Free Hawaii Surety Examination Practice Questions

Sample Practice Questions

Try these 10 sample questions from the Hawaii Surety Examination practice bank. Each includes the answer and explanation. Continue with the interactive practice above to review the full question set.

1. 1A proposed surety agreement has parties legally able to contract, a definite offer, and acceptance on the offered terms. Which further fact would supply the remaining essential formation element?

   1. A. The parties demonstrate legal capacity to enter the agreement
   2. B. The principal pays a premium for the surety's guarantee
   3. C. The surety states definite terms in an offer of coverage
   4. D. The obligee accepts the terms of the surety's offer

   Answer: B

   Explanation: "elements of a contract are: (1) capacity to enter the contract, (2) offer, (3) acceptance, and (4) consideration." The Hawaii court identifies capacity, offer, acceptance, and consideration. The premium exchanged for the surety's promise supplies consideration; A, C, and D describe the other actual elements already established by the facts.

   Reference: Jones v. Brady, Hawai‘i Intermediate Court of Appeals — Jones v. Brady, memorandum opinion, p. 8 (quoting Calipjo v. Purdy)

2. 2An employer asks for protection against financial loss when a covered employee steals company funds. Which coverage most directly addresses that loss?

   1. A. A contract performance surety bond
   2. B. A public official faithful-duty bond
   3. C. Fidelity insurance for employee dishonesty
   4. D. A contractor payment surety bond

   Answer: C

   Explanation: "Fidelity insurance indemnifies an employer for loss caused by the dishonest or fraudulent acts of covered employees." NAIC describes the employee-dishonesty loss insured by fidelity coverage. The other bonds answer for a principal's nonperformance of an obligation to an obligee, rather than indemnifying this employer for its covered employee's theft.

   Reference: NAIC Statistical Handbook of Data Available to Insurance Regulators — Statistical Handbook, §20.2, Nature of Fidelity Insurance, p. 20-1

3. 3A licensing authority requires a business to provide a bond against loss caused by violating duties attached to its permit. Which type of surety bond fits that obligation?

   1. A. A license and permit bond
   2. B. A court fiduciary bond
   3. C. A contract performance bond
   4. D. A public official bond

   Answer: A

   Explanation: "Such bonds provide payment to the obligee for loss or damage resulting from violations by the licensee (the principal) of the duties and obligations imposed upon him." NAIC describes license and permit bonds as prerequisites to licenses or permits and protection for violations of the licensee's duties. The other bond types secure different duties or beneficiaries.

   Reference: NAIC Statistical Handbook of Data Available to Insurance Regulators — Statistical Handbook, §20.3, Nature of Surety Bonding, p. 20-2

4. 4A mercantile employer wants employee-dishonesty coverage only for workers named on a list attached to its bond. Which fidelity form matches that selection?

   1. A. Blanket fidelity bond
   2. B. Financial institution bond
   3. C. Individual fidelity bond
   4. D. Named schedule bond

   Answer: D

   Explanation: "Employee Dishonesty coverage for Mercantile Entities may be written on either a blanket (all employees covered) basis or on a schedule basis where only selected employees are covered." NAIC contrasts blanket coverage of all employees with schedule coverage of only selected employees. California's insurance glossary calls the listed-person form a named schedule bond; the question's attachment supplies that distinction.

   Reference: NAIC Statistical Handbook of Data Available to Insurance Regulators — Statistical Handbook, §20.2, Nature of Fidelity Insurance, p. 20-1

5. 5In Hawaii, a surety insurer guarantees a defendant's required court appearance in exchange for a bail bond. Which activity constitutes bail-bond insurance rather than a person's direct security deposit?

   1. A. Pledging an in-state deed with the court clerk to secure the bail
   2. B. Depositing cash equal to bail with the appropriate court clerk
   3. C. Depositing unencumbered stocks with the appropriate court clerk
   4. D. Guaranteeing the defendant's court attendance through an insurer's bond

   Answer: D

   Explanation: "Bail bond insurance, which is a guarantee that any person, in or in connection with any proceedings in any court, will: (A) Attend in court when required" HRS §431:1-210 includes a guarantee of court attendance in bail-bond insurance and expressly excludes property or cash bail. The other options are direct deposits of security rather than an insurer's guarantee.

