What is a policy that insures property against loss by fire, lightning, and extended coverage known as?
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Named peril.
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What is a policy that insures property against loss by fire, lightning, and extended coverage known as?
Named peril.
Who is considered the first party in an insurance contract?
The insured.
Which option best describes a moral hazard?
Lying on an application.
What does a lapse in a policy refer to?
Termination due to non-payment.
How may the destroyed TV be covered after an accident?
B. Homeowner’s policy.
Which statement is true about workers' compensation?
C. It is regulated by the state government.
What is the minimum amount for a good driver discount in California?
D. 20%.
What benefits are included under workers' compensation?
D. All of the above (Rehabilitation, Medical costs, Loss of time).
Which of the following is considered an uninsured motorist?
D. All of the above (Hit and run driver, Car insured by an insolvent company, A driver with no insurance or bond).
What is it called when an insured voluntarily relinquishes his rights?
Waiver.
What does the liberalization clause in property insurance mean?
If an insurer changes a policy form to broaden coverage, all existing similar policies will have the broadened coverage without additional premium.
A judgment or verdict of guilty following a plea of nolo-contendre is considered to be the same as?
Conviction.
What types of damage are covered under physical damage of a personal auto policy under OTC?
D. All of the above (Earthquake, Flood, Violent windstorm damage).
In theory, who should never sustain a loss from a surety bond?
The surety.
If the insured hits a pole causing $2000 worth of damage, how much will the insured receive from the insurer?
B. 1000 collision deductible).
What does collision coverage typically cover?
Damage to the insured's vehicle resulting from a collision with another vehicle or object.
What is not provided by CAARP?
A. Collision.
What section of a personal auto policy covers damage to a rental car used temporarily?
D. Physical Damage.
What principle states that the insured should be compensated for his loss, returning him to the condition prior to the loss?
B. It is a basic principle of insurance.
Who is ineligible for CAARP?
Applicants who failed to pay auto premiums in the year before or do not have a driver's license.
If a house is located next door to a manufacturer of explosives, what type of hazard is this?
Physical.
What type of cancellation occurs when an insurer retains only the earned premium?
Short rate cancellation.
What would cover the insured’s injuries in a hit and run incident?
D. Medical payments or uninsured motorist.
What is a wrongful act other than a crime or a breach of contract called?
Tort.
Which advisory organization develops insurance policies for the standard market?
Insurance Services Office (ISO).
Who has the right to sue if a surety bond is forfeited?
All of the above (the principal, the obligee, the surety).
What does 24-hour coverage refer to?
B. It is the joint issuance of a worker’s compensation policy with a disability insurance policy or other medical coverage for non-occupational injuries and illnesses.
Which part of the insurance contract summarizes the major promises of the insurer?
Insuring agreement.
What is the definition of risk?
An uncertainty or chance of loss.
What is considered a pure risk?
A situation with only the possibility of loss or no loss.
What process involves an insured suffering a loss and being paid to return to their prior financial condition?
C. Indemnity.
What are supplementary payments in liability policies?
Payments that are payable in addition to the policy limit of liability.
What does it mean to subrogate?
To substitute.
Which of the following is considered special damage?
Compensation for time away from work.
If a property valued at 300,000 with an 80% coinsurance clause and suffers a $200,000 loss, how much will the insurer pay?
$150,000.
Which component is not part of DICE?
Insuring Agreement.
With whom are policy forms filed?
Department of Insurance (DOI).
What is true about uninsured motorist coverage in California?
C. Must be included in the policy, but can be waived by supplemental agreement.
If a partially disabled worker sustains a second injury, who pays the benefits?
C. The current employer would pay the benefits for the current injury and the second injury fund would pay for the difference between the partial and total disability benefits.
What type of liability is imposed by law on those participating in hazardous activities?
Absolute liability.
What is a document attached to a policy that changes the original policy called?
B. Endorsement.
What is the primary purpose of liability insurance?
To protect a third party.
How much will Driver B receive under contributory negligence if Driver A is 2/3 at fault for $6,000 in damages?
$4,000.
What can be covered under breach of contract?
A. Damages, attorney’s fees and court costs.
What is the main purpose of tort law?
To determine responsibility for damages.
Which of the following is NOT considered an other than collision loss under the personal auto policy?
A. Collision with another object.
Why did the woman's non-occupational disability policy refuse to pay after her auto accident?
C. The non-occupational policy does not pay, as this situation should be covered by Worker’s Compensation.
What is an automobile physical damage policy?
