Fire & Casualty Practice Exam #1

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  • 1/148 Questions

    A church has a boilerin the basement of the church that explodes one day, but no one was hurt. Which class of insurance covers this boiler?

    • Liability
    • Workers Compensation
    • Boiler & Machinery
    • Insolvency
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About This Quiz

Fire & Casualty Practice Exam #1 assesses knowledge on insurance policy structure, market value, package policies, and specific clauses. It is essential for professionals in the insurance industry, enhancing understanding of key concepts and application in real-world scenarios.

Fire & Casualty Practice Exam #1 - Quiz

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  • 2. 

    A person not wanting to be killed from a plane crash would choose to never fly in an airplane. This method of managing a risk is know as:

    • Avoidance

    • Retention

    • Reduce

    • Transfer

    Correct Answer
    A. Avoidance
    Explanation
    The given correct answer is "Avoidance". This is because the person in question wants to eliminate the risk of being killed in a plane crash entirely, and the most effective way to do so is to never fly in an airplane. By avoiding flying, the person is actively choosing to stay away from the risk altogether. This method of managing risk is known as avoidance, as it involves completely eliminating exposure to the risk.

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  • 3. 

    All of the following are examples of being a good agent for your client except:

    • Stay up to date with clients and contact them periodically

    • Go above and beyond with the service you provide for your client

    • Make important decisions about the policy for clients without consulting and bothering them

    • Know your job and strive to learn all there is about your job so you can be an effective agent

    Correct Answer
    A. Make important decisions about the policy for clients without consulting and bothering them
    Explanation
    The correct answer is "Make important decisions about the policy for clients without consulting and bothering them." This is because a good agent should always involve the client in decision-making and keep them informed throughout the process. Making important policy decisions without consulting the client goes against the principles of good client-agent communication and may not align with the client's needs and preferences. A good agent should prioritize client satisfaction and ensure that the client is involved in decision-making to provide the best possible service.

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  • 4. 

    The insurer may examine books and records of an insured:

    • Annually

    • Only after 30 days notice to the insured

    • Only with the consent of the insured

    • At any time and for up to three years after the policy expires

    Correct Answer
    A. At any time and for up to three years after the policy expires
    Explanation
    The correct answer is "At any time and for up to three years after the policy expires." This means that the insurer has the right to examine the books and records of an insured at any time during the policy period and for up to three years after the policy expires. This allows the insurer to verify the accuracy of the insured's records and ensure that the policy terms and conditions are being followed. It also gives the insurer the opportunity to investigate any potential fraudulent activities or misrepresentations by the insured.

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  • 5. 

    The declarations page of a commercial policy will state which of the following:

    • Premium amount and coverage limits

    • Named insureds

    • Covered property

    • All of the above

    Correct Answer
    A. All of the above
    Explanation
    The declarations page of a commercial policy will state the premium amount and coverage limits, named insureds, and covered property. This page provides a summary of the important details of the policy, including the cost of the premium, the maximum amount the policy will pay for covered claims, the individuals or entities insured under the policy, and the specific property that is covered. Therefore, the correct answer is "All of the above."

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  • 6. 

    The claims department is responsible for:

    • Receiving applications for insurance and then deciding if the company should approve or reject the application.

    • Receiving claim requests, evaluating them and paying claims that are covered by the terms of the contract and rejecting those that are not.

    • Advertising, promoting and distributing an insurer's products to the public.

    • Using claims history, statistics and computer data to predict losses.

    Correct Answer
    A. Receiving claim requests, evaluating them and paying claims that are covered by the terms of the contract and rejecting those that are not.
    Explanation
    The claims department is responsible for receiving claim requests, evaluating them and paying claims that are covered by the terms of the contract and rejecting those that are not. This involves assessing the validity of each claim, determining if it falls within the coverage provided by the insurance contract, and processing the payment accordingly. By doing so, the claims department ensures that policyholders receive the appropriate compensation for their covered losses, while also preventing fraudulent or invalid claims from being paid out.

