Property/Casualty Exam 1 Part 1

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1) John Davis owns a personal auto policy and a homeowners policy. On his way home from the T.V. repair shop he gets involved in an accident. In the course of the accident his T.V. is destroyed. The T.V. is to be covered by which of the following:

a) homeowners policy

b) auto policy

c) neither policy

d) both policies will pay in proportion to the amount carried


2) Of the following situations which may be called a "gap" in coverage caused by the ordinance or code exclusion in a homeowners policy?

a) damage as a result of fire causing extra cost due to present zoning laws

b) municipal code requires dogs to be on a leash and the insured’s dog bites

someone while not on a leash

c) ordinance requires swimming pools to be fenced.

d) all of the above


3) Of the following which is covered under a standard HO-3?

a) damage to a table because of removal from the house during a fire

b) insured’s auto stolen from a locked garage

c) insured’s trailer is damaged while being towed by the family car

d) none of the above


4) In reference to coverage C of a HO policy, sublimits pertain to jewelry and furs regardless of the cause.

a) true b) false


5) Scheduled personal property floaters are to provide which type of coverage?

a) open peril coverage

b) multi-peril coverage

c) all risk coverage

d) all of the above


6) Condomimium owners should use which type of coverage?

a) HO-1 b) HO-2 c) HO-3 d) HO-4

7) An HO-3 can be used to provide coverage for which?

a) mobile home b) condo c) single family Detached d) apt.


8) Is there liability coverage provided in a Mobilehome policy?

a) true b) false


9) While on a trip in France, an insured has a fire in the hotel room and has the following losses: luggage, watches, wedding rings, clothing for a total of $40,000. How much will be covered under the HO-4 contract (no deductible) assuming the property has a factor of depreciation of 25%?

a) $40,000 b) $30,000 c) no coverage d) $10,000


10) Of the following HO forms; which is usually refered to as the renters policy?

a) HO-8 b) HO-5 c) HO-4 d) none of these


11) According to HO policy designs, small losses are paid on the basis of replacement cost even in the event that replacement cost limits are not satisfied:

a) true b) false


12) In property contracts the insured’s monetary recovery is limited to the amount of the insured’s insurable interest in the property.

a) true b) false


13) All ofthe following are considered logical reasons an insured would have a dwelling policy instead of an HO policy, except:

a) insured rejects liability coverage

b) insured desires broad coverage

c) property fails to meet homeowner contract elgibility requirements

d) none of the above


14) Under which of the following coverage forms would damage done by burglars not be covered?

a) basic b) broad c) special d) all of these


15) Do dwelling forms cover property away from the premises?

a) no coverage b) up to 10% of limit c) 100% d) 50% of limit


16) Which of the following dwelling forms provides the broadest coverage?

a) special b) deluxe c) superior d) standard plus


17) Furnishings that cost $10,000 seven years ago is destroyed by fire. It has depreciated by $4,000 and in today’s dollars would cost $18,000 to replace. Figure out the actual cash value of the destroyed furniture.

a) $18,000 b) $6,000 c) $8,000 d) $14,000


18) Which of the following would be a good example of a physical hazard?

a) insured resides next to a fireworks manufacturer

b) insured breaks a window on his car with intent

c) insured fails to call the local fire department when insured’s house burns

d) all of the above


19) "All risk" and "open peril" policies:

a) provides coverage for any type of peril

b) provides coverage for all perils that are not specifically excluded

c) provides coverage for just the stated perils

d) none of the above


20) David Farmer just received his original insurance license January of 1999. He sells among other things LTC contracts. During the year of 1999, David must complete how many continuing education hours for LTC?

a) 25 b) 30 c) 8 d) none


21) It is permissable for agents to convey to their clients that their contracts and insurance companies are insured for insolvency?

a) true b) false


22) Edward R. Bussy has guaranteed dividends to his client as a result of his companies solid financial status and great reputation. This practice is considered to be an O.K. practice under CIC 1456.

a) true b) false


23) Anyone licensed in insurance (life agent/property-casualty) after Jan. 1,1992 must complete how many hours of continuing education?

a) 30 hours every two years

b) 25 hours every two years

c) 30 hours every year for each of the first four years

d) 25 hours for each of the first four years then 30 hours every two year period


24) It is considered a violation of the insurance code should anyone in the business of financing purchases of real/personal property to require one to place insurance coverage through a specific agent or broker.

a) true b) false


25) Of the following which action would enable a licensed person to act in the most ethical manner?

a) to always put the needs of the client in a superior position

b) to always put the needs of the insurer first

c) to put the agent’s needs in a superior position

d) to put the needs of the beneficiaries first


26) In considering the concept of "concealment" as it pertains to insurance; which of the following descriptions would be most accurate?

