Fire & Casualty Exam 1b
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The one basic characteristic of any type of insurance is that the insured is returned to the same (or close to the same) status that existed prior to the loss, but without a chance for gain or profit.
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This is true
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This is false
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California Fire & Casualty Practice Exam 1B
150 questions, 3 hours.
70% to pass
Quiz Preview
- 2.
The type of coverage the owner of a public parking garage should purchase in order to have liability coverage in case of accidental damage to vehicles that are owned by the public, but are left in the care, custody and control of the garage is known as garagekeepers coverage.
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True
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False
Correct Answer
A. TrueExplanation
statement of fact regarding the type of coverage needed by the owner of a public parking garage, as well as owners of other types of businesses who have the vehicles of others in their care, custody and control.Rate this question:
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- 3.
There is an exclusion in automobile insurance issued by admitted insurers in California regarding coverage in Mexico, which can only be provided through an endorsement to a PAP. Which is true regarding this endorsement?
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It is liability coverage, on an excess bases, provided for losses that occur in Mexico, within 25 miles of the Californa/Mexico Interntational border
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It is a required endorsement for all personal auto policies issued in California to Mexican citizens
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There is no coverage unless the loss is reported within 48-hours of the occurrence
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It is liability coverage, on a primary basis, for insureds driving anywhere in the country of Mexico
Correct Answer
A. It is liability coverage, on an excess bases, provided for losses that occur in Mexico, within 25 miles of the Californa/Mexico Interntational borderExplanation
Statement of fact regarding the limitations of the Mexico coverage endorsement of a personal auto policy.Rate this question:
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- 4.
Vandalism to an insured vehicle would be covered under the "other than collision" section of a personal auto policy.
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True
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False
Correct Answer
A. TrueExplanation
statement of fact.Rate this question:
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- 5.
In an insured does not pay the premium by the due date, there is a period of time known as the "grace period" which is that time period after the expiration of the policy when the insurer continues coverage without a lapse in protection. If the payment is not received by the insurer by the end of this time period the coverage will be discontinued, and insurability requirements must be met to reinstate the coverage.
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True
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False
Correct Answer
A. TrueExplanation
statement of fact regarding the grace period. If the overdue payment is received during this period, then there is no evidence or proof of insurability required and coverage remains in force. After the grace period expires, coverage lapses and the insured must prove insurability to reinstate the contract.Rate this question:
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- 6.
The condition that is contained in a commercial lines insurance policy which is known as the "changes" condition states that any agreement between the insurance company and the insured are contained in the policy. Further, the only way that the terms or provisions of the policy can be waived or modified is by using an endorsement given by the insurer. This modification must then become part of the policy.
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True
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False
Correct Answer
A. TrueExplanation
statement of factRate this question:
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- 7.
An individual who lives nest to a Nuclear Power Plant is exposed to which of the following types of hazards?
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Physical
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Moral
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Morale
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Legal
Correct Answer
A. PhysicalExplanation
A physical hazard has tangible characteristics that can be quantified such as location of the insured premises of the distance from a high-risk structure.Rate this question:
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- 8.
The State of California DOI minimums for liability coverage are $15,000/$30,000/$5,000. An insured has an accident out of state that has higher financial responsibility limits than California. Which of these is true?
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The policy autmatically provides the higher necessary limits without an extra premium
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The policy only pays up to its limits
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There is no coverage
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The insured will have to pay an additional premium for the increased difference in the required coverage
Correct Answer
A. The policy autmatically provides the higher necessary limits without an extra premiumExplanation
statement of fact regarding minimum liability coverage in other states that require higher limits than California.Rate this question:
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- 9.
What does the California FAIR Plan provide coverage for?
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Youthful and/or inexperienced drivers, typically with less than three years of driving experience
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Homes located in a hazardous brush or high risk urban areas
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Structures that were constructed prior to the currently stringent earthquake codes
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Homes that are located in a flood plain risk regions
Correct Answer
A. Homes located in a hazardous brush or high risk urban areasExplanation
statement of fact regarding FAIR Plan coverageRate this question:
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- 10.
A claim payment is declined under the terms of a building personal property coverage form because of certain actions on the insured. The mortgage holder will typically have the right to receive compensation for the loss if the contract specifies protection for the mortgage holder.
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True
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False
Correct Answer
A. TrueExplanation
statement of fact regarding the mortgagee clause.Rate this question:
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- 11.
