PERSONAL LINES-CALIFORNIA INSURANCE QUESTIONS
WITH CORRECT ANSWERS 2025/2026
Insurance - CORRECT ANSWER -Insurer, entity, principal, underwriter, carrier or company. Uses
"we, us, and our". Insurer is the 2nd party to contract
Person receiving benefits - CORRECT ANSWER -Insured, policyholder, owner. Named insured
uses "you and your". Insured is first parry on contract.
Claimant - CORRECT ANSWER -Person seeking recovery. In property=insured. In liability=3rd
party
Falsification provision - CORRECT ANSWER -Warning found on claim forms that those filing a
false or fraudulent claim are subject to fines and imprionment
CIC - CORRECT ANSWER -California Insurance Code- state insurance laws proposed, written,
enacted and changed only by state Legislatures. Commissioner just enforces
CCR - CORRECT ANSWER -California Code of Regulations- rules and procedures written by the
commissioner to carry out the intent of the code. Commissioner writes and changes the
regulations.
Pooling - CORRECT ANSWER -Sharing or spreading the risk
Department of Insurance/California Department of Insurance - CORRECT ANSWER -DOI and CDI
Rescind - CORRECT ANSWER -Voiding or revoking a contract back to its inception date
(beginning) as though it never existed (flat cancellation). Can ONLY be done for material
misrepresentation, material concealment, breach of warranty or fraud
,CIC definition of Insurance - CORRECT ANSWER -Insurance is a contract (written) in which one
undertakes to indemnify (restore/whole) another against loss, damage or liability arising from a
contingent or unknown event (may or may not happen)
Layman definition of Insurance - CORRECT ANSWER -Substitution/exchange of a small certain
loss (premium) for a large uncertain loss (claim)
Conceptual definition of Insurance - CORRECT ANSWER -Social device transferring risk from
individuals to a group
Insurance Contract - CORRECT ANSWER -Policy, written instrument, indemnity agreement and
legal document
Benefits of insurance - CORRECT ANSWER -Device that allows individuals and society to recover
from unexpected loss; secure credit; satisfy legal requirements; source of investment income;
reduce social burdens; promotes loss control; reduces anxiety, uncertainty. Cost benefits
increases moral and morale hazards (dishonesty/lack of care)
Loss - CORRECT ANSWER -Any reduction in quantity, quality or value of something. Can mean
death, bodily injury, property damage, incurred expenses, reduction in quality of life or an
obligation to pay for any such loss
Property insurance loss - CORRECT ANSWER -Direct to tangible property or indirect
Liability insurance loss - CORRECT ANSWER -Obligation to pay for bodily injury, property
damage, personal injury, advertising injury. Harm caused by the insured to others
Loss exposure - CORRECT ANSWER -Possibility of loss. There are 3 dimensions of loss exposure.
Type of value exposed to loss, the peril causing loss, the extent of the potential financial
consequences. Normally written as Property, Liability or Human/Personnel
, Property Loss Exposure - CORRECT ANSWER -Damage to the insureds property
Liability Loss Exposure - CORRECT ANSWER -Harm caused to others/another
Personal Loss Exposure - CORRECT ANSWER -Death, retirement, unemployment, disability
Human Loss Exposure - CORRECT ANSWER -Considered personal unless they give work scenario
(personnel)
Financial Loss - CORRECT ANSWER -IS NOT a loss exposure, it is a consequence of all of the
exposures
Personnel Loss Exposure - CORRECT ANSWER -Death, resignation, termination, disability
Peril - CORRECT ANSWER -Cause of loss or reason for loss
Named Peril - CORRECT ANSWER -Fire, lightening, etc. the perils are named/listed/stated in the
contract. Not listed claim is not paid. The burden is on the insured to prove the damage was
caused by listed peril. (Basic form: dp1, ho8 Broad Form: dp2, ho2, ho4, ho6)
Open Peril/All Risk - CORRECT ANSWER -Lists exclusions and does not name/state/list the perils
but states it covers all or any peril except those specifically excluded. This type of policy shifts
the burden of proof to the insurer (company). The insurer must pay unless they can show the
cause of loss was an exclusion under the policy/contract. (Special: dp3, ho3 Comprehensive:
ho5 Inland/Ocean Marine)
Hazard - CORRECT ANSWER -(Key phrases: increases or leads to) Chance/likelihood/severity of
loss. Types of Hazards: Moral, Morale, Physical, and Court
WITH CORRECT ANSWERS 2025/2026
Insurance - CORRECT ANSWER -Insurer, entity, principal, underwriter, carrier or company. Uses
"we, us, and our". Insurer is the 2nd party to contract
Person receiving benefits - CORRECT ANSWER -Insured, policyholder, owner. Named insured
uses "you and your". Insured is first parry on contract.
