A monoline policy:
Is a property that is written to cover property only
Is any insurance written as a single line policy
Is a policy that covers only lines of insurance which cannot be part of package policies
There is no such thing
A risk is:
A peril
Certainty of loss
Proximate cause
Uncertainty of loss
A pure risk involves a chance of:
Gain
Loss
Both A&B
Neither A&B
A risk management technique that eliminates a loss exposure and reduces the chance of loss to zero is:
Loss prevention
Retention
Loss reduction
Avoidance
When suffering is a covered loss, an insured individual should do which of the following?
Send a list of items damaged stating the quantity and receipts of purchase
Submit to an interview with the insurers representative without any other person present
Notify the police if there is a theft loss
All of the above
How many days does an insurer hve to return unearned premiums to an insured?
10 days
15 days
25 days
30 days
The amount to replace property with like property of the same quality and construction is the:
Replacement cost
Actual cash value (ACV)
Market value
Stated value
What is actual cash value (ACV)?
ACV = replacement cost + depreciation
ACV = market value - depreciation
ACV = replacement cost - depreciation
ACV = stated cost - depreciation
If an individual or a family suffers a loss due to death or disability of a member, what type of loss is it?
Personal loss
Personnel loss
Human loss
Needs loss
Insurance has a number of characteristics. Which of the following is not one of them?
If there is ambiguous language i an insurance contract, it will be resolved in the favor of the insured
Parties to a contract should be able to rely upon the honest representations of the other party
It involves a catastrophic exposure
The insurer is bound to perform under the contract
Which of the following is an example of loss retention?
Buying health insurance
Not purchasing collision insurance on your auto
Placing a watercraft endorsement on your homeowner's policy
Removing dried brush from your house's premises
If it is proven that another person's negligence contributed to an injury, what gives the injured party the right to seek compensation?
Case law
Contract law
Criminal law
Tort law
Which of the following statements is true regarding compensatory damages?
General damages have specific economic value
Punitive damages are awarded to a person for actual pain and suffering
Special damages do not have a specific economic value
There is usually no direct correlation between the amount of general and special damages awarded to the victim
Liability losses are referred to as:
First party losses
Second party losses
Third party losses
None of the above
In an insurance contract, D. I. C. E. refers to:
Declarations, insurable interest, conditions, and exclusions
Declarations, insurable interest, conditions, and endorsements
Declarations, insuring clause, conditions and endorsements
Declarations, insuring clause, conditions, and exclusions
An insured purchased new furniture for $6,000. At the time of a fire loss, it had depreciated $2,000. At current rates, the same furniture will cost $7,000 to replace. The actual cash value of the destroyed furniture is:
$7,000
$8,000
$6,000
$5,000
When an insurer cancels a policy and only retains earned premium, this is:
Flat cancellation
Short rate cancellation
Pro-rata cancellation
Continuous cancellation
An insurers loss reserve for a claim is:
Equal to claims paid divided by earned premium reserve, not including loss adjustment expense
The maximum amount the insurer wil have to pay to close the claim
The exact amount the insurer will have to pay to close the claim
An estimate of the amount that the insurer will pay
What is the process called whereby insurers decide which customers to insure and what coverage to offer?
Adverse selection
Rate making
Marketing
Underwriting
A reduction in the value of property that results immediately from damage to the property is known as:
Additional living expense
Consequential loss
Extra expense
Direct loss
The process whereby an insured suffers a loss and is paid to return him to his prior financial condition is:
Insurable interest
Pure risk
Indemnity
Ceding
What is a hazard?
Anything that increases the chance of loss
A broken promise
Any possibility of financial loss
A peril or loss of property
A policy may not be transferred to another without:
Oral consent of the insured
Oral consent of the insurer
Written consent of the insured
Written consent of the insurer
Which of the following is a true statement about insurance?
It is a method of transferring risk
It is for the low income/high risk persons
It is sold by government officials
It is a method of retention
Grouping people by similar characteristics is:
Unfair discrimination
Prejudice
Fair discrimination
A basic principle of insurance
A peril is defined as:
A cause of loss
Increases the chance of loss
A hazard
An accident
The main purpose of insurance is to:
Transfer the risk
Reduce perils
Avoid hazards
Reduce the risk
The insured should be compensated for his loss, returning him to the condition that existed prior to the loss. The is the principle of indemnity. Which of the following is correct?
It is based on the law of small numbers
It is a basic principle of insurance
It is based on the law of supply and demand
It involves the principle of adhesion
Buying life insurance
Placing a motorcycle endorsement on your homeowners policy
Which of the following is an example of reducing risk probability?
Buying OTC
Reducing premium payments
Increasing deductibles
Putting a fence around a pool
Which of the following is not a benefit of insurances?
It can be a source of investment funds
It transfers loss
It reduces risk exposure
It reduces out of pocket expenses
A house located next to a dynamite plant is considered what kind of hazard?
Moral
Legal
Physical
Liability
Where is a policy personalized to say who is covered, what is covered, limit of insurance, and policy period?
Insuring clause
Declarations
Conditions
Endorsements
An insured suffers a loss caused by a third party. How will the insured's insurance company handle the claim?