A commercial package policy contains a coinsurance clause which is a method used by insurance companies to encourage their insureds to purchase amounts of insurance coveage that are close to the dollar value of the insured property
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True
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False
Correct Answer
A. TrueExplanation
Statement of fact regarding the purpose of coinsurance in both personal and commercial lines insurance contractsRate this question:
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- 12.
Boiler and Machinery exposures are excluded from coverage under commercial property policies because this type of risk is very unique and unusual. This is the reason that a separate boiler and machiner policy is needed by many business owners.
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True
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False
Correct Answer
A. TrueExplanation
Statement of fact regarding the need to purchase a separate policy to cover the exposures associated with boiler and machinery risks.Rate this question:
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- 13.
Broader coverage will automatically apply if a policy form revision broadens coverage, with no additional premium, according to a policy condition known as the "liberalization" clause that in contained in many commercial property policies.
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True
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False
Correct Answer
A. TrueExplanation
statement of factRate this question:
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- 14.
Of the following, which is the true characteristic about insurance?
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It is considered a type of gambling
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It is considered a way of retaining risk
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It is considered a method of transferring risk
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It is incorprated under the laws of any other jurisdication other that the state of california
Correct Answer
A. It is considered a method of transferring riskExplanation
insurance always transfers possible financial risk/loss form an individual to a group of similar risk exposures that are accepted and categorized by an insurance companyRate this question:
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- 15.
"Risk" is one of the most important terms in the insurance industry. How is it defined?
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The certainty of financial loss
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The uncertainty of financial loss
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The basis of a financial loss
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The predictability of a financial loss
Correct Answer
A. The uncertainty of financial lossExplanation
The uncertainty is whether an insured peril will occur, and the acutal dollar amount of the damage.Rate this question:
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- 16.
Damage which is the result of a hailstorm, is covered in which of the following ways under a personal auto policy?
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Excluded as a catastrophic event
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Covered as an other-than-collision loss
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Covered as a collision loss
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Covered only if the vehicle was under some type of covering at the time of the damaging storm
Correct Answer
A. Covered as an other-than-collision lossExplanation
statement of fact. this is also referred to as comprehensive coverage.Rate this question:
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- 17.
Which of these is defined as "exclusive agent"?
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Sells health insurance only
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Sells one line of insurance only
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Sells one insurance company's products only
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Sells all policies by telephone only
Correct Answer
A. Sells one insurance company's products onlyExplanation
statement of fact regarding exclusive agentRate this question:
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- 18.
Under the business income coverage form, the loss of income to an insured's business must be covered by an insured peril or there will be no payment for a loss
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True
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False
Correct Answer
A. TrueExplanation
Statement of fact regarding loss of income requirements under the business income coverage fromRate this question:
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- 19.
A personal auto policy contains the state required liability and medical payment coverage as well as "other-than-collision" coverage. how would a claim be paid if there were a loss after an insured vehicle is stolen then wrecked?
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The claim would not be paid
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The claim would be paid under medical payments
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The claim would be paid under liability payments
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The claim would be paid under "other-than-collision" coverage
Correct Answer
A. The claim would be paid under "other-than-collision" coverageExplanation
In a PAP, coverage for theft and related damages are covered under the other-than-collision coverage part of the policy.Rate this question:
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- 20.
The type of policy that the owner of a medium-sized pleasure boat would purchase is quite different from the type that the owner of a yacht would purchase. However, the policy that the owner of the medium sized pleasure boat would purchase is quite similar to the structure of a personal auto insurance contract.
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This comparison is true.
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This comparison is false.
Correct Answer
A. This comparison is true.Explanation
statement of fact. both a boatowners policy and a personal auto policy contain physical damage coverage and liability coverage. the owner of a yacht might purchase a package of yacht coverage that would include hull coverage, trailer insurance, property damage and liability coverage (P&I), medical payments coverage and federal longshoremen's and harbor workers compensation insurance.Rate this question:
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- 21.
An employee is operating their own car for their employer. The individual injures a person in an area as a result of negligent driving. The reason why the employer would be held liable is because of which of the following?
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Contributory negligence
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Comparative liability
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Gross negligence
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Vicarious liability
Correct Answer
A. Vicarious liabilityExplanation
Vicarious, as it is used here means that the responsibility for one person's actions is substitued by another person. Therefore, the employer becomes responsible for the injuries caused by their own employees.Rate this question:
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- 22.
