State: California | Category: Property and Casualty Insurance | All tests in this Category:
Practice Test 1 Practice Test 21. Vocational rehabilitation benefits are designed to:
Vocational rehabilitation assists an injured worker in returning to suitable employment, often through retraining or job placement.
2. Piracy coverage in standard Ocean Marine cargo forms is generally:
Piracy is typically encompassed within the standard perils of the sea in many Ocean Marine cargo forms, though endorsements can modify coverage.
3. Disputes about the amount of loss are typically resolved through which mechanism?
The appraisal process is designed to resolve disagreements about loss amounts via appraisers and an umpire.
4. Which power allows the California Insurance Commissioner to immediately halt unlicensed activity or violations?
The Commissioner can issue cease and desist orders to stop unlicensed activity or violations; it may accompany further enforcement actions under the Insurance Code.
5. Which statement correctly contrasts replacement cost (RC) and actual cash value (ACV) valuation?
Replacement cost is the current cost to replace the property with new, without subtracting depreciation. Actual cash value equals replacement cost minus depreciation.
6. Estoppel in an insurance contract refers to:
Estoppel prevents a party from asserting a right if their prior conduct or statements have led another party to rely on them in a manner that would be unjust to retract.
7. Salvage is used in loss adjustment to:
Salvage allows the insurer to recover some value from damaged property, reducing the net amount paid for the loss.
8. Property Damage (PD) liability coverage pays for damage to:
PD liability covers damage to third-party property caused by an at-fault insured, not damage to the insured's own property or personal belongings.
9. If a building has an 80% coinsurance requirement and replacement cost is $200,000, but the insured carries $120,000, a loss of $20,000 occurs. How much will be paid under coinsurance?
Required amount = 0.80 × 200,000 = 160,000. Payout = (120,000 / 160,000) × 20,000 = 0.75 × 20,000 = 15,000.
10. Money and securities are typically:
Money and securities are generally excluded from standard property coverage and require a separate endorsement or form to be covered.
11. General Average refers to which of the following concepts in marine risk?
General Average is a deliberate sacrifice to save the voyage, and the resulting costs are shared by all parties with an insurable interest.
12. What does a 'prior acts' endorsement address in a claims-made policy?
A 'prior acts' endorsement aligns with the retroactive date. It ensures coverage for acts occurring after that date that are first claimed during the policy period, preventing gaps when switching carriers.
13. Which clause requires the insurer to obtain the insured's consent before accepting a settlement that could impose obligations on the insured?
Consent to settle provisions protect the insured from settlements that may admit fault or impose obligations beyond coverage. Without consent, the insurer may not settle a claim on behalf of the insured.
14. Which of the following is a named peril commonly covered for personal property under HO-2?
Theft is a named peril that is typically covered for personal property under HO-2; floods and earthquakes are usually excluded unless endorsed.
15. Which statement about insurable interest is correct?
For property insurance, insurable interest must generally exist at the time of loss. For life insurance, insurable interest must exist at policy inception. This prevents wagering on losses.
16. Fire Department Service Charge coverage within a Commercial Property policy:
Fire Department Service Charge provides coverage for the cost of fire department services, up to a specified limit, when responding to a covered loss at the insured location.
17. Which statement best describes the indemnity principle in property & casualty insurance?
Indemnity aims to restore the insured to the financial position they had before the loss. It should not allow profit or windfalls beyond the actual loss.
18. Who bears the burden of proving the amount of loss in a typical property claim?
The insured generally has the primary burden to prove the loss amount with documentation, while the insurer investigates and assesses liability.
19. Direct Physical Loss in a Commercial Property policy means:
Direct physical loss refers to physical damage or destruction to covered property, as opposed to intangible or purely financial losses.
20. Supplementary Payments under CGL typically include which of the following?
Supplementary Payments cover defense costs and certain bonds; they are paid in addition to the policy limits.
21. A fidelity bond primarily covers losses caused by:
Fidelity bonds protect employers from losses due to employee dishonesty, such as theft or fraud.
22. Replacement Cost vs Actual Cash Value in a Commercial Property policy is generally:
Most CP policies default to Actual Cash Value unless Replacement Cost coverage is added by endorsement; RC coverage is common for buildings and can be extended to personal property with the right endorsements.
23. Products-Completed Operations Hazard provides coverage for claims arising from which of the following?
This hazard covers injuries or damages arising from products or completed work after the product has been sold or work completed.
24. The peril described as 'weight of ice, snow, or sleet' is typically included as a covered peril for which property under most homeowners forms?
Weight of ice, snow, or sleet on roofs is a peril commonly listed for the dwelling as part of many homeowners forms.
25. Term length and selection method for the California Insurance Commissioner is:
The California Insurance Commissioner is an elected official serving a four-year term; the position is not appointed by the Governor.