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QUESTIONS YOU ANSWERED CORRECTLY

#2 Question #11639
What part of an Aviation policy provides a set amount of voluntary payments to injured passengers: Correct Answer: Medical payments

#3 Question #11583
A California Insurance Broker represents: Correct Answer: The customer

#4 Question #11607
Which of the following is a definition of RISK: Correct Answer: The possibility of loss

#5 Question #11651
A standard HO-3 form requires what additional endorsement to cover a loss by enforcement of laws regulating construction? Correct Answer: Building code upgrade coverage

#6 Question #11685
Horace Timm has a General Liability policy with Marvel Insurance Company. The policys limit of liability is $25,000 per occurrence. In the course of one policy year, Timm became liable for the following amounts as a result of three separate occurrences. Incident #1 $35,000 Incident #2 $10,000 Incident #3 $25,000 The total amount Marvel will pay as a result of these three occurrences is: Correct Answer:

$60,000

#7 Question #11570
If a homeowner is concerned about coverage for libel and slander, he should add which type of coverage to his Homeowners policy? Correct Answer: Personal injury liability

#8 Question #11723
Under the CIC insurable interest is required to exist: Correct Answer: At the time of purchase and the time of loss

#12 Question #11610


Which of the following is covered by an HO-3? Correct Answer: Damage to personal property that has been removed from the insured dwelling to protect it from fire

#14 Question #11729


A person convicted of the federal law regulating issues that effect the insurance industry and interstate commerce can be sentenced to how many years in prison: Correct Answer: 10 or 15

#18 Question #11591


In the event of a claim under the Physical Damage coverage on a personal Auto Policy (PAP), the insurer agrees to pay: Correct Answer: The actual cash value of the loss or the cost of repairs, whichever is less

#19 Question #11593


Fire and Casualty broker-agents must do which of the following when they arrange for outside premium financing for their clients:

Correct Answer: All of the above

#21 Question #11733


Under the CIC, an insurance agent can sell all of the following types of insurance EXCEPT: Correct Answer: Life

#24 Question #11660


Which of the following is not an uninsured motor vehicle as defined by the Personal Auto Policys Uninsured Motorist coverage? Correct Answer: A vehicle owned by a state agency which self-insures its autos

#28 Question #11644


The California Insurance Code does not prohibit the use of a question that asks for the birthplace of an applicant, even if the question is used to discriminate against the applicant. Correct Answer: False

#29 Question #11669


A Personal Auto Policys collision coverage will pay for rental expenses while the insureds auto is being repaired following a collision with a telephone pole. Correct Answer: True

#35 Question #11739


Which of the following is not a part of a policy: Correct Answer: Rebates

#37 Question #11667


An insureds recovery is limited to the amount of the insureds insurable interest in the property.

Correct Answer: True

#40 Question #11630


Under the California Insurance Code there are only 5 classes of insurance. Correct Answer: False

#41 Question #11589


Which of the following is true about an exclusive agent: Correct Answer: They represent only one insurance company

#45 Question #11637


Which one of the following is true with respect to replacement cost coverage in an HO-3? Correct Answer: Dwelling losses are paid on a replacement cost basis if the policy limit is 80% or more of the dwelling's replacement cost

#46 Question #11661


Under the Commercial General Liability Policy, medical payments coverage applies: Correct Answer: To injuries incurred by customers on the insured's premises

#49 Question #11681


The Commercial Auto policy has territorial limits that include: Correct Answer: Montreal, Canada

#50 Question #11596


The Physical Damage section of a Personal Auto Policy (PAP) will pay an insured transportation expenses to rent a car when: Correct Answer:

The insured's covered auto has been stolen

#52 Question #11734


A personal lines agent may sell all of the following types of insurance EXCEPT: Correct Answer: Fleet truck insurance

#53 Question #11664


Section II of a Homeowners policy would provide coverage for: Correct Answer: All of the above

#54 Question #11675


Under a Business Auto policy, which of the following types of physical damage loss is not covered? Correct Answer: Loss to CB radio equipment which is not permanently installed

#56 Question #11617


Grant, an agent, represents only the Direct City Insurance Company. He therefore could be referred to as a: Correct Answer: Exclusive agent

#57 Question #11609


An insurance company organized in Great Britain doing business in California is: Correct Answer: A Alien insurer

#58 Question #11577


Why would a doctor with a Commercial General Liability (CGL) policy need a Professional Liability policy: Correct Answer:

Both A and B

#61 Question #11582


Mary has a parking garage. She wants to buy liability insurance. She would purchase: Correct Answer: Garagekeeper's policy

#66 Question #11569


If an insurance company cancels a policy after 6 months and refunds exactly 50% of the premium it is referred to as a ____________ refund of unearned premium. Correct Answer: Pro-rata

#68 Question #11598


Fire and Casualty rate filings are subject to what method of approval in this state: Correct Answer: Prior approval

#69 Question #11585


All of the following are covered under a Homeowners Section II Personal Liability EXCEPT: Correct Answer: The insured operating an auto repair shop in the garage

#71 Question #11592


The Property coverage contained in the Businessowners policy is similar to that provided by the: Correct Answer: Commercial Property coverage part

#76 Question #11642


If an applicant while filling out an application for a disability policy failed to mention a new hobby, such as bungee jumping, this would be considered: Correct Answer: Concealment

#78 Question #11602


Workers Compensation insurance: Correct Answer: Covers an employer for benefits the employer must pay under state law to employees injured on the job

#79 Question #11628


On a Personal Auto Policy (PAP), the Limited Coverage for Mexico endorsement: Correct Answer: Provides coverage for accidents in Mexico that occur within 25 miles of the U.S. border

#86 Question #11720


An insured has a PAP with $250 deductible for collision coverage and $100 deductible for other than collision coverage. They run a stop sign and hit another car causing $1,300 in damage to their own auto. How much is covered? Correct Answer: $1,050

#87 Question #11614


Which of the following is true about premium? Correct Answer: It is the amount the customer pays for the coverage provided

#88 Question #11670


Coverage against loss by some perils (vandalism, theft, etc.) under the commercial building and personal property coverage is suspended if: Correct Answer: The insured building is vacant for over 60 days

#93 Question #11634


A life insurance policy is an example of a valued policy, in that if you buy a $1,000,000 policy on yourself and die, the insurer will pay your beneficiary $1,000,000. They dont send out a claims adjuster to see what you were really worth! What type of Property and Casualty policy follows this same philosophy:

Correct Answer: Fine Arts Floaters

#98 Question #11727


An insurance policy must specify all of the following except: Correct Answer: Financial Rating of the insurer

#99 Question #11571


An insured has a Personal Auto Policy (PAP) with minimum liability limits of $15,000/$30,000/$5,000. What would happen if he is involved in a serious at fault accident while on vacation in a state that has minimum liability limits of $25,000/$50,000/$10,000: Correct Answer: His PAP would automatically conform to the higher limits for no additional premium charge

#100 Question #11608


The California Insurance Code (CIC) requires agents to inspect private passenger automobiles: Correct Answer: Whenever collision or other than collision coverage is added

#104 Question #11606


On a Personal Auto Policy (PAP), which of these losses would be covered under the Other than Collision (OTC) coverage: Correct Answer: The car is stolen and is damaged in a collision while the thief is attempting to elude the police

#107 Question #11668


The Commercial Property policy excludes all coverage for Boiler and Machinery. Correct Answer: True

#109 Question #11629

A Dwelling Policy is to a Homeowner Policy what a Commercial Property Policy is to a: Correct Answer: Businessowners Policy

#112 Question #11604


Bill has an agency contract with Alpha Insurance Company. His duties are spelled out in his contract, but he has the authority to do other things necessary to carry out his duties of agency under the doctrine of: Correct Answer: Implied authority

#113 Question #11662


An owner of a parking lot should purchase which of the following liability policies? Correct Answer: A Garage liability policy

#116 Question #11620


A client who does not own a car, but wants liability coverage while driving cars that he rents or borrows should purchase a: Correct Answer: PAP with a Named Non-Owner Endorsement

#117 Question #11666


The Insurance Code provides the state laws that relate to insurance principles and practices. Correct Answer: True

#121 Question #11573


Newly licensed agents need _____ hours of Continuing Education (CE): Correct Answer: 24 Hours every two years

#122 Question #11736

Which of the following policies could be purchased as a mono line policy, or as part of a modular policy: Correct Answer: Commercial Property

#125 Question #11648


Living next door to en explosive manufacturer would be called a: Correct Answer: Physical hazard

#129 Question #11726


Which of the following would be covered under Part B of a HO policy? Correct Answer: Swimming pool

#130 Question #11682


The liability portion of a PAP (personal auto policy) would not cover: Correct Answer: A teenage neighbor takes the insured car on a joyride without permission

#133 Question #11686


Umbrella Liability on a commercial policy covers: Correct Answer: Bodily injury to a customer resulting in a damage awarded above the general liability policy limits

#135 Question #11673


The primary purpose of Business Income coverage is to reimburse the insured for: Correct Answer: Loss of income resulting from property damage of the insured property from a covered peril

#136 Question #11605

Which of the following would be covered under Section II of a Homeowners policy? Correct Answer: All of the above

#138 Question #11684


A Commercial General Liability (CGL) coverage form covers: Correct Answer: The liquor liability exposure of an organization or company that occasionally serves liquor, but is not involved in the manufacture, sale, distribution or serving of liquor

#145 Question #11626


Elimination of the risk includes all EXCEPT: Correct Answer: Increasing your auto insurance limits since you are old and can't drive as well

#147 Question #11645


As to representations and concealment, materiality: Correct Answer: Is the influence of the facts that is determined by each party's estimate of the disadvantages of entering into the contract

#148 Question #11656


Under the Physical damage section of the Personal Auto Policy, which of the following is covered? Correct Answer: Vandalism

#149 Question #11722


What HO form would be used for an owner occupied structure where the replacement cost far exceeds the market value? Correct Answer: HO-8

#150 Question #11613

Which of the following are true about the California Automobile Assigned Risk Plan: Correct Answer: Minimum liability limits offered are $15,000/$30,000/$5,000

QUESTIONS YOU ANSWERED INCORRECTLY


#1 Question #11676
Mr. Jones has a Commercial Auto policy with XYZ Company. The policy has symbol #4 on the declarations page. What type of vehicle does this cover? Wrong Answer: Private passenger autos Correct Answer: Owned autos other than private passenger autos Explanation: In the Business Auto form the insured has to select a symbol to declare what autos are covered. If the insured select symbol #4 it means that owned autos other than private passenger autos would be covered.

