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PROPERTY AND CASUALTY INSURANCE EXAM
QUESTIONS AND CORRECT ANSWERS PART ONE
"If an insured bakery is sued because its marketing states that the products of another bakery
may not be safe, which coverage of a commercial general liability policy will defend the suit? -
CORRECT ANSWER Personal and advertising injury liability"
"Any licensed person whose activities affect interstate commerce and who knowingly makes false
material statements related to the business of insurance may be imprisoned for up to -
CORRECT ANSWER 10 years."
"According to the principles of ocean marine insurance, an actual total loss may occur in all of the
following situations EXCEPT - CORRECT ANSWER When cargo is misplaced."
"Which of the following statements regarding coverage for the flood and earthquake perils is
true? - CORRECT ANSWER Both flood and earthquake are excluded perils in all property
policies." "A premium discount is the term that describes when an insured owes a total standard premium
greater than - CORRECT ANSWER $5,000."
"In order to reject uninsured motorist coverage, the first named insured must make the rejection
- CORRECT ANSWER In writing at the time of application."
"What is the minimum age for obtaining an insurance producer's license in this state? -
CORRECT ANSWER 18"
"Individuals in the business of selling construction equipment and mobile equipment should
insure with a/an - CORRECT ANSWER Equipment dealers coverage form."
"Which of the following insurance options would be considered a risk-sharing arrangement? -
CORRECT ANSWER Reciprocal"
"If a person is using an auto with the belief that he is entitled to do so, subrogation rights under a
personal auto policy would apply to all coverages EXCEPT - CORRECT ANSWER Physical
damage."
"Loss of yield from which of the following causes would be covered under a Federal Crop
Insurance policy? - CORRECT ANSWER Any of the above"
"Which of the following best describes a misrepresentation? - CORRECT ANSWER Issuing sales
material with exaggerated statements about policy benefits"
"A builder's risk form is most often written as which of the following? - CORRECT ANSWER
Completed value form" "Under the Fair Credit Reporting Act, if the consumer challenges the accuracy of the information
contained in his or her report, the reporting agency must - CORRECT ANSWER Respond to the
consumer's complaint."
"All of the following are found in the declarations section of a policy EXCEPT the - CORRECT
ANSWER Exclusions."
"The cost of restoring farm records is an additional coverage offered under a farm policy. How
much will the policy pay to restore the records? - CORRECT ANSWER Up to $2,000"
"All of the following could be considered rebates if offered to an insured in the sale of insurance
EXCEPT - CORRECT ANSWER Dividends from a mutual insurer."
"Which of the following may be covered by electronic data processing coverage form under an
inland marine policy? - CORRECT ANSWER a) Computer hardware that is specifically
scheduled. b) Extra expense the insured incurs to continue the business following a loss. c) Data processing media, including magnetic tapes or paper tapes, punch cards and discs"
"The party to a surety or fidelity bond who promises to fulfill the obligation is the - CORRECT
ANSWER Principal"
"The transfer of money from inside a banking premises to a person other than a messenger outside those premises or to a place outside those premises is covered under which commercial
crime coverage? - CORRECT ANSWER Computer fraud"
"The insured's mother-in-law broke her leg falling down the front steps of the insured's premises.
The insured's homeowners medical payments coverage will - CORRECT ANSWER Apply to
injuries of any guests or visitors."
"All of the following are exclusions under farm property coverage EXCEPT - CORRECT ANSWER
Loss of use." "Coverage for medical payments under a personal auto policy applies to expenses following a
covered accident that are incurred and services rendered within what maximum time period? -
CORRECT ANSWER 3 years"
"Under the workers compensation system, who is responsible for the expenses resulting from
work-related injuries and occupational diseases? - CORRECT ANSWER The employer,
regardless of whether it was at fault for the injury or disease" "A person applying for a manager or exclusive general agent license must meet all of the following
criteria EXCEPT - CORRECT ANSWER Be responsible for at least 25% of total commissions
collected by the office that he or she manages." "When a vehicle travels from one state to another, what happens to the limits of policy liability in
a personal auto policy? - CORRECT ANSWER They do not change."
