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Flashcards in IA Test 23 Deck (100)
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1

An office building is limited in the number of stories it may contain be eligible for coverage under the Businessowners Policy?

Answer Choices: Select the Correct Answer
Five stories
Six stories
Four stories
Seven stories

Question 1 of 100

Your answer: Five stories is incorrect. The correct answer is: Six stories.

EXPLANATION:
Office buildings, including office condominium associations, occupied principally for office purposes, are eligible. Buildings, including apartment buildings, cannot exceed six stories in height or 100,000 square feet in total floor area. Eligible incidental occupancies are (1) apartments; (2) eligible wholesaler, mercantile, service or processing occupancies and contractors which in total do not exceed 35,000 square feet; and (3) contractors which do not occupy more than 7,500 square feet or more than 15 percent of the total area.


Question 1 of 100

2

Protection and indemnity coverage contained in an ocean marine policy covers:

I. Liability against injuries to seamen.
II. Injury to stevedores, longshoreman and harbor workers.
III. Cargo, if lost or damaged through negligence.

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

Question 2 of 100

Your answer: I, II and III. is correct.

EXPLANATION:
Protection and indemnity coverage would apply to all of these types of losses.


Question 2 of 100

3

A customer deposits items in a safe deposit box at the bank. These items are missing the next time the customer opens the box. What crime coverage is necessary to cover this loss?

Answer Choices: Select the Correct Answer
Safe Depository
Guests Property
Lessees of Safe Deposit Boxes
Extortion-Commercial Entities

Question 3 of 100

Your answer: Safe Depository is correct.

EXPLANATION:
If the bank is legally liable for the loss, the "Safe Depository" coverage form will cover the loss.


Question 3 of 100

4

A contractor in need of a bid bond to obtain a contract is an example of a(n):

Answer Choices: Select the Correct Answer
Principal.
Obligee.
Surety.
Fiduciary.

Question 4 of 100

Your answer: Surety. is incorrect. The correct answer is: Principal. .

EXPLANATION:
A contractor needing a bid bond would be the principal. The bond company is the guarantor and the owner (who receives the benefit of the bond) would be the obligee.


Question 4 of 100

5

Under the comprehensive coverage of a business auto policy, which of the following would not be a covered loss?

Answer Choices: Select the Correct Answer
After sliding on an icy pavement, a driver hits a guardrail.
Electrical wiring in the vehicle catches fire when the ignition is turned on.
All four tires are removed and a truck is put on blocks while it is parked over the weekend, even though there is no evidence of forcible entry into the company parking lot.
A vehicle has its tires slashed by an undetermined person.

Question 5 of 100

Your answer: Electrical wiring in the vehicle catches fire when the ignition is turned on. is incorrect. The correct answer is: After sliding on an icy pavement, a driver hits a guardrail..

EXPLANATION:
Since the vehicle sustained damage by hitting the guard rail, it is considered a collision claim. This is because the definition of collision includes the upset of a vehicle, its impact with another vehicle or object; anything else would be other than collision and thus be covered by comprehensive coverage.


Question 5 of 100

6

Which of the following represents an indirect loss?

Answer Choices: Select the Correct Answer
A tree fell on a house, causing a hole in the roof, which later allowed rain to enter
Rain entered a house after a tree fell onto it, later causing mold to develop
Mold developed in a house, later causing the occupants to become very ill
A kitchen fire made a house untenable, causing the occupants to incur hotel charges

Question 6 of 100

Your answer: A kitchen fire made a house untenable, causing the occupants to incur hotel charges is correct.

EXPLANATION:
An indirect loss is the temporary loss of use caused by a direct property loss. A kitchen fire is a direct loss. If that loss is severe enough to make the house unfit to be used, the insured will need to temporarily find an alternative place to live in until repairs to the house are completed. The cost of that temporary replacement - the hotel charge - is the indirect loss.


Question 6 of 100

7

The standardized Homeowners forms provide ______ for Fire Department Service Charge.

Answer Choices: Select the Correct Answer
$1,000
$500
$250
$750

Question 7 of 100

Your answer: $500 is correct.

EXPLANATION:
$500 is paid under the standardized Homeowners forms for Fire Department Service Charge. This is "additional insurance" and the deductible does not apply.


Question 7 of 100

8

Which of the following types of losses will NOT be excluded by Ace Building and Materials Company's CGL policy?

Answer Choices: Select the Correct Answer
Bodily injury to a customer arising out of a forklift being used by the insured
Damage to a forklift owned by others which was in the custody of the insured
Property damage caused to the water system when a forklift dropped a drum of caustic chemicals owned by the insured
Bodily injury to an employee driving a forklift

Question 8 of 100

Your answer: Bodily injury to a customer arising out of a forklift being used by the insured is correct.

