Practice Exam 2.0

Question 1

What course of action does a party to a contract have if the other party is found to be in breach of that contract?
(A)Nothing, unless the injured party can prove the damages are substantial
(B)Reasonable attorney fees & costs only
(C)Damages for breach, reasonable attorney fees, & costs
(D)Damages caused by the breach only

Answer 1

(C)Damages for breach, reasonable attorney fees, & costs

Question 2

All of the following are characteristics of an “ideally insurable loss exposure” EXCEPT:
(A)Losses that are accidental
(B)Losses that are catastrophic
(C)Losses that are definite & measurable
(D)Large number of exposure units

Answer 2

(B)Losses that are catastrophic

Question 3

The personal auto policy territory limits include:
(A)Tokyo, Japan
(B)London, England
(C)Mexico City, Mexico
(D)Montreal, Canada

Answer 3

(D)Montreal, Canada

Question 4

A broker's role is to work in the best interest of: 
(A)His insurer
(B)His client
(C)His agency
(D)Himself

Answer 4

(B)His client

Question 5

Most companies use a/an \_\_\_\_\_ to establish a cost of repair
(A)Bid
(B)Paid receipt
(C)Appraised estimate
(D)Replacement cost

Answer 5

(C)Appraised Estimate

Question 6

How many days prior notice in writing is required before a company can cancel your policy for nonpayment?
(A)10 days
(B)45 days
(C)15 days
(D)60 days

Answer 6

(A) 10 days

Question 7

A mutual insurance company is owned by the:
(A)Insureds
(B)Directors
(C)Inventory
(D)Stockholders

Answer 7

(A) insureds

Question 8

Error & Omissions Insurance does not cover:
(A)legal costs
(B)fraudulent acts by agents
(C)mistakes by agents
(D)an insurance company

Answer 8

(B)fraudulent acts by agents

Question 9

Before an entity/individual can be insured, it must have a/an \_\_\_\_ interest.
(A)spousal
(B)undivided
(C)enclosable
(D)insurable

Answer 9

(D)insurable

Question 10

According to the Department of Insurance, there is no fraud unless there is:
(A)intent to gain
(B)a premium payment
(C)an agent
(D)an insurance company

Answer 10

(A)intent to gain

Question 11

A representation in an insurance contract qualifies as which of the following?
(A)an amendment
(B)an express warranty
(C)a policy provision
(D)an implied warranty

Answer 11

(D)an implied warranty

Question 12

What does it mean if an agent’s insurance license is inactive?
(A)the agent can transact insurance business if it is done with another agent’s approval
(B)the agent can transact any insurance business in CA, but not in any other state until it is reactivated
(C)the agent can still transact insurance business in CA, but not in any other state until it is reactivated
(D)the agent cannot transact any insurance business for which a valid, active license is required

Answer 12

(D)the agent cannot transact any insurance business for which a valid, active license is required

Question 13

In the state of CA, no rate will remain in effect if it is considered to be any of the following, except:
(A)impartial
(B)unfairly discriminatory
(C)excessive
(D)inadequate

Answer 13

(A)impartial

Question 14

The amount paid for damage to property which is equal to the price for which it could have been sold is:
(A)actual cash value
(B)replacement amount
(C)stated amount
(D)market value

Answer 14

(A)actual cash value

>paying for damage=depreciation

Question 15

The limited Mexico endorsement applies to trips to Mexico with a duration of:
(A)7 days or less
(B)10 days or less
(C)2 days or less
(D)14 days or less

Answer 15

(B)10 days or less

Question 16

Which of the following types of coverage would pay for losses which occurred during the policy period & are found for up to one year after policy termination?
(A)occurrence
(B)loss sustained
(C)claims made
(D)discovery

Answer 16

(B)loss sustained

Question 17

If an insured borrows a neighbor’s vehicle to run a personal errand, how do the policies respond in the event of an auto accident?
(A)both policies respond on a pro-data basis
(B)only the neighbor’s policy provides coverage; there is no coverage by the driver’s policy
(C)the driver’s policy is primary and the neighbor’s policy is excess
(D)the neighbor’s policy is primary & the driver’s policy is excess

Answer 17

(D)the neighbor’s policy is primary & the driver’s policy is excess

Question 18

It is a violation of the CA insurance code to act as a producer for a non-admitted carrier unless:
(A)The producer is an insurance solicitor
(B)it is always a violation no matter what type of producer
(C)the producer is dually licensed in at least two states
(D)the producer is a surplus lines broker

Answer 18

(D)the producer is a surplus lines broker

Question 19

In CA, excess & surplus lines coverage needs to be placed through:
(A)an admitted insurer
(B)an excess & surplus lines solicitor
(C)Llyods of London
(D)a surplus lines broker

Answer 19

(D)a surplus lines broker

Question 20

Mitchell’s unendorsed PAP liability coverage would pay for:
(A)his broken windshield caused by a rock thrown by the tire of a passing car
(B)his rental car expense when his car is unusable due to a collision that was not his fault
(C)the cost of repairing the neighbor’s fence that Mitchell damaged due to the negligent operation of his car
(D)damage or injury caused intentionally by Mitchell

Answer 20

(C)the cost of repairing the neighbor’s fence that Mitchell damaged due to the negligent operation of his car

Question 21

An umbrella policy:
(A) provides coverage for outdoor fairs & exhibitions in case of bad weather
(B) provides excess physical damage coverage
(C) provides broad primary coverage for most personal or commercial exposures
(D) provides broad excess liability coverage over one or more primary policies

