Property & Casualty Agent License Vocabulary
EXAM Questions Latest Update 2026 (Questions
and Answers-Verified solutions
depreciation - CORRECT ANSWERS reduction in value, particularly due to wear
and tear
exposure - CORRECT ANSWERS susceptibility to risk
implied warranty - CORRECT ANSWERS a legal term meaning that a product is
suitable for its intended purpose and that it fits an ordinary buyer's expectations
insurance policy - CORRECT ANSWERS a contract between a policy owner
(and/or insured) and an insurance company which agrees to pay the insured or the beneficiary for loss
caused by specific events
insurer (principal) - CORRECT ANSWERS the company who issues an insurance
policy
obsolescence - CORRECT ANSWERS depreciation in the value of a property due
to becoming outdated
premium - CORRECT ANSWERS the money paid to the insurance company for
the insurance policy
insurance - CORRECT ANSWERS a transfer of risk of loss from an individual or a
business entity to an insurance company, which, in turn, spreads the costs of unexpected losses to many
individuals
,law of large numbers - CORRECT ANSWERS the larger the number of people
with a similar exposure to loss, the more predictable the actual losses will be
insurable interest - CORRECT ANSWERS an insured person must have
something to lose (via damage physical or otherwise) to be insured; ownership often creates this
situation, must exist at the time of loss
risk - CORRECT ANSWERS the uncertainty or chance of a loss occurring (pure
and speculative)
pure risk - CORRECT ANSWERS situations that can only result in a loss or no
change. There is no opportunity for financial gain. It is the only type of risk that insurance companies are
willing to cover
speculative risk - CORRECT ANSWERS involves the opportunity for either loss or
gain (gambling). non-insurable
hazards - CORRECT ANSWERS conditions or situations that increase the
probability of an insured loss occurring (slippery floors, traffic...), can me moral, physical, or morale
physical hazards - CORRECT ANSWERS those arising from the material,
structural, or operational features of the risk, apart from the persons owning or managing it
moral hazards - CORRECT ANSWERS applicants that lie on applications or
fraudulent claims
morale hazards - CORRECT ANSWERS an increase in the hazard presented by a
risk because of the insured's indifference to loss because of the existence of insurance
,perils - CORRECT ANSWERS the causes of loss insured against in an insurance
policy
indemnity - CORRECT ANSWERS a provision in an insurance policy that states
that in the event of loss, an insured or a beneficiary is permitted to collect only to the extent of the
financial loss, and is not allowed to gain financially because of the existence of an insurance contract
(sometimes called reimbursement)
subrogation - CORRECT ANSWERS the insurer's legal right to seek damages
from third parties, after it has reimbursed the insured for the loss; based on the principle of indemnity
by preventing the insured from collecting on loss twice: once from insurer and again from whomever
caused the damage/loss
accident - CORRECT ANSWERS sudden, unplanned and unexpected event; not
under the control of the insured; results in injury or damage that is neither expected nor intended
occurence - CORRECT ANSWERS a broader definintion of loss that includes
losses caused by continuous or repeated eposure to conditions resulting in injury to persons or damage
to property that is neither intended nor expected
named peril - CORRECT ANSWERS describes the breadth of coverage provided
under an insurance policy form that lists specific covered perils
open peril - CORRECT ANSWERS describes the breadth of coverage provided
under an insurance policy form that insures against any risk of loss that is not specifically excluded
negligence - CORRECT ANSWERS failure to use the care that a reasonable,
prudent person would have under the same or similar circumstances
, vacancy - CORRECT ANSWERS refers to an insured structure in which no people
have been living or working, and no property has been stored for the period of time required as stated
in the policy
unoccupancy - CORRECT ANSWERS refers to an insured structure in which no
people have been living or working within the required period of time, but some property is stored
blanket insurance - CORRECT ANSWERS a single property insurance policy that
provides coverage for multiple classes of property at one location, or for one or more classes of property
at multiple locations; all insured properties are written for one total amount of insurance, and no single
insured item is assigned a specific moment of insurance; different amounts may be shown for buildings
in general, equipment in general...
specific insurance - CORRECT ANSWERS property insurance policy that covers a
specific kind of unit of property for a specific amount of insurance
actual cash value= - CORRECT ANSWERS current replacement cost -
depreciation
replacement cost - CORRECT ANSWERS the cost to replace damaged property
with like kind and quality at today's price, without any deduction for depreciation; does not apply to
personal property of others, contents of a residence, works of art, antiques or rare articles, or stock
unless shown in declarations; replaces ACV in the valuation condition
market value - CORRECT ANSWERS the amount a buyer is willing to pay the
seller prior to loss, includes land and location
agreed value - CORRECT ANSWERS property policy with a provision agreed
upon by the insurer and insured as to the amount of insurance that represents a fair valuation for the
property at the time the insurance is written and suspends any coinsurance or other contribution
clauses in the policy; works well on items whose value is mainly stable; insurer and insured determine
value, insurer pays no more for loss/damage than the proportion of the insurance limit for this coverage
bears to the value shown, coinsurance does not apply
EXAM Questions Latest Update 2026 (Questions
and Answers-Verified solutions
depreciation - CORRECT ANSWERS reduction in value, particularly due to wear
and tear
exposure - CORRECT ANSWERS susceptibility to risk
implied warranty - CORRECT ANSWERS a legal term meaning that a product is
suitable for its intended purpose and that it fits an ordinary buyer's expectations
insurance policy - CORRECT ANSWERS a contract between a policy owner
(and/or insured) and an insurance company which agrees to pay the insured or the beneficiary for loss
caused by specific events
insurer (principal) - CORRECT ANSWERS the company who issues an insurance
policy
obsolescence - CORRECT ANSWERS depreciation in the value of a property due
to becoming outdated
premium - CORRECT ANSWERS the money paid to the insurance company for
the insurance policy
insurance - CORRECT ANSWERS a transfer of risk of loss from an individual or a
business entity to an insurance company, which, in turn, spreads the costs of unexpected losses to many
individuals
,law of large numbers - CORRECT ANSWERS the larger the number of people
with a similar exposure to loss, the more predictable the actual losses will be
insurable interest - CORRECT ANSWERS an insured person must have
something to lose (via damage physical or otherwise) to be insured; ownership often creates this
situation, must exist at the time of loss
risk - CORRECT ANSWERS the uncertainty or chance of a loss occurring (pure
and speculative)
pure risk - CORRECT ANSWERS situations that can only result in a loss or no
change. There is no opportunity for financial gain. It is the only type of risk that insurance companies are
willing to cover
speculative risk - CORRECT ANSWERS involves the opportunity for either loss or
gain (gambling). non-insurable
hazards - CORRECT ANSWERS conditions or situations that increase the
probability of an insured loss occurring (slippery floors, traffic...), can me moral, physical, or morale
physical hazards - CORRECT ANSWERS those arising from the material,
structural, or operational features of the risk, apart from the persons owning or managing it
moral hazards - CORRECT ANSWERS applicants that lie on applications or
fraudulent claims
morale hazards - CORRECT ANSWERS an increase in the hazard presented by a
risk because of the insured's indifference to loss because of the existence of insurance
,perils - CORRECT ANSWERS the causes of loss insured against in an insurance
policy
indemnity - CORRECT ANSWERS a provision in an insurance policy that states
that in the event of loss, an insured or a beneficiary is permitted to collect only to the extent of the
financial loss, and is not allowed to gain financially because of the existence of an insurance contract
(sometimes called reimbursement)
subrogation - CORRECT ANSWERS the insurer's legal right to seek damages
from third parties, after it has reimbursed the insured for the loss; based on the principle of indemnity
by preventing the insured from collecting on loss twice: once from insurer and again from whomever
caused the damage/loss
accident - CORRECT ANSWERS sudden, unplanned and unexpected event; not
under the control of the insured; results in injury or damage that is neither expected nor intended
occurence - CORRECT ANSWERS a broader definintion of loss that includes
losses caused by continuous or repeated eposure to conditions resulting in injury to persons or damage
to property that is neither intended nor expected
named peril - CORRECT ANSWERS describes the breadth of coverage provided
under an insurance policy form that lists specific covered perils
open peril - CORRECT ANSWERS describes the breadth of coverage provided
under an insurance policy form that insures against any risk of loss that is not specifically excluded
negligence - CORRECT ANSWERS failure to use the care that a reasonable,
prudent person would have under the same or similar circumstances
, vacancy - CORRECT ANSWERS refers to an insured structure in which no people
have been living or working, and no property has been stored for the period of time required as stated
in the policy
unoccupancy - CORRECT ANSWERS refers to an insured structure in which no
people have been living or working within the required period of time, but some property is stored
blanket insurance - CORRECT ANSWERS a single property insurance policy that
provides coverage for multiple classes of property at one location, or for one or more classes of property
at multiple locations; all insured properties are written for one total amount of insurance, and no single
insured item is assigned a specific moment of insurance; different amounts may be shown for buildings
in general, equipment in general...
specific insurance - CORRECT ANSWERS property insurance policy that covers a
specific kind of unit of property for a specific amount of insurance
actual cash value= - CORRECT ANSWERS current replacement cost -
depreciation
replacement cost - CORRECT ANSWERS the cost to replace damaged property
with like kind and quality at today's price, without any deduction for depreciation; does not apply to
personal property of others, contents of a residence, works of art, antiques or rare articles, or stock
unless shown in declarations; replaces ACV in the valuation condition
market value - CORRECT ANSWERS the amount a buyer is willing to pay the
seller prior to loss, includes land and location
agreed value - CORRECT ANSWERS property policy with a provision agreed
upon by the insurer and insured as to the amount of insurance that represents a fair valuation for the
property at the time the insurance is written and suspends any coinsurance or other contribution
clauses in the policy; works well on items whose value is mainly stable; insurer and insured determine
value, insurer pays no more for loss/damage than the proportion of the insurance limit for this coverage
bears to the value shown, coinsurance does not apply