Of the following, which are included under the coverage provided by a Workers Compensation policy?
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Coverage for sickness or injuries that are job-related without regard to who is at fault or negligent
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Compensation benefits at retirement to provide monthly income
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Medical benefits with a coinsurance percentage of 80%/20%, a $1,000 stop-loss limit, but with an unlimited dollar amount of coverage
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24-hours a day coverage, whether on or off the job for all workers who are eligible
Correct Answer
A. Coverage for sickness or injuries that are job-related without regard to who is at fault or negligentExplanation
The correct answer is A because there is no limit for coverage as long as the injury or illness is job related; there are no retirement benefits under a workers compensation policy, nor is there any coinsurance or stop-loss limits. 24-hour coverage is not provided under a standard policy, it must be purchased specifically as a 24-hour workers compensation policy.Rate this question:
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- 23.
The territorial limits of a personal auto policy include which of the following?
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Toronto, canada
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Hong kong, china
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Los cabos, mexico
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These cities are all excluded
Correct Answer
A. Toronto, canadaExplanation
territorial limits of a personal auto policy include the U.S., Canada, Puerto Rico, Guam and U.S. Possessions.Rate this question:
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- 24.
Under the terms and conditions of a commercial package policy, who is responsible to make all premium payments, if there are four individuals named as insureds. who are all operating a business under a "DBA" and are unincorporated?
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Any of the four named individuals
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All four of the named individuals insureds have an equal responsibility
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The business itself, because it is unincorporated
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The first named insured.
Correct Answer
A. The first named insured.Explanation
The first named insured is responsible for all premium payments under all types of personal and commercial lines insurance contracts.Rate this question:
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- 25.
A disability income insurance policy provided coverage for which of the following?
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Medical and hospital expenses
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Room and board charges in the hospital
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The income that is lost after a business closes as the result of an earthquake related injury
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The income that is lost or reduced, in some cases, resulting from the insured experiencing a physical injury or any time of sickness
Correct Answer
A. The income that is lost or reduced, in some cases, resulting from the insured experiencing a physical injury or any time of sicknessExplanation
disability income contracts pay personal income that is lost as the result of personal injury of illness, but do not pay any type of medical expenses, hospital or room and board costs, or damages resulting from an earthquake.Rate this question:
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- 26.
For an insured to recover payment for a loss, that individual must have an insurable interest in the specifically referenced property which was damaged, destroyed or stolen and this financial interest will limit the amount of payment by the insurer.
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True
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False
Correct Answer
A. TrueExplanation
statement of fact regarding insurable interest. this limitation requirement prevents any type of profit or gain by the insured resulting from an insured loss.Rate this question:
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- 27.
Which party is allowed to cancel a commercial policy (assuming all legal requirements are met)?
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Insurance company only
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Insurance company and/or any insured named in the policy
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Insurance company and/or the first named insured in the policy
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Insurance company and/or the first named insured, only concurrently
Correct Answer
A. Insurance company and/or the first named insured in the policyExplanation
Statment of fact. These cancellation requirements apply to both personal and commercial lines.Rate this question:
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- 28.
Which of the following types of crime coverage is the broadest in terms of coverage?
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Robbery
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Safe burglary
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Theft
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Burglary
Correct Answer
A. TheftExplanation
Theft is any act of stealing which would include robbery, burglary and safe burglary.Rate this question:
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- 29.
Identify which of the following is always included in a commercial package policy?
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Common policy declarations and conditions
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Personal auto coverage (for non-owned commercial vehicle)
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Commercial auto coverage part
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There are no coverage parts of components that are required in commercial package policies
Correct Answer
A. Common policy declarations and conditionsExplanation
Statement of fact. These two elements are found in all commercial package policies.Rate this question:
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- 30.
Which of the following types of business could utilize a businessowners policy?
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Banks
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Service station and auto repair station
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Restaurants
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Office buildings 2-stories high and containing about 5,000 sq ft
Correct Answer
A. Office buildings 2-stories high and containing about 5,000 sq ftExplanation
Choices A, B & C are specifically excluded from eligibility for a businessowners policy. Choice C is correct because the maximum size for an office building to be covered under a businessowners policy is 6 stories and 100,000 sq ft.Rate this question:
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- 31.
