1.
What course of action does a party to a contract have if the other party is found to be in breach of that contract ?
Correct Answer
C. Damages for breach, reasonable attorney fees and costs
Explanation
If a party to a contract is found to be in breach, the injured party has the course of action to claim damages for the breach. This means that they can seek compensation for any losses or harm suffered as a result of the breach. Additionally, they may also be entitled to reasonable attorney fees and costs incurred in pursuing legal action to enforce the contract or seek remedies for the breach.
2.
A representation in an insurance contract qualifies as which of the following ?
Correct Answer
D. An implied warranty
Explanation
An implied warranty refers to a guarantee that is not explicitly stated in the insurance contract but is assumed to be present based on the nature of the agreement or the intentions of the parties involved. In the context of an insurance contract, an implied warranty could be a promise made by the insurer to provide coverage for certain risks or to act in good faith when handling claims. This type of warranty is inferred from the circumstances and is binding on both the insurer and the insured, even if it is not explicitly written in the policy.
3.
What does it mean if an agen'ts license is inactive ?
Correct Answer
D. The agent cannot transact any insurance business for which a valid, active license is required
Explanation
If an agent's license is inactive, it means that the agent is not authorized to conduct any insurance business that requires a valid and active license. This means that the agent cannot engage in any transactions that require a license, such as selling insurance policies or providing insurance advice. The agent must reactivate their license before they can resume transacting insurance business.
4.
The ordinance or law exclusion found in property policies such as the commercial property coverage, and in the homeowner's policy have the following effect:
Correct Answer
D. It excludes that part of the loss resulting from the enforcement of a building ordinance or law
Explanation
The correct answer is that the ordinance or law exclusion in property policies excludes the part of the loss that is a result of the enforcement of a building ordinance or law. This means that if a loss occurs due to the enforcement of a building ordinance or law, that specific part of the loss will not be covered by the insurance policy. This exclusion is in place to ensure that the insured does not knowingly violate any ordinances or laws and to reduce coverage if such violations occur.
5.
Extra expense insurance covers:
Correct Answer
B. The extra expense that a business incurs to continue a business while damage to the premises are being restored
Explanation
Extra expense insurance covers the additional costs that a business incurs to continue operations while the premises are being restored after damage. This can include expenses such as renting temporary facilities, purchasing equipment, or hiring additional staff. It is designed to help businesses minimize the financial impact of a loss and ensure that they can continue operating during the restoration process.
6.
A plate glass/glass coverage form is needed by some insureds. Which of the following statements about the coverage for the peril of glass breakage in commercial property for a "building and personal property" basic, broad and special causes of loss forms is true ?
Correct Answer
A. There is limited glass breakage coverage in both of the broad and special forms
Explanation
There is limited glass breakage coverage in both the broad and special forms of the "building and personal property" basic, broad, and special causes of loss forms.
7.
In the state of CA, no rate will remain in effect if it is considered to be any of the following, except:
Correct Answer
B. Unfairly discriminatory
Explanation
In the state of CA, rates will not remain in effect if they are considered to be impartial, excessive, or inadequate. However, rates can remain in effect if they are unfairly discriminatory. This means that while rates cannot be impartial, excessive, or inadequate, they can still be unfairly discriminatory and still be allowed to remain in effect.
8.
The amount paid for damage to property which is equal to the price for which it could have been sold is
Correct Answer
D. Market Value
Explanation
Market Value refers to the amount paid for damage to property, which is equal to the price for which it could have been sold. This means that the payment is based on the current market value of the property, taking into account factors such as depreciation and condition. It is different from Actual Cash Value, which may consider the property's depreciated value, and Replacement Amount, which may involve the cost of replacing the property with a similar one. Stated Amount, on the other hand, is a predetermined value agreed upon by the parties involved, and may not necessarily reflect the market value.
9.
