PERSONAL LINES INSURANCE EXAM
2025 QUESTIONS AND ANSWERS
Risk _________ is when one takes action to prevent or reduce potential loss. -
ANS Reduction
When the number of similar units increases, the predictability of the loss improves according to
the rule of _____ ________. - ANS Large Numbers
The insuring of risks that are more prone to losses than average risks is known as? -
ANS Adverse Selection
A ___________ contract is an arrangement where one insurer transfers or shares risks with
another insurer. - ANS Reinsurance
_____________ Reinsurance is accepted or rejected by a case by case basis. -
ANS Facultative
The fact that an insured would profit from a loss, would be a violation of the principle of
___________. - ANS Indemnity
The determination of acceptable risks is the primary function of the ___________ . -
ANS Underwriter
1 @COPYRIGHT THESTAR 2025/2026
,Underwriters like to select insureds who's actual losses will be similar to expected losses. True
or False? - ANS True
When rates cannot be used until they are improved by the department or division of insurance,
they are called ____ ________ rates. - ANS Prior Approval
The termination of a policy by either the insured or insurer before its expiration date is known
as ___________. - ANS Cancellation
When the insurer cancels a property policy, the unearned premium is returned ___ ____. -
ANS Pro Rata
When an insured requests cancellation of a policy, the unearned premium is refunded to the
insured on a _____ _____. - ANS Short Rate
A fire is considered to be a _____ of a potential loss. - ANS Cause
A document that provides temporary insurance coverage until a policy is issued is known as a
______. - ANS Binder
The process by which a disputed claim is decided by a neutral third party is known as
___________. - ANS 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. - ANS Concurrent Causation
If two or more policies provide identical coverage for the same risk, the policies are deemed to
be __________. - ANS Concurrent
2 @COPYRIGHT THESTAR 2025/2026
, 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? - ANS A= $20,000 ;
B= $0
A building that has neither occupants nor personal property is ______. - ANS Vacant
When property is damaged by fire, the loss is said to be a(n) ______ loss. - ANS 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? - ANS Indirect Loss
Open peril policies include losses caused by theft. True or False? - ANS True
If a property owner does not desire any deduction for depreciation following a covered loss,
he/she should purchase a ___________ ____ policy. - ANS Replacement Cost
For replacement cost coverage to apply in dwelling policies, the insured must carry insurance at
least equal to ____% of the cost of replacement of the building. - ANS 80
Would a stated amount method of valuation likely be used when insuring gold bullion? -
ANS No
An ____ policy is one that the value of the subject matter is not agreed upon, but is left to be
ascertained in case of loss. - ANS Open
A valued policy is one that expresses on it's face an agreement that the thing insured is valued
at a specific sum. True or False? - ANS True
3 @COPYRIGHT THESTAR 2025/2026
2025 QUESTIONS AND ANSWERS
Risk _________ is when one takes action to prevent or reduce potential loss. -
ANS Reduction
When the number of similar units increases, the predictability of the loss improves according to
the rule of _____ ________. - ANS Large Numbers
The insuring of risks that are more prone to losses than average risks is known as? -
ANS Adverse Selection
A ___________ contract is an arrangement where one insurer transfers or shares risks with
another insurer. - ANS Reinsurance
_____________ Reinsurance is accepted or rejected by a case by case basis. -
ANS Facultative
The fact that an insured would profit from a loss, would be a violation of the principle of
___________. - ANS Indemnity
The determination of acceptable risks is the primary function of the ___________ . -
ANS Underwriter
1 @COPYRIGHT THESTAR 2025/2026
,Underwriters like to select insureds who's actual losses will be similar to expected losses. True
or False? - ANS True
When rates cannot be used until they are improved by the department or division of insurance,
they are called ____ ________ rates. - ANS Prior Approval
The termination of a policy by either the insured or insurer before its expiration date is known
as ___________. - ANS Cancellation
When the insurer cancels a property policy, the unearned premium is returned ___ ____. -
ANS Pro Rata
When an insured requests cancellation of a policy, the unearned premium is refunded to the
insured on a _____ _____. - ANS Short Rate
A fire is considered to be a _____ of a potential loss. - ANS Cause
A document that provides temporary insurance coverage until a policy is issued is known as a
______. - ANS Binder
The process by which a disputed claim is decided by a neutral third party is known as
___________. - ANS 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. - ANS Concurrent Causation
If two or more policies provide identical coverage for the same risk, the policies are deemed to
be __________. - ANS Concurrent
2 @COPYRIGHT THESTAR 2025/2026
, 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? - ANS A= $20,000 ;
B= $0
A building that has neither occupants nor personal property is ______. - ANS Vacant
When property is damaged by fire, the loss is said to be a(n) ______ loss. - ANS 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? - ANS Indirect Loss
Open peril policies include losses caused by theft. True or False? - ANS True
If a property owner does not desire any deduction for depreciation following a covered loss,
he/she should purchase a ___________ ____ policy. - ANS Replacement Cost
For replacement cost coverage to apply in dwelling policies, the insured must carry insurance at
least equal to ____% of the cost of replacement of the building. - ANS 80
Would a stated amount method of valuation likely be used when insuring gold bullion? -
ANS No
An ____ policy is one that the value of the subject matter is not agreed upon, but is left to be
ascertained in case of loss. - ANS Open
A valued policy is one that expresses on it's face an agreement that the thing insured is valued
at a specific sum. True or False? - ANS True
3 @COPYRIGHT THESTAR 2025/2026
