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PROPERTY AND CASUALTY INSURANCE EXAM QUESTIONS AND ANSWERS
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"An insured owns a building valued at $400,000. To comply with the 80% coinsurance provision of
his insurance policy, how , much should he insure the property for? - CORRECT ANSWER 80%
of the property's replacement cost or more" "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 Business Pursuits endorsement under Section II of a homeowners policy will cover all of the
following EXCEPT - CORRECT ANSWER Business liability."
"If a property is covered by Company A for $20,000 and Company B covers the same property for
$40,000, how much will Company A pay on a $24,000 loss? - CORRECT ANSWER $8,000"
"The risk management technique that is used to prevent a specific loss by not exposing oneself to
that activity is called - CORRECT ANSWER Avoidance."
"In a farm policy, any cost incurred by the insurer for the investigation or defense of a claim will be
paid by - CORRECT ANSWER The insurer."
"Which of the following entities must approve all continuing education courses in this state? -
CORRECT ANSWER The Commissioner"
"An applicant knowingly fails to communicate information that would help an underwriter make
a sound decision regarding coverage. This is an example of - CORRECT ANSWER Concealment"
"If more than one person has an insurable interest in the property covered under a dwelling
policy, - CORRECT ANSWER The insurer will be liable for only the insured's interest in the
damaged property." "Bob's home is insured for $100,000 under a dwelling policy. Yesterday his home suffered $20,000 damage from a fire. Today the home was struck by lightning, starting another fire that
completely destroyed the structure. Bob's policy will pay - CORRECT ANSWER $100,000."
"An automobile that is owned by a nontraditional household, not consisting of a husband and
wife, may be insured under a personal auto policy if - CORRECT ANSWER A joint ownership
coverage endorsement is added." "Which of the following is defined as a covered cause of loss in businessowners property
coverage? - CORRECT ANSWER Leakage from fire-extinguishing equipment"
"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."
"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." "Which of the following criminal activities would be sufficient violation to warrant rejection,
revocation, or suspension of an insurance producer's license? - CORRECT ANSWER Forgery"
"In dwelling policies, automatic increase in insurance is - CORRECT ANSWER Coverage by
endorsement." "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."
"How soon after the due date should the insurer pay the agent appointment fees? - CORRECT
ANSWER Within 30 days"
"Which of the following is the federal body that regulates truckers who travel across state lines?
CORRECT ANSWER Federal Motor Carrier Safety Administration"
"What is not a consideration when paying an inland marine claim? - CORRECT ANSWER
Market value when the property was first purchased"
"A commercial property special form covers property in transit up to - CORRECT ANSWER
"Bulk carriers are used to transport - CORRECT ANSWER Loose cargo."
"According to the loss payment condition in HO policies, losses must be paid within how many
days of the insurer receiving proof of loss? - CORRECT ANSWER 60 days"
"In which of the following situations would punishment include imprisonment? - CORRECT
ANSWER Omission of a material fact with intent to embezzle funds"
"A producer licensed in Pennsylvania must notify the Insurance Department of any change of
address in his or her residence or business address within how many days? - CORRECT
ANSWER 30"
"If an insured lives in a high-risk area and can't find an insurer that will cover his/her property,
which of the following would most likely provide coverage? - CORRECT ANSWER The FAIR
Plan" "If an insurer changes a form that it uses to transact insurance, it must do which of the following?
- CORRECT ANSWER File the form with the Commissioner for approval"
"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 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"
"Which inland marine form would provide the best protection for a dry cleaning company against loss or damage to their customer's property while in the care, custody, and control of the dry
cleaners? - CORRECT ANSWER Bailee's customer policy"
"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"
"Which of the following is the type of property NOT covered by the homeowners policy? -
CORRECT ANSWER Land on which the property is located"
"When a regular bill of lading is issued, who will be responsible for the invoice cost of any
damaged property? - CORRECT ANSWER The carrier"
"Which of the following is defined as the cost to replace damaged property with less expensive
and more modern construction or equipment? - CORRECT ANSWER Functional replacement
cost" "To avoid violations of unfair claims settlement regulations, insurers are required to acknowledge
the receipt of a claim within how many days? - CORRECT ANSWER 10 days"
"Tom's Truck Service's vehicle is stolen. The policyholder may obtain coverage for transportation
expenses subject to which of the following limits? - CORRECT ANSWER $20 per day; $
maximum"
"Robbery is - CORRECT ANSWER Taking of property by use of force, violence, or fear."
"What are common carriers required to issue to every shipper that it transports goods for? -
CORRECT ANSWER A uniform bill of lading"
"A ranchowners policy is most similar to which of the following? - CORRECT ANSWER
Homeowners" "When transacting business in this state an insurer formed under the laws of another country is
known as a/an - CORRECT ANSWER Alien insurer."
"All of the following are other coverages under the dwelling policy EXCEPT - CORRECT
ANSWER Earth movement."
"Which of the following regulatory authorities participated in creating the National Do Not Call
Registry? - CORRECT ANSWER FTC"
"Installing deadbolt locks on the doors of a home is an example of which method of handling risk?
- CORRECT ANSWER Reduction"
"The members of a limited liability company are insureds under a businessowners policy (BOP) if
CORRECT ANSWER The limited liability company is designated as the named insured."
"In property insurance, actual cash value is defined as which of the following? - CORRECT
ANSWER Replacement cost at the time of the loss, less depreciation"
"Under a personal auto policy, in which of the following locations would a vehicle primarily
garaged in California be covered? - CORRECT ANSWER Any other state"
"An employee is injured while visiting the employer's out-of-state site. How will the workers
compensation benefits be determined? - CORRECT ANSWER Benefits will be provided if the
state was listed on the policy information page." "All of the following people would be considered insureds under the liability section of a
homeowners policy EXCEPT - CORRECT ANSWER The 22-year-old niece of the insured who is
visiting." "An individual was just caught acting as an exclusive general agent - even though he is not properly licensed. Assuming that this occurred in a single day, what is the maximum penalty he
faces? - CORRECT ANSWER A third degree misdemeanor and a $1,000 fine"
"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."
"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."
"A banker is ready to close on a customer's loan. The bank is prepared to offer the loan but only if the customer purchases a life insurance policy from the bank in the amount of the loan. This is an
example of - CORRECT ANSWER Coercion."
"In the event of a claim under a commercial general liability policy, the insured has all of the
following duties to the insurer EXCEPT - CORRECT ANSWER Submitting to a medical exam
when requested." "Which of the following dwelling policy forms primarily insures a structure on an actual cash value
basis? - CORRECT ANSWER DP-1"
"For the purpose of examination by the department, insurers must keep a record of all financial
files for at least - CORRECT ANSWER 5 years."
"A commercial package policy (CPP) allows the insured to select the coverage needed and customize the policy to meet the needs of the insured's business. In a CPP, the business owner
may select from all of the following types of coverage EXCEPT - CORRECT ANSWER Workers
compensation coverage" "Which of the following licensees is classified as a representative of the insurance company and
not allowed to represent an insured or claimant? - CORRECT ANSWER Producer"
"All of the following are true of Coverage B - Other Structures EXCEPT - CORRECT ANSWER It
must be added by endorsement to a homeowners policy." "A building is insured, but no one has lived or worked in it for 10 years. The building is completely empty of any furniture or personal belongings. From an insurance standpoint, the building is
considered - CORRECT ANSWER Vacant."
"When an individual purchases insurance, what risk management technique is he or she
practicing? - CORRECT ANSWER Transfer"
"All of the following are factors in the determination of actual cash value EXCEPT - CORRECT
ANSWER Insurance premium paid."
"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"
"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."
"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"
"Pete wants to have separate insurance coverage for separate acreages. What kind of insurance
should Pete get? - CORRECT ANSWER Unit Insurance"
"According to the standard workers compensation and employer liability policy form, a state should be listed in Part Three - other states' insurance of the workers compensation and
employers liability policy when - CORRECT ANSWER The insured expects to extend operations
to that state." "When twin brothers applied for life insurance from Company A, the company found that while neither of them smoked and both had a very similar lifestyle, one of the twins was in a much stronger financial position than the other. Because of this, the company charged him a higher rate
for his insurance. This practice is considered - CORRECT ANSWER Discrimination."
"All of the following actions can be described as twisting EXCEPT - CORRECT ANSWER
Explaining to client the advantages of permanent insurance over term and suggesting changing policies"
"Professional photographers and musicians may insure their equipment with - CORRECT
ANSWER A commercial articles floater."
"In the split limit coverage in personal auto policies, which limit indicates the maximum amount
the policy will pay for bodily injury per person? - CORRECT ANSWER 1st limit"
"An advertising company has its annual holiday party for employees and customers, after which a customer who had too much to drink is involved in an automobile accident. Occupants of the other car involved in the accident sue the company for serving the customer too much alcohol.
Will the company's businessowners policy provide coverage? - CORRECT ANSWER Yes, none
of the exclusions will apply."
"Which of the following homeowners policies covers those who rent their dwelling? - CORRECT
ANSWER HO-4"
"All of the following actions by a person could be described as risk avoidance EXCEPT - CORRECT
ANSWER Investing in the stock market."
"State law specifically prohibits using illegal inducements in the marketing of insurance. All of the
following would be considered illegal inducements EXCEPT - CORRECT ANSWER Inviting
prospective clients to the grand opening of the company's new office." "Coverage A - Bodily Injury and Property Damage in the commercial general liability policy will
cover - CORRECT ANSWER Losses due to the insured's negligence."
"Which of the following would provide coverage for loss of income when an insured rental
dwelling is rendered uninhabitable because of a covered loss? - CORRECT ANSWER Coverage
D"
"A premium discount is the term that describes when an insured owes a total standard premium
greater than - CORRECT ANSWER $5,000."
"Which of the following personal auto coverages would pay for the insured's travel expenses and
loss of earnings while involved in the settlement process of a covered loss? - CORRECT
ANSWER Liability coverage"
"In the event of a loss covered by the policy, if the insurer requests a signed sworn proof of loss,
the named insured is required to submit it within - CORRECT ANSWER A specified time."
"The regular National Flood Insurance Program would insure an eligible single-family dwelling for
up to - CORRECT ANSWER $250,000."
"During a sales presentation a producer intentionally makes a statement which may mislead the
insurance applicant. This describes - CORRECT ANSWER Misrepresentation."
"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."
"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"
"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 true regarding a risk retention group? - CORRECT ANSWER It is a
liability insurance company owned by its members."
"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" "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"
"If a licensee wants to transact insurance under a different name than that listed on his or her
producer's license, which of the following must occur? - CORRECT ANSWER The change must
be reported to the Commissioner." "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"
"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."
"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" "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"
"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." "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)"