#9 Question #11728
All of the following would be considered a violation of federal law except: Wrong Answer: Transacting insurance in the state as a restricted person without prior authorization of the insurance commissioner Correct Answer: Providing false information on an insurance application Explanation: Although providing false information on an insurance application would be a violation of state law, it is not a violation of Section 1033 of the United States Code which addresses crimes committed by persons engaged in the business of insurance whose activities affect interstate commerce.

#10 Question #11632


A dwelling may be insured in an HO-3 if it has: Wrong Answer:

One unit that is occupied by a renter Correct Answer: Two units and the owner lives in one of them Explanation: In order for a dwelling to be insured under a HO form it must be four units or less and the owner must live in one unit. If it is more than four units it would have to be insured on a commercial property form.

#11 Question #11646


The California Insurance Code provides standards for names that may be used by insurance producers. This means that: Wrong Answer: All of the above are acceptable Correct Answer: A Chartered Property and Casualty Underwriter may use CPCU after his own name Explanation: Designations that are true can be used after an individual's name.

#13 Question #11659


An insured slides into a traffic sign and does $1,050 damage to their vehicle. Under a Personal Auto Policy with a $500 Collision deductible and a $50 Other Than Collision deductible, how much will the insured collect? Wrong Answer: $50 Correct Answer: $550 Explanation: Since this is a collision loss you would subtract the deductible from the loss ($1,050 - $500 = $550) to arrive at the answer.

#15 Question #11618


Which of the following is a pre-requisite to a valid insurance contract: Wrong Answer: Both of the above

Correct Answer: Insurable interest Explanation: Insurable interest is required in order to purchase Property insurance. Basically the applicant must prove they have some type of financial interest in the property being insured. It is required to hopefully prevent a person from profiting from their loss. It is also required to be proven at the time of loss.

#16 Question #11597


The insured, Zippys Bar, wants coverage for liability arising out of selling and serving alcoholic beverages, such coverage can be provided by purchasing: Wrong Answer: A Businessowners policy Correct Answer: A Liquor Liability coverage form Explanation: This coverage is called liquor liability and is excluded from the Commercial General Liability policy.

#17 Question #11586


You sell your client a Personal Auto Policy (PAP) with Physical Damage deductibles of $500 on Collision and $250 on Other than Collision. If the insured falls asleep and rolls his car over into a ditch damaging it $5,000, the insurer will pay: Wrong Answer: $4,250 Correct Answer: $4,500 Explanation: Upset of the vehicle is a collision loss. Subtract the collision deductible from the loss ($5,000 $500 = $4,500). The answer is $4,500.

#20 Question #11678


An insured is covered by a Commercial Broad form property policy which excludes concurrent causation. An earthquake occurs and a vehicle on the street loses control and crashes into the insureds building. A short time later the building catches fire due to a gas leak. A review of the

damage shows: *25% direct damage by the earthquake *25% damage caused by the vehicle *50% damage caused by the fire. What dollar amount will be paid for this loss? Wrong Answer: 75% of the policy limit Correct Answer: 50% of the loss, subject to policy limits Explanation: Since earthquake is not covered and the vehicle damage was directly related neither loss would be covered due to the concurrent causation exclusion. However, if the building catches fire due to a gas leak after the fact this would be covered.

#22 Question #11595


Which of the following claims would be EXCLUDED by the Homeowners policy under the Ordinance or law exclusion? Wrong Answer: All of these claims are excluded Correct Answer: After a small fire, the insured must remove a partially damaged wood shake roof and replace it with a tile roof to comply with building codes Explanation: The ordinance or law exclusion applies to property losses not liability. The insurance company does not want to be responsible for expenses incurred due to changes in building codes. For example, your roof catches on fire and partially burns. In order to repair it current building codes require sprinklers to be built in the ceiling. The ordinance or law exclusion excludes the increased cost to comply with this new law.

#23 Question #11653


The insurer has the right to examine the books and records under a commercial package policy any time during the policy period and up to three months after the policy ends with the client's permission. Wrong Answer: True

Correct Answer: False Explanation: The insurance company has the right to examine the insured's book up to three years after the policy period, and does not need the insured's consent.

#25 Question #11625


The transfer of the insureds rights to the insurer after a loss is known as: Wrong Answer: Assignment Correct Answer: Subrogation Explanation: If someone else is negligent and causes the insured property damage the insured can transfer their right to sue the negligent party to the insured. This is known as subrogation and helps keep insurance premiums down.

