California Personal Lines Broker Test
A-1. Insurance is a contract whereby one undertakes to indemnify another against: -
answer Damage
A-2. A peril is: - answer The actual cause of a loss.
A-3. The uncertainty or chance of a loss occurring is known as: - answer Risk
A-4. Which are the main types of risks? - answer Pure and Speculative
A-5. A hazard is best defined as: - answer Anything that increases the chance of loss or
severity of loss due to a peril.
A-6. A hazard that deals with a person`s mental attitude, behavior and habits is an
example of: - answer A Moral hazard.
A-7. The law of large numbers is a principal that basically says: - answer The larger the
amount of information gathered, the more reliable that information will be.
A-8. The term loss exposure refers to: - answer The possibility of a loss.
A-9. The degree of loss a person/organization faces from suits brought by a third party
refers to: - answer Liability loss exposure.
A-10. Which of the following is NOT required for a risk to be ideally insurable?
The loss must be an accident.
The loss must be definite and measurable.
The loss must occur on the insured`s property.
The loss must create economic hardship. - answer The loss must occur on the
insured's property.
A-11. Any contingent or unknown event, whether past or future, which may damnify a
person having an insurable interest or create a liability against him/her, may be insured
against. The more unpredictable a loss becomes: - answer The more insurable it
becomes.
A-12. Restoring the insured back to the condition he or she was in before the loss
occurred is known as: - answer Indemnification
,A-13. The process of reviewing applications for insurance and the information on the
application is: - answer Underwriting
A-14. Which of the following is NOT a known private insurer?
Reciprocal Insurance Exchanges
Mutual Insurance Companies
Bond Insurance Companies
Stock Insurance Companies - answer Bond Insurance companies are not considered
insurers.
A-15. Bob is thinking about obtaining insurance because he just found out he needs
extensive surgery that will require several days in the hospital. This situation of waiting
until the last minute to obtain insurance is known as: - answer Adverse selection
A-16. Loss control refers to: - answer Taking the necessary precautions that will reduce
the risk of a loss.
A-17. Which of the following is the amount of money the insured pays before the insurer
pays for the rest of the claim? - answer Deductible
A-18. What is reinsurance? - answer Reinsurance is the process whereby the insurer
transfers all or part of the risk to another company.
A-19. Which of the following is defined as `an agreement between two or more parties
enforceable by law?` - answer A contract.
A-20. What are the two types of torts? - answer Intentional and Unintentional.
A-21. What is the binding force of a contract? - answer Consideration
A-22. What is fraud? - answer When one party intentionally gives the other party false
information in order to benefit from the unlawful gain.
A-23. When a right or privilege has been given up, a party cannot reassert that right or
privilege. The process of preventing the party from reasserting that right or privilege is
known as: - answer Estoppel
A-24. Either party may rescind a contract for what reasons? - answer Once signed a
contract can never be rescinded.
A-25. Examples of tort law include all of the following EXCEPT:
Libel and slander
Bodily injury
Personal injury
Breach of contract - answer Breach of contract.
,A-26. Substitution of a small certain loss for a large uncertain loss is: - answer
Insurance
A-27. The state of being subject to a loss is considered: - answer Exposure
A-28. Performance depends upon an uncertain future event is the feature: - answer
Aleatory
A-29. Type of loss exposure pertaining to land and structures attached to it is: - answer
Property loss exposure.
A-30. Which of the following is an example of an adverse underwriting decision?
Charging a higher rate
Rejecting the risk
Issuing with limitations
All of these are examples - answer All are examples.
A-31. Which of the following is not a class of insurance?
Casualty
Fire
Marine
Auto - answer Casualty is not a class of insurance.
A-32. Punishment for twisting or misrepresentation would be: - answer$25,000 fine or 1
year in jail.
A-33. A beautician stating that this conditioner fixes badly damaged hair is a: - answer
Implied warranty.
A-34. Materiality is determined by the disadvantage placed on the other party and -
answer the influence of the facts, not by the event.
A-35. When an insured rejects uninsured motorist in writing this is considered: - answer
A waiver.
B-1. In which of the following marketing distribution systems does the agent represent
more than one insurer and more than one company?
Direct mailing system
Direct writing system
Exclusive agency
Independent agency - answer An independent agency
B-2. Which of the following is a responsibility of the insured in an insurance contract?
To complete the application.
Give true statements and information on the application.
Send the application to the underwriting department.
, Fully explain the policy to the client. - answer Give true statements and information on
the application.
B-3. Which of the following is NOT a type of authority given to agents?
Express authority
Implied authority
Customary authority
Apparent authority - answer Customary authority. There is no such thing.
B-4. In a legal relationship, which authority does a principal (company) give the agent in
writing? - answer Express warranty.
B-5. Which of the following is NOT a source of information an underwriter might use to
investigate an application in order to approve or reject it?
Medical Information Bureau
Department of Industrial Relations
Department of Motor Vehicles
Financial Reports - answer Department of Industrial Relations
B-6. A broker can transact all of the following EXCEPT:
Life, health, and disability insurance
Property insurance
Casualty insurance
Personal Lines - answer Life, health, and disability insurance.
B-7. Which of the following is NOT an action a person performs when transacting
insurance?
Calling an insurer for a price quote
Solicitation of insurance
The actual execution of a contract
Any transactions that later result from the operation of the contract - answer Calling an
insurer for a price quote.
B-8. A person licensed as a broker/agent shall be deemed to be:
responsible for deciding if an application should be approved or rejected
acting as an insurance agent in the transaction of insurance placed with those for
whom a notice of appointment has been filed with the Commissioner
involved in the business of financing the purchase of real estate
acting with the same authority granted a managing general agent - answer Acting as an
insurance agent in the transaction of insurance placed with those for whom a notice of
appointment has been filed with the Commissioner.
B-9. Which of the following is not true about the relationship between an agent and a
solicitor?
An agent represents the company, whereas the solicitor is an assistant to an agent and
has no binding authority.
A-1. Insurance is a contract whereby one undertakes to indemnify another against: -
answer Damage
A-2. A peril is: - answer The actual cause of a loss.
A-3. The uncertainty or chance of a loss occurring is known as: - answer Risk
A-4. Which are the main types of risks? - answer Pure and Speculative
A-5. A hazard is best defined as: - answer Anything that increases the chance of loss or
severity of loss due to a peril.
A-6. A hazard that deals with a person`s mental attitude, behavior and habits is an
example of: - answer A Moral hazard.
A-7. The law of large numbers is a principal that basically says: - answer The larger the
amount of information gathered, the more reliable that information will be.
A-8. The term loss exposure refers to: - answer The possibility of a loss.
A-9. The degree of loss a person/organization faces from suits brought by a third party
refers to: - answer Liability loss exposure.
A-10. Which of the following is NOT required for a risk to be ideally insurable?
The loss must be an accident.
The loss must be definite and measurable.
The loss must occur on the insured`s property.
The loss must create economic hardship. - answer The loss must occur on the
insured's property.
A-11. Any contingent or unknown event, whether past or future, which may damnify a
person having an insurable interest or create a liability against him/her, may be insured
against. The more unpredictable a loss becomes: - answer The more insurable it
becomes.
A-12. Restoring the insured back to the condition he or she was in before the loss
occurred is known as: - answer Indemnification
,A-13. The process of reviewing applications for insurance and the information on the
application is: - answer Underwriting
A-14. Which of the following is NOT a known private insurer?
Reciprocal Insurance Exchanges
Mutual Insurance Companies
Bond Insurance Companies
Stock Insurance Companies - answer Bond Insurance companies are not considered
insurers.
A-15. Bob is thinking about obtaining insurance because he just found out he needs
extensive surgery that will require several days in the hospital. This situation of waiting
until the last minute to obtain insurance is known as: - answer Adverse selection
A-16. Loss control refers to: - answer Taking the necessary precautions that will reduce
the risk of a loss.
