California Insurance Exam
CALIFORNIA INSURANCE EXAM ACTUAL EXAM 400 QUESTIONS
AND CORRECT DETAILED ANSWERS (VERIFIED ANSWERS)
||ALREADY GRADED A+||BRAND NEW VERSION!!
Jim is applying to become an insurance agent and has a past misdemeanor conviction that was
later expunged due to California Penal Code 1203.4. Which of the following statements is
correct? - ANSWER-Jim must still disclose the conviction on his insurance license application
Pete is a life agent who has misappropriated fiduciary funds to his own use. What is Pete guilty
of? - ANSWER-theft
The California Insurance Code requires than an insurer must have enough assets to cover its
liabilities and for reinsurance of all outstanding risks. To remain solvent, it must also possess
additional assets equal to what amount? - ANSWER-Its paid-in capital
What does the term "indemnity" mean as it pertains to insurance? - ANSWER-To make whole
ABC Insurance Company paid an insured $30,000 in lost wages, $35,000 for hospital costs, and
$20,000 for physical therapy treatments. ABC later discovers this was a fraudulent claim. How
much may the insured be fined? - ANSWER-$170,000
According to PPACA, what is a health benefits exchange? - ANSWER-An entity to which
individuals and small businesses can have access to affordable health coverage
What is an insurance solicitor authorized to do? - ANSWER-Help an agent or broker sell
insurance
1|Page
, California Insurance Exam
What is required after a life agent sells an insurance policy to an applicant without being
appointed by the insurer? - ANSWER-Notice of appointment must be submitted to the
Commissioner
The medical enrollment tier that has 80% actuarial value is called - ANSWER-gold
When intentional concealment is involved, what course of action is the injured party entitled
to? - ANSWER-Rescission of the contract
MRMIP stands for - ANSWER-Major Risk Medical Insurance Program
People with low income can be provided with medical assistance through which program? -
ANSWER-Medi-Cal
Which of the following is NOT considered to be an act of insurance solicitation? - ANSWER-
Publishing a magazine where one of the advertisers is an insurer
A person who asserts a right of recovery under an insurance policy is called - ANSWER-claimant
Which of the following is NOT protected under the California Life and Health Guarantee
Association? - ANSWER-Insurers
Which type of jurisdiction requires an insurer to have its rates accepted by the Insurance
Department prior to using them? - ANSWER-prior approval
How are health plans classified according to the Affordable Care Act? - ANSWER-Bronze, Silver,
Gold, Platinum
2|Page
, California Insurance Exam
How would a grandfathered health plan lose its grandfathered status? - ANSWER-The insurer
significantly raises co-insurance charges, deductibles, or co-payment charges
Group dental plans will frequently place a limit on annual benefits in order to minimize -
ANSWER-adverse selection
A life insurance company has transferred some of its risk to another insurer. The insurer
assuming the risk is called the - ANSWER-reinsurer
A type of insurer that is owned by its policyowners is called - ANSWER-mutual
An insurer's ability to make unpredictable payouts to policyowners is called - ANSWER-liquidity
Karen is a producer who has obtained personal information about a client without having a
legitimate reason to do so. Under the McCarran-Ferguson Act, what is the minimum penalty for
this? - ANSWER-$10,000
Ken is a producer who has obtained Consumer Information Reports under false pretenses.
Under the Fair Credit Reporting Act, what is the maximum penalty that may be imposed on
Ken? - ANSWER-$5,000
The Fair Credit and Reporting Act's main purpose is to - ANSWER-protect consumers with
guidelines regarding credit reporting and distribution
A nonparticipating company is sometimes called - ANSWER-stock insurer
A plan in which an employer pays insurance benefits from a fund derived from the employer's
current revenues is called - ANSWER-A self-funded plan
3|Page
, California Insurance Exam
An insurer's claim settlement practices are regulated by the - ANSWER-State insurance
departments
What is pure risk vs speculative risk? - ANSWER-Pure risk is a category in which loss is the only
possible outcome, which is the opposite of speculative risk
How do insurers predict the increase of individual risks? - ANSWER-law of large numbers
What is known as the immediate specific event causing loss and giving rise to risk? - ANSWER-
Peril (i.e. when an individual is in an accident, the accident is the peril: when a building burns,
fire is the peril)
Which is considered to be an event or condition that increases the probability of an insured's
loss? - ANSWER-Hazard
Insurance represents the process of risk - ANSWER-transference
People with higher loss exposure have the tendency to purchase insurance more often than
those at average risk. This is called - ANSWER-adverse selection
In an insurance contract, the element that shows each party is giving something of value is
called - ANSWER-consideration
Which word implies permissiveness according to the California Insurance Code? - ANSWER-May
What effect did the Pregnancy Discrimination Act have on the health industry? - ANSWER-
Pregnancy must be treated as any other medical condition
4|Page
CALIFORNIA INSURANCE EXAM ACTUAL EXAM 400 QUESTIONS
AND CORRECT DETAILED ANSWERS (VERIFIED ANSWERS)
||ALREADY GRADED A+||BRAND NEW VERSION!!
Jim is applying to become an insurance agent and has a past misdemeanor conviction that was
later expunged due to California Penal Code 1203.4. Which of the following statements is
correct? - ANSWER-Jim must still disclose the conviction on his insurance license application
Pete is a life agent who has misappropriated fiduciary funds to his own use. What is Pete guilty
of? - ANSWER-theft
The California Insurance Code requires than an insurer must have enough assets to cover its
liabilities and for reinsurance of all outstanding risks. To remain solvent, it must also possess
additional assets equal to what amount? - ANSWER-Its paid-in capital
What does the term "indemnity" mean as it pertains to insurance? - ANSWER-To make whole
ABC Insurance Company paid an insured $30,000 in lost wages, $35,000 for hospital costs, and
$20,000 for physical therapy treatments. ABC later discovers this was a fraudulent claim. How
much may the insured be fined? - ANSWER-$170,000
According to PPACA, what is a health benefits exchange? - ANSWER-An entity to which
individuals and small businesses can have access to affordable health coverage
What is an insurance solicitor authorized to do? - ANSWER-Help an agent or broker sell
insurance
1|Page
, California Insurance Exam
What is required after a life agent sells an insurance policy to an applicant without being
appointed by the insurer? - ANSWER-Notice of appointment must be submitted to the
Commissioner
The medical enrollment tier that has 80% actuarial value is called - ANSWER-gold
When intentional concealment is involved, what course of action is the injured party entitled
to? - ANSWER-Rescission of the contract
MRMIP stands for - ANSWER-Major Risk Medical Insurance Program
People with low income can be provided with medical assistance through which program? -
ANSWER-Medi-Cal
Which of the following is NOT considered to be an act of insurance solicitation? - ANSWER-
Publishing a magazine where one of the advertisers is an insurer
A person who asserts a right of recovery under an insurance policy is called - ANSWER-claimant
Which of the following is NOT protected under the California Life and Health Guarantee
Association? - ANSWER-Insurers
Which type of jurisdiction requires an insurer to have its rates accepted by the Insurance
Department prior to using them? - ANSWER-prior approval
How are health plans classified according to the Affordable Care Act? - ANSWER-Bronze, Silver,
Gold, Platinum
2|Page
, California Insurance Exam
How would a grandfathered health plan lose its grandfathered status? - ANSWER-The insurer
significantly raises co-insurance charges, deductibles, or co-payment charges
Group dental plans will frequently place a limit on annual benefits in order to minimize -
ANSWER-adverse selection
A life insurance company has transferred some of its risk to another insurer. The insurer
assuming the risk is called the - ANSWER-reinsurer
A type of insurer that is owned by its policyowners is called - ANSWER-mutual
An insurer's ability to make unpredictable payouts to policyowners is called - ANSWER-liquidity
Karen is a producer who has obtained personal information about a client without having a
legitimate reason to do so. Under the McCarran-Ferguson Act, what is the minimum penalty for
this? - ANSWER-$10,000
Ken is a producer who has obtained Consumer Information Reports under false pretenses.
Under the Fair Credit Reporting Act, what is the maximum penalty that may be imposed on
Ken? - ANSWER-$5,000
The Fair Credit and Reporting Act's main purpose is to - ANSWER-protect consumers with
guidelines regarding credit reporting and distribution
A nonparticipating company is sometimes called - ANSWER-stock insurer
A plan in which an employer pays insurance benefits from a fund derived from the employer's
current revenues is called - ANSWER-A self-funded plan
3|Page
, California Insurance Exam
An insurer's claim settlement practices are regulated by the - ANSWER-State insurance
departments
What is pure risk vs speculative risk? - ANSWER-Pure risk is a category in which loss is the only
possible outcome, which is the opposite of speculative risk
How do insurers predict the increase of individual risks? - ANSWER-law of large numbers
What is known as the immediate specific event causing loss and giving rise to risk? - ANSWER-
Peril (i.e. when an individual is in an accident, the accident is the peril: when a building burns,
fire is the peril)
Which is considered to be an event or condition that increases the probability of an insured's
loss? - ANSWER-Hazard
Insurance represents the process of risk - ANSWER-transference
People with higher loss exposure have the tendency to purchase insurance more often than
those at average risk. This is called - ANSWER-adverse selection
In an insurance contract, the element that shows each party is giving something of value is
called - ANSWER-consideration
Which word implies permissiveness according to the California Insurance Code? - ANSWER-May
What effect did the Pregnancy Discrimination Act have on the health industry? - ANSWER-
Pregnancy must be treated as any other medical condition
4|Page
