Property and Casualty Insurance Exam REVIEW
2026/2027 MOST RECENT QUESTIONS AND
SOLUTIONS
• Commercial Auto policies protect... -✓✓ Your business if you're in an auto accident
while working or in a company vehicle
• Workers Comp policies protect... -✓✓ Your business if an employee is injured on the
job
• Professional Liability policies protect... -✓✓ Your business if a client accuses you of
making a mistake or giving bad advice (AKA errors and emissions insurance)
• Commercial Property policies protect... -✓✓ Your business if the space, assets, and/or
equipment are damaged and need to be replaced/repaired
• Fiduciary Liability policies protect... -✓✓ Your business from lawsuits claiming the
mismanagement of employee benefit plans
• Host Liquor Liability policies protect... -✓✓ Businesses that don't sell alcohol, but
permit drinking on their property (generally included on a GL policy)
• Inland Marine policies protect... -✓✓ Business property that gets transported over land
(such as medical equipment, construction vehicles, etc.)
• Aggregate Limit -✓✓ The maximum amount an insurer will pay for all covered losses
during the covered policy period.
• Arbitration -✓✓ Settling a dispute by agreeing to accept the decision of a neutral 3rd
party
• Commercial Umbrella Insurance -✓✓ Extends coverage beyond the limits of
scheduled underlying liability policies.
• Fidelity Bond -✓✓ Insurance policy that pays the employer money in the case of
employees' theft
• Fiduciary -✓✓ Someone who has to act in the best interest of another party
• GL class code -✓✓ Code to identify different types of businesses based on their risk
level (helps insurer determine cost)
,• Hold Harmless Agreement -✓✓ Protects a party from liability if there are damages or
losses (protects from a 3rd party's claim)
• Indemnity -✓✓ A payment for damage or loss (agreement between business and
insurer to help business be whole after a loss)
• Insurance Adjuster -✓✓ Someone who evaluates damages to determine costs insurer
will pay for losses
• Loss Payee -✓✓ A person or an entity other than the named insured to whom the
proceeds of insurance will be paid
• Named Perils -✓✓ Only those perils specifically named in the policy are covered
• Nose Coverage -✓✓ Protects business from claims filed for an incident that occurred
during an older/previous policy
• Open Perils -✓✓ All perils are covered unless specifically excluded (common with
property insurance)
• Products and Completed Operations -✓✓ Helps cover losses if your
products/completed service causes bodily injury or damage to another person's property
• Products-Completed Operations Aggregate Limit -✓✓ The most the insurer will pay for
losses payable under Coverage A included in the Product and Completed Operations
Hazard.
• Subrogation -✓✓ The right for an insurer to pursue a third party that caused an
insurance loss to the insured
• Vicarious Liability -✓✓ Legal responsibility placed on one person for the acts of
another
• Workers Comp class code -✓✓ Codes that identify type of work and risk workers face
• Direct/physical loss -✓✓ Self explanatory (house fire, car accident, etc)
• Indirect loss -✓✓ Consequential loss as the result from a direct loss (temporary
housing, rental car, etc)
• Peril -✓✓ The cause of a loss (fire, flood, disease, icy roads, etc)
• Moral Hazard -✓✓ Results from a decision to do something wrong or be less cautious
, • Morale Hazard -✓✓ Results from careless or reckless actions/attitudes (ex: texting and
driving)
• Physical Hazard -✓✓ Self explanatory (slippery floor, icy road, structural defects, etc)
• Risk Sharing -✓✓ Distribute risk among a number of individuals
• Transfer risk -✓✓ Insurance, hold harmless agreements
• Principle of indemnity -✓✓ States that insurance companies will restore you to the
same financial position you were in before (ex: if your house burns down, an insurer will
not pay for you to build a better house, but one to the same standard as before)
• Actual Cash Value -✓✓ replacement cost minus depreciation
• Replacement cost -✓✓ the cost to replace an inventory item in its identical form
• Judgement Rating -✓✓ each exposure is individually evaluated, and the rate is
determined largely by the judgement of the underwriter
• Manual or Class Rating -✓✓ uses company rates for a particular state or area that are
contained in a manual
• Merit Rating -✓✓ a rating plan by which class rates are adjusted upward or downward
based on individual loss experience
• HO-2 -✓✓ -Broad form
-covers the dwelling, other structures, and personal property on a named perils basis
-owner occupied
• HO-3 -✓✓ -special form
-Dwelling and other structures are covered on an open perils basis. Personal property is
covered on a named perils basis
-owner occupied
• HO-4 -✓✓ Renter's insurance
• HO-5 -✓✓ -comprehensive form
-provides open peril coverage for the dwelling, other structures, and personal property
-owner occupied
• HO-6 -✓✓ Modified HO-2 policy specifically designed for condo owners
2026/2027 MOST RECENT QUESTIONS AND
SOLUTIONS
• Commercial Auto policies protect... -✓✓ Your business if you're in an auto accident
while working or in a company vehicle
• Workers Comp policies protect... -✓✓ Your business if an employee is injured on the
job
• Professional Liability policies protect... -✓✓ Your business if a client accuses you of
making a mistake or giving bad advice (AKA errors and emissions insurance)
• Commercial Property policies protect... -✓✓ Your business if the space, assets, and/or
equipment are damaged and need to be replaced/repaired
• Fiduciary Liability policies protect... -✓✓ Your business from lawsuits claiming the
mismanagement of employee benefit plans
• Host Liquor Liability policies protect... -✓✓ Businesses that don't sell alcohol, but
permit drinking on their property (generally included on a GL policy)
• Inland Marine policies protect... -✓✓ Business property that gets transported over land
(such as medical equipment, construction vehicles, etc.)
