California Insurance Practice Test - Free 20 Questions

Question 1

A hailstorm occurred just before year-end, but many affected policyholders have not reported claims. Which reserve estimates these losses?

Accepted Answer

IBNR reserve

Answer

Conditions section

Answer

Transfer of recovery rights

Answer

Credit-based insurance score

Question 2

The concept that an insured should not be able to buy an insurance policy and intentionally cause a loss for profit is supported by the requirement of:

Accepted Answer

Insurable interest

Answer

Aleatory contracts

Answer

Absolute liability

Answer

Proximate cause

Question 3

A policy is canceled halfway through its term. What is the portion of premium attributable to the unused coverage period called?

Accepted Answer

Unearned premium

Answer

Avoidance

Answer

Conditional contract

Answer

Representation

Question 4

Which underwriting report describes a property's physical condition, occupancy, protection, and surrounding exposures?

Accepted Answer

Inspection report

Answer

Expense loading

Answer

Combined ratio

Answer

Lloyd's association

Question 5

An applicant answers an application question according to what the applicant honestly believes is true. How is that statement generally classified?

Accepted Answer

Representation

Answer

Concealment

Answer

Endorsement

Answer

Unearned premium

Question 6

David sells his house to Mary on May 1st, but forgets to cancel his homeowners insurance. On May 15th, the house burns down. Why won't David's insurance pay him for the loss?

Accepted Answer

Because David no longer has an insurable interest in the property at the time of loss

Answer

Because the policy is a contract of adhesion

Answer

Because the peril of fire was excluded

Answer

Because of the principle of subrogation

Question 7

An insurer asks a reinsurer to evaluate and accept one unusually large property risk separately. What type of reinsurance is being requested?

Accepted Answer

Facultative reinsurance

Answer

Field underwriting

Answer

Judgment rating

Answer

Loss ratio

Question 8

Which reinsurance arrangement is designed to protect an insurer from accumulated losses caused by one hurricane or earthquake?

Accepted Answer

Catastrophe reinsurance

Answer

Manual rating

Answer

Merit rating

Answer

Stock insurer

Question 9

Besides underwriting results, an insurer earns money by investing premiums and surplus. What is this revenue called?

Accepted Answer

Investment income

Answer

Facultative reinsurance

Answer

Adverse selection

Answer

Manual rating

Question 10

The principle of indemnity states that the insured should:

Accepted Answer

Be restored to the same financial condition they were in prior to the loss

Answer

Profit from an insurance claim

Answer

Receive the full face value of the policy regardless of the actual loss amount

Answer

Only be compensated if the loss is catastrophic

Free California General Insurance Principles Practice Test

Question 1 of 10

A hailstorm occurred just before year-end, but many affected policyholders have not reported claims. Which reserve estimates these losses?