"If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, and if a notice of insurance information practices has been provided, the
report may contain all of the following information EXCEPT the applicant's - CORRECT
ANSWER Ancestry"
"Which of the following would NOT be classified as personal property for insurance purposes? -
CORRECT ANSWER A house"
"Under the "limited tort insurance" option, an insured may not seek recovery for pain and
suffering or other nonmonetary damages UNLESS - CORRECT ANSWER The injuries fall within
the definition of "serious injury.""
"Which of the following statements is true regarding the commercial general liability policy's
Coverage C - Medical Payments? - CORRECT ANSWER The coverage is considered good will
because payments are made without regard to fault."
"Homeowners policies provide coverage for - CORRECT ANSWER Business property while on
the residence premises."
"Who will transport the property of anyone who hires them? - CORRECT ANSWER Common
carriers" "Which insurers are required to participate in the Pennsylvania Automobile Insurance Plan
(Assigned Risk Plan)? - CORRECT ANSWER All insurers authorized to write auto liability
insurance in the state" "A licensee serving in the military is unable to fulfill her continuing education requirement. What
would the licensee have to do to renew the license? - CORRECT ANSWER The licensee may
submit a request to the department to have requirements and fees waived. The department will then determine if the request is permissible."
"Which of the following is NOT true regarding a Certificate of Authority? - CORRECT ANSWER
It is issued to group insurance participants." "What is the required limit of insurance in the coinsurance clause for Coverage F - Unscheduled
Farm Personal Property? - CORRECT ANSWER 80% (note-Coverage F - Unscheduled Farm
Personal Property insures all farm personal property on a blanket basis. Coverage F is subject to an 80% coinsurance clause. )"
"Which of the following would be considered an unfair claims settlement practice? - CORRECT
ANSWER A claims adjuster advises the insured that if the claim goes to arbitration, the insured
would probably receive less than what is currently being offered" "Which of the following policies must contain, at a minimum, policy language equal to the
Standard Fire Policy? - CORRECT ANSWER All of the above"
"Under the dwelling policy, Coverage C - Personal Property is - CORRECT ANSWER Limited to
covering a servant's property while at the insured location."
"Which of the following is NOT a duty of the employer/insured if an injury occurs at the
workplace? - CORRECT ANSWER Make voluntary payments for treatment of the worker's
injury" "A meteorite hits the insured's car, causing damage. Under which of the following coverages in a
personal auto policy would this loss be paid? - CORRECT ANSWER Other-than-collision"
"If an insurer terminates a producer's appointment, the Commissioner must be notified within
how many days? - CORRECT ANSWER 30"
"The other insurances clause of an ocean marine policy allows coverage for which reasons? -
CORRECT ANSWER To obtain coverage for war, strikes, and related risks not covered by the
policy" "Which of the following terms refers to other insurance that is written on the same risk, but not
on the same coverage basis? - CORRECT ANSWER Nonconcurrency"
"Damage to insured property caused by earth movement or earthquake is covered under which
of the following homeowners forms? - CORRECT ANSWER None"
"What is the limit for the forgery or alteration coverage in the businessowners policy? -
CORRECT ANSWER $2,500"
"The type of professional liability coverage a medical doctor needs is - CORRECT ANSWER
Malpractice coverage." "An insured hits a deer and crashes his car into a tree. The total damage to the vehicle is $6,000.
How will this loss be covered? - CORRECT ANSWER $6,000 would be paid under other-than-
collision coverage." "In the computer fraud crime coverage form, what limit is placed on each occurrence of the loss
of manuscripts, drawings, or records? - CORRECT ANSWER $5,000"
"What was created to keep telemarketers from calling consumers who do not wish contacted? -
CORRECT ANSWER National Do Not Call Registry"
"In which of the following situations would the jewelers block extension cover a loss? -
CORRECT ANSWER A jeweler fixes a necklace and sends it by registered mail to the owner.