The company will not cover the loss
The company will have to seek reimbursement himself from the third party
The insurer will cover a portion of the loss
The insurer will pay the insured for a covered loss and seek reimbursement from the party at fault with the cooperation of the insured
The insurer's right to recover its claim payment to an insured from a negligent third party is known as:
Arbitration
Liberalization
Subrogation
Assignment
If an insured voluntarily relinquishes his rights, this is an example of:
Estoppel
Coercion
Waiver
Warranty
Actual cash value
When an insurance policy is cancelled by the insured, and the company retains premium for the protection provided plus expenses, cancellation is said to be on a:
Flat basis
Short rate basis
Pro rata basis
Fixed basis
An insurer cancels a policy and returns the entire premium. This is:
Short rate
Pro rata
No fault
How many days does an agent have to return unearned premium to an insured?
How many days does an insurance company have to give unearned premium back to an agent?
Insurers may purchase reinsurance for a variety of reasons. Which of the following is not a good example of the use of reinsurance? Insurer purchases reinsurance:
Only on the below average business submitted to them, keeping the good business for themselves.
To avoid capacity problems by reducing the amount of unearned premium
To more safely insure an exceptionally large account
Which insurance company is owned and formed for the benefit of its members?
Llloyds of London
A mutual insurer
Demutualization
Captive companies
What effect does increasing a deductible have on a policy?
Increases the premium payment
Reduces the premium payment
Increases likelihood of getting insurance
Increases insurance policy benefits
The method in which insurance companies receive approval from the DOI before using certain rates:
Prior approval
Reinsurance
Coinsurance
Which of the following is not a method for risk management?
Transfer
Variance
The system in which insurers determine who to insure and that rates to charge is known as
Insurance
Insurance companies transfer part of a particularly large risk through what process:
Insurance contracts are between how many parties?
4
3
1
2
The total amount an insurance company is liable to pay out is:
Policy total
Limit of insurance
Aggregate limit
A speculative risk, like a pure risk, is insurable:
To qualify as an insurable risk:
Losses must be definable
Losses must be accidental
Losses must be enough to cause hardship to the insured
Aleatory in nature refers to:
Ambiguous language
Enforeable
Unequal exchange by two parties
Waiver of a promise
Because insurance is a contract of adhesion, ambiguous language in a contract will show which party at fault:
Insurance company
MGA
Insured
Agent
Failure to disclose material fact is:
Concealment
Fraud
Estoppels
Misrepresentation, deceit, or trickery can be defined as:
Materiality
False warrant
Conditional concealment
Provisions that deny coverage for certain perils:
Exclusions
The insuring agreement contains all of the following except:
Perils insured against
Persons/property covered
Location
Assignment/transfer cannot be made without written consent from:
Additional insured
First named insured
Insurer
A deductible is the portion of a loss retained by the insured before the insurer will cover a claim.
To what does lapse refer?
The insurer decides not to continue insuring a customer
The insured voluntarily cancels their coverage
Termination due to non-payment
A policy that is cancelled upon its effective date
Insureds must comply with certain provisions when submitting a claim. These include:
Prompt notice of loss or damage
Submitting claims
Notifying the police if theft is involved
All answers are correct
Coinsurance refers to the amount of insurance an insured must carry in order to be fully insured
What is unoccupied?
There are people living in the building but no furniture
There may be furniture but no people in a building
No people and no furniture
The same as vacant
Which of the following must be on ALL insurance policies?
Parties of the contract
Term of the policy
To what does insurable interest mean?
A loss to the property would have some financial loss for the person
A loss that the insured would like to cover through insurance
Property taken over by an insurer to reduce loss
A term that refers to a situation in which two or more perils cause a loss
Peril
Open peril
Concurrent causation
A consequential loss is not directly caused by a peril but assumed as a result of a direct loss
In order for negligence to exist, which of the following must be present?
Breach of the duty to act
Occurrence of injury or damage
Duty to act
Compensatory damages in a hearing will generally determine the amount of punitive damages
An event that results in a loss to an insured at a definite time and place or due to repeated exposure can be defined as
Negligence
Occurrence
Accident
Through what kind of liability can a person be held responsible for the actions of others. IE: negligent acts of a child or employee
Strict
Absolute
Vicarious
Intentional
An insurer organized in a state outside the state of California can be referred to as what kind of insurer?
Domestic
Foreign
Alien
Admitted
What department is set up in order to regulate insurance rates?
DOI
The FAIR plan
CAARP
ISO
A person that solicits, negotiates and effects contracts on behalf of an insurer is a:
Agent (Producer)
Captive agent
Solicitor
Independent agent
A person that sells insurance for only one company is:
Broker
A fiduciary must hold funds and property in a position of trust. They must also:
Act in a prudent fashion
Act as an agent
Commingle money
Misappropriate funds
An illegal practice which occurs when an agent mixes personal funds with the insured's or insurer's funds:
Theft
Stealing
Commingling
Robbery
An incorporated insurer owned by its policy holders and formed for their benefit is called
Stock insurer
Mutual insurer
Independent Insurer
Broker insurer
A way for insurers to avoid having to pay for large or catastrophic losses
Claims handling
