Fire & Casualty Practice Exam 4

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  • 1/150 Questions

    A physician is being sued by a patient for misdiagnosing terminal cancer.  What type of insurance would protect the physician against this type of mistake?

    • Professional liability
    • Health insurance
    • Allied lines insurance
    • Personal Liability
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About This Quiz

Fire & Casualty Practice Exam 4 tests understanding of insurance concepts including rate-making, benefits of insurance, valuation of property, and policyholder responsibilities. It's crucial for professionals in the insurance sector, enhancing skills in policy management and risk assessment.

Fire & Casualty Practice Exam 4 - Quiz

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  • 2. 

    Professionals are exposed to liability for failure to properly perform their professional duties.  Which of the following would be the least likely prospect for a professional liability policy ?

    • Dentist

    • Pro basketball player

    • Attorney

    • Architect

    Correct Answer
    A. Pro basketball player
    Explanation
    A professional liability policy is designed to protect professionals from liability claims arising from errors or negligence in their professional duties. In this context, a pro basketball player would be the least likely prospect for such a policy. Unlike the other options, a pro basketball player does not typically provide professional services that could result in liability claims. Their role is primarily related to sports and entertainment, rather than providing professional advice or services. Therefore, the need for a professional liability policy would be significantly lower for a pro basketball player compared to the other professions listed.

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  • 3. 

    A wrongful act other than a crime or breach of contract is a

    • Tort

    • Proximate cause

    • Liability

    • Hazard

    Correct Answer
    A. Tort
    Explanation
    A wrongful act other than a crime or breach of contract is referred to as a tort. A tort is a civil wrong that causes harm or injury to another person, their property, or their reputation. Unlike a crime, which is a violation of public law, a tort is a private wrong that can result in a legal claim for damages. Examples of torts include negligence, defamation, and intentional infliction of emotional distress. Tort law aims to provide compensation to the injured party and deter others from engaging in similar harmful behavior.

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  • 4. 

    The named insured for a commercial package policy is "Jill Koslin and Edward Koslin DBA Coastline Photo Shop".  Under the terms of the common policy conditions of the commercial package policy, who is responsible for the premium payments?

    • Jill

    • Edward

    • Coastline Photo Shop

    • Both Jill and Edward have equal responsibility

    Correct Answer
    A. Jill
    Explanation
    Jill is responsible for the premium payments because she is specifically named as the insured in the policy. Edward and Coastline Photo Shop may also have some responsibility, but the named insured, Jill, is ultimately the one responsible for paying the premiums.

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  • 5. 

    Your insured has a ten year lease on his store.  He has spent $50,000 on shelving, wall-to-wall carpeting, partitions, and lighting, etc., all of which are part of the building and cannot be legally removed.  He is concerned that a fire might damage these changes that he has made and wants to make sure he is protected for their value.  He should purchase

    • Coverage for improvements and betterments

    • Coverage for legal liability

    • Accounts receivable coverage

    • $50,000 on the building

    Correct Answer
    A. Coverage for improvements and betterments
    Explanation
    The insured should purchase coverage for improvements and betterments because these are changes that he has made to the building and cannot be legally removed. This coverage will protect him in case of a fire or damage to these improvements, ensuring that he is compensated for their value.

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  • 6. 

    A medical condition that exists on the policy effective date and during a specified time earlier, is the definition of

    • Undisclosed condition

    • First-manifest condition

    • First diagnosed condition

    • Pre-existing condition

    Correct Answer
    A. Pre-existing condition
    Explanation
    A pre-existing condition refers to a medical condition that already exists before the policy becomes effective and during a specific period prior to the policy's start date. This means that the individual had the condition before obtaining the insurance coverage.

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  • 7. 

    All of the following meet the definition of the insured under a HO-3 policy, except

    • A 70-year-old grandparent residing in an adult care facility

    • An 89-year-old uncle residing in the household

    • An 18-year-old foster child residing with the insured

    • A 20-year-old son enrolled as a full-time student in another state

    Correct Answer
    A. A 70-year-old grandparent residing in an adult care facility
    Explanation
    The HO-3 policy typically covers the named insured, their relatives living in the household, and other individuals under their care. The 70-year-old grandparent residing in an adult care facility does not meet the definition of the insured under the HO-3 policy because they are not living in the household. The other options, including the 89-year-old uncle, the 18-year-old foster child, and the 20-year-old son, all meet the criteria as they either reside in the household or are under the care of the insured.

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  • 8. 

    California has lower financial responsibility limits than most other states.  If Randy, a California personal auto policy insured, carrying minimum limits on coverage, has an accident in a state that requires higher limits, then

    • The policy will automatically provide the higher required limits - at no extra charge

    • The unendorsed policy does not cover the out-of-state operation of the automobile

    • He is breaking the law of that state unless he has added the "other-state" endorsement

    • The policy will provide the higher limits retroactively, but only when he has paid the difference in premiums

    Correct Answer
    A. The policy will automatically provide the higher required limits - at no extra charge
    Explanation
    California has lower financial responsibility limits compared to most other states. However, if Randy, who has a California personal auto policy with minimum limits, has an accident in a state that requires higher limits, his policy will automatically provide the higher required limits without any additional charge. This means that Randy will be covered for the higher limits mandated by the state where the accident occurred, even though his policy initially had lower limits.

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  • 9. 

    It is a violation of the CA Insurance code to act as a producer for a non-admitted carrier unless

    • The producer is an insurance solicitor

    • It is always a violation, no matter what type of producer

    • The producer is duly licensed in at least two states

    • The producer is a surplus lines broker

    Correct Answer
    A. The producer is a surplus lines broker
    Explanation
    The correct answer is that the producer is a surplus lines broker. A surplus lines broker is a licensed insurance professional who specializes in placing insurance coverage with non-admitted carriers. Non-admitted carriers are insurance companies that are not licensed or authorized to do business in a particular state. Surplus lines brokers are allowed to work with these carriers to provide coverage for risks that cannot be insured through admitted carriers. Therefore, if a producer is acting as a surplus lines broker, it is not a violation of the CA Insurance code to work with a non-admitted carrier.

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  • 10. 

    The Mexico coverage endorsement may be attached to personal auto policies, and ...

    • Provide excess liability coverage for accidents in Mexico within 25 miles of the US border

    • Must be attached to US policies for citizens of Mexico

    • Will provide primary liability coverage for insureds driving anywhere in Mexico

    • Must be added to the policy of an insured who lives within 25 miles of the Mexican border

    Correct Answer
    A. Provide excess liability coverage for accidents in Mexico within 25 miles of the US border
    Explanation
    The Mexico coverage endorsement provides excess liability coverage for accidents that occur in Mexico within 25 miles of the US border. This means that if an insured person gets into an accident in Mexico within this specified distance from the US border, the endorsement will provide additional coverage on top of their regular auto insurance policy. It is not necessary for the insured to be a citizen of Mexico or for the endorsement to be added to the policy of someone who lives within 25 miles of the Mexican border.

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  • 11. 

    Thomas Fry has insured a building under his commercial policy.  the building was vacant for 75 consecutive days before a loss.  the policy will not pay for the loss if caused by the perils of

    • Building glass breakage and vandalism

    • Riot

    • Fire

    • Windstorm or hail

    Correct Answer
    A. Building glass breakage and vandalism
    Explanation
    The policy will not pay for the loss if caused by the perils of building glass breakage and vandalism. This means that if the loss was a result of these specific perils, Thomas Fry's policy will not cover it. The other perils listed (riot, fire, windstorm or hail) are not excluded, so if the loss was caused by any of those, the policy would provide coverage.

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  • 12. 

    Jevon has a personal auto policy with $250 deductible collision coverage and $100 deductible other than collision coverage.  He runs a stop sign and hits another car.  There is $1,300 worth of damage to his (the insured's) car.  How much would the insurer pay for the damage to the Jevon's car /

    • $1,050

    • $1,200

    • $950

    • Nothing, since it was Jevon's fault

    Correct Answer
    A. $1,050
    Explanation
    The insurer would pay $1,050 for the damage to Jevon's car. This is because the deductible for collision coverage is $250, so Jevon would be responsible for paying that amount. The remaining damage amount of $1,050 would be covered by the insurer.

