California Insurance Code and Ethics: General California Insurance Law Correct and Verified Answers Graded A

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California Insurance Code and Ethics:

General California Insurance Law Correct and Verified Answers Graded A

• Question: What document must an insurer receive in order to transact insurance in this

state?

• Binder of Coverage
• Certificate of Authority
• Insurer's License
• State Authorization Form

Correct Answer: B) Certificate of Authority

• Question: If an insured intentionally failed to communicate information related to an

implied warranty, which of the following may occur?

• The insurer may increase the premium.
• The insurer may rescind the contract.
• The policy is automatically canceled.
• The insured must pay a fine.

Correct Answer: B) The insurer may rescind the contract.

• Question: Which state law was enacted in California to protect persons age 65 or older

from insurance agent dishonesty?

• Senior Citizen Protection Act
• Financial Elder Abuse Statutes
• Medicare Fraud Prevention Act
• California Aging Insurance Law

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Correct Answer: B) Financial Elder Abuse Statutes

• Question: According to the California Law, if an insurer includes a fraudulent claim

clause in the contract regarding the legal ramifications of a false claim, the clause must be preceded by which of the following statements?

A) "Warning: False claims are punishable by law."

• "For your protection, California Law requires the following to appear on this form."
• "Insurance fraud is a felony in the state of California."
• "Any fraudulent activity will result in policy cancellation."

Correct Answer: B) "For your protection, California Law requires the following to appear on this form."

5. Question: De-mutualization happens when...

Correct Answer: A mutual insurer becomes a stock company.

6. Question: What is a Managing General Agent (MGA)?

Correct Answer: An MGA is any person, firm, association, partnership or corporation that negotiates ceding reinsurance contracts on behalf of an insurer or manages the insurance business for that insurer and acts as its agent.

• Question: Fraudulent activities in health care are estimated in billions of dollars

annually. This results in...

Correct Answer: Increase in health care costs for everyone.

• Question: Which type of insurance includes the assumption of a contractual obligation

to reimburse the insured against all or a portion of his fees, costs, and expenses related to or arising out of services performed by or under the supervision of an attorney who is an active member of the bar of any jurisdiction or jurisdictions of the United States?

• Malpractice Insurance
• Professional Liability Insurance
• Legal Insurance
• Surety Insurance

Correct Answer: C) Legal Insurance

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• Question: Which type of insurance guarantees or indemnifies owners of real or personal

property or the holders of liens or other interested parties against loss or damage suffered to said property?

• Property Insurance
• Title Insurance
• Casualty Insurance
• Liability Insurance

Correct Answer: B) Title Insurance

• Question: The type of insurance that guarantees the behavior of persons and the

performance of contracts other than insurance policies is known as...

Correct Answer: Surety insurance.

11. Question: Under the file-and-use law, an insurer...

Correct Answer: Submits a rate plan to the Commissioner and immediately begins

marketing the plan.

• Question: What method do insurers use to protect themselves against catastrophic

losses?

• Deductibles
• Reinsurance
• Co-insurance
• Stop-loss provisions

Correct Answer: B) Reinsurance

• Question: Home Service insurance is a variation of which type of life policies?
• Whole Life insurance
• Universal Life insurance
• Industrial Life insurance
• Term Life insurance

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Correct Answer: C) Industrial Life insurance

• Question: What certification must an insurer receive before it can transact insurance in

California?

• Certificate of Good Standing
• Certificate of Authority
• Certificate of Insurance
• Certificate of Operation

Correct Answer: B) Certificate of Authority

15. Question: What is reinsurance?

• Changing an insurance policy to cover new risks
• A policy bought by an individual to cover excess liability
• An agreement between a ceding insurer and an assuming insurer
• A method of calculating insurance premiums

Correct Answer: C) An agreement between a ceding insurer and an assuming insurer

• Question: Any person or governmental entity that provides information about an

individual to an agent, insurance company, or insurance-support organization is known as a(n)...

Correct Answer: Institutional source.

• Question: The rating method which allows insurers to compete with one another by

quickly changing rates without review by the state regulators is known as...

Correct Answer: Open Competition.

• Question: Bob owns an insurance company. How many names (real or fictitious) may

his business have?

• 1
• 2
• 3
• Unlimited