The limited Mexico endorsement applies to trips to Mexico with a duration of
Correct Answer
B. 10 days or less
Explanation
The limited Mexico endorsement applies to trips to Mexico that have a duration of 10 days or less. This means that if someone is planning to travel to Mexico for a period of 10 days or less, they can obtain this endorsement. It is likely that this endorsement provides certain benefits or coverage specifically tailored for shorter trips to Mexico, such as emergency medical coverage or travel assistance services.
10.
Which of the following types of coverage would pay for losses which occurred during the policy period and are found for up to one year after policy termination?
Correct Answer
B. Loss sustained
Explanation
Loss sustained coverage is a type of insurance coverage that pays for losses that occurred during the policy period and are discovered up to one year after the policy termination. This means that even if the policy has ended, any losses that are found within one year after the termination will still be covered by the insurance. This type of coverage provides extended protection for potential losses that may not be immediately discovered or reported.
11.
Which coverage is needed to protect physicians, surgeons, and dentists for their professional activities
Correct Answer
B. Malpractice coverage
Explanation
Malpractice coverage is needed to protect physicians, surgeons, and dentists for their professional activities. This type of coverage specifically addresses the risks and liabilities associated with medical errors, negligence, or omissions that may result in harm to patients. It provides financial protection for professionals in the event of malpractice claims, including legal expenses and potential settlements or judgments. Commercial general liability, employer's liability, and errors and omissions coverage may offer different types of protection, but they do not specifically address the unique risks faced by healthcare professionals in their professional activities.
12.
What must an insurer do who accepts an application from an agent who is not specifically appointed that insurer, and then issues a policy from that application?
Correct Answer
D. Forward to the commissioner a notice of appointment within 14 days of receipt of application
Explanation
The insurer must forward to the commissioner a notice of appointment within 14 days of receipt of the application. This is necessary to inform the regulatory authority about the agent's acceptance and issuance of the policy on behalf of the insurer. It ensures transparency and compliance with regulatory requirements.
13.
Under a major medical plan, coinsurance equals a percentage
Correct Answer
A. The employee pays after the deductible is met
Explanation
In a major medical plan, coinsurance refers to the percentage that the employee is responsible for paying after the deductible has been met. This means that once the employee has paid the required deductible amount, they are then required to pay a percentage of the remaining costs for their medical expenses. The plan itself may also contribute to the costs, but the employee is responsible for their portion after the deductible is met.
14.
If an insured borrows a neighbor's vehicle to run a personal errand, how do the policies respond in the event of an auto accident ?
Correct Answer
D. The neighbor's policy is primary and the driver's policy is excess
Explanation
When an insured borrows a neighbor's vehicle to run a personal errand and gets into an auto accident, the neighbor's policy is considered primary and provides coverage for the accident. The driver's policy is considered excess, meaning it only provides coverage if the neighbor's policy limits are exhausted. This means that the neighbor's policy will be the first to respond and pay for damages, while the driver's policy will only come into play if the neighbor's policy is not sufficient to cover all the expenses.
15.
The equipment dealer's coverage form covers all of the following types of property, except:
Correct Answer
B. Motor vehicles designed for highway use
Explanation
The equipment dealer's coverage form provides coverage for all types of property, including the dealer's used stock, customer's equipment in for service, and the dealer's new stock. However, it does not cover motor vehicles designed for highway use. This means that if any motor vehicles designed for highway use are damaged or stolen, the coverage form will not provide any compensation or coverage for those vehicles.
16.
A self-insured group qualifies for stop-loss after claims:
Correct Answer
C. Exceed a specified limit in a set period of time
Explanation
A self-insured group qualifies for stop-loss after claims exceed a specified limit in a set period of time. This means that the group's claims must go beyond a predetermined threshold within a certain timeframe in order for stop-loss coverage to be activated. This ensures that the group is protected against excessively high claims and provides a safety net for their self-insured healthcare expenses.
17.
A reporting form is used for property insurance
Correct Answer
A. To maintain the correct limits of coverage without over or under insuring when the value of volume of the property varies during the policy term
Explanation
A reporting form is used for property insurance to ensure that the correct limits of coverage are maintained throughout the policy term, especially when the value or volume of the property fluctuates. This allows the insured to avoid over-insuring or under-insuring their property. By regularly reporting the changes in property value, the insurance coverage can be adjusted accordingly to accurately reflect the current value of the property. This helps to ensure that the insured is adequately protected in the event of a loss or damage to their property.
