USG Part 4 v2 Non CA Specific

The Ultimate Study Guide
Part Four
The Ultimate Study Guide - Part 4

Welcome
to Part 4 of the
Ultimate Study Guide!
When you fully comprehend these concepts
(and score 90% or higher on all four parts)
You will be ready to move on to the
Study Lounge Sessions.

151. Which (1) coverage letter and (2) specific section of an
endorsed PAP (Personal Auto Policy) covers physical damage to
one's vehicle resulting from a flood or earthquake?
A. “A”, Collision
B. “B”, Comprehensive
C. “C”, Collision
D. “D”, Comprehensive

151 (D) - Comprehensive:
This question tests your knowledge of coverage "D" (in a personal auto
policy’s comprehensive and collision sections):
Remember:
Comprehensive = Everything Other Than Collision
Comprehensive coverage will even cover damage to an Insured’s vehicle
caused by a flood or an earthquake.

152. In an HO3 policy, which of the following coverages comes
standard with limits up to 5% of coverage "A" and a maximum
payout of $500 for any one damaged item?
A. Ordinance or law
B. Contents Replacement
C. Lawn, trees and outdoor plants
D. Separate/Appurtenant structures

152 (B) Lawn, trees and outdoor plants:
An HO3 policy’s additional property coverage covers damage to an
Insured’s trees, shrubs, outdoor plants and lawn. The additional property
coverage is limited to no more than 5% of coverage "A" and no more
than $500 for any one tree, shrub, outdoor plant or lawn.

153. In order to cover lost wages resulting from time away from work
(following an auto accident in which he was found to be not at fault), a
third party claimant seeks "monetary retribution”.
The wages lost during the claimant’s recovery process are characteristic
of which of the following settlement types?
A. Compensation for pain and suffering.
B. Compensatory Damages.
C. Specific/Special Damages.
D. Physical Damages

153 C. Specific/Special Damages:
Specific/Special Damages awarded in a claim settlement pay the Insured
for lost wages. The awards are quantified by time (the duration of loss)
multiplied by salary.

154. The "Broad form" Commercial Package policy excludes property coverage
"A" for losses attributed to concurrent causation. Which of the following
situations describe a loss excluded by the Commercial Property “Concurrent
causation” exclusion.
A. Lightning causes a fire; however, only one peril is covered in any single
occurrence and the fire is not covered.
B. An earthquake causes a fire. Because earthquake losses are excluded, the fire will also
be excluded. In fact, all damages resulting from catastrophic
occurrences are excluded by the "Concurrent Causation Exclusion."
C. An earthquake causes a fire. Any repair expense that can be attributed to the actual
earthquake will be subtracted from the resulting fires claim settlement.
D. None of the above are examples of the "Concurrent Causation Exclusion".

154 B: An earthquake causes a fire. Because earthquake losses are excluded, the fire will
also be excluded. In fact, all damages resulting from catastrophic occurrences are
excluded by the "Concurrent Causation Exclusion."
Commercial property policies exclude losses caused by concurrent
causation whereby two perils happen in sequence to cause a loss.
In this example, damage from a fire would not be covered if the fire had
been caused by an earthquake. The loss would not be covered because
damage caused by earth movement/earthquakes are excluded.

155. An earthquake causes a fire that destroys an Insured’s residence. The home
is covered with an unendorsed H03 policy. Which of the following statements is
most accurate regarding coverage for the loss?
A. The fire is excluded, as only one peril is covered in any single occurrence.
B. Because earthquake losses are excluded, the fire also will not be covered. Damages
resulting from catastrophic occurrences are excluded by an HO3 policy’s "Concurrent
Causation Exclusion".
C. Any damage that can be attributed to the actual earthquake will be reduced from the
resulting claim settlement for fire damage.
D. An unendorsed HO3 policy does not exclude damage caused by concurrent causation;
however, catastrophic perils are excluded. Therefore, a claim settlement for the fire loss
will be reduced by an amount that reflects the structure damage caused by the earthquake.

155. An earthquake causes a fire that destroys an Insured’s residence. The home
is covered with an unendorsed H03 policy. Which of the following statements is
most accurate regarding coverage for the loss?
A. The fire is excluded, as only one peril is covered in any single occurrence.
B. Because earthquake losses are excluded, the fire also will not be covered. Damages
resulting from catastrophic occurrences are excluded by an HO3 policy’s "Concurrent
Causation Exclusion".
C. Any damage that can be attributed to the actual earthquake will be reduced from the
resulting claim settlement for fire damage.
D. An unendorsed HO3 policy does not exclude damage caused by concurrent causation;
however, catastrophic perils are excluded. Therefore, a claim settlement for the fire loss
will be reduced by an amount that reflects the structure damage caused by the
earthquake.