When the necklace arrives, it has been damaged." "Valuable papers and records form provides coverage for the reconstruction of all of the
following types of records EXCEPT - CORRECT ANSWER Prepackaged software."
"The provision in Pennsylvania workers compensation that requires an employer to pay compensation, without regard to negligence, according to a compensation schedule set by law, and for the injured employee to agree to limit the employer's responsibility to the amount of
workers compensation to which he or she is entitled, is called - CORRECT ANSWER Exclusive
remedy." "If a licensed person is moving to Pennsylvania, he or she may become licensed as a resident if they submit a completed application within how many days of establishing residence in
Pennsylvania with proof of licensing from their prior home state? - CORRECT ANSWER 90"
"Which of the following is the type of property NOT covered by the homeowners policy? -
CORRECT ANSWER Land on which the property is located"
"Robbery is - CORRECT ANSWER Taking of property by use of force, violence, or fear."
"Which of the following commercial crime coverages would cover a loss resulting from theft of
the company's money and securities from the armored vehicle making a delivery? - CORRECT
ANSWER Outside the premises"
"Which of the following would be covered under the crime coverage inside the premises - theft of
money and securities? - CORRECT ANSWER Loss or damage to a locked safe, vault, or cash
register" "One of the primary benefits to the insured in selecting the "full tort option" under their auto
insurance coverage is - CORRECT ANSWER Unrestricted ability to sue for pain and suffering."
"All of the following are true regarding physical damage coverage EXCEPT - CORRECT ANSWER
The limit of liability is the greater of the actual cash value of the vehicle at the time of loss or the amount necessary to repair or replace the vehicle."
"What is the purpose of increased value and excess liability (IVEL) clauses? - CORRECT
ANSWER To provide extra coverage for the same losses covered by an underlining policy"
"Which of the following would NOT be considered an unfair and deceptive practice? - CORRECT
ANSWER Controlled business"
"Losses caused by vandalism and malicious mischief are excluded under a homeowners policy if
the dwelling had been vacant for more than - CORRECT ANSWER 60 days."
"If an insurer appoints a producer, which authority must be notified? - CORRECT ANSWER
Department of Insurance" "What term best describes the act of withholding material information that would be crucial to an
underwriting decision? - CORRECT ANSWER Concealment"
"What is a Certificate of Insurance? - CORRECT ANSWER A written document showing the
types and amounts of insurance that have been issued to the insured"
"All of the following are conditions commonly found in the insurance policy EXCEPT - CORRECT
ANSWER Insuring agreement."
"If an insured has an umbrella liability policy in addition to his personal auto policy, which would
be considered the underlying policy? - CORRECT ANSWER Auto policy"
"All of the following are true regarding rebates EXCEPT - CORRECT ANSWER Rebates are
allowed if it's in the best interest of the client." "Termination of an in-force insurance policy prior to the expiration date shown in the policy is
known as - CORRECT ANSWER Cancellation."
"A municipality can protect itself against the construction or repair of properties that do not
conform to the building codes established by ordinance by requiring the contractors to obtain -
CORRECT ANSWER License and permit bonds."
"Farm policy Coverage B - Structures would pay how much for loss of an outside antenna, tower,
or satellite dish? - CORRECT ANSWER Up to $1,000"
"Which of the following is NOT a goal of risk retention? - CORRECT ANSWER To minimize the
insured's level of liability in the event of loss"
"For how long must a company maintain a complete file of all advertisements used? - CORRECT
ANSWER At least 4 years"
"Replacement cost coverage is provided in both the broad and special form dwelling policies
when - CORRECT ANSWER The amount of insurance on the dwelling is at least 80% of its
replacement cost at the time of loss."
"The Federal Fair Credit Reporting Act - CORRECT ANSWER Regulates consumer reports."
