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Flashcards in IA Test 11 Deck (100)
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1

An insured has an NFIP policy and suffers a direct loss due to flood. How many days does the insured have to submit a proof of loss?

Answer Choices: Select the Correct Answer
90 days.
45 days.
60 days.
30 days.

Question 1 of 100

Your answer: 90 days. is incorrect. The correct answer is: 60 days..

EXPLANATION:
An NFIP policy requires that the proof of loss be submitted within 60 days of the loss.


Question 1 of 100

2

The principle of indemnity is illustrated by which of the following?

Answer Choices: Select the Correct Answer
Restores an insured to the same condition enjoyed before a loss
Allows an insured to profit from a loss
Limits recovery to actual cash value
Requires an insured to assign any rights of recovery against a third party

Question 2 of 100

Your answer: Restores an insured to the same condition enjoyed before a loss is correct.

EXPLANATION:
It is not intended for a claimant to profit from insurance. The purpose of insurance is to attempt to restore the person to the status enjoyed prior to the loss.


Question 2 of 100

3

What type of coverage would a heating and cooling contractor need when work has been done on a newly renovated building but not yet accepted by the owner?

Answer Choices: Select the Correct Answer
An Installation Floater
A Builder’s Risk Policy
A Bailee Form of Coverage
A Transportation Floater

Question 3 of 100

Your answer: An Installation Floater is correct.

EXPLANATION:
The contractor would need an installation floater that provides property coverages for work performed until accepted by the owner.


Question 3 of 100

4

The insured is a CPA and has the accounting tax records of several clients on the premises. If the records were suddenly destroyed by fire, what inland marine form would cover the cost to reproduce them?

Answer Choices: Select the Correct Answer
Valuable papers and records
Accounts Receivable Coverage
EDP Coverage
A Bailee Form

Question 4 of 100

Your answer: EDP Coverage is incorrect. The correct answer is: Valuable papers and records.

EXPLANATION:
The purpose of the valuable papers and records form is to pay for the cost of reproducing destroyed valuable papers and records.


Question 4 of 100

5

A tornado blows over a wall of a barn which, in turn, knocks over a lamp and starts a fire. What is the proximate cause of loss?

Your answer: Tornado is correct.

EXPLANATION:
The proximate cause of loss would be the tornado (wind).


Question 5 of 100

6

When Commercial General Liability "claims made" coverage is written, a "laser beam" endorsement may be used to:

Answer Choices: Select the Correct Answer
Exclude specific accidents, products, work, or locations.
Provide special coverage for certain high technology risks.
Provide coverage for certain types of nuclear hazards.
Add special conditions applicable to defense contractors.

Question 6 of 100

When Commercial General Liability "claims made" coverage is written, a "laser beam" endorsement may be used to:

Your answer: Exclude specific accidents, products, work, or locations. is correct.

EXPLANATION:
The "laser beam" endorsement is used to exclude risks or hazards that the insurer does not wish to insure. It is used exclusively on the "claims made" CGL form.


Question 6 of 100

7

Which of the following scenarios would fall under the scope of the "Products Liability" section of a CGL policy?

Answer Choices: Select the Correct Answer
A visitor to a business steps on a nail.
A driver for Maid-Your-Day cleaning services causes an accident when she runs a stop sign.
An exercise machine snaps a belt, injuring a consumer in a sporting good store.
A team of contractor's employees install a toilet in the wrong area of a bathroom.

Question 7 of 100

our answer: A team of contractor's employees install a toilet in the wrong area of a bathroom. is incorrect. The correct answer is: An exercise machine snaps a belt, injuring a consumer in a sporting good store..

EXPLANATION:
Product liability covers injuries or damage caused by a faulty product. The exercise machine is faulty. The other three choices have nothing to do with a faulty product.


Question 7 of 100

8

Which of the following are covered under the Homeowners "Additional Residence Rented to Others" endorsement?

I. Personal Liability (Injury)
II. Medical Payment to Others
III. Dwelling
IV. Personal Property

Answer Choices: Select the Correct Answer
I and II only.
I, II, III and IV.
I and IV only.
III and IV only.

Question 8 of 100

Your answer: III and IV only. is incorrect. The correct answer is: I and II only..

EXPLANATION:
The "Additional Residence Rented to Others" endorsement provides personal liability (injury) and medical payments to others coverage to cover the insured's liability arising out of the ownership of a residence regularly rented to others.