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  • 7. 

    Which of the following terms refers to how much the property (usually a home) would be bought for on the market?

    • Replacement cost

    • Actual Cash Value

    • Market Value

    • Agreed Value

    Correct Answer
    A. Market Value
    Explanation
    Market value refers to the amount for which a property, typically a home, would be bought or sold on the open market. It is the price that a willing buyer and a willing seller would agree upon in a competitive and fair transaction. Market value takes into consideration factors such as the property's location, condition, size, and current market conditions. It is an important concept in real estate as it helps determine the listing price, appraisal value, and potential returns on investment.

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  • 8. 

    Which of the following are ways of managing risks?

    • Sharing, Transfer and Avoidance

    • Avoidance, Shifting and Collecting

    • Minimizing, Retaining and Exposure

    • Containing, Collecting and Avoidance

    Correct Answer
    A. Sharing, Transfer and Avoidance
    Explanation
    The correct answer is "Sharing, Transfer and Avoidance". These are all strategies for managing risks. Sharing involves distributing the risk among multiple parties, such as through insurance or partnerships. Transfer refers to transferring the risk to another party, such as through contractual agreements or outsourcing. Avoidance means completely avoiding the risk by not engaging in the activity that poses the risk. These strategies help organizations mitigate potential risks and minimize their impact on the business.

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  • 9. 

    If an insurer's legal reserve funds are less than the minimum required by law, the company is impaired in its ability to pay claims and it technically:

    • Bankrupt

    • Insolvent

    • Recission

    • Estoppel

    Correct Answer
    A. Insolvent
    Explanation
    If an insurer's legal reserve funds are less than the minimum required by law, it means that the company does not have enough funds to cover its claims. This indicates that the company is unable to fulfill its financial obligations and is therefore insolvent. Being insolvent means that the company's liabilities exceed its assets, and it may not be able to continue operating in the long term.

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  • 10. 

    Which of the following terms refers to a company that fails to meet is financial obligations when they are due?

    • Adverse selection

    • Loss control

    • Indemnity

    • Insolvency

    Correct Answer
    A. Insolvency
    Explanation
    Insolvency refers to a company's inability to meet its financial obligations when they are due. This means that the company does not have enough assets or cash flow to pay off its debts or fulfill its financial commitments. Insolvency is a serious financial condition that can lead to bankruptcy or liquidation of the company. It indicates a significant financial distress and inability to continue operating in a sustainable manner.

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  • 11. 

    According to the Code, the word 'person' means:

    • The client seeking insurance

    • The insurer is an insurance contract

    • Any person, association, organization, partnership, business trust, limited liability company or corporation

    • Any person capable of binding an insurance contract

    Correct Answer
    A. Any person, association, organization, partnership, business trust, limited liability company or corporation
    Explanation
    The correct answer is "any person, association, organization, partnership, business trust, limited liability company or corporation." This definition encompasses a wide range of entities that can be considered as a "person" according to the Code. It includes not only individuals but also various types of organizations and legal entities.

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  • 12. 

    Which of the following is not covered in the homeowners watercraft endorsement under section II?

    • The insured takes his/her boat out on the lake for a leisurely ride and it is damaged

    • Ths insured takes his/her boat to the river and it is damaged due to collision with a large rock

    • The insured enter his/her boat in a weekend boat race and the boat is damaged in the race.

    • The insured is towing his/her boat to the lake for the weekend and the boat is damaged.

    Correct Answer
    A. The insured enter his/her boat in a weekend boat race and the boat is damaged in the race.
    Explanation
    The homeowners watercraft endorsement under section II covers damage to the insured's boat while it is being used for leisurely rides on the lake, while being towed to the lake, and even if it is damaged due to a collision with a large rock in the river. However, it does not cover damage to the boat during a boat race.

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  • 13. 

    Which of the following is not associated with the word insurance?

    • Tansferring risk

    • Indemnify

    • Known event

    • Written contract

    Correct Answer
    A. Known event
    Explanation
    The term "known event" is not associated with insurance because insurance is typically designed to cover unforeseen or uncertain events. A known event refers to a situation or occurrence that is already known or expected to happen, which does not require the need for insurance coverage. Insurance is intended to provide protection against risks and uncertainties, such as accidents, natural disasters, or unforeseen circumstances, rather than events that are already known or anticipated.

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  • 14. 

    Which of the following is not covered property under a Builders Risk form?

    • Scaffoldings

    • Lumber and other building supplies

    • Temporary structures on the premises

    • Trees, plants and shrubs

    Correct Answer
    A. Trees, plants and shrubs
    Explanation
    Trees, plants, and shrubs are not covered property under a Builders Risk form. A Builders Risk form typically provides coverage for property that is directly related to the construction project, such as scaffoldings, lumber, and other building supplies, as well as temporary structures on the premises. However, trees, plants, and shrubs are considered landscaping and are not typically included in the coverage provided by a Builders Risk form.

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  • 15. 

    What is the purpose of Miscellaneous Type Vehicle Endorsement?

    • Is for people who don't own a vehicle but still drive (rented, public transportation, company vehicle, etc.)

    • Allows non-owned vehicles furnished for the insured's regular use (company car)

    • Allows the PAP to cover vehicles such as motorcycles, ATV's, dune buggies and motorhomes.

    • Covers expenses incurred in the event of a total theft

    Correct Answer
    A. Allows the PAP to cover vehicles such as motorcycles, ATV's, dune buggies and motorhomes.
    Explanation
    The purpose of the Miscellaneous Type Vehicle Endorsement is to allow the Personal Auto Policy (PAP) to provide coverage for vehicles such as motorcycles, ATV's, dune buggies, and motorhomes. This endorsement expands the coverage of the policy to include these specific types of vehicles, which may not be covered under the standard policy. By adding this endorsement, the insured can ensure that these vehicles are protected in the event of an accident or damage.

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  • 16. 

    Which type of coverage is needed to cover how much you owe on a vehicle and how much the actual cash value is worth?

    • Gap coverage

    • New Auto Coverage

    • P & I (protection and indemnity)

    • Liability coverage

    Correct Answer
    A. Gap coverage
    Explanation
    Gap coverage is needed to cover how much you owe on a vehicle and how much the actual cash value is worth. Gap coverage is an optional insurance coverage that helps pay off the difference between the amount you owe on your car loan or lease and the car's actual cash value in the event of a total loss. This coverage is particularly important for individuals who have a loan or lease on their vehicle, as it protects them from having to pay out of pocket for the remaining balance on the loan if the car is totaled.

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  • 17. 

    To have a contract, there must be an offer made by the insurer and then an acceptance made by the insured. This is known as the:

    • Agreement

    • Legal Purpose

    • Consideration

    • Competent Parties

    Correct Answer
    A. Agreement
    Explanation
    The correct answer is "Agreement." In order for a contract to be formed, there must be an offer made by one party (in this case, the insurer) and an acceptance made by the other party (in this case, the insured). This agreement between the parties is essential for the contract to be valid and enforceable. Without agreement, there is no mutual understanding and consent between the parties, and therefore no contract can exist.

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  • 18. 

    According to the Code, the word 'person' means:

    • The client seeking insurance

    • The insurer in an insurance contract

    • Any person, association, organization, partnership, business trust, limited liability company or corporation

    • Any person cabable of binding an insurance contract

    Correct Answer
    A. Any person, association, organization, partnership, business trust, limited liability company or corporation
    Explanation
    The correct answer is "any person, association, organization, partnership, business trust, limited liability company or corporation." This means that the term 'person' in the Code refers to not only individuals but also various entities such as associations, organizations, partnerships, business trusts, limited liability companies, and corporations.

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  • 19. 

    Which of the following describes an Alien Insurer?

    • An insurance company that is incorporated outside the United States

    • An insurance company thas is incorporated in California

    • An insurance company that is incorporated in another state

    • An insurance company that is incorporated outside of the principal city

    Correct Answer
    A. An insurance company that is incorporated outside the United States
    Explanation
    An alien insurer refers to an insurance company that is incorporated outside the United States. This means that the company's headquarters and legal establishment are located in a foreign country rather than within the United States.

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  • 20. 

    Business Income and Extra Expense coverage would be necessary in which of the following cases?

    • A dry cleaner has a fire and must relocate to temporary location to avoid losing customers

    • A contractor has his tools stolen from a job site

    • A grocery store suffers damage to stock when an earthquake collapses a shelf

    • A restaurant owner forgets to order enough product as a result suffers a loss of business income.

    Correct Answer
    A. A dry cleaner has a fire and must relocate to temporary location to avoid losing customers
    Explanation
    Business Income and Extra Expense coverage would be necessary in the case of a dry cleaner having a fire and needing to relocate to a temporary location to avoid losing customers. This coverage would provide financial protection for the loss of income and the additional expenses incurred due to the temporary relocation.

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  • 21. 

    If you are acting in the best interest of the insured and handling their funds and affairs then you are acting as a:

    • Insolvency dirctor

    • Guarantee association

    • Fiduciary

    • Conservator

    Correct Answer
    A. Fiduciary
    Explanation
    A fiduciary is a person or entity that is entrusted with the responsibility to act in the best interest of another party. In this case, if you are acting in the best interest of the insured and handling their funds and affairs, you are acting as a fiduciary. As a fiduciary, you have a legal and ethical duty to prioritize the insured's interests above your own. This includes managing their finances and making decisions that are in their best interest.

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  • 22. 

    The Homeowners Watercraft Endorsement under Section II includes all the following except:

    • The use of a boat in a racing competition

    • Coverage for liability exposure on a scheduled boat

    • Coverage for medical payments exposure on scheduled boats

    • Property damage coverage for the boat itself

    Correct Answer
    A. The use of a boat in a racing competition
    Explanation
    The Homeowners Watercraft Endorsement under Section II includes coverage for liability exposure on a scheduled boat, coverage for medical payments exposure on scheduled boats, and property damage coverage for the boat itself. However, it does not include coverage for the use of a boat in a racing competition.

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  • 23. 

    Which of the following terms is mandatory as used in the code?

    • May

    • Shall

    • Both may and shall

    • Neither may or shall

    Correct Answer
    A. Shall
    Explanation
    The term "shall" is mandatory in the code because it implies a requirement or obligation that must be followed. It indicates that the action or condition described is necessary and binding. The use of "shall" in the code suggests that compliance is not optional and must be adhered to.

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  • 24. 

    Which of the following terms is mandatory as used in the Code?

    • 'may'

    • 'shall'

    • Both 'may' and 'shall'

    • Neither 'may' or 'shall'

    Correct Answer
    A. 'shall'
    Explanation
    The term 'shall' is mandatory as used in the Code. This term implies a requirement or obligation, indicating that the action described must be followed or complied with. It leaves no room for discretion or choice. Therefore, the use of 'shall' in the Code makes it a mandatory requirement.

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  • 25. 

    The three (3) parties to a Surety Bond contract are:

    • Principal, surety and obligee

    • Insured, insurer and principal

    • Olibor, oligee and insurer

    • None of the above, as there are only two (2) parties to a surety bond contract

    Correct Answer
    A. Principal, surety and obligee
    Explanation
    A surety bond is a contract between three parties: the principal, the surety, and the obligee. The principal is the party who needs the bond and is obligated to fulfill certain obligations. The surety is the party who provides the bond and guarantees the principal's performance. The obligee is the party who is protected by the bond and is entitled to make a claim if the principal fails to fulfill their obligations. Therefore, the correct answer is principal, surety, and obligee.

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  • 26. 

    Which of the following Homeowners policies covers a home that was built 75 years ago?