Answer 21

(D) provides broad excess liability coverage over one or more primary policies

Question 22

Carmen is driving her own car on behalf of her employer. Carmen's negligent operation of her car injures members of the public. The employers may be held liable because of what is called:
(A) vicarious liability
(B) gross negligence
(C) absolute liability
(D) contributory negligence

Answer 22

(A) vicarious liability

Question 23

Under the liability portion of an unendorsed PAP, what coverage is available if the named insured is operating a company car on a regular basis?
(A) the coverage of the vehicle primarily operated by the named insured
(B) the financial responsibility coverage limitations
(C) the broadest coverage of any of the autos listed in the declaration
(D) the policy excludes this coverage

Answer 23

(D) the policy excludes this coverage

Question 24

A possibility of financial loss resulting from the ownership of property known as:
(A) insurable interest
(B) valuation
(C) indemnity
(D) legal liability

Answer 24

(A) insurable interest

Question 25

What is the limit for sound reproducing equipment under the coverage endorsement for excess sound reproducing equipment, audio, visual, & data electronics, tapes, records, disks, & other media endorsement in a PAP?
(A) $200
(B) the amount scheduled on the endorsement
(C) $500
(D) $1000

Answer 25

(A) $200

Question 26

Which of the following is a true statement about CAARP?
(A) only agents with 2 or more years of experience are eligible to place business with CAARP
(B) CAARP offers dwelling coverage but no homeowners
(C) commercial risks are not eligible for CAARP
(D) the minimum liability for CAARP is 15/30/5

Answer 26

(C) commercial risks are not eligible for CAARP

Question 27

The amount to replace an insured's damaged property less depreciation is known as:
(A) actual cash value
(B) commercial general liability policy
(C) replacement value
(D) agreed amount

Answer 27

(A) actual cash value

Question 28

What’s the difference between the per occurrence limit in a split limits policy & the combined single limit?
(A) the per occurrence limit applies to all claims. the combines single limit applies only to BI
(B) the per occurrence limit applies only to BI, the combined single limit applies to all claims
(C) there is no difference
(D) the per occurrence limit applies to PD, the combined single limit applies to all claims

Answer 28

(B) the per occurrence limit applies only to BI, the combines single limit applies to all claims

Question 29

If an insured rents an auto while on vacation, what coverage, if any will be available for physical damage coverage under a PAP?
(A) the least coverage on any auto shown on the declaration
(B) no coverage available
(C) the coverage of the last auto shown in the declarations
(D) the broadest coverage on any auto shown in the declarations

Answer 29

(D) the broadest coverage on any auto shown in the declarations

Question 30

What is the minimum discount percentage for the good driver discount?
(A) 5%
(B) 10%
(C) 20%
(D) 25%

Answer 30

(C) 20%

Question 31

What is the primary difference between umbrella & excess liability policies?
(A) the umbrella has fewer supplementary features & is less expensive than the excess policy
(B) the umbrella covers most liability exposures; the excess liability may cover only one line
(C) the umbrella covers intentional acts; the excess does not
(D) the umbrella affords defense costs; the excess liability does not

Answer 31

(B) the umbrella covers most liability exposures; the excess liability may cover only one line

Question 32

The intentional relinquishment of a right is: 
(A) warranty
(B) Waiver
(C) concealment
(D) estoppel

Answer 32

(B) waiver

Question 33

In the business of insurance, concealment is defined by all of the following statements except:
(A) does not occur if no inquiry is made
(B) is grounds for declination by the insurers
(C) can be unintentional
(D) can be intentional

Answer 33

(B) is grounds for declination by the insurers

Question 34

All of the following are characteristics of an “ideally insurable loss exposure” except:
(A) losses that are accidental
(B) losses that are catastrophic
(C) losses that are definite & measurable
(D) large number of exposure units

Answer 34

(B) losses that are catastrophic

Question 35

The PAP territory limits include
(A) Tokyo, Japan
(B) London, England
(C) Mexico city, Mexico
(D) Montreal, Canada

Answer 35

(D) Montreal, Canada

Question 36

The collision coverage of a PAP cover:
(A) a desert sand storm pitting the car windshield
(B) damages caused by the insured driving into a tree that had fallen during a recent storm
(C) a vandal making a deep scratch on the car with a screwdriver
(D) collision does not cover any of these losses

Answer 36

(B) damages caused by the insured driving into a tree that had fallen during a recent storm

Question 37

Kim’s car is insured with a PAP. The coverage includes medical payments with $2000 limits. Which of the following situations is true?
(A) Kim’s daughter is struck by a car while crossing the street. Kim’s policy will pay nothing because Kim’s daughter was not in the car at the time of the accident.
(B)Kim gives her neighbor a ride to the store in the insured car. She has an auto accident in which they each incur over $2000 in medical expenses. The max. amount that Kim’s policy will pay is $2K for her & $2K for her neighbor.
(C)Kim is injured in an accident while riding in her neighbor’s car. The neighbor’s policy covers $2K in medical payments. The Max. amount that would be paid by both policies for Kim’s injuries is a total of $2K
(D)Kim’s daughter is struck by a car. the policy will pay nothing because she was riding her bicycle in the street

Answer 37

(B)Kim gives her neighbor a ride to the store in the insured car. She has an auto accident in which they each incur over $2000 in medical expenses. The max. amount that Kim’s policy will pay is $2K for her & $2K for her neighbor.