A contract whereby the company agrees to pay the insured for direct loss or damage to the automobile.
What term describes an individual who shows total disregard for the safety of others?
Gross negligence.
What are the limits of liability on low cost insurance?
A. 15/30/5.
Loss retention is effective when all conditions exist except?
A. The probability of loss is unknown.
What is the limit of liability for damage to your own automobile under a personal auto policy?
The lesser of the amount necessary to repair or replace the property or the actual cash value of the stolen or damaged property.
What type of insurance would a movie company use to protect its actors from injuries?
B. Worker’s Compensation.
What coverage is provided under a personal auto policy if an insured rents a vehicle while on vacation?
C. All coverages are in force in the personal auto policy.
What type of policy protects against loss from any type of peril except those that are specifically excluded?
All risk or open peril.
What principle of an insurance contract indicates fault in case of ambiguous language?
Adhesion; it indicates the Insurance Company is at fault.
What is true about an aleatory contract?
There may be an unequal exchange of money.
For a property valued at 75,000 with an 80% coinsurance clause, how much will be paid on a $50,000 loss?
$30,000.
Why is an endorsement needed to add a motorcycle to a personal auto policy?
A. The PAP does not cover vehicles with two wheels.
Under workers' compensation medical payments, which statement is correct?
C. There is both a time limit and a dollar limit.
What is NOT covered under OTC of a personal auto policy?
B. Theft of necktie and briefcase from the car.
What type of contract is an insurance policy considered due to ambiguity?
Adhesion.
What does a pure risk involve?
A chance of loss (or no loss).
Which of the following is NOT considered a personal auto policy?
D. Auto used for business.
How long does an insured have to request collision coverage on a newly acquired auto that replaces a covered auto with liability coverage only?
C. 14 days.
How will a claim be settled if an insured woman with collision and liability protection borrows a car and is in an at-fault accident?
C. The auto owner’s liability is primary; the insured woman’s collision coverage will cover the borrowed car.
What is a hazard?
A condition that might increase the likelihood of a loss occurring.
What is required for a policy to be transferred to another?
Written consent of the insurer.
What are liability losses referred to as?
Third party losses.
What is the limit for transportation expense under OTC for total theft of the insured’s covered auto?
A. Coverage pays up to 600.
How may the insurance cover a motorcycle on a personal auto policy?
D. Either A or B (Miscellaneous vehicle endorsement or Special motorcycle endorsement).
What does the Miscellaneous Type Vehicle Endorsement not insure?
D. Golf Carts.
Which statement is true about the state compensation insurance fund?
D. None of the above.
Which of the following is not an uninsured motorist?
C. A vehicle self-insured by a state agency.
What is the liability called that an employer has for the acts of his employees?
Vicarious liability.
If Driver A is 2/3 at fault for a $6,000 damage to Driver B's car, how much will Driver B receive under comparative negligence?
$4,000.
What is one main reason for the existence of federal government programs?
The large amount of resources needed to cover some catastrophic losses.
What is one option of an insurer when making a loss settlement with an insured on a personal auto policy?
Return stolen property to the address shown on the policy.
Under what condition is an employee covered by Worker’s Compensation?
C. Without regard to fault of negligence of the employer or any other person.
What does subrogation refer to?
Transferring of 'third party' money rights.
What is it called when an insurer cancels a policy and returns the entire premium?
Pro-rata cancellation.
How will the claim be paid if the insured has 50,000?
B. 50,000 by the insured’s company.
How much of Mary's rental expense will be covered by her insurance?
C. It will be covered up to the limits stated in her policy.
Which event would disqualify an individual from receiving a good driver discount?
C. An at-fault accident involving minor bodily injury.
What is the primary purpose of a Surety Bond?
To protect an individual if the contractor fails to perform according to contract.
What is the limit of coverage for Optional Physical Damage Coverage in a PAP?
B. $1,000.
What will the insured's company do if they have minimum limits of auto liability insurance and are in a state with higher limits?
C. Pay up to the limits of the insured’s policy.
Who is covered under the Personal Auto Policy (PAP)?
The named insured & spouse, any occasional driver with permission, and the insured driving any other vehicle with permission.
What liability limits apply if an insured is driving a company car under an unendorsed personal auto policy?
A. There would be no coverage.
What is gap coverage?
Insurance that pays the difference between the amount an insurer will pay for a totaled car and the amount the insured owes on the lease or loan.
What is the minimum limit of coverage for Bodily Injury Liability under CAARP?
30,000.
If an employee trips over his shoelace at work, which insurance would cover the injury?
