California Insurance Practice Test - Free 20 Questions

Question 1

An insurer that cedes a portion of its risk to another insurer is known as the:

Accepted Answer

Ceding insurer

Answer

Reinsurer

Answer

Assuming insurer

Answer

Primary insurer

Question 2

A moral hazard is characterized by:

Accepted Answer

A fraudulent or dishonest tendency

Answer

An individual's indifference to loss

Answer

A pre-existing physical condition

Answer

An unpredictable natural event

Question 3

Statements made by an applicant on an insurance application that are believed to be true to the best of their knowledge are called:

Accepted Answer

Representations

Answer

Warranties

Answer

Concealments

Answer

Guarantees

Question 4

What does it mean if an insurer is 'non-admitted' in California?

Accepted Answer

It can only sell insurance through a surplus lines broker.

Answer

It is not allowed to sell any insurance in California.

Answer

It is financially impaired.

Answer

It is an alien insurer.

Question 5

If a life insurance application is approved and a policy is issued, but the applicant's health has deteriorated since the application date and no premium was paid, what is the insurer's obligation?

Accepted Answer

The policy is not in effect until it is delivered and a statement of good health is signed.

Answer

The policy is in effect, but at a higher premium.

Answer

The insurer must deliver the policy as issued.

Answer

The insurer can cancel the policy immediately.

Question 6

If an insurer allows an unlicensed individual to solicit insurance applications using the company's letterhead, business cards, and office space, the insurer may be liable under the doctrine of:

Accepted Answer

Apparent authority

Answer

Express authority

Answer

Implied authority

Answer

Subrogation

Question 7

The McCarran-Ferguson Act of 1945 established that:

Accepted Answer

Insurance is regulated by the states, unless federal law specifically relates to insurance

Answer

The federal government has exclusive authority to regulate insurance

Answer

All insurance companies must be federally chartered

Answer

State regulation of insurance is prohibited

Question 8

Which of the following is an example of a speculative risk?

Accepted Answer

A gambling debt

Answer

A car accident

Answer

A house fire

Answer

A work-related injury

Question 9

An insurer incorporated in Canada and conducting business in California is a(n):

Accepted Answer

Alien insurer

Answer

Foreign insurer

Answer

Domestic insurer

Answer

Surplus lines insurer

Question 10

A condition that increases the chance of a loss is called a:

Accepted Answer

Hazard

Answer

Peril

Answer

Risk

Answer

Exposure

Question 1 of 118

An insurer that cedes a portion of its risk to another insurer is known as the: