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Flashcards in IA Test 12 Deck (100)
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1

Under a self-insured workers compensation plan, what coverage should be purchased to cover a claim that is more than the insured's self-insured limits?

Answer Choices: Select the Correct Answer
Excess coverage
Catastrophic coverage
Umbrella coverage
A surety bond

Question 1 of 100

Your answer: Umbrella coverage is incorrect. The correct answer is: Excess coverage.

EXPLANATION:
Excess coverage should be purchased by a self-insured workers compensation plan to cover claims in excess of the self-insured limits of coverage.


Question 1 of 100

2

An "uninsured motor vehicle" under a personal auto policy does not include:

Answer Choices: Select the Correct Answer
An abandoned car used as a residence.
A "hit and run" driver.
A vehicle carrying liability insurance in an amount less than required by a state's financial responsibility law.
A car whose bodily injury liability coverage has expired.

Question 2 of 100

Your answer: An abandoned car used as a residence. is correct.

EXPLANATION:
This is one of the exceptions of eligibility for coverage. The personal auto form states that an "uninsured motor vehicle" does not include any vehicle or equipment while located for use as a residence or premises.


Question 2 of 100

3

A covered loss has damaged the property belonging to the owner. Property belonging to a customer is also damaged. The customer brings suit against the insured for this damage. The insurer may do which of the following?

Answer Choices: Select the Correct Answer
Pay the defense costs incurred in the suit against the insured
Negotiate the settlement of the property of others directly with the owners of that property
Negotiate the settlement of the property of others directly with the owners of that property and pay the defense costs incurred in the suit against the insured
Only pay the expense cost and not negotiate a settlement

Question 3 of 100

Your answer: Negotiate the settlement of the property of others directly with the owners of that property is incorrect. The correct answer is: Negotiate the settlement of the property of others directly with the owners of that property and pay the defense costs incurred in the suit against the insured.

EXPLANATION:
The insurer may negotiate the settlement of the property of others directly with the owner of that property. The will also pay the defense costs incurred in defending the insured in the suit brought by the customer.


Question 3 of 100

4

Standard Homeowners policies have "special limits of liability" for losses to all of the following types of property, EXCEPT:

Answer Choices: Select the Correct Answer
Fire damage to guns.
Theft of coins.
Theft of silverware.
Theft of furs.

Question 4 of 100

Your answer: Fire damage to guns. is correct.

EXPLANATION:
The special limit of liability for guns applies only to the peril of theft. Guns are not limited to a certain amount of coverage by the peril of fire.


Question 4 of 100

5

Which of the following is not a duty of an insurer in case of a loss?

Answer Choices: Select the Correct Answer
Conduct a thorough investigation
Establish claim procedures and methods of documentation
Acknowledge receipt of a claim in a timely fashion
Separate the damaged property from the undamaged property and protect the property from further loss

Question 5 of 100

Your answer: Separate the damaged property from the undamaged property and protect the property from further loss is correct.

EXPLANATION:
The insurance company is not required to separate the damaged property from the undamaged property nor to protect the property from further loss. This is the responsibility of the insured.


Question 5 of 100

6

Insurance that guarantees or indemnifies owners of real or personal property, or the holders of liens or encumbrances on that property, is classified in California as which of the following types of insurance?

Answer Choices: Select the Correct Answer
Title insurance.
Surety insurance.
Credit insurance.
Mortgage Guaranty insurance.

Question 6 of 100

Your answer: Title insurance. is correct.

EXPLANATION:
Insurance that guarantees or indemnifies owners of real or personal property, or the holders of liens or encumbrances on that property, is classified in California as Title insurance.


Question 6 of 100

7

While in England an insured has her purse stolen and files a claim for $500 of cash, $1,000 in airline tickets, $250 for miscellaneous items and $50 for the value of the purse. How much of this loss would be covered under a DP-1 dwelling form?

Answer Choices: Select the Correct Answer
Nothing
$1,050
$1,800
$1,750

Question 7 of 100

Your answer: $1,800 is incorrect. The correct answer is: Nothing.

EXPLANATION:
None of the dwelling forms provide theft coverage of personal property unless the theft coverage endorsement is purchased.


Question 7 of 100

8

If an employee becomes injured due to serious and willful misconduct on his or her behalf, what level of workers compensation benefits is he or she entitled to?

Answer Choices: Select the Correct Answer
A level reduced by his or degree of misconduct
None
A maximum of 25% of the normal benefits
50% of the normal benefits

Question 8 of 100

Your answer: 50% of the normal benefits is correct.

