AFSB 151 EXAM 2026 STUDY GUIDE
TEST BANK QUESTIONS ANSWERS
VERIFIED A+
◉ Which one of the these groups, for the most part, serves the market
for fidelity and surety bonds in the United States? Answer: Multiline
property-casualty insurers
◉ Sureties use what written document to authorize a producer to act as
the surety's agent in bond production? Answer: A power of attorney
◉ While suretyship and banking both use a prequalification process to
extend credit to their customers, suretyship is different from bank credit
in that Answer: Suretyship guarantees performance as well as monetary
obligations.
◉ Because most bonds are "joint and several liability" documents, the
obligee can recover losses from Answer: The principal or the surety, or
from both.
◉ A financial guarantee differs from performance and fidelity
guarantees because it requires honesty, the ability to perform the
contract, and Answer: The ability to pay money to meet the contractual
obligation.
◉ A legal remedy that a surety can use against a defaulting bond
principal, in which the surety exercises its right to force the principal to
,perform by exhausting the principal's resources instead of its own, is
Answer: Exoneration
◉ In an unlimited cosurety arrangement, the obligee can collect Answer:
The full loss from any of the cosureties up to the penal sum of the bond.
◉ A bond that guarantees that faulty work will be corrected and
defective materials will be replaced for a period of one year or less and
that is usually provided with a performance bond at no additional cost is
a Answer: Maintenance bond
◉ A contract bond that guarantees the local governmental authority that
a principal will complete a development in accordance with approved
proposals and at the principal's expense is a Answer: Subdivision bond
◉ This classification of license and permit bonds poses the least risk to
the surety and guarantees that the principal will conform with laws that
govern the business or activity it conducts.
Which bond classification is described? Answer: Compliance-only
bonds
◉ Under a public official bond guaranteeing the honesty of a treasurer,
Answer: He or she must account for the cash that he or she holds while
in office.
,◉ Bond losses occur when a fiduciary and its surety are held
accountable because the fiduciary did not exercise reasonable care in
notifying all heirs of an impending probate proceeding. This fiduciary is
called Answer: An administrator
◉ A person who commences an action against another to obtain an
equitable remedy may be required to post a bond before the court will
proceed with the action. This bond is called Answer: A plaintiff bond
◉ The legally mandated hazardous waste facilities performance bond
Answer: Can be posted only for hazardous waste facilities with permits,
and it requires an underwriting review of the closure plan.
◉ The principal on a hazardous waste bond Answer: Is an owner or
operator of a hazardous waste facility and is responsible for closure and
postclosure care of the facility.
◉ In the next step of the bond prequalification process, once the
producer has compiled the contractor's financial documents showing
significant liquidity, Answer: The producer may facilitate underwriter
interviews to help determine the contractor's experience in meeting past
contractual obligations.
◉ A contractor's percentage-of-completion estimates Answer: Are based
on the contractor's ability to estimate the cost to complete the project and
recognize income and profit as they accrue during the project.
, ◉ A $5 million/$20 million contract surety credit line means that the
surety is willing to Answer: Bond single jobs up to a contract price of $5
million when the aggregate contract backlog does not exceed $20
million.
◉ Which one of the following statements is true regarding surety
producers' promotion? Answer: Participating in professional seminars
and construction industry associations is an excellent way to
communicate to a target audience.
◉ When developing one aspect of the business plan, the planning group
should consider their agency's philosophy and culture, management
quality and commitment, team motivation and dedication, resources, and
the continuity of ownership and management. Which one of the
following describes this aspect of the planning process? Answer:
Identify the agency's strengths and weaknesses
◉ Which one of these categories of court bonds is written primarily on
the basis of an attorney's character and reputation for trustworthiness?
Answer: Fiduciary bonds
◉ Producers of public official bonds serve themselves and their
prospective principals by Answer: Offering their services in September
after primary elections are over and the candidates are known.
◉ Staff underwriting activities generally include which one of the
following? Answer: Formulating underwriting policy
TEST BANK QUESTIONS ANSWERS
VERIFIED A+
◉ Which one of the these groups, for the most part, serves the market
for fidelity and surety bonds in the United States? Answer: Multiline
property-casualty insurers
◉ Sureties use what written document to authorize a producer to act as
the surety's agent in bond production? Answer: A power of attorney
◉ While suretyship and banking both use a prequalification process to
extend credit to their customers, suretyship is different from bank credit
in that Answer: Suretyship guarantees performance as well as monetary
obligations.
◉ Because most bonds are "joint and several liability" documents, the
obligee can recover losses from Answer: The principal or the surety, or
from both.
◉ A financial guarantee differs from performance and fidelity
guarantees because it requires honesty, the ability to perform the
contract, and Answer: The ability to pay money to meet the contractual
obligation.
◉ A legal remedy that a surety can use against a defaulting bond
principal, in which the surety exercises its right to force the principal to
,perform by exhausting the principal's resources instead of its own, is
Answer: Exoneration
◉ In an unlimited cosurety arrangement, the obligee can collect Answer:
The full loss from any of the cosureties up to the penal sum of the bond.
◉ A bond that guarantees that faulty work will be corrected and
defective materials will be replaced for a period of one year or less and
that is usually provided with a performance bond at no additional cost is
a Answer: Maintenance bond
◉ A contract bond that guarantees the local governmental authority that
a principal will complete a development in accordance with approved
proposals and at the principal's expense is a Answer: Subdivision bond
◉ This classification of license and permit bonds poses the least risk to
the surety and guarantees that the principal will conform with laws that
govern the business or activity it conducts.
Which bond classification is described? Answer: Compliance-only
bonds
◉ Under a public official bond guaranteeing the honesty of a treasurer,
Answer: He or she must account for the cash that he or she holds while
in office.
,◉ Bond losses occur when a fiduciary and its surety are held
accountable because the fiduciary did not exercise reasonable care in
notifying all heirs of an impending probate proceeding. This fiduciary is
called Answer: An administrator
◉ A person who commences an action against another to obtain an
equitable remedy may be required to post a bond before the court will
proceed with the action. This bond is called Answer: A plaintiff bond
◉ The legally mandated hazardous waste facilities performance bond
Answer: Can be posted only for hazardous waste facilities with permits,
and it requires an underwriting review of the closure plan.
◉ The principal on a hazardous waste bond Answer: Is an owner or
operator of a hazardous waste facility and is responsible for closure and
postclosure care of the facility.
◉ In the next step of the bond prequalification process, once the
producer has compiled the contractor's financial documents showing
significant liquidity, Answer: The producer may facilitate underwriter
interviews to help determine the contractor's experience in meeting past
contractual obligations.
◉ A contractor's percentage-of-completion estimates Answer: Are based
on the contractor's ability to estimate the cost to complete the project and
recognize income and profit as they accrue during the project.
, ◉ A $5 million/$20 million contract surety credit line means that the
surety is willing to Answer: Bond single jobs up to a contract price of $5
million when the aggregate contract backlog does not exceed $20
million.
◉ Which one of the following statements is true regarding surety
producers' promotion? Answer: Participating in professional seminars
and construction industry associations is an excellent way to
communicate to a target audience.
◉ When developing one aspect of the business plan, the planning group
should consider their agency's philosophy and culture, management
quality and commitment, team motivation and dedication, resources, and
the continuity of ownership and management. Which one of the
following describes this aspect of the planning process? Answer:
Identify the agency's strengths and weaknesses
◉ Which one of these categories of court bonds is written primarily on
the basis of an attorney's character and reputation for trustworthiness?
Answer: Fiduciary bonds
◉ Producers of public official bonds serve themselves and their
prospective principals by Answer: Offering their services in September
after primary elections are over and the candidates are known.
◉ Staff underwriting activities generally include which one of the
following? Answer: Formulating underwriting policy
