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GA Property & Casualty practice questions

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Question 1Insurance Regulation and Licensing (state and national)

How is the Georgia Commissioner of Insurance chosen?

  1. Selected by the General Assembly for a two-year term
  2. Appointed by the Governor for a six-year term
  3. Elected by the state's voters for a four-year term Correct answer.
  4. Chosen by licensed insurers for a four-year term

Explanation

Georgia's Commissioner of Insurance is a statewide elected official who serves a four-year term and also holds the role of Safety Fire Commissioner. The position is not filled by gubernatorial appointment or legislative selection.

Question 2Insurance Regulation and Licensing (state and national)

What is the minimum age for a person to be eligible for a Georgia resident insurance producer license?

  1. 21 years
  2. 16 years
  3. 25 years
  4. 18 years Correct answer.

Explanation

Georgia requires a resident producer license applicant to be at least 18 years old, along with other qualifications such as prelicensing education and examination. Age 21 or higher is not a licensing requirement.

Question 3Insurance Regulation and Licensing (state and national)

Before an insurer may transact insurance business in Georgia, it must obtain what from the Commissioner?

  1. A domestic charter
  2. A producer appointment
  3. A surplus lines bond
  4. A certificate of authority Correct answer.

Explanation

An insurer must be authorized by the Commissioner and receive a certificate of authority before it may legally transact insurance in Georgia. A producer appointment applies to individual producers, not to the insurer's own authorization.

Question 4Insurance Regulation and Licensing (state and national)

An agent tells a prospect that a policy covers flood damage when it does not. This conduct is an example of:

  1. Rebating
  2. Coercion
  3. Twisting
  4. Misrepresentation Correct answer.

Explanation

Misrepresentation involves making false or misleading statements about the terms, benefits, or conditions of an insurance policy. Coercion involves threats, rebating involves improper inducements, and twisting involves inducing a policy lapse through misrepresentation.

Question 5Insurance Regulation and Licensing (state and national)

Offering a prospect a $100 gift card to buy an insurance policy is prohibited as:

  1. Twisting
  2. Defamation
  3. Unfair discrimination
  4. Rebating Correct answer.

Explanation

Rebating is the practice of offering any inducement not specified in the policy to persuade a person to buy insurance. Georgia prohibits rebating because it can result in unfair discrimination among policyholders.

Question 6Insurance Regulation and Licensing (state and national)

What are Georgia's minimum required liability limits for a private passenger automobile policy?

  1. 50/100/50
  2. 15/30/10
  3. 30/60/15
  4. 25/50/25 Correct answer.

Explanation

Georgia requires minimum bodily injury liability limits of $25,000 per person and $50,000 per accident, plus $25,000 for property damage. Higher limits may be purchased but are not the statutory minimum.

Question 7Insurance Regulation and Licensing (state and national)

Premiums an insurance producer collects from insureds are held in what capacity?

  1. As an escrow agent for the Commissioner
  2. In a fiduciary capacity Correct answer.
  3. As a trustee for the insurer
  4. As personal funds once deposited

Explanation

Georgia law treats premiums collected by a producer as fiduciary funds held on behalf of the insurer or insured. The producer may not commingle these funds with personal or business operating funds.

Question 8Insurance Regulation and Licensing (state and national)

Within how many days must an insurer notify the Commissioner that it has appointed a producer?

  1. 15 days
  2. 10 days
  3. 30 days Correct answer.
  4. 60 days

Explanation

Georgia requires an insurer to file notice of a producer appointment with the Commissioner within 30 days after the appointment. The appointment gives the producer authority to act for that insurer.

Question 9Insurance Regulation and Licensing (state and national)

How many continuing education hours must a Georgia resident producer complete every two years?

  1. 24 hours, including 3 hours of ethics Correct answer.
  2. 40 hours, including 4 hours of ethics
  3. 12 hours, including 1 hour of ethics
  4. 30 hours, including 5 hours of ethics

Explanation

Georgia resident producers must complete 24 hours of continuing education every two years, with at least 3 of those hours in ethics. The requirement applies to maintaining the license, subject to limited exceptions.

Question 10Insurance Regulation and Licensing (state and national)

A producer licensed in good standing in another state may generally obtain a Georgia nonresident license by:

  1. Maintaining a Georgia business office
  2. Passing the Georgia licensing examination
  3. Filing a surety bond with the Commissioner
  4. Reciprocity, without an examination Correct answer.

Explanation

Georgia grants nonresident producer licenses on a reciprocal basis when the applicant holds a valid home-state license in good standing. The nonresident applicant generally is not required to take the Georgia examination.

Question 11Insurance Regulation and Licensing (state and national)

An agent persuades a client to lapse an existing policy by falsely claiming the insurer is insolvent. This practice is known as:

  1. Rebating
  2. Twisting Correct answer.
  3. Defamation
  4. Coercion

Explanation

Twisting is inducing a policyholder to lapse, surrender, or replace coverage through misrepresentation or incomplete comparison. The false insolvency claim is used to cause the lapse.

Question 12Insurance Regulation and Licensing (state and national)

Threatening to cancel a client's other coverage unless the client buys an additional policy is:

  1. Twisting
  2. Rebating
  3. Unfair discrimination
  4. Coercion Correct answer.

Explanation

Coercion is the use of threats or pressure to compel a person to buy insurance or to restrain the person's free choice in insurance transactions. Conditioning existing coverage on a new purchase is coercive.

Question 13Insurance Regulation and Licensing (state and national)

In Georgia, uninsured motorist coverage must be:

  1. Offered to the insured, who may reject it in writing Correct answer.
  2. Included in every policy with no rejection allowed
  3. Provided only for commercial vehicles
  4. Purchased only by drivers with prior violations

Explanation

Georgia requires insurers to offer uninsured motorist coverage, but the insured may reject it in writing. The coverage protects the insured when an at-fault driver has no insurance or insufficient limits.

Question 14Insurance Regulation and Licensing (state and national)

Georgia's FAIR Plan, known as the Georgia Underwriting Association, was created to:

  1. Provide auto liability coverage to high-risk drivers
  2. Offer excess flood insurance above federal limits
  3. Guarantee workers compensation coverage for all employers
  4. Provide basic property insurance when it is unavailable in the voluntary market Correct answer.

Explanation

The FAIR Plan is a residual market mechanism that makes basic property insurance available to applicants who cannot obtain coverage in the voluntary market. It does not write auto liability or workers compensation coverage.

Question 15Insurance Regulation and Licensing (state and national)

An insurer may pay a commission for the sale of an insurance policy to:

  1. A bank teller who solicits the sale
  2. Any person who refers a customer
  3. An unlicensed office employee
  4. Only a licensed producer Correct answer.

Explanation

Commissions for selling insurance may be paid only to a properly licensed producer. Paying commissions to unlicensed persons generally violates Georgia licensing and unfair trade practice laws.

Question 16Insurance Regulation and Licensing (state and national)

A Georgia resident producer license generally expires:

  1. Every year on December 31
  2. Only when the producer permanently stops selling insurance
  3. Every four years on the license anniversary
  4. Every two years at the end of the birth month Correct answer.

Explanation

Georgia resident producer licenses are renewed biennially, with the expiration tied to the last day of the producer's birth month. The producer must renew and meet continuing education requirements to keep the license active.

Question 17Insurance Regulation and Licensing (state and national)

When a licensed producer dies or becomes disabled, the Commissioner may issue a temporary producer license for up to:

  1. 30 days
  2. 180 days Correct answer.
  3. Two years
  4. One year

Explanation

Georgia allows a temporary producer license to help continue the business when a licensed producer dies or becomes disabled. The temporary authority is limited to 180 days and may be issued to a qualified person.

Question 18Insurance Regulation and Licensing (state and national)

For a personal auto policy in Georgia, an insurer canceling for nonpayment of premium must give the insured at least:

  1. 60 days' written notice
  2. 45 days' written notice
  3. 30 days' written notice
  4. 10 days' written notice Correct answer.

