California Property & Casualty: Casualty Insurance Basics

Correct

The answer is B: Burglary insurance

Burglary is class 12 in Ins. Code §100, and loss from burglary or theft is damage to property, which a property broker-agent license covers (§1625). Life is a separate class that needs a life license, and annuities are written as part of life insurance. Title insurance is also a §100 class but is not within a property or casualty broker-agent license.

Reviewed in our October 2026 California fact-check.

Correct

The answer is D: 75% of the annual premium

When an insurer cancels, the refund is pro rata: the insurer keeps only the premium for the time the policy was in force and returns the unearned premium for the unused portion, as the California standard fire policy (Ins. Code §2071) provides. The policy was in force 90 of 365 days, so 275 days remain, and 275/365 is about 75% of the annual premium. Short-rate cancellation, which keeps a penalty, applies when the insured cancels, and the question specifies pro rata. Keeping 25% would be refunding the earned portion rather than the unearned portion, and keeping all of the premium is wrong because premium is earned over the term, not all at once.

Reviewed in our October 2026 California fact-check.

Correct

The answer is D: Risk avoidance

Risk avoidance involves eliminating the activity that creates the risk entirely. By discontinuing the product line, the manufacturer removes the exposure to product liability claims. Risk reduction would involve making the product safer (e.g., better design or warnings). Risk retention means accepting the risk (e.g., self-insuring). Risk transfer involves shifting the risk to another party, such as by purchasing insurance or using hold-harmless agreements.

Reviewed in our October 2026 California fact-check.

Correct

The answer is C: Definitions

The Definitions section clarifies the meaning of specific words used throughout the policy to avoid ambiguity and define the scope of coverage.

Reviewed in our October 2026 California fact-check.

Correct

The answer is C: Can meet the claims and premium refunds it owes policyholders.

Statutory reserves are the liabilities an insurer must carry by law, chiefly unearned premium reserves and loss (and loss adjustment expense) reserves. They exist so the insurer can pay the claims and return of premium it owes policyholders. They are not minimum capital or surplus.

Reviewed in our October 2026 California fact-check.