Question 8 of 100

9

An independent adjuster must complete ___ hours of continuing education during each license renewal cycle.

Answer Choices: Select the Correct Answer
12
20
24
36

Question 9 of 100

Your answer: 24 is correct.

EXPLANATION:
An individual who holds an insurance adjuster license and who is not exempt must satisfactorily complete a minimum of 24 hours, of which three hours are to be in ethics, of continuing education courses pertinent to the duties and responsibilities of an insurance adjuster license reported to the Insurance Commissioner on a biennial basis in conjunction with his or her license renewal cycle.


Question 9 of 100

10

The Homeowners policy provides a special limit for Damage to Property of Others in the Section II (liability) Additional Coverages of:

Answer Choices: Select the Correct Answer
$500.
$250.
$1,000.
$2,000.

Question 10 of 100

Your answer: $2,000. is incorrect. The correct answer is: $1,000..

EXPLANATION:
This coverage has been increased to $1,000.


Question 10 of 100

11

Which of the following is NOT a claim settlement option for liability claims?

Answer Choices: Select the Correct Answer
Excessive amounts claimed.
Lost wages claimed.
Loss of Use.
Disfigurement.

Question 11 of 100

Your answer: Excessive amounts claimed. is correct.

EXPLANATION:
Excessive amounts claimed are always contested by the insurer. Liability losses are categorized as "special damages"or "general damages." Special damages include medical expenses and loss of wages or the costs of other known expenses. General damages would include pain and suffering, punitive damages, loss of consortium, disfigurement and disability claims.


Question 11 of 100

12

Which of the following perils is not covered under the Commercial Property Basic Cause of Loss form:

Answer Choices: Select the Correct Answer
Collapse (other than sinkhole collapse).
Sprinkler leakage
Explosion
Sinkhole collapse

Question 12 of 100

Your answer: Sprinkler leakage is incorrect. The correct answer is: Collapse (other than sinkhole collapse)..

EXPLANATION:
The Basic Form does not cover collapse except sinkhole collapse.


Question 12 of 100

13

An insured has a $2 million limit of insurance under a Personal Umbrella policy with a $2,000 self-insured retention limit. The insured is sued for $1 million in personal injury damages and $1.5 million in property damages arising from the same occurrence. The insured's underlying liability policies exclude coverage in this case, but the claim is covered under the Umbrella policy. In this case, the umbrella policy will pay:

Answer Choices: Select the Correct Answer
$1 million of the damages.
$1,998,000 of the damages.
$2 million of the damages.
$2,500,000 of the damages.

Question 13 of 100

Your answer: $1 million of the damages. is incorrect. The correct answer is: $1,998,000 of the damages..

EXPLANATION:
Since the underlying coverage does not apply the insured must pay the $2,000 self-insured retention limit and the Umbrella insurer must pay the rest of the claim.


Question 13 of 100

14

Contractor Joe has borrowed funds from a bank in order to finance a construction project. A surety bond which guarantees the lender that the contractor will use the borrowed funds to finish the contract free and clear of liens is known as a:

Answer Choices: Select the Correct Answer
Bid bond.
Performance bond.
Labor and materials bond.
Completion bond.

Question 14 of 100

Your answer: Completion bond. is correct.

EXPLANATION:
A completion bond guarantees the lending party of the funds that the borrowed funds will be used only for this work or project, and the work will be delivered free and clear of liens.


Question 14 of 100

15

All of the following would be excluded under Coverage D - Physical Damage of a Personal Automobile Policy, EXCEPT:

Answer Choices: Select the Correct Answer
Permanently-installed GPS systems.
Radar or laser detection equipment.
Camper bodies or trailers owned by the named insured but not listed on the declarations page.
Custom furnishings or equipment in a van.

Question 15 of 100

Your answer: Permanently-installed GPS systems. is correct.

EXPLANATION:
Permanently installed electronic equipment such as sound systems and GPS devices are covered, but no custom equipment is covered in a van unless an endorsement for this coverage is attached to the policy and an additional premium is paid. (Remember, radar detectors are excluded.)


Question 15 of 100

16


QUESTION:
Which of the following zones is not expected to flood during the "base flood"?

Your answer: X zones. is correct.

EXPLANATION:
X zones are not expected to flood during the base flood.


Question 16 of 100

17

For a first-party uninsured motorist claim in California, how many days notification must an insurer give if the statute of limitations on filing a claim is about to expire?

Answer Choices: Select the Correct Answer
60 days
30 days
No notice is required.
45 days

Question 17 of 100

Your answer: 30 days is correct.

EXPLANATION:
For pending claims, the insurer must provide written notice to any first-party uninsured motorists claimant at least 30 days before the expiration date of the statute of limitations.


Question 17 of 100

18

Under the farm forms, a "half a head" of livestock is an animal that is:

Answer Choices: Select the Correct Answer
Under three years of age and the most coverage that will be paid for that animal under the policy is $3,000.
Under two yeara of age and the most coverage that will be paid for that animal under the policy is $2,500.
Under one year of age and the most coverage that will be paid for that animal under the policy is $1,000.
Is under six months of age and the most coverage that will be paid for that animal under the policy is $500.

Question 18 of 100

Your answer: Under one year of age and the most coverage that will be paid for that animal under the policy is $1,000. is correct.

EXPLANATION:
An animal under one year of age, is known as a "half a head." Coverage F covers farm personal property on a blanket basis both on and off the insured premises. A blanket limit for livestock can be added, however, the most that will be paid for "half a head" of livestock (an animal under one year of age) is $1,000.


Question 18 of 100

19

An insured purchases two homeowner policies from two different insurance companies. If a covered loss occurs, on what basis will the loss be settled by each of the insurers?

Answer Choices: Select the Correct Answer
First policy effective basis
Excess basis
Equal share basis
Pro rata basis

Question 19 of 100

Your answer: Equal share basis is incorrect. The correct answer is: Pro rata basis.

EXPLANATION:
Each company will pay its pro-rata share of the loss. This means the percentage of coverage (the total amount of insurance carried) that each company provides on the risk.


Question 19 of 100

20

Under a commercial inland marine form, which of the following is true regarding the appraisal clause?

Answer Choices: Select the Correct Answer
The insurer is bound by the decision of the appraisers or umpire
It is not binding to all parties
The insurer is not bound by the appraisal clause
The insurer must seek legal action under the appraisal clause to enforce the terms and conditions

Question 20 of 100

Your answer: The insurer is bound by the decision of the appraisers or umpire is correct.

EXPLANATION:
The insurer is bound by the outcome of a an appraisal on the damaged property as to it's value. They still reserve the right to deny the claim if there is a coverage, rather than a valuation question.


Question 20 of 100

21

Coverage G under the Farm forms covers which of the following?

Answer Choices: Select the Correct Answer
Covers barns, silos, fences
Covers unscheduled personal farm property
Covers scheduled personal property
Covers blanket buildings and contents

Question 21 of 100

Your answer: Covers blanket buildings and contents is incorrect. The correct answer is: Covers barns, silos, fences.

EXPLANATION:
Coverage G covers barns, outbuildings such as silos, fences, radio equipment and other farm structures that are not related to the dwelling.


Question 21 of 100

22

Your answer: Covers blanket buildings and contents is incorrect. The correct answer is: Covers barns, silos, fences.

EXPLANATION:
Coverage G covers barns, outbuildings such as silos, fences, radio equipment and other farm structures that are not related to the dwelling.


Question 21 of 100

Your answer: Accounts Receivable for uncollectible accounts is incorrect. The correct answer is: Customer signs in their care custody and control.

EXPLANATION:
The Sign Coverage Form will cover the neon, electrical, and mechanical signs of others that in the care, custody and control of the insured.


Question 22 of 100

23

Which of the following does not have to be included in the inspection report required to participate in the California Fair Access to Insurance Requirements (FAIR) Plan?

Answer Choices: Select the Correct Answer
Structural inspection
Condition of surrounding structures
Occupancy features
Photographs of the occupants

Question 23 of 100

Your answer: Photographs of the occupants is correct.

EXPLANATION:
According to the California Insurance Code (CIC 10093(b)), the inspection must include, but need not be limited to, pertinent structural and occupancy features as well as the general condition of the building and surrounding structures. A representative photograph of the property may be taken as part of the inspection.


Question 23 of 100

24

Which of the following would be considered a consequential loss under a homeowner policy?

Answer Choices: Select the Correct Answer
Water damage to a house as a result of a fire
A tree falling on the roof and a branch breaks a window
Food spoilage in a freezer as a result of a fire in the house
Smoke damage to a detached garage as a result of a fire

Question 24 of 100

Your answer: Water damage to a house as a result of a fire is incorrect. The correct answer is: Food spoilage in a freezer as a result of a fire in the house.