Explanation

Georgia requires at least 10 days' written notice when canceling a personal auto policy for nonpayment of premium. Longer notice periods generally apply to cancellations for other reasons.

Question 19Insurance Regulation and Licensing (state and national)

A surplus lines broker may place coverage with an unauthorized insurer only when:

  1. The Commissioner has issued a certificate of authority to the insurer
  2. The insured signs a waiver of all coverage disputes
  3. The full amount of coverage cannot be obtained from authorized insurers Correct answer.
  4. The insurer is owned by a Georgia resident

Explanation

Surplus lines placement is permitted when the required coverage is not available from authorized insurers after a diligent search. The broker must follow Georgia surplus lines requirements and disclose that the insurer is not admitted.

Question 20Insurance Regulation and Licensing (state and national)

Which action may the Georgia Commissioner of Insurance take against a producer who violates insurance laws?

  1. Order the producer to pay a rebate to customers
  2. Impose a criminal prison sentence without a court hearing
  3. Suspend or revoke the producer's license after a hearing Correct answer.
  4. Require the producer to join a trade association

Explanation

The Commissioner has administrative authority to suspend or revoke a producer license, impose fines, or issue cease and desist orders after proper notice and hearing. Criminal imprisonment may be imposed only by a court.

Question 21General Insurance Concepts and Principles

A business owner purchases a commercial property policy to cover the financial consequences of fire damage. Which method of handling risk is the owner using?

  1. Loss control
  2. Risk avoidance
  3. Risk transfer Correct answer.
  4. Risk retention

Explanation

Insurance is a risk-transfer device: the insured pays a premium and shifts the financial consequence of an uncertain loss to the insurer. Retention means the business absorbs the loss itself, while avoidance eliminates the exposure entirely.

Question 22General Insurance Concepts and Principles

In property insurance, insurable interest must exist at which point for a claim to be valid?

  1. Only when the application is signed
  2. At the time of the loss Correct answer.
  3. At both application and loss
  4. Only when the policy is delivered

Explanation

Property coverage requires insurable interest at the time of loss, because the insured must suffer actual financial detriment from the damage. Life insurance differs, requiring insurable interest at inception only.

Question 23General Insurance Concepts and Principles

Which principle restricts a property claim payment to the value of the loss actually sustained, so the insured does not profit from the claim?

  1. Subrogation
  2. Coinsurance
  3. Abandonment
  4. Indemnity Correct answer.

Explanation

The principle of indemnity restores the insured to approximately the pre-loss financial position and no better. Replacement cost and valued policy variations modify how the amount is measured, but the underlying aim remains the same.

Question 24General Insurance Concepts and Principles

A policy carries a $500 deductible. A covered loss of $4,000 occurs. How much does the insurer pay?

  1. $3,500 Correct answer.
  2. $500
  3. $3,000
  4. $4,000

Explanation

A deductible is subtracted from the covered loss before the insurer pays, so the insured bears the first $500. The insurer therefore pays $4,000 minus $500, or $3,500.

Question 25General Insurance Concepts and Principles

A building has a replacement cost of $400,000. The policy limit is $300,000 with an 80% coinsurance clause and no deductible. A covered loss of $80,000 occurs. What does the insurer pay?

  1. $75,000 Correct answer.
  2. $80,000
  3. $64,000
  4. $60,000

Explanation

The coinsurance requirement is 80% of $400,000, or $320,000. Because the limit carried is $300,000, the payment is (300,000 / 320,000) x $80,000 = $75,000.

Question 26General Insurance Concepts and Principles

After paying an auto claim to its insured, the insurer sues the at-fault driver to recover the amount paid. This right is known as:

  1. Salvage
  2. Subrogation Correct answer.
  3. Assignment
  4. Contribution

Explanation

Subrogation lets the insurer stand in the insured's shoes and pursue the party legally responsible for the loss. It prevents the insured from collecting twice and places the cost on the party who caused the harm.