"Which of the following risks would NOT be eligible for coverage under a homeowners policy? -
CORRECT ANSWER An applicant who owns and lives on a commercial farm"
"Within the first 60 days of coverage under a dwelling policy, how much notice is required for the
cancellation of a policy? - CORRECT ANSWER 10 days"
"Which of the following terms describes making false statements about the financial condition of
any insurer that are intended to injure any person engaged in the business of insurance? -
CORRECT ANSWER Defamation"
"Which of the following is NOT considered a misrepresentation as it pertains to unfair trade
practices? - CORRECT ANSWER Making comparisons between different policies"
"In addition to the common policy conditions, all of the following conditions apply to liability
coverage EXCEPT - CORRECT ANSWER Employers liability."
"In accordance with American Institute Hull Clauses, a pro rata return of premium will be given for
all the following reasons EXCEPT - CORRECT ANSWER If the policy is cancelled by the insured."
"While an insured was towing a utility trailer with his auto, the trailer came loose and ran into a
store front. What part of the insured's auto policy would pay for the damage to the store? -
CORRECT ANSWER Property damage liability"
"Under the provisions of the business income coverage form, all of the following are true EXCEPT
- CORRECT ANSWER The insured is reimbursed for the loss from the date of loss to the date of restoration or policy expiration date, whichever comes first." "How long is the waiting period after the application has been accepted before flood coverage
goes into effect? - CORRECT ANSWER 30 days"
"Coverage J under farm coverage agrees to pay reasonable medical expenses, regardless of fault, caused by an accident if the expenses are incurred and reported to the insurer within how many
years of the accident date? - CORRECT ANSWER 3 years"
"An insured has a special form dwelling policy written for $100,000 on a dwelling. The dwelling's replacement cost is $115,000. Fire causes $75,000 in damage to the dwelling, $15,000 damage to a separate garage, and kills 10 trees valued at $600 each. How much will the policy pay for the
trees? - CORRECT ANSWER $5,000"
"Which of the following losses would be covered by an unendorsed homeowners policy? -
CORRECT ANSWER Fire or lightning"
"Which of the following would NOT be compensable under Workers Compensation insurance? -
CORRECT ANSWER While working in his office, Bill suffers a heart attack."
"If the ocean marine contract pays the ACV of the property just prior to the loss, it is - CORRECT
ANSWER An indemnity contract."
"The designation symbols used in commercial auto policies can be found in which policy section?
- CORRECT ANSWER Covered Auto" "Under a businessowners policy, the inspections and surveys condition specifies all of the
following EXCEPT - CORRECT ANSWER The insurer does not have the right to inspect the
insured's property and operations."
"A trucking business swaps trailers with other carriers. What coverage is necessary to cover loss
to the other's trailer while in the borrower's possession? - CORRECT ANSWER Trailer
interchange coverage"
"Which coverage form would provide coverage for all incoming and outgoing shipments? -
CORRECT ANSWER Annual transit"
"A person who does not lock the doors or does not repair leaks shows an indifferent attitude. This
person presents what type of hazard? - CORRECT ANSWER Morale"
"What other term is used to refer to unintentional torts? - CORRECT ANSWER Negligence"
"Which of the following statements is true concerning the special form dwelling policy? -
CORRECT ANSWER Coverage A is for all-risk perils, and Coverage C is for the broad form
perils." "An apartment occupant's personal property would be insured under which homeowners form?
CORRECT ANSWER Tenant broad form (HO-4)"
"What type of insurance policy insures against all risks of loss that are not specifically excluded by
the policy? - CORRECT ANSWER Open peril policy"
"Which inland marine coverage condition says that an insurer will settle with the actual owners of
property involved in a loss? - CORRECT ANSWER Privilege to adjust with the owner"
"After a hearing, if the Commissioner finds that a licensee is in violation of the state insurance
laws, the Commissioner can do any of the following EXCEPT - CORRECT ANSWER Imprison the
licensee." "Agents who persuade insureds to cancel a policy in favor of another one when it might not be in
the insured's best interest are guilty of - CORRECT ANSWER Twisting."
