Personal Lines Practice Exam Flashcards

A set of 20 practice questions and answers covering personal lines insurance principles, California regulations, and policy specifics based on the lecture workbook.

What is the basic characteristic of insurance regarding the financial status of the insured after a loss?

The insured is returned to the same (or close to the same) status that existed prior to the loss, without a chance for gain or profit.

What type of coverage does an open peril policy provide?

Perils other than those specifically named as being excluded.

How is Actual Cash Value (ACV) calculated?

Replacement cost minus the depreciated amount.

What are the continuing education (CE) requirements for a personal lines broker/agent in California?

24-hours during each 2 year license term.

An individual living next to a Nuclear Power Plant is exposed to what specific type of hazard?

Physical hazard.

How does the California DOI define an admitted insurer?

An insurer that transacts insurance according to the laws of the state of California.

What is the insurance industry's definition of "Risk"?

The uncertainty of financial loss.

The concept of "pure risk" involves the possibility of what outcome?

A loss only.

Which type of insurance company is owned by stockholders who share in the profits?

Stock insurance companies.

What term describes a cancellation where the insurer keeps earned premiums plus an amount for overhead expenses at the request of the insured?

The short rate type of cancellation.

Under a homeowners policy Coverage "C", the sublimits for jewelry, furs, and watches apply only if the loss is caused by what?

Theft.

Which homeowners policy form (HO) is specifically recommended for condominium owners?

HO-6 contract.

What type of homeowners policy should be purchased by a tenant renting a 2,500 sq. foot home?

HO-4.

What are the limitations of the Mexico coverage endorsement in a California Personal Auto Policy (PAP)?

It is liability coverage, on an excess basis, for losses within 25-miles of the California/Mexico International border.

According to the personal auto policy (PAP), how is "collision" defined?

Hitting any other vehicle or object with the insured vehicle, or the upset of the insured vehicle.

What are the territorial limits of a personal auto policy?

The United States, its territories and possessions, Puerto Rico, and Canada.

Which coverage part of a PAP covers damage to an insured vehicle resulting from an earthquake?

Other-than-collision coverage.

What does an Umbrella policy provide?

Excess liability coverage, on a broader basis, above an underlying primary policy.

What specific risks does the California FAIR Plan provide coverage for?

Homes located in hazardous brush or high risk urban areas.

When does the license of a fire and casualty broker/agent become inactive?

When the broker/agent has no appointment with any insurance company, but licensing renewal fees are paid and CE requirements are met.