COMPREHENSIVE PROPERTY AND
CASUALTY INSURANCE EXAM PREP |
PRACTICE QUESTIONS, CORRECT ANSWERS
AND STUDY GUIDE
| GRADED A+ | GUARANTEED SUCCESS
Updated 2026 Questions and Answers
100% Verified Exam Prep
,Pro rata The Union Theater had two property policies in place the day it was destroyed in a fire.
How did coverage apply under the policies if each made claim payment in proportion to
the limits of liability contained in the policies?
- When two primary policies provide coverage on a pro-rata basis, they share a loss in
proportion to their limits of liability.
special damages A customer slips and falls on a wet floor in a store, and incurs damages consisting of
emergency room charges, doctor bills, X-rays, and lost earnings from her job when she
couldn't work for two weeks. All of these are examples of:
- special damages are awarded to an injured party for tangible losses that have a specific,
measurable dollar value. Examples include doctor bills, prescriptions, and losses of
income
components of an insurance rate The three components of an insurance rate are loss costs, expenses, and an allowance
for profits and contingencies.
"we" in property insurance policy Throughout an insurance policy, the terms "we," "us," and "our" refer to the insurance
company providing insurance.
Excluded under the maintenance or wear and tear exclusion in addition to wear and tear, the causes of loss typically excluded in this category include
deterioration, rust, smoke from industrial operations, damage by animals owned by the
insured, and damage by birds, vermin, rodents or insects
War This is not a named peril on a property policy; it's an exclusion
No benefit to bailee clause Jack takes his computer to Atlas Computer Repair to have it repaired. The computer is
damaged while at the repair shop. Atlas tells Jack that his homeowners coverage will
cover Atlas since Atlas is a third-party beneficiary of the policy. What provision in Jack's
homeowners policy will eliminate coverage in this situation?
- this preempts coverage for outside parties who are bailees. A bailee is a person or
organization that holds another party's personal property for a certain purpose (usually
for their mutual benefit). The bailee must obtain coverage through its own insurance or
pay for a loss out of its own pocket
Common property insurance exclusions flood, earthquake, nuclear hazard
,replacement value Mrs. Grant's home suffered a fire. The contractor tells Mrs. Grant it will cost $10,000 to
repair the damage and restore her home so it's exactly the same as it was before the fire.
What valuation basis did the contractor explain to Mrs. Grant?
- loss valuation based on replacement value calculates the cost to repay or replace
property with property of like kind and quality
Morale hazard John faces bankruptcy and foreclosure of his home. When he abandons his home to
avoid the attempts of his mortgage company to collect payment of his mortgage, what
type of hazard does John pose to his homeowners insurance company?
- a morale hazard is one that arises from a person's state of mind, attitude, or indifference
to loss
Leakage or seepage exclusion Which property insurance exclusion would eliminate coverage for damage to house
siding caused by drops of condensation falling from a window air conditioner?
- although sudden water damage from a burst pipe is typically covered, most property
insurance policies exclude coverage for situations in which water gradually leaks or
seeps from a plumbing system, air conditioning system, or appliance. Damage of this
type is generally within the insured's control. Insureds are expected to be aware of such
conditions and correct them.
It may deny claim payment. If the insured under a property insurance policy fails to comply with duties outlined in the
policy following a loss, which of the following correctly describes what the insurer will
do?
- if the insured fails to comply with its duties as stated in the policy Conditions, the insurer
may deny coverage
Ordinance or law The air-conditioning unit in Myrna's condo malfunctioned. Water seeped under her
parquet flooring and caused major damage, which was covered by her insurance. The
contractor discovered Myrna's electrical wiring did not meet current building codes and
would also have to be replaced. This additional cost was NOT covered because her
policy contained what type of exclusion?
- Property policies provide coverage to repair or replace the building damage but
provide little or no coverage for the additional costs to comply with current building
codes and ordinances. An ordinance or law exclusion eliminates coverage for the extra
expenses, over and above the cost of replacing damaