Personal Lines Insurance EXAM STUDY
GUIDE 2026/2027 COMPLETE QUESTIONS
WITH VERIFIED CORRECT ANSWERS ||
ALREADY GRADED A+
Aleatory Contract - ANSWER✔The exchange of value is unequal. Insured's
premium payment if less than the potential benefit to be received in the event of a
loss. The insurer's payment in the event of a loss may be much greater, or much
less, than the insured's premium payment.
Valued Contract - ANSWER✔A contract that pays a stated amount in the event of
a loss. Most policies are NOT valued contracts.
Indemnity Contract - ANSWER✔An agreement to pay on behalf of another party
under specified circumstances, such as when a loss occurs.
Applicant - ANSWER✔The party submitting an application for insurance.
Application - ANSWER✔A document submitted by an applicant to an insurer that
provides information needed for the insurer to underwrite a risk; becomes part of
the insurance contract. Most applications require statements on the application to
be true to the best knowledge and belief of the applicant.
Endorsement - ANSWER✔A policy form that alters or adds to the provisions of a
property and casualty insurance contract.
, Personal Contract - ANSWER✔Owner cannot transfer or assign ownership of an
insurance policy (property and casualty) to another person
Non-Personal Contract - ANSWER✔Owner may transfer or assign ownership of a
life or health insurance policy to another person.
Assignment - ANSWER✔Policy owners may not assign or transfer their rights
under an insurance contract without the written consent of the insurer.
Issue Age - ANSWER✔Insured's original age on the policy issue date
Attained Age - ANSWER✔Insured's age at any point in time at issuance, renewal
or conversion
Risk _________ is when one takes action to prevent or reduce potential loss. -
ANSWER✔Reduction
When the number of similar units increases, the predictability of the loss improves
according to the rule of _____ ________. - ANSWER✔Large Numbers
The insuring of risks that are more prone to losses than average risks is known as?
- ANSWER✔Adverse Selection
A ___________ contract is an arrangement where one insurer transfers or shares
risks with another insurer. - ANSWER✔Reinsurance
_____________ Reinsurance is accepted or rejected by a case by case basis. -
ANSWER✔Facultative
,The fact that an insured would profit from a loss, would be a violation of the
principle of ___________. - ANSWER✔Indemnity
The determination of acceptable risks is the primary function of the ___________
. - ANSWER✔Underwriter
Underwriters like to select insureds who's actual losses will be similar to expected
losses. True or False? - ANSWER✔True
When rates cannot be used until they are improved by the department or division
of insurance, they are called ____ ________ rates. - ANSWER✔Prior Approval
The termination of a policy by either the insured or insurer before its expiration
date is known as ___________. - ANSWER✔Cancellation
When the insurer cancels a property policy, the unearned premium is returned ___
____. - ANSWER✔Pro Rata
When an insured requests cancellation of a policy, the unearned premium is
refunded to the insured on a _____ _____. - ANSWER✔Short Rate
A fire is considered to be a _____ of a potential loss. - ANSWER✔Cause
A document that provides temporary insurance coverage until a policy is issued is
known as a ______. - ANSWER✔Binder
, The process by which a disputed claim is decided by a neutral third party is known
as ___________. - ANSWER✔Arbitration
_________ _________ is a situation where there are two causes resulting in a loss,
with one of the causes excluded and the other cause of loss not excluded. -
ANSWER✔Concurrent Causation
If two or more policies provide identical coverage for the same risk, the policies
are deemed to be __________. - ANSWER✔Concurrent
Policy A is written for $100,000, and an excess Policy B is written for $200,000
on the same property. In the event of a $20,000 loss, how much will each policy
pay? - ANSWER✔A= $20,000 ; B= $0
A building that has neither occupants nor personal property is ______. -
ANSWER✔Vacant
When property is damaged by fire, the loss is said to be a(n) ______ loss. -
ANSWER✔Direct
If a fire on a premises caused a power outage, which caused meat in the freezer to
spoil, would the meat spoilage be considered a direct loss or indirect loss? -
ANSWER✔Indirect Loss
Open peril policies include losses caused by theft. True or False? -
ANSWER✔True
GUIDE 2026/2027 COMPLETE QUESTIONS
WITH VERIFIED CORRECT ANSWERS ||
ALREADY GRADED A+
Aleatory Contract - ANSWER✔The exchange of value is unequal. Insured's
premium payment if less than the potential benefit to be received in the event of a
loss. The insurer's payment in the event of a loss may be much greater, or much
less, than the insured's premium payment.