18.
All of the following contribute to the rising cost of Worker's Compensation Insurance, except:
Correct Answer
A. The growing population
Explanation
The growing population is not a factor that contributes to the rising cost of Worker's Compensation Insurance. The cost of insurance is typically determined by factors such as the number of claims, the severity of those claims, and the overall risk profile of the workforce. While a growing population may result in an increase in the number of workers, it does not directly impact the cost of insurance.
19.
Which type of exposure can be best defined as a condition or situation where the exposure to finance loss is presented to an individual or family from causes such as injury, disability, death, sickness, or unemployment ?
Correct Answer
C. Personal loss exposure
Explanation
Personal loss exposure can be best defined as a condition or situation where the exposure to financial loss is presented to an individual or family from causes such as injury, disability, death, sickness, or unemployment. It refers to the potential financial impact that individuals or families may face due to personal circumstances or events that can result in a loss of income or increased expenses. This type of exposure highlights the risks and vulnerabilities individuals and families may encounter in their personal lives, which can have significant financial consequences.
20.
All of the following would be considered benefits of Insurance, except:
Correct Answer
B. Retention of the loss by the insured
Explanation
Insurance provides various benefits such as payment for the cost of covered losses, redemption of financial uncertainty for the insured, and serving as a source of investment funds. However, the retention of the loss by the insured is not a benefit of insurance. In fact, insurance is designed to protect individuals or organizations from financial losses by transferring the risk to the insurer. Therefore, the insured should not bear the burden of retaining the loss.
21.
Which of the following is also known as a human loss exposure ?
Correct Answer
A. Personnel loss exposure
Explanation
Personnel loss exposure refers to the risk of losing human resources within an organization due to various factors such as death, disability, retirement, or resignation. This can lead to a loss of skills, knowledge, and experience, and can also impact the overall productivity and efficiency of the organization. Therefore, personnel loss exposure is also known as a human loss exposure as it involves the potential loss of valuable human assets.
22.
If a tenant is insured under a building personal property coverage form, when is the property considered vacant ?
Correct Answer
C. When there is insufficient business personal property present to conduct customary operations
23.
A commercial property policy can provide coverage for all of the following, except:
Correct Answer
C. Intangible losses
Explanation
A commercial property policy is designed to provide coverage for physical damage or loss to a business's property, such as buildings, equipment, and inventory. Tangible losses refer to physical losses that can be seen or touched, and a commercial property policy would cover these types of losses. Indirect losses are losses that result from the physical damage or loss, such as loss of income or additional expenses, and a commercial property policy would typically cover these as well. However, intangible losses are losses that do not involve physical damage or loss, such as reputation damage or loss of customer goodwill, and a commercial property policy would not typically provide coverage for these types of losses. Therefore, the correct answer is intangible losses.
24.
Which of the following types of coverage would be needed to cover a contract's bulldozers which are used in the contract's business but are not held for sale ?
Correct Answer
C. Contract's equipment floater
Explanation
A contract's equipment floater would be needed to cover a contract's bulldozers which are used in the contract's business but are not held for sale. A contract's equipment floater is a type of insurance coverage specifically designed to protect equipment that is used in the course of a contract. It provides coverage for equipment that is owned, rented, or leased by the contract holder, and it typically covers a wide range of perils such as theft, damage, and vandalism. This type of coverage would be necessary to ensure that the bulldozers used in the contract's business are protected in case of any unforeseen events or accidents.
25.
It is a violation of the CA insurance Code to act as a producer for a non-admitted carrier unless:
Correct Answer
D. The producer is a surplus lines broker
Explanation
According to the given information, it is a violation of the CA insurance Code to act as a producer for a non-admitted carrier unless the producer is a surplus lines broker. This means that if a producer wants to work with a non-admitted carrier, they must be specifically licensed as a surplus lines broker.
26.
In California, excess and surplus lines coverage needs to be placed through:
Correct Answer
D. A surplus lines broker
Explanation
In California, excess and surplus lines coverage needs to be placed through a surplus lines broker. A surplus lines broker is a licensed professional who specializes in placing coverage with non-admitted insurers, such as Lloyds of London. These brokers have the expertise and knowledge to navigate the complexities of the surplus lines market and ensure that clients receive the necessary coverage from reputable insurers. Therefore, a surplus lines broker is the appropriate choice for placing excess and surplus lines coverage in California.
27.
Under a scheduled personal property endorsement, loss to stamps are excluded when they are:
Correct Answer
B. Being shipped with a freight company
Explanation
The correct answer is "Being shipped with a freight company." This means that if the stamps are being transported or shipped using a freight company, they will not be covered under the scheduled personal property endorsement. This exclusion suggests that the risk associated with shipping stamps through a freight company is considered higher, and therefore, the insurance coverage does not apply in such cases.
28.
Which of the following is most likely to be eligible for the CA Fair Plan ?
Correct Answer
D. A well-maintained dwelling located in a hazardous brush area
Explanation
A well-maintained dwelling located in a hazardous brush area is most likely to be eligible for the CA Fair Plan. The CA Fair Plan is a program that offers insurance coverage to property owners who are unable to obtain insurance through traditional means due to high-risk factors such as location. In this case, the well-maintained dwelling suggests that the property is in good condition, which may make it more insurable. However, the hazardous brush area indicates a higher risk, which aligns with the purpose of the CA Fair Plan to provide coverage in such situations.
29.
What items of personal property are included in Coverage A under a HO-3 policy ?
Correct Answer
C. Paint on the premises to be applied to the interior
Explanation
Coverage A under a HO-3 policy typically includes personal property that is permanently attached or built in to the structure of the insured premises. This includes items like built-in appliances, fixtures, and permanently installed carpeting. However, paint on the premises to be applied to the interior is not considered personal property that is permanently attached or built in, as it is a temporary item that can be easily removed or replaced. Therefore, it is not included in Coverage A under a HO-3 policy.
30.
Mitchell's (unendorsed) personal auto policy liability coverage would pay for:
Correct Answer
C. The cost of repairing the neighbor's fence that Mitchell damaged due to the negligent operation of his car
Explanation
Mitchell's personal auto policy liability coverage would pay for the cost of repairing the neighbor's fence that Mitchell damaged due to the negligent operation of his car. This is because liability coverage typically covers damages caused by the insured's negligent actions, such as damaging someone else's property.
31.
All Workers Compensation policies provide
Correct Answer
B. Compensation for worker related injuries without regard to fault
Explanation
Workers Compensation policies provide compensation for worker-related injuries without regard to fault. This means that regardless of who is at fault for the injury, the policy will provide financial compensation to the injured worker. This is important because it ensures that workers are protected and taken care of in the event of an injury while on the job. It helps to cover medical expenses, lost wages, and other related costs, providing support and financial stability for the injured worker and their family.
32.
All of the following are principal rating factors under Proposition 103 for personal auto policies, except;
Correct Answer
D. Number of listed drivers
Explanation
The number of listed drivers is not a principal rating factor under Proposition 103 for personal auto policies. This means that the number of drivers listed on the policy does not directly affect the premium or cost of the policy. Factors such as years of driving experience, annual miles driven, and the driver's safety record are considered more important in determining the premium for a personal auto policy.
33.
Under a builders risk form, how much insurance is required to pay any loss without a penalty for underinsurance?
Correct Answer
A. 100% of the completed value
Explanation
In a builders risk form, the insurance is required to pay any loss without a penalty for underinsurance by covering 100% of the completed value. This means that the insurance coverage should be equal to the total value of the project once it is completed. This ensures that there is no penalty for underinsurance, meaning that the policyholder will receive full compensation for any loss or damage that occurs during the construction process.