Insureds, especially those with higher premiums, very often do no have the immediate funds to pay required premiums, such as automobile liability insurance. In many cases insurers will provide premium financing. Which of the following statements is correct regarding this financing according to the requirements of the California Insurance Code?
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There are no requirements regarding premium financing
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Premium financing is prohibited
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Premium financing compensation of any type is prohibited
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Any agent that provides premium financing services is required to maintain all records regarding the financing if compensation is received for financing of the premiums.
Correct Answer
A. Any agent that provides premium financing services is required to maintain all records regarding the financing if compensation is received for financing of the premiums.Explanation
statement of factRate this question:
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- 32.
The concept of "pure risk" involves the possibility or chance of which of the following?
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A loss only
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Either a loss or a gain
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A profitable distribution of risks
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None of the above
Correct Answer
A. A loss onlyExplanation
Insurance is only not intended to create any type of gain.Rate this question:
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- 33.
A dwelling that is occupied by, and only houses one-family, can be insured by using an HO-3 policy.
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False
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True
Correct Answer
A. TrueExplanation
statement of fact regarding the use of an HO-3 policy.Rate this question:
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- 34.
The statement is true regarding medical expense coverage in a workers' compensation policy is ...
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It contains an unlimited amount of coverage for both time and dollar amounts
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It has a limit, but no dollar limit
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It has a dollar limit, but no time limet
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None of these are true statements
Correct Answer
A. It contains an unlimited amount of coverage for both time and dollar amountsExplanation
statement of fact regarding medical expense coverage limits found in a workers compensation policyRate this question:
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- 35.
The following coverages are need for a client who owns a condominium in a rural farm area:- Fire and all extended coverage for his personal property- Liability coverage for himself and his wife and children- Coverage for any assessments that result from damage to any common areasThe correct coverage would be?
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HO-2
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HO-3
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HO-4
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HO-6
Correct Answer
A. HO-6Explanation
an HO-6, it provides coverage for the condominium and common walls, floors ceilings, permanent fixtures and cabinets.Rate this question:
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- 36.
Any damages to an insured vehicle resulting from an earthquake, are covered under a PAP by the other-than-collision section of the policy.
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True
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False
Correct Answer
A. TrueExplanation
damages from perils such as earthquake, fire, hail, theft or collision with an animal are all covered under "loss-other-than-collision"Rate this question:
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- 37.
Umbrella policies provide coverage for and are best defined as which of the following?
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Excess liability coverage, on a broader basis, above an underlying primary policy
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Coverage, on an all-risk basis for damage that occurs to both personal and commercial property risk
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Physical damage coverage, written as excess and broader coverage, over an underlying primary policy
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High risk commercial business exposures that are not able to be insured elsewhere
Correct Answer
A. Excess liability coverage, on a broader basis, above an underlying primary policyExplanation
statement of fact regarding umbrella coverage as it is found in both personal lines and commercial lines.Rate this question:
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- 38.
Professional liability insurance should be purchased by all of the following categories of professions, except:
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A manicurist, cosmetologist and beautician
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Life insurance agents, financial planners and accountants
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Architects and attorneys
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Professional athletes and coaches
Correct Answer
A. Professional athletes and coachesExplanation
be careful with the wording on this one, it is an "except" question which means of the choices would not be a condidate for professional liability insurance. The occupations listed in choices A, B & C provide services to the public such that the individuals providing these services may, as a result of rendering improper or failing to render proper service, be found financially negligent. Professional liability insurance covers this type of liability exposure. Professional athletes and coaches do not provided this type of service to the public, therefore they are not eligible for this type of overlaps.Rate this question:
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- 39.
The coverage parts of HO-2 and HO-3 that are identical are those coverages provided for personal liability and medical payments exposures
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True
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False
Correct Answer
A. TrueExplanation
statement of fact about the similarities found in the liability coverage in both an HO-2 and HO-3 policy.Rate this question:
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- 40.
A personal auto policy will cover all of the following types of losses, except:
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The insured leaves the keys in the ignition, the driver's door unlocked and quickly goes into a store, when the vehicle is stolen
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A flood deluges the insured's home washing the car down a nearby riverbed
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During a sever wind and rainstorm, a large sign is blown off a store and damages an insured vehicle
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A "palm-top" computer, personally owned by the insured, is stolen from the insured's car while it is parked in her driveway.
