PERSONAL LINES INSURANCE PRACTICE
EXAM {LATEST 2026 -2027 UPDATE}
QUESTIONS AND ANSWERS 100%
CORRECT
The provisions of the Terrorism Risk Insurance Act of 2002 apply to which of the
following lines of insurance?
A) Homeowners
B) Commercial property
C) Automobile
D) Dwelling - correct answer B) Commercial property
Explanation: The Terrorism Risk Insurance Act of 2002 established a federal program
to provide compensation for insured losses resulting from terrorism acts. Most
commercial property and casualty policies are required to offer coverage for certified
acts of terrorism. The program does not apply to personal lines coverage.
Reference: 3.8.2 in the License Exam Manual
,Trees, shrubs, and other plants are covered as additional coverages for Coverages A-
The coverage is limited to certain perils, however. All of the following perils are
covered when causing damage to a tree or shrub EXCEPT
A) riot
B) explosion
C) theft
D) wind - correct answer D) wind
Explanation: The insurer will cover trees, shrubs, plants or lawns at the residence
premises for loss caused by fire, lightning, explosion, riot, civil commotion, aircraft,
nonowned vehicles, vandalism and malicious mischief, and theft. Wind, a common peril
causing damages to trees, is not covered.
Reference: 7.5.3 in the License Exam Manual
Which one of the following is an example of a peril?
A) Gasoline stores on the premises
B) Earthquake
C) Indifference
D) Illness - correct answer B) Earthquake
,Explanation: A peril is the actual cause of a loss. Examples of perils are fire, wind, hail,
and collision. For example, if there is a house fire that destroys an entire house, the
fire is the peril.
Reference: 1.3 in the License Exam Manual
Which of the following coverages is NOT included in a boatowners/watercraft package
policy?
A) Medical payments
B) Liability
C) Longshore and harbor workers' compensation insurance
D) Property - correct answer C) Longshore and harbor workers' compensation
insurance
Explanation: Boatowners/watercraft package policies were developed by individual
insurance companies and they combine property, liability, and medical payments
insurance on an open peril basis. Longshore and harbor workers' compensation
insurance is found in personal yacht policies, which are used to insure larger vessels
than those covered under boatowners policies.
, Reference: 9.8.1 in the License Exam Manual
An insured owns a pet lion that is caged on the homeowner's property. The owner
takes great care to warn neighbors of the possible danger by posting signs, fencing the
yard, and locking the cage at all times. When a neighbor's child manages to open the
cage and is bitten, what type of liability would apply to the lion owner?
A) Absolute liability
B) Contractual liability
C) Premises liability
D) Vicarious liability - correct answer A) Absolute liability
Explanation: The law imposes strict or absolute liability for specific situations or
activities that pose threats to the safety of others. People who own dangerous animals
are held to a higher standard of care. Absolute liability applies when a person is liable
for a dangerous condition, regardless of the amount of care taken.
Reference: 5.3.4 in the License Exam Manual
Which of the following terms is used to describe an empty building that is not being
used?
EXAM {LATEST 2026 -2027 UPDATE}
QUESTIONS AND ANSWERS 100%
CORRECT
The provisions of the Terrorism Risk Insurance Act of 2002 apply to which of the
following lines of insurance?
A) Homeowners
B) Commercial property
C) Automobile
D) Dwelling - correct answer B) Commercial property
Explanation: The Terrorism Risk Insurance Act of 2002 established a federal program
to provide compensation for insured losses resulting from terrorism acts. Most
commercial property and casualty policies are required to offer coverage for certified
acts of terrorism. The program does not apply to personal lines coverage.
Reference: 3.8.2 in the License Exam Manual
,Trees, shrubs, and other plants are covered as additional coverages for Coverages A-
The coverage is limited to certain perils, however. All of the following perils are
covered when causing damage to a tree or shrub EXCEPT
A) riot
B) explosion
C) theft
D) wind - correct answer D) wind
Explanation: The insurer will cover trees, shrubs, plants or lawns at the residence
premises for loss caused by fire, lightning, explosion, riot, civil commotion, aircraft,
nonowned vehicles, vandalism and malicious mischief, and theft. Wind, a common peril
causing damages to trees, is not covered.
Reference: 7.5.3 in the License Exam Manual
Which one of the following is an example of a peril?
A) Gasoline stores on the premises
B) Earthquake
C) Indifference
D) Illness - correct answer B) Earthquake
,Explanation: A peril is the actual cause of a loss. Examples of perils are fire, wind, hail,
and collision. For example, if there is a house fire that destroys an entire house, the
fire is the peril.
Reference: 1.3 in the License Exam Manual
Which of the following coverages is NOT included in a boatowners/watercraft package
policy?
A) Medical payments
B) Liability
C) Longshore and harbor workers' compensation insurance
D) Property - correct answer C) Longshore and harbor workers' compensation
insurance
Explanation: Boatowners/watercraft package policies were developed by individual
insurance companies and they combine property, liability, and medical payments
insurance on an open peril basis. Longshore and harbor workers' compensation
insurance is found in personal yacht policies, which are used to insure larger vessels
than those covered under boatowners policies.
, Reference: 9.8.1 in the License Exam Manual
An insured owns a pet lion that is caged on the homeowner's property. The owner
takes great care to warn neighbors of the possible danger by posting signs, fencing the
yard, and locking the cage at all times. When a neighbor's child manages to open the
cage and is bitten, what type of liability would apply to the lion owner?
A) Absolute liability
B) Contractual liability
C) Premises liability
D) Vicarious liability - correct answer A) Absolute liability
Explanation: The law imposes strict or absolute liability for specific situations or
activities that pose threats to the safety of others. People who own dangerous animals
are held to a higher standard of care. Absolute liability applies when a person is liable
for a dangerous condition, regardless of the amount of care taken.
Reference: 5.3.4 in the License Exam Manual
Which of the following terms is used to describe an empty building that is not being
used?