Claimant - CORRECT ANSWER -Person seeking recovery. In property=insured. In liability=3rd
party
Falsification provision - CORRECT ANSWER -Warning found on claim forms that those filing a
false or fraudulent claim are subject to fines and imprionment
CIC - CORRECT ANSWER -California Insurance Code- state insurance laws proposed, written,
enacted and changed only by state Legislatures. Commissioner just enforces
CCR - CORRECT ANSWER -California Code of Regulations- rules and procedures written by the
commissioner to carry out the intent of the code. Commissioner writes and changes the
regulations.
Pooling - CORRECT ANSWER -Sharing or spreading the risk
Department of Insurance/California Department of Insurance - CORRECT ANSWER -DOI and CDI
Rescind - CORRECT ANSWER -Voiding or revoking a contract back to its inception date
(beginning) as though it never existed (flat cancellation). Can ONLY be done for material
misrepresentation, material concealment, breach of warranty or fraud
,CIC definition of Insurance - CORRECT ANSWER -Insurance is a contract (written) in which one
undertakes to indemnify (restore/whole) another against loss, damage or liability arising from a
contingent or unknown event (may or may not happen)
Layman definition of Insurance - CORRECT ANSWER -Substitution/exchange of a small certain
loss (premium) for a large uncertain loss (claim)
Conceptual definition of Insurance - CORRECT ANSWER -Social device transferring risk from
individuals to a group
Insurance Contract - CORRECT ANSWER -Policy, written instrument, indemnity agreement and
legal document
Benefits of insurance - CORRECT ANSWER -Device that allows individuals and society to recover
from unexpected loss; secure credit; satisfy legal requirements; source of investment income;
reduce social burdens; promotes loss control; reduces anxiety, uncertainty. Cost benefits
increases moral and morale hazards (dishonesty/lack of care)
Loss - CORRECT ANSWER -Any reduction in quantity, quality or value of something. Can mean
death, bodily injury, property damage, incurred expenses, reduction in quality of life or an
obligation to pay for any such loss
Property insurance loss - CORRECT ANSWER -Direct to tangible property or indirect
Liability insurance loss - CORRECT ANSWER -Obligation to pay for bodily injury, property
damage, personal injury, advertising injury. Harm caused by the insured to others
Loss exposure - CORRECT ANSWER -Possibility of loss. There are 3 dimensions of loss exposure.
Type of value exposed to loss, the peril causing loss, the extent of the potential financial
consequences. Normally written as Property, Liability or Human/Personnel
, Property Loss Exposure - CORRECT ANSWER -Damage to the insureds property
Liability Loss Exposure - CORRECT ANSWER -Harm caused to others/another
Personal Loss Exposure - CORRECT ANSWER -Death, retirement, unemployment, disability
Human Loss Exposure - CORRECT ANSWER -Considered personal unless they give work scenario
(personnel)
Financial Loss - CORRECT ANSWER -IS NOT a loss exposure, it is a consequence of all of the
exposures
Personnel Loss Exposure - CORRECT ANSWER -Death, resignation, termination, disability
Peril - CORRECT ANSWER -Cause of loss or reason for loss
Named Peril - CORRECT ANSWER -Fire, lightening, etc. the perils are named/listed/stated in the
contract. Not listed claim is not paid. The burden is on the insured to prove the damage was
caused by listed peril. (Basic form: dp1, ho8 Broad Form: dp2, ho2, ho4, ho6)
Open Peril/All Risk - CORRECT ANSWER -Lists exclusions and does not name/state/list the perils
but states it covers all or any peril except those specifically excluded. This type of policy shifts
the burden of proof to the insurer (company). The insurer must pay unless they can show the
cause of loss was an exclusion under the policy/contract. (Special: dp3, ho3 Comprehensive:
ho5 Inland/Ocean Marine)
Hazard - CORRECT ANSWER -(Key phrases: increases or leads to) Chance/likelihood/severity of
loss. Types of Hazards: Moral, Morale, Physical, and Court
