system

Answer 9

Rationale - The independent agency system the agent/agency owns the expiration/client list.

Question 10

The application is the document that:
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states the name of the insured, the premium, and other facts that help the insurer decide whether to accept or reject it.
Incorrect Answer
shows proof of insurance.
Incorrect Answer
serves as a temporary contract that usually lasts 30 days.
Incorrect Answer
shows the insured has coverage currently in force.

Answer 10

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Rationale - The application is the document on which the applicant states facts and answers questions regarding the insurance he wants to purchase.

states the name of the insured, the premium, and other facts that help the insurer decide whether to accept or reject it.

Question 11

Which of the following is not true about the relationship between an agent and a solicitor?
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Incorrect Answer
An agent represents the company, whereas the solicitor is an assistant to an agent and has no binding authority.
Incorrect AnswerYou Selected This Answer
A solicitor cannot be employed by more than one fire and casualty broker/agent at the same time.
Correct Answer
An agent or broker cannot transact as a solicitor, but a solicitor can transact as a broker or agent.
Incorrect Answer
A solicitor may give premium quotes over the phone, just like an agent.

Answer 11

Rationale - An agent or broker cannot transact as a solicitor and a solicitor cannot transact as a broker or agent.

An agent or broker cannot transact as a solicitor, but a solicitor can transact as a broker or agent.

Question 12

In which of the following marketing distribution systems does the agent represent more than one insurer and more than one company?
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Incorrect Answer
Direct mailing system
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Independent agency
Incorrect Answer
Direct writing system
Incorrect Answer
Exclusive agency

Answer 12

Rationale - An independent agency operates with a broker or brokers with several appointments at different companies. This broker is able to shop for the best prices and coverage.

Question 13

In which system is the agent considered an employee?
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Direct writing system
Incorrect Answer
None of these
Incorrect Answer
A direct response system
Incorrect Answer
Exclusive agency system

Answer 13

Rationale - Direct writing system uses sales representatives who are considered employees.

Question 14

Any person who transacts insurance without a valid license is guilty of a misdemeanor, punishable by a fine not exceeding ______.
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Incorrect Answer
$25,000
Incorrect Answer
$20,000
Correct AnswerYou Selected This Answer
$50,000
Incorrect Answer
$10,000

Answer 14

Rationale - Any person who transacts insurance without a valid license is guilty of a misdemeanor, punishable by a fine not exceeding $50,000 or by imprisonment in a county jail for a period not exceeding one year, or by both fine and imprisonment.

Question 15

Which of the following actions would not be considered transacting insurance?
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Incorrect Answer
Emailing a prospect a auto quote.
Incorrect Answer
Giving a price quote over the phone.
Incorrect Answer
Collecting premium for a policy.
Correct AnswerYou Selected This Answer
Handing a prospect a business card and asking them for information.

Answer 15

Rationale - When a person performs any of the following actions, he/she is transacting insurance: The actual execution of a contract; Negotiations preliminary to the execution of a contract; Solicitation of insurance; Any transactions that later result from the operation of the contract. Just handing out a business card would not be considered transacting insurance.

Handing a prospect a business card and asking them for information.

Question 16

A solicitor holds which license?
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Either P&C broker-agent or Personal lines broker-agent
Incorrect Answer
Personal lines broker-agent
Incorrect Answer
P&C broker-agent
Incorrect Answer
A solicitor’s license

Answer 16

Rationale - A solicitor can be licensed as either a P&C or Personal lines broker-agent.

Question 17

Errors and omissions is a type of liability insurance:
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Incorrect Answer
that indemnifies a client.
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that agents use to protect themselves if they give incorrect advice or information to a client.
Incorrect Answer
for insured`s to use to protect themselves against a claim loss.
Incorrect Answer
for protection against misrepresentation when filing a declaration page.

Answer 17

Rationale - Errors and omissions is a type of coverage of liability insurance for nonmedical professionals that pays for losses or the defense of suits that might be filed against them.

that agents use to protect themselves if they give incorrect advice or information to a client.