A-17. Which of the following is the amount of money the insured pays before the insurer
pays for the rest of the claim? - answer Deductible
A-18. What is reinsurance? - answer Reinsurance is the process whereby the insurer
transfers all or part of the risk to another company.
A-19. Which of the following is defined as `an agreement between two or more parties
enforceable by law?` - answer A contract.
A-20. What are the two types of torts? - answer Intentional and Unintentional.
A-21. What is the binding force of a contract? - answer Consideration
A-22. What is fraud? - answer When one party intentionally gives the other party false
information in order to benefit from the unlawful gain.
A-23. When a right or privilege has been given up, a party cannot reassert that right or
privilege. The process of preventing the party from reasserting that right or privilege is
known as: - answer Estoppel
A-24. Either party may rescind a contract for what reasons? - answer Once signed a
contract can never be rescinded.
A-25. Examples of tort law include all of the following EXCEPT:
Libel and slander
Bodily injury
Personal injury
Breach of contract - answer Breach of contract.
,A-26. Substitution of a small certain loss for a large uncertain loss is: - answer
Insurance
A-27. The state of being subject to a loss is considered: - answer Exposure
A-28. Performance depends upon an uncertain future event is the feature: - answer
Aleatory
A-29. Type of loss exposure pertaining to land and structures attached to it is: - answer
Property loss exposure.
A-30. Which of the following is an example of an adverse underwriting decision?
Charging a higher rate
Rejecting the risk
Issuing with limitations
All of these are examples - answer All are examples.
A-31. Which of the following is not a class of insurance?
Casualty
Fire
Marine
Auto - answer Casualty is not a class of insurance.
A-32. Punishment for twisting or misrepresentation would be: - answer$25,000 fine or 1
year in jail.
A-33. A beautician stating that this conditioner fixes badly damaged hair is a: - answer
Implied warranty.
A-34. Materiality is determined by the disadvantage placed on the other party and -
answer the influence of the facts, not by the event.
A-35. When an insured rejects uninsured motorist in writing this is considered: - answer
A waiver.
B-1. In which of the following marketing distribution systems does the agent represent
more than one insurer and more than one company?
Direct mailing system
Direct writing system
Exclusive agency
Independent agency - answer An independent agency
B-2. Which of the following is a responsibility of the insured in an insurance contract?
To complete the application.
Give true statements and information on the application.
Send the application to the underwriting department.
, Fully explain the policy to the client. - answer Give true statements and information on
the application.
B-3. Which of the following is NOT a type of authority given to agents?
Express authority
Implied authority
Customary authority
Apparent authority - answer Customary authority. There is no such thing.
B-4. In a legal relationship, which authority does a principal (company) give the agent in
writing? - answer Express warranty.
B-5. Which of the following is NOT a source of information an underwriter might use to
investigate an application in order to approve or reject it?
Medical Information Bureau
Department of Industrial Relations
Department of Motor Vehicles
Financial Reports - answer Department of Industrial Relations
B-6. A broker can transact all of the following EXCEPT:
Life, health, and disability insurance
Property insurance
Casualty insurance
Personal Lines - answer Life, health, and disability insurance.
B-7. Which of the following is NOT an action a person performs when transacting
insurance?
Calling an insurer for a price quote
Solicitation of insurance
The actual execution of a contract
Any transactions that later result from the operation of the contract - answer Calling an
insurer for a price quote.
B-8. A person licensed as a broker/agent shall be deemed to be:
responsible for deciding if an application should be approved or rejected
acting as an insurance agent in the transaction of insurance placed with those for
whom a notice of appointment has been filed with the Commissioner
involved in the business of financing the purchase of real estate
acting with the same authority granted a managing general agent - answer Acting as an
insurance agent in the transaction of insurance placed with those for whom a notice of
appointment has been filed with the Commissioner.
B-9. Which of the following is not true about the relationship between an agent and a
solicitor?
An agent represents the company, whereas the solicitor is an assistant to an agent and
has no binding authority.