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  • 13. 

    Which of the following does not have a standard coverage form

    • Claims made commercial liability

    • Umbrella policy

    • Homeowner's policy

    • Professional liability

    Correct Answer
    A. Umbrella policy
    Explanation
    An umbrella policy is not a standard coverage form because it is a type of liability insurance that provides additional coverage beyond the limits of other policies, such as homeowner's or auto insurance. It is typically tailored to individual needs and can provide coverage for various types of liability claims. Unlike claims made commercial liability, homeowner's policy, and professional liability, which all have standard coverage forms that are widely used and recognized in the insurance industry, an umbrella policy does not have a standardized form.

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  • 14. 

    After an employee recuperating from a standard surgical procedure misses 4 weeks of work, what group benefit will pay for lost wages

    • Extended leave

    • Short term disability

    • Sick leave

    • Long term disability

    Correct Answer
    A. Short term disability
    Explanation
    Short term disability is the correct answer because it is a group benefit that typically covers a portion of an employee's lost wages when they are unable to work due to a temporary illness or injury, such as recovering from a surgical procedure. This benefit is designed to provide financial support during the employee's recovery period, usually for a limited duration, until they are able to return to work.

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  • 15. 

    What is an additional coverage provided by an HO-3 policy?

    • Defective planning

    • Trees, shrubs and other plants

    • Money and securities

    • Governmental action

    Correct Answer
    A. Trees, shrubs and other plants
    Explanation
    An additional coverage provided by an HO-3 policy is for trees, shrubs, and other plants. This means that if these items are damaged or destroyed due to covered perils such as fire, vandalism, or theft, the policy will provide coverage for their replacement or repair. This coverage is important for homeowners who have invested in landscaping and want to protect their outdoor plants and trees from potential damage.

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  • 16. 

    A car is insured using a personal auto policy.  the car is damaged by hail.  The loss is

    • Covered as other than collision loss

    • Excluded because of the uninsurable catastrophic potential damage by hail

    • Covered as a collision loss

    • Covered only if the car was in a garage or shelter at the time of the hail

    Correct Answer
    A. Covered as other than collision loss
    Explanation
    The car being insured using a personal auto policy means that it is protected against various types of losses, including damage caused by hail. Since the question states that the car is damaged by hail, it implies that the loss is covered under the insurance policy. The term "other than collision loss" refers to comprehensive coverage, which typically includes damage caused by hail, fire, theft, vandalism, and other non-collision incidents. Therefore, the correct answer is that the loss is covered as other than collision loss.

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  • 17. 

    What endorsement can be used to insure a motorcycle under a personal auto policy ?

    • Named non-owner coverage endorsement

    • Miscellaneous type vehicle endorsement

    • No endorsement is available to broaden a PAP to cover motorcycles

    • No endorsement is needed; the unendorsed PAP covers motorcycles

    Correct Answer
    A. Miscellaneous type vehicle endorsement
    Explanation
    The correct answer is Miscellaneous type vehicle endorsement. This endorsement can be used to insure a motorcycle under a personal auto policy.

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  • 18. 

    The medical expense coverage in a workers compensation policy

    • Does not have a dollar limit, but does have a maximum time limit

    • Does not have a time limit, but does have a maximum dollar limit

    • Does not have a time limit nor a dollar limit

    • Has both a maximum dollar limit and a maximum time limit

    Correct Answer
    A. Does not have a time limit nor a dollar limit
    Explanation
    The correct answer is that the medical expense coverage in a workers compensation policy does not have a time limit nor a dollar limit. This means that there is no maximum amount of money that can be spent on medical expenses, and there is also no maximum time period in which these expenses can be incurred. This provides workers with the assurance that their medical needs will be covered without any restrictions on the amount or duration of treatment.

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  • 19. 

    In a commercial property policy, the company providing the insurance is referred to as

    • A surety

    • "You"

    • NIRR

    • "We"

    Correct Answer
    A. "We"
    Explanation
    The correct answer is "We" because in a commercial property policy, the company providing the insurance refers to themselves as "We". This is a common practice in the insurance industry where the insurance company uses the pronoun "We" to represent themselves in their policies and contracts. It establishes the relationship between the company and the policyholder, indicating that the company is taking responsibility for providing the insurance coverage.

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  • 20. 

    All of the following are parties to a surety bond, except

    • Obligee

    • Bondsman

    • Surety

    • Principal

    Correct Answer
    A. Bondsman
    Explanation
    A surety bond involves three parties: the obligee, the surety, and the principal. The obligee is the party that requires the bond and is protected by it. The surety is the party that provides the bond and guarantees the obligations of the principal. The principal is the party that is required to fulfill certain obligations and is responsible for any damages or losses. A bondsman, on the other hand, is not typically a party to a surety bond. Bondsman is a term commonly used to refer to a person who provides bail bonds in the criminal justice system, which is a different type of bond.

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  • 21. 

    All of the following are characteristics of "an ideally insurable loss exposure," except

    • Losses that are accidental

    • Large number of similar exposure units

    • Losses that are definite and measurable

    • Losses that are catastrophic

    Correct Answer
    A. Losses that are catastrophic
    Explanation
    The characteristics of an ideally insurable loss exposure include losses that are accidental, a large number of similar exposure units, and losses that are definite and measurable. However, losses that are catastrophic do not fall under the category of an ideally insurable loss exposure. Catastrophic losses are typically large-scale events that result in significant damage or loss, such as natural disasters or major accidents. These types of losses are often difficult to predict and manage, making them less suitable for insurance coverage.

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  • 22. 

    Which property is excluded under an HO-3 policy ?

    • Jewelry

    • Guard dog

    • Firearms

    • Securities

    Correct Answer
    A. Guard dog
    Explanation
    An HO-3 policy is a type of homeowner's insurance policy that provides coverage for the structure of the home and personal belongings. It typically covers a wide range of perils, but there are certain exclusions. In this case, the correct answer is "Guard dog." This means that under an HO-3 policy, the coverage does not extend to any damages or liabilities related to having a guard dog on the property.

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  • 23. 

    One difference between a robbery peril and a burglary peril is that the burglary peril

    • Requires physical signs of forcible entry or exit

    • Requires taking property directly from a person

    • May occur only when the premises are open for business

    • May involve force or violence

    Correct Answer
    A. Requires physical signs of forcible entry or exit
    Explanation
    The correct answer is "Requires physical signs of forcible entry or exit." This means that in order for a burglary peril to occur, there must be visible evidence of someone breaking into or out of a property. This could include broken windows, damaged doors, or other signs of forced entry. This is different from a robbery peril, which does not require physical signs of entry or exit and can involve taking property directly from a person.

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  • 24. 

    If an insured timely requests coverage for a newly acquired auto under an existing personal auto policy, what coverage is provided before the request is made

    • Broadest coverage for any vehicle shown on the declarations

    • Statutory minimum required coverages

    • Average coverage for all vehicles shown on the declarations

    • Lowest coverage for any vehicle shown on the declarations

    Correct Answer
    A. Broadest coverage for any vehicle shown on the declarations
    Explanation
    When an insured timely requests coverage for a newly acquired auto under an existing personal auto policy, the broadest coverage for any vehicle shown on the declarations is provided before the request is made. This means that the policy will extend the same level of coverage that is provided for the vehicles already listed on the policy declarations to the newly acquired auto. This ensures that the insured has the maximum coverage available for any vehicle covered under the policy.

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  • 25. 

    Exclusive agents

    • Make all sales by telephone

    • Specialize exclusively in one class of business

    • Generally represent only one insurer

    • Have exclusive ownership rights to their renewals

    Correct Answer
    A. Generally represent only one insurer
    Explanation
    Exclusive agents generally represent only one insurer. This means that they work exclusively with one insurance company and do not represent any other insurers. These agents have a close relationship with the insurer they represent and have in-depth knowledge about their products and policies. They are dedicated to selling the insurance products of that particular insurer and do not have the flexibility to offer products from other companies. This exclusivity allows the insurer to have more control over their sales and customer service, and it also ensures that the agent is well-versed in the specific policies and coverage options offered by that insurer.

