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Property & Casualty Insurance Exam, General, Practice Exams

The national portion shared by every state's Property & Casualty producer exam: general insurance concepts, property and casualty basics, dwelling and homeowners, personal and commercial auto, commercial property and liability, workers' compensation, and federal regulation. Original questions with explanations. State-specific P&C law sections are being added.
Content last updated 23 September 2026

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Each module is scored separately so you know exactly where you stand. The general section is the bulk of every state exam; most states require about 70% to pass.

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The free sample gives you about 20 questions per module. The full bank contains every question — general insurance plus state law — with written, statute-cited explanations. $49, one time, lifetime access on up to 3 devices — every state and line we add later included.

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Frequently asked questions

Who is the general Property & Casualty bank for?

It covers the national, general-knowledge portion shared by every U.S. state's Property & Casualty producer exam - property, casualty, auto, homeowners, commercial lines, workers' compensation and federal regulation. It is the bulk of the exam and is ideal before you add your state's law section.

Will this alone qualify me for my state licence?

It covers the national portion, not your state's insurance-law section. Every state P&C exam also has a state-specific part. As we add dedicated state P&C exams, use yours for full coverage; until then this gives you a strong head start on the majority of the material.

What score do I need to pass?

Most states require about 70%. Revise each module to that level in Revision Mode, then run the full exam simulation in Exam Mode before your test date.

Are these real exam questions?

No vendor publishes the live exam. Every question is original, written to the standard national P&C content outline and the standard ISO policy forms, with a plain-English explanation.

How many practice questions are included?

The full general P&C bank contains 708 questions across all the core property and casualty topics, with written explanations. The free sample gives you about 20 questions per module.

What does access cost?

$49, one time, for lifetime access - and it includes every state and line we add later, at no extra charge. No subscription.

Can I use it on more than one device?

Yes. One purchase works on up to 3 of your devices, for example your laptop, phone and tablet. Your progress is saved on each device.

Do I need to create an account?

No. The practice tests run in your browser with no signup. Your score history is saved on your own device.

What topics does the Property & Casualty Insurance Exam, General question bank cover?

It is organised into 8 modules that follow the exam's own content areas: P&C — General Insurance Concepts, P&C — Insurance Basics, P&C — Dwelling & Homeowners, P&C — Personal & Commercial Auto, P&C — Commercial Property, BOP & Marine, P&C — Commercial General Liability & Specialty, P&C — Workers' Compensation and P&C — Other Lines, Flood & Federal Regulation. Each module is drilled and scored separately, so you can see exactly which areas are exam-ready and which still need work.

When was this question bank last updated?

Last updated 23 September 2026. The bank is revised whenever the source material it cites changes, and every question carries the source its explanation is drawn from.

Sample Property & Casualty Insurance Exam, General practice questions

A selection of free questions with answers and explanations. Use the interactive modules above for timed, scored drills.

Which marine coverage would insure a bank's exposure for valuable customer securities documents lost in a fire on premises?

  1. Ocean marine freight coverage on the shipowner's earnings
  2. Ocean marine cargo insurance on goods in transit
  3. Hull and machinery coverage
  4. Valuable Papers and Records floater ✓

Why: The Valuable Papers and Records inland marine floater covers the cost to reconstruct or replace important documents and records destroyed by a covered peril.

A medical professional wants protection against patient claims of negligent treatment. The correct policy is:

  1. Medical Professional Liability (malpractice) / E&O ✓
  2. Employee Benefits Liability, which covers errors in administering benefit plans
  3. Commercial General Liability, since the patient suffered bodily injury
  4. A performance bond for medical work

Why: Patient injury from professional treatment is excluded by the CGL and covered by medical professional liability (malpractice) insurance.

An insured damages a friend's mailbox and fence while backing out of a driveway in the covered auto. This is covered under:

  1. Part A — Property Damage Liability ✓
  2. Part D — Collision
  3. Part B — Medical Payments
  4. Part C — Uninsured Motorists

Why: Damage to another person's property (mailbox, fence) for which the insured is legally liable is covered under Part A property damage liability.

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Under the Building and Personal Property Coverage Form, which coverage applies to the building structure and permanently installed fixtures?

  1. Coverage A — Building ✓
  2. Coverage C — Personal Property of Others
  3. Coverage B — Business Personal Property
  4. Coverage D — Extra Expense

Why: Coverage A (Building) covers the described building, completed additions, fixtures, permanently installed machinery, and equipment.

