PERSONAL LINES FINAL EXAM QUESTIONS
WITH CORRECT ANSWERS 2025/2026
Statements made in the application are considered:
A. Warranties
B. Representations
C. Possible Concealments
D. None of the Above - CORRECT ANSWER -B. Representations
The definition of Risk is:
A. Uncertainty regarding loss
B. A chance of gain
C. Uncertainty regarding gain or profit
D. Intended unforseen damage to property for gain or profit - CORRECT ANSWER -A. Uncertainty
regarding loss
A financial device for transferring or shifting risk from an individual or entity to a large group
with the same risk is the definition of:
A. Avoidance
B. Retention
C. Transfer
D. Insurance - CORRECT ANSWER -D. Insurance
Hazards include which of the following:
1. Unintended oily rags stacked in a corner
2. A homeowner's carelessness because he has insurance
,A. 1 only
B. 2 only
C. Both 1 & 2
D. Neither 1 or 2 - CORRECT ANSWER -C. Both 1 & 2
The mortgage condition in a property policy:
1. Guarantees that the lending institutions may act for itself in paying a premium
2. Guarantees claim payments will be divided as the interests of the insurance and mortgagee
appear
A. 1 only
B. 2 only
C. Both 1 & 2
D. Neither 1 nor 2 - CORRECT ANSWER -C. Both 1 & 2
Which of the following situations does NOT create an insurable interest?
A. Being named in someone's will as an heir
B. Holding a mortgage or lien on property
C. Having custody or control of someone else's property
D. Owning property - CORRECT ANSWER -A. Being named in someone's will as an heir
The plumbing in Mrs. Ward's home suddenly burst and the ceilings were damaged by water.
Which of the following homeowner forms would cover the loss?
A. HO1
B. HO2
C. HO4
, D. HO7` - CORRECT ANSWER -B. HO2
Nicole has a Personal Auto policy with limits of 10/20/10 for liability coverage. She causes an
accident that results in $12,000 bodily injury damages to the other driver and $5,000 in
property damage to the other driver's car. How much would Nicole's policy pay for the the BI
and PD losses?
A. $15,000
B. $17,000
C. $10,000
D. $12,000 - CORRECT ANSWER -A. $15,000
Sally Smith calls her agent, Hubert Dufus, to purchase flood insurance. Agent Dufus explains to
Ms. Smith that flood coverage can be purchased directly through the NFIP or through him.
Should Ms. Smith choose to purchase coverage through Agent Dufus it is called the:
A. Write your own program
B. Create flood insurance program
C. Flood insurance is not available through private insurers
D. None of the Above - CORRECT ANSWER -A. Write your own program
The law of large numbers state that the larger...
A. The number of insured, the more likely they will have losses
B. A company, the more profit it will make
C. The chance of loss, the higher the premium
D. The number of insureds, the easier it is to estimate their losses - CORRECT ANSWER -D. The
number of insureds, the easier it is to estimate their losses
WITH CORRECT ANSWERS 2025/2026
Statements made in the application are considered:
A. Warranties
B. Representations
C. Possible Concealments
D. None of the Above - CORRECT ANSWER -B. Representations
The definition of Risk is:
A. Uncertainty regarding loss
B. A chance of gain
C. Uncertainty regarding gain or profit
D. Intended unforseen damage to property for gain or profit - CORRECT ANSWER -A. Uncertainty
regarding loss
A financial device for transferring or shifting risk from an individual or entity to a large group
with the same risk is the definition of:
A. Avoidance
B. Retention
C. Transfer
D. Insurance - CORRECT ANSWER -D. Insurance
Hazards include which of the following:
1. Unintended oily rags stacked in a corner
2. A homeowner's carelessness because he has insurance
,A. 1 only
B. 2 only
C. Both 1 & 2
D. Neither 1 or 2 - CORRECT ANSWER -C. Both 1 & 2
The mortgage condition in a property policy:
1. Guarantees that the lending institutions may act for itself in paying a premium
2. Guarantees claim payments will be divided as the interests of the insurance and mortgagee
appear
A. 1 only
B. 2 only
C. Both 1 & 2
D. Neither 1 nor 2 - CORRECT ANSWER -C. Both 1 & 2
Which of the following situations does NOT create an insurable interest?
A. Being named in someone's will as an heir
B. Holding a mortgage or lien on property
C. Having custody or control of someone else's property
D. Owning property - CORRECT ANSWER -A. Being named in someone's will as an heir
The plumbing in Mrs. Ward's home suddenly burst and the ceilings were damaged by water.
Which of the following homeowner forms would cover the loss?
A. HO1
B. HO2
C. HO4
, D. HO7` - CORRECT ANSWER -B. HO2
Nicole has a Personal Auto policy with limits of 10/20/10 for liability coverage. She causes an
accident that results in $12,000 bodily injury damages to the other driver and $5,000 in
property damage to the other driver's car. How much would Nicole's policy pay for the the BI
and PD losses?
A. $15,000
B. $17,000
C. $10,000
D. $12,000 - CORRECT ANSWER -A. $15,000
Sally Smith calls her agent, Hubert Dufus, to purchase flood insurance. Agent Dufus explains to
Ms. Smith that flood coverage can be purchased directly through the NFIP or through him.
Should Ms. Smith choose to purchase coverage through Agent Dufus it is called the:
A. Write your own program
B. Create flood insurance program
C. Flood insurance is not available through private insurers
D. None of the Above - CORRECT ANSWER -A. Write your own program
The law of large numbers state that the larger...
A. The number of insured, the more likely they will have losses
B. A company, the more profit it will make
C. The chance of loss, the higher the premium
D. The number of insureds, the easier it is to estimate their losses - CORRECT ANSWER -D. The
number of insureds, the easier it is to estimate their losses
