©EVERLY 2024/2025 ALL RIGHTS RESERVED.
Insurance License Exam Questions And
Answers (Guaranteed A+)
A group-owned insurance company that is formed to assume and spread the liability risks of its
members is known as - Answer✔risk retention group
Who elects the governing body of a mutual insurance company? - Answer✔Policyholders
Who is a mutual insurance company owned by? - Answer✔Its policyholders
What type of reinsurance contract involves two companies automatically sharing their risk
exposure? - Answer✔Treaty
Insurers that are organized in countries outside the United States are referred to as -
Answer✔alien
An insurance applicant MUST be informed of an investigation regarding his/her reputation and
character according to the: - Answer✔Fair Credit Reporting Act
At what point must an insurance applicant be informed of their rights that fall under the Fair
Credit Reporting Act? - Answer✔Upon completion of the application
What type of insurer's company is domiciled in England, but conducts business in the United
States? - Answer✔Alien
N causea an accident injuring tree people. N's policy has split limits of liability of 250/500/250.
What is the maximum amount that all three as a whole could collect in the event of death or
injury? - Answer✔$500,000
Which of the following requires insurers to disclose when an applicant's consumer or credit
history is being investigated - Answer✔1970 - Fair Credit Reporting Act
During the application process, the agent's primary responsibility is to - Answer✔the insurance
company
In Virginia, an insurer domiciled and incorporated in Virginia is called a(n) - Answer✔domestic
insurer
Which of these describe a participating insurance policy? - Answer✔Policyowners are entitled to
receive dividends
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, ©EVERLY 2024/2025 ALL RIGHTS RESERVED.
A nonprofit incorporated society that does not have capital stock and operates for the sole benefit
of its members is known as: - Answer✔a fraternal benefit society
A stock insurance company - Answer✔is owned exclusively by its shareholders
Who owns a stock company? - Answer✔Its stockholders
A mutual insurance company and a stock insurance company have one main difference between
them. What is this major contrast? - Answer✔Stock company is owned by its shareholders.
Mutual company is owned by its policyholders.
D just purchased a warehouse at an auction. When D receives the keys and documents, he arrives
at the building to find it completely empty with no people or contents. The warehouse has a -
Answer✔Vacancy
Y has a policy of split limits of 50/100/50. If Y causes loss, what is the maximum amount that
each person would receive? - Answer✔$50,000
B purchased a home five years ago and was issued an HO-3 contract. This year, B wants to add
the sump pump overflow rider to her policy.
Adding coverage to her policy can best be described as an: - Answer✔Endorsement
An unbroken chain of events that begins with negligence and leads to loss is known as: -
Answer✔Proximate Cause
What is CORRECT regarding cancellation of a policy? - Answer✔If the insured terminated
coverage, the insurer is sometimes allowed to deduct administrative costs for processing
cancellation before refunding any premiums.
H owns a small restaurant that is a local favorite.
One night, H's restaurant catches fire which will cause his business to be shut down for the next
six months, causing H to lose revenue during repairs. H's loss of revenue because of the fire is
known as a. - Answer✔Consequential Loss
D just purchased a warehouse at an auction. When D receives the keys and documents, he arrives
at the building to finds it completely with no people but there is some miscellaneous office
furniture.
The warehouse has a: - Answer✔Unoccupancy
An insured purchases a rental property for $250,000, its replacement cost. He insures it for
$150,000 under a Property Coverage Form with an 80 percent Coinsurance clause with a $100
deductible. In the event of a $100,000 loss how much will the insurer pay on the claim? -
Answer✔$74,900
J has a policy that pays a maximum single dollar amount for property damage and death or
bodily injury. Which limit of liability does J's policy have? - Answer✔Combined Single Limit
2|Page
, ©EVERLY 2024/2025 ALL RIGHTS RESERVED.
Which of the following situations would be best described as a pure risk? - Answer✔An insured
purchasing an HO-6 policy to insure their new condo
F's toy company has just produced a child's toy that has sharp edges. Although F's toy company
guarantees the product is safe, if a child were to get hurt, the company would have: -
Answer✔Strict Liability
Which of the following would be an example of a peril?
• Fire
• Lightning
• Internal Explosion - Answer✔All of the answers listed.
An unintended, unforeseen reduction or destruction of economic value is known as: -
Answer✔Loss
An event or mindset that greatly increases the change that a peril will actually occur is known as:
- Answer✔Hazard
A lightning storm that completely destroys an insured's roof is an example of a - Answer✔Direct
Loss
D purchased an antique muscle car in November with the intent to restore it in the summer. Upon
inspection, D decides that the car is in good enough shape to store it in the garage until the
weather gets warmer. Although D knows how to fix cars, he misses a very small hole in the gas
tank. If the gas were to accumulate over time and cause the car and garage to explode, the event
would be defined as - Answer✔Occurrence
Which of the following best describes Actual Cash
Value loss valuation? - Answer✔Current replacement minus depreciation
M owned a factory warehouse that suffered a total loss due to a fire. The insurer discovers that
they can scrap some of the metal beams left from the structure to recoup some of their loss paid
to the insured. Which method of valuation would allow this to occur? - Answer✔Salvage Value
An insurance company insures two million homes under Homeowners coverage and collects
$1,500
in premium from each insured. In the next policy year, only 200 homes suffer a total loss. In this
event, the insurer still collected enough premium dollars from all insureds to pay the actual
losses as well as their overhead and still collected a profit. This is known as - Answer✔Law of
Large Numbers
An insured purchases an apartment building for $250,000, its replacement cost. He insures it for
$150,000 under a Building and Property Coverage Form with an 80 percent Coinsurance clause.
In the event of a total loss how much will the insurer pay on the claim? - Answer✔$150,000
3|Page
Insurance License Exam Questions And
Answers (Guaranteed A+)
A group-owned insurance company that is formed to assume and spread the liability risks of its
members is known as - Answer✔risk retention group
Who elects the governing body of a mutual insurance company? - Answer✔Policyholders
Who is a mutual insurance company owned by? - Answer✔Its policyholders
What type of reinsurance contract involves two companies automatically sharing their risk
exposure? - Answer✔Treaty
Insurers that are organized in countries outside the United States are referred to as -
Answer✔alien
An insurance applicant MUST be informed of an investigation regarding his/her reputation and
character according to the: - Answer✔Fair Credit Reporting Act
At what point must an insurance applicant be informed of their rights that fall under the Fair
Credit Reporting Act? - Answer✔Upon completion of the application
What type of insurer's company is domiciled in England, but conducts business in the United
States? - Answer✔Alien
N causea an accident injuring tree people. N's policy has split limits of liability of 250/500/250.
What is the maximum amount that all three as a whole could collect in the event of death or
injury? - Answer✔$500,000
Which of the following requires insurers to disclose when an applicant's consumer or credit
history is being investigated - Answer✔1970 - Fair Credit Reporting Act
During the application process, the agent's primary responsibility is to - Answer✔the insurance
company
In Virginia, an insurer domiciled and incorporated in Virginia is called a(n) - Answer✔domestic
insurer
Which of these describe a participating insurance policy? - Answer✔Policyowners are entitled to
receive dividends
1|Page
, ©EVERLY 2024/2025 ALL RIGHTS RESERVED.
A nonprofit incorporated society that does not have capital stock and operates for the sole benefit
of its members is known as: - Answer✔a fraternal benefit society
A stock insurance company - Answer✔is owned exclusively by its shareholders
Who owns a stock company? - Answer✔Its stockholders
A mutual insurance company and a stock insurance company have one main difference between
them. What is this major contrast? - Answer✔Stock company is owned by its shareholders.
Mutual company is owned by its policyholders.
D just purchased a warehouse at an auction. When D receives the keys and documents, he arrives
at the building to find it completely empty with no people or contents. The warehouse has a -
Answer✔Vacancy
Y has a policy of split limits of 50/100/50. If Y causes loss, what is the maximum amount that
each person would receive? - Answer✔$50,000
B purchased a home five years ago and was issued an HO-3 contract. This year, B wants to add
the sump pump overflow rider to her policy.
Adding coverage to her policy can best be described as an: - Answer✔Endorsement
An unbroken chain of events that begins with negligence and leads to loss is known as: -
Answer✔Proximate Cause
What is CORRECT regarding cancellation of a policy? - Answer✔If the insured terminated
coverage, the insurer is sometimes allowed to deduct administrative costs for processing
cancellation before refunding any premiums.
H owns a small restaurant that is a local favorite.
One night, H's restaurant catches fire which will cause his business to be shut down for the next
six months, causing H to lose revenue during repairs. H's loss of revenue because of the fire is
known as a. - Answer✔Consequential Loss
D just purchased a warehouse at an auction. When D receives the keys and documents, he arrives
at the building to finds it completely with no people but there is some miscellaneous office
furniture.
The warehouse has a: - Answer✔Unoccupancy
An insured purchases a rental property for $250,000, its replacement cost. He insures it for
$150,000 under a Property Coverage Form with an 80 percent Coinsurance clause with a $100
deductible. In the event of a $100,000 loss how much will the insurer pay on the claim? -
Answer✔$74,900
J has a policy that pays a maximum single dollar amount for property damage and death or
bodily injury. Which limit of liability does J's policy have? - Answer✔Combined Single Limit
2|Page
, ©EVERLY 2024/2025 ALL RIGHTS RESERVED.
Which of the following situations would be best described as a pure risk? - Answer✔An insured
purchasing an HO-6 policy to insure their new condo
F's toy company has just produced a child's toy that has sharp edges. Although F's toy company
guarantees the product is safe, if a child were to get hurt, the company would have: -
Answer✔Strict Liability
Which of the following would be an example of a peril?
• Fire
• Lightning
• Internal Explosion - Answer✔All of the answers listed.
An unintended, unforeseen reduction or destruction of economic value is known as: -
Answer✔Loss
An event or mindset that greatly increases the change that a peril will actually occur is known as:
- Answer✔Hazard
A lightning storm that completely destroys an insured's roof is an example of a - Answer✔Direct
Loss
D purchased an antique muscle car in November with the intent to restore it in the summer. Upon
inspection, D decides that the car is in good enough shape to store it in the garage until the
weather gets warmer. Although D knows how to fix cars, he misses a very small hole in the gas
tank. If the gas were to accumulate over time and cause the car and garage to explode, the event
would be defined as - Answer✔Occurrence
Which of the following best describes Actual Cash
Value loss valuation? - Answer✔Current replacement minus depreciation
M owned a factory warehouse that suffered a total loss due to a fire. The insurer discovers that
they can scrap some of the metal beams left from the structure to recoup some of their loss paid
to the insured. Which method of valuation would allow this to occur? - Answer✔Salvage Value
An insurance company insures two million homes under Homeowners coverage and collects
$1,500
in premium from each insured. In the next policy year, only 200 homes suffer a total loss. In this
event, the insurer still collected enough premium dollars from all insureds to pay the actual
losses as well as their overhead and still collected a profit. This is known as - Answer✔Law of
Large Numbers
An insured purchases an apartment building for $250,000, its replacement cost. He insures it for
$150,000 under a Building and Property Coverage Form with an 80 percent Coinsurance clause.
In the event of a total loss how much will the insurer pay on the claim? - Answer✔$150,000
3|Page