"Insurable interest in the property covered in a policy must be proven - CORRECT ANSWER At
time of loss."
"Which of the following risks is eligible for coverage under a businessowners policy? - CORRECT
ANSWER Condominiums"
"In personal auto policies, the term "you" refers to - CORRECT ANSWER The named insured."
"Which rating method provides an insurer with that portion of a rate that does not include provisions of expenses (other than adjusting expense) or profit and is based on historical aggregate loss and loss adjustment expenses projected through development to their ultimate
value and through trending to a future point in time? - CORRECT ANSWER Loss costs rating"
"In which type of commercial crime policy coverage is triggered by a loss that happens during the
policy period but is not necessarily discovered during the policy period? - CORRECT ANSWER
Loss sustained form" "An insured is driving above the posted speed limit. As he rounds a curve, he crashes into an
illegally parked car. This is an example of - CORRECT ANSWER Contributory negligence."
"Under the commercial crime coverage inside the premises - robbery or safe burglary of other property, what is the special per occurrence limit that applies to loss or damage to precious
metals, precious and semiprecious stones, pearls, furs, manuscripts, drawings, or records? -
CORRECT ANSWER $5,000"
"What documentation grants express authority to an agent? - CORRECT ANSWER Agent's
contract with the principal"
"All of the following are essential elements of a commercial package policy (CPP) EXCEPT -
CORRECT ANSWER Valuations and/or settlement provisions"
"Personal property coverage under a homeowners policy would cover - CORRECT ANSWER
The insured's camera if it is stolen while the insured is on vacation."
"Which of the following would the livestock coverage form NOT insure against? - CORRECT
ANSWER The euthanasia of livestock after being hit by a vehicle"
"In the personal auto policy, owned trailers being towed by an insured auto are automatically
covered for - CORRECT ANSWER Uninsured motorist coverage."
"ABC Trucking hauls products for Acme, Inc. as a contract carrier. On one shipment, the driver stopped at a truck stop for lunch. Leaving the truck in the parking lot, he made certain that the truck was locked before leaving it. Upon returning to the truck, he discovered that someone had
broken into the truck and stolen the cargo. Is ABC legally liable for this loss? - CORRECT
ANSWER No, the driver had taken reasonable measures to protect the property by locking the
truck." "A recent college graduate bought a new car and is trying to get automobile insurance on it as required by the lienholder. After being rejected by several insurance companies due to his driving record, he finally talked to an agent who can get him coverage. His agent called him a residual market risk. From which type of automobile insurance plan can the applicant purchase
insurance? - CORRECT ANSWER Assigned risk"
"An insured who has coverage for all his personal property has his TV stolen from the shop of the repairman. The owner of the repair shop filed a claim under the insured's policy, but it paid
nothing to the owner of the store. Which provision does the policy have? - CORRECT ANSWER
No benefit to bailee clause"
"Which of the following perils is covered by the HO-2 and HO-3? - CORRECT ANSWER Sudden
and accidental rupture of a heating system" "Frank's Steaks furnishes meat to steakhouses. An accident on the premises causes the building to lose refrigeration for 32 hours. The state inspectors will not allow the meat in the refrigerating units to be sold for human consumption, and Frank loses $18,500 in disposing of the meat. What
coverage under Frank's BOP policy will cover the loss? - CORRECT ANSWER Utility service -
direct damage"
"Professional liability coverage protects the insured against legal liability resulting from -
CORRECT ANSWER Errors and omissions."
"The abandonment provision in property insurance policies states that - CORRECT ANSWER
The insured may not relinquish ownership of damaged property to claim a total loss, but must protect damaged property from further loss."
"A business using its own trucks to move its own cargo would insure the cargo using - CORRECT
ANSWER Motor truck cargo - owners form."
"Which of the following is NOT a duty of the employer/insured if an injury occurs at the
workplace? - CORRECT ANSWER Make voluntary payments for treatment of the worker's
injury"
"An insured has a liability policy that sets the amount for all claims that arise from a single
incident at $50,000. Which type of limit of liability does this insured's policy have? - CORRECT
ANSWER Per occurrence"
"Which of the following is an example of a protective safeguard in a businessowners policy? -
CORRECT ANSWER Automatic sprinkler system"
"Which of the following is an example of an unfair claims settlement practice? - CORRECT
ANSWER Failure to promptly settle a claim when liability has been clearly established"
"Which of the following definitions best defines the term "accident"? - CORRECT ANSWER A
sudden, unplanned and unexpected event, not under the control of the insured, resulting in injury or damage neither expected nor intended"
"An insured's accounts receivable records have been damaged. The loss may be covered with -
CORRECT ANSWER The accounts receivable coverage form."
"In a personal umbrella policy, the amount paid by the insured for certain losses not covered
under the primary coverage is called - CORRECT ANSWER Self-insured retention."
"Which of the following circumstances would be EXCLUDED under medical payments coverage of
a personal auto policy? - CORRECT ANSWER The insured is injured while driving his
motorcycle on his resident premises."
"Which of the following is NOT an essential element of an insurance contract? - CORRECT
ANSWER Counteroffer"
"Which of the following persons is required to hold a producer license? - CORRECT ANSWER A
person who negotiates insurance contracts" "In property and casualty insurance, what is the term for the amount of a loss that the insured must cover out of pocket, and the insurer will only pay for the additional amount of the loss above
this limit? - CORRECT ANSWER Deductible"
"A restaurant is out of business for 3 days after an insured's automobile hits an electrical pole. The pole falls and hits the building, knocking out all electrical power supply. Which of the following is
NOT covered under the insured driver's auto policy? - CORRECT ANSWER Lost revenues from
the restaurant" "How much is the premium for the dwelling under construction endorsement under the dwelling
policy? - CORRECT ANSWER The average amount of insurance during construction"
"With regards to the personal auto policy, in the event of a claim or loss, the insured is required to
do all of the following EXCEPT - CORRECT ANSWER Immediately report to an emergency room
for medical examination." "What is the maximum amount of protection available to insureds under the Pennsylvania
Property and Casualty Insurance Guaranty Association? - CORRECT ANSWER The amount of
loss up to the amount of coverage in the original policy, not to exceed $300,000 (per claimant)" "A mortgage company is named as a loss payee on the insured's homeowners policy, under the standard mortgage clause. If the insured suffers a loss due to a fire, which of the following is true?
- CORRECT ANSWER The loss is payable to the insured and the mortgagee." "With regards to a homeowners policy, which coverage provides for indirect or consequential
losses? - CORRECT ANSWER Coverage D"
"To be eligible for businessowners policy (BOP) coverage, an office building CANNOT be higher
than - CORRECT ANSWER 6 stories."
"The legal liability coverage form provides coverage for damages for which the insured is legally
liable arising from - CORRECT ANSWER Direct physical damage to property of others in the
insured's care." "Which of the following symbols is available to an insured with vehicles subject to no-fault
coverage? - CORRECT ANSWER Symbol 5"
"A type of policy that is used to provide a specific amount of replacement cost for a given risk after
it has been destroyed is called a(n) - CORRECT ANSWER Valued policy."
"In terms of parties to a contract, which of the following does NOT describe a competent party?
CORRECT ANSWER The person must have at least completed secondary education."
"An individual's construction company leaves mobile equipment and construction machinery on
the job site until the project is completed. What could this individual use to insure it? - CORRECT
ANSWER Contractors equipment floater"
"An insured has a personal property replacement cost endorsement under her homeowners policy. If an expensive painting and an antique chair are stolen from the insured's home, what will
the insured receive on the claim under that endorsement? - CORRECT ANSWER Nothing"