EXPLANATION:
Employees who are injured as a result of their own serious and willful misconduct will have any workers compensation benefits reduced by 50%.


Question 8 of 100

9

As a prerequisite to receive an adjuster license in California, the applicant must have at least two years of claims adjusting experience. The California Insurance Code defines one year of experience as:

Answer Choices: Select the Correct Answer
Not less than 1,000 hours of actual compensated work performed by an applicant, completed prior to submitting the license application.
Not less than 2,000 hours of actual compensated work performed by an applicant, completed prior to submitting the license application.
Not less than 2,000 hours of actual compensated work performed by an applicant, completed after submitting the license application.
Not less than 1,000 hours of actual compensated work performed by an applicant, completed after submitting the license application.

Question 9 of 100

Your answer: Not less than 2,000 hours of actual compensated work performed by an applicant, completed prior to submitting the license application. is correct.

EXPLANATION:
The CIC defines "one year of experience" as not less than 2,000 hours of actual compensated work performed by an applicant, completed prior to submitting the license application. Therefore, if an applicant must have the equivalent of two years of experience, they would need a total of 4,000 hours of compensated work.


Question 9 of 100

10

The base deductible of 5% under the Earthquake Endorsement can be converted to a specific dollar amount by:

Answer Choices: Select the Correct Answer
Multiplying the greater of Coverage A or C, by the deductible percentage scheduled on the policy.
Scheduling a dollar amount on the endorsement form.
Multiplying the limit of liability for Coverage A by the deductible percentage.
Multiplying the limit of liability for Coverage C by the deductible percentage.

Question 10 of 100

Your answer: Scheduling a dollar amount on the endorsement form. is incorrect. The correct answer is: Multiplying the greater of Coverage A or C, by the deductible percentage scheduled on the policy..

EXPLANATION:
The deductible for an Earthquake Endorsement is converted to a specific dollar amount by multiplying the greater of Coverage A or C limit of liability, by the deductible percentage.


Question 10 of 100

11

Which of the following is NOT considered to be a consequential loss coverage under Commercial Property insurance?

Answer Choices: Select the Correct Answer
Replacement Cost Coverage
Business Income Coverage
Leasehold Interest Coverage
Extra Expense Coverage

Question 11 of 100

Your answer: Leasehold Interest Coverage is incorrect. The correct answer is: Replacement Cost Coverage.

EXPLANATION:
A consequential loss occurs as the result of a direct loss to the insured property. Replacement cost coverage is used to determine the amount of the loss. If replacement cost coverage is not selected then actual cash value applies.


Question 11 of 100

12

An interline endorsement used in a Commercial Package Policy (CPP):

I. May be mandatory or optional.
II. Is an endorsement that applies to more than one line of insurance.

Answer Choices: Select the Correct Answer
Both I and II
I only
II only
Neither I nor II

Question 12 of 100

Your answer: Both I and II is correct.

EXPLANATION:
Interline endorsements are used in the CPP to simplify coverages and conditions among many different forms. Many of the same policy conditions apply to the various coverage parts.


Question 12 of 100

13

In a contract, something of value exchanged between the parties is referred to as:

Answer Choices: Select the Correct Answer
An offer.
The acceptance of an offer.
Consideration.
The legal basis.

Question 13 of 100

Your answer: An offer. is incorrect. The correct answer is: Consideration..

EXPLANATION:
Consideration is something of value exchanged between the parties. The insured pays a premium, known as consideration and the insurer promises a larger amount in the event of a claim.


Question 13 of 100

14

Which of the following people does NOT have an insurable interest in an insured property?

Answer Choices: Select the Correct Answer
A homeowner's interest in the local town water pipes that deliver water to his home.
A mechanic's interest in a customer's convertible, which is sitting in his garage overnight.
A tenant's interest in the premium wood flooring that she had installed in her apartment.
A bank's interest in the new minivan they just financed for a young couple.

Question 14 of 100

Your answer: A tenant's interest in the premium wood flooring that she had installed in her apartment. is incorrect. The correct answer is: A homeowner's interest in the local town water pipes that deliver water to his home..

EXPLANATION:
The homeowner has no insurable interest in the town's water pipes as he does not own them. The other choices are all examples of insurable interest.


Question 14 of 100

15

In crime insurance, which of the following terms is defined as "any unlawful taking of property to the deprivation of the insured"?

Answer Choices: Select the Correct Answer
Theft.
Mysterious disappearance.
Burglary.
Robbery.

Question 15 of 100

Your answer: Burglary. is incorrect. The correct answer is: Theft. .

