Arizona Insurance Producer License
Exam – Property Exam Practice
Questions And Correct Answers
(Verified Answers) Plus Rationale 2026
Q&A| Instant Download Pdf
1. Which of the following best describes the primary purpose of property
insurance?
A. To provide health benefits to the insured
B. To protect the insured against financial loss from damage to
property
C. To pay for legal liabilities arising from personal injury
D. To guarantee income in the event of disability
B. To protect the insured against financial loss from damage to property
Property insurance is designed to compensate the insured for loss or
damage to buildings, personal property, or other physical assets due to
specified perils, ensuring financial protection.
2. In a standard homeowners policy, which peril is typically covered?
A. Flood
B. Earthquake
C. Fire
D. War
,C. Fire
Standard homeowners policies generally cover fire and lightning damage,
while flood, earthquake, and war require separate endorsements or
policies.
3. Which type of property insurance policy provides coverage for all risks
except those specifically excluded?
A. Named-peril policy
B. Open-peril policy
C. Basic-peril policy
D. Standard-peril policy
B. Open-peril policy
An open-peril (or all-risk) policy covers all perils except those explicitly
excluded in the policy wording, offering broader protection than a named-
peril policy.
4. What is the main difference between actual cash value (ACV) and
replacement cost coverage?
A. ACV includes depreciation, replacement cost does not
B. ACV is higher than replacement cost
C. Replacement cost includes depreciation, ACV does not
D. ACV only covers liability losses
A. ACV includes depreciation, replacement cost does not
Actual cash value deducts depreciation from the cost of repair or
replacement, whereas replacement cost pays the full cost to repair or
replace the property without depreciation.
5. A policyholder has a personal property limit of $50,000 and suffers a
covered loss of $10,000. The deductible is $1,000. How much will the
insurer pay?
A. $9,000
, B. $10,000
C. $49,000
D. $50,000
A. $9,000
The insurer pays the loss amount minus the deductible, so $10,000 - $1,000
= $9,000.
6. Which clause in a property insurance policy prevents the insured from
collecting more than the actual loss?
A. Insuring agreement
B. Deductible clause
C. Coinsurance clause
D. Principle of indemnity
D. Principle of indemnity
The principle of indemnity ensures that the insured cannot profit from a
loss, providing payment only up to the actual amount of financial loss
suffered.
7. In property insurance, what does the term “coinsurance” generally
refer to?
A. Sharing of premiums between insurer and insured
B. Requirement to insure property to a specified percentage of its
value
C. Deductible applied per claim
D. Coverage for multiple perils
B. Requirement to insure property to a specified percentage of its value
Coinsurance encourages policyholders to insure property to an appropriate
value, usually 80% or more, or face a reduced claim payment proportional
to underinsurance.
, 8. Which of the following is typically excluded under a standard
homeowners policy?
A. Fire damage
B. Theft of personal property
C. Earthquake damage
D. Vandalism
C. Earthquake damage
Earthquake damage is usually excluded from standard homeowners
policies and requires a separate earthquake endorsement or policy.
9. When an insurer and insured agree to settle a property loss by paying
the current market value of damaged property, this is known as:
A. Replacement cost settlement
B. Actual cash value settlement
C. Functional replacement
D. Guaranteed value settlement
B. Actual cash value settlement
Actual cash value settlement pays the current market value of the property
at the time of loss, factoring in depreciation.
10. Which type of property policy provides coverage for multiple
types of property, usually under one limit?
A. Single-property policy
B. Blanket policy
C. Named-peril policy
D. Open-peril policy
B. Blanket policy
A blanket policy allows multiple properties to be insured under one
coverage limit, offering flexibility and convenience compared to separate
property-specific policies.
Exam – Property Exam Practice
Questions And Correct Answers
(Verified Answers) Plus Rationale 2026
Q&A| Instant Download Pdf
1. Which of the following best describes the primary purpose of property
insurance?
A. To provide health benefits to the insured
B. To protect the insured against financial loss from damage to
property
C. To pay for legal liabilities arising from personal injury
D. To guarantee income in the event of disability
B. To protect the insured against financial loss from damage to property
Property insurance is designed to compensate the insured for loss or
damage to buildings, personal property, or other physical assets due to
specified perils, ensuring financial protection.
2. In a standard homeowners policy, which peril is typically covered?
A. Flood
B. Earthquake
C. Fire
D. War
,C. Fire
Standard homeowners policies generally cover fire and lightning damage,
while flood, earthquake, and war require separate endorsements or
policies.
3. Which type of property insurance policy provides coverage for all risks
except those specifically excluded?
A. Named-peril policy
B. Open-peril policy
C. Basic-peril policy
D. Standard-peril policy
B. Open-peril policy
An open-peril (or all-risk) policy covers all perils except those explicitly
excluded in the policy wording, offering broader protection than a named-
peril policy.
4. What is the main difference between actual cash value (ACV) and
replacement cost coverage?
A. ACV includes depreciation, replacement cost does not
B. ACV is higher than replacement cost
C. Replacement cost includes depreciation, ACV does not
D. ACV only covers liability losses
A. ACV includes depreciation, replacement cost does not
Actual cash value deducts depreciation from the cost of repair or
replacement, whereas replacement cost pays the full cost to repair or
replace the property without depreciation.
5. A policyholder has a personal property limit of $50,000 and suffers a
covered loss of $10,000. The deductible is $1,000. How much will the
insurer pay?
A. $9,000
, B. $10,000
C. $49,000
D. $50,000
A. $9,000
The insurer pays the loss amount minus the deductible, so $10,000 - $1,000
= $9,000.
6. Which clause in a property insurance policy prevents the insured from
collecting more than the actual loss?
A. Insuring agreement
B. Deductible clause
C. Coinsurance clause
D. Principle of indemnity
D. Principle of indemnity
The principle of indemnity ensures that the insured cannot profit from a
loss, providing payment only up to the actual amount of financial loss
suffered.
7. In property insurance, what does the term “coinsurance” generally
refer to?
A. Sharing of premiums between insurer and insured
B. Requirement to insure property to a specified percentage of its
value
C. Deductible applied per claim
D. Coverage for multiple perils
B. Requirement to insure property to a specified percentage of its value
Coinsurance encourages policyholders to insure property to an appropriate
value, usually 80% or more, or face a reduced claim payment proportional
to underinsurance.
, 8. Which of the following is typically excluded under a standard
homeowners policy?
A. Fire damage
B. Theft of personal property
C. Earthquake damage
D. Vandalism
C. Earthquake damage
Earthquake damage is usually excluded from standard homeowners
policies and requires a separate earthquake endorsement or policy.
9. When an insurer and insured agree to settle a property loss by paying
the current market value of damaged property, this is known as:
A. Replacement cost settlement
B. Actual cash value settlement
C. Functional replacement
D. Guaranteed value settlement
B. Actual cash value settlement
Actual cash value settlement pays the current market value of the property
at the time of loss, factoring in depreciation.
10. Which type of property policy provides coverage for multiple
types of property, usually under one limit?
A. Single-property policy
B. Blanket policy
C. Named-peril policy
D. Open-peril policy
B. Blanket policy
A blanket policy allows multiple properties to be insured under one
coverage limit, offering flexibility and convenience compared to separate
property-specific policies.
