California Commercial Insurance Exam Questions
and Verified Answers
In a commercial property policy, concealment, misrepresentation or fraud could cause a policy to:
Correct Answer: Be voided, denied or cancelled.
NOTE: This is a common condition in the commercial property policy
Any licensed agent or broker may submit risks to the FAIR plan: Correct Answer: But there is no binding
authority.
NOTE: An agent never has binding authority with the FAIR plan.
Under the Building and Personal Property coverage form, vacancy means: Correct Answer: Insufficient
business property present to conduct customary operations.
NOTE: The premises does not need to be completely empty to be considered vacant.
If a building has been vacant for 90 consecutive days prior to a loss, which of the following is false?
All of the above are true.
The loss will not be covered if due to theft or attempted theft.
The loss will not be covered if due to vandalism.
If the loss is due to a fire, it will be covered but payment is reduced by 15%. Correct Answer: All of the
above are true.
NOTE: The policy states if a property is vacant for more than 60 days and the loss is due to vandalism,
theft, attempted theft, sprinkler leakage, glass breakage or water damage, there is no coverage. All other
losses are reduced in payment by 15%.
All of the following may be written on a monoline basis, EXCEPT:
Ocean Marine
Inland Marine
,Boiler & Machinery
General Liability Correct Answer: Ocean Marine
NOTE: Ocean Marine is a completely separate policy type.
On a commercial package policy, "You" and "Your" refers to: Correct Answer: The named insured and
resident spouse.
NOTE: Not just anyone can be considered covered on the policy. They must be NAMED or be a resident
spouse.
The CPP Common Condition that relates to establishing premium is: Correct Answer: Inspections &
Surveys
NOTE: Inspection & Survey condition address insurability and premium to be charged.
The FAIR plan does all of the following, EXCEPT:
Provides for equitable distribution among admitted insurers of the responsibility for insuring qualified
property for which basic property insurance cannot be obtained through the normal insurance market
by the establishment of a FAIR plan.
Establish a list of all surplus line insurers that have met the recognized requirements for such title and
shall issue a master list at least semiannually.
Encourages maximum use of the normal insurance market provided by admitted insurers and licensed
surplus line brokers.
Assures stability in the property insurance market for property located in California. Correct Answer:
Establish a list of all surplus line insurers that have met the recognized requirements for such title and
shall issue a master list at least semiannually.
NOTE: This list is the LESLI list and has nothing to do with the FAIR plan
The normal vacancy condition under a commercial lines policy can be waived by: Correct Answer:
Adding a Vacancy Permit endorsement.
NOTE: A vacancy permit is needed in order to waive the condition of vacancy under a Building and
Personal Property coverage form.
,Which of the following would be considered a "module"?
Conditions
Business Auto
Declarations
Exclusions Correct Answer: Business Auto
NOTE: Modules are the coverage parts that make up a package policy.
Coverage C perils are broad form on all HO policies except:
HO-8
HO-3 & HO-5
HO-8 & HO-5
HO-4 & HO-6 Correct Answer: HO-8 & HO-5
NOTE: Coverage C perils on an HO-8 are basic perils and HO-5 are open perils/all risk.
When may the insurer examine books and records of an insured: Correct Answer: At any time and for up
to three years after the policy expires.
NOTE: The insurer may examine books and records at any time and for up to 3 years, as premiums are
determined based on the audit information provided by the insured.
Coverage B of the Commercial Building and Personal Property coverage form covers all of the following
EXCEPT:
Furniture and office supplies
Property off the premises
Postage Meters
, Copy Machines Correct Answer: Property off the premises.
NOTE: Property off premises is not included in the policy but added with an extension of coverage. This
need would be expressed by the insured and added by way of extension. An additional premium charge
would apply.
Coverage A of the Commercial Building and Personal Property coverage form covers which of the
following:
A riding lawn mower.
Personal Property
Buildings and sparate structures and a riding lawn mower are both correct answers.
Buildings and Separate Structures Correct Answer: Buildings and sparate structures and a riding lawn
mower are both correct answers.
NOTES: Buildings and separate structures as well as a riding lawn mower is considered part of Coverage
A, as it is used to maintain/service the property
Which of the following is a coverage extension on the Commercial Building and Personal property
coverage form?
Indoor and Outdoor fixtures
Stock or Inventory
Improvements and Betterments
Debris Removal Correct Answer: Debris Removal
NOTES: Debris removal is a coverage extension with no extra premium charge and does not reduce the
limit of insurance.
Coverage A of a Building and Personal Property form would exclude all but:
Vacuum and Floor waxer
Patios and Driveways
and Verified Answers
In a commercial property policy, concealment, misrepresentation or fraud could cause a policy to:
Correct Answer: Be voided, denied or cancelled.
NOTE: This is a common condition in the commercial property policy
Any licensed agent or broker may submit risks to the FAIR plan: Correct Answer: But there is no binding
authority.
NOTE: An agent never has binding authority with the FAIR plan.
Under the Building and Personal Property coverage form, vacancy means: Correct Answer: Insufficient
business property present to conduct customary operations.
NOTE: The premises does not need to be completely empty to be considered vacant.
If a building has been vacant for 90 consecutive days prior to a loss, which of the following is false?
All of the above are true.
The loss will not be covered if due to theft or attempted theft.
The loss will not be covered if due to vandalism.
If the loss is due to a fire, it will be covered but payment is reduced by 15%. Correct Answer: All of the
above are true.
NOTE: The policy states if a property is vacant for more than 60 days and the loss is due to vandalism,
theft, attempted theft, sprinkler leakage, glass breakage or water damage, there is no coverage. All other
losses are reduced in payment by 15%.
All of the following may be written on a monoline basis, EXCEPT:
Ocean Marine
Inland Marine
,Boiler & Machinery
General Liability Correct Answer: Ocean Marine
NOTE: Ocean Marine is a completely separate policy type.
On a commercial package policy, "You" and "Your" refers to: Correct Answer: The named insured and
resident spouse.
NOTE: Not just anyone can be considered covered on the policy. They must be NAMED or be a resident
spouse.
The CPP Common Condition that relates to establishing premium is: Correct Answer: Inspections &
Surveys
NOTE: Inspection & Survey condition address insurability and premium to be charged.
The FAIR plan does all of the following, EXCEPT:
Provides for equitable distribution among admitted insurers of the responsibility for insuring qualified
property for which basic property insurance cannot be obtained through the normal insurance market
by the establishment of a FAIR plan.
Establish a list of all surplus line insurers that have met the recognized requirements for such title and
shall issue a master list at least semiannually.
Encourages maximum use of the normal insurance market provided by admitted insurers and licensed
surplus line brokers.
Assures stability in the property insurance market for property located in California. Correct Answer:
Establish a list of all surplus line insurers that have met the recognized requirements for such title and
shall issue a master list at least semiannually.
NOTE: This list is the LESLI list and has nothing to do with the FAIR plan
The normal vacancy condition under a commercial lines policy can be waived by: Correct Answer:
Adding a Vacancy Permit endorsement.
NOTE: A vacancy permit is needed in order to waive the condition of vacancy under a Building and
Personal Property coverage form.
,Which of the following would be considered a "module"?
Conditions
Business Auto
Declarations
Exclusions Correct Answer: Business Auto
NOTE: Modules are the coverage parts that make up a package policy.
Coverage C perils are broad form on all HO policies except:
HO-8
HO-3 & HO-5
HO-8 & HO-5
HO-4 & HO-6 Correct Answer: HO-8 & HO-5
NOTE: Coverage C perils on an HO-8 are basic perils and HO-5 are open perils/all risk.
When may the insurer examine books and records of an insured: Correct Answer: At any time and for up
to three years after the policy expires.
NOTE: The insurer may examine books and records at any time and for up to 3 years, as premiums are
determined based on the audit information provided by the insured.
Coverage B of the Commercial Building and Personal Property coverage form covers all of the following
EXCEPT:
Furniture and office supplies
Property off the premises
Postage Meters
, Copy Machines Correct Answer: Property off the premises.
NOTE: Property off premises is not included in the policy but added with an extension of coverage. This
need would be expressed by the insured and added by way of extension. An additional premium charge
would apply.
Coverage A of the Commercial Building and Personal Property coverage form covers which of the
following:
A riding lawn mower.
Personal Property
Buildings and sparate structures and a riding lawn mower are both correct answers.
Buildings and Separate Structures Correct Answer: Buildings and sparate structures and a riding lawn
mower are both correct answers.
NOTES: Buildings and separate structures as well as a riding lawn mower is considered part of Coverage
A, as it is used to maintain/service the property
Which of the following is a coverage extension on the Commercial Building and Personal property
coverage form?
Indoor and Outdoor fixtures
Stock or Inventory
Improvements and Betterments
Debris Removal Correct Answer: Debris Removal
NOTES: Debris removal is a coverage extension with no extra premium charge and does not reduce the
limit of insurance.
Coverage A of a Building and Personal Property form would exclude all but:
Vacuum and Floor waxer
Patios and Driveways