Valued Contract - ANSWER✔A contract that pays a stated amount in the event of
a loss. Most policies are NOT valued contracts.
Indemnity Contract - ANSWER✔An agreement to pay on behalf of another party
under specified circumstances, such as when a loss occurs.
Applicant - ANSWER✔The party submitting an application for insurance.
Application - ANSWER✔A document submitted by an applicant to an insurer that
provides information needed for the insurer to underwrite a risk; becomes part of
the insurance contract. Most applications require statements on the application to
be true to the best knowledge and belief of the applicant.
Endorsement - ANSWER✔A policy form that alters or adds to the provisions of a
property and casualty insurance contract.
, Personal Contract - ANSWER✔Owner cannot transfer or assign ownership of an
insurance policy (property and casualty) to another person
Non-Personal Contract - ANSWER✔Owner may transfer or assign ownership of a
life or health insurance policy to another person.
Assignment - ANSWER✔Policy owners may not assign or transfer their rights
under an insurance contract without the written consent of the insurer.
Issue Age - ANSWER✔Insured's original age on the policy issue date
Attained Age - ANSWER✔Insured's age at any point in time at issuance, renewal
or conversion
Risk _________ is when one takes action to prevent or reduce potential loss. -
ANSWER✔Reduction
When the number of similar units increases, the predictability of the loss improves
according to the rule of _____ ________. - ANSWER✔Large Numbers
The insuring of risks that are more prone to losses than average risks is known as?
- ANSWER✔Adverse Selection
A ___________ contract is an arrangement where one insurer transfers or shares
risks with another insurer. - ANSWER✔Reinsurance
_____________ Reinsurance is accepted or rejected by a case by case basis. -
ANSWER✔Facultative
,The fact that an insured would profit from a loss, would be a violation of the
principle of ___________. - ANSWER✔Indemnity
The determination of acceptable risks is the primary function of the ___________
. - ANSWER✔Underwriter
Underwriters like to select insureds who's actual losses will be similar to expected
losses. True or False? - ANSWER✔True
When rates cannot be used until they are improved by the department or division
of insurance, they are called ____ ________ rates. - ANSWER✔Prior Approval
The termination of a policy by either the insured or insurer before its expiration
date is known as ___________. - ANSWER✔Cancellation
When the insurer cancels a property policy, the unearned premium is returned ___
____. - ANSWER✔Pro Rata
When an insured requests cancellation of a policy, the unearned premium is
refunded to the insured on a _____ _____. - ANSWER✔Short Rate
A fire is considered to be a _____ of a potential loss. - ANSWER✔Cause
A document that provides temporary insurance coverage until a policy is issued is
known as a ______. - ANSWER✔Binder
, The process by which a disputed claim is decided by a neutral third party is known
as ___________. - ANSWER✔Arbitration
_________ _________ is a situation where there are two causes resulting in a loss,
with one of the causes excluded and the other cause of loss not excluded. -
ANSWER✔Concurrent Causation
If two or more policies provide identical coverage for the same risk, the policies
are deemed to be __________. - ANSWER✔Concurrent
Policy A is written for $100,000, and an excess Policy B is written for $200,000
on the same property. In the event of a $20,000 loss, how much will each policy
pay? - ANSWER✔A= $20,000 ; B= $0
A building that has neither occupants nor personal property is ______. -
ANSWER✔Vacant
When property is damaged by fire, the loss is said to be a(n) ______ loss. -
ANSWER✔Direct
If a fire on a premises caused a power outage, which caused meat in the freezer to
spoil, would the meat spoilage be considered a direct loss or indirect loss? -
ANSWER✔Indirect Loss
Open peril policies include losses caused by theft. True or False? -
ANSWER✔True
