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WorksheetsCalifornia Insurance Licensing and Market Conduct Questions
Total questions: 100
Worksheet time: 50mins
In California, who regulates insurance licensing and market conduct?
The U.S. Department of Commerce
The California Department of Insurance (CDI)
The Federal Reserve Board
The Securities and Exchange Commission
Which law established the authority of the California Insurance Commissioner?
California Administrative Code
California Insurance Code (CIC)
McCarran-Ferguson Act
Civil Code
An individual must be at least what age to apply for a California P&C license?
16
17
18
21
How often must a Property & Casualty Broker-Agent renew their license?
Every year
Every two years
A licensee must complete how many hours of continuing education (CE) per renewal period?
12 hours
24 hours
36 hours
40 hours
How many hours of ethics training are required within each renewal period?
1
2
3
5
If a licensee changes their business address, they must notify the CDI within:
10 days
15 days
20 days
30 days
A person who transacts insurance without a valid license is guilty of:
An infraction
A misdemeanor
A felony
An administrative violation only
Which of the following acts requires insurers to protect customers’ private financial information?
HIPAA
California Consumer Privacy Act (CCPA)
Gramm-Leach-Bliley Act (GLBA)
Fair Credit Reporting Act (FCRA)
The act of “transacting insurance” does not include which of the following?
Soliciting insurance
Negotiating insurance
Executing a contract of insurance
Paying a claim
A broker represents the _____ ; an agent represents the _____
Insurer ; insured
Insured ; insurer
Insurer ; broker
Public ; state
When an agent acts as both broker and agent in the same transaction, this is:
Allowed if disclosed in writing to all parties
Illegal under California law
Allowed only for surplus lines brokers
Permitted only for personal-lines policies
“Fiduciary responsibility” refers to:
Handling client money with honesty and trust
Selling multiple lines of insurance
Providing free legal advice
Disclosing all financial records
Commingling premiums with personal funds is considered:
Acceptable for small accounts
A fiduciary violation
Permitted if approved by insurer
Ethical under the CIC
Which term refers to the illegal practice of offering anything of value to induce someone to buy insurance?
Rebating
Twisting
Defamation
Misrepresentation
The unfair act of persuading someone to cancel an existing policy to purchase another is called:
Rebating
Twisting
Churning
Sliding
What is the penalty for violating California’s Unfair Practices Act?
Revocation only
Fine of up to 5,000perviolation( 10,000 if willful)
Imprisonment only
Administrative suspension for 1 year
Which document must a P&C agent provide when making a home-insurance quote?
Privacy Notice
California Residential Property Insurance Disclosure
Application Summary
Loss History Report
The California Fair Access to Insurance Requirements (FAIR) Plan was created to:
Subsidize flood insurance
Provide property coverage when standard insurers decline risk
Offer earthquake coverage
Provide low-income auto insurance
A “binder” provides:
Temporary insurance coverage until the policy is issued
Proof of permanent insurance
Extended reporting coverage
No coverage without payment
What is the California Low-Cost Automobile Insurance Program designed for?
Teen drivers
High-income individuals
Low-income drivers who need liability insurance
Unlicensed drivers
Which coverage part of a Homeowners policy protects against liability for injury to others?
Coverage A – Dwelling
Coverage B – Other Structures
Coverage C – Personal Property
Coverage E – Personal Liability
Which peril is excluded in most Homeowners policies but available through separate coverage?
Fire
Windstorm
Flood
Lightning
The California Earthquake Authority (CEA) provides what kind of coverage?
Flood
Fire
Earthquake
Tsunami
In California, the cancellation notice for nonpayment of premium on a personal-lines policy must give at least:
5 days’ notice
10 days’ notice
20 days’ notice
30 days’ notice
If a homeowners policy is cancelled for reasons other than nonpayment, how many days’ notice must be given?
10
20
30
60
Under the California Insurance Code, a “binder” cannot be valid for longer than:
30 days
60 days
90 days
120 days
Which of the following is not a type of property insurance?
Dwelling Fire
Homeowners
Commercial Auto
Business Owners Policy (BOP)
An HO-4 policy is intended for:
Homeowners
Condo owners
Renters
Landlords
A commercial policy that combines property and liability coverages for small businesses is called:
BOP (Business Owners Policy)
CGL (Commercial General Liability)
DIC (Difference in Conditions)
Umbrella Policy
California’s “Good Driver Discount” requires insurers to offer a minimum discount of:
10 %
15 %
A California auto policy must provide minimum liability limits of:
10/20/5
15/30/5
25/50/10
30/60/15
Uninsured Motorist Coverage (UIM) is designed to protect the insured against:
Damage to their own vehicle
Injury caused by an uninsured or hit-and-run driver
Weather losses
Mechanical failure
California’s Compulsory Financial Responsibility Law is found in the:
Civil Code
Vehicle Code
Insurance Code
Penal Code
Which of the following would be covered by Workers’ Compensation?
An employee injured off the job
A business owner without employees
An employee injured during work-related activities
An independent contractor
Who administers Workers’ Compensation claims in California?
Department of Labor
Workers’ Compensation Appeals Board (WCAB)
Department of Justice
CDI
A surplus lines broker may place insurance only when:
They prefer a non-admitted carrier
Coverage is not available from admitted insurers
The premium is lower
They get permission from the insured
Which agency licenses surplus lines brokers in California?
(a)
A “domestic” insurer is an insurer that:
Is chartered in California
Is licensed in another state
Is chartered in a foreign country
Operates without a license
A foreign insurer is:
Licensed outside the U.S.
Chartered in another state but authorized in California
Unauthorized
Part of the FAIR Plan
A California insurer chartered in London is classified as a(n):
Domestic insurer
Foreign insurer
Alien insurer
Surplus lines broker
Which type of 3rd-party bond guarantees faithful performance of duties?
Fidelity bond
Surety bond
Performance bond
Blanket bond
In a surety bond, the obligee is the:
Principal who promises
Surety company
Party protected by the bond
Broker
Which type of insurer is owned by its policyholders?
Mutual
Stock
Reciprocal
Lloyd’s
A Lloyd’s of London association is best described as:
(a)
What does “admitted” insurer mean?
Licensed to transact in California
Foreign only
Federal reinsurer
Unauthorized but bonded
When an insurer transfers part of its risk to another insurer, this is called:
Subrogation
Reinsurance
Coinsurance
Assignment
The California Insurance Guarantee Association (CIGA) protects policyholders when:
An insurer goes insolvent
A policy is canceled
A claim is denied
A deductible is too high
CIGA covers all the following except:
Workers’ Compensation claims
Life and health insurance
Auto liability
Homeowners policies
The maximum CIGA benefit for most covered claims is:
$100,000
$300,000
$500,000
Unlimited
Under California law, an insurance company may cancel a commercial policy for nonpayment of premium after giving at least:
5 days’ notice
10 days’ notice
20 days’ notice
30 days’ notice
The California Fair Claims Settlement Practices Regulations require insurers to acknowledge a claim within:
5 calendar days
10 calendar days
15 calendar days
21 calendar days
Once a proof of loss is submitted, an insurer must accept or deny the claim within:
10 days
20 days
If additional time is needed to investigate a claim, the insurer must notify the claimant every:
10 days
20 days
30 days
45 days
In California, the maximum deductible allowed under the California FAIR Plan policy for residential property is typically:
$500
$1,000
$2,500
$5,000
Which of the following is not considered an unfair claims practice?
Misrepresenting policy provisions
Failing to acknowledge claim letters
Prompt payment of claims
Failing to conduct reasonable investigations
A “binder” in California is valid for a maximum of:
60 days
90 days
120 days
6 months
What is the “grace period” for payment of renewal premiums on most property-casualty policies?
5 days
10 days
15 days
None
A loss ratio compares:
Premiums earned to losses paid
Expenses to premiums
Retention to reinsurance
Claims frequency to severity
An agent who fails to disclose a material fact in an insurance transaction is guilty of:
Rebating
Concealment
Twisting
Defamation
A misrepresentation occurs when an agent:
Gives false information about policy terms or benefits
Fails to file taxes
Offers a rebate
Transfers a policy without consent
An agent who makes a false statement about a competing insurer to harm its reputation commits:
Twisting
Defamation
Churning
Coercion
A person who offers to share commissions with a client violates which prohibition?
Rebating
Coercion
“Churning” in insurance refers to:
Misrepresentation to replace a policy within the same company for commission gain
Canceling policies early
Rebating practices
Creating fraudulent claims
An insurance “endorsement” is:
A separate policy
A modification or addition to an existing policy
A binder
A cancellation notice
Under a Personal Auto Policy, “Collision” coverage applies when:
A vehicle is stolen
A vehicle overturns
Damage is caused by hail
The car is vandalized
“Other-Than-Collision” coverage applies to:
Collision with another vehicle
Theft, vandalism, or fire
Liability claims
Rental car reimbursement
Which of the following is not a covered auto under a Personal Auto Policy?