EXPLANATION:
The use of mobile equipment on or off the insured's premises is covered under the CGL policy. Property in the insured's care, custody or control is excluded. Pollution is also excluded as well as injuries to employees.


Question 8 of 100

9

Amelia has suffered a covered collision loss to her vehicle. The insurer requires that her vehicle be repaired at a repair shop of the insurer's choice. The insurer:

Answer Choices: Select the Correct Answer
Is guilty of an unfair claims practice act.
Can make this request.
Waives the deductible, if any, in this case.
Can usually get the work done for less and can help to reduce insurance costs.

Question 9 of 100

Your answer: Can make this request. is incorrect. The correct answer is: Is guilty of an unfair claims practice act..

EXPLANATION:
The insurer can recommend a repair shop, but cannot require that a particular shop be used.


Question 9 of 100

10

Fidelity bonds which apply coverage to an employee or employees acting in collusion with others are called:

Answer Choices: Select the Correct Answer
Commercial blanket bonds.
Scheduled bonds.
Position bonds.
Blanket position bonds.

Question 10 of 100

Your answer: Commercial blanket bonds. is correct.

EXPLANATION:
The commercial blanket bond's limit applies separately to each employee involved in the loss whether acting alone or in collusion with other employees. However, in case of a loss only the bond limit will apply to the entire loss.


Question 10 of 100

11

A Businessowners policy has a $500,000 occurrence limit for liability, and a $1,000,000 aggregate limit. If claims for $600,000 and $400,000 have been filed in two separate incidents, how much coverage remains, if any, for future claims submitted during the policy term?

Answer Choices: Select the Correct Answer
$500,000
$0
$100,000
$1,000,000

Question 11 of 100

Your answer: $100,000 is correct.

EXPLANATION:
The most the policy will pay for any one single occurrence is $500,000, therefore that amount would be payable for the first loss. Once paid that amount must be subtracted from the Aggregate Limit (the most available for all claims in the policy year) leaving $500,000 remaining in the aggregate. The second claim is within the occurrence limit and because there is enough left in the aggregate, the entire $400,000 is payable. After subtracting the $400,000 loss from the remaining aggregate, $100,000 is left to pay any and all future claims for the remainder of the policy term.


Question 11 of 100

12

An applicant for an independent adjuster license must file with the Commissioner a surety bond in the amount of:

Answer Choices: Select the Correct Answer
$10,000.
$5,000.
$2,500.
$2,000.

Question 12 of 100

Your answer: $2,000. is correct.

EXPLANATION:
No license will be issued unless the applicant files with the Commissioner a surety bond executed by a surety company authorized to do business in the state in the sum of $2,000 conditioned for the faithful and honest conduct of business by the applicant. Such bond as to its form, execution, and sufficiency of the sureties must be approved by the Commissioner.


Question 12 of 100

13

How are the HO-2, HO-4 and HO-6 forms similar?

Answer Choices: Select the Correct Answer
The perils covered
The risk of damage to the dwelling
The type of residence insured
The property insurance

Question 13 of 100

Your answer: The perils covered is correct.

EXPLANATION:
All three forms use the broad form, named perils approach for covered property. But property insured under these three forms varies to accommodate policyholder's needs. The HO-2 covers the dwelling building, whereas the HO-4 does not and the HO-6 includes the building coverage as needed by the unit owner.


Question 13 of 100

14

All of the following are "advertisements" as defined by the California Code of Regulations (CCR), EXCEPT:

Answer Choices: Select the Correct Answer
Any written or printed communication for the purpose of soliciting, describing, or promoting the licensed business of the licensee, including a brochure, letter, pamphlet, newspaper, periodical, publication, or other writing.
A directory listing caused or permitted by the licensee that also indicates his licensed activity.
Any printing or writing on buildings used as the licensee's place of business or branch office.
A radio, television or similar airwaves transmission that solicits or promotes the licensed business of the licensee.

Question 14 of 100

Your answer: Any printing or writing on buildings used as the licensee's place of business or branch office. is correct.

EXPLANATION:
"Any printing or writing on buildings used as the licensee's place of business or branch office" is actually listed as NOT being included in the definition of "advertisement". All the other answer choices ARE considered "advertisements" according to the CCR. (CCR 2691.17)


Question 14 of 100

15

On an unendorsed special form BOP, how much coverage is there for theft of money & securities?