a) once a policy is issued, regardless of the weight of the concealment, the insurer is bound to execute and pay the claim

b) when the facts (that were held from the insurer, on purpose) are deemed to be material upon the risks insured against can the insurer rescind/cancel coverage

c) when the policy issued conflicts with the material representations as set forth in the application to the insurer

d) none of the above are correct


27) The California Insurance Code sets forth certain standards for names which may be used by licensees. Choose the most appropriate:

a) Jon Von Soot Insurance Company

b) Jon Von Soot and Company

c) Jon Von Soot, CPCU

d) none of the above are acceptable


28) Of the following lines of insurance; which are permitted to be marketed by a licensed Property/Casualty Broker-Agent?

a) Liability

b) disability

c) auto

d) property

Select the most correct:

a) a,c,d only

b) a,d only

c) all lines listed above

d) c,d only


29) When would a new licensee (P/C) have the authority to transact insurance?

a) the date the Dept. of Insurance approves the apppointment

b) the date the agent receives a copy of his/her approval application

c) the date the notice of appointment is signed by the insurer

d) the date the licensee passes the state exam


30) With regards to representations, concealment and materiality:

a) these do not influence the parties to the contract

b) has a profound effect upon property/casualty contracts but not life contracts

c) determined by the influence of the facts upon each party’s estimation of the disadvantages of the contractual agreement established

d) all of the above


31) The California Insurance Code references to the subjects of the principles and practices of:

a) any U.S. state

b) only California

c) California and residents of reciprocating jurisdictions

d) some Federal adherences and regulations only


32) Robert and Tiffany are licensed agents in the state. They have been given a favorable lease on new office space for their insurance firm, "Tiffany and Robert’s Insurance Agency". The CIC requires that they file a notice of "partnership" and file with the Department of Corporations." In addition they must provide worker’s compensation insurance to their 5 employees.

a) true b) false


33) It is ethical for an agent to require that all questions from clients be written.

a) true b) false


34) Insurance companies that obtain reinsurance agreements from "reinsurers" relinquish their direct financial obligation to the insureds.

a) true b) false


35) Which of the following describes the idea that an insured’s loss be restored to the approximate fiscal position the insured occupied before the covered loss to place.

a) principle of large numbers

b) principle of irrigation

c) principle of indemnification

d) principle of reciprocity


36) An insurance company that is actually owned by it’s policyowners is often referred to as which of the following?

a) reinsurer

b) exchange syndicate

c) mutual

d) interexchange


37) Pure or Ideal risk is best descibed by:

a) only the chance of loss exists; uncertainty

b) only the possibility of loss and gain exist separately; severability concept

c) only the chance of loss exists if premiums are paid

d) none of the above


38) Requiring the "birthplace" of an applicant on an application is not prohibited by the CIC as long as the information is used only to market non-insurance products.

a) true b) false


39) Which of the following descibes an "inactive" insurance agent’s license?

a) license was terminated due to nonrenewal procedures

b) license was requested past two year renewal period

c) renewal is in compliance but the appointment has been terminated

d) license was renewed without proper paperwork signed


40) In California it is lawful for an insurer to charge a different rate or refuse insurance for those that are physically handicapped if the insurer can justify the rate from statisical data?

a) true b) false


41) Is it considered to be an unfair claims practice for an insurer to finalize/settle a claim amount for less than a reasonable amount based upon references to the insurance contract?

a) true b) false


42) Agents can prosper by using language terminology that is legalistic and sophisticated so as to impress the client?

a) true b) false


43) The best description of risk would be:

a) something that causes a loss to happen

b) the chance that something may happen to cause a loss

c) something that increases the possibility of loss

d) the likelihood that a loss will occur more than once


44) California uses which of the following systems for rate approval:

a) prior approval

b) file and use

c) combination of prior approval/file and use

d) experience projections based upon losses in the industry


45) For a risk to be classified as pure or ideal it includes all of the following except:

a) portion to a large homogeneous group

b) loss is accidental

c) loss is calculable in monetary terms

d) little chance or zero possibility of occuring


46) Exclusive or captive agents generally:

a) contact prospects by referral only

b) are experts on one class of insurance

c) place business with exclusive insurers

d) typically represent one insurer


47) The concept of insurance is to:

a) emphasize risk management techniques

b) transfers the element of risk through contracts

c) is a type of risk

d) provides coverage for speculative risk


48) The selection of relatively small deductibles by insureds causes:

a) premiums to be unstable

b) small claim filings to rise

c) cheaper rates for all

d) all of the above


49) Insurers loss reserve is the estimatof liability for open claims?

a) true b) false


50) Short rate cancellation can best be described as:

a) all unused/unearned premium is returned

b) all unused/unearned premium is returned less commissions

c) all earned premium is kept by the insurer plus incurred expenses

d) all earned premium is kept by the insurer less deposit by the insured


Answers to Part 1

1) a 2) a 3) a 4) b 5) d 6) d 7) c 8) b 9) b 10) c 11) b 12) a 13) b 14) a 15) b 16) a 17)d

18) a 19) b 20) c 21) b 22) b 23) d 24)a 25) a 26)b 27) c 28)c 29) c 30) c 31) b 32) b

33) b 34)b 35) c 36) c 37) a 38) b 39) c 40) b 41) a 42) d 43) b 44) a 45) d 46) d 47) b

48) b 49) a 50) c


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