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  • 26. 

    Fred is a named insured on a commercial property policy insuring a commercial building.  Fred burns the building down and is convicted of arson.  Fred's commercial property policy conditions state that

    • The mortgagee of the insured property can recover on this loss

    • His partner, also an insured, has the right of recovery

    • Fred's spouse can recover on this loss

    • None of the above have the right of recover

    Correct Answer
    A. The mortgagee of the insured property can recover on this loss
    Explanation
    The correct answer is that the mortgagee of the insured property can recover on this loss. This means that if Fred burns down the building and is convicted of arson, the mortgagee (the lender who provided the loan for the property) has the right to recover the loss. This is because the mortgagee has a financial interest in the property and wants to protect their investment. Fred's partner and spouse do not have the right to recover on this loss, as stated in the policy conditions.

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  • 27. 

    The named insured on a commercial insurance policy is "Sam Stone and Dan Sullivan, DBA S&S Bar and Grill."  If the insurer cancels the policy, they are required to mail or deliver written notice to:

    • Only Dan Sullivan

    • Sam Stone and Dan Sullivan, DBA S&S Bar and Grill

    • Only Sam Stone

    • Any of the above are OK

    Correct Answer
    A. Only Sam Stone
    Explanation
    The named insured on the commercial insurance policy is "Sam Stone and Dan Sullivan, DBA S&S Bar and Grill." Therefore, if the insurer cancels the policy, they are required to mail or deliver written notice to Only Sam Stone. Since Sam Stone is one of the named insured individuals, he must be notified about the cancellation. Dan Sullivan is also a named insured, but the question specifies that only Sam Stone should receive the notice.

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  • 28. 

    What is one peril included in a DP 2 that is not included in a DP 1 ?

    • Explosion

    • Falling objects

    • Volcanic eruption

    • Sink hole collapse

    Correct Answer
    A. Falling objects
    Explanation
    A DP 2 insurance policy provides coverage for falling objects, which is not included in a DP 1 policy. This means that if any object falls and causes damage to the insured property, the policy will cover the cost of repairs or replacement. This coverage is important as falling objects can cause significant damage to a property, such as broken windows or structural damage. Therefore, falling objects are a peril specifically covered under a DP 2 policy but not under a DP 1 policy.

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  • 29. 

    All of the following vehicles are eligible for coverage under a personal auto policy, except

    • An SUV owned by a 25 year old individual

    • A pickup truck leased to a husband and wife

    • A private passenger auto owned by a partnership

    • A conversion van leased to a 19 year old individual

    Correct Answer
    A. A private passenger auto owned by a partnership
    Explanation
    A personal auto policy typically provides coverage for vehicles that are owned by individuals or families for personal use. A partnership is a business entity, and therefore a private passenger auto owned by a partnership would not be eligible for coverage under a personal auto policy.

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  • 30. 

    A common formula that is used to establish actual cash value is:

    • ACV = stated value - agreed value

    • ACV = market value - overhead

    • ACV = stated value - depreciation

    • ACV = replacement cost - depreciation

    Correct Answer
    A. ACV = replacement cost - depreciation
    Explanation
    The correct answer is ACV = replacement cost - depreciation. This formula is used to determine the actual cash value (ACV) of an item or property. It takes into account the replacement cost, which is the cost to replace the item with a similar one in the current market, and subtracts the depreciation, which is the decrease in value over time due to wear and tear or obsolescence. By subtracting the depreciation from the replacement cost, the formula calculates the ACV, which represents the current value of the item.

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  • 31. 