Answer Choices: Select the Correct Answer
$5000 on the premises only
$5000 on the premises but only $2500 off
$1000 on and off the premises
Nothing

Question 15 of 100

Your answer: $5000 on the premises but only $2500 off is incorrect. The correct answer is: Nothing.

EXPLANATION:
Even though the special BOP is "open peril" coverage which includes theft, the loss of money and securities are still not a covered form of property. The endorsement for Money & Securities is necessary to cover this exposure.


Question 15 of 100

16


QUESTION:
All of the following statements are true regarding state Guaranty Associations, EXCEPT:

Answer Choices: Select the Correct Answer
The Association covers the claims of insurers that become insolvent in the state.
The Association assesses admitted insurers a percentage of net premiums written in the state to finance the fund.
The fund assists insurers in gaining new insurance business by allowing them to advertise their membership in the Guaranty Association.
The fund pays the workers compensation claims of an insolvent insurance in full with no limit.

Question 16 of 100

Your answer: The fund assists insurers in gaining new insurance business by allowing them to advertise their membership in the Guaranty Association. is correct.

EXPLANATION:
The fund does NOT assists insurers in gaining new insurance business by allowing them to advertise their membership in the Guaranty Association. In fact, the Association prohibits insurers from advertising that they are a member of the Guaranty Association. COVERED IN INSURANCE FUNDAMENTALS.


Question 16 of 100

17

Adjusters have a relationship to the legal profession, and must exercise care to avoid the unauthorized practice of law. In California, the insurance code states that nothing in the code will be construed as entitling any person to practice law in the state, UNLESS:

Answer Choices: Select the Correct Answer
He/she is a licensed independent adjuster.
He/she has graduated from an accredited law school.
He/she is an active member of the State Bar of California.
He/she is a licensed public adjuster.

Question 17 of 100

Your answer: He/she is an active member of the State Bar of California. is correct.

EXPLANATION:
In California, the insurance code states that nothing in the code will be construed as entitling any person to practice law in the state, UNLESS he/she is an active member of the State Bar of California.


Question 17 of 100

18

An application for an independent adjuster license in California must include:

I. The full name and business address of the applicant.
II. A recent photograph of the applicant and one classifiable set of his or her fingerprints.
III. A verified statement of his or her experience qualifications.
IV. A statement as to the classification or classifications under which the applicant desires to be qualified.

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

Question 18 of 100

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

EXPLANATION:
Two recent photographs of the applicant, of a type prescribed by the Commissioner, and two classifiable sets of his or her fingerprints is required.


Question 18 of 100

19

Which of the following is NOT needed for rating the premium for an ISO standardized Businessowners policy?

Answer Choices: Select the Correct Answer
Square foot area
Property coverage amount
Protection class
Rate group

Question 19 of 100

Your answer: Protection class is incorrect. The correct answer is: Square foot area .

EXPLANATION:
Square footage is not needed in the rating of the premium for the ISO BOP policy, however, square footage DOES play a role in determining the ELIGIBILITY of the risk to be covered under a BOP. The property coverage amount, the protection class, and the rate group all play a role in the premium RATING process.


Question 19 of 100

20

All the following are cause for nonrenewal or cancellation of an automobile policy in California, EXCEPT:

Answer Choices: Select the Correct Answer
a subtantial increase in the hazard insured against.
nonpayment of premium.
the insured declaring bankruptcy.
fraud or material misrepresentation.

Question 20 of 100

Your answer: the insured declaring bankruptcy. is correct.

EXPLANATION:
According to the California Insurance Code (CIC 661), an insured declaring bankruptcy is not a cause for cancellation or nonrenewal of an auto policy.


Question 20 of 100

21

Under the Commercial Building and Personal Property form, all of the following are extensions of coverage, EXCEPT:

Answer Choices: Select the Correct Answer
Appraisal.
Personal effects.
Property Off Premises.
Valuable papers.

Question 21 of 100

Your answer: Personal effects. is incorrect. The correct answer is: Appraisal. .

EXPLANATION:
The appraisal clause is not an extension of coverage. This clause is in most, if not all, property insurance contracts to assist in the resolving of disputes between the insured and the insurer as to the value of the damaged property.


Question 21 of 100

22

If an adjusting firm intends to add a new branch office, what action must be taken?

Answer Choices: Select the Correct Answer
Report the new location to the Commissioner immediately
Report the new location within 30 days
Must first obtain a branch office certificate
No action needs to be taken

Question 22 of 100

Your answer: Must first obtain a branch office certificate is correct.

EXPLANATION:
Adjusters cannot conduct business from any location other than that shown on the records of the Commissioner as his or her place of business unless he or she has received a branch location certificate for that location. A licensee must notify the Commissioner in writing within 10 days after the closing or changing the location of a branch office.