Correct Answer
A. A "palm-top" computer, personally owned by the insured, is stolen from the insured's car while it is parked in her driveway.Explanation
The personal auto policy will cover losses caused by theft of the vehicle itself, but it typically does not cover the theft of personal belongings from inside the vehicle. Therefore, the theft of the "palm-top" computer from the insured's car would not be covered by the policy.Rate this question:
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- 41.
Why is a newly acquired motorcycle not automatically covered under the terms and conditions of a personal auto policy?
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Homeowners policies will provide coverage for a motorcycle
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Motorcycle owners policies will provide coverage for a motorcyle
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These types of vehicles are not covered under a personal auto policy that is unendorsed
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Motorcycles are covered through the CAARP
Correct Answer
A. These types of vehicles are not covered under a personal auto policy that is unendorsedExplanation
statement of fact.Rate this question:
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- 42.
A policy called "builder's risk" would be found in which of the following circumstances?
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Building in the process of being constructed
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Used by a construction contractor as a type of surety bond
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Protect homeowners who hire private subcontractors to complete repair projects
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Protect equipment and tools at construction sites
Correct Answer
A. Building in the process of being constructedExplanation
statement of fact regarding a builders risk policy. under this type of contract, the value of coverage increases as teh construction of the building also progresses.Rate this question:
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- 43.
Which of the following coverages does an open peril policy provide?
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Ocean and sea perils
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Perils that would affect business continuance
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Perils other than those specifically named as being excluded
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Perils stated in the policy
Correct Answer
A. Perils other than those specifically named as being excludedExplanation
This is the definition of an open-peril or all-risk policy, and applies to both personal and commercial lines.Rate this question:
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- 44.
Where is ocean marine liability insurance found?
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Protection and indemnity coverage
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Ocean marine cargo coverage insurance
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Ocean marine freight liability coverage
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Comprehensive personal liability policies
Correct Answer
A. Protection and indemnity coverageExplanation
statement of fact regarding Protection & Indemnity (P&I) coverage. Cargo covers the goods being shipped, freight refers to the shipping charges of the cargo, there is no comprehensive personal liability coverage in an ocean marine liability policy.Rate this question:
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- 45.
The type of homeowners contract that should by considered, and then purchases by one of your prospective insureds, who is a tenant renting a 2,500 sq ft, 2 story house is which of the following?
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HO-2
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HO-3
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HO-4
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HO-5
Correct Answer
A. HO-4Explanation
Anyone who rents or leases an apartment, condominium, townhouse, or detached home has no financial interest in the structure/dwelling, but should purchase an HO-4 to insure possible losses to personal property/contents.Rate this question:
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- 46.
How is an admitted insured defined according to the California DOI?
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It transacts insurance business in all states
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It is organized and chartered according to the laws of the state of California
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It transacts insurance according to the laws of the state of California
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It is incorporated under the laws of any other jurisdiction other than the state of California
Correct Answer
A. It transacts insurance according to the laws of the state of CaliforniaExplanation
An admitted insurance company is approved to transact insurance business in the State of California, but may have been organized, incorporated, or chartered according to the laws of another state. The other state would be the insurer's state of domicile.Rate this question:
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- 47.
What type of insurance company has owners who are stockholders in the company who share in the profits of the company?
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Assessment insurance companies
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Reciprocal insurance companies
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Mutual insurance companies
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Stock insurance companies
Correct Answer
A. Stock insurance companiesExplanation
Statement of fact regarding owners/shareholders of stock insurance companies.Rate this question:
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- 48.
The coverage that is the broadest, is found in which of the following dwelling insurance contracts?
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Broad form
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Special form
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Basic form
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The named peril coverage form
Correct Answer
A. Special formExplanation
special form or all risk is the braodest, most comprehensive coverage as it covers perils except those that are named in the policy as exclusions.Rate this question:
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- 49.
The limit for personal property coverage under an HO-4 is $60,000 with no decuctible. The insured is vacationing in Europe when the bed & breakfast they are staying in burns. The insured has the following losses:- Clothing & suitcases: $20,000 (replacement cost),- Jewelry: $20,000 (replacement cost)Additionally, all of this property has depreciated by 20% in value)What will the insurer pay under this policy?
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$18,000
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$24,000
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$28,000
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$32,000
Correct Answer
A. $32,000Explanation
Total Loss: $40,000 less $8,000 (20% depreciation) = $32,000.Rate this question:
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Current Version
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Mar 21, 2023Quiz Edited by
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Mar 10, 2010Quiz Created by
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