Property and Casualty Insurance Exam
2026/2027 UPDATED QUESTIONS WITH
ANSWERS GRADED A+
• Specific insurance -✓✓ This type of insurance designates a particular item to be
insured
• Blanket insurance -✓✓ This type of insurance covers more than one item of property
at a single location or one more items of property at multiple locations.
• Speculative -✓✓ possibility of both gain and loss. Not insurable.
• Pure -✓✓ only the possibility of loss. Insurable.
• What are the 5 methods of managing or handling risk? -✓✓ avoid, control, retain, and
transfer risk.
• Hazard -✓✓ A condition or situation which increases the chance for loss
• Physical Hazards -✓✓ a hazard that arises from the condition, occupancy, or use of
the property itself.
ex: skateboard left on the steps
• Moral Hazards -✓✓ when an individual through carelessness or by irresponsible
actions can increase the possibly for a loss.
ex: person who drives carelessly just because they know they are insured.
• Morale Hazards -✓✓ when a person might create a loss situation on purpose just to
collect from the insurance company.
ex: Prearranged, faked theft of someone's old vehicle so they can get an insurance
payout to buy a new vehicle.
• Replacement Cost -✓✓ The amount of money it would take to replace a damaged or
destroyed item with one of like kind and quality AT THE TIME OF LOSS. No deduction
for depreciation.
• Actual Cash Value (ACV) -✓✓ Replacement Cost, minus depreciation.
,• Pair and Set Clause -✓✓ Loss to one item of a pair or set does not constitute loss to
the entire pair or set.
• Appraisal -✓✓ A method of resolving disputes between insurers and insureds over the
amount owed on a covered loss.
-both parties select an appraiser
-the two appraisers select an umpire
-if the appraisers do not agree, the umpire is consulted
-the amount agreed on by 2 out of 3 is the amount that will be paid
• Subrogation -✓✓ An insurer's right to recover the amount of its loss payment from the
third party who is legally responsible for the loss.
• Arbitration -✓✓ this condition is similar to the Appraisal Condition but it is not limited to
disputes over the value of the loss. It may also be used to resolve other areas of
disagreement between the insured and the insurance company.
• What does WC SHAVVER stand for? -✓✓ Windstorm, Civil commotion, Smoke, Hail,
Aircraft, Vehicles, Volcanic eruption, Explosion, Riot
• What does BIG AFFECT stand for? -✓✓ Burglar damage, Ice & snow weight, Glass
breakage, Accidental discharge, Falling objects, Freezing of pipes, Electrical damage,
Collapse, Tearing apart.
• Insolvency -✓✓ A financial state that occurs if liabilities are greater than assets.
• Law of Agency -✓✓ Knowledge of the Agents is Knowledge of the Principal (Insurance
Company)
• Principal -✓✓ Insurance Company
• What is the ISO? -✓✓ Insurance Services Office which is an organization established
for the benefit of its member insurance companies. This organization gathers statistics,
provides loss costs, drafts policy forms and coverage provisions and conducts
inspections for rate making purposes.
• Coinsurance Clause -✓✓ Requires the insured to carry a minimum specified amount
(generally 80%) of the replacement cost value of the insured property in order for partial
losses to be paid in full.
• Estoppel -✓✓ A legal bar to changing or denying a fact because of one's own previous
actions or words to the contrary.
, ex: If an insurance company representative intentionally or unintentionally gives the
impression that a specific fact exists when it does not and a client relies on that
impression and is damaged a result.
• Binder -✓✓ A temporary contract of insurance, oral or written, offered by an insurer
pending issuance of the policy. Usually written for a period of 30-60 days and remains in
force for that period or until a permanent policy is either issued or denied by the insurer.
• Warranty -✓✓ A provision in a policy that pledges that a condition does exist or will
exist at some time in the future.
• Deposit Premium -✓✓ Tentative charge made at the beginning of certain policies and
reinsurance agreements to be adjusted when the actual earned charge has been later
determined.
• Audit -✓✓ Verification of books or accounts to determine their accuracy.
• Occurrence -✓✓ An accident, including continuous or repeated exposure to the same
harmful conditions, which result in bodily injury or property damage.
• Special Damages -✓✓ type of compensatory damages that reimburse the injured part
for direct and specific expenses involved in the loss. Such as medical expenses, funeral
expenses and loss wages.
• General Damages -✓✓ type of compensatory damages that reimburse the injured
party for such things as pain and suffering and disfigurement.
• Punitive Damages -✓✓ type of damages intended to punish the defendant and make
an example out of her to discourage others from behaving the same way.
• Proximate Cause -✓✓ An act, through an uniterrupted chain of events, that can be
determined to be the immediate or actual cause of a loss.
• 4 elements of negligence -✓✓ 1. The existence of a DUTY to act in a certain way
2. A FAILURE to live up to this duty
3. An actual INJURY must occur
4. The failure in duty must be the PROXIMATE CAUSE of the injury.
• Negligence -✓✓ An unreasonable or prudent act, A thoughtless or careless act or one
committed out of ignorance. It may be a non-act or omission, but it is NEVER an
intentional act.
• Casualty Insurance -✓✓ Refers to coverage designed to address the liability of
individuals and organizations resulting from negligent acts in their personal, business, or
professional roles.
2026/2027 UPDATED QUESTIONS WITH
ANSWERS GRADED A+
• Specific insurance -✓✓ This type of insurance designates a particular item to be
insured
• Blanket insurance -✓✓ This type of insurance covers more than one item of property
at a single location or one more items of property at multiple locations.
• Speculative -✓✓ possibility of both gain and loss. Not insurable.
• Pure -✓✓ only the possibility of loss. Insurable.
• What are the 5 methods of managing or handling risk? -✓✓ avoid, control, retain, and
transfer risk.
• Hazard -✓✓ A condition or situation which increases the chance for loss
• Physical Hazards -✓✓ a hazard that arises from the condition, occupancy, or use of
the property itself.
ex: skateboard left on the steps
• Moral Hazards -✓✓ when an individual through carelessness or by irresponsible
actions can increase the possibly for a loss.
ex: person who drives carelessly just because they know they are insured.
• Morale Hazards -✓✓ when a person might create a loss situation on purpose just to
collect from the insurance company.
ex: Prearranged, faked theft of someone's old vehicle so they can get an insurance
payout to buy a new vehicle.
• Replacement Cost -✓✓ The amount of money it would take to replace a damaged or
destroyed item with one of like kind and quality AT THE TIME OF LOSS. No deduction
for depreciation.
• Actual Cash Value (ACV) -✓✓ Replacement Cost, minus depreciation.
,• Pair and Set Clause -✓✓ Loss to one item of a pair or set does not constitute loss to
the entire pair or set.
• Appraisal -✓✓ A method of resolving disputes between insurers and insureds over the
amount owed on a covered loss.
-both parties select an appraiser
-the two appraisers select an umpire
-if the appraisers do not agree, the umpire is consulted
-the amount agreed on by 2 out of 3 is the amount that will be paid
• Subrogation -✓✓ An insurer's right to recover the amount of its loss payment from the
third party who is legally responsible for the loss.
• Arbitration -✓✓ this condition is similar to the Appraisal Condition but it is not limited to
disputes over the value of the loss. It may also be used to resolve other areas of
disagreement between the insured and the insurance company.
• What does WC SHAVVER stand for? -✓✓ Windstorm, Civil commotion, Smoke, Hail,
Aircraft, Vehicles, Volcanic eruption, Explosion, Riot
• What does BIG AFFECT stand for? -✓✓ Burglar damage, Ice & snow weight, Glass
breakage, Accidental discharge, Falling objects, Freezing of pipes, Electrical damage,
Collapse, Tearing apart.
• Insolvency -✓✓ A financial state that occurs if liabilities are greater than assets.
• Law of Agency -✓✓ Knowledge of the Agents is Knowledge of the Principal (Insurance
Company)
• Principal -✓✓ Insurance Company
• What is the ISO? -✓✓ Insurance Services Office which is an organization established
for the benefit of its member insurance companies. This organization gathers statistics,
provides loss costs, drafts policy forms and coverage provisions and conducts
inspections for rate making purposes.
• Coinsurance Clause -✓✓ Requires the insured to carry a minimum specified amount
(generally 80%) of the replacement cost value of the insured property in order for partial
losses to be paid in full.
• Estoppel -✓✓ A legal bar to changing or denying a fact because of one's own previous
actions or words to the contrary.
, ex: If an insurance company representative intentionally or unintentionally gives the
impression that a specific fact exists when it does not and a client relies on that
impression and is damaged a result.
• Binder -✓✓ A temporary contract of insurance, oral or written, offered by an insurer
pending issuance of the policy. Usually written for a period of 30-60 days and remains in
force for that period or until a permanent policy is either issued or denied by the insurer.
• Warranty -✓✓ A provision in a policy that pledges that a condition does exist or will
exist at some time in the future.
• Deposit Premium -✓✓ Tentative charge made at the beginning of certain policies and
reinsurance agreements to be adjusted when the actual earned charge has been later
determined.
• Audit -✓✓ Verification of books or accounts to determine their accuracy.
• Occurrence -✓✓ An accident, including continuous or repeated exposure to the same
harmful conditions, which result in bodily injury or property damage.
• Special Damages -✓✓ type of compensatory damages that reimburse the injured part
for direct and specific expenses involved in the loss. Such as medical expenses, funeral
expenses and loss wages.
• General Damages -✓✓ type of compensatory damages that reimburse the injured
party for such things as pain and suffering and disfigurement.
• Punitive Damages -✓✓ type of damages intended to punish the defendant and make
an example out of her to discourage others from behaving the same way.
• Proximate Cause -✓✓ An act, through an uniterrupted chain of events, that can be
determined to be the immediate or actual cause of a loss.
• 4 elements of negligence -✓✓ 1. The existence of a DUTY to act in a certain way
2. A FAILURE to live up to this duty
3. An actual INJURY must occur
4. The failure in duty must be the PROXIMATE CAUSE of the injury.
• Negligence -✓✓ An unreasonable or prudent act, A thoughtless or careless act or one
committed out of ignorance. It may be a non-act or omission, but it is NEVER an
intentional act.
• Casualty Insurance -✓✓ Refers to coverage designed to address the liability of
individuals and organizations resulting from negligent acts in their personal, business, or
professional roles.
