PERSONAL LINES INSURANCE EXAM | ACTUAL EXAM
WITH CORRECT ANSWERS 2025/2026
Risk _________ is when one takes action to prevent or reduce potential loss. - CORRECT
ANSWER -Reduction
When the number of similar units increases, the predictability of the loss improves according to
the rule of _____ ________. - CORRECT ANSWER -Large Numbers
The insuring of risks that are more prone to losses than average risks is known as? - CORRECT
ANSWER -Adverse Selection
A ___________ contract is an arrangement where one insurer transfers or shares risks with
another insurer. - CORRECT ANSWER -Reinsurance
_____________ Reinsurance is accepted or rejected by a case by case basis. - CORRECT
ANSWER -Facultative
The fact that an insured would profit from a loss, would be a violation of the principle of
___________. - CORRECT ANSWER -Indemnity
The determination of acceptable risks is the primary function of the ___________ . - CORRECT
ANSWER -Underwriter
Underwriters like to select insureds who's actual losses will be similar to expected losses. True
or False? - CORRECT ANSWER -True
When rates cannot be used until they are improved by the department or division of insurance,
they are called ____ ________ rates. - CORRECT ANSWER -Prior Approval
,The termination of a policy by either the insured or insurer before its expiration date is known
as ___________. - CORRECT ANSWER -Cancellation
When the insurer cancels a property policy, the unearned premium is returned ___ ____. -
CORRECT ANSWER -Pro Rata
When an insured requests cancellation of a policy, the unearned premium is refunded to the
insured on a _____ _____. - CORRECT ANSWER -Short Rate
A fire is considered to be a _____ of a potential loss. - CORRECT ANSWER -Cause
A document that provides temporary insurance coverage until a policy is issued is known as a
______. - CORRECT ANSWER -Binder
The process by which a disputed claim is decided by a neutral third party is known as
___________. - CORRECT ANSWER -Arbitration
_________ _________ is a situation where there are two causes resulting in a loss, with one of
the causes excluded and the other cause of loss not excluded. - CORRECT ANSWER -Concurrent
Causation
If two or more policies provide identical coverage for the same risk, the policies are deemed to
be __________. - CORRECT ANSWER -Concurrent
Policy A is written for $100,000, and an excess Policy B is written for $200,000 on the same
property. In the event of a $20,000 loss, how much will each policy pay? - CORRECT ANSWER -
A= $20,000 ; B= $0
,A building that has neither occupants nor personal property is ______. - CORRECT ANSWER -
Vacant
When property is damaged by fire, the loss is said to be a(n) ______ loss. - CORRECT ANSWER -
Direct
If a fire on a premises caused a power outage, which caused meat in the freezer to spoil, would
the meat spoilage be considered a direct loss or indirect loss? - CORRECT ANSWER -Indirect Loss
Open peril policies include losses caused by theft. True or False? - CORRECT ANSWER -True
If a property owner does not desire any deduction for depreciation following a covered loss,
he/she should purchase a ___________ ____ policy. - CORRECT ANSWER -Replacement Cost
For replacement cost coverage to apply in dwelling policies, the insured must carry insurance at
least equal to ____% of the cost of replacement of the building. - CORRECT ANSWER -80
Would a stated amount method of valuation likely be used when insuring gold bullion? -
CORRECT ANSWER -No
An ____ policy is one that the value of the subject matter is not agreed upon, but is left to be
ascertained in case of loss. - CORRECT ANSWER -Open
A valued policy is one that expresses on it's face an agreement that the thing insured is valued
at a specific sum. True or False? - CORRECT ANSWER -True
Insuring more than one property on one policy for a single amount of insurance that applies to
all properties covered under the policy is known as _______ coverage. - CORRECT ANSWER -
Blanket
, The name of the insured is found on the declarations page of the policy. True or False? -
CORRECT ANSWER -True
What part or portion of a property policy contains the effective or expiration dates of the
policy? - CORRECT ANSWER -Declarations
Are the insurer's limits of insurance amount stated in the conditions part or portion part of the
policy? - CORRECT ANSWER -No
The __________ part or portion of a property policy sets forth the rights, rules, duties, and
obligations of the insurer and insured to be followed throughout the policy period. - CORRECT
ANSWER -Conditions
The ______________ Clause allows insurers to automatically broaden coverage without
endorsement on existing policies with no increase in premium. - CORRECT ANSWER -
Liberalization
When a property policy has been in effect less than 60 days and the insurer cancels for the
nonpayment of premium, the insurer must give the insured ____ days written notice. -
CORRECT ANSWER -10
Could an order to vacate the property possibly cause an insurer to cancel a commercial property
policy? - CORRECT ANSWER -Yes
An insurer may nonrenew a homeowners policy with oral notice to the insured. True or False? -
CORRECT ANSWER -False
The insured's transfer of right of ownership or interest in an insurance policy to another party
with the insurer's written consent is known as an __________. - CORRECT ANSWER -Assignment
WITH CORRECT ANSWERS 2025/2026
Risk _________ is when one takes action to prevent or reduce potential loss. - CORRECT
ANSWER -Reduction
When the number of similar units increases, the predictability of the loss improves according to
the rule of _____ ________. - CORRECT ANSWER -Large Numbers
The insuring of risks that are more prone to losses than average risks is known as? - CORRECT
ANSWER -Adverse Selection
A ___________ contract is an arrangement where one insurer transfers or shares risks with
another insurer. - CORRECT ANSWER -Reinsurance
_____________ Reinsurance is accepted or rejected by a case by case basis. - CORRECT
ANSWER -Facultative
The fact that an insured would profit from a loss, would be a violation of the principle of
___________. - CORRECT ANSWER -Indemnity
The determination of acceptable risks is the primary function of the ___________ . - CORRECT
ANSWER -Underwriter
Underwriters like to select insureds who's actual losses will be similar to expected losses. True
or False? - CORRECT ANSWER -True
When rates cannot be used until they are improved by the department or division of insurance,
they are called ____ ________ rates. - CORRECT ANSWER -Prior Approval
,The termination of a policy by either the insured or insurer before its expiration date is known
as ___________. - CORRECT ANSWER -Cancellation
When the insurer cancels a property policy, the unearned premium is returned ___ ____. -
CORRECT ANSWER -Pro Rata
When an insured requests cancellation of a policy, the unearned premium is refunded to the
insured on a _____ _____. - CORRECT ANSWER -Short Rate
A fire is considered to be a _____ of a potential loss. - CORRECT ANSWER -Cause
A document that provides temporary insurance coverage until a policy is issued is known as a
______. - CORRECT ANSWER -Binder
The process by which a disputed claim is decided by a neutral third party is known as
___________. - CORRECT ANSWER -Arbitration
_________ _________ is a situation where there are two causes resulting in a loss, with one of
the causes excluded and the other cause of loss not excluded. - CORRECT ANSWER -Concurrent
Causation
If two or more policies provide identical coverage for the same risk, the policies are deemed to
be __________. - CORRECT ANSWER -Concurrent
Policy A is written for $100,000, and an excess Policy B is written for $200,000 on the same
property. In the event of a $20,000 loss, how much will each policy pay? - CORRECT ANSWER -
A= $20,000 ; B= $0
,A building that has neither occupants nor personal property is ______. - CORRECT ANSWER -
Vacant
When property is damaged by fire, the loss is said to be a(n) ______ loss. - CORRECT ANSWER -
Direct
If a fire on a premises caused a power outage, which caused meat in the freezer to spoil, would
the meat spoilage be considered a direct loss or indirect loss? - CORRECT ANSWER -Indirect Loss
Open peril policies include losses caused by theft. True or False? - CORRECT ANSWER -True
If a property owner does not desire any deduction for depreciation following a covered loss,
he/she should purchase a ___________ ____ policy. - CORRECT ANSWER -Replacement Cost
For replacement cost coverage to apply in dwelling policies, the insured must carry insurance at
least equal to ____% of the cost of replacement of the building. - CORRECT ANSWER -80
Would a stated amount method of valuation likely be used when insuring gold bullion? -
CORRECT ANSWER -No
An ____ policy is one that the value of the subject matter is not agreed upon, but is left to be
ascertained in case of loss. - CORRECT ANSWER -Open
A valued policy is one that expresses on it's face an agreement that the thing insured is valued
at a specific sum. True or False? - CORRECT ANSWER -True
Insuring more than one property on one policy for a single amount of insurance that applies to
all properties covered under the policy is known as _______ coverage. - CORRECT ANSWER -
Blanket
, The name of the insured is found on the declarations page of the policy. True or False? -
CORRECT ANSWER -True
What part or portion of a property policy contains the effective or expiration dates of the
policy? - CORRECT ANSWER -Declarations
Are the insurer's limits of insurance amount stated in the conditions part or portion part of the
policy? - CORRECT ANSWER -No
The __________ part or portion of a property policy sets forth the rights, rules, duties, and
obligations of the insurer and insured to be followed throughout the policy period. - CORRECT
ANSWER -Conditions
The ______________ Clause allows insurers to automatically broaden coverage without
endorsement on existing policies with no increase in premium. - CORRECT ANSWER -
Liberalization
When a property policy has been in effect less than 60 days and the insurer cancels for the
nonpayment of premium, the insurer must give the insured ____ days written notice. -
CORRECT ANSWER -10
Could an order to vacate the property possibly cause an insurer to cancel a commercial property
policy? - CORRECT ANSWER -Yes
An insurer may nonrenew a homeowners policy with oral notice to the insured. True or False? -
CORRECT ANSWER -False
The insured's transfer of right of ownership or interest in an insurance policy to another party
with the insurer's written consent is known as an __________. - CORRECT ANSWER -Assignment
