NJ PSI PROPERTY AND CASUALTY EXAM 2026 | EXAM QUESTIONS AND CORRECT
ANSWERS | ALREADY GRADED A+ | LATEST UPDATE
Question 1
The Mobile Home Endorsement of a Homeowners policy affords coverage to mobile homes
under which forms?
A) HO-1 (Basic Form)
B) HO-2 (Broad Form)
C) HO-3 (Special Form)
D) HO-2 or HO-3 (Broad and Special)
E) HO-4 or HO-6 (Contents and Condo)
Correct Answer: D) HO-2 or HO-3 (Broad and Special)
Rationale: Mobile homes do not fit the standard definition of a "dwelling" under a standard
Homeowners policy because they are transportable. However, the Mobile Home
Endorsement can be added to an HO-2 or HO-3 form to provide coverage for the structure
and personal property. HO-2 provides broad named perils for both the dwelling and
contents, while HO-3 provides open perils for the dwelling and broad named perils for the
contents.
Question 2
All of the following entities or individuals are eligible for coverage under a standard
Homeowners policy EXCEPT?
A) A condominium unit owner.
B) A farm owner.
C) A mobile home owner.
D) A tenant in an apartment building.
E) An owner-occupant of a 1-4 family dwelling.
Correct Answer: B) A farm owner.
Rationale: The Homeowners policy is designed for residential exposures only. Farming is
considered a commercial/business enterprise involving significant unique risks (livestock,
heavy machinery, high-value crops) that require a specialized Farmowners policy or
commercial agricultural coverage. Condos (HO-6), Tenants (HO-4), and Mobile Homes
(with endorsement) are all eligible residential risks.
Question 3
The term "Insured Location" under Section II (Liability) of a Homeowners policy refers to all of
the following EXCEPT?
A) The residence premises listed in the Declarations.
B) Farm land owned by the insured.
C) A non-owned premises where an insured is temporarily residing (e.g., a hotel room).
D) Vacant land owned by or rented to an insured.
E) Individual or family cemetery plots.
Correct Answer: B) Farm land.
, 2
Rationale: While vacant land is covered under the definition of "insured location," land
used for farming is specifically excluded because of the business/commercial nature of the
activity. Residential liability is not intended to extend to the specialized hazards of
agricultural production. Temporary residences and cemetery plots are considered
extensions of the insured's personal space.
Question 4
Which of the following would NOT be considered an "insured" under the definitions of a
standard Homeowners policy?
A) Resident relatives of the named insured.
B) A non-relative resident under age 21 in the care of the insured.
C) The named insured's spouse if the spouse resides in the household.
D) A non-relative resident over age 21 who pays rent.
E) A full-time student away at college who is a relative and under age 24.
Correct Answer: D) A non-relative resident over age 21.
Rationale: The policy defines an "insured" as the person named in the Declarations and
their resident spouse. It also includes resident relatives and any person under age 21 in the
care of an insured. A non-relative over age 21 (like a roommate or boarder) is not an
insured and needs their own separate policy (such as an HO-4).
Question 5
Which of the following Homeowners forms does NOT provide any coverage for the dwelling
(Coverage A)?
A) HO-2
B) HO-3
C) HO-4
D) HO-8
E) HO-1
Correct Answer: C) HO-4
Rationale: The HO-4 form is specifically designed for renters (tenants). Since the tenant
does not own the building, the policy does not include Coverage A (Dwelling) or Coverage B
(Other Structures). It focuses primarily on Coverage C (Personal Property) and Coverage
D (Loss of Use), plus Section II Liability.
Question 6
Under Homeowners Coverage A (Dwelling), which of the following is typically excluded and
covered under a different section?
A) The main dwelling structure.
B) An attached deck on the back of the house.
C) A detached Gazebo.
D) Construction materials on the premises for use in repairing the dwelling.
, 3
E) Plumbing and heating systems within the walls.
Correct Answer: C) A Gazebo.
Rationale: Coverage A applies to the dwelling and structures attached to the dwelling (like a
deck). A detached gazebo is considered an "Other Structure" and is covered under
Coverage B. Construction materials located on the residence premises intended for the
dwelling are included in Coverage A.
Question 7
Under standard Homeowners policies, what is the typical base deductible applicable to Section I
(Property) losses?
A) $100
B) $250
C) $500
D) $1,000
E)
2,500𝐶𝑜𝑟𝑟𝑒𝑐𝑡𝐴𝑛𝑠𝑤𝑒𝑟: 𝐵) ∗∗
250**
Rationale: While many modern policies have higher deductibles (like $500 or $1,000) to
lower premiums, the standard ISO (Insurance Services Office) base deductible for
Homeowners Section I is $250. This deductible applies to all property coverages except for
Loss of Use.
Question 8
The National Flood Insurance Program (NFIP) is categorized as which type of program?
A) State-mandated.
