Certified Insurance Counselor (CIC)
Practice Exam Questions With Correct
Answers (Verified Answers) Plus
Rationales 2026 Q&A | Instant
Download Pdf
Question 1
An insurance agent explains that an insurance contract requires
agreement between the insurer and insured, legal consideration,
competent parties, and a legal purpose. These requirements describe:
A. Conditions of insurance
B. Policy declarations
C. Elements of a valid contract
D. Principles of indemnity
Answer: C. Elements of a valid contract
Rationale: A valid insurance contract must contain the essential
elements of a contract: agreement (offer and acceptance), consideration
(exchange of value), competent parties, and legal purpose. Without
these elements, the contract may not be legally enforceable.
Question 2
,Which insurance principle prevents an insured from collecting more
than the amount of a covered loss?
A. Subrogation
B. Indemnity
C. Contribution
D. Utmost good faith
Answer: B. Indemnity
Rationale: The principle of indemnity ensures that insurance restores an
insured financially to approximately the same position held before a loss
occurred. It prevents the insured from profiting from an insurance claim.
Question 3
A commercial property policyholder intentionally conceals a material
fact during underwriting. The insurer may take action because
insurance contracts are based on:
A. Coinsurance
B. Arbitration
C. Utmost good faith
D. Replacement cost
Answer: C. Utmost good faith
Rationale: Insurance relies on the principle of utmost good faith,
requiring both parties to provide truthful and complete information.
Concealing material facts can affect coverage or allow the insurer to
void the contract.
,Question 4
Which section of a commercial insurance policy identifies the insured,
policy period, limits, and covered locations?
A. Conditions
B. Exclusions
C. Declarations
D. Endorsements
Answer: C. Declarations
Rationale: The declarations section provides key information specific to
the insured risk, including names, locations, coverage limits,
deductibles, and policy dates.
Question 5
A business owner purchases insurance with limits lower than the actual
value of the property. Which provision may penalize the insured for
underinsurance?
A. Subrogation clause
B. Coinsurance clause
C. Liberalization clause
D. Assignment clause
Answer: B. Coinsurance clause
Rationale: A coinsurance clause encourages policyholders to carry
insurance limits close to the property’s value. If the insured carries
insufficient limits, a partial loss may result in a reduced claim payment.
, Question 6
Which type of property valuation provides payment based on the cost
to replace damaged property with similar property without deduction
for depreciation?
A. Actual cash value
B. Market value
C. Replacement cost
D. Stated amount value
Answer: C. Replacement cost
Rationale: Replacement cost coverage pays the amount necessary to
repair or replace property with similar materials without subtracting
depreciation. Actual cash value reduces payment by depreciation.
Question 7
A business receives a lawsuit alleging bodily injury caused by its
operations. Which coverage section of a Commercial General Liability
policy would respond?
A. Property coverage
B. Liability coverage
C. Inland marine coverage
D. Workers compensation coverage
Answer: B. Liability coverage
Practice Exam Questions With Correct
Answers (Verified Answers) Plus
Rationales 2026 Q&A | Instant
Download Pdf
Question 1
An insurance agent explains that an insurance contract requires
agreement between the insurer and insured, legal consideration,
competent parties, and a legal purpose. These requirements describe:
A. Conditions of insurance
B. Policy declarations
C. Elements of a valid contract
D. Principles of indemnity
Answer: C. Elements of a valid contract
Rationale: A valid insurance contract must contain the essential
elements of a contract: agreement (offer and acceptance), consideration
(exchange of value), competent parties, and legal purpose. Without
these elements, the contract may not be legally enforceable.
Question 2
,Which insurance principle prevents an insured from collecting more
than the amount of a covered loss?
A. Subrogation
B. Indemnity
C. Contribution
D. Utmost good faith
Answer: B. Indemnity
Rationale: The principle of indemnity ensures that insurance restores an
insured financially to approximately the same position held before a loss
occurred. It prevents the insured from profiting from an insurance claim.
Question 3
A commercial property policyholder intentionally conceals a material
fact during underwriting. The insurer may take action because
insurance contracts are based on:
A. Coinsurance
B. Arbitration
C. Utmost good faith
D. Replacement cost
Answer: C. Utmost good faith
Rationale: Insurance relies on the principle of utmost good faith,
requiring both parties to provide truthful and complete information.
Concealing material facts can affect coverage or allow the insurer to
void the contract.
,Question 4
Which section of a commercial insurance policy identifies the insured,
policy period, limits, and covered locations?
A. Conditions
B. Exclusions
C. Declarations
D. Endorsements
Answer: C. Declarations
Rationale: The declarations section provides key information specific to
the insured risk, including names, locations, coverage limits,
deductibles, and policy dates.
Question 5
A business owner purchases insurance with limits lower than the actual
value of the property. Which provision may penalize the insured for
underinsurance?
A. Subrogation clause
B. Coinsurance clause
C. Liberalization clause
D. Assignment clause
Answer: B. Coinsurance clause
Rationale: A coinsurance clause encourages policyholders to carry
insurance limits close to the property’s value. If the insured carries
insufficient limits, a partial loss may result in a reduced claim payment.
, Question 6
Which type of property valuation provides payment based on the cost
to replace damaged property with similar property without deduction
for depreciation?
A. Actual cash value
B. Market value
C. Replacement cost
D. Stated amount value
Answer: C. Replacement cost
Rationale: Replacement cost coverage pays the amount necessary to
repair or replace property with similar materials without subtracting
depreciation. Actual cash value reduces payment by depreciation.
Question 7
A business receives a lawsuit alleging bodily injury caused by its
operations. Which coverage section of a Commercial General Liability
policy would respond?
A. Property coverage
B. Liability coverage
C. Inland marine coverage
D. Workers compensation coverage
Answer: B. Liability coverage