    • HO 1

    • HO 2

    • HO 4

    • HO 8

    Correct Answer
    A. HO 8
    Explanation
    HO 8 is the correct answer because it is a homeowners policy specifically designed for older homes. It provides coverage for the dwelling and personal property at replacement cost, regardless of the age of the home. HO 1, HO 2, and HO 4 are not suitable for a home that was built 75 years ago as they have limitations and restrictions based on the age and condition of the property.

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  • 27. 

    What does an HO 6 cover?

    • The tenants personal property, loss of use and liability exposures in renter's insurance.

    • Covers perils to condominium units and the exposure of liability, as wee as loss assessment coverage.

    • An HO 6 is coverage by the broad form perils.

    • Covers all risks except those excluded

    Correct Answer
    A. Covers perils to condominium units and the exposure of liability, as wee as loss assessment coverage.
    Explanation
    An HO 6 policy provides coverage for condominium units and the liability exposures associated with them. It also includes loss assessment coverage, which protects the policyholder in case they are assessed a portion of a loss that occurred in a common area of the condominium complex. This type of insurance typically covers a wide range of perils, with the exception of those specifically excluded from the policy.

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  • 28. 

    What type of endorsement waives the standard requirement of a "4-wheel vehicle and/or a vehicle weight of less than 10,000 pounds" limitation?

    • Extended non-owned liability

    • Named non-owner

    • Excess automobile liability exposure

    • Miscellaneous Type Vehicle.

    Correct Answer
    A. Miscellaneous Type Vehicle.
    Explanation
    The correct answer is Miscellaneous Type Vehicle. A Miscellaneous Type Vehicle endorsement waives the standard requirement of a "4-wheel vehicle and/or a vehicle weight of less than 10,000 pounds" limitation. This means that with this endorsement, vehicles that do not meet these requirements can still be covered under the policy.

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  • 29. 

    What are the four types of hazards?

    • Avoidance, Shifting, Collecting and Transfer

    • Legal, Moral, Morale and Physical

    • Transfer, Retain, Legal and Moral

    • Physical, Morale, Pure and Speculative

    Correct Answer
    A. Legal, Moral, Morale and Physical
    Explanation
    The four types of hazards mentioned in the answer are legal, moral, morale, and physical. These hazards encompass different aspects of potential risks or dangers. Legal hazards refer to risks associated with legal issues, such as lawsuits or compliance violations. Moral hazards involve ethical dilemmas and the potential for unethical behavior. Morale hazards pertain to risks related to low morale or motivation within a group or organization. Lastly, physical hazards encompass any potential physical harm or danger to individuals or property.

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  • 30. 

    Incurred loss + loss adjusting expense/earned premium =

    • Loss ratio

    • Loss exposure

    • Liability Loss exposure

    • Property exposure

    Correct Answer
    A. Loss ratio
    Explanation
    The formula provided is used to calculate the loss ratio. The loss ratio is a measure of the profitability of an insurance company, representing the ratio of incurred losses and loss adjusting expenses to earned premiums. It helps insurers assess their underwriting performance and determine if they are charging appropriate premiums for the risks they are assuming. By comparing the amount of losses and expenses incurred to the premiums earned, insurers can determine if they are paying out more in claims and expenses than they are receiving in premiums, indicating a potentially unsustainable business model. Therefore, the correct answer is "Loss ratio."

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  • 31. 

    An owner of an auto repair business would be best covered under which of the following?

    • A Commercial General Liability form

    • A Business Auto Policy with Non-Owned Autos as a specified symbol

    • A Garage Liability Coverage form

    • A Commercial Property Coverage form

    Correct Answer
    A. A Garage Liability Coverage form
    Explanation
    An owner of an auto repair business would be best covered under a Garage Liability Coverage form. This form is specifically designed to provide coverage for businesses that operate in the automotive repair industry. It offers protection against liability claims arising from bodily injury or property damage that may occur on the premises of the business or as a result of the business's operations. It also includes coverage for products and completed operations, as well as coverage for damage to customers' vehicles while in the care, custody, and control of the business. Overall, a Garage Liability Coverage form provides comprehensive coverage tailored to the unique risks faced by auto repair businesses.