B) Municipal-sponsored.
C) Federal.
D) Private industry-only.
E) Worldwide non-profit.
Correct Answer: C) Federal.
Rationale: The NFIP was created by Congress in 1968 because private insurers generally
found the peril of flood to be uninsurable. It is a federal program that allows property
owners in participating communities to purchase flood insurance backed by the U.S.
government.
Question 9
All of the following are optional endorsements or increased limits that must be added to a
Homeowners policy EXCEPT?
A) Personal Property Replacement Cost.
B) Increased limits for jewelry, furs, and silverware.
, 4
C) Loss of Use (Coverage D) coverage.
D) Earthquake coverage.
E) Water Back-up and Sump Discharge.
Correct Answer: C) Loss of Use.
Rationale: Loss of Use (Coverage D) is a standard, built-in component of all Homeowners
forms (HO-2 through HO-8). It provides coverage for additional living expenses if the home
is uninhabitable due to a covered loss. Earthquake, Replacement Cost on contents, and
Scheduled items are all optional and require an additional premium.
Question 10
Administration of the National Flood Insurance Program (NFIP) and setting of its standards is
handled by?
A) The National Flood Management Association (NFMA).
B) The National Emergency Standards Agency (NESA).
C) The Federal Flood Coverage Association (FFCA).
D) The Federal Emergency Management Agency (FEMA).
E) The Department of Housing and Urban Development (HUD).
Correct Answer: D) Federal Emergency Management Agency (FEMA)
Rationale: FEMA is the federal agency responsible for overseeing the NFIP. This includes
mapping flood zones (Flood Insurance Rate Maps), managing the Write Your Own (WYO)
program with private insurers, and setting the rules for community participation.
Question 11
Which of the following is considered an optional property coverage endorsement under a
Homeowners policy?
A) Earthquake coverage.
B) Fine Arts (Scheduled).
C) Replacement Cost coverage on personal property.
D) All of the above.
E) None of the above.
Correct Answer: D) All of the above.
Rationale: Standard HO policies exclude earthquakes and value personal property at
Actual Cash Value (ACV). To gain coverage for these or to insure high-value fine arts
specifically, the insured must add the appropriate endorsements to the policy.
Question 12
Under an NFIP Flood policy, the definition of "Flood" includes all of the following EXCEPT?
A) The overflow of inland or tidal waters.
B) Mudflow caused by a current of water.
C) Heavy, driving sheets of wind-blown rain.
D) The collapse or subsidence of land along a shore due to waves/currents.
ANSWERS | ALREADY GRADED A+ | LATEST UPDATE
Question 1
The Mobile Home Endorsement of a Homeowners policy affords coverage to mobile homes
under which forms?
A) HO-1 (Basic Form)
B) HO-2 (Broad Form)
C) HO-3 (Special Form)
D) HO-2 or HO-3 (Broad and Special)
E) HO-4 or HO-6 (Contents and Condo)
Correct Answer: D) HO-2 or HO-3 (Broad and Special)
Rationale: Mobile homes do not fit the standard definition of a "dwelling" under a standard
Homeowners policy because they are transportable. However, the Mobile Home
Endorsement can be added to an HO-2 or HO-3 form to provide coverage for the structure
and personal property. HO-2 provides broad named perils for both the dwelling and
contents, while HO-3 provides open perils for the dwelling and broad named perils for the
contents.
Question 2
All of the following entities or individuals are eligible for coverage under a standard
Homeowners policy EXCEPT?
A) A condominium unit owner.
B) A farm owner.
C) A mobile home owner.
D) A tenant in an apartment building.
E) An owner-occupant of a 1-4 family dwelling.
Correct Answer: B) A farm owner.
Rationale: The Homeowners policy is designed for residential exposures only. Farming is
considered a commercial/business enterprise involving significant unique risks (livestock,
heavy machinery, high-value crops) that require a specialized Farmowners policy or
commercial agricultural coverage. Condos (HO-6), Tenants (HO-4), and Mobile Homes
(with endorsement) are all eligible residential risks.
Question 3
The term "Insured Location" under Section II (Liability) of a Homeowners policy refers to all of
the following EXCEPT?
A) The residence premises listed in the Declarations.
B) Farm land owned by the insured.
C) A non-owned premises where an insured is temporarily residing (e.g., a hotel room).
D) Vacant land owned by or rented to an insured.
E) Individual or family cemetery plots.
Correct Answer: B) Farm land.
, 2
Rationale: While vacant land is covered under the definition of "insured location," land
used for farming is specifically excluded because of the business/commercial nature of the
activity. Residential liability is not intended to extend to the specialized hazards of
agricultural production. Temporary residences and cemetery plots are considered
extensions of the insured's personal space.
Question 4
Which of the following would NOT be considered an "insured" under the definitions of a
standard Homeowners policy?
A) Resident relatives of the named insured.