34.
Which of the following persons is not an insured under Section I of a homeowner's policy?
Correct Answer
D. The named insured's (non-resident) spouse
Explanation
The named insured's (non-resident) spouse is not an insured under Section I of a homeowner's policy because the policy only covers residents of the insured's household. Since the spouse is a non-resident, they are not eligible for coverage under the policy.
35.
An unbrella Policy
Correct Answer
D. Provides broad excess liability coverage over one or more primary policyes
Explanation
An umbrella policy provides broad excess liability coverage over one or more primary policies. This means that it offers additional coverage beyond the limits of the primary policies, such as homeowners or auto insurance. It acts as a safety net, providing extra protection in case of a lawsuit or large claim that exceeds the limits of the primary policies. This coverage is typically applicable to both personal and commercial loss exposures.
36.
All of the following expenses are covered in addition to the limits of liability under Coverage A of a personal auto policy, except:
Correct Answer
C. Loss of earnings to attend trials at the company's request
Explanation
Loss of earnings to attend trials at the company's request is not covered under Coverage A of a personal auto policy. Coverage A typically includes liability coverage for bodily injury and property damage caused by the insured. However, loss of earnings to attend trials at the company's request is not a direct expense related to a covered accident, but rather a personal inconvenience or obligation that is not covered by the policy.
37.
Under a commercial property coverage form, all of the following properties are included in the definition of "building." except:
Correct Answer
D. Personal property used to maintain the premises
Explanation
Under a commercial property coverage form, the definition of "building" typically includes the physical structure of the property, such as walls, roofs, and floors, as well as permanently installed fixtures and outdoor fixtures. However, personal property used to maintain the premises, such as cleaning supplies or gardening tools, would not be considered part of the building.
38.
Carmen is driving her own car on behalf of her employer. Carmen's negligent operation of her car injured member of the public. The employer may be held liable because of what is called:
Correct Answer
A. Vicarious liability
Explanation
Vicarious liability is the legal doctrine that holds an employer responsible for the actions of their employees while they are acting within the scope of their employment. In this case, Carmen was driving her own car on behalf of her employer, which means she was acting within the scope of her employment. Therefore, if Carmen's negligent operation of her car injured a member of the public, the employer may be held liable under the principle of vicarious liability.
39.
Which of the following perils is insured against in the Special form but not in the Basic form ?
Correct Answer
D. Collapse
Explanation
The Special form of insurance covers the peril of collapse, while the Basic form does not. Collapse refers to the sudden falling down or caving in of a building or structure. This peril can occur due to various reasons, such as structural defects, foundation issues, or natural disasters like earthquakes. The Basic form of insurance typically covers more common perils like fire or theft, but does not provide coverage for collapse.
40.
Which of the following types of policies pays for bodily injury or property damage which occurs or is discovered during the policy period ?
Correct Answer
D. Occurrence general liability policy
Explanation
An occurrence general liability policy pays for bodily injury or property damage that occurs or is discovered during the policy period. This means that the policy covers any incidents that happen within the specified time frame, regardless of when the claim is actually made. This type of policy provides coverage for accidents or events that may have long-term effects or may not be immediately apparent. It is a broad form of coverage that offers protection for a wide range of potential liabilities.
41.
If an armored car carrying an insured's bank deposit is robbed, what Insurance would the insured need to be covered?
Correct Answer
C. Outside the premises-theft of money and securities
Explanation
The insured would need coverage for "Outside the premises-theft of money and securities" in case the armored car carrying their bank deposit is robbed. This coverage would protect them against theft of money and securities that occurs outside their premises, such as during transportation.
42.
Under the liability portion of an unendorsed personal auto policy, what coverage is available fi the namedinsured is operating a company car ?
Correct Answer
A. The coverage of the vehicle primarily operated by the named insured
Explanation
The correct answer is the coverage of the vehicle primarily operated by the named insured. This means that under the liability portion of the personal auto policy, the named insured will have coverage for the vehicle they primarily operate, even if it is a company car. This coverage applies regardless of whether the vehicle is listed in the policy declarations or not. The policy does not exclude coverage for this usage.
