AFSB 151 Practice Exam Questions With 100% Correct Answers.

AFSB 151 Practice Exam Questions With 100% Correct Answers. Which one of the following characteristics is unique under American personal suretyship compared with corporate suretyship? Sureties were protected by laws that were favorable to them Except in the case of a forfeiture bond, if the principal defaults the surety will pay Up to the bond penalty, but no more than the obligee's actual loss amount CB Construction entered into a construction contract with Lee Properties. The contract required that CB Construction obtain a performance bond, with Lee Properties named as the obligee. Performance bonds guarantee that the obligee will be indemnified for any loss resulting from the principal's failure to perform the work According to the contract, plans, and specifications; at the agreed price; and within the time allowed Which of the following groups, for the most part, serves the market for fidelity and surety bonds in the United States? Multiline property-casualty insurers Which one of the following is an example of a third-party beneficiary on a given bond? An heir on a fiduciary executory bond Bonds under this classification guarantee that the principal will properly account for and remit government funds collected as required. Which license and permit bond classification is described? Tax or fee bonds The two basic types of surety bonds that are written today are Contract surety bonds and commercial surety bonds A basic type of bond that involves all situations in which sureties guarantee performance of obligations that generally do not arise from contract is Commercial surety bonds When evaluating a surety claim, claims representatives are often assisted by outside legal counsel. Which one of the following other professionals often assist claims representatives? Engineers The surety bond three-party relationship, the party who guarantees fulfillment of the obligation and who will either perform the obligation or pay the costs for its fulfillment is the Surety Paul has the legal responsibility for the care for his brother, who is a legally incompetent person, and for his brother's property. Paul is required to obtain a bond that guarantees he will exercise his duties faithfully and account for all property received. This bond is called A fiduciary bond 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 A plaintiff bond Bonds for which the laws specify the bond conditions and for which all three parties are dictated by the applicable law rather than the bond provisions are Statutory bonds A surety bond is a written document in which one party guarantees a second party's Performance to a third party for the second party's failure to fulfill an obligation Unless the cosureties limit their respective liabilities in a bond, when two or more cosureties execute a bond with the same principal, their liability to the obligee is Joint and several A group that educates the general public, legislative bodies, contractor associations, and others about the benefits of surety bonds is The National Association of Surety Bond Producers (NASBP) A surety's liability for a surety bond can only cease to exist when the underlying obligation/agreement has Been performed as specified in the contract or when the bond has been canceled Because most bonds are "joint and several liability" documents, the obligee can recover losses from The principal or the surety, or from both The Miller Act was passed to require principals, in addition to furnishing a performance bond, to furnish a separate payment bond guaranteeing payment of all bills incurred by the contractor For labor and materials at the project completion for all federal jobs Judicial bonds Are a category of court bonds that arise out of litigation and are posted by persons seeking or appealing a remedy in court 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 An administrator In accordance with a contract to build a county shed for the Village of Malcolm, Raymone Construction purchases a contract surety bond from SureRite Insurance. Identify the principal, obligee, and surety in this suretyship. Principal- Raymone Construction; obligee- Village of Malcolm; Surety- SureRite Insurance In an unlimited cosurety arrangement, the obligee can collect The full loss from any of the cosureties up to the penal sum of the bond WP Hospitality hired Green Builders to build a new hotel. As part of the contract, WP Hospitality required that Green Builders obtain a surety bond to guarantee that it would pay all subcontractors for their labor and materials. The payment bond was obtained from Blue Surety. Which one of the following is a potential third-party beneficiary in this surety relationship? Subcontractors Under a bid bond, if the bid is accepted and the principal refuses to enter into the contract or fails to provide the additional required bonds, subject to the penal amount of the bond, the obligee is generally entitled to be paid The difference between the amount of the principal's bid and the next lowest bid the obligee finally accepts Public official bonds are written for principals who have administrative duties but do not handle money and who Include commissioners, assessors, judges, coroners, town clerks, engineers, and auditors Ellen was planning a large family reunion at a local park. She wanted to reserve the picnic tables, and have use of the restrooms at the park. As a prerequisite to using the park, the township required that Ellen obtain a commercial surety bond. Which one of the following types of surety bonds would Ellen be required to obtain? Permit bond Jennifer is a producer for Goshen Insurance Agency. She is also the person at the agency responsible for selling and servicing surety bonds. Which of the following written documents do sureties use to authorize a producer to act as the surety's agent in bond production? A power of attorney Following the Civil War, the growing number of complexity of financial/commercial relationships led to the need for Corporate suretyship In the surety bond three-party relationship who is primarily responsible for fulfilling the obligation and who typically has control of the obligation is the Principal A bond that guarantees that faulty work will be corrected and defective materials will be replaced for a period of one year or less that is usually provided with a performance bond at no additional cost is a Maintenance bond In bonds under this classification, the surety pays the entire bond penalty if the principal fails to complete the obligations. Which one of the following bond classifications is described? Forfeiture bonds Which one of the following developed in the United States to guarantee the large amounts of money involved in the country's industrial and commercial growth? Corporate suretyship An organization that uses its collected data to calculate loss costs that member company underwriters use to determine premiums for risks is The Surety and Fidelity Association of America (SFAA) Under a public official bond guaranteeing honestly of a treasurer He or she must account for the cash that he or she holds while in office Which one of the following statements provides an accurate description of license and permit bonds or their use? Licenses help regulate license holders through statutes, regulations, or ordinances, and they are backed by license and permit bonds The establishment of the formal contract between the surety, principal, and obligee that is offered to the principal is called Execution of a bond A pre-set surety bond credit limit Eliminates the need to reevaluate the contractor's need for every bond To reach a reasonable rate of return for their bond risks Sureties pay competent underwriters and agents competitive salaries and commissions A contractor's percentage-of-completion estimates 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. Which one of these statements is true regarding the surety producer's role in a bonding relationship? The producer assists the contractor and the underwriter in the bond application and analyses; when the bond or credit line is approved by the underwriter, the producer assists with communication and continues as an integral part of the contractor's management team. Johnson Construction was approved for a $5 million/$20 million annual contract surety credit. A $5 million/$20 million contract surety credit line means that the surety is willing to 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 regarding a surety's capacity is true? If a contractor appears to be outgrowing the surety's capacity, the producer should arrange a backup surety with adequate capacity to replace the first surety before reaching capacity The most effective and credible form of promotion for surety producers is Word-of-mouth advertising and referrals from the producer's satisfied clients Which one of the following statements is true regarding surety producer's promotion? Participating in professional seminars and construction industry associations is an excellent way to communicate to a target audience Jay is a surety bond producer. After receiving a standard letter of authority from a surety, he is allowed to approve which one of the following types of bonds without the surety's approval? Bankruptcy bonds Sureties compete for commercial surety bonds in this category on the basis of service to the agent and to the client and they usually offer substantial price discounts for accounts with larger clients. Which one of these categories of bonds is described? License and permit and miscellaneous bonds In the next step of the bond prequalification process, once the producer has compiled the contractor's financial documents showing significant liquidity, The producer may facilitate underwriter interviews to help determine the contractor's experience in meeting past contractual obligations A surety bond credit line covers the contractor's normal, anticipated bond needs. If a special situation develops that would cause a contractor to exceed the credit line, then The contractor and the producer should discuss the merits of the case with the underwriter to determine the desirability of an increased credit line Which one of the following is a factor of marketing that requires the surety producer to have education, training, knowledge, skill, and organization to provide professional service that clients need? Product Each of the following steps is performed toward the beginning of the development of a contract surety business plan EXCEPT: Change goals and action steps as the agency's strengths and market conditions change Which one of these categories of court bonds is underwritten on the basis of the principal's financial capacity? Judicial bonds According to the law, companies that write credit enhancement financial guarantees Cannot write any other type of insurance within that company Alex is a contract surety bond underwriter. He expects that a surety producer will perform certain prequalification tasks before submitting a contractor as a prospective bond principal. Which one of the following prequalification responsibilities would include a clear and concise review of the contractor's company history, management, type of work, bidding history, trade and bank credit relationships, and five-year financial trend? Performing a credit analysis A pre-set credit line has which one of the following benefits? The limit enables the surety producer to service the contractor's normal bond needs more effectively and within the terms and conditions of the credit line A surety producer has developed a favorable percentage of the local bond market and has earned a reputation among local contractors for professional quality service. She has established which one of the following? Position Which one of the following categories of court bonds is written primarily on the basis of an attorney's character and reputation for trustworthiness? Fiduciary bonds When selecting a surety company for a bonding relationship with a contractor, The producer should consider the surety's suitability factors to the contractor's needs, including the sureties philosophies, financial capacity, stability, and comfort with the projects Field underwriting activities generally include which one of the following? Providing service to producers and policy holders As a loss control practice concerning large public official bonds, a surety may ask for which of the following to confirm that the governmental body has established an approved list of banks? Designation of depsitory