Question 22 of 100

23

For the insured dwelling and other detached structures, the DP-3 provides:

Answer Choices: Select the Correct Answer
Open peril coverage.
Broad perils coverage.
Basic perils coverage.
Fire, lightning, extended coverage and vandalism & malicious mischief coverage.

Question 23 of 100

Your answer: Broad perils coverage. is incorrect. The correct answer is: Open peril coverage. .

EXPLANATION:
The DP-3 provides open perils protection for the dwelling and other structures, and named perils protection for personal property. The DP-1 and DP-2 forms provide named peril protection only for the dwelling, other structures, and personal property.


Question 23 of 100

24

Jerusha has her business automobiles covered under a Business Auto policy. She has purchased a new business automobile recently but was not required under her policy provisions to report her newly acquired auto. Based on this information, which BAP symbol is listed on the Declarations page of Jerusha's policy?

Answer Choices: Select the Correct Answer
Symbol 1.
Symbol 7.
Symbol 5.
Symbol 3.

Question 24 of 100

Your answer: Symbol 5. is incorrect. The correct answer is: Symbol 1..

EXPLANATION:
When Symbol 1 is listed on the Declarations page, the insured is not required to report "newly acquired autos" to the insurer. This is because Symbol 1 covers "any auto".


Question 24 of 100

25

Which of the following is the type of report indicating the initial results of the investigation of a claim?

Answer Choices: Select the Correct Answer
Field Report
Interim Report
Full Report
Claims Report

Question 25 of 100

Your answer: Interim Report is incorrect. The correct answer is: Field Report.

EXPLANATION:
This report can also be called the initial report and is the result of the initial investigation.


Question 25 of 100

26

All of the following are exclusions under Equipment Breakdown coverage, EXCEPT:

Answer Choices: Select the Correct Answer
Sudden and accidental loss.
Fire losses.
Flood.
Wear and tear.

Question 26 of 100

Your answer: Sudden and accidental loss. is correct.

EXPLANATION:
The Equipment Breakdown policy covers sudden and accidental loss. It can be modified to cover indirect loss (loss of income) as a result of a direct loss. The commercial property forms would cover a fire loss as a result of a boiler explosion since this would be an ensuing loss.


Question 26 of 100

27

An insured auto dealer has purchased a Garage policy with physical damage coverage against specified causes of loss. Which of the following losses will not be covered by the policy?

Answer Choices: Select the Correct Answer
Flood damage to a covered auto.
Vandalism damage to a covered auto.
Damage resulting from the collision of the truck carrying a covered auto with another vehicle.
Explosion.

Question 27 of 100

Your answer: Flood damage to a covered auto. is incorrect. The correct answer is: Damage resulting from the collision of the truck carrying a covered auto with another vehicle..

EXPLANATION:
A specified cause of loss is named perils coverage and collision is not one of the named perils. Collision is a separate physical damage coverage requiring the upset of the covered vehicle, or its impact with another vehicle or object.


Question 27 of 100

28

The conditions section of an insurance contract specifies which of the following?

I. The property location.
II. The insurance company's responsibilities.
III. The insured's responsibilities.
IV. The policy duration.

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

Question 28 of 100

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

EXPLANATION:
The location of the property and policy duration is shown on the declarations page of the policy. The responsibilities of both parties are contained in the conditions section of the contract.


Question 28 of 100

29

Under the farm forms, theft of certain types of property has a theft coverage limitation. The theft limitation on firearms and other related equipment is:

Answer Choices: Select the Correct Answer
$1,500.
$500.
$3,000.
$5,000.

Question 29 of 100

Your answer: $5,000. is incorrect. The correct answer is: $3,000..

EXPLANATION:
The theft limitation on firearms and other related equipment is $3,000.


Question 29 of 100

30

How may days notice are required in the case of cancellation of an auto policy in California which has been in effect for more than 60 days?

Answer Choices: Select the Correct Answer
20 days, except for 10 days in the case of nonpayment of premium.
30 days, except for 10 days in the case of nonpayment of premium.
45 days, except for 10 days in the case of nonpayment of premium.
10 days in any case.

Question 30 of 100

Your answer: 30 days, except for 10 days in the case of nonpayment of premium. is incorrect. The correct answer is: 20 days, except for 10 days in the case of nonpayment of premium. .

EXPLANATION:
There are only a few legal reasons an insurer may cancel an auto policy that has been in force for 60 days or longer, but when allowed, 20 days notice is required before the cancellation date, unless for nonpayment of premium, in which case 10 days notice is sufficient.


Question 30 of 100