43.
A possibility of financial loss resulting from the ownership of property is knowns as:
Correct Answer
A. Insurable interest
Explanation
Insurable interest refers to the financial stake or potential loss that an individual has in a property. It is the basis for purchasing insurance, as it ensures that the policyholder will suffer a financial loss if the property is damaged or destroyed. Insurable interest is necessary for a valid insurance contract, as it demonstrates the relationship between the insured and the property being insured. Valuation refers to determining the monetary worth of a property, indemnity refers to compensation for a loss or damage, and legal liability refers to the responsibility to pay for damages or injuries caused to others.
44.
If the vacancy permit endorsement is added to a building and personal property coverage form, the vacancy conditions under the basic policy is:
Correct Answer
D. Waived only for designed perils during the policy period
Explanation
The correct answer is "Waived only for designated perils during the policy period." This means that the vacancy conditions under the basic policy are only waived for specific perils during the policy period, not for all perils or for the entire permit period.
45.
You are to meet with a small furniture manufacturer and make property and liability insurance recommendations. You have insured many risks of this type in the past and have a good idea of what their needs may be. there are several populat ways of determining business loss exposures. Which of the following ways are the least professional and the least likely to correctly identify the loss exposures? You:
Correct Answer
C. Get a copy of all current policies and determine what coverage they have been carrying and how much they have been paying
Explanation
Getting a copy of all current policies and determining what coverage they have been carrying and how much they have been paying is the least professional and least likely to correctly identify the loss exposures. This approach does not involve directly observing the business operations or gathering information from key people. It solely relies on the information provided in the policies, which may not accurately reflect the actual risks and exposures faced by the business.
46.
Where would an insured who is in the business of importing exotic animals from Africa most likely go to obtain insurance coverage?
Correct Answer
D. Excess and surplus lines insurer
Explanation
An insured who is in the business of importing exotic animals from Africa would most likely go to an excess and surplus lines insurer to obtain insurance coverage. Excess and surplus lines insurers specialize in providing coverage for unique or high-risk exposures that traditional insurance companies may not cover. Importing exotic animals from Africa would be considered a high-risk activity, and therefore, an insured would need to seek coverage from a specialized insurer like an excess and surplus lines insurer.
47.
A commercial building and a personal property coverage form covers three kinds of property, one which has "your business peronal property," "Your" refers to:
Correct Answer
D. Only the named insured(s) shown in the declarations
Explanation
The term "your" in the context of the commercial building and personal property coverage form refers to only the named insured(s) shown in the declarations. This means that the coverage is specifically for the individuals or entities that are listed as named insured(s) in the policy declarations.
48.
Which of the following losses is not covered by either the personal auto policy collision or other than collision coverage?
Correct Answer
D. Sean leaves his personal (non-business) laptop computer in his car overnight. His car is parked in the driveway in front of his house. the computer is stolen from his car.
Explanation
The loss of Sean's personal laptop computer is not covered by either the personal auto policy collision or other than collision coverage.
49.
Self-funding of employee benefit plans cannot be used for:
Correct Answer
B. Death benefits
Explanation
Self-funding of employee benefit plans cannot be used for death benefits because death benefits typically involve a lump sum payment to the beneficiary upon the death of an employee. Self-funding refers to the practice of an employer bearing the financial risk of providing benefits to its employees rather than purchasing insurance. While self-funding can be used for short-term disability, hospital, and health benefits, it is not typically used for death benefits as the financial risk associated with such benefits can be significant and unpredictable.
50.
How much additional coverage is provided under Homeowners 3 for ordinance or law ?
Correct Answer
C. No coverage
Explanation
Homeowners 3 does not provide any additional coverage for ordinance or law. This means that if there are any expenses related to complying with building codes or laws during the repair or rebuilding of the insured property, the policy will not cover those costs. It is important for homeowners to be aware of this limitation and consider purchasing additional coverage if they want to be protected against such expenses.