1
Property and Casualty Insurance Questions
with Answers (100% Correct Answers)
Elements for a contract: Answer: 1) Agreement - offer and acceptance
2) Consideration
3) Competent parties
4) Legal purpose
Payment for medical expenses, loss of wages, funeral expenses, or the cost to
repair or replace damaged property are known as what type of compensatory
damages? Answer: Special
Which method of loss valuation is contrary to the basic concept of indemnity?
Answer: Replacement cost
An insured owns several buildings, each at a different location and insured on a
separate policy. What type of coverage does the insured have? Answer: Specific
The policy provision found in property insurance policies that prevents the
insured from collecting twice for the same loss is called Answer: Subrogation
Losses caused by continuous or repeated exposure to conditions resulting in
injury persons or damage to property that is neither intended nor expected is
the definition of which of the following terms? Answer: Occurrence
An insured relocated to another state for work. However, she still owns and
insures a house in this state, but has had no one living in it for 3 months. She is
also storing some of furniture and clothes in the house. From an insurance
standpoint, the insured's house is considered Answer: Unoccupied
An insured's roof cost $4,000 when installed 5 years ago. It has been damaged
by hail and must be replaced. The new roof will cost $6,000 at today's prices. If
the roof has been depreciating at $200 per year and the insured's policy is
,2
written on the actual cash value(ACV), how much will the policy pay toward
the insured's new roof? Answer: $5,000
An insured carries a property policy on her home in the amount of $250,000. A
bank is shown as the mortgagor in the policy. Last month the insured made her
final mortgage payment, but did not remove the bank from the policy. In the
event of a covered loss to her home, how much will the bank receive? Answer:
Nothing
What type of damages may be awarded by the court to create disincentives that
discourage behavior that is deemed highly undesirable by society? Answer:
Punitive
A tornado that destroys property would be an example of which of the
following? Answer: A Peril
The insured's house is located one mile from the county's new landfill and
across the road from the entrance of a rock quarry. It would cost $150,000 to
rebuild the house if something happened to it, but when the insured tried to sell
it, the best offer he received was $80,000. The insurance company will insure
the house for only $80,000. What method of valuation is used to insure this
property? Answer: Market Value
An insured is applying for a casualty insurance policy. One of the conditions of
the policy allows the insurance company to inspect the insured's books at the
end of the policy term to make sure sufficient premium has been collected for
the exposure she plans to insure. Which condition is part of the insured's
policy? Answer: Deposit premium audit
All of the following statements concerning coinsurance are true EXCEPT
Answer: The coinsurance formula will also be applied to total losses.
A situation in which a person can only lose or have no change represents
Answer: Pure risk
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A policy condition that stipulates how the amount of damaged or lost property
will be determined if the insured and the principal do not agree is known as
Answer: Appraisal
An insured has a liability policy that sets the amount for all claims that arise
from a single incident at $50,000. Which type of limit of liability does this
insured's policy have? Answer: Per occurrence
Which of the following is NOT an element of negligence? Answer: Libel
-duty, breach, and unbroken chain are
Insurable interest in the property covered in a policy must be proven Answer:
At time of loss
A building is insured, but no one has lived or worked in it for 10 years. The
building is completely empty of any furniture or personal belongings. From an
insurance standpoint, the building is considered Answer: Vacant
For the purpose of insurance, risk is defined as Answer: The uncertainty or
chance of loss
Which law is the foundation of the statistical prediction of loss upon which
rates for insurance are calculated? Answer: Law of large numbers
The legal process that gives the insurer, after payment of a loss, the right to seek
recovery from a third party that was responsible for the loss is known as
Answer: Subrogation
What is a Certificate of Insurance? Answer: A written document showing the
types and amounts of insurance that have been issued to the insured
A $100,000 house insured on a policy with an 80% coinsurance requirement
has a fire that caused $40,000 of damage; the owner has a policy with $60,000
coverage. How much can the owner collect for his loss? Answer: $30,000
, 4
- For the total amount of a partial loss to be paid, a house must be insured for at
least 80% of its value on the date of loss. In this case, because the house is
insured for only $60,000 (75% of the minimum requirement), the policy will
pay only 75% of the loss, or $30,000.
An insured stated on her application for life insurance that she had never had a
heart attack, when in fact she had a series of minor heart attacks last year for
which she sought medical attention. Which of the following will explain the
reason a death benefit claim is denied? Answer: Material misrepresentation
All of the following are conditions commonly found in the insurance policy
EXCEPT Answer: Insuring agreement
-subrogation, appraisal, cancellation and nonrenewal are all found
Duties of the insurer found in property policy conditions include all of the
following EXCEPT Answer: -Notify the insured in the event of financial
difficulty
All of the following are considered parts of the policy structure EXCEPT
Answer: Provisions
-conditions, exclusions, and insuring clause are found
Representations are written or oral statements made by the applicant that are
Answer: Considered true to the best of the applicant's knowledge
The part of a policy that clarifies terms in the policy is the Answer: Definitions
In forming an insurance contract, when does acceptance usually occur?
Answer: When an insurer's underwriter approves coverage
In insurance, an offer is usually made when Answer: The completed
application is submitted
Which of the following is NOT the consideration in a policy? Answer: The
application given to a prospective insured
Property and Casualty Insurance Questions
with Answers (100% Correct Answers)
Elements for a contract: Answer: 1) Agreement - offer and acceptance
2) Consideration
3) Competent parties
4) Legal purpose
Payment for medical expenses, loss of wages, funeral expenses, or the cost to
repair or replace damaged property are known as what type of compensatory
damages? Answer: Special
Which method of loss valuation is contrary to the basic concept of indemnity?
Answer: Replacement cost
An insured owns several buildings, each at a different location and insured on a
separate policy. What type of coverage does the insured have? Answer: Specific
The policy provision found in property insurance policies that prevents the
insured from collecting twice for the same loss is called Answer: Subrogation
Losses caused by continuous or repeated exposure to conditions resulting in
injury persons or damage to property that is neither intended nor expected is
the definition of which of the following terms? Answer: Occurrence
An insured relocated to another state for work. However, she still owns and
insures a house in this state, but has had no one living in it for 3 months. She is
also storing some of furniture and clothes in the house. From an insurance
standpoint, the insured's house is considered Answer: Unoccupied
An insured's roof cost $4,000 when installed 5 years ago. It has been damaged
by hail and must be replaced. The new roof will cost $6,000 at today's prices. If
the roof has been depreciating at $200 per year and the insured's policy is
,2
written on the actual cash value(ACV), how much will the policy pay toward
the insured's new roof? Answer: $5,000
An insured carries a property policy on her home in the amount of $250,000. A
bank is shown as the mortgagor in the policy. Last month the insured made her
final mortgage payment, but did not remove the bank from the policy. In the
event of a covered loss to her home, how much will the bank receive? Answer:
Nothing
What type of damages may be awarded by the court to create disincentives that
discourage behavior that is deemed highly undesirable by society? Answer:
Punitive
A tornado that destroys property would be an example of which of the
following? Answer: A Peril
The insured's house is located one mile from the county's new landfill and
across the road from the entrance of a rock quarry. It would cost $150,000 to
rebuild the house if something happened to it, but when the insured tried to sell
it, the best offer he received was $80,000. The insurance company will insure
the house for only $80,000. What method of valuation is used to insure this
property? Answer: Market Value
An insured is applying for a casualty insurance policy. One of the conditions of
the policy allows the insurance company to inspect the insured's books at the
end of the policy term to make sure sufficient premium has been collected for
the exposure she plans to insure. Which condition is part of the insured's
policy? Answer: Deposit premium audit
All of the following statements concerning coinsurance are true EXCEPT
Answer: The coinsurance formula will also be applied to total losses.
A situation in which a person can only lose or have no change represents
Answer: Pure risk
,3
A policy condition that stipulates how the amount of damaged or lost property
will be determined if the insured and the principal do not agree is known as
Answer: Appraisal
An insured has a liability policy that sets the amount for all claims that arise
from a single incident at $50,000. Which type of limit of liability does this
insured's policy have? Answer: Per occurrence
Which of the following is NOT an element of negligence? Answer: Libel
-duty, breach, and unbroken chain are
Insurable interest in the property covered in a policy must be proven Answer:
At time of loss
A building is insured, but no one has lived or worked in it for 10 years. The
building is completely empty of any furniture or personal belongings. From an
insurance standpoint, the building is considered Answer: Vacant
For the purpose of insurance, risk is defined as Answer: The uncertainty or
chance of loss
Which law is the foundation of the statistical prediction of loss upon which
rates for insurance are calculated? Answer: Law of large numbers
The legal process that gives the insurer, after payment of a loss, the right to seek
recovery from a third party that was responsible for the loss is known as
Answer: Subrogation
What is a Certificate of Insurance? Answer: A written document showing the
types and amounts of insurance that have been issued to the insured
A $100,000 house insured on a policy with an 80% coinsurance requirement
has a fire that caused $40,000 of damage; the owner has a policy with $60,000
coverage. How much can the owner collect for his loss? Answer: $30,000
, 4
- For the total amount of a partial loss to be paid, a house must be insured for at
least 80% of its value on the date of loss. In this case, because the house is
insured for only $60,000 (75% of the minimum requirement), the policy will
pay only 75% of the loss, or $30,000.
An insured stated on her application for life insurance that she had never had a
heart attack, when in fact she had a series of minor heart attacks last year for
which she sought medical attention. Which of the following will explain the
reason a death benefit claim is denied? Answer: Material misrepresentation
All of the following are conditions commonly found in the insurance policy
EXCEPT Answer: Insuring agreement
-subrogation, appraisal, cancellation and nonrenewal are all found
Duties of the insurer found in property policy conditions include all of the
following EXCEPT Answer: -Notify the insured in the event of financial
difficulty
All of the following are considered parts of the policy structure EXCEPT
Answer: Provisions
-conditions, exclusions, and insuring clause are found
Representations are written or oral statements made by the applicant that are
Answer: Considered true to the best of the applicant's knowledge
The part of a policy that clarifies terms in the policy is the Answer: Definitions
In forming an insurance contract, when does acceptance usually occur?
Answer: When an insurer's underwriter approves coverage
In insurance, an offer is usually made when Answer: The completed
application is submitted
Which of the following is NOT the consideration in a policy? Answer: The
application given to a prospective insured
