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LA Property & Casualty practice questions

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Question 1Insurance Principles and Concepts (risk, insurable interest, indemnity, contracts, insurer types, agency/authority)

Which of the following exposures is an example of a pure risk?

  1. A homeowner's exposure to fire damage Correct answer.
  2. Wagering money on the outcome of a sporting event
  3. Launching a new product in an untested market
  4. Investing retirement savings in the stock market

Explanation

Pure risk involves only the chance of loss or no loss, with no possibility of gain, and it is the type of risk insurance is designed to handle. Fire, windstorm, and liability exposures are pure risks.

Question 2Insurance Principles and Concepts (risk, insurable interest, indemnity, contracts, insurer types, agency/authority)

A homeowner buys a homeowners policy to protect against fire damage. Which risk management technique does the purchase represent?

  1. Retention
  2. Loss reduction
  3. Avoidance
  4. Transfer Correct answer.

Explanation

Transfer shifts the financial consequences of a loss to another party, and buying an insurance policy is the most common transfer technique because the insurer agrees to pay covered losses.

Question 3Insurance Principles and Concepts (risk, insurable interest, indemnity, contracts, insurer types, agency/authority)

In property insurance, an insured must have an insurable interest in the covered property at which point?

  1. At the time of the loss Correct answer.
  2. Only when the policy is delivered
  3. Continuously from application through expiration
  4. Only when the application is signed

Explanation

For property coverage, insurable interest is measured at the time of loss, because the coverage exists to make good an actual financial loss. Property acquired after the policy is written can still be covered, so continuous interest is not required.

Question 4Insurance Principles and Concepts (risk, insurable interest, indemnity, contracts, insurer types, agency/authority)

The principle of indemnity is intended to do which of the following?

  1. Guarantee that every damaged item is replaced with new property
  2. Restore the insured to the pre-loss financial position Correct answer.
  3. Punish the party who caused the loss
  4. Enable the insured to profit from a loss

Explanation

Indemnity means the insured is made whole, no better and no worse off than before the loss, which is why payment is generally limited to the actual amount of the loss.

Question 5Insurance Principles and Concepts (risk, insurable interest, indemnity, contracts, insurer types, agency/authority)

A stock insurance company is owned by which of the following?

  1. Its stockholders Correct answer.
  2. Its policyholders
  3. The producers who sell its policies
  4. The state department of insurance

Explanation

A stock insurer is a corporation owned by stockholders who supply the capital and may receive dividends from profits. Ownership by policyholders describes a mutual insurer instead.

Question 6Insurance Principles and Concepts (risk, insurable interest, indemnity, contracts, insurer types, agency/authority)

Authority that an insurer deliberately gives a producer in the agency agreement is called:

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

Explanation

Express authority is spelled out in the written agency agreement, such as the power to solicit applications and collect premiums. Implied and apparent authority arise in other ways.

Question 7Insurance Principles and Concepts (risk, insurable interest, indemnity, contracts, insurer types, agency/authority)

Which of the following is a physical hazard?

  1. A property owner who is careless about housekeeping
  2. An insured who exaggerates the value of a claim
  3. Frayed electrical wiring in an older home Correct answer.
  4. A neighborhood with a rising rate of vandalism

Explanation

A physical hazard is a tangible condition of the property or its surroundings that increases the chance of loss, such as defective wiring, oily rags, or a steep stairway.

Question 8Insurance Principles and Concepts (risk, insurable interest, indemnity, contracts, insurer types, agency/authority)

A roof has a replacement cost of $12,000 and has depreciated 40 percent. Using actual cash value, what will the insurer pay for a total loss of the roof, ignoring any deductible?

  1. $4,800
  2. $7,200 Correct answer.
  3. $6,000
  4. $12,000

Explanation

Actual cash value equals replacement cost minus depreciation, so $12,000 less 40 percent of $12,000 ($4,800) yields $7,200.

Question 9Insurance Principles and Concepts (risk, insurable interest, indemnity, contracts, insurer types, agency/authority)

An insurance contract is aleatory because:

  1. It is drafted by one party on a take-it-or-leave-it basis
  2. Only one party makes a legally enforceable promise
  3. Both parties exchange promises of equal value at the outset
  4. The parties exchange unequal amounts depending on chance Correct answer.

Explanation

In an aleatory contract the dollar values exchanged are not equal and depend on whether a loss occurs, so a small premium can produce a large claim payment.

Question 10Insurance Principles and Concepts (risk, insurable interest, indemnity, contracts, insurer types, agency/authority)

A contract of adhesion is best described as one that:

  1. Is binding only after the insured pays the first premium in full
  2. Requires the insured to promise to reduce the chance of loss
  3. Is drafted by one party and accepted or rejected by the other Correct answer.
  4. Is negotiated on equal terms by both parties before it takes effect

Explanation

Insurance policies are prepared by the insurer and offered to the applicant on a take-it-or-leave-it basis, so ambiguities are generally construed against the insurer.

Question 11Insurance Principles and Concepts (risk, insurable interest, indemnity, contracts, insurer types, agency/authority)

An insurance policy is a unilateral contract because:

  1. The insured may cancel at any time without any consequence
  2. Only the insurer makes a legally enforceable promise Correct answer.
  3. Its ambiguous terms are interpreted in favor of the insured
  4. Both parties are bound by promises from the moment of application

Explanation

Only the insurer makes an enforceable promise to pay covered claims. The insured makes no enforceable promise and cannot be sued for failing to pay future premiums, although coverage may lapse.

Question 12Insurance Principles and Concepts (risk, insurable interest, indemnity, contracts, insurer types, agency/authority)

An applicant intentionally says nothing about a prior fire loss that the insurer would consider important. This failure to disclose is known as:

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

Explanation

Concealment is the intentional withholding of a material fact from the insurer. Because insurance is a contract of utmost good faith, material concealment can allow the insurer to rescind the policy.

Question 13Insurance Principles and Concepts (risk, insurable interest, indemnity, contracts, insurer types, agency/authority)

In insurance, a warranty is best described as:

  1. A temporary agreement providing coverage until the policy is issued
  2. A statement believed true to the best of the applicant's knowledge
  3. A promise that a specified condition of the policy is true Correct answer.
  4. An oral statement made to a producer during the application process

Explanation

A warranty is a promise by the insured that a stated condition is true, and a breach may affect coverage depending on the policy language and applicable law. A representation, by contrast, is a statement believed true to the best of the applicant's knowledge.

Question 14Insurance Principles and Concepts (risk, insurable interest, indemnity, contracts, insurer types, agency/authority)

An insurer learns that its insured breached a policy condition but continues to handle the claim without reserving its rights. The insurer may later be barred from denying coverage under which doctrine?

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

Explanation

By waiving a known right and letting the insured rely on its continued handling of the claim, the insurer is estopped from later asserting that right. Waiver is the relinquishment; estoppel is the legal bar that follows.

Question 15Insurance Principles and Concepts (risk, insurable interest, indemnity, contracts, insurer types, agency/authority)

A producer who has no written power to bind coverage tells an applicant that coverage is bound. The insurer's past practice of letting producers bind coverage led the applicant to reasonably believe the producer had that power. The producer acted with:

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

Explanation

Apparent authority arises from the insurer's conduct that creates a reasonable belief in a third party that the producer has authority, and the insurer may be bound by that belief.

Question 16Insurance Principles and Concepts (risk, insurable interest, indemnity, contracts, insurer types, agency/authority)

A producer deposits premiums collected from insureds into a personal bank account. This misconduct is called:

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

Explanation

A producer holds premium money in a fiduciary capacity and must keep it separate from personal funds. Mixing the two is commingling, which is prohibited and can lead to license action.

Question 17Insurance Principles and Concepts (risk, insurable interest, indemnity, contracts, insurer types, agency/authority)

Reinsurance arranged by a ceding insurer for one individual risk, negotiated case by case, is called:

  1. Facultative reinsurance Correct answer.
  2. Coinsurance
  3. Reciprocal reinsurance
  4. Treaty reinsurance

Explanation

Facultative reinsurance is purchased risk by risk, and the reinsurer may accept or decline each submission. Treaty reinsurance instead covers a defined class or volume of business automatically.

Question 18Insurance Principles and Concepts (risk, insurable interest, indemnity, contracts, insurer types, agency/authority)

The tendency of applicants most likely to suffer a loss to seek insurance more actively than average applicants is called:

  1. Moral hazard
  2. Adverse selection Correct answer.
  3. Law of large numbers
  4. Risk retention

Explanation

Adverse selection is the concentration of poorer-than-average risks in an insurance pool. Underwriters guard against it with application questions, inspections, and policy exclusions.

Question 19Insurance Principles and Concepts (risk, insurable interest, indemnity, contracts, insurer types, agency/authority)

An insured becomes indifferent about locking the doors of a covered building because any claim would be paid anyway. This attitude is:

  1. A moral hazard
  2. A speculative risk
  3. A morale hazard Correct answer.
  4. A physical hazard

Explanation

Morale hazard is carelessness or indifference toward loss that arises because insurance exists. Moral hazard, by contrast, involves intentional dishonesty.

Question 20Insurance Principles and Concepts (risk, insurable interest, indemnity, contracts, insurer types, agency/authority)

An insurer pays its insured $18,000 for fire damage caused by a negligent contractor, then sues the contractor for that amount. The insurer is exercising:

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

Explanation

Subrogation gives the insurer, after paying a loss, the insured's right to recover from the party that caused it. This prevents the insured from collecting twice and places the cost on the responsible party.

Question 21Insurance Principles and Concepts (risk, insurable interest, indemnity, contracts, insurer types, agency/authority)

Under a valued policy law, when a building is a total loss from a covered peril, the insurer must:

  1. Pay the full amount shown on the policy's declarations Correct answer.
  2. Pay the policy limit reduced by depreciation and the deductible
  3. Pay only the actual cash value set by an independent appraiser
  4. Pay the outstanding mortgage balance owed by the insured

Explanation

A valued policy law treats the amount written on the policy as the agreed value of the insured building, so a total loss requires payment of that full amount regardless of actual cash value.

Question 22Insurance Principles and Concepts (risk, insurable interest, indemnity, contracts, insurer types, agency/authority)

When a written insurance policy is clear and complete, oral statements made before it was issued generally cannot be used to alter its terms. This rule is known as the:

  1. Rule of adhesion
  2. Principle of indemnity
  3. Doctrine of reasonable expectations
  4. Parol evidence rule Correct answer.

Explanation

The parol evidence rule makes a complete written agreement the final expression of the parties' intent, so prior or contemporaneous oral statements generally cannot change it.

Question 23Insurance Principles and Concepts (risk, insurable interest, indemnity, contracts, insurer types, agency/authority)

A building with a replacement cost of $400,000 is insured for $240,000 under a policy containing an 80 percent coinsurance clause. A covered partial loss of $60,000 occurs. Ignoring the deductible, how much will the insurer pay?

  1. $48,000
  2. $45,000 Correct answer.
  3. $36,000
  4. $60,000

Explanation

The coinsurance requirement is 80 percent of $400,000, or $320,000. Because the insured carried only $240,000, the recovery is ($240,000 divided by $320,000) times $60,000, which equals $45,000.

Question 24Insurance Principles and Concepts (risk, insurable interest, indemnity, contracts, insurer types, agency/authority)

An applicant submits a completed application and the first premium for a $250,000 policy. The insurer issues a policy with a $150,000 limit. In contract terms, the insurer has:

  1. Made a binding unilateral amendment to the policy
  2. Revoked an offer that had already been accepted
  3. Accepted the applicant's offer exactly as submitted
  4. Rejected the offer and made a counteroffer Correct answer.

Explanation

Acceptance must mirror the terms of the offer. Issuing a policy with a lower limit is a counteroffer, which the applicant may accept or reject, so no coverage exists under the original terms unless the applicant agrees.

Question 25Louisiana Insurance Laws, Rules, and Regulations (licensing, producer duties, unfair trade practices, CE, guaranty associations)

In Louisiana, how is the Commissioner of Insurance selected?

  1. Appointed by the governor to a four-year term
  2. Chosen by a vote of licensed insurers and producers
  3. Appointed by the legislature for a six-year term
  4. Elected by the voters to a four-year term Correct answer.

Explanation

Louisiana is one of the states where the insurance regulator is a statewide elected official rather than an appointee. The Commissioner heads the Louisiana Department of Insurance and serves a four-year term.

Question 26Louisiana Insurance Laws, Rules, and Regulations (licensing, producer duties, unfair trade practices, CE, guaranty associations)

A new employee of an agency wants to quote and sell homeowners policies in Louisiana while a license application is pending. Which statement is correct?

  1. Selling is allowed if a licensed producer reviews the paperwork afterward
  2. The person must hold a current Louisiana producer license before soliciting or selling Correct answer.
  3. Selling may begin immediately and continue for 30 days while the application is pending
  4. Selling is allowed once the insurer promises to appoint the person

Explanation

Louisiana requires a person to hold a valid producer license for the applicable line before soliciting, negotiating, or selling insurance. Acting without a license is unlawful regardless of supervision or a promise of later appointment.

Question 27Louisiana Insurance Laws, Rules, and Regulations (licensing, producer duties, unfair trade practices, CE, guaranty associations)

Before sitting for the licensing examination, a Louisiana resident applying for a property and casualty producer license generally must do what?

  1. Finish a state-approved prelicensing course Correct answer.
  2. Obtain written sponsorship from an insurer
  3. Complete twelve hours of continuing education
  4. Post a surety bond with the Department of Insurance

Explanation

Louisiana requires resident license applicants to complete Department-approved prelicensing education before taking the licensing exam. Continuing education applies to already-licensed producers, and no bond or insurer sponsorship is required to sit for the exam.

Question 28Louisiana Insurance Laws, Rules, and Regulations (licensing, producer duties, unfair trade practices, CE, guaranty associations)

How much continuing education must a Louisiana resident producer complete during each two-year license period?

  1. 12 hours, including 2 hours of ethics
  2. 24 hours, including 3 hours of ethics Correct answer.
  3. 16 hours, including 3 hours of ethics
  4. 8 hours, including 1 hour of ethics

Explanation

Louisiana requires resident producers to complete 24 hours of approved continuing education every two years, at least 3 of which must be in ethics. Credit is granted only for courses approved by the Department of Insurance.

Question 29Louisiana Insurance Laws, Rules, and Regulations (licensing, producer duties, unfair trade practices, CE, guaranty associations)

A producer lives in Mississippi, holds a Mississippi resident license in good standing that requires continuing education, and is licensed as a Louisiana nonresident. How does the producer satisfy Louisiana's continuing education requirement?

  1. By completing ethics courses only
  2. By completing the full Louisiana continuing education requirement
  3. By doing nothing, because nonresidents are never subject to continuing education
  4. By meeting the home state's continuing education requirement Correct answer.

Explanation

Louisiana honors continuing education reciprocity for nonresident producers in good standing whose home state imposes a continuing education requirement. The producer complies with the home state's requirement instead of duplicating Louisiana courses.

Question 30Louisiana Insurance Laws, Rules, and Regulations (licensing, producer duties, unfair trade practices, CE, guaranty associations)

A newly contracted producer may begin writing business for an insurer only after which step occurs?

  1. The Commissioner reviews the producer's resume
  2. The producer completes 24 hours of continuing education
  3. The insurer files an appointment with the Department of Insurance Correct answer.
  4. The producer pays a separate appointment fee to the state

Explanation

Producers act for an insurer only after the insurer files the required appointment with the Department of Insurance. A producer may hold a license but still may not write for a particular insurer until that insurer appoints the producer.

Question 31Louisiana Insurance Laws, Rules, and Regulations (licensing, producer duties, unfair trade practices, CE, guaranty associations)

To persuade a client to replace an existing policy, an agent falsely tells the client that the current insurer is about to become insolvent. How is this conduct classified?

  1. Prohibited as twisting Correct answer.
  2. Permitted if the replacement policy costs less
  3. Prohibited only if the client actually cancels the policy
  4. Permitted if the agent discloses the commission earned

Explanation

Twisting is a misrepresentation made to induce a policyholder to lapse, surrender, or replace coverage. It is a prohibited unfair trade practice whether or not the replacement ultimately occurs.

Question 32Louisiana Insurance Laws, Rules, and Regulations (licensing, producer duties, unfair trade practices, CE, guaranty associations)

Which action by a Louisiana producer constitutes illegal rebating?

  1. Comparing the policy with a competitor's coverage
  2. Charging the premium rate filed with the Department
  3. Explaining a policy's exclusions to an applicant
  4. Paying part of the applicant's premium personally Correct answer.

Explanation

Rebating is offering an inducement not specified in the policy, such as paying part of the premium or giving something of value to win the sale. Louisiana prohibits rebating because it results in unequal treatment of applicants for the same coverage.

Question 33Louisiana Insurance Laws, Rules, and Regulations (licensing, producer duties, unfair trade practices, CE, guaranty associations)

Two applicants present identical risk characteristics for the same homeowners coverage, but the insurer charges one more solely because of the applicant's race. How should this be characterized?

  1. Unfair discrimination, which is prohibited Correct answer.
  2. Lawful if the rating plan is filed with the state
  3. Lawful if the agent agrees to the rate
  4. Lawful underwriting classification

Explanation

Unfair discrimination occurs when individuals of the same class and essentially the same hazard are treated differently without a sound actuarial basis. Distinctions based on race are unlawful, and filing the rating plan does not make them permissible.

Question 34Louisiana Insurance Laws, Rules, and Regulations (licensing, producer duties, unfair trade practices, CE, guaranty associations)

An insurer warns a mortgage lender that it will stop doing business with the lender unless the lender channels all of its insurance business to that insurer. This conduct is best described as which prohibited practice?

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

Explanation

Coercion and intimidation, including threatening economic harm to restrain a party's choice of insurer, are prohibited unfair trade practices. Competition must be conducted without restraining another party's freedom to select coverage.

Question 35Louisiana Insurance Laws, Rules, and Regulations (licensing, producer duties, unfair trade practices, CE, guaranty associations)

A producer's advertisement promises that a policy pays 'every claim with no exclusions,' but the policy actually contains major exclusions. What is the status of this advertisement?

  1. Acceptable if the insurer approved the wording
  2. An unfair trade practice, because it is misleading Correct answer.
  3. Acceptable if no consumer has complained yet
  4. Acceptable, because advertising is not regulated

Explanation

False or misleading advertising about the terms, benefits, or conditions of a policy is a prohibited unfair trade practice. Insurer approval or the absence of complaints does not cure materially misleading statements.

Question 36Louisiana Insurance Laws, Rules, and Regulations (licensing, producer duties, unfair trade practices, CE, guaranty associations)

An agent circulates a false written statement that a competing insurer is insolvent and cannot pay claims. Under Louisiana insurance law, this is best described as which prohibited practice?

  1. Prohibited only if the competitor files suit
  2. Permitted, because financial strength is a legitimate topic
  3. Prohibited, as defamation of an insurer Correct answer.
  4. A permissible comparison of financial ratings

Explanation

Publishing a false statement that is derogatory to the financial condition or business conduct of an insurer is defamation and is a prohibited unfair trade practice. Accuracy of comparative statements is essential to lawful competition.

Question 37Louisiana Insurance Laws, Rules, and Regulations (licensing, producer duties, unfair trade practices, CE, guaranty associations)

Which insurers are required to be members of the Louisiana Insurance Guaranty Association?

  1. Only surplus lines insurers
  2. Insurers authorized to write property and casualty insurance in Louisiana Correct answer.
  3. Only insurers domiciled in Louisiana
  4. Only insurers writing life and health insurance

Explanation

LIGA is the property and casualty guaranty association, and membership is a condition of holding a certificate of authority to write those lines in Louisiana. Life and health insurers are covered by a separate guaranty association, and unauthorized insurers do not belong to LIGA.

Question 38Louisiana Insurance Laws, Rules, and Regulations (licensing, producer duties, unfair trade practices, CE, guaranty associations)

What is the maximum amount LIGA will pay on a covered claim, and what deductible applies to each claim?

  1. There is no limit, and a $50 deductible applies
  2. $100,000, with a $250 deductible
  3. $500,000, with no deductible
  4. $300,000, with a $100 deductible Correct answer.

Explanation

LIGA pays covered claims up to $300,000 per claim, and a $100 deductible is applied to each covered claim. Claims above the statutory cap are not paid by the guaranty association, and the insured may have an unsecured claim in the insolvency for the excess.

Question 39Louisiana Insurance Laws, Rules, and Regulations (licensing, producer duties, unfair trade practices, CE, guaranty associations)

What is the purpose of Louisiana Citizens Property Insurance Corporation?

  1. To insure property owners who cannot obtain coverage in the voluntary market Correct answer.
  2. To provide reinsurance only to Louisiana domestic insurers
  3. To pay the claims of insurers that have been declared insolvent
  4. To set rates for all property insurers in the state

Explanation

Louisiana Citizens Property Insurance Corporation is the state's residual market insurer, serving property owners who cannot obtain coverage from authorized insurers in the voluntary market. It writes policies rather than regulating rates or paying insolvency claims, which is LIGA's function.

Question 40Louisiana Insurance Laws, Rules, and Regulations (licensing, producer duties, unfair trade practices, CE, guaranty associations)

Which statement about hurricane or named-storm deductibles in Louisiana homeowners policies is correct?

  1. They may be applied retroactively after a loss has been reported to the insurer
  2. They apply only to commercial policies and never to homeowners coverage
  3. They must be clearly disclosed and apply only when the defined named-storm trigger occurs Correct answer.
  4. They apply automatically to any windstorm causing damage above the policy deductible

Explanation

Louisiana law requires insurers to clearly disclose any hurricane or named-storm deductible and to apply it only when the defined trigger occurs. Applying such a deductible to storms that do not meet the definition is improper.

Question 41Louisiana Insurance Laws, Rules, and Regulations (licensing, producer duties, unfair trade practices, CE, guaranty associations)

A person who investigates and negotiates property damage claims on behalf of an insurer in Louisiana must do which of the following?

  1. Be licensed as a public adjuster
  2. Hold a producer license
  3. Be a licensed attorney
  4. Hold an adjuster license Correct answer.

Explanation

Louisiana licenses adjusters who investigate and settle claims for insurers, including catastrophe adjusters working under emergency licensing provisions after a disaster. A producer license and a public adjuster license serve different roles in the claims process.

Question 42Louisiana Insurance Laws, Rules, and Regulations (licensing, producer duties, unfair trade practices, CE, guaranty associations)

A homeowner hires a public adjuster to handle a fire claim. Which statement is correct?

  1. The public adjuster must have a written contract with the insured before representing the insured Correct answer.
  2. The public adjuster may also be employed by the insurer on the same claim
  3. The public adjuster must be licensed as a producer with a casualty line of authority
  4. The public adjuster may charge any contingency fee without a written contract

Explanation

Public adjusters must be licensed and must enter into a written contract with the insured before representing the insured in a claim. The public adjuster represents the insured only and may not also act for the insurer on the same claim.

Question 43Louisiana Insurance Laws, Rules, and Regulations (licensing, producer duties, unfair trade practices, CE, guaranty associations)

An insured intentionally adds items to a fire loss claim that were never in the home. How does Louisiana law treat this conduct?

  1. It is permitted if the insurer pays less than the policy limit
  2. It is insurance fraud and may be prosecuted criminally Correct answer.
  3. It is a civil matter only, with no criminal exposure
  4. It is permitted if the insured withdraws the items before payment

Explanation

Knowingly presenting a false or inflated claim is insurance fraud, and Louisiana provides criminal penalties as well as civil exposure. The insurer may also deny the claim and pursue recovery of amounts already paid.

Question 44Louisiana Insurance Laws, Rules, and Regulations (licensing, producer duties, unfair trade practices, CE, guaranty associations)

A producer wants to place coverage with an insurer that is not authorized to do business in Louisiana. What does the law require?

  1. The producer must hold surplus lines authority and place the risk with an eligible surplus lines insurer Correct answer.
  2. The producer may place it if the unauthorized insurer agrees to pay Louisiana premium tax
  3. Any licensed producer may place it if the insured signs a consent form
  4. The producer may place it for commercial risks without any special license

Explanation

Placing business with an unauthorized insurer is unlawful unless the producer holds a surplus lines license and places the risk with an insurer on the eligible surplus lines list after a diligent search of the authorized market. A producer who improperly places business with an unauthorized insurer may be personally liable for the premium tax and subject to discipline.

Question 45Louisiana Insurance Laws, Rules, and Regulations (licensing, producer duties, unfair trade practices, CE, guaranty associations)

Under Louisiana law, after receiving satisfactory proof of loss on a property claim, an insurer must pay the amount due within how many days?

  1. Sixty days
  2. Ten days
  3. Fifteen days
  4. Thirty days Correct answer.

Explanation

Louisiana requires an insurer to pay a claim within thirty days after receipt of satisfactory proof of loss. When the failure to pay is arbitrary and capricious, the insurer may owe a penalty of up to fifty percent of the amount due plus attorney fees.

Question 46Louisiana Insurance Laws, Rules, and Regulations (licensing, producer duties, unfair trade practices, CE, guaranty associations)

A licensed Louisiana producer changes residence and mailing address. What is required?

  1. Notify only the insurers that appointed the producer
  2. No notice is required if the producer keeps the same phone number
  3. Wait until the next license renewal to report the change
  4. Notify the Department of Insurance within 30 days Correct answer.

Explanation

Licensees must keep the Department of Insurance informed of a current address, and the change must be reported within 30 days. Department notices, including renewal and disciplinary notices, are sent to the address of record.

Question 47Louisiana Insurance Laws, Rules, and Regulations (licensing, producer duties, unfair trade practices, CE, guaranty associations)

How often must a Louisiana producer license be renewed?

  1. Every four years
  2. Every two years Correct answer.
  3. Only when the producer changes insurers
  4. Annually, on January 1

Explanation

Louisiana producer licenses are renewed on a biennial basis, subject to completion of continuing education and payment of the renewal fee. Failing to renew terminates the authority to transact insurance until the license is reinstated or reissued.

Question 48Louisiana Insurance Laws, Rules, and Regulations (licensing, producer duties, unfair trade practices, CE, guaranty associations)

A producer collects a $2,000 premium from a client and deposits it into the agency's general operating account, using part of it to pay office rent. How should this be characterized?

  1. A breach of fiduciary duty, because premium funds must be held in a fiduciary capacity Correct answer.
  2. Acceptable if the client is told about the practice
  3. Acceptable, because small agencies are exempt from trust requirements
  4. Acceptable if the insurer is paid within 90 days

Explanation

Premiums collected from insureds are held in a fiduciary capacity for the insurer and must be accounted for and remitted as required. Commingling premium funds with operating money and spending them on agency expenses is a breach of that fiduciary duty and grounds for discipline.

Question 49Property Insurance Fundamentals (policy structure, coverage forms, limits, deductibles, coinsurance, valuation, exclusions)

Which section of a standard property policy identifies the named insured, the policy period, the covered locations, the limits of insurance, and the deductible?

  1. The insuring agreement
  2. The declarations Correct answer.
  3. The exclusions
  4. The conditions

Explanation

The declarations page is the summary page of the policy: it names the insured, states the policy term, lists covered locations, shows the limits and deductible, and states the premium. It does not itself grant or remove coverage.

Question 50Property Insurance Fundamentals (policy structure, coverage forms, limits, deductibles, coinsurance, valuation, exclusions)

The insuring agreement in a property policy performs which function?

  1. It identifies the deductible that applies to each occurrence
  2. It states the insurer's promise to pay for covered loss Correct answer.
  3. It lists the duties the insured must perform after a loss
  4. It describes the appraisal process for disputed losses

Explanation

The insuring agreement is the heart of the coverage grant: it sets out the insurer's promise to pay and identifies the perils and property covered. The remaining policy sections support, limit, or condition that promise.