AFSB 151 Ch. 2 Practice Exam

AFSB 151 Ch. 2 Practice Exam When selecting a surety company for a bonding relationship with a contractor, The producer should consider the surety's suitability factors to the contractor's needs, including the surety's philosophies, financial capacity, stability, and comfort with the projects Johnson Construction was approved for a $5 million/$20 million annual contract surety credit. A $5 million/$20 million contract surety credit line means that the surety is willing to Bond single jobs up to a contract price of $5 million when the aggregate contract backlog does not exceed $20 million A surety bond credit line covers the contractor's normal, anticipated bond needs. If a special situation develops that would cause a contractor to exceed the credit line, then The contractor and the producer should discuss the merits of the case with the underwriter to determine the desirability of an increased credit line. As a surety producer, Beth has developed a favorable percentage of the local bond market and has earned a reputation among local contractors for professional-quality service. She has established which one of the following? Position Which one of the following is a factor of marketing that requires the surety producer to have education, training, knowledge, skill, and organization to provide professional service that clients need? Product Which one of these categories of court bonds is underwritten on the basis of the principal's financial capacity? Judicial bonds According to the law, companies that write credit enhancement financial guarantees Cannot write any other type of insurance within that company A contractor's percentage-of-completion estimates are based on the contractor's ability to estimate the cost to complete the project and recognize income and profit as they accrue during the project A pre-set surety bond credit limit Eliminates the need to reevaluate the contractor's need for every bond. Which one of the following statements regarding a surety's capacity is true? If a contractor appears to be outgrowing the surety's capacity, the producer should arrange a backup surety with adequate capacity to replace the first surety before reaching capacity The most effective and credible form of promotion for surety producers is Word-of-mouth advertising and referrals from the producer's satisfied clients To reach a reasonable rate of return for their bond risks, Sureties pay competent underwriters and agents competitive salaries and commissions Which one of the following categories of court bonds is written primarily on the basis of an attorney's character and reputation for trustworthiness? Fiduciary bonds