CA Personal Lines Broker (Actual) Test
Questions and Answers
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 solicitor cannot be employed by more than one fire and casualty broker/agent at the
same time.
An agent or broker cannot transact as a solicitor, but a solicitor can transact as a broker
or agent.
Questions and Answers
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 solicitor cannot be employed by more than one fire and casualty broker/agent at the
same time.
An agent or broker cannot transact as a solicitor, but a solicitor can transact as a broker
or agent.