155 D: An unendorsed HO3 policy does not exclude damage caused by concurrent
causation; however, catastrophic perils are excluded. Therefore, a claim settlement for
the fire loss will be reduced by an amount that reflects the structure damage caused by
the earthquake.
Homeowner’s policies, such as the HO3, do not contain the Concurrent
Causation Exclusion found in Commercial Property Policies. This means that
HO3’s do cover the damage attributed to the covered peril (which is a fire in this
question). However, HO3 policies do not cover damage caused directly by
catastrophic perils such as an earthquake or a hurricane.

156. Eddie is involved in a collision caused by a negligent third party driver.
Although Eddie is not allowed to seek claim settlements from both insurers, he
may seek settlement from either his insurer or the third party’s insurer.
Which term or phrase describes the rights and limitations for Eddie’s claim?
A. First and Third Party Indemnification.
B. Notice of Subrogation.
C. Absolute Indemnity.
D. Claim settlement assignment.

156 (B) Notice of Subrogation:
Subrogation literally means, “to prevent one from collecting twice in the event of a
claim”. When an Insured signs a notice of Subrogation during a claim settlement (in
this case from the other person’s insurer), the Insured waives the right to collect
from his/her own insurer. Subrogation notices were designed to prevent an insured
from collecting from the first and third party insurers in the event of a claim.
Without Subrogation, an Insured could be compensated by two insurers and find
himself wealthier than before the loss. Therefore, Subrogation complements the
Principle of Insurance: Indemnity.

157. In accordance with the Insurance Code, the ________ Act
specifically states that it is unlawful for an insurer to alter its books and
records in any manner, or publish misleading statements regarding the
company’s financial condition with an intent to deceive the general
public.
A. Fair Credit Reporting Act.
B. Unfair Practices Act.
C. Market Conduct Reporting Act.
D. Solvency Protection Act.

157 B. Unfair Practices Act.
For questions involving The Unfair Practices Act, the key phrase/words
are: "Altered" and "Misleading statements with the intent to deceive."

158. Which of the following statements is most accurate regarding "Extra
Expense Coverage”, as it relates to Business Income protection in a
Commercial Package Policy?
A. Extra Expense coverage is automatically included with the purchase of the Business
Income coverage endorsement in a commercial package policy.
B. Extra Expense coverage is a duplicate endorsement and unnecessary for Business
Income protection.
C. Extra Expense coverage is excluded in a Business Income Coverage
Endorsement, as it is a completely separate and highly complementary
coverage endorsement.
D. None of the above are accurate.

158 C. Extra Expense coverage is excluded in a Business Income Coverage
Endorsement, as it is a completely separate and highly complementary
coverage endorsement:
• Business Income Coverage and Extra Expense Coverage are two
separate but complimentary coverages. However, Extra Expense
Coverage is not included with Business Income Coverage and therefore is
"excluded" as part of business income coverage.

159. When a policy is to be cancelled due to non-payment of
premium, the insurer must provide the insured with a written notice
of cancellation. Prior to the actual cancellation, what is the
minimum time period for the written notice?
A. 15 days
B. 25 days
C. 30 days
D. 10 days

159 (D) 10 days:
The magic number for the non-payment of a premium in a personal
auto policy (PAP) is always 10 days.
By law, the Insurer (insurance company) must give the Insured
written notice 10 days in advance of cancellation for non-payment
of premium.

160. Drew recently purchased a used Catamaran. As his agent, you
recommend that Drew purchase a __________ to be attached to his HO3
policy. This will extend personal liability, vicarious liability and medical
payments coverage to Drew and his permissive use occupants on his
scheduled watercraft.
A. Miscellaneous Type Vehicle Endorsement
B. Watercraft Endorsement
C. Inland Marine Floater
D. Ocean Marine Floater

160 (B) Watercraft Endorsement:
The Watercraft Endorsement covers scheduled watercraft. The boat is physically
written in a homeowner’s contract as a "scheduled" item. As in an HO policy,
the Watercraft Endorsement covers limited physical damage to the craft’s trailer
and extends the liability and medical payments to others.
The watercraft endorsement extends liability and med pay coverage for
watercraft that are a maximum of 26ft in length. The endorsement also covers
permissive use occupants.

161. The conditions section (the "C" in DICE) of a commercial
package policy states that an insurer has the right to inspect an
Insured’s property for all of the following reasons, except?
A. Premium Determination.
B. Underwriting policy procedure.
C. Renewal status and or rate increase/decrease.
D. Safety Regulation.

161 (D) Safety Regulation:
The Insurer has the right to inspect an Insured’s property as part of the
Conditions section in a Commercial Package policy.
For example, an agent has a right to inspect a client’s business property at
any time. The inspection helps determine the underwriting eligibility for
the business and calculate the premium to be charged.

162. Which endorsement can be added to a claims-made
commercial general liability policy form, in order to extend
coverage for losses that occur up to 75 days following policy
cancellation?
A. Commercial General Liability Umbrella Endorsement.
B. Protection and Indemnity Endorsement.
C. Supplemental Extended Reporting Period Endorsement.
D. Mini tail coverage endorsement.

162 (C) Supplemental extended reporting period endorsement:
In an unendorsed claims made Commercial General Liability policy, losses
occurring up to 60 days after termination (either by insured cancellation or non-
renewal) are automatically covered.
However, this question asks about 75 days. Therefore, the “Supplemental
Extended Reporting Period Endorsement” is needed.
Be sure to memorize this:
75 days = Supplemental Extended Reporting Period Endorsement.

163. Although different in terms of structure coverage, which
coverage letter offers the same protection in an H03, HO4, and
HO6 policy?
A. Coverage "A" causes of loss AKA perils.
B. Coverage "A" policy limits.
C. Coverage "C" policy limits.
D. Coverage "C" causes of loss AKA perils.

163 (D) Coverage "C" causes of loss AKA perils:
The trick to is question is to note that HO4 and HO6 are structurally very similar,
but the HO3 is radically different. However, these different homeowner’s forms
are similar in the perils insured by coverage "C."
The HO3, HO4 and HO6 cover the Insured’s personal property
(or "C" for Contents) coverage the same way.

164. Alanis purchased an HO5 policy for her beach house. The policy offers "All
Risk" coverage for both real and personal property. Alanis's home is insured with
the following coverage limits: "A" $500,000, "B" $50,000, "C" $250,000.
Which specific coverages do "A", "B", and "C" represent?
A. “A” Personal Property, "B" Dwelling/Structure,
“C” Appurtenant/Separate Structures.
B. “A” Dwelling/Structure, "B" Personal Property,
“C” Appurtenant/Separate Structures.
C. “A” Separate/Appurtenant Structures, "B" Dwelling/Structure,
“C” Personal Property.
D. “A” Dwelling/Structure, "B" Separate/Appurtenant Structures,
“C” Personal Property.

164. (D) "A" Dwelling/Structure, "B" Separate Appurtenant Structures,"
C" personal property:
(HO) Homeowners Section 1 (Property Coverage):
A – Dwelling/Structures (100%) $500,000
B – Appurtenant/Separate (10%) $50,000
C – Personal Property (50%) $250,000, 100% worldwide.

165. An Insured’s unendorsed HO3 policy form covers "Ordinance or Law"
claims up to a certain policy limit. Therefore, a gap in coverage can still exist -
particularly with older homes. Which of the following statements most
accurately describes this coverage gap?
A. An insured is fined for not filing for permits prior to building a detached
workshop on his property.
B. An insured’s home is damaged in a kitchen fire. Prior to reconstruction, city engineers
increase building code enforcement by 10% of coverage "A".
C. An insured’s home is damaged in a garage fire. Prior to reconstruction, city engineers
increase building code enforcement by 15% of coverage "A".
D. An insured converts his residence (located in a split residential/commercial zone) into
a hair salon, and is forced to build wheelchair access ramps - in order to comply with
ADA regulations.

20% and check with underwriting for any additionl clarification.
165 (C) An insured’s home is damaged in a garage fire. Prior to reconstruction city
engineers increase building code enforcement by 15% of coverage "A":
In order to protect an Insured from an unexpected increase in the potential reconstruction
cost of his or her home, HO Homeowners policies automatically include a “10% of
coverage “A” allotment. This allotment allows funds to cover building code upgrades that
may be required.
The 10% can cover items such as dual-paned shatter resistant windows, which are
mandatory in today’s construction codes.
However, 10% may not be sufficient for homes that were built in the 1960's and 1970's. In
this question, a 5% coverage gap exists - yikes!
If there is (as this question states) a 15% additional reconstruction cost requirement, a
coverage gap does exist.
Note to future agents: If your client’s home was built before 1985, increase the 10% to

166. All of the following causes of loss are excluded in both an
H03 and HO5 policy, except?
A. Collapse resulting from the weight of contents, animals or
persons.
B. Sewer Backup.
C. Collapse occurring during coarse of construction.
D. Earthquake.

166 (A) Collapse resulting from the weight of contents, animals or
persons:
• An HO3 policy does cover a collapse that occurs due to the
weight of contents, animals or persons.

167. Which of the following represents the “per occurrence” limit
in the following coverage sequence 15/30/5?
A. $10,000
B. $15,000
C. $30,000
D. $20,000

167 (C) $30,000:
In the coverage sequence 15/30/5. The “30” represents the per
accident (occurrence) limit of coverage available for the combined
medical expense total for all injured in an accident.

168. Xavier is involved in an accident with Yvette. Xavier incurs
$10,000 worth of damage to his Porsche Boxster. The investigation
determines that Xavier is 70% responsible for the accident. How
much will Xavier receive from his claim, in accordance with
contributory negligence rules?
A. $7,000
B. $3,000
C. $10,000
D. $0

168 (D) $0:
The trick for this question is to remember to look for “Contributory
Negligence” within the question.
When the percentage of responsibility for the accident is larger than 50%
(as the 70% in this question is larger than 50%), the payout is always
$0.00 under the Contributory Negligence Law.

169. Which of the following are covered by the Hull coverage
section contained in Joe Mikels’ Yacht owner’s policy?
A. Vicarious Liability
B. Marine legal liability
C. Boat, engine, and gasoline
D. Personal property unattached to the insured vessel

The Ultimate StudGuide - Part 4
169 (C) Boat, engine and gasoline:
Tip from Insuratest:
Remember that Hull coverage in an Ocean Marine Policy covers the
vessel, the engine and fuel.
In other words, Hull Coverage covers the Hull Enchilada!

170. What is the minimum discount awarded to “Good
Drivers”?
A. 15%.
B. 20%.
C. 25%.
D. 30%.

170 (B) 20%:
Insurers award their Insureds with a minimum 20% premium discount
for being good drivers accident and ticket free for 3 years and with no
majors.
Good Driver Qualifications:
• No accidents in the past 3 years
• No tickets in the past 3 years
• No major citations in the past 10 years

171. Angela is involved in an accident with Becky. Angela incurs
$100,000 worth of damage to her Lamborghini Murcielago. An
investigation determines that Angela is 25% responsible for the
accident. How much will Angela receive in accordance with
comparative negligence rules?
A. $25,000
B. $0
C. $100,000
D. $75,000

171. (C) $75,000:
Hint from Insuratest:
The trick is to look for the phrase "Comparative Negligence Rules" in the
question.
Remember, in Comparative Negligence questions: “Just do the Math.”
For these questions, deduct 25% (or ¼) from the $100,000 payout. In this
question, Angela is 25% responsible. Therefore, in accordance with comparative
negligence rules, Angela will receive $75,000 as the claim settlement.

172. Kim’s personal auto policy includes 25/50 bodily injury coverage "A”, plus
$5,000 medical payments coverage "B". Kim is involved in an accident where
her daughter Stacy suffers $4,000 in injuries, Stacy’s friend Holly suffers $1,000,
and Kim herself suffers $7,000. Which of the following statements is true
regarding Kim's coverage "B" limits?
A. Kim's policy will pay a total of $5,000 for all injuries sustained.
B. Kim's policy will pay Kim $5,000, Stacy $4,000, and Holly $1,000 for a total
of $10,000.
C. Kim's policy will pay Kim $7,000, Stacy $4,000 and Holly $1,000. For a total
of $12,000.
D. None of the above are true.

172. (B) Kim's policy will pay Kim $5,000, Stacy $4,000, and Holly
$1,000 for a total of $10,000.
This question involves a little math, but it is very simple. The concept behind
this question is that, unlike bodily injury coverage “A”, Med pay coverage “B” is
settled on a per-person basis with no occurrence limit.
Therefore, the only math involves adding the amount for the injuries of each
person and respecting the “ceiling” of $5,000. Kim's injuries are only covered up
to $5,000 under coverage "B”, while all of Stacy and Holly's injuries are
covered.
Simply add up $5,000 for Kim (not $7,000), plus $4,000 for Stacy and $1,000
for Holly. The correct total is $10,000. Remember, the concept of Med Pay
relates to “per person” and not “per occurrence.”

173. A Property Broker-Agent and/or Casualty Broker-Agent, licensees
must complete a total of _________ hours of continuing education, with
________ hours of ethics training being _____________________ the
continuing education renewal requirement for every _____ year license
renewal term?
A. 20 / 15 / being part of, not in addition to / 3
B. 22 / 5 / in addition to, not part of / 2
C. 24 / 3 / being part of, not in addition to / 2
D. 30 / 5 / in addition to, not part of / 5

173 C. 24 / 3 / being part of, not in addition to / 2
Junior Producers are required to complete 24 hours of continuing education
per year, for a total of 48 hours per two year renewal term. This applies only to
the first two renewal terms. Remember 3 hours of ethics education hours must
be part of not in addition to the educational renewal requirement for every 2
year term.
Failure to complete this requirement results in license termination. To reinstate a
terminated license, a person must re-enroll in the 52 hour State mandated class
and again pass the insurance exam. (Yikes!)

174. How long may an Agent/Broker & Solicitor/Producer hold an
inactive license?
A. Up to two renewal terms, as long as renewal fees are paid and continuing
education requirements are completed.
B. Up to four renewal terms, as long as renewal fees are paid and continuing
C. One renewal term, as long as renewal fees are paid and continuing education
requirements are completed.
D. An unlimited period of time, as long as renewal fees are paid and continuing

174. D. An unlimited period of time, as long as renewal fees are paid and
continuing education requirements are completed.
An Agent/Broker & Solicitor/Producer may hold an inactive license for
an unlimited period of time as long as their renewal fees are paid to date
and their Continuing Education requirements are completed.

175. On what date will an Insured automatically become eligible to
receive Medicare benefits for parts A (Hospital) and B (Physician
Services)?
A. The Insured’s 65th birthday.
B. On the first of the month containing the Insured’s 65th birthday, or the first of
the previous month (when the Insured’s birthday is on the first day of the
month.)
C. 60 days after the Insured’s 65th birthday.
D. 10 days after the Insured’s 65th birthday.

175. On what date will an Insured automatically become eligible to
receive Medicare benefits for parts A (Hospital) and B (Physician
Services)?
A. The Insured’s 65th birthday.
B. On the first of the month containing the Insured’s 65th birthday, or the first of
the previous month (when the Insured’s birthday is on the first day of the month.)
C. 60 days after the Insured’s 65th birthday.
D. 10 days after the Insured’s 65th birthday.

175 B. On the first of the month containing the Insured’s 65th birthday, or the
first of the previous month (when the Insured’s birthday is on the first day of the
month.)
An Insured is automatically enrolled in Medicare Parts A and B effective the
month they turn 65 years of age.
Please Note:
When an Insured’s birthday falls on the first day of the month, Medicare Part A
and Part B will become effective the first day of the prior month. For example, if
an Insured’s 65th birthday is March 1, 2010, his Medicare benefit effective date
would be February 1, 2010.

176. Each of the following are a qualifying event for an insured to
receive Cobra benefits, except…
A. Divorce
B. Loss of Employment for any reason other than gross misconduct
C. Termination for gross misconduct
D. Employment downgrade to part-time status (Insured no longer
qualifies for benefits)

176 C. Termination for gross misconduct
All of the other choices would have qualified an insured for cobra
benefits except for:
“Termination of employment due to gross misconduct”.

177. An agent binds coverage on an Insured’s home. Later, an
underwriter discovers that the home’s wood shake roof does not meet
the local code. When the Insured fails to replace the roof, the insurer
cancels the HO3 policy.
How many days does the insurer have to return the flat-rate cancellation
premium to their insured?
A. 10 days
B. 25 days
C. 30 days
D. 15 days

177 B. 25 days:
In accordance with the CIC (California Insurance Code), an insurer must
refund an Insured’s flat-rate, short rate or pro rate cancellation premium
within 25 days.
When the question asks about the agent refunding the premium, the answer will
be 15 days.

178. An agent binds coverage on an Insured’s vacation cabin.
Later, the insurer cancels the new DP3 policy, as the cabin’s
proximity to the nearest fire station does not meet underwriting
standards.
How many days does the agent have to return the flat-rate
cancellation premium to their insured?
A. 10 days
B. 25 days
C. 30 days
D. 15 days

178 D. 15 days:
In accordance with the Insurance Code, an agent must refund an
Insured’s flat-rate, short rate or pro rate cancellation premium
within 15 days.
When the question asks about the insurer refunding the premium,
the answer will be 25 days.

179. How is the Insurance Commissioner selected and how long
may he or she hold this position?
A. Elected by the registered voting public for a maximum of two four
year terms.
B. Elected by a board of directors for a maximum of two four year terms.
C. Elected by agents (who attend the Sacramento legislative
conference) for a maximum of two four year terms.
D. Elected by the registered voting public for a maximum of two three
year terms.

179. How is the Insurance Commissioner selected and how long
may he or she hold this position?
A. Elected by the registered voting public for a maximum of two four year
terms.
B. Elected by a board of directors for a maximum of two four year terms.
C. Elected by agents (who attend the Sacramento legislative
conference) for a maximum of two four year terms.
D. Elected by the registered voting public for a maximum of two three
year terms.

179 A. Elected by the registered voting public for a maximum of two four
year terms:
The Insurance Commissioner is elected by the registered voting public,
and can stay in office for a maximum of two four year terms.
It might help to remember that the Insurance Commissioner's term
structure is similar to that of a Governor

180. All of the following loss types would be covered by a commercial
property policy except?
A. Intangible loss
B. Direct loss
C. Indirect Loss
D. Consequential loss

180 (A) This is a trick question with the wording. Of course an intangible loss (a
loss which can not be determined or measured would not be covered). Direct
losses, indirect losses and Consequential losses are all covered.

181. Kevin’s PAP (personal auto policy) will cover his rental
car in which of the following cities?
A. Tijuana, Mexico
B. Montreal, Canada
C. Hilo, Hawaii
D. Both B and C

181 (D): Montreal, Canada and Hilo, Hawaii:
While insurers love Canada and provide rental car extension coverage
for Hawaii, Mexico is a different story:
Coverage in Mexico is only available with the purchase of a...
“Mexico Coverage Endorsement”
…with the following coverage limits:
Twenty Five miles inside the Mexican border
for a maximum of 10 days

182. The definition of “Auto” and “Mobile Equipment”, as listed in
the Commercial Auto and Commercial General Liability policies,
are…
A. the same, and eliminate overage charges and coverage gaps between the
two types of policies.
B. the same, but CGL policies exclude physical damage to mobile
equipment.
C. different by design, creating the need for both types of policies to avoid
gaps in coverage.
D. Both A and B

182. D - Both A and B:
The state includes trick questions, and this is one of them. A
similarly sneaky question may also appear in the exam.
In this case, the definitions are the same, but the coverages are
not the same.

183. The coverages of “Auto” and “Mobile Equipment” listed in
Commercial Auto and Commercial General Liability policies are…
A. the same, and eliminate overage charges and coverage gaps between
the two types of policies.
B. The terms have similar definitions, but CGL policies exclude physical
damage to mobile equipment.
C. different by design, creating the need for both types of policies to
avoid gaps in coverage.
D. Both B and C

183. D - Both B and C:
The coverages are different by design, but their definitions are the same.
Both types of policies are needed to avoid gaps in coverage.
Repeated tip from Insuratest...
Physical damage to mobile equipment is excluded in CGL policies.

184. Annual Transit policies provide which type of coverage?
(Choose the most comprehensive answer.)
A. All Risk
B. Open Peril
C. Named Peril
D. Theft

184. C - Named Peril:
The Annual Transit policy, also referred to as the “Motor Truck Cargo
form”, covers losses on a named peril basis.
Theft is one of the most commonly named perils in annual transit policies.
Therefore "Named Peril” is the most comprehensive answer.

185. Regarding coverages "A" and "B" in a Commercial Package Policy,
what effect will a vacancy term greater than 60 days have on a claim for loss
due to vandalism?
A. The vandalism loss will be excluded
B. The damages awarded will be reduced by 15%
C. The loss will be covered
D. The damages awarded will be reduced by 25%

185. A - The vandalism loss will be excluded
Once a Commercial building has been vacant for 60 consecutive days,
vandalism coverage would be excluded, unless a vacancy permit
endorsement had been purchased.
However, another question may ask about a property loss caused by another
peril. Consider a fire loss to a building that has been vacant for more than 60
consecutive days. The claim settlement would have been reduced by 15% in
that case.

186. Regarding coverages "A" and "B" in a Commercial Package
Policy, what effect will a vacancy term greater than 60 days have on
a claim for a fire loss?
A. The vandalism loss will be excluded
B. The damages awarded will be reduced by 15%
C. The loss will be covered
D. The damages awarded will be reduced by 25%

186. B - The damages awarded will be reduced by 15%
Claim settlements for property losses caused by perils other than
vandalism are reduced by 15%, if the building had been vacant for 60
or more consecutive days.
Remember:
Coverage for vandalism is excluded, unless the Insured purchases a
Vacancy Permit endorsement.