    Self-funding of employee benefit plans cannot be used for

    • Hospital benefits

    • Health benefits

    • Death benefits

    • Short-term disability benefits

    Correct Answer
    A. Death benefits
    Explanation
    Self-funding of employee benefit plans cannot be used for death benefits because death benefits typically involve providing financial support or compensation to the beneficiaries or dependents of an employee who has passed away. These benefits are usually paid out by the employer or the insurance company, and they are not typically funded through a self-funded employee benefit plan. Self-funding is more commonly used for health benefits, hospital benefits, and short-term disability benefits, where the employer assumes the financial risk of providing these benefits directly to employees.

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  • 32. 

    What additional coverage is provided in a DP-3 that is not provided in a DP-1

    • Collapse

    • Worldwide coverage

    • Fire Department service charge

    • Other structures

    Correct Answer
    A. Collapse
    Explanation
    A DP-3 policy provides coverage for collapse, which means that if a building or structure collapses due to certain covered perils, such as weight of ice or snow, the policy will provide coverage for the damage. This coverage is not provided in a DP-1 policy, which only covers basic perils like fire, lightning, and wind. Therefore, the additional coverage of collapse is provided in a DP-3 policy but not in a DP-1 policy.

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  • 33. 

    Diamond Toy Company is being sued for a death caused by a child choking on a piece from one of its transformers.  Where would Diamond find coverage for the defense of this law suit

    • Crime insurance

    • Commercial General Liability Insurance

    • Professional liability insurance

    • Life insurance

    Correct Answer
    A. Commercial General Liability Insurance
    Explanation
    Commercial General Liability Insurance would provide coverage for the defense of this lawsuit because it typically covers bodily injury claims, such as the death caused by a child choking on a piece from one of its transformers. This type of insurance is designed to protect businesses from a variety of liability risks, including accidents and injuries that occur on their premises or as a result of their products. Therefore, Diamond Toy Company could potentially find coverage for the defense of this lawsuit under their Commercial General Liability Insurance policy.

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  • 34. 

    Under a yacht policy, protection and indemnity provides coverage for

    • The insured's vessel if it is damaged in a sudden squall

    • The extra expense to move the vessel out of a storm what area

    • Liability if the insured vessel strikes a marina and injures a dock worker

    • The cost to salvage the insured vessel

    Correct Answer
    A. Liability if the insured vessel strikes a marina and injures a dock worker
    Explanation
    Protection and indemnity coverage under a yacht policy provides liability coverage for the insured vessel if it strikes a marina and causes injury to a dock worker. This means that if the insured vessel is involved in an accident where it collides with a marina and causes harm to a dock worker, the policy will provide coverage for any resulting liability claims or legal expenses. This coverage is important as it protects the insured from potential financial losses and legal liabilities in such situations.

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  • 35. 

    A pickup or van with a gross vehicle weight of 9,500 lbs. may be eligible for a personal policy it it was used in the business of

    • Floral delivery

    • Claims adjusting

    • Farming or ranching

    • Hauling property for a fee

    Correct Answer
    A. Farming or ranching
    Explanation
    A pickup or van with a gross vehicle weight of 9,500 lbs. may be eligible for a personal policy if it was used in the business of farming or ranching. This is because farming or ranching often requires the use of heavy vehicles for transporting equipment, livestock, or agricultural products. Therefore, insurance companies may offer personal policies to individuals engaged in these activities, as they understand the specific needs and risks associated with farming or ranching operations.

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  • 36. 

    Under the financial responsibility law requirements in California, what is the minimum limit for several people injured in one accident ?

    • $15,000

    • $25,000

    • $30,000

    • $10,000

    Correct Answer
    A. $30,000
    Explanation
    The correct answer is $30,000. Under the financial responsibility law requirements in California, the minimum limit for several people injured in one accident is $30,000. This means that if multiple individuals are injured in an accident, the minimum amount of insurance coverage required to cover their medical expenses and damages is $30,000. This ensures that there is enough financial protection for the injured parties in case of an accident.

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  • 37. 

    Which of the following would best be described as using forcible entry to steal property when a business is closed ?