C. Worker’s Compensation.
What do open peril policies provide coverage for?
All risks, except those specifically excluded.
When an insurance policy is cancelled by the insured and the company retains premium for protection plus expenses, this is known as?
Short rate basis.
What is the purpose of automobile liability insurance?
Written to protect a third party.
What did Proposition 103 require regarding auto premiums?
To be based on driving safety record, number of miles driven annually, and number of years of driving experience.
When is an insured required to notify the police under a personal auto policy?
C. For hit and run accidents and thefts.
What options does the insurer have when the insured’s auto is damaged?
D. All of the above.
What is NOT true about a fidelity bond?
The principal pays for and is protected by the bond.
What is the time frame for returning unearned premium to the insured when a policy is canceled?
15 days.
Who is eligible for Low Cost Automobile Insurance?
Individuals with a gross annual income not exceeding 250% of the federal poverty level, aged 19 or older, and with no recent at-fault accidents or moving violations.
Which of the following is an example of loss retention?
B. Not purchasing collision insurance on your auto.
Who is not a party to a surety bond?
B. Bondsman.
If an insured has a liability coverage limit of 150,000 bodily injury to one driver, 8,000 property damage, what is the insurer’s liability?
$300,000.
What does Part 1 of Worker’s Compensation cover?
C. All sums the insurer is required to pay by state law.
Which option best describes a morale hazard?
Driving fast and reckless.
How many parties are involved in contracts of insurance?
Under tort law, which of the following is NOT a basis for legal liability?
D. Breach of contract.
Which of the following is NOT eligible for coverage under uninsured motorist coverage?
A. An incident with a motorist who has less liability insurance than required by financial responsibility laws.
What gives the injured party the right to seek compensation if another person’s negligence contributed to an injury?
Tort law.
What is a duty of an insured following a loss under a PAP?
B. Allow the insurer to inspect & appraise damages before repairs are made.
What type of coverage is provided for vandalism in a Personal Auto Policy?
B. Vandalism is covered under physical damage.
In which scenario would collision coverage apply?
When the insured hits a tree that fell in the street due to a storm.
What is the purpose of insurance?
To transfer risk.
What vehicles are covered under the PAP?
Vehicles cannot weigh more than 10,000 pounds and must be 4-wheel vehicles.
What is a hazard?
Anything that increases the chance of a loss.
What is included in supplemental payments of a personal auto policy?
Cost of defense, bail bonds up to 200 per day for loss of earnings).
If an insured borrows a car and is in an accident, which insurance is primary?
B. Both policies apply but the owner of the car’s insurance is primary.
What does Worker’s Compensation not cover?
A. Illnesses that are common for people to get such as colds or the flu.
What is a peril?
A cause of loss.
What is it called when an insurer keeps 50% of the premium and returns the other 50% upon cancellation?
Pro-rata cancellation.
What happens if the insured does not maintain the 80% coinsurance requirement?
The insurer will pay a reduced amount on the loss, and the insured becomes a coinsurer by the amount of the penalty.
How much would an insured receive in transportation expense if his car was stolen 12 days ago?
A. $150.
What is generally required by workers' compensation law?
A. It is compulsory for employers to secure liability for worker’s compensation.
Which statement about medical payments coverage is incorrect?
C. The insured is hurt while driving with a neighbor who does not have medical payments. The insured’s medical payments will cover him.
What does the concept of utmost good faith entail?
Each party to a contract should be able to rely on the representations of the other party.
What rule reduces damages awarded based on a person's own negligence?
Comparative negligence.
Which example illustrates a pure risk?
Mary has a financial loss due to an auto accident (medical bills).
What coverage is provided for a newly acquired auto under an existing personal auto policy before a request is made?
A. Broadest coverage for any vehicle shown on the declarations.
Under a personal auto policy, how are towing and labor expenses handled?
Paid if endorsed onto the policy for an additional premium.
What is the minimum limit of coverage for Property Damage Liability under CAARP?
$5,000.
What should Art add to his personal auto policy to cover his needs while renting or borrowing cars?
A. Named non-owner.
What does the CA Insurance Code require property insurance policies to specify?
The insurer’s address, the insured risks or perils, the policy period, and a description of the insured property.
What is the correct definition of coinsurance?
A requirement that the insured carry insurance equal to at least 80% of the property value at the time of the loss to be fully paid for the loss without any penalty.
What does the term 'aleatory' mean?
The outcome depends on an uncertain future event.
If a commercial property is insured for 100,000 suffers a $50,000 loss, how much will the insured pay?