EXPLANATION:
"Theft" is a very broad term encompassing any type of stealing, whether it is robbery, burglary, or some other type of unlawful taking like embezzlement or shoplifting.


Question 15 of 100

16

All the following statements are true regarding earthquake insurance under residential property coverage in California, EXCEPT:

Answer Choices: Select the Correct Answer
Earthquake insurance must be offered with any new policy, or policy renewal.
The offer of earthquake insurance may be made by mail or electronically.
A separate earthquake policy must be issued; an endorsement is not permitted.
The offer may be made prior to, concurrent with, or within 60 days following the policy effective date.

Question 16 of 100

Your answer: A separate earthquake policy must be issued; an endorsement is not permitted. is correct.

EXPLANATION:
According to the California Insurance Code (CIC 10081), earthquake coverage may be provided in the policy of residential property insurance itself, either by specific policy provision or endorsement, or in a separate policy or certificate of insurance which specifically provides coverage for loss or damage caused by the peril of earthquake alone or in combination with other perils.


Question 16 of 100

17

The term "time element coverage" is used when the amount of loss depends on:

Answer Choices: Select the Correct Answer
The time it takes to repair, rebuild or restore damaged property.
The time between the effective date and date of loss.
The time between the date of loss and expiration date.
The time of year when a seasonal business suffers a loss.

Question 17 of 100

Your answer: The time between the effective date and date of loss. is incorrect. The correct answer is: The time it takes to repair, rebuild or restore damaged property. .

EXPLANATION:
This is called the restoration period.


Question 17 of 100

18

Medical Payments on a CGL will pay for all of the following EXCEPT:

Answer Choices: Select the Correct Answer
Ambulance services.
Funeral expenses.
In-hospital medical charges.
Pain and suffering.

Question 18 of 100

Your answer: Pain and suffering. is correct.

EXPLANATION:
Medical payments pays for the tangible economic damages incurred as a result of the injury. It does not pay for non-economic intangible damages such as pain and suffering.


Question 18 of 100

19

When an applicant for auto insurance has been rejected by several admitted insurers in California due to a poor driving record, the applicant may obtain coverage through:

Answer Choices: Select the Correct Answer
The California Assigned Risk Automobile Insurance Plan
Through a non-admitted auto insurer
California's Low Cost Auto Insurance Program
Through the Federal Assigned Risk Plan

Question 19 of 100

Your answer: The California Assigned Risk Automobile Insurance Plan is correct.

EXPLANATION:
If a licensed driver is denied coverage in the standard markets he or she can apply for a High-Risk Auto Insurance policy under the California Assigned Risk Automobile Insurance Plan for coverage.


Question 19 of 100

20

Rudy, a licensed California independent adjuster, has received a letter from a claimant requesting information about a claim. Rudy is required to respond within:

Answer Choices: Select the Correct Answer
30 calendar days.
15 working days.
15 calendar days.
10 days.

Question 20 of 100

Your answer: 10 days. is incorrect. The correct answer is: 15 calendar days..

EXPLANATION:
Upon receiving any communication from a claimant, regarding a claim, that reasonably suggests that a response is expected, every licensee must immediately, but in no event more than 15 calendar days after receipt of that communication, furnish the claimant with a complete response based on the facts as then known by the licensee.


Question 20 of 100

21

Which of the following would be covered under the Commercial Property Builders Risk Coverage Form?

Answer Choices: Select the Correct Answer
All of the responses are correct
Buildings under construction
Foundation of a building under construction
Fixtures, machinery and equipment used to service the building if they become a permanent part of the building and are located within 100 feet of the premises

Question 21 of 100

Your answer: All of the responses are correct is correct.

EXPLANATION:
All of the responses are correct as regards the builders risk coverage.


Question 21 of 100

22

A Property Value Reporting form is used to:

Answer Choices: Select the Correct Answer
Present a new claim to the insurer
Report a property theft to police
List and valuate business personal property at an insured location
Present home appraisal value to the insurance company

Question 22 of 100

Your answer: Report a property theft to police is incorrect. The correct answer is: List and valuate business personal property at an insured location.

EXPLANATION:
Property value reporting forms are provided to business owners so that they can accurately list and insure their business personal property to value.


Question 22 of 100

23

The physical damage coverage for an auto dealer's vehicles held for sale is covered under the dealer's Garage policy:

Answer Choices: Select the Correct Answer
Blanket basis.
Scheduled basis.
All owned autos.
All owned and non owned autos.

Question 23 of 100

Your answer: Blanket basis. is correct.