A machine made by a third party injures an employee. The employee collects WC, then sues the machine maker, who in turn sues the employer claiming the employer's negligence contributed. What is this type of claim that Part Two can cover?

  1. A dual-capacity suit
  2. A care and loss of services suit
  3. A consequential bodily injury suit
  4. A third-party-over (action over) suit ✓

Why: A third-party-over (or action-over) suit occurs when a third party sued by the employee brings the employer in for contribution; Part Two Employers Liability can respond to this.

A Homeowners insured suffers theft of firearms. The special Coverage C limit for theft of firearms is commonly:

  1. $2,500 ✓
  2. $200
  3. $5,000
  4. $1,500

Why: Theft of firearms is subject to a special sublimit (commonly $2,500) under Coverage C; collections worth more should be scheduled.

With auto liability split limits of 50/100/25, the maximum paid for bodily injury to any one person in an accident is:

  1. $100,000
  2. $50,000 ✓
  3. $175,000
  4. $25,000

Why: The first number (50) is the per-person bodily injury limit: $50,000.

A spouse of an injured worker sues the employer for loss of the worker's companionship and services resulting from the work injury. This is an example of which type of claim Part Two may cover?

  1. Dual-capacity injury caused by the employer's product
  2. Occupational disease claimed by a family member
  3. Third-party-over action brought by a manufacturer
  4. Consequential (related) bodily injury and loss of consortium ✓

Why: Part Two can cover consequential bodily injury and care/loss of services (loss of consortium) suits brought by family members related to the employee's work injury.

The maximum NFIP building coverage limit available for a single-family residential structure under the regular program is:

  1. $250,000 ✓
  2. $100,000
  3. $500,000
  4. $150,000

Why: The NFIP caps building coverage for a single-family dwelling at $250,000, with a separate $100,000 limit available for contents.

Under the FCRA, a consumer who is the subject of an adverse action based on a consumer report has the right to:

  1. Demand a copy of the producer's license and appointment before the file is reopened
  2. Receive the policy at the originally quoted rate while the dispute is pending
  3. Sue the Federal Trade Commission for damages caused by the reporting agency
  4. Obtain a free copy of the report and dispute inaccurate information ✓

Why: The FCRA gives consumers the right to a free copy of the report that led to an adverse action and the right to dispute inaccurate or incomplete information.

Theft of property is covered automatically under which Causes of Loss form?

  1. None of the forms
  2. Broad only
  3. Special form ✓
  4. Basic only

Why: Theft is not a named peril under Basic or Broad, but the open-perils Special form covers theft (subject to special limits) since it is not excluded.

In a competitive state fund jurisdiction, the state fund:

  1. Writes only Employers Liability, leaving benefits to carriers
  2. Is the only lawful source of workers compensation coverage
  3. Competes with private insurers as one option among many ✓
  4. Is reserved for federal employees covered by the FECA program

Why: A competitive state fund operates alongside private insurers; employers may buy WC from the state fund or from private carriers.

An employer with a poor loss history cannot find a private insurer willing to write its workers' compensation voluntarily. Where would this employer most likely obtain coverage?

  1. The assigned-risk (residual market) plan ✓
  2. The Jones Act pool
  3. The federal LHWCA program
  4. A monopolistic fund in a competitive state

Why: Employers unable to obtain WC in the voluntary market are placed in the assigned-risk or residual market plan, which guarantees availability of mandatory coverage.

Which best describes the difference between replacement cost and actual cash value?

  1. ACV is always higher than replacement cost
  2. They are identical
  3. Replacement cost includes depreciation; ACV does not
  4. ACV is replacement cost minus depreciation ✓

Why: Actual cash value equals replacement cost minus depreciation, so it pays less than replacement cost on older property.

Defense costs under the standard CGL are:

  1. Paid in addition to the limits as a Supplementary Payment ✓
  2. Paid within the limits of insurance, reducing them
  3. Never covered
  4. Subject to a separate aggregate only

Why: Under the standard CGL, defense costs are paid in addition to the limits as part of Supplementary Payments (unlike many specialty 'defense-within-limits' policies).