    • Extortion

    • Theft

    • Robbery

    • Burglary

    Correct Answer
    A. Burglary
    Explanation
    Burglary would best be described as using forcible entry to steal property when a business is closed. This crime involves breaking into a building or premises with the intent to commit theft or any other felony. Unlike robbery, which involves the use of force or threat against a person, burglary focuses on unlawfully entering a property to steal. Extortion involves obtaining something through coercion or intimidation, while theft is the act of taking someone else's property without their consent.

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  • 38. 

    What type of policy protects against loss from any type of peril except those that are specifically excluded

    • Specified peril

    • All-risk or open peril

    • Named peril

    • Stated value

    Correct Answer
    A. All-risk or open peril
    Explanation
    The correct answer is "All-risk or open peril." This type of policy provides coverage for a wide range of perils, unless they are specifically excluded. It offers broader protection compared to named peril policies, which only cover specific perils listed in the policy. The all-risk or open peril policy is designed to provide comprehensive coverage and protect against a variety of risks, providing the policyholder with greater peace of mind.

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  • 39. 

    Where would an insured find insurance coverage to protect against damage to a shipment of televisions shipped on a semi-truck for the insured's business

    • Inland marine

    • Commercial auto liability

    • Commercial general liability

    • Fire and allied lines

    Correct Answer
    A. Inland marine
    Explanation
    Inland marine insurance provides coverage for property that is in transit or being transported. In this case, the insured would find insurance coverage for the shipment of televisions on a semi-truck under inland marine insurance. This type of insurance is specifically designed to protect goods that are being transported over land, including goods being transported by trucks. It covers damage or loss to the insured's property during transit, ensuring that they are financially protected in case of any damage to the shipment of televisions.

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  • 40. 

    Under the common policy conditions, who is authorized to make changes to a commercial policy

    • The producer

    • Any insured named on the policy

    • The first named insured (with insurer's consent)

    • The insurance company

    Correct Answer
    A. The first named insured (with insurer's consent)
    Explanation
    The first named insured is authorized to make changes to a commercial policy, but only with the insurer's consent. This means that the policyholder who is listed as the first named insured on the policy has the authority to make changes or modifications to the policy, but they must seek approval from the insurance company before doing so. This ensures that any changes made to the policy are in line with the insurer's guidelines and requirements.

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  • 41. 

    According to the CA Insurance Code, a binder is deemed a valid insurance policy for the purpose of providing that the insured has the insurance coverage specified in the binder for each of the following types of insurance, except

    • Life insurance

    • Marine insurance

    • Auto insurance

    • Fire insurance

    Correct Answer
    A. Life insurance
    Explanation
    According to the CA Insurance Code, a binder is deemed a valid insurance policy for the purpose of providing that the insured has the insurance coverage specified in the binder for each of the following types of insurance: marine insurance, auto insurance, and fire insurance. However, it is not deemed a valid insurance policy for life insurance.

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  • 42. 

    If an insured discovers an occurrence 75 days after the expiration of a claim-made commercial liability policy, what must the insured have in order for the loss to be covered?

    • Nothing; he is covered as long as the loss occurred during the policy period

    • Supplemental extended reporting period endorsement

    • An umbrella policy

    • The loss will not be covered since it was not reported during the policy period

    Correct Answer
    A. Supplemental extended reporting period endorsement
    Explanation
    The insured must have a supplemental extended reporting period endorsement in order for the loss to be covered. This endorsement extends the reporting period beyond the expiration of the policy, allowing the insured to report occurrences that happened during the policy period but were discovered after the policy expired. Without this endorsement, the loss would not be covered since it was not reported during the policy period.

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  • 43. 

    One example of a loss covered by business income insurance is a loss

    • Of profits due to a suspension of business operations because of a premises fire

    • Represented by the difference between the actual cash value and present replacement cost

    • Of perishables due to a delay in transporting

    • Due to depreciation of parts of matched sets

    Correct Answer
    A. Of profits due to a suspension of business operations because of a premises fire
    Explanation
    Business income insurance provides coverage for the loss of profits that a business may experience due to a suspension of business operations caused by a premises fire. This type of insurance helps to compensate the business for the income it would have earned during the period of interruption. It is designed to help the business recover from the financial impact of the fire and continue its operations after the incident.

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  • 44. 

    A home is damages minutes after an earthquake, first by fire, and then by fuel pipes bursting and causing an explosion. Under a homeowner's HO-3 form

    • There is coverage, but only for the damage caused by the ensuing fire and explosion

    • There is no coverage due to the fact that HO-3 covers only named perils

    • The policy covers all of the damage since explosion is an insured peril

    • There is no coverage unless the insured has made an earthquake endorsement as part of his policy

    Correct Answer
    A. There is coverage, but only for the damage caused by the ensuing fire and explosion
    Explanation
    The correct answer states that there is coverage, but only for the damage caused by the ensuing fire and explosion. This means that the homeowner's insurance policy will cover the damage caused by the fire and explosion that occurred after the earthquake. However, it does not cover the damage caused directly by the earthquake itself.

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  • 45. 

    A written provision that modifies the provisions of the original contract is known as

    • An insuring agreement

    • A condition

    • An endorsement

    • A miscellaneous provision

    Correct Answer
    A. An endorsement
    Explanation
    An endorsement is a written provision that modifies the provisions of the original contract. It is an additional clause or amendment added to the contract to change or add terms and conditions. Endorsements are commonly used in insurance contracts to provide coverage for specific risks or to modify the terms of coverage. They can be used to add or remove coverage, change policy limits, or clarify policy language. Therefore, an endorsement is the correct answer in this context.

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  • 46. 

    Your commercial auto policy insured needs coverage for  his liability arising out of his employees using their own cars in his business.  The best way to be sure your insured is covered to

    • Require all employees have your insured named as an additional insured on their personal auto policies

    • Include employers non-ownership liability coverage in the employer's commercial auto policy

    • Instruct all employees not to use their cars in your insured's business

    • Include uninsured motorist and also hired car coverage in your insured's commercial policy

    Correct Answer
    A. Include employers non-ownership liability coverage in the employer's commercial auto policy
    Explanation
    The best way to ensure that the insured is covered for liability arising from employees using their own cars in the business is to include employers non-ownership liability coverage in the employer's commercial auto policy. This coverage specifically addresses the liability that may arise when employees use their personal vehicles for work-related purposes. By including this coverage, the insured will have protection in case of any accidents or damages caused by employees while using their own cars for business purposes.

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  • 47. 

    Which of the following events within the last three years would disqualify an individual from receiving a good driver discount

    • A moving violation while driving a company car during business hours

    • An at-fault accident involving only property damage

    • An at-fault accident involving minor bodily injury

    • A not-at-fault accident resulting in the death of a passenger

    Correct Answer
    A. An at-fault accident involving minor bodily injury
    Explanation
    An at-fault accident involving minor bodily injury would disqualify an individual from receiving a good driver discount because it indicates that the driver was responsible for causing harm to another person, even if the injuries were minor. Good driver discounts are typically given to individuals who have a clean driving record and have not been involved in any accidents where they were at fault.

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  • 48. 

    The amount paid for damaged property which is equal to the price for which it could have been sold is the

    • Actual cash value

    • Stated amount

    • Market value

    • Replacement amount

    Correct Answer
    A. Market value
    Explanation
    The market value refers to the price at which a damaged property could have been sold. It represents the value of the property in the current market conditions. Therefore, if the amount paid for the damaged property is equal to its market value, it means that the compensation received is equivalent to the price at which the property could have been sold. This indicates that the payment is fair and reflects the actual value of the property.

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  • 49. 

    If a named insured is not the owner of the building, improvements and betterments are covered under the

    • Business personal property

    • Building

    • Agreed value

    • Newly constructed property

    Correct Answer
    A. Business personal property
    Explanation
    If a named insured is not the owner of the building, improvements and betterments are covered under the business personal property. This means that any improvements or upgrades made to the building by the named insured would be covered under their business personal property insurance. This coverage is important because it protects the named insured's investment in the improvements and betterments, even if they do not own the building itself.

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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
  • Dec 27, 2009
    Quiz Created by
    Pchinna

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