PROPERTY AND CASUALTY INSURANCE
EXAM PART ONE COMPLETE STUDY GUIDE
ALREADY GRADED A+ 2026
⩥ 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 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
⩥ 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
EXAM PART ONE COMPLETE STUDY GUIDE
ALREADY GRADED A+ 2026
⩥ 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 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
⩥ 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
