CALIFORNIA PROPERTY & CASUALTY
EXAM QUESTIONS AND CORRECT
ANSWERS (VERIFIED ANSWERS) PLUS
RATIONALES 2025/2026 Q&A | INSTANT
DOWNLOAD PDF
Question 1
Insurance is best defined as:
A. A guaranteed investment
B. A transfer of risk from one party to another
C. A savings account
D. A government tax
Correct Answer: B
Rationale:
Insurance transfers risk from the insured to the insurer in exchange for premium.
Question 2
An insurance policy is a:
A. Verbal promise
B. Legal contract
C. Banking agreement
D. Warranty
Correct Answer: B
,Rationale:
Insurance policies are legally binding contracts.
Question 3
Consideration in an insurance contract refers to:
A. Only the insurer’s promise
B. Only the insured’s payment
C. Exchange of value between parties
D. Government approval
Correct Answer: C
Rationale:
Consideration is the exchange of premium and insurer promise to pay claims.
Question 4
Insurable interest must exist:
A. After a loss
B. At policy purchase
C. Only during renewal
D. Never required
Correct Answer: B
Rationale:
Insurable interest must exist at the time the policy is purchased.
Question 5
A unilateral contract means:
A. Both parties make equal promises
B. Only one party makes a legally enforceable promise
,C. No contract exists
D. Both parties are insured
Correct Answer: B
Rationale:
Only the insurer is legally obligated to pay claims.
Question 6
A contract of adhesion is:
A. Negotiable by both parties equally
B. Written by one party only
C. Illegal in insurance
D. Oral only
Correct Answer: B
Rationale:
Insurance contracts are drafted by insurers, not negotiated.
Question 7
Utmost good faith requires:
A. Hiding information
B. Full disclosure of material facts
C. Delaying claims
D. Ignoring policies
Correct Answer: B
Rationale:
Both parties must disclose all relevant facts honestly.
Question 8
, Indemnity means:
A. Profit from loss
B. Restoration to financial position prior to loss
C. Guaranteed profit
D. Free coverage
Correct Answer: B
Rationale:
Insurance restores, not profits, the insured.
Question 9
Subrogation allows:
A. Insured to sue insurer
B. Insurer to recover from responsible third party
C. Government control of claims
D. Policy cancellation
Correct Answer: B
Rationale:
Insurers recover losses from negligent third parties.
Question 10
A peril is:
A. A policy document
B. A cause of loss
C. A type of insurance agent
D. A deductible
Correct Answer: B
Rationale:
Perils are causes of loss like fire or theft.
EXAM QUESTIONS AND CORRECT
ANSWERS (VERIFIED ANSWERS) PLUS
RATIONALES 2025/2026 Q&A | INSTANT
DOWNLOAD PDF
Question 1
Insurance is best defined as:
A. A guaranteed investment
B. A transfer of risk from one party to another
C. A savings account
D. A government tax
Correct Answer: B
Rationale:
Insurance transfers risk from the insured to the insurer in exchange for premium.
Question 2
An insurance policy is a:
A. Verbal promise
B. Legal contract
C. Banking agreement
D. Warranty
Correct Answer: B
,Rationale:
Insurance policies are legally binding contracts.
Question 3
Consideration in an insurance contract refers to:
A. Only the insurer’s promise
B. Only the insured’s payment
C. Exchange of value between parties
D. Government approval
Correct Answer: C
Rationale:
Consideration is the exchange of premium and insurer promise to pay claims.
Question 4
Insurable interest must exist:
A. After a loss
B. At policy purchase
C. Only during renewal
D. Never required
Correct Answer: B
Rationale:
Insurable interest must exist at the time the policy is purchased.
Question 5
A unilateral contract means:
A. Both parties make equal promises
B. Only one party makes a legally enforceable promise
,C. No contract exists
D. Both parties are insured
Correct Answer: B
Rationale:
Only the insurer is legally obligated to pay claims.
Question 6
A contract of adhesion is:
A. Negotiable by both parties equally
B. Written by one party only
C. Illegal in insurance
D. Oral only
Correct Answer: B
Rationale:
Insurance contracts are drafted by insurers, not negotiated.
Question 7
Utmost good faith requires:
A. Hiding information
B. Full disclosure of material facts
C. Delaying claims
D. Ignoring policies
Correct Answer: B
Rationale:
Both parties must disclose all relevant facts honestly.
Question 8
, Indemnity means:
A. Profit from loss
B. Restoration to financial position prior to loss
C. Guaranteed profit
D. Free coverage
Correct Answer: B
Rationale:
Insurance restores, not profits, the insured.
Question 9
Subrogation allows:
A. Insured to sue insurer
B. Insurer to recover from responsible third party
C. Government control of claims
D. Policy cancellation
Correct Answer: B
Rationale:
Insurers recover losses from negligent third parties.
Question 10
A peril is:
A. A policy document
B. A cause of loss
C. A type of insurance agent
D. A deductible
Correct Answer: B
Rationale:
Perils are causes of loss like fire or theft.