• Aggregate Limit -✓✓ The maximum amount an insurer will pay for all covered losses
during the covered policy period.
• Arbitration -✓✓ Settling a dispute by agreeing to accept the decision of a neutral 3rd
party
• Commercial Umbrella Insurance -✓✓ Extends coverage beyond the limits of
scheduled underlying liability policies.
• Fidelity Bond -✓✓ Insurance policy that pays the employer money in the case of
employees' theft
• Fiduciary -✓✓ Someone who has to act in the best interest of another party
• GL class code -✓✓ Code to identify different types of businesses based on their risk
level (helps insurer determine cost)
,• Hold Harmless Agreement -✓✓ Protects a party from liability if there are damages or
losses (protects from a 3rd party's claim)
• Indemnity -✓✓ A payment for damage or loss (agreement between business and
insurer to help business be whole after a loss)
• Insurance Adjuster -✓✓ Someone who evaluates damages to determine costs insurer
will pay for losses
• Loss Payee -✓✓ A person or an entity other than the named insured to whom the
proceeds of insurance will be paid
• Named Perils -✓✓ Only those perils specifically named in the policy are covered
• Nose Coverage -✓✓ Protects business from claims filed for an incident that occurred
during an older/previous policy
• Open Perils -✓✓ All perils are covered unless specifically excluded (common with
property insurance)
• Products and Completed Operations -✓✓ Helps cover losses if your
products/completed service causes bodily injury or damage to another person's property
• Products-Completed Operations Aggregate Limit -✓✓ The most the insurer will pay for
losses payable under Coverage A included in the Product and Completed Operations
Hazard.
• Subrogation -✓✓ The right for an insurer to pursue a third party that caused an
insurance loss to the insured
• Vicarious Liability -✓✓ Legal responsibility placed on one person for the acts of
another
• Workers Comp class code -✓✓ Codes that identify type of work and risk workers face
• Direct/physical loss -✓✓ Self explanatory (house fire, car accident, etc)
• Indirect loss -✓✓ Consequential loss as the result from a direct loss (temporary
housing, rental car, etc)
• Peril -✓✓ The cause of a loss (fire, flood, disease, icy roads, etc)
• Moral Hazard -✓✓ Results from a decision to do something wrong or be less cautious
, • Morale Hazard -✓✓ Results from careless or reckless actions/attitudes (ex: texting and
driving)
• Physical Hazard -✓✓ Self explanatory (slippery floor, icy road, structural defects, etc)
• Risk Sharing -✓✓ Distribute risk among a number of individuals
• Transfer risk -✓✓ Insurance, hold harmless agreements
• Principle of indemnity -✓✓ States that insurance companies will restore you to the
same financial position you were in before (ex: if your house burns down, an insurer will
not pay for you to build a better house, but one to the same standard as before)
• Actual Cash Value -✓✓ replacement cost minus depreciation
• Replacement cost -✓✓ the cost to replace an inventory item in its identical form
• Judgement Rating -✓✓ each exposure is individually evaluated, and the rate is
determined largely by the judgement of the underwriter
• Manual or Class Rating -✓✓ uses company rates for a particular state or area that are
contained in a manual
• Merit Rating -✓✓ a rating plan by which class rates are adjusted upward or downward
based on individual loss experience
• HO-2 -✓✓ -Broad form
-covers the dwelling, other structures, and personal property on a named perils basis
-owner occupied
• HO-3 -✓✓ -special form
-Dwelling and other structures are covered on an open perils basis. Personal property is
covered on a named perils basis
-owner occupied
• HO-4 -✓✓ Renter's insurance
• HO-5 -✓✓ -comprehensive form
-provides open peril coverage for the dwelling, other structures, and personal property
-owner occupied
• HO-6 -✓✓ Modified HO-2 policy specifically designed for condo owners