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  • 32. 

    The percentage of a deceased worker's weekly wages payable to the spouse and dependent children is:

    • 33 1/3

    • 66 2/3

    • 50

    • 100

    Correct Answer
    A. 66 2/3
    Explanation
    The correct answer is 66 2/3. This percentage represents the amount of a deceased worker's weekly wages that are payable to their spouse and dependent children. This percentage ensures that the family members are provided with financial support after the worker's death.

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  • 33. 

    At the time of all appointments being terminated (after all fees paid and education requirements have been fulfilled) the agent's license:

    • Terminates

    • Becomes inactive

    • Terminates after 10 days

    • Becomes inactive after 30 days

    Correct Answer
    A. Becomes inactive
    Explanation
    When all appointments are terminated, the agent's license becomes inactive. This means that while the license is still valid, the agent is not currently authorized to act as an agent or conduct any business. The license can be reactivated by fulfilling any necessary requirements or obtaining new appointments.

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  • 34. 

    An insurance company that has met all the qualifications designed by the Department of Insurance and has received a Certificate of Authority from the DOI to trasact insurance in this state is known as:

    • A domestic insurer

    • A foreign insurer

    • An admitted insurer

    • A non-admitted insurer

    Correct Answer
    A. An admitted insurer
    Explanation
    An insurance company that has met all the qualifications set by the Department of Insurance and has received a Certificate of Authority to transact insurance in a specific state is known as an admitted insurer. This means that the insurer is authorized and licensed to operate within that state and comply with its regulations and requirements. They are considered to be part of the state's insurance market and have the necessary approval to provide insurance coverage to customers within that jurisdiction.

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  • 35. 

    Which of the following does not define an uninsured motorist?

    • A hit and run vehile

    • Person without insurance

    • Person's insurer becomes insolvent

    • Person with insurance

    Correct Answer
    A. Person with insurance
    Explanation
    The correct answer is "Person with insurance." This option does not define an uninsured motorist because it states that the person has insurance. An uninsured motorist refers to someone who does not have insurance coverage for their vehicle.

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  • 36. 

    All of the following are covered perils on a Crop Insurance policy, except:

    • Insect infestation

    • Drought

    • Tornado

    • Inherent vice

    Correct Answer
    A. Inherent vice
    Explanation
    Inherent vice refers to the natural tendency of a crop to deteriorate or become damaged over time, which is not covered under a crop insurance policy. Insect infestation, drought, and tornado are all covered perils as they are external factors that can cause damage to the crop.

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  • 37. 

    What is the purpose of the Fair plan?

    • To see that each member is provided with insolvency insurance and to provide indemnity toward claims of policyholders of that insolvent company

    • The FAIR plan is designed to refulate laws that define insurance and make sure the people are fairly represented

    • The FAIR plan shall establish a list of all surplus line insurers meeting the recognized requirements for such title and shall issue a master list at least semiannually

    • The FAIR plan is a collection of risks to provide fire and extended coverage insurance to individuals who cannot get coverage through regular channels because of environmental hazards

    Correct Answer
    A. The FAIR plan is a collection of risks to provide fire and extended coverage insurance to individuals who cannot get coverage through regular channels because of environmental hazards
    Explanation
    The purpose of the FAIR plan is to provide fire and extended coverage insurance to individuals who are unable to obtain coverage through regular channels due to environmental hazards. The plan acts as a collection of risks, ensuring that those who are considered high-risk due to their location or other factors are still able to access insurance coverage. This helps to protect individuals and their properties from potential damages or losses caused by fire or other covered events.

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  • 38. 

    The oldest type of insurance in the world is:

    • Shipowners liability insurance

    • Product liability insurance

    • Ocean marine insurance

    • Automobile liability insurance

    Correct Answer
    A. Ocean marine insurance
    Explanation
    Ocean marine insurance is considered the oldest type of insurance in the world because it dates back to ancient times when maritime trade was prevalent. This type of insurance was developed to protect shipowners against the risks of loss or damage to their vessels and cargo during sea voyages. It played a crucial role in facilitating international trade and ensuring the financial security of shipowners. Over time, other forms of insurance such as product liability insurance and automobile liability insurance emerged to cater to different industries and risks. However, ocean marine insurance holds the distinction of being the oldest and most traditional form of insurance.

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  • 39. 

    When coverage is terminated under a group plan, the coverage for a totally disables employee who submits a claim prior to the termination of the policy will:

    • Not have coverage beyond the termination date for any reason

    • Be covered only for Life Insurance

    • Be covered under a lifetime provision

    • Be covered under the Extension of Benefits, for a specified period of time

    Correct Answer
    A. Be covered under the Extension of Benefits, for a specified period of time
    Explanation
    When coverage is terminated under a group plan, the coverage for a totally disabled employee who submits a claim prior to the termination of the policy will be covered under the Extension of Benefits, for a specified period of time. This means that even after the policy is terminated, the disabled employee will still have coverage for a specific duration. This extension of benefits allows the employee to continue receiving coverage and benefits for a limited period, ensuring that they are not left without any coverage immediately after the termination of the policy.

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  • 40. 

    Who has the ability to legally bind insurance for the insurer?

    • Insurance Broker

    • Insurance Agent

    • Insurance Solicitor

    • Insurance Administrator

    Correct Answer
    A. Insurance Agent
    Explanation
    An insurance agent has the ability to legally bind insurance for the insurer. They act as intermediaries between the insurance company and the client, selling insurance policies and assisting with the application process. Insurance agents have the authority to bind coverage on behalf of the insurer, meaning they can enter into contracts and make legally binding agreements with clients on behalf of the insurance company. This allows them to issue policies and provide coverage to clients based on the terms and conditions set by the insurer.

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  • 41. 

    Which of the following is not an element of a contract to be enforced by the law?

    • Competent parties

    • Tort Law

    • Offer and Acceptance

    • Legal purpose

    Correct Answer
    A. Tort Law
    Explanation
    Tort Law is not an element of a contract to be enforced by the law. Tort Law deals with civil wrongs and liabilities, such as negligence, defamation, or personal injury, whereas a contract is a legally binding agreement between competent parties that requires offer and acceptance, legal purpose, and consideration. While Tort Law may intersect with contract law in certain cases, it is not a fundamental element of a contract itself.

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  • 42. 

    A person within California shall not conduct any insurance on property located or operations conducted within, or on the lives or persons of residents of California, with nonadmitted insurers except by:

    • An agent

    • An agent licensed with the state of california

    • A licensed surplus line borker

    • A licensed special surplus line broker

    Correct Answer
    A. A licensed surplus line borker
    Explanation
    A person within California can only conduct insurance on property located or operations conducted within, or on the lives or persons of residents of California, with nonadmitted insurers through a licensed surplus line broker. This means that the person must use the services of a professional who is authorized and licensed to handle insurance transactions with nonadmitted insurers in California. The other options mentioned, such as an agent or a licensed special surplus line broker, may not have the necessary qualifications or authorization to conduct such insurance transactions.

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  • 43. 

    Aggregate limit refers to:

    • The limit of insurance per loss

    • The most an insurer will pay in any one policy period

    • A per article limit

    • Agricultural loss limit

    Correct Answer
    A. The most an insurer will pay in any one policy period
    Explanation
    Aggregate limit refers to the maximum amount that an insurer will pay in any one policy period. This means that regardless of the number of claims or losses that occur during the policy period, the insurer will not pay more than the aggregate limit. This limit is set to protect the insurer from excessive losses and to ensure that they can manage their risk effectively. It is an important consideration for policyholders as they need to ensure that the aggregate limit is sufficient to cover their potential losses.

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  • 44. 