Question 18

If an agent gives incorrect advice or unknowingly provides incorrect information to the client, which of the following liability insurance policies for nonmedical professionals is available to pay for losses or defend lawsuits that might be filed against him?
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Incorrect Answer
Medical Insurance
Correct AnswerYou Selected This Answer
Errors and Omissions
Incorrect Answer
Liability insurance
Incorrect Answer
Nonadmitted

Answer 18

Rationale - Errors and omissions is a type of liability insurance for non-medical professionals. It will pay for losses or the defense of lawsuits that might be filed against them.

Question 19

Which of the following would not require a license?
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Insurance Adjuster
Incorrect Answer
All require a license
Incorrect Answer
Public Adjuster
Incorrect Answer
Independent Adjuster

Answer 19

Rationale - Insurance adjuster is an employee of the insurer and not required to be licensed.
Insurance Adjuster

Question 20

A _____________ licensee is authorized to transact ONLY the following lines of insurance: Automobile, recreational vehicles (noncommercial purposes), personal watercraft, residential property, earthquake, flood, inland marine, umbrella (excess liability).
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Incorrect Answer
Limited Lines Automobile
Incorrect Answer
Fire and Casualty
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Personal Lines
Incorrect Answer
Life Only

Answer 20

Rationale - A Personal Lines licensee is authorized to transact ONLY the following lines of insurance: Automobile, recreational vehicles (noncommercial purposes), personal watercraft, residential property, earthquake, flood, inland marine, umbrella (excess liability).

Question 21

Which of the following is NOT a type of authority given to agents?
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Incorrect Answer
Express authority
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Customary authority
Incorrect Answer
Apparent authority
Incorrect Answer
Implied authority

Answer 21

Rationale - There is no such thing as customary authority.

Question 22

An insurer not authorized to conduct business in California would be:
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Incorrect Answer
neither of these
Incorrect Answer
an unauthorized insurer
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either of these
Incorrect Answer
a non-admitted insurer

Answer 22

Rationale - Both terms indicate an insurer that is not authorized to transact.
Incorrect Answer
neither of these

Question 23

Monitoring of existing risks is:
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Incorrect Answer
conditional underwriting
Incorrect Answer
pre-selection
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post-selection
Incorrect Answer
a code requirement

Answer 23

Rationale - Monitoring risks for possible non-renewal or cancellation is post-selection.

Question 24

Which of the following is NOT a source of information an underwriter might use to investigate an application in order to approve or reject it?
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Incorrect Answer
Medical Information Bureau
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Department of Industrial Relations
Incorrect Answer
Department of Motor Vehicles
Incorrect Answer
Financial Reports

Answer 24

Rationale - The DIR is a department used to monitor labor, health, Workers Compensation, etc..

Department of Industrial Relations

Question 25

The following acts are unlawful and are misdemeanors in California except when performed by a surplus lines broker EXCEPT:
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Incorrect Answer
Acting as agent for a nonadmitted insurer in the transaction of insurance business in this state.
Incorrect Answer
In any manner, advertising for a nonadmitted insurer in this state.
Incorrect Answer
In any other manner, aiding a nonadmitted insurer to transact insurance business in this state.
Correct AnswerYou Selected This Answer
In any manner, advertising for an admitted insurer in this state.

Answer 25

Rationale - Advertising for an admitted carrier is acceptable for anyone appointed with that carrier.

In any manner, advertising for an admitted insurer in this state.

Question 26

Which of the following is a responsibility of the insured in an insurance contract?
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Incorrect Answer
Send the application to the underwriting department.
Incorrect Answer
Fully explain the policy to the client.
Incorrect Answer
To complete the application.
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Give true statements and information on the application.

Answer 26

Rationale - The insured`s responsibilities are to give true statements and information to the agent so a proper and complete application can be sent to the company.

Give true statements and information on the application.

Question 27

An insurance agent is appointed to transact:
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Incorrect Answer
all lines of insurance
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all are incorrect
Incorrect Answer
all lines except 24hr care
Incorrect Answer
all classes of insurance

Answer 27

Rationale - Insurance agents transact all lines/classes except life and disability. Life and Disability are classes of insurance. 24hr care coverage is a product that can only be transacted by A&H Agents.

all are incorrect

Question 28

Law of agency is the relationship between:
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Incorrect Answer
agent and client
Incorrect Answer
agency and agent
Incorrect Answer
insurer and customer
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agent and principal

Answer 28

Rationale - Agent is authorized to represent/act for the insurer, who is the principal.