NORTH DAKOTA CROP INSURANCE EXAM ACTUAL EXAM 2026 | COMPLETE
QUESTIONS AND CORRECT ANSWERS | UPDATED VERSION
Question 1
Which of the following best describes the "Actual Cash Value" (ACV) of a property in an
insurance settlement?
A) The original purchase price plus interest
B) The current market value of the land only
C) The cost to replace an item at the time of loss, minus depreciation
D) The maximum limit of liability stated on the declarations page
E) The replacement cost with no deduction for age or wear
Correct Answer: C) The cost to replace an item at the time of loss, minus depreciation
Rationale: Actual Cash Value is a fundamental valuation method used to determine the
amount of an indemnity. It is mathematically expressed as Replacement Cost (RC) minus
Depreciation. This ensures the principle of indemnity is upheld, returning the insured to
the same financial position they were in prior to the loss without allowing them to profit
from the claim by receiving a brand-new item in place of an older, used one.
Question 2
In the context of Crop-Hail insurance, when does the application typically serve as a "Binder"?
A) Only after the policy has been physically mailed to the insured
B) When it is signed by the producer but before the premium is paid
C) When properly completed, dated, signed, and accompanied by the premium or a promissory
note
D) On the date the crop first emerges from the soil
E) 24 hours after the insurance company conducts a field inspection
Correct Answer: C) When properly completed, dated, signed, and accompanied by the
premium or a promissory note
Rationale: A binder is a temporary insurance contract that provides immediate proof of
coverage until the permanent policy is issued. In the specialized field of crop-hail
insurance, the application itself functions as a binder. For it to be legally effective in North
Dakota, the paperwork must be complete, the signatures must be present, and the
, 2
consideration (premium or a signed promissory note) must be provided at the time of
application.
Question 3
Which type of hazard is characterized by a person's "dishonesty or lack of integrity"?
A) Physical Hazard
B) Morale Hazard
C) Moral Hazard
D) Legal Hazard
E) Perilous Hazard
Correct Answer: C) Moral Hazard
Rationale: Insurance distinguishes between the way hazards influence risk. A "Moral"
hazard stems from the insured’s character or behavior, specifically relating to dishonesty.
An example would be an insured intentionally destroying a crop to collect insurance
money. This is distinct from a "Morale" hazard, which involves a careless attitude or
indifference (e.g., "It’s insured, so I don't care if I leave the gate open").
Question 4
A farmer’s indifference to the safety of their equipment because they know it is fully insured is
an example of which of the following?
A) A Peril
B) A Moral Hazard
C) A Morale Hazard
D) An Occurrence
E) A Physical Hazard
Correct Answer: C) A Morale Hazard
Rationale: Morale hazards arise from a state of mind characterized by carelessness or
indifference to loss. Unlike moral hazards (which involve intentional dishonesty), morale
hazards involve an insured being less careful because they have shifted the financial risk of
loss to the insurance company. In crop insurance, this might manifest as a farmer failing to
properly maintain irrigation equipment because "the policy will cover the loss anyway."
, 3
Question 5
In insurance terminology, the "cause of a possible loss," such as fire, wind, or hail, is referred to
as:
A) An Occurrence
B) A Hazard
C) A Peril
D) An Endorsement
E) A Risk
Correct Answer: C) A Peril
Rationale: While a hazard is a condition that increases the likelihood of a loss, a peril is the
actual event that causes the damage. Common perils in North Dakota crop insurance
include hail, wind, frost, and fire. The policy defines which specific perils are covered and
which are excluded.
Question 6
Which of the following terms describes "the lack of reasonable care required to protect others
from an unreasonable chance of harm"?
A) Liability
B) Negligence
C) Proximate Cause
D) Occurrence
E) Indemnity
Correct Answer: B) Negligence
Rationale: Negligence is the failure to act as a "reasonably prudent person" would under
similar circumstances. In the insurance world, if an individual’s negligence leads to damage
to another person's property or body, the negligent party becomes legally liable. Negligence
is usually a prerequisite for a liability insurance claim to be paid.
Question 7
The maximum amount an insurer will pay for a single loss or during a specific policy period is
known as the:
, 4
A) Premium
B) Deductible
C) Limit of Liability
D) Actual Cash Value
E) Consideration
Correct Answer: C) Limits of Liability
Rationale: Limits of Liability (also known as policy limits or limits of insurance) represent
the cap on the insurer's financial obligation. In crop insurance, this is often expressed as a
dollar amount per acre. If a loss exceeds this limit, the insured is responsible for the
remaining balance of the loss.
Question 8
Under a standard crop insurance policy, what is required for an "Assignment of Indemnity" to be
valid?
A) It can be done verbally with the agent
B) It requires the written consent of the neighbors
C) It must be on the insurer’s approved form and have the insurer's approval
D) It can only be assigned to a spouse
E) It is automatically granted if the farmer dies
Correct Answer: C) it must be on our form and with our approval.
Rationale: An Assignment of Indemnity allows the insured to transfer their right to receive
a claim payment to a third party (often a bank or creditor). Because this changes the
financial dynamics of the contract, insurance companies require that the assignment be
documented on their specific forms and receive formal approval before it is recognized.
Question 9
In North Dakota, the "Sales Closing Date" (SCD) for spring-planted crops is typically:
A) January 1st
B) March 15th
C) April 29th
QUESTIONS AND CORRECT ANSWERS | UPDATED VERSION
Question 1
Which of the following best describes the "Actual Cash Value" (ACV) of a property in an
insurance settlement?
A) The original purchase price plus interest
B) The current market value of the land only
C) The cost to replace an item at the time of loss, minus depreciation
D) The maximum limit of liability stated on the declarations page
E) The replacement cost with no deduction for age or wear
Correct Answer: C) The cost to replace an item at the time of loss, minus depreciation
Rationale: Actual Cash Value is a fundamental valuation method used to determine the
amount of an indemnity. It is mathematically expressed as Replacement Cost (RC) minus
Depreciation. This ensures the principle of indemnity is upheld, returning the insured to
the same financial position they were in prior to the loss without allowing them to profit
from the claim by receiving a brand-new item in place of an older, used one.
Question 2
In the context of Crop-Hail insurance, when does the application typically serve as a "Binder"?
A) Only after the policy has been physically mailed to the insured
B) When it is signed by the producer but before the premium is paid
C) When properly completed, dated, signed, and accompanied by the premium or a promissory
note
D) On the date the crop first emerges from the soil
E) 24 hours after the insurance company conducts a field inspection
Correct Answer: C) When properly completed, dated, signed, and accompanied by the
premium or a promissory note
Rationale: A binder is a temporary insurance contract that provides immediate proof of
coverage until the permanent policy is issued. In the specialized field of crop-hail
insurance, the application itself functions as a binder. For it to be legally effective in North
Dakota, the paperwork must be complete, the signatures must be present, and the
, 2
consideration (premium or a signed promissory note) must be provided at the time of
application.
Question 3
Which type of hazard is characterized by a person's "dishonesty or lack of integrity"?
A) Physical Hazard
B) Morale Hazard
C) Moral Hazard
D) Legal Hazard
E) Perilous Hazard
Correct Answer: C) Moral Hazard
Rationale: Insurance distinguishes between the way hazards influence risk. A "Moral"
hazard stems from the insured’s character or behavior, specifically relating to dishonesty.
An example would be an insured intentionally destroying a crop to collect insurance
money. This is distinct from a "Morale" hazard, which involves a careless attitude or
indifference (e.g., "It’s insured, so I don't care if I leave the gate open").
Question 4
A farmer’s indifference to the safety of their equipment because they know it is fully insured is
an example of which of the following?
A) A Peril
B) A Moral Hazard
C) A Morale Hazard
D) An Occurrence
E) A Physical Hazard
Correct Answer: C) A Morale Hazard
Rationale: Morale hazards arise from a state of mind characterized by carelessness or
indifference to loss. Unlike moral hazards (which involve intentional dishonesty), morale
hazards involve an insured being less careful because they have shifted the financial risk of
loss to the insurance company. In crop insurance, this might manifest as a farmer failing to
properly maintain irrigation equipment because "the policy will cover the loss anyway."
, 3
Question 5
In insurance terminology, the "cause of a possible loss," such as fire, wind, or hail, is referred to
as:
A) An Occurrence
B) A Hazard
C) A Peril
D) An Endorsement
E) A Risk
Correct Answer: C) A Peril
Rationale: While a hazard is a condition that increases the likelihood of a loss, a peril is the
actual event that causes the damage. Common perils in North Dakota crop insurance
include hail, wind, frost, and fire. The policy defines which specific perils are covered and
which are excluded.
Question 6
Which of the following terms describes "the lack of reasonable care required to protect others
from an unreasonable chance of harm"?
A) Liability
B) Negligence
C) Proximate Cause
D) Occurrence
E) Indemnity
Correct Answer: B) Negligence
Rationale: Negligence is the failure to act as a "reasonably prudent person" would under
similar circumstances. In the insurance world, if an individual’s negligence leads to damage
to another person's property or body, the negligent party becomes legally liable. Negligence
is usually a prerequisite for a liability insurance claim to be paid.
Question 7
The maximum amount an insurer will pay for a single loss or during a specific policy period is
known as the:
, 4
A) Premium
B) Deductible
C) Limit of Liability
D) Actual Cash Value
E) Consideration
Correct Answer: C) Limits of Liability
Rationale: Limits of Liability (also known as policy limits or limits of insurance) represent
the cap on the insurer's financial obligation. In crop insurance, this is often expressed as a
dollar amount per acre. If a loss exceeds this limit, the insured is responsible for the
remaining balance of the loss.
Question 8
Under a standard crop insurance policy, what is required for an "Assignment of Indemnity" to be
valid?
A) It can be done verbally with the agent
B) It requires the written consent of the neighbors
C) It must be on the insurer’s approved form and have the insurer's approval
D) It can only be assigned to a spouse
E) It is automatically granted if the farmer dies
Correct Answer: C) it must be on our form and with our approval.
Rationale: An Assignment of Indemnity allows the insured to transfer their right to receive
a claim payment to a third party (often a bank or creditor). Because this changes the
financial dynamics of the contract, insurance companies require that the assignment be
documented on their specific forms and receive formal approval before it is recognized.
Question 9
In North Dakota, the "Sales Closing Date" (SCD) for spring-planted crops is typically:
A) January 1st
B) March 15th
C) April 29th