    A person within California shall not conduct any insurance on property located or operations conducted within, or on the lives or persons of residents of California with nonadmitted insurers except by:

    • An agent

    • An agent licensed with the state of California

    • A licensed surplus line broker

    • A licensed special surplus line broker

    Correct Answer
    A. A licensed surplus line broker
    Explanation
    A licensed surplus line broker is allowed to conduct insurance on property located or operations conducted within California, or on the lives or persons of residents of California with nonadmitted insurers. This means that only brokers who have obtained the necessary license from the state of California are authorized to handle insurance transactions with nonadmitted insurers in the state.

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  • 45. 

    Which of the following is a basis provision of all property policies for property that can't be moved, such as ahouse and sends payment to the insured as well as the lien holder in the event of a loss?

    • Concurrent Policy Coverage

    • Standard Mortgage Clause

    • Special Lines Surplus Lines

    • Uniform Insurers Rehabiliation Act

    Correct Answer
    A. Standard Mortgage Clause
    Explanation
    The Standard Mortgage Clause is a provision in property insurance policies that protects both the insured and the lien holder in the event of a loss. It ensures that the payment for the loss is made to both the insured and the lien holder, typically the mortgage company. This clause is commonly included in property policies for properties that cannot be moved, such as houses, to provide financial protection to all parties involved.

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  • 46. 

    Which of the following is not true of the Good Driver Discount according to Proposition 103?

    • Prop. 103 states an insurer cannot refuse to write an application who qualifies for a good driver discount.

    • A good driver discount should be a least 20% below the rate the insured would otherwise have charged for the same coverage

    • Prop 103 requires the insured to purchase homeowner's insurance to be eligible for the good driver discount

    • A good driver discount applies if all of the following criteria is met: licensed driver has not had one violation point during the past three years, was not the driver of a motor vehicle involved in an accident which resulted in death or in total loss of damage exceeding $500, and was not pricipally at fault.

    Correct Answer
    A. Prop 103 requires the insured to purchase homeowner's insurance to be eligible for the good driver discount
  • 47. 

    Which of the following terms is a legal defense used when a person has placed him/herself in a dangerous situation?

    • Recission

    • Estoppel

    • Fraud

    • Assumption of Risk

    Correct Answer
    A. Assumption of Risk
    Explanation
    Assumption of Risk is a legal defense used when a person willingly places themselves in a dangerous situation and is aware of the risks involved. By voluntarily engaging in the activity or situation, the person acknowledges and accepts the potential harm or injury that may occur. This defense can be used to argue that the person should bear some or all of the responsibility for any resulting harm, rather than holding others liable.

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  • 48. 

    Every resident insurance fire and casualty broker/agent shall maintain:

    • A principal office in each city where business is transacted

    • A principal office in California for the transaction of business done in California

    • A principal office in each state where business in transacted

    • A principal office in one specified city of business

    Correct Answer
    A. A principal office in California for the transaction of business done in California
    Explanation
    The correct answer is "a principal office in California for the transaction of business done in California." This means that every resident insurance fire and casualty broker/agent must have a main office located in California specifically for conducting business in California. This ensures that they have a physical presence in the state to handle any transactions and provide services to clients within California.

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  • 49. 

    According to the definition of an ideally insurable risk, all the following are required except:

    • Loss must be the result of a catastrophic event

    • Loss must be measurable in monetary value

    • Loss exposure must be part of a similar group of exposures

    • Loss must be accidental

    Correct Answer
    A. Loss must be the result of a catastrophic event
    Explanation
    The correct answer is "Loss must be the result of a catastrophic event." The definition of an ideally insurable risk includes the requirement that the loss must be accidental, measurable in monetary value, and part of a similar group of exposures. However, it does not require the loss to be the result of a catastrophic event. This means that even non-catastrophic events can be considered insurable risks as long as they meet the other criteria.

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Quiz Review Timeline (Updated): Mar 22, 2023 +

Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness.

  • Current Version
  • Mar 22, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Feb 19, 2010
    Quiz Created by
    Petsya

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