Under 'contribution by equal shares,' insurers covering the same loss pay:

  1. Only the insurer whose policy was written first, with the others reimbursing it afterward
  2. Nothing until the insured has paid a share equal to the deductible
  3. Equal amounts until the lowest limit is exhausted, then the rest continue ✓
  4. Amounts proportional to each policy's limit of insurance

Why: Each insurer contributes equal amounts until the smallest applicable limit is used up; remaining insurers continue contributing equally.

An insured has two policies covering the same building: Policy A with $100,000 and Policy B with $300,000. Under pro rata, a $40,000 loss is shared so Policy A pays:

  1. $20,000
  2. $30,000
  3. $10,000 ✓
  4. $40,000

Why: Policy A's share = ($100,000 ÷ $400,000) × $40,000 = $10,000.

A producer who exceeds the actual authority granted by the insurer but acts within the authority the public reasonably believes the producer has may still bind the insurer because of:

  1. Express authority
  2. Subrogation
  3. Apparent authority ✓
  4. The law of large numbers

Why: Apparent authority can bind the insurer when a third party reasonably relies on the appearance of authority the insurer permitted to exist.

The characteristic of an insurance contract under which the dollar amounts exchanged by the parties may be unequal is called:

  1. Conditional
  2. Aleatory ✓
  3. Personal
  4. Unilateral

Why: An aleatory contract involves an exchange of unequal amounts; the insured pays a small premium and may collect a large benefit, or nothing at all.

In a Homeowners policy, Coverage D (Loss of Use) provides which of the following?

  1. Defense costs for a liability suit brought against the insured by a guest
  2. Medical payments for a guest injured on the residence premises
  3. Repair or replacement cost of the damaged dwelling structure itself
  4. Additional living expense and loss of fair rental value ✓

Why: Coverage D — Loss of Use pays additional living expenses while the home is uninhabitable and any lost fair rental value if part of the home was rented.

For Part Three (Other States Insurance) to respond, a state generally must be:

  1. Listed in Item 3.A. of the Information Page as a state covered by Part One
  2. A monopolistic fund state such as Ohio or Wyoming
  3. Listed in the Other States Insurance item of the Information Page ✓
  4. Approved by the federal Department of Labor

Why: Other States Insurance applies to states named in the Part Three item of the Information Page (often 'all states except' those that are monopolistic or already listed in Part One).

Unlike Part One, Part Two (Employers Liability) of the policy does include limits of liability. The three Part Two limits typically apply to:

  1. Medical benefits, wage-replacement indemnity benefits, and death benefits payable to the worker's surviving dependents
  2. Temporary disability benefits, permanent disability benefits, and survivor benefits, each shown as a separate dollar amount
  3. A per-claim limit, a per-occurrence limit, and an annual aggregate limit applied to the worker's medical payments
  4. Bodily injury by accident, bodily injury by disease per employee, and bodily injury by disease policy limit ✓

Why: Part Two shows three limits: bodily injury by accident (each accident), bodily injury by disease (policy limit), and bodily injury by disease (each employee).

A farmer wants protection against widespread yield loss from drought across an entire growing season. The most appropriate coverage is:

  1. Multiple Peril Crop Insurance (MPCI) through the RMA ✓
  2. A state FAIR Plan covering the farm buildings and equipment
  3. Private crop-hail insurance written on an acreage basis
  4. A commercial umbrella policy

Why: MPCI covers broad yield losses from many natural perils, including drought, making it the appropriate choice over narrow crop-hail coverage.

Which is NOT one of the three parties to a surety bond?

  1. Principal
  2. Reinsurer ✓
  3. Obligee
  4. Surety

Why: The three parties to a surety bond are the principal, the obligee, and the surety; a reinsurer is not a bond party.

How does the BOP commonly differ from a Commercial Package Policy for property valuation?

  1. The BOP excludes business income entirely unless it is added by a separate endorsement carrying a scheduled limit
  2. The BOP contains no liability coverage, only property
  3. The BOP typically provides replacement cost and includes business income automatically ✓
  4. The BOP values both building and contents at actual cash value

Why: A BOP typically provides replacement cost valuation and includes business income/extra expense automatically (often without a separate dollar limit), unlike a CPP which adds these separately.

The Gramm-Leach-Bliley Act (GLBA) requires financial institutions, including insurers, to:

  1. Offer multiple peril crop insurance to every agricultural customer and report the resulting yield data to the Risk Management Agency before spring planting
  2. Write flood coverage on any dwelling financed through the institution
  3. Join the state FAIR Plan as an assessable member
  4. Protect the privacy of nonpublic personal financial information and give consumers notice and an opt-out right before sharing it with nonaffiliated third parties ✓

Why: GLBA's privacy provisions require notice of information-sharing practices and, in many cases, allow consumers to opt out of having their nonpublic personal financial information shared with nonaffiliated third parties.

Federal Multiple Peril Crop Insurance (MPCI) is overseen by which federal entity?

  1. The Federal Reserve Board of Governors
  2. The Department of Commerce
  3. The Risk Management Agency (RMA) of the USDA ✓
  4. FEMA, through the NFIP

Why: MPCI is administered through the USDA's Risk Management Agency, which works with the Federal Crop Insurance Corporation and private insurers.

Personal Injury Protection (PIP), where applicable, typically covers:

  1. Comprehensive damage to the insured's own vehicle from theft, fire, hail, or falling objects
  2. Liability to third parties for bodily injury and property damage the insured causes
  3. Property damage to another person's vehicle or fence caused by the insured
  4. The insured's medical expenses, lost wages, and certain other economic losses regardless of fault ✓

Why: PIP, common in no-fault states, pays the insured's own medical, wage loss, and related economic benefits without regard to fault.

A bond that guarantees the contractor will complete the project according to the contract terms is a:

  1. License bond
  2. Performance bond ✓
  3. Payment bond
  4. Bid bond

Why: A performance bond guarantees completion of the work per the contract specifications.

An insurance policy is a unilateral contract because:

  1. Only the insured makes a legally enforceable promise
  2. Only the insurer makes a legally enforceable promise ✓
  3. Both parties make legally enforceable promises
  4. Neither party makes any promise

Why: In a unilateral contract, only one party, the insurer, makes a legally enforceable promise; the insured is not legally obligated to pay future premiums.

The premium basis for workers' compensation insurance is generally expressed as a rate applied to:

  1. Square footage of the workplace
  2. Gross sales revenue
  3. Each employee per year
  4. Each $100 of payroll ✓

Why: WC premium is calculated using rates per $100 of payroll for each job classification, then adjusted by other factors.

Which dwelling form would be most appropriate for the broadest property protection on an owner-occupied home?

  1. DP-2
  2. DP-3 ✓
  3. Personal Liability Supplement
  4. DP-1

Why: DP-3 provides open-perils coverage on the dwelling and is the broadest of the standard dwelling forms for the structure.

Which federal law would a producer most likely consult to determine whether a previously convicted individual may lawfully work in the insurance business?

  1. The can-SPAM Act
  2. The Fair Credit Reporting Act
  3. 18 U.S.C. §§ 1033 and 1034 ✓
  4. The Terrorism Risk Insurance Act

Why: 18 U.S.C. 1033 and 1034 govern whether persons convicted of crimes involving dishonesty may engage in the business of insurance and the penalties for violations.

A Farm Coverage Form generally combines:

  1. Coverage for the dwelling, farm personal property, and farm structures ✓
  2. Workers compensation benefits for the farm's hired laborers together with statutory employers liability limits
  3. Only the liability arising out of the farming operation, with no property coverage on the dwelling or the barns
  4. Ocean marine cargo on crops moving to market and personal auto coverage on the farm's pickup trucks

Why: The Farm Coverage Form can combine coverage for the farm dwelling, household personal property, farm personal property (including livestock and machinery), and farm buildings/structures.

A loss resulting from physical damage that occurs immediately from the action of a peril is a:

  1. Indirect loss
  2. Net loss
  3. Consequential loss
  4. Direct loss ✓

Why: A direct loss is the immediate physical damage to property caused by a covered peril.

The primary method of handling risk that insurance represents is:

  1. Risk transfer ✓
  2. Risk reduction
  3. Risk avoidance
  4. Risk retention

Why: Insurance is fundamentally a transfer of the financial consequences of risk from the insured to the insurer.

'Completed operations' coverage applies when:

  1. The product is still in the insured's inventory awaiting shipment
  2. A customer slips on a wet floor inside the insured's showroom
  3. Work is still in progress at the job site and the insured's crew has not yet turned the finished project over to the owner
  4. The insured's work is completed or abandoned and bodily injury or property damage occurs away from the premises ✓

Why: Completed operations responds after the work is finished, typically for injury/damage occurring away from owned/rented premises.