A vehicle owned by the insured
A newly acquired vehicle
A friend’s car borrowed occasionally
A vehicle used as a taxi
Under California law, insurance rates must be:
Excessive, inadequate, or unfairly discriminatory
Approved by the Federal Reserve
Adequate, not excessive, and not unfairly discriminatory
Determined solely by the insurer
Proposition 103 in California primarily regulates:
Life insurance licensing
Auto and property insurance rates
Health insurance rates
Broker commissions
Under Proposition 103, auto rates must primarily consider:
A. Driving record, annual mileage, and years of experience
B. Gender, income, and education
C. Credit score only
D. Zip code only
A personal lines broker-agent may transact:
Commercial property only
Workers’ compensation only
Personal auto, homeowners, and personal liability
Surplus lines
A commercial lines broker-agent may transact:
Personal auto only
Homeowners only
Business property, liability, and commercial auto
Life insurance
When an agent collects a premium from the insured, they hold it in:
A. A general account
B. A fiduciary capacity
C. Trust for the insurer
D. Either B or C
A premium trust account must not be used for:
Depositing premiums
Paying insurer obligations
Personal or business expenses
Returning unearned premiums
The California Code defines a “premium” as:
The agent’s commission
The consideration for an insurance contract
A deductible
A filing fee
An insurance solicitor may:
Transact directly with the public
Act only on behalf of a licensed agent or broker
Represent multiple insurers
Hold fiduciary funds
In California, what must appear on all printed insurance advertisements?
A. A state license number
B. Agent’s home address
C. Company profit statement
D. Commissioner’s signature
Failure to display a license number on advertising materials may result in:
License suspension or fine
No consequence
Automatic renewal denial
Referral to federal authorities
A person whose license has been revoked must wait how long before reapplying?
6 months
1 year
The Notice of Appointment must be filed by the insurer with the CDI within:
5 days
14 days
30 days
45 days
If an agent’s appointment is terminated, the insurer must notify the CDI within:
10 days
15 days
30 days
45 days
Under California law, a binder must include:
The policy number only
The name of the insured, type of coverage, and limits
Premium only
Claims phone number
In a dwelling policy, Coverage C refers to:
Dwelling
Other Structures
Personal Property
Loss of Use
A moral hazard refers to:
Physical conditions increasing risk
Dishonesty or character traits increasing likelihood of loss
Environmental factors
Geographic location
A morale hazard is:
Intentional fraud
Careless attitude toward risk (e.g., “I’m insured”)
Poor construction quality
Increased frequency of theft
Which of the following is considered a peril?
Fire
Negligence
Slippery floors
Unsafe wiring
Under property insurance, a direct loss is:
Damage resulting directly from an insured peril
Consequential financial loss
Business interruption
Extra expense
Actual Cash Value (ACV) equals:
Replacement cost
Replacement cost minus depreciation
Market value
Stated value
A homeowners policy provides replacement cost coverage when the insured carries at least:
50% of replacement cost
60%
80%
100%
The Standard Fire Policy (California) insures against:
Fire only
Fire and lightning
Fire, lightning, and removal
All perils
The liberalization clause provides that:
The insurer can change rates without notice
Any policy broadening that benefits insureds automatically applies
The insured must reapply for benefits
Policies may be canceled more easily
Which policy condition prevents the insured from collecting twice for the same loss?
Other insurance clause
Subrogation clause
Insuring agreement
Deductible
Subrogation allows the insurer to:
Pay a claim immediately
Sue the at-fault party after paying the insured
Which clause states that the insured must protect property after a loss?
Duties after loss
Liberalization
Subrogation
Insuring agreement
An insurer’s consideration in an insurance contract is:
The premium paid
The promise to pay covered claims
The application
The deductible
Which element is not required for a valid insurance contract?
A. Offer and acceptance
B. Consideration
C. Competent parties
D. Profit motive
An aleatory contract means:
Equal value is exchanged
Performance depends on an uncertain event
Both parties are insured
It can’t be canceled
A unilateral contract means:
Both parties promise performance
Only the insurer makes a legally enforceable promise
Only the insured promises performance
Both must act at the same time
A conditional contract means:
Coverage applies regardless of conditions
The insured must meet policy conditions before the insurer’s duty arises
The insurer can cancel anytime
The policy has no limits