187. During Toyota’s “Christmas in July” weekend sale, Matt trades-in his
Toyota Tacoma for a new Tundra pick-up truck. Although the insurance
agency is closed, Matt’s older Tacoma is insured, and that policy includes
coverage "D" with comprehensive and collision. Will Matt's PAP extend
coverage to his new truck prior to notifying his agent? If yes, for how many
days?
A. No. Matt will need to purchase gap coverage from the dealer.
B. Yes. Because Matt’s in-force policy includes coverage "D”, his
coverage will automatically extend for 14 days.
C. Yes. Because Matt’s in-force policy includes coverage "D”, his
coverage will automatically extend for four days.
D. No. Before he can drive off of the lot, Matt needs to “quote, buy and print”
an auto policy from an online agency, such as esurance.com.

187. B - Yes. Because Matt’s in-force policy includes coverage "D”, his
When an Insured has an in-force policy with coverage "D" limits, he or she is
given an automatic extension to cover any new or used vehicle purchased, for
a maximum of 14 days.
When multiple vehicles are insured, the broadest coverage of any vehicle
listed on the policy’s declarations page will apply.

188. During Toyota’s “Christmas in July” weekend sale, Matt trades-in his
Toyota Tacoma for a new Tundra pick-up truck. Although the insurance
agency is closed, Matt’s older Tacoma is insured, and that policy excludes
coverage "D" with comprehensive and collision. Will Matt's PAP extend
coverage to his new truck prior to notifying his agent? If yes, for how many
days?
A. No. Matt will need to purchase gap coverage from the dealer.
B. Yes. Because Matt’s in-force policy includes coverage "D”, his
C. Yes. Because Matt’s in-force policy includes coverage "D”, his
coverage will automatically extend for four days.
D. No. Before he can drive off of the lot, Matt needs to “quote, buy and print”
an auto policy from an online agency, such as esurance.com.

188. C -Yes. Because Matt’s in-force policy includes coverage "D”,
his coverage will automatically extend for 4 days.
When an Insured has an in-force policy without coverage "D" limits,
he or she is given an automatic extension to cover any new or used
vehicle purchased, for a maximum of four days.
When multiple vehicles are insured, the broadest coverage of any
vehicle listed on the policy’s declarations page will apply.

189. Which of the following CGL (Commercial General Liability)
coverage forms covers both BI (Bodily Injury) & PD (Property
Damage) losses that occur and are discovered during the annual policy
term?
A. Occurrence Form
B. Loss Sustained
C. Discovery Type
D. Claims Made

189. D - Claims Made:
When you determine this is a Commercial General Liability question (vs.
Commercial Crime), you can narrow your answer choices down to two: An
Occurrence form or a Claims Made form.
The next step is to isolate the key words “Occur” and “Discovered” (or sometimes
“Retroactive date”) in the question. If these words appear, the answer will be
Claims Made.
This is tricky: If you can determine that the question tests the concept of
Commercial General Liability (and not Commercial Crime), and “occur” is the
only key word you see, the answer will always be occurrence.
Meanwhile, the occurrence form contract merely limits liability to the annual
policy term and does not extend coverage to the discovery period.

190. Which of the following CGL (Commercial General Liability)
coverage forms covers both BI (Bodily Injury) & PD (Property
Damage) losses that occur during the annual policy term?
A. Occurrence Form
B. Loss Sustained
C. Discovery Type
D. Claims Made

190. A - Occurrence Form:
If you can determine that the question tests the concept of Commercial General
Liability (and not Commercial Crime), and “occur” is the only key word you see,
the answer will always be occurrence.
Meanwhile, the occurrence form contract merely limits liability to the annual
policy term and does not extend coverage to the discovery period.
This is where it gets tricky:
When you determine this is a Commercial General Liability question (vs.
Commercial Crime), you can narrow your answer choices down to two: An
Occurrence form or a Claims Made form.
The next step is to isolate the key words “ Occur” and “Discovered” (or sometimes
“Retroactive date”) in the question. If these words appear, the answer will be
Claims Made.

191. Which of following persons has the legal capacity to place
business with a non-admitted insurer?
A. An insurance broker
B. A surplus lines broker
C. An MGA (Managing General Agent)
D. None of the above

191. B - A surplus lines broker
Surplus lines brokers have the legal capacity to place business with
non-admitted insurance carriers.
Surplus lines brokers typically insure large commercial risks such as
aircraft, locomotives, railcars and exotic animals.

192. Exclusive or Captive agents are different than Brokers for which
of the following reasons?
A. Exclusive or Captive agents can only sell one line or class of
insurance.
B. Exclusive or Captive agents can not receive renewal commissions.
C. Exclusive or Captive agents can only sell insurance for one
company.
D. Exclusive or Captive agents are salaried employees.

192. C - Exclusive or Captive agents can only sell insurance for one company.
Exclusive or Captive agency systems (such as Farmers’, State Farm and
Allstate) have appointed agents who are contracted sell their own company’s
products and no other company’s products.
On the other hand, brokers are not appointed and have the legal capacity to
place business with multiple carriers. Brokers must be licensed and bonded
with a $10,000 broker bond.

193. Paul and Erin purchase a new home with a swimming pool. Their
pool is covered as a ______________ (by coverage letter _____), and
is automatically covered as ten percent of coverage letter ______.
A. Dwelling/Structure / B / A
B. Dwelling/Structure / A / B
C. Separate/Appurtenant Structure / B / A
D. Separate/Appurtenant Structure / A / B

193. C - Separate/Appurtenant Structure / B / A
Any permanent structure not attached to a home will be covered by coverage
letter "B" as a Separate/Appurtenant structure. Coverage “B” is automatically
calculated as 10% of coverage "A".
Coverage “ B” covers pools, fences, decks and barns.
Remember: “B” for “Barns” from the ABC's document.

194. When an Insured is found guilty of submitting a fraudulent claim,
the fine is up to two times the dollar amount of fraudulent claim
submitted, or $_______ (whichever is greater). This penalty is posed
by the ___________.
A. $150,000, District Attorney
B. $100,000, Insurance Commissioner
C. $150,000, Insurer
D. $100,000, Insurer

194. C - $150,000, Insurer
When an Insured submits a fraudulent claim, the penalty is twice the
dollar amount of the fraud, or $150,000 (which ever is greater), and up
to one year in prison. The insurer will enforce this penalty as per
insuring agreement signed by the Insured at the policy’s inception.

195. Once an agent signs a notice of appointment, how many
days does the insurer have to submit the application to the
Department of Insurance?
A. 10 days
B. 25 days
C. 14 days
D. 25 days

195. C -14 days
Once an agent has signed a notice of appointment. the insurer must
submit the application to the Department of Insurance no later than
14 days following the receipt of signature.

196. How many days of advance notice must insurers give their clients
prior to non-renewal of policy?
A. 10 days
B. 25 days
C. 14 days
D. 30 days

196. D - 30 days
An insurer must give 30 days written notice prior to non-renewal. This
allows the Insured time to find an alternate carrier or make property
improvements to meet underwriting guidelines.

197. The surplus lines broker disclosure statement must be a
_______________ in at at least a _____ point font.
A. Part of the declarations / 14 point
B. Part of the insuring agreement / 12 point
C. A stand-alone document / 16 point
D. Part of the conditions / 16 point

197. C - A stand alone document / 16 point
Insureds must be provided with disclosure statements to highlight
coverage exclusions to ensure all Insureds are aware of their
coverage gaps.
The disclosure statement must be a free-standing document in a font
size of no smaller than 16 points.

198. Within how many days of the policy term’s completion must an
insurer provide a written notice of renewal ?
A. 45 days
B. 25 days
C. 30 days
D. 20 days

198. D - 20 days
For a policy renewal, the insurer must provide the insured a written
notice of no less than 20 days prior to the policy term’s completion.
Do not confuse this with a “non-renewal” situation, where the period
is 30 days.

199. Who is responsible for insuring the tenant’s improvements and
betterments made to a commercial property, and under which
coverage letter does it fall?
A. Tenant / coverage letter “B”
B. Tenant / coverage letter “A”
C. Owner / coverage letter “B”
D. Owner / coverage letter “A”

199. A - Tenant / coverage letter “B”
Tenant’s improvements and betterments are classified as business personal
property under coverage letter "B" in a (B.O.P) business owners policy.
Business owners and property owners may purchase a BOP for small to
medium sized commercial risks.
This is tricky:
The owner is responsible for the building maintenance, but the tenant is
responsible for all improvements and betterments.

200. Which one of the following choices makes up the largest
form of Tort law?
A. Libel
B. Slander
C. Crime
D. Negligence

200. D: Negligence
This question is a little tricky, so it is important to understand a little about tort law:
A tort is a wrongdoing (other than a crime or breach of contract) caused either intentionally or
by negligence. Unlike criminal prosecutions (which are brought by the government), tort
prosecutions are brought by private citizens. Unlike lawsuits for breach of contract, tort actions
are not dependent upon an agreement between the parties.
Intentional torts include: Assault, battery, trespassing, false imprisonment, invasion of privacy,
misrepresentation, and fraud. Tort injuries due to negligence occur when the responsible
person’s behavior departs from the conduct ordinarily expected of a reasonably prudent person
under the circumstances.
It is important to note that most tort injuries are due to negligence, and not intentional
wrongdoing. For the exam, it is also important to remember that a crime is separate from the
wrongdoing of a tort.

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