CPCL California Property and Casualty license exam - Set 1 - Part 2

Test your knowledge of technical writing concepts with these practice questions. Each question includes detailed explanations to help you understand the correct answers.

Question 21: An insurance company transfers part of the risk on its policies to another insurer in exchange for a premium. This arrangement is known as which of the following?

Coinsurance

Subrogation

Reinsurance

Self-insurance

Question 22: Under which form of reinsurance does the reinsurer evaluate and choose to accept or reject each individual risk offered by the ceding insurer?

Treaty reinsurance

Facultative reinsurance

Coinsurance

Pro rata reinsurance

Question 23: Under the California Insurance Code, the fire class of insurance covers loss by fire, lightning, and also which of the following perils?

Liability for bodily injury

Employee dishonesty

Failure to repay a loan

Windstorm, tornado, and earthquake

Question 24: Under California Insurance Code Section 108, the liability class of insurance specifically does NOT include which of the following?

Workers' compensation insurance

Coverage for bodily injury to others

Coverage for property damage to others

Professional liability coverage

Question 25: All else being equal, how does selecting a higher deductible generally affect the premium an insured pays?

It increases the premium

It has no effect on premium

It lowers the premium

It voids the coverage

Question 26: Which of the following is NOT one of the four elements required for a valid insurance contract?

Offer and acceptance

Consideration

Legal purpose

A notarized signature

Question 27: In an insurance contract, the insured's consideration consists of the premium payment together with which of the following?

The statements made on the application

A promise to renew the policy

The insurer's certificate of authority

The agent's commission

Question 28: Generally, what is the legal status of an insurance contract entered into by a minor?

Automatically void from the start

Fully binding on the minor

Voidable at the minor's option

Illegal and subject to penalty

Question 29: In the typical insurance transaction, which party makes the offer?

The insurance company

The applicant

The state regulator

The reinsurer

Question 30: An applicant requests coverage, and the insurer issues a policy with a higher premium and an added exclusion. In contract terms, the insurer has made which of the following?

An unconditional acceptance

A binding waiver

A representation

A counteroffer

Question 31: An insurance policy is called an aleatory contract because of which of the following characteristics?

The values exchanged may be unequal

Both parties are equally bound

Only the insured drafts the terms

It must be renewed annually

Question 32: Because an insurance policy is a contract of adhesion drafted by the insurer, how does a California court generally resolve ambiguous policy language?

In favor of the insurer

By voiding the policy entirely

In favor of the insured

By splitting the difference evenly

Question 33: An insurance policy is described as a unilateral contract because of which of the following?

Both parties make enforceable promises

Only the insurer makes an enforceable promise

Insured must promise to pay premiums

Neither party is legally bound

Question 34: Which characteristic of insurance contracts requires both the insurer and the insured to deal honestly and disclose all material facts?

Aleatory

Unilateral

Conditional

Utmost good faith

Question 35: An insurer's duty to pay a claim depends on the insured first meeting obligations such as paying premiums and reporting losses promptly. This describes which characteristic?

Conditional

Aleatory

Personal

Unilateral

Question 36: Under California law, when does an insured's concealment of a material fact give the insurer the right to rescind the policy?

Only when the concealment is intentional

Only when a loss actually results

Whether intentional or unintentional

Only when the insured profits from it

Question 37: Under the California Insurance Code, the materiality of a concealed fact is determined by which of the following?

Whether the fact actually caused the loss

Its probable influence on the insurer's decision

The dollar size of the eventual claim

Whether the insured acted in good faith

Question 38: Under the California Insurance Code, a representation made by an applicant may take which of the following forms?

Only a written statement

Only a notarized statement

Only a recorded statement

Either an oral or a written statement

Question 39: Under California law, the answers an applicant provides on an insurance application are generally treated as which of the following?

Representations

Express warranties

Implied warranties

Binding conditions

Question 40: Which of the following best describes a warranty in an insurance policy?

A statement merely believed to be true

An optional coverage the insured buys

A statement guaranteed to be true

A refund of unearned premium

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