EXPLANATION:
The food spoilage as a result of a covered peril cutting off the electricity would be an example of a consequential loss.


Question 24 of 100

25

Who is an insured under the liability section of a Farm insurance policy?

Answer Choices: Select the Correct Answer
A retail feed store employee.
A representative from a farm chemical company.
A roadside farm stand employee.
A custom farming employee hired to plow the insured’s fields under contract.

Question 25 of 100

Your answer: A custom farming employee hired to plow the insured’s fields under contract. is incorrect. The correct answer is: A roadside farm stand employee..

EXPLANATION:
A farm employee is covered while acting within the scope of their duties. Farming includes the incidental operation of roadside stands where farm products principally produced by the insured are sold.


Question 25 of 100

26

Herb has a duplex covered under an HO-8 form in California. The property is damaged by an insured peril that falls under the status of a declared state of emergency. Herb realizes that the standardized HO-8 policy only provides loss settlement at Actual Cash Value (ACV), but he also understands that the California mandatory special provisions form will allow him to make a claim to recoup his cost to repair or replace the damaged property if all of the following are TRUE regarding Herb's claim, EXCEPT:

Answer Choices: Select the Correct Answer
If he restores the duplex to the same occupancy level and does not increase that level.
He restores the duplex on the same site where it was located at the time of the loss.
He submits his claim for the cost to repair or replace the property within 12 months of the loss.
He submits his claim for the cost to repair or replace the property within 24 months of the loss.

Question 26 of 100

Your answer: He submits his claim for the cost to repair or replace the property within 24 months of the loss. is incorrect. The correct answer is: He submits his claim for the cost to repair or replace the property within 12 months of the loss..

EXPLANATION:
The question is asking you to choose the answer that is NOT TRUE. The only answer choice that is not true regarding Herb's claim is: "He submits his claim for the cost to repair or replace the property within 12 months of the loss." This answer choice is not true because the California mandatory special provisions form allows Herb 24 months to submit his claim.


Question 26 of 100

27

Three of the situations below describe circumstances in which an individual is usually not an insured by a commercial umbrella liability policy. Which situation describes circumstances in which an individual IS an insured?

Answer Choices: Select the Correct Answer
An employee of the insured injured another employee while driving the insured’s forklift.
A deceased insured’s brother has temporary legal custody of the insured’s business property.
Personal property belonging to a partner in the insured business is damaged.
A stockholder in the insured corporation was driving her own auto and was involved in an accident on the way to a stockholder’s meeting.

Question 27 of 100

Your answer: An employee of the insured injured another employee while driving the insured’s forklift. is incorrect. The correct answer is: A deceased insured’s brother has temporary legal custody of the insured’s business property. .

EXPLANATION:
In the case of the death of an insured, the person that has legal custody of the insured’s business is also considered to be an insured while acting in that capacity.


Question 27 of 100

28

Which of the following is not an "additional coverage" under Homeowners Liability -- Section II coverage?

Answer Choices: Select the Correct Answer
Payments made by the insurer to settle a claim.
Interest accruing after a legal judgment is entered.
The insurer’s costs to investigate a claim.
Damage to Property of Others.

Question 28 of 100

Your answer: The insurer’s costs to investigate a claim. is incorrect. The correct answer is: Payments made by the insurer to settle a claim..

EXPLANATION:
Settlements paid by the insurer come from the limits of liability shown on the Declarations page and are not an "additional coverage."


Question 28 of 100

29

Which of the following best describes the purpose of an "insuring agreement"?

Answer Choices: Select the Correct Answer
To describe the promises of the insurer and the insured and the coverages provided
To identify the named insured
To explain the duties of the named insured
To set forth the conditions and exclusions

Question 29 of 100

Your answer: To set forth the conditions and exclusions is incorrect. The correct answer is: To describe the promises of the insurer and the insured and the coverages provided.

EXPLANATION:
Insuring agreements are the promises or obligations of the insurer and the insured. In property insurance, it also contains the coverage the insured has purchased.


Question 29 of 100

30

The HO-3 form covers which of the following that the HO-4 form does not?

Answer Choices: Select the Correct Answer
Automobiles
Motorcycles
Dwellings
Work related injuries

Question 30 of 100

Your answer: Work related injuries is incorrect. The correct answer is: Dwellings.

EXPLANATION:
The HO-3 covers a dwelling structure; the HO-4 covers the insured's contents. The other choices are excluded on both forms


Question 30 of 100