A neighbor is injured by the insured's dog and incurs medical bills. Even though no lawsuit is filed and fault is unclear, payment may be available under:

  1. Coverage E — Personal Liability
  2. Coverage F — Medical Payments to Others ✓
  3. Coverage C — Personal Property
  4. Coverage D — Loss of Use

Why: Coverage F pays reasonable medical expenses for injured third parties on a no-fault, goodwill basis without requiring a finding of legal liability.

In a surety bond, the party who is required to provide the bond and perform the obligation is the:

  1. Obligee
  2. Beneficiary
  3. Principal ✓
  4. Surety

Why: The principal is the party who must perform the obligation and is required to furnish the bond.

A manufacturer wants to avoid any coinsurance penalty at the time of loss and is willing to agree on the property's value in advance. The best option is:

  1. Spoilage endorsement
  2. Reporting form
  3. Peak Season endorsement
  4. Agreed Value option ✓

Why: The Agreed Value option suspends the coinsurance condition based on a value agreed upon by insurer and insured, avoiding any coinsurance penalty.

The right of an insurer, after paying a claim, to recover from the party who caused the loss is:

  1. Abandonment
  2. Subrogation ✓
  3. Salvage
  4. Liberalization

Why: Subrogation transfers the insured's right of recovery against a responsible third party to the insurer after it pays the claim.

Which Homeowners form is the Broad Form, covering the dwelling on a named-perils (broad) basis?

  1. HO-2 ✓
  2. HO-6
  3. HO-3
  4. HO-4

Why: HO-2 is the Broad Form, insuring the dwelling and personal property on a named-perils (broad form) basis.

A producer who recommends a product the client does not need solely to earn a larger commission has most clearly breached the duty of:

  1. Suitability and fair dealing ✓
  2. Salvage and abandonment rights
  3. Coinsurance and loss sharing
  4. Subrogation and recovery rights

Why: Recommending unsuitable products for the producer's own gain violates the ethical duties of suitability and fair dealing owed to the client.

A risk retention group is an insurer formed to provide liability coverage for:

  1. Federal government employees and their immediate dependents only
  2. Members engaged in similar businesses with similar exposures ✓
  3. Individual homeowners who cannot obtain coverage in the admitted market
  4. The general public on a statewide basis

Why: A risk retention group is a liability insurer owned by members with similar or related liability exposures who share that risk.

Under the CGL, the duty to defend ends when:

  1. The policy is renewed and a fresh set of aggregate limits takes effect for the new term
  2. The applicable limit of insurance has been exhausted by payment of judgments or settlements ✓
  3. The insured retains its own attorney and the insurer reimburses those fees
  4. The first claim of the policy period is filed against the insured

Why: The insurer's duty to defend ceases once the applicable limit is used up by judgments or settlements.

Workers' compensation wage-replacement (indemnity) benefits typically pay the worker:

  1. Only the difference between the worker's wages and any unemployment compensation collected during the same weeks
  2. One hundred percent of pre-injury gross wages, reported on a W-2 and fully subject to income tax
  3. A flat statewide amount set by statute, the same for every worker
  4. A percentage of average weekly wage, generally tax-free and subject to a maximum ✓

Why: Indemnity benefits usually replace a percentage (often around two-thirds) of the worker's average weekly wage, are generally tax-free, and are subject to statutory minimums and maximums.

In an insurance contract, the consideration given by the insured is:

  1. The promise to pay covered claims that arise during the policy period
  2. The certificate of authority that the insurer holds from its state of domicile
  3. The policy document itself, once it has been delivered to the applicant
  4. The payment of premium and the statements made in the application ✓

Why: The insured's consideration is the premium plus the representations made in the application; the insurer's consideration is its promise to pay covered losses.

The Motor Carrier Act and related federal regulations require interstate motor carriers to maintain:

  1. Workers compensation coverage on all drivers and nothing more, since federal rules leave liability limits to each state
  2. Minimum levels of public liability (financial responsibility) coverage based on cargo type ✓
  3. Comprehensive and collision coverage on every power unit and trailer in the fleet, at limits set by the FMCSA
  4. No federal filing at all when the truck is owner-operated, because an owner-operator is not classed as a motor carrier

Why: Federal law sets minimum public liability limits for interstate carriers, which vary by the type and hazard of cargo transported (e.g., higher for hazardous materials).

A commercial umbrella policy provides which three basic functions?

  1. Excess limits over underlying coverage, broader 'drop-down' coverage for some gaps, and additional protection where no underlying exists (subject to an SIR) ✓
  2. Replacement cost valuation, actual cash value settlement, and agreed value coverage on the insured's buildings and stock
  3. Property, commercial auto, and crime coverage packaged in one form so the insured needs only a single policy
  4. Surety bonds, fidelity bonds, and license and permit bonds, guaranteeing the insured's performance of its contracts and the honesty of the employees who handle its money

Why: Umbrellas provide excess limits over underlying policies, broader coverage that drops down for certain gaps, and coverage for losses not covered by underlying subject to a self-insured retention.

A spectator hit by a foul ball at a baseball game may be barred from recovery under which defense?

  1. Subrogation
  2. Assumption of risk ✓
  3. Contribution
  4. Vicarious liability

Why: Assumption of risk applies when a person knowingly and voluntarily exposes themselves to a known danger, such as inherent risks at a sporting event.

Under the PAP, an insured loses control on ice and slides into a tree. This loss is covered under:

  1. Liability
  2. Other Than Collision
  3. Medical Payments
  4. Collision ✓

Why: Striking a tree as the result of losing control is a collision loss, since collision includes upset or impact with an object.

Which Part of the Workers Compensation and Employers Liability Policy pays the benefits required by the workers' compensation law of a listed state, with no dollar limit on the amount paid?

  1. Part Three — Other States Insurance
  2. Part One — Workers Compensation ✓
  3. Part Four — Your Duties
  4. Part Two — Employers Liability

Why: Part One pays promptly all benefits required by the workers' compensation law of the states listed; because the law sets the benefits, there is no policy limit on Part One.

Personal property losses under most Homeowners forms are settled on what basis unless replacement cost is endorsed?

  1. Market value
  2. Replacement cost
  3. Agreed value
  4. Actual cash value (ACV) ✓

Why: Coverage C personal property is settled on an actual cash value basis (replacement cost minus depreciation) unless replacement cost coverage is added by endorsement.

PAP Part E — Duties After an Accident or Loss requires the insured to:

  1. Promptly notify the insurer and cooperate in the investigation and settlement ✓
  2. Pay the other driver's damages directly and then submit the receipts for reimbursement
  3. Complete all repairs before reporting the loss to the insurer
  4. Admit fault at the scene so the insurer can settle quickly

Why: Part E requires prompt notice of the accident, cooperation, providing proof of loss, and allowing inspection, among other duties.

Most workers' compensation laws impose a 'waiting period' before income (indemnity) benefits begin. The purpose is to:

  1. Give the employer time to contest compensability
  2. Delay medical benefits until a doctor files a report
  3. Let the state audit the employer's payroll records
  4. Avoid paying wage benefits for very short, minor absences ✓

Why: The waiting period (commonly a few days) means no wage-loss benefits are paid for minor, brief absences; medical benefits, however, usually begin immediately.

Compensatory damages are intended to:

  1. Set a public example that deters others from similar conduct
  2. Punish the defendant for willful or malicious wrongdoing
  3. Pay the plaintiff's contingency fee
  4. Reimburse the injured party for actual losses ✓

Why: Compensatory damages reimburse the claimant for actual losses suffered, restoring them to their pre-loss condition.

The CGL's coverage for 'damage to premises rented to you' generally does NOT apply to:

  1. Damage the insured causes to premises it owns ✓
  2. Fire damage to a building rented to the insured
  3. Lightning damage to rented premises
  4. Explosion or smoke damage to short-term rented premises

Why: This coverage applies to rented premises, not to property the insured owns, which would need property insurance.

Injuries to civilian federal government employees (such as a postal or federal agency worker) are covered under:

  1. FELA, since the employer is federal
  2. The Defense Base Act, for postal routes
  3. The Federal Employees' Compensation Act (FECA) ✓
  4. The LHWCA, for federal facilities

Why: FECA provides workers' compensation benefits to civilian employees of the federal government for job-related injuries and illnesses.

Authority that is explicitly granted to a producer in the written agency contract is called:

  1. Assumed authority
  2. Express authority ✓
  3. Apparent authority
  4. Implied authority

Why: Express authority is the authority specifically granted to the agent in writing through the agency agreement.

Intentional injury caused by an insured is treated under Section II how?

  1. Covered under Coverage F only
  2. Fully covered
  3. Excluded ✓
  4. Covered under Coverage D

Why: Bodily injury or property damage expected or intended by the insured is excluded under Section II liability coverage.

For a property owner to be eligible to purchase NFIP flood insurance, the property must be located in:

  1. A coastal county
  2. A federally declared disaster area
  3. A community that participates in the NFIP ✓
  4. A state with a FAIR Plan

Why: NFIP coverage is only available in communities that have agreed to adopt and enforce floodplain management ordinances and thus participate in the program.

Insurable interest in property insurance requires that the insured:

  1. Hold a state insurance license before the property can be covered at all
  2. Own the property outright, free of any mortgage, lien or other encumbrance
  3. Be related by blood or marriage to the previous owner of the property
  4. Will suffer a financial loss if the property is damaged or destroyed ✓

Why: Insurable interest exists when a person would suffer a genuine financial loss from damage to or destruction of the property.

PAP Part B — Medical Payments covers:

  1. Lost wages and the cost of household services the named insured cannot perform while recovering from the accident
  2. Medical expenses of the other driver only, and only after that driver's own liability insurer has denied the claim
  3. Repair costs for damage to the covered auto, plus any medical bills the insured cannot recover from the at-fault driver
  4. Reasonable medical and funeral expenses for the insured and occupants of the covered auto, regardless of fault ✓

Why: Medical Payments covers reasonable and necessary medical and funeral expenses for an insured injured in an auto accident, paid without regard to fault.

Medical Payments coverage typically pays expenses incurred within what time frame after the accident?

  1. Within 30 days
  2. Indefinitely with no limit
  3. Within 1 year
  4. Within 3 years ✓

Why: PAP Part B generally pays covered medical and funeral expenses incurred within three years of the date of the accident.

Shareholders sue a corporation's board alleging mismanagement caused a stock drop. Which policy responds?

  1. CGL Coverage B, treating the board's statements as advertising injury
  2. Directors and Officers (D&O) Liability ✓
  3. Liquor liability, if the board met over dinner
  4. EPLI, because the suit names corporate officers

Why: Claims against directors and officers for wrongful management acts are handled by D&O liability insurance.

Employment Practices Liability Insurance (EPLI) covers claims such as:

  1. Defects in the products the insured manufactures that injure a consumer
  2. Damage to premises the insured rents, caused by a fire it started
  3. Wrongful termination, discrimination, harassment, and retaliation by employees ✓
  4. Bodily injury to a customer who trips over a floor display inside the insured's retail store

Why: EPLI responds to employment-related claims like discrimination, harassment, wrongful termination, and retaliation.

A primary reason an organization purchases an umbrella in addition to its CGL, auto, and employers liability is to:

  1. Obtain a single high layer of catastrophic liability protection above several underlying policies ✓
  2. Cover first-party damage to the organization's own buildings and equipment
  3. Lower the deductibles that apply under the underlying primary policies
  4. Eliminate the need to carry workers compensation insurance in the states where it operates

Why: Umbrellas provide a consolidated high limit of catastrophic excess protection over multiple underlying liability policies.

Because the standard policy's Part One does not apply in monopolistic fund states (where coverage comes from the state fund), what does the policy still commonly provide for those states via endorsement?

  1. Part One statutory benefits for those states
  2. Vocational rehabilitation and retraining benefits
  3. Stop Gap / Employers Liability coverage ✓
  4. Other States Insurance listing the monopolistic states

Why: In monopolistic states, the state fund provides statutory benefits but not employers liability; a stop gap (Employers Liability) endorsement fills that gap.

A policy designated as 'excess' over other coverage will:

  1. Never pay anything once any other collectible insurance exists
  2. Share each loss pro rata with the primary from the first dollar
  3. Pay first and then seek reimbursement
  4. Pay only after the primary policy's limits are exhausted ✓

Why: Excess coverage applies only after the underlying (primary) insurance limits have been used up.

An 'impairment rating' in workers' compensation is used primarily to:

  1. Decide which state's compensation law governs a multistate claim
  2. Measure the degree of permanent loss of function for benefit determination ✓
  3. Set the employer's premium classification code from its payroll
  4. Calculate the experience modification factor applied to the employer's manual premium

Why: An impairment rating, often expressed as a percentage, measures the extent of permanent physical impairment and is used to determine permanent disability benefits.

Pet insurance is generally classified as a form of:

  1. Crop insurance, since animals raised for household purposes are treated as agricultural production units
  2. Property and casualty inland marine/health-type coverage reimbursing veterinary expenses ✓
  3. A surety bond under which the treating veterinarian guarantees recovery and the insurer pays if treatment fails
  4. Workers compensation coverage extended to service and working animals

Why: Pet insurance reimburses veterinary expenses for illness or injury and is offered as a specialty personal-lines product.

A Businessowners Policy (BOP) is best described as:

  1. A package policy combining property and liability for small to medium businesses ✓
  2. A monoline liability policy sold separately from any property coverage the insured buys
  3. A policy available only to large manufacturers with multiple plant locations nationwide
  4. An ocean marine form covering cargo shipped internationally by vessel and aircraft

Why: A BOP is a prepackaged policy combining property and liability coverage designed for eligible small and medium-sized businesses.

When an employer is held responsible for the negligent acts of an employee committed within the scope of employment, this is:

  1. Contributory negligence
  2. Vicarious liability ✓
  3. Absolute liability
  4. Strict liability

Why: Vicarious liability holds one party (e.g., an employer) responsible for the actions of another (e.g., an employee acting within the scope of employment).

Supplementary payments in a liability policy typically include:

  1. The insured's lost earnings for every day spent assisting with the defense, with no dollar cap
  2. Defense costs, bail bond premiums, and reasonable expenses incurred at the insurer's request ✓
  3. Punitive damages awarded against the insured, paid in addition to the applicable limit of liability
  4. The replacement cost of property the insured damaged

Why: Supplementary (additional) payments cover items like defense costs, certain bonds, and the insured's expenses incurred assisting the defense, often beyond the limit.

An insured increases jewelry coverage by scheduling items. Scheduled items differ from blanket Coverage C because they:

  1. Are excluded from theft coverage unless a burglar alarm is installed
  2. Have lower limits than Coverage C provides for the same class of property
  3. Require a mortgage clause naming the lender before the schedule takes effect
  4. Are individually listed and valued, often with broader perils and no deductible ✓

Why: Scheduled personal property is individually listed and valued, generally insured on a broader open-peril basis, often with no deductible and above Coverage C sublimits.

Self-insurance is best defined as:

  1. Buying a policy from an offshore carrier that is not licensed in the insured's home state, so no premium tax applies
  2. Purchasing an umbrella policy to sit above the primary limits
  3. An entity setting aside its own funds to pay for its own anticipated losses rather than transferring the risk ✓
  4. Joining a state FAIR Plan so that the residual market, rather than the entity itself, absorbs the cost of each loss

Why: Self-insurance is a risk-retention technique in which an organization budgets and funds its own losses internally instead of transferring the risk to an insurer.

Which statement about how coverage parts combine in a CPP is correct?

  1. Two or more coverage parts share the Common Declarations and Common Conditions to form a package ✓
  2. A monoline policy brings every available coverage part together under one set of common declarations
  3. A package may combine property coverage parts only, since liability parts must always be written by themselves
  4. Each coverage part must be issued as a separate policy with its own declarations

Why: In a package, two or more coverage parts attach to common declarations and common conditions; a single coverage part written alone is monoline.

The Business Pursuits endorsement on a Homeowners policy is used to:

  1. Extend liability for certain business activities of an insured (e.g., a teacher or clerk) ✓
  2. Cover an insured's full-scale business operation, replacing the need for a commercial general liability policy
  3. Add scheduled coverage for jewelry, silverware and other valuables kept at the insured's place of work
  4. Provide flood coverage for a home office

Why: The business pursuits endorsement extends Section II liability to certain employee business activities that would otherwise be excluded; it does not cover an owned business.

Under the BPP, money stolen from a register is not covered. The correct coverage to address this exposure is:

  1. The Special Causes of Loss form
  2. A commercial crime policy ✓
  3. Ordinance or Law
  4. Builders Risk

Why: Money and securities are excluded under property forms; theft of money is properly insured under a commercial crime policy.

In a life insurance contract (by contrast with property), insurable interest must exist:

  1. At the inception of the policy only ✓
  2. Never
  3. Continuously throughout the policy
  4. At the time of loss only

Why: Life insurance requires insurable interest only at policy inception, whereas property/casualty requires it at the time of loss.