$50,000.
Which of the following is not an intentional tort?
Owning a wild animal.
What percentage of salary does a person receive when eligible for workers' compensation benefits?
B. 66 2/3%.
In a commercial property policy, what is the company providing the insurance referred to as?
'We'.
What coverages are provided by CAARP?
C. Liability, medical payments, and uninsured motorists.
Which situation best characterizes a speculative risk?
A situation that offers the possibility of a loss or a gain.
What is NOT needed to determine if a risk is insurable?
The loss must be catastrophic in nature.
What does towing and labor cover under a personal auto policy?
Pays for labor at the place of disablement.
What will disqualify someone from CAARP eligibility?
Having a suspended license due to points on their driving record.
What is the policy provision that denies coverage for certain perils?
Exclusions.
What is it called when the insured makes a claim against the insurer for a direct loss?
First party claims.
What would provide coverage for the insured's stolen car?
A. Other than collision.
What is it called when employers can only buy workers' compensation insurance through a state-run fund?
B. Monopolistic.
What type of contract is a surety bond?
It is a 2 party contract.
If the insured hits a deer causing $2000 worth of damage, how much will the insured receive from the insurer?
B. 500 OTC deductible).
From whom will the man who suffered paralysis likely collect disability income benefits?
B. Worker’s Compensation.
Which of the following would be covered under collision?
None of the above.
What is it called when a person cannot file for negligence due to their own negligence?
Contributory negligence.
Is there coverage for business use under the PAP?
No, unless endorsed onto the policy (farm use is covered).
In a surety bond, what is the company providing the bond called?
A. Surety (guarantor).
What is a requirement for eligibility for CAARP?
An applicant must have tried and failed to obtain insurance through voluntary markets in the 60 days before their application.
What is the minimum limit of Medical Payments coverage under CAARP?
$1,000.
What does Worker’s Compensation Part 1 include?
A. Insurer’s promise to pay all compensation and other benefits required by state law for a work-related accident.
What is true about punitive damages?
They are a form of punishment to dissuade the at fault party (defendant) from entering those situations again.
What does DICE refer to in an insurance contract?
Declarations, insurable interest, conditions, and exclusions.
Which scenario would be covered under OTC of a personal auto policy?
B. Rear window blown out by a gunshot while the car was parked.
What is a permanent physical impairment that leaves an individual incapable of performing their previous occupation but capable of some other work?
B. Permanent partial disability.
Which statement is NOT true about a surety bond?
The obligee is obligated to the guarantor (surety).
What is meant by 'other than collision' coverage in automobile insurance?
It covers any direct or accidental loss of, or damage to, the insured’s automobile, except collision.
What must occur for negligence to exist, except for one condition?
Concurrent causation.
What risk management technique eliminates a loss exposure and reduces the chance of loss to zero?
D. Avoidance.
How will a personal auto policy respond to liability claims if a covered auto is involved in an accident while being test-driven by a dealer's employee?
A. The personal auto policy is primary.
How much will a personal auto policy with bodily injury limits of 25/50 pay for three injured parties with medical bills of 9,000, and $8,000?
$50,000.
Which of the following is true about a temporary substitute auto?
A. It is a non-owned automobile.
Is 24-hour coverage a seamless coverage consisting of disability and indemnity insurance covering occupational and non-occupational sickness and injuries?
A. True.
What is Low Cost Automobile Insurance?
An outreach program devised in 1999 to focus on California counties with high numbers of uninsured drivers.
If an insured rents a car, what coverage applies for physical damage?
A. The same as the car on his policy that has the most coverage.
What is a key difference between bonds and insurance policies?
A. Bonds are three-party contracts; insurance policies are two-party contracts.
How is an employee defined under workers compensation laws?
B. Any person in the service of any employer under any appointment, expressed, implied, oral or written, and lawfully employed.
What does Worker’s Compensation cover?
D. Injury or illness in the course of working.
What coverage is available under the liability portion of an unendorsed personal auto policy if the named insured operates a company car?
D. The policy excludes this usage.
What does an automobile policy limit of liability specified as 100/300/100 mean?
B.I. per person / P.D. per occurrence / P.D. per person.
What are the minimum liability limits that CAARP can cover?
15/30/5.
What occupation is an allowable use under a personal auto policy for a 9,500 lb. pick-up truck?
A. Landscaping
What is NOT covered under a personal auto policy?
B. 3 only (Non-owned auto used for regular use).
What happens if an insured borrows a car from an uninsured friend and gets in an accident?
D. None of the above.