#26 Question #11601


Which of the following would be covered under the liability section of a Personal Auto Policy: Wrong Answer: BI and PD for which the insured is legally liable because of a covered auto accident Correct Answer: All of the above Explanation: All of those mentioned would be covered.

#27 Question #11650


Of the dwelling forms, which one provides the broadest coverage? Wrong Answer: Specific form Correct Answer: Special form Explanation:

There are only three dwelling form you need to know. The DP-1 is called the Basic form and is the cheapest with the least coverage. The DP-2 is called the broad form and is better than the Basic since the coverage is broader. The DP-3 is the best form with the most coverage.

#30 Question #11737


The policy form which covers direct damage from those perils which are not excluded is: Wrong Answer: Specified Correct Answer: Special Explanation: Name peril (specified peril) policies cover only those perils which are named in the policy. All risk, or open peril policies, cover all perils, except those which are excluded. The special form is all risk.

#31 Question #11578


The Information and Privacy Protection Act specifies that agents do not have to specify those question that are partly marketing research as long as the questions are also for underwriting reasons. Wrong Answer: False Correct Answer: True Explanation: This is a true statement.

#32 Question #11627


Under which of the following circumstances will Coverage D-Loss of Use of the HO-3 pay for additional living expenses? Wrong Answer: The insured's house is damaged in a flood and the insured must stay in a motel while repairs are being made Correct Answer: A gas line explosion damages the insured's house after an earthquake and the insured must stay in a motel while repairs are being made

Explanation: Loss of use provides coverage for an indirect loss. In order for an indirect loss to be covered whatever caused it (the direct loss) must first be covered. Although earthquake is not covered explosion is.

#33 Question #11636


Buying insurance does all of the following EXCEPT: Wrong Answer: Helps you sleep at night Correct Answer: Eliminates the risk Explanation: When you purchase insurance you are transferring your risk to the insurance company. Purchasing insurance does not eliminate the risk. For example, you have auto insurance, does this mean you will never get in an auto accident? No. Purchasing insurance transfers the risk to the insurance company.

#34 Question #11665


When an Insurer obtains reinsurance they have sold the contract and no longer have direct responsibility to the insured. Wrong Answer: True Correct Answer: False Explanation: When reinsurance is purchased the insurance company is transferring some of their risk to the reinsurance company. The primary insurance company is still responsible for a portion of the claims and does not have to notify the insured that reinsurance was obtained.

#36 Question #11731


Which of the following classes of insurance is exempt from the California Insurance Guarantee Association (CIGA): Wrong Answer: Plate glass Correct Answer:

Life and annuity Explanation: Life and annuity policies are specifically excluded from coverage under the California Insurance Guarantee Association, however, life and annuity policies are covered by the California Life and Health Insurance Guarantee Association which is a separate Act altogether.

#38 Question #11719


All property owners in California are able to purchase regular or emergency flood insurance from the NFIP: Wrong Answer: True Correct Answer: False Explanation: You must live in a community that participates in the National Flood Insurance Program (NFIP) to qualify for National Flood Insurance. Not all areas are eligible for coverage.

#39 Question #11581


Scott lends his car to Dawn, a friend who works for Incorp, Inc. While driving Scotts car on company business, Dawn is involved in an at fault accident. Which of the following are considered to be insured under Scotts Personal Auto Policy (PAP): Wrong Answer: No one, since business use is excluded on a PAP Correct Answer: Scott, Dawn and Incorp, Inc. Explanation: The definition of insured in the auto policy includes anyone who borrows the insured's car and any business entity that is found legally responsible for the insured's actions (Incorp).

#42 Question #11671


In a Commercial Property Policy when it refers to Your property, who is Your referring to? Wrong Answer: The first named insured Correct Answer:

The insured's and any persons property which is under the care, custody, and control of the insured Explanation: This is a definition within the policy.

#43 Question #11619


Which of the following could be insured in the California FAIR Plan? Wrong Answer: All of the above Correct Answer: A Dwelling in a hazardous brush area Explanation: The Fair plan is a plan for structures in high risk fire areas.

#44 Question #11721


Ordinance or Law coverage in a HO-3 is: Wrong Answer: Replacement cost up the coverage A limits Correct Answer: 10% of Coverage A Explanation: Although there is a general exclusion in the policy relating to Ordinance or Law coverage, there is a minimal amount of ordinance or law coverage built into the policy as an additional coverage under Section I of the policy (10% of Coverage A).

#47 Question #11574


Some property insurance policies value losses based on the Actual Cash Value of the property which is defined as: Wrong Answer: Both A and B Correct Answer: Replacement cost minus depreciation Explanation:

Actual cash value is defined as replacement cost minus depreciation.

#48 Question #11654


Which of the following can sell a FAIR Plan policy? Wrong Answer: Only agents who are FAIR Plan licensed Correct Answer: Any licensed Fire & Casualty agent/broker Explanation: Any licensed Fire & Casualty agent or broker can sell the coverage offered under the FAIR plan.

#51 Question #11657


Concerning concealment on an insurance application: Wrong Answer: If concealment is proven or admitted, the premiums paid (minus the penalties and interest) must be returned to the insured Correct Answer: Only when the concealed facts are material could the insurer cancel or rescind the policy Explanation: As mentioned earlier the insurance company will only cancel the policy if a material concealment is made.

#55 Question #11572


Generally Inland Marine policies provide what type of coverage? Wrong Answer: None of the above Correct Answer: All Risk Explanation: Inland marine policies provide all risk coverage.

#59 Question #11588

The Insurance Commissioner can deny a licensing application without a hearing for which of the following reasons: Wrong Answer: The applicant has been charged with a felony Correct Answer: The applicant had a licensing application denied in the past 5 years Explanation: The Commissioner may, without a hearing, deny an application if the applicant has committed a felony and been convicted of it, committed and been convicted of a misdemeanor related to the insurance industry, had a previous application denied for cause within five year or had a previously issued license suspended or revoked for cause within five years before the filing of the application.

#60 Question #11638


All of the following are true regarding the Common Policy Conditions in a Commercial Package Policy (CPP) EXCEPT: Wrong Answer: A named insured may not transfer their rights under the policy without the written consent of the insurer Correct Answer: The insurer must notify all Named Insureds prior to canceling the policy Explanation: The insurance company only need notify the first named insured of cancellation, not all named insureds.

#62 Question #11689


XYZ Corporation moved out of their building and immediately notified their insurance carrier of the move. They incur a loss 90 days later. The insurer will: Wrong Answer: Deny any coverage as the building has been vacant over 60 days Correct Answer: Provide coverage for fire and liability with a 15% penalty, but no coverage for vandalism, theft, and glass breakage Explanation:

Coverage for vandalism and theft will be removed after 60 days of vacancy. The remaining perils covered will be reduced by 15% after 60 days of vacancy.

#63 Question #11680


The Value Reporting form: Wrong Answer: Commits the insurer to a specific value at the beginning of the policy period Correct Answer: Requires the insured to report values of the property at specified intervals throughout the policy period Explanation: Premiums are based on whatever the current value is, not the maximum value. Reporting forms are usually used when a new structure is being constructed or in cases of fluctuating inventories.

#64 Question #11735


Which of the following is an example of retaining the risk: Wrong Answer: Deciding not to buy a boat Correct Answer: Deciding not to buy physical damage coverage on an auto Explanation: Purchasing insurance is a transfer of the risk and deciding not to buy auto insurance is a situation where an individual is retaining the risk that their auto will get damaged, and they would therefore be responsible for the fees associated with repairing it.

#65 Question #11622


Which is true about mode of payment? Wrong Answer: It is set by the insurance company Correct Answer: Semi-annual is more expensive than annual premium Explanation:

Mode of payment is how often you pay your premium. The more frequently the premium is paid the higher the total cost due to service charges levied by the insurance company. Paying annually is the least expensive mode of payment and there are no service charges added.

#67 Question #11635


Transacting insurance without a license is a: Wrong Answer: Felony Correct Answer: Misdemeanor Explanation: Transacting insurance without a license is a misdemeanor.

#70 Question #11690


An insureds vehicle breaks down and they have towing and labor coverage on their PAP. Which of the following is covered? Wrong Answer: Towing the vehicle to a garage nearest the insured's home Correct Answer: Labor performed at the site of disablement Explanation: Towing is usually covered to the nearest place of repair. Work performed at the shop is not covered, only minor work performed at the site of breakdown.

#72 Question #11694


Under the concurrent causation exclusion, which of the following is correct? Wrong Answer: None of the above Correct Answer: If one of the perils causing the loss is excluded, then neither is covered Explanation: Under the concurrent causation exclusion if one of the perils is excluded neither will be covered.

#73 Question #11725

Under a Personal Auto Policy (PAP), when a new auto replaces an auto which had liability coverage only, how many days does the insured have to request collision coverage: Wrong Answer: 30 days Correct Answer: 4 days Explanation: If the insured does not have collision coverage on at least one auto listed on the Declarations page, collision coverage on a newly acquired auto begins on the date the insured becomes the owner, but the insured must request collision coverage within 4 days and a $500 deductible applies.

#74 Question #11688


Under the Commercial General Liability coverage form, Personal Injury is: Wrong Answer: Bodily injury suffered by the named insured Correct Answer: Injury, other than bodily injury, arising out of such things as slander, libel, and invasion of privacy Explanation: Bodily injury coverage provides coverage for physical harm. Personal injury is damage to a person's reputation. Personal injury liability does not cover bodily injury it covers things such as libel and slander.

#75 Question #11691


A farm property policy would cover which of the following? Wrong Answer: Dwelling Correct Answer: Dwelling, other private structures, and personal property Explanation: Although answers A and B are correct you must pick the best answer of those listed. Answer C is the most correct of the four listed.

#77 Question #11687

On a Commercial Package policy, interline endorsements are endorsements that apply to: Wrong Answer: All of the above Correct Answer: One or more policy coverage parts Explanation: The interline endorsement applies to more than one coverage part and is included to streamline the language from one part of the policy to another.

#80 Question #11616


All of the following are true regarding coverage for motorcycles on an unendorsed Personal Auto Policy (PAP) EXCEPT: Wrong Answer: A and C above Correct Answer: Motorcycles may never be added to a PAP Explanation: Motorcycles can be added using the miscellaneous vehicles endorsement.

#81 Question #11611


On a Personal Auto Policy (PAP), which of the following are covered under the Other than Collision (OTC) coverage: Wrong Answer: Neither A nor B Correct Answer: Both A and B Explanation: Both flood and earthquake are covered under other than collision coverage.

#82 Question #11612


The difference between pure risk and speculative risk is that: Wrong Answer: A speculative risk is insurable, while a pure risk is not

Correct Answer: A pure risk involves the possibility of loss only, while a speculative risk involves the possibility of either loss or gain Explanation: A pure risk is a risk situation that presents a chance of loss only and no chance for gain. Pure risks are insurable. A speculative risk is a risk situation that presents a chance of loss and chance for gain, such as gambling. Speculative risks are not insurable.

#83 Question #11599


Insurance is known as: Wrong Answer: The transfer of speculative risk to the insurance company Correct Answer: The transfer of pure risk to the insurance company Explanation: Insurance is defined as the transfer of pure risk to the insurer in return for the premium paid.

#84 Question #11575


Why would a client add the endorsement called additional residence rented to others to their homeowners policy? Wrong Answer: To provide coverage for the property of the tenant in case of theft Correct Answer: To provide liability in event the renter sues for injury at the rented premises Explanation: If you own a home that you reside in and a number of rental properties that you rent out you have a huge liability exposure at your rental properties. In order to be covered under a HO form a property must be owner occupied. You may have a HO form covering your residence however, HO forms exclude liability to rental properties. You may think you are covered since you have Dwelling policies covering your rental properties, however, as you know, Dwelling forms provide no liability coverage. You would need to add the endorsement mentioned in the question for this reason.

#85 Question #11576

An insured carries optional medical coverage with limits of $2,000 on his Personal Auto Policy (PAP). All of the following are true EXCEPT: Wrong Answer: His daughter is covered if she is hit by a car while walking to school Correct Answer: The coverage limit applies per occurrence Explanation: The limit for Medical under the auto policy pays per person. It covers the insured and people in the insured's vehicle. It also pays to the insured if they are hit by an auto while walking as a pedestrian.

#89 Question #11587


Which of the following businesses would be eligible for a Businessowners policy? Wrong Answer: Hometown Bank & Trust Correct Answer: Hill & Morton Funeral Home Explanation: Taverns, auto dealers, repair shops, banks, credit unions, manufacturing companies, and contractors are not eligible for the BOP.

#90 Question #11674


Mr. Jones insures his truck under a business auto policy, indicated with a symbol #7. This will provide coverage: Wrong Answer: For any auto Correct Answer: For specifically described autos only Explanation: Coverage symbol 7 states the policy will only cover specifically described autos.

#91 Question #11590


Which of the following is true about other coverages in Homeowners policies?

Wrong Answer: The coverage varies depending on the Homeowners form Correct Answer: They are the same on all Homeowners forms Explanation: Additional coverages are included in all HO forms without charge. They are exactly the same on all HO forms.

#92 Question #11603


Jill adds a new car to her policy, but fails to pay the additional premium. The insurer must give _____ days notice of cancellation. Wrong Answer: 15 days Correct Answer: 10 days Explanation: If the insured does not pay their premium the insurance company only need give 10 days notice of cancellation.

#94 Question #11640


The California Insurance Code (CIC) requires insurers of residential properties with one to 4 units to send the insured a disclosure statement describing coverages in general and how losses are paid: Wrong Answer: With every new policy and every renewal Correct Answer: With every new policy and every other renewal Explanation: This disclosure statement is required to be delivered with every new policy and every other renewal.

#95 Question #11624


Under your Personal Auto Policy (PAP), liability for which of the following would only be covered if you add a special endorsement and pay an additional premium:

Wrong Answer: Towing a travel trailer Correct Answer: Driving a company car that is furnished for your regular use Explanation: Coverage for non-owned cars that are furnished for your regular use is excluded. If you want coverage under your PAP for a company car furnished for your use you must add the extended non-owned auto coverage for a named individual endorsement.

#96 Question #11697


To get protection as a mortgage holder, the building and personal property coverage form must have the mortgage holder endorsement form added. Wrong Answer: True Correct Answer: False Explanation: There is no such thing as a mortgage holder endorsement form. The mortgage holder would be listed on the declarations page as having a collateral security interest in the property.

#97 Question #11679


A stock companys policyholders are considered owners of the company and share in the profits. Wrong Answer: True Correct Answer: False Explanation: Stock companies are owned by the shareholders not their policyholders.

#101 Question #11580


Which of the following is NOT covered under Section I of a Homeowners policy? Wrong Answer: Other Structures Correct Answer:

Personal Liability Explanation: Section I of the HO forms provides Property coverage. Section II provides liability coverage. Personal Liability is coverage E found in Section II of the HO forms.

#102 Question #11594


For a property insurance policy to cover an indirect loss what must occur: Wrong Answer: None of the above Correct Answer: The direct loss must be covered first Explanation: In order for an indirect loss to be covered the direct loss must be a covered peril in the policy.

#103 Question #11643


Which of the following is false? Wrong Answer: Sales pressure may cause an agent to act unethically Correct Answer: Agents can gain professionally by using terms that their clients are not familiar with Explanation: Obviously, there is nothing to gain by using language your client is unfamiliar with. It will only lead to confusion on their behalf.

#105 Question #11584


A employer may be sued for the negligent driving of his employee using their own car in the course of business, this is known as: Wrong Answer: Contributory negligence Correct Answer: Vicarious liability Explanation:

Vicarious liability is liability assumed through the actions of others. Employers are vicariously liable for the actions of their employees.

#106 Question #11692


In a Homeowners policy, what does the 80% co-insurance clause mean to the insured? Wrong Answer: It limits the insured to 80% recovery in a loss Correct Answer: It offers the insured a reduced rate and if they don't maintain 80% coverage, they suffer the co-insurance penalty Explanation: Since the policy includes an 80% co-insurance requirement the insured must carry a minimum of 80% of the current replacement cost of the structure. If they carry less they will be penalized. If they want to be fully insured they would carry 100% of the current replacement cost.

#108 Question #11696


Special or all-risk coverage forms: Wrong Answer: Name the perils to be insured Correct Answer: List policy exclusions Explanation: Special or all-risk policy forms cover all perils except those excluded.

#110 Question #11730


A person found guilty of a violation of the federal law regulating issues that effect the insurance industry and interstate commerce can be subject to a civil penalty of up to: Wrong Answer: $30,000 Correct Answer: $50,000 Explanation: The Attorney General may bring a civil action in the appropriate United States district court against any person who engages in conduct constituting an offense under section 1033 of Title

18 of the United State Code and, upon proof of such conduct such person shall be subject to a civil penalty of not more than $50,000 for each violation.

#111 Question #11724


An insured who has an unendorsed claims made Commercial General Liability (CGL) policy would have how long to turn in a claim that occurred during the policy period after the end of the policy period: Wrong Answer: 5 years Correct Answer: 60 days Explanation: Upon the end of a policy period the insured would have up to 60 days to notify the insurer of a potential claim under the basic extended reporting period. The extended reporting period does not extend the policy period, but rather extends the period of time to turn in a claim which occurred during the policy period.

#114 Question #11693


Which of the following would not be a proper way to evaluate a potential clients insurance needs? Wrong Answer: Walk around the client's building and ask key people about the company business operation Correct Answer: Obtain a copy of the current insurance policy and coverages Explanation: An agent would not want to base any of their recommendation on what the applicant's current policy covers.

#115 Question #11663


Ocean Marine liability coverage is best provided in: Wrong Answer: None of the above Correct Answer: Protection and Indemnity policy

Explanation: Protection and Indemnity is a liability coverage in ocean marine insurance that is very similar to bodily injury and property damage liability coverage in other types of insurance. It covers liability to others, including crew members. It does not cover the insured for their losses.

#118 Question #11641


Insurance: Wrong Answer: Is a method of transferring risk Correct Answer: Both A and B Explanation: When an individual purchases insurance they are transferring their risk to the insurance company in return for the premium paid. The insurance companies base their rates on the law of large numbers. The law of large numbers states the more similar risks the insurance companies combine the easier it becomes to determine how many losses they will have during a certain time period.

#119 Question #11621


A factor that increases the chance that a loss will occur is called a: Wrong Answer: Risk Correct Answer: Hazard Explanation: A hazard is something that increases the change of loss. A peril is a cause of loss and risk is the chance of loss.

#120 Question #11677


Which crime coverage provides the broadest coverage? Wrong Answer: Burglary Correct Answer: Theft

Explanation: Of the forms listed theft would provide the broadest coverage.

#123 Question #11738


A policy can be assigned with: Wrong Answer: Verbal approval of the insurer Correct Answer: Written approval of the insurer Explanation: A policy can be assigned only with written approval of the insurer.

#124 Question #11600


Which of the following coverages are the same on an HO-2 and HO-3 policy? Wrong Answer: Dwelling and other structures Correct Answer: Personal Liability and Medical Payments Explanation: Section II of the HO forms are exactly the same on all forms. As is personal property (Coverage C). However, Coverage A (Dwelling) is named peril on the HO-2 and all risk on the HO-3.

#126 Question #11683


Which of the following are eligible for a Businessowners policy (BOP): Wrong Answer: A two story, 80,000 square foot retail operation Correct Answer: A six story office building with less than 100,000 square feet of total area Explanation: Taverns, banks and manufacturing companies are not eligible for a BOP.

#127 Question #11615

Coverage C of a HO form has special lower sublimits of coverage for jewelry, watches, and furs, regardless of the loss form: Wrong Answer: False Correct Answer: True Explanation: All HO forms include a special limit of liability of $1,500 for theft of jewelry, watches and furs.

#128 Question #11652


The named insured for a Commercial Package policy is Pepper Hill and Mike Hill D.B.A., The Doggie Hotel. Under terms of the common policy conditions of the Commercial Package policy, who is responsible for the premium payments? Wrong Answer: Mike Hill Correct Answer: Pepper Hill Explanation: The person listed first on the declarations page is responsible for premium payments.

#131 Question #11623


Personal Liability coverage under Section II of the Homeowners policy: Wrong Answer: Is limited to accidents that occur on the residence premises that arise out of the insured's personal or business activities Correct Answer: Covers accidents that arise out of the insured's personal activities anywhere in the world Explanation: Business activities are excluded from the HO forms. The personal liability provided on the HO forms cover you anywhere in the world on or off the premises.

#132 Question #11672


If the insurer makes a contractual revision during the policy period which broadens coverage without a premium increase and the coverage applies immediately. This is defined as:

Wrong Answer: Apparent authority Correct Answer: Liberalization clause Explanation: This is the definition of the liberalization clause.

#134 Question #11655


Under an auto policy, Other Than Collision coverage would apply to which of the following? Wrong Answer: An insured breaks a window to gain access because the key were left inside Correct Answer: Vandals spray paint the trunk Explanation: Vandalism is covered as an other than collision loss.

#137 Question #11647


Which of the following might make it easier for an agent to act ethically? Wrong Answer: Not keeping up with complex insurance contract changes Correct Answer: Remembering to keep the client's best interest first Explanation: Keeping your client's best interest above your own will always make it easier to act ethically.

#139 Question #11579


Which of the following coverages would be classified as property insurance? Wrong Answer: Personal auto liability Correct Answer: Motor vehicle physical damage coverage Explanation:

Answer A is classified as property insurance. Answers B, C and D are all liability insurance. Some policies only provide property coverage, such as the Dwelling forms. Some policies provide both property and liability coverage such as the Homeowners forms. Policies that provide coverage for both property and liability are referred to as package policies.

#140 Question #11658


Which of the following would not be covered under a Personal Auto Policy? Wrong Answer: The insured's auto is damaged when the wind blows a sign off the roof of a building Correct Answer: A necktie and case are stolen from the insured's auto Explanation: Answer B would not be covered in the auto policy.

#141 Question #11695


The CGL definition of personal injury is bodily injury resulting from wrongful eviction from a premises or false arrest. Wrong Answer: True Correct Answer: False Explanation: Bodily injury and personal injury are two different things. If you are wrongfully evicted or suffer false arrest your reputation may be damaged. This is personal injury.

#142 Question #11631


A morale hazard is: Wrong Answer: A dishonest applicant Correct Answer: Driving recklessly Explanation:

A hazard is something that increases the chance of loss. A physical hazard is something physical such as gasoline stored in a garage, or smoking in bed. A moral hazard is someone who lies, cheats and steals. A morale hazard is a careless client who has no pride of ownership (slob).

#143 Question #11732


Under HIPAA in order for creditable coverage to apply there may be a gap of no greater than: Wrong Answer: 13 days Correct Answer: 63 days Explanation: This is actually a question related to health insurance, which you cannot sell with a Fire & Casualty license. However, we have received feedback from multiple students that a question similar to this has appeared on the Fire & Casualty exam. HIPAA stands for the Health Insurance Portability and Accountability Act, and regulates probationary periods which may apply in health insurance policies. Under HIPAA, in order for any creditable coverage to apply, there may be a gap of coverage from the old to new plan of 63 days.

#144 Question #11633


Ed has a Personal Auto Policy (PAP) with only Liability coverages. Sue has a PAP that provides both Liability and Physical Damage coverage on her covered auto. Sue borrows Eds car and is involved in an at fault accident that causes Bodily Injury (BI) to others as well as damage to Eds car. How would this claim be paid: Wrong Answer: Ed's PAP is primary for the Bodily Injury but the damage to his car would not be covered by either policy Correct Answer: Ed's PAP is primary for the Bodily Injury but Sue's PAP will pay for the damage to his car Explanation: The insurance policy follows the car and always is primary. Since Sue borrowed Ed's car Ed's policy is primary. His policy will pay primary and Sue's will provide excess coverage. However, since Ed does not have physical damage Sue's policy will cover the damage on a primary basis.

#146 Question #11649

In Commercial Property insurance, the purpose of coinsurance is to: Wrong Answer: Apportion losses Correct Answer: Encourage an insured to carry a reasonable amount of insurance to value Explanation: The purpose of coinsurance is to encourage an insured to carry adequate limits. In personal lines the coinsurance requirement is 80%. In commercial lines it is selected by the insured. The higher it is the lower the rates will be.