   Reference: Hawaii Revised Statutes §431:1-210 — HRS §431:1-210(1)

6. 6In Hawaii, which person meets the statutory definition of a bail agent?

   1. A. A licensed insurance producer appointed by an authorized surety insurer who furnishes bail for compensation and has power of attorney to execute or countersign bail bonds
   2. B. A licensed insurance producer who only collects collateral for a court clerk
   3. C. A full-time salaried officer of an insurer who furnishes bail for compensation
   4. D. A person who pledges personal cash as security for a bail bond

   Answer: A

   Explanation: HRS §431:9N-101 defines a bail agent as “a licensed insurance producer under article 9A who is appointed by an authorized surety insurer” and has the stated bail-bond authority.

   Reference: House Bill — HRS §431:9N-101

7. 7A contractor is the principal on a surety bond required by a project owner. If the contractor defaults, which party is the bond's obligee?

   1. A. The project owner protected by the bond
   2. B. The contractor whose work is guaranteed
   3. C. The insurer promising to answer for default
   4. D. The producer who arranged the bond

   Answer: A

   Explanation: "the surety) undertakes to answer to the second party (the obligee) for the debt, default or miscarriage of the third party (the principal)" NAIC identifies the obligee as the party to whom the surety answers for the principal's default. Here the project owner receives that protection. The contractor is the principal, the insurer is the surety, and the producer arranges the bond.

   Reference: NAIC Statistical Handbook of Data Available to Insurance Regulators — Statistical Handbook, §20.3, Nature of Surety Bonding, p. 20-1

8. 8A municipality wants a bond guaranteeing that its treasurer will perform official duties faithfully and account for public funds. Which bond type serves that purpose?

   1. A. A contractor payment bond
   2. B. A court judicial bond
   3. C. A license and permit bond
   4. D. A public official bond

   Answer: D

   Explanation: "Public Official Bonds guarantee the faithful performance of duty of a public official in a position of trust and provide for an honest accounting of all public funds handled by him." NAIC states that public official bonds guarantee faithful duty and honest accounting of public funds. The treasurer's public role and custody of funds match that bond type.

   Reference: NAIC Statistical Handbook of Data Available to Insurance Regulators — Statistical Handbook, §20.3, Nature of Surety Bonding, p. 20-2

9. 9A bank's financial institution blanket bond has only its basic insuring agreements and no optional coverage. Which loss is included beyond employee dishonesty?

   1. A. Forgery of a bank instrument
   2. B. Extortion of a bank officer
   3. C. Robbery of the bank's premises
   4. D. Dishonesty by an outside data processor

   Answer: C

   Explanation: "financial institutions blanket bonds provide coverage for loss caused by burglary, robbery and hold-up in the basic insuring agreements. Additional coverage is available on an optional basis for losses caused by forgery, extortion and the inclusion of employees of a private data processing organization as employees of the insured." NAIC identifies burglary, robbery, and hold-up as basic financial institution blanket-bond coverages. It identifies forgery, extortion, and inclusion of private data processor employees as optional, which the stem excludes.

   Reference: NAIC Statistical Handbook of Data Available to Insurance Regulators — Statistical Handbook, §20.2, Nature of Fidelity Insurance, p. 20-1

10. 10A person offers Hawaii real property as security for a $20,000 bail bond. Assume the depositor owns the in-state interest, it is not exempt from execution, and it is unencumbered. What is the minimum value of that interest under HRS §804-11.5?

    1. A. $20,000 in unencumbered real-property value
    2. B. $30,000 in unencumbered real-property value
    3. C. $40,000 in unencumbered real-property value
    4. D. $50,000 in unencumbered real-property value

    Answer: C

    Explanation: "(D) Consisting of an unencumbered interest the value of which is at least double the amount of the bail bond." The statute requires an unencumbered real-property interest worth at least double the bail bond. Twice $20,000 is $40,000; larger values can also qualify, but $40,000 is the minimum.

    Reference: Hawaii Revised Statutes §804-11.5 — HRS §804-11.5(a)(3)(A)–(D)