Question 27General Insurance Concepts and Principles

A producer issues a binder while the application is being underwritten. The binder:

  1. Guarantees the policy will be issued at the quoted premium
  2. Is unenforceable until the insurer approves the application
  3. Covers only the day on which it is issued
  4. Provides temporary coverage pending policy issuance Correct answer.

Explanation

A binder is temporary evidence of coverage that applies the terms of the policy being applied for until the policy is issued or the binder expires. It does not guarantee that the insurer will ultimately accept the risk.

Question 28General Insurance Concepts and Principles

Which situation best illustrates a moral hazard?

  1. A homeowner leaves a ladder standing against the house
  2. An insured intentionally sets fire to insured stock Correct answer.
  3. An applicant has a low credit score
  4. A store owner installs a sprinkler system

Explanation

Moral hazard arises from dishonesty or intentional conduct that increases the likelihood or size of a loss, such as deliberately causing damage to collect insurance. Carelessness reflects morale hazard, and protective measures reduce hazard.

Question 29General Insurance Concepts and Principles

An insurer's adjuster tells an insured that late notice is acceptable and continues to work the claim. The insurer later denies coverage for late notice. Which doctrine most likely prevents that denial?

  1. Concealment
  2. Coinsurance
  3. Estoppel Correct answer.
  4. Subrogation

Explanation

A waiver is the voluntary relinquishment of a known right, and estoppel prevents a party from asserting that right when another has relied on its conduct to their detriment. Because the insured relied on the adjuster's assurance, the denial may be barred.

Question 30General Insurance Concepts and Principles

Windstorm tears open a roof, and rain entering the opening damages inventory. The policy covers windstorm and excludes rain damage to property inside a building unless the building was first damaged by a covered peril. How should the claim be handled?

  1. Covered only if the roof is repaired before the claim is filed
  2. Not covered, because rain damage is excluded
  3. Covered, because windstorm proximately caused the loss Correct answer.
  4. Not covered, because concurrent causes cancel coverage

Explanation

Proximate cause is the efficient, dominant cause that sets the loss in motion. Windstorm is a covered peril that first damaged the building, so the ensuing rain damage falls within the exception to the exclusion.

Question 31General Insurance Concepts and Principles

An applicant states on an application that the building has a working central alarm. The applicant honestly believes this, but the statement is inaccurate. This statement is:

  1. A warranty
  2. An estoppel
  3. A representation Correct answer.
  4. A concealment

Explanation

A representation is a statement of fact the applicant believes to be true to the best of their knowledge. It is not a warranty, which is a promise that the fact is exactly as stated, and a misrepresentation voids coverage only if it is material.

Question 32General Insurance Concepts and Principles

Two policies cover the same property on the same basis. Policy A has a $60,000 limit and Policy B has a $40,000 limit. A $20,000 loss occurs and each policy pays pro rata. How much does Policy A pay?

  1. $10,000
  2. $8,000
  3. $12,000 Correct answer.
  4. $20,000

Explanation

Under pro rata sharing, each insurer pays the proportion its limit bears to the total insurance. Policy A pays (60,000 / 100,000) x $20,000 = $12,000.

Question 33General Insurance Concepts and Principles

Which policy section identifies the named insured, the covered property, the policy period, and the applicable limits?

  1. Declarations Correct answer.
  2. Exclusions
  3. Insuring agreement
  4. Conditions

Explanation

The declarations page personalizes the contract by listing the parties, locations, dates, limits, and premiums. The insuring agreement states the promise to pay, conditions set duties of the parties, and exclusions remove coverage.

Question 34General Insurance Concepts and Principles

What purpose do exclusions in a property or casualty policy serve?

  1. Setting the time allowed for filing a claim
  2. Establishing the premium payment schedule
  3. Removing exposures the insurer does not intend to cover Correct answer.
  4. Broadening coverage beyond the insuring agreement

Explanation

Exclusions eliminate coverage for exposures that are catastrophic, uninsurable, or better handled by another policy. They define the boundaries of the insuring agreement rather than expand it.