EXPLANATION:
The physical damage coverage is provided on a blanket basis for the auto dealer's owned vehicles because it would be difficult to list each vehicle on the Declarations page. This coverage will NOT pay for damage to customers' cars left with the dealer for repair or service.


Question 23 of 100

24

All of the following are exceptions to the workers' compensation exclusive remedy, EXCEPT:

Answer Choices: Select the Correct Answer
Failure of the employer to provide benefits.
Third-party-over actions.
An on-the-job injury caused by worker fatigue from working an excessive number of over-time hours.
The fellow worker doctrine.

Question 24 of 100

Your answer: Failure of the employer to provide benefits. is incorrect. The correct answer is: An on-the-job injury caused by worker fatigue from working an excessive number of over-time hours..

EXPLANATION:
An on-the-job injury would be covered, whether or not it was caused by worker fatigue. All of the other answer choices are exceptions to the exclusive remedy provided by workers' compensation.


Question 24 of 100

25

Under an unendorsed commercial building and personal property form, loss valuation is based on:

Answer Choices: Select the Correct Answer
Actual cash value.
Market value.
Original cost.
Replacement cost.

Question 25 of 100

Your answer: Actual cash value. is correct.

EXPLANATION:
Losses are settled at ACV (Actual Cash Value). If the insured desires replacement cost settlement, a separate endorsement must be purchased.


Question 25 of 100

26

In California, which of the following is an untrue statement regarding the adjustment of a total auto physical damage loss?

Answer Choices: Select the Correct Answer
The insurer may elect a cash settlement that is based upon the actual cost of a "comparable automobile" less any deductible provided in the policy.
A cash settlement does not include sales taxes.
The cash settlement includes one-time fees incident to transfer of evidence of ownership of a comparable automobile.
The cash settlement must also include the license fee and other annual fees to be computed based upon the remaining term of the loss vehicle’s current registration.

Question 26 of 100

Your answer: The cash settlement includes one-time fees incident to transfer of evidence of ownership of a comparable automobile. is incorrect. The correct answer is: A cash settlement does not include sales taxes..

EXPLANATION:
The cash settlement amount must include all applicable taxes, license fees and other one-time fees incident to transfer of evidence of ownership of a comparable automobile. This amount must also include the license fee and other annual fees to be computed based upon the remaining term of the loss vehicle’s current registration.


Question 26 of 100

27

Which of the following statements is correct?

I. Unendorsed DP-2 and DP-3 settle all losses to personal property at actual cash value.
II. Unendorsed DP-2 and DP-3 settle all partial losses to dwellings at replacement cost if insured 80% to value.

Answer Choices: Select the Correct Answer
I only
II only
Both I and II
Neither I nor II

Question 27 of 100

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

EXPLANATION:
Both DP-2 and DP-3 settle all personal property losses on an ACV basis. They settle partial dwelling losses at replacement value ONLY if adequate limits are carried. That is, the dwelling limit must be at least 80% of a dwelling's replacement value in order to receive a replacement cost settlement for a partial dwelling loss.


Question 27 of 100

28

The fee for a duplicate copy of an insurance adjuster's license in California is:

Answer Choices: Select the Correct Answer
$7
$12
$5
$10

Question 28 of 100

Your answer: $12 is incorrect. The correct answer is: $10.

EXPLANATION:
The fee for a duplicate copy of an insurance adjuster's license is $10 (CCR 2691.23)


Question 28 of 100

29

All of the following are acceptable methods to satisfy the motor vehicle financial responsibility requirement in California, EXCEPT:

Answer Choices: Select the Correct Answer
A certificate of self-insurance issued by the Department of Motor Vehicles.
A motor vehicle liability insurance policy.
A cash deposit of $35,000 with the Department of Motor Vehicles.
A personal savings account with a consistent balance of $50,000.

Question 29 of 100

Your answer: A personal savings account with a consistent balance of $50,000. is correct.

EXPLANATION:
A personal savings account is not an acceptable method to satisfy the California financial responsibility requirement.


Question 29 of 100

30

Which part of the personal auto policy will contain a deductible?

Answer Choices: Select the Correct Answer
The "other than collision" coverage.
The "collision".
Neither "other than collision" nor the "collision".
Both the "other than collision" coverage and the "collision" coverage.

Question 30 of 100

Your answer: Both the "other than collision" coverage and the "collision" coverage. is correct.

EXPLANATION:
Both "collision" and "other than collision" coverage will be subject to a deductible. The deductible amount does not have to be the same for both coverages.


Question 30 of 100