B) A non-relative resident under age 21 in the care of the insured.
C) The named insured's spouse if the spouse resides in the household.
D) A non-relative resident over age 21 who pays rent.
E) A full-time student away at college who is a relative and under age 24.
Correct Answer: D) A non-relative resident over age 21.
Rationale: The policy defines an "insured" as the person named in the Declarations and
their resident spouse. It also includes resident relatives and any person under age 21 in the
care of an insured. A non-relative over age 21 (like a roommate or boarder) is not an
insured and needs their own separate policy (such as an HO-4).
Question 5
Which of the following Homeowners forms does NOT provide any coverage for the dwelling
(Coverage A)?
A) HO-2
B) HO-3
C) HO-4
D) HO-8
E) HO-1
Correct Answer: C) HO-4
Rationale: The HO-4 form is specifically designed for renters (tenants). Since the tenant
does not own the building, the policy does not include Coverage A (Dwelling) or Coverage B
(Other Structures). It focuses primarily on Coverage C (Personal Property) and Coverage
D (Loss of Use), plus Section II Liability.
Question 6
Under Homeowners Coverage A (Dwelling), which of the following is typically excluded and
covered under a different section?
A) The main dwelling structure.
B) An attached deck on the back of the house.
C) A detached Gazebo.
D) Construction materials on the premises for use in repairing the dwelling.
, 3
E) Plumbing and heating systems within the walls.
Correct Answer: C) A Gazebo.
Rationale: Coverage A applies to the dwelling and structures attached to the dwelling (like a
deck). A detached gazebo is considered an "Other Structure" and is covered under
Coverage B. Construction materials located on the residence premises intended for the
dwelling are included in Coverage A.
Question 7
Under standard Homeowners policies, what is the typical base deductible applicable to Section I
(Property) losses?
A) $100
B) $250
C) $500
D) $1,000
E)
2,500𝐶𝑜𝑟𝑟𝑒𝑐𝑡𝐴𝑛𝑠𝑤𝑒𝑟: 𝐵) ∗∗
250**
Rationale: While many modern policies have higher deductibles (like $500 or $1,000) to
lower premiums, the standard ISO (Insurance Services Office) base deductible for
Homeowners Section I is $250. This deductible applies to all property coverages except for
Loss of Use.
Question 8
The National Flood Insurance Program (NFIP) is categorized as which type of program?
A) State-mandated.
B) Municipal-sponsored.
C) Federal.
D) Private industry-only.
E) Worldwide non-profit.
Correct Answer: C) Federal.
Rationale: The NFIP was created by Congress in 1968 because private insurers generally
found the peril of flood to be uninsurable. It is a federal program that allows property
owners in participating communities to purchase flood insurance backed by the U.S.
government.
Question 9
All of the following are optional endorsements or increased limits that must be added to a
Homeowners policy EXCEPT?
A) Personal Property Replacement Cost.
B) Increased limits for jewelry, furs, and silverware.
, 4
C) Loss of Use (Coverage D) coverage.
D) Earthquake coverage.
E) Water Back-up and Sump Discharge.
Correct Answer: C) Loss of Use.
Rationale: Loss of Use (Coverage D) is a standard, built-in component of all Homeowners
forms (HO-2 through HO-8). It provides coverage for additional living expenses if the home
is uninhabitable due to a covered loss. Earthquake, Replacement Cost on contents, and
Scheduled items are all optional and require an additional premium.
Question 10
Administration of the National Flood Insurance Program (NFIP) and setting of its standards is
handled by?
A) The National Flood Management Association (NFMA).
B) The National Emergency Standards Agency (NESA).
C) The Federal Flood Coverage Association (FFCA).
D) The Federal Emergency Management Agency (FEMA).
E) The Department of Housing and Urban Development (HUD).
Correct Answer: D) Federal Emergency Management Agency (FEMA)
Rationale: FEMA is the federal agency responsible for overseeing the NFIP. This includes
mapping flood zones (Flood Insurance Rate Maps), managing the Write Your Own (WYO)
program with private insurers, and setting the rules for community participation.
Question 11
Which of the following is considered an optional property coverage endorsement under a
Homeowners policy?
A) Earthquake coverage.
B) Fine Arts (Scheduled).
C) Replacement Cost coverage on personal property.
D) All of the above.
E) None of the above.
Correct Answer: D) All of the above.
Rationale: Standard HO policies exclude earthquakes and value personal property at
Actual Cash Value (ACV). To gain coverage for these or to insure high-value fine arts
specifically, the insured must add the appropriate endorsements to the policy.
Question 12
Under an NFIP Flood policy, the definition of "Flood" includes all of the following EXCEPT?
A) The overflow of inland or tidal waters.
B) Mudflow caused by a current of water.
C) Heavy, driving sheets of wind-blown rain.
D) The collapse or subsidence of land along a shore due to waves/currents.