Question 35General Insurance Concepts and Principles

An insured reasonably relies on a producer's apparent ability to bind coverage, even though the insurer never granted that authority. The insurer may be bound under:

  1. Statutory authority
  2. Express authority
  3. Apparent authority Correct answer.
  4. Implied authority

Explanation

Apparent authority arises from the reasonable impression the insurer creates through its producer's words or conduct. The insurer can be bound even without actual authority if a third party reasonably relies on appearances.

Question 36General Insurance Concepts and Principles

Which contract characteristic describes insurance because the amounts exchanged depend on chance and are usually unequal?

  1. Conditional
  2. Aleatory Correct answer.
  3. Unilateral
  4. Personal

Explanation

An aleatory contract is one in which performance depends on an uncertain event, so the premium paid and the benefit received may be very unequal. Insurance is also conditional, unilateral, and personal, but chance-based imbalance is the aleatory feature.

Question 37General Insurance Concepts and Principles

After a total loss, an insured tells the insurer to take title to the burned building and pay the full policy limit. The insurer:

  1. Must accept the title and pay the limit
  2. Must sell the property and split the proceeds
  3. Must pay the limit and leave the property with the insured
  4. May decline to accept the damaged property Correct answer.

Explanation

Standard property policies state that the insurer is not obligated to accept abandonment of the insured property. The insured cannot force the insurer to take title, although the insurer is entitled to salvage after paying a total loss.

Question 38General Insurance Concepts and Principles

An insurer's ability to predict losses accurately improves as it insures a larger number of similar, independent exposure units. This is known as:

  1. Adverse selection
  2. The principle of indemnity
  3. Reinsurance
  4. The law of large numbers Correct answer.

Explanation

The law of large numbers holds that actual loss experience approaches expected experience as the number of similar independent units increases. This is why insurers seek broad, homogeneous pools of business.

Question 39General Insurance Concepts and Principles

Under a standard mortgage clause, the lender named on a property policy has the right to:

  1. Collect policy proceeds for its own use
  2. Receive loss payment to the extent of its interest Correct answer.
  3. Cancel the policy without notice to the insured
  4. Raise policy limits without the insured's consent

Explanation

A mortgage clause protects the lender's security interest by paying the lender up to the amount of its interest in the property. It also commonly lets the lender pay premium and receive notice of cancellation or nonrenewal.

Question 40General Insurance Concepts and Principles

Which of these is an insurable risk?

  1. A pure risk of accidental loss Correct answer.
  2. A risk that cannot be measured
  3. A speculative risk taken in a stock purchase
  4. A loss that is certain to happen

Explanation

Insurable risks are pure, accidental, measurable, and independent, with losses that are not catastrophic to the insurer. Speculative risks and certain losses are excluded because they involve gain potential or no uncertainty.

Question 41Property Insurance Basics and Policy Structure

In property insurance, the principle of insurable interest requires that the insured:

  1. The property must be located in the state where the policy is issued
  2. The insured must stand to lose financially if the property is damaged Correct answer.
  3. The insured must carry coverage equal to the full market value
  4. The insured must own the property outright with no mortgage

Explanation

Insurable interest means the insured has a pecuniary relationship with the property, so damage to it causes a genuine financial loss. Ownership is one way to establish that interest, but mortgagees, lessees, and bailees can also have an insurable interest. Without it, the contract would look like a wager rather than insurance.

Question 42Property Insurance Basics and Policy Structure

The principle of indemnity means that a property claim payment is intended to:

  1. Restore the insured to approximately the pre-loss financial position Correct answer.
  2. Punish the party whose negligence caused the loss
  3. Pay the full face amount of the policy for any covered loss, large or small
  4. Provide an opportunity for the insured to profit from a loss

Explanation

Indemnity puts the insured back where he or she stood financially before the loss, no better and no worse. That is why valuation methods such as actual cash value and limits of liability exist. It also explains why an insured generally cannot collect twice for the same loss.

Question 43Property Insurance Basics and Policy Structure

Which policy section identifies the named insured, the property location, the policy period, and the limits of insurance?

  1. Conditions
  2. Exclusions
  3. Declarations Correct answer.
  4. Insuring agreement

Explanation

The declarations page is the informational snapshot of the policy. It lists who is insured, what and where the property is, the term dates, and the applicable limits and deductibles. The remaining sections describe what is covered and under what terms.

Question 44Property Insurance Basics and Policy Structure

A property policy carries a $1,000 deductible. This means that the insured:

  1. Pays nothing on any covered loss
  2. Receives $1,000 in addition to the amount of the loss
  3. Pays $1,000 per year in additional premium
  4. Absorbs the first $1,000 of a covered loss Correct answer.

Explanation

A deductible is the portion of a covered loss the insured retains before the insurer pays. It is subtracted from the loss amount (or from the limit, depending on the form) when the claim is settled. Deductibles reduce small claims and help hold down premium.

Question 45Property Insurance Basics and Policy Structure

In property insurance terminology, a condition that increases the likelihood or severity of a loss is called a:

  1. Risk retention
  2. Peril
  3. Hazard Correct answer.
  4. Proximate cause

Explanation

A peril is the actual cause of loss, such as fire or windstorm, while a hazard is a condition that makes that peril more likely or more damaging. Faulty wiring and an unprotected swimming pool are examples of hazards. Underwriting and loss control efforts focus on identifying hazards.

Question 46Property Insurance Basics and Policy Structure

Actual cash value is best described as:

  1. Replacement cost minus depreciation Correct answer.
  2. The original purchase price of the property
  3. The outstanding balance of any mortgage on the property
  4. Replacement cost minus the policy deductible

Explanation

Actual cash value starts with the cost to replace the damaged property and then subtracts depreciation to reflect its used condition. The deductible is then applied separately when the claim is paid. Replacement cost coverage, by contrast, does not subtract depreciation.

Question 47Property Insurance Basics and Policy Structure

A binder provides:

  1. A permanent endorsement that the insurer cannot cancel mid-term
  2. A written guarantee that the premium will not increase during the term
  3. Temporary proof of coverage in force before the policy is issued Correct answer.
  4. A list of items excluded from coverage

Explanation

A binder is temporary evidence that coverage is in effect while the policy is being written or underwritten. Its terms are those of the policy to be issued, and it usually remains effective until the policy is issued or coverage is declined. It is not a promise about future premium.

Question 48Property Insurance Basics and Policy Structure

A building with a $500,000 replacement cost is insured for $300,000 under a policy containing an 80% coinsurance clause. A covered loss of $100,000 occurs. Ignoring any deductible, what amount does the insurer pay?

  1. $80,000
  2. $75,000 Correct answer.
  3. $100,000
  4. $60,000

Explanation

The coinsurance requirement is 80% of $500,000, or $400,000. The insured carries $300,000, which is 75% of the requirement, so the loss is paid at 75% of $100,000, or $75,000. The payment is also subject to the policy limit.

Question 49Property Insurance Basics and Policy Structure

Why do property policies contain exclusions?

  1. To let the insurer cancel coverage retroactively after a loss occurs
  2. To reduce the insurer's duty to defend the insured in liability suits
  3. To remove losses that are catastrophic, uninsurable, or covered elsewhere Correct answer.
  4. To increase the premium charged for high-risk or older property

Explanation

Exclusions keep the policy focused on the risks the insurer intends to underwrite. Catastrophic perils, losses that are uninsurable in principle, and exposures better handled by a separate policy are commonly excluded. Exclusions also help keep coverage affordable.

Question 50Property Insurance Basics and Policy Structure

After paying a covered loss caused by a negligent third party, an insurer's right of subrogation allows it to:

  1. Cancel the insured's policy without notice
  2. Reduce the claim payment by the amount of the deductible
  3. Seek reimbursement from the responsible third party Correct answer.
  4. Require the insured to repair the property before payment

Explanation

Subrogation transfers the insured's right of recovery against the responsible party to the insurer, to the extent of the payment made. It helps hold down premiums by placing the cost on the party at fault. The insured cannot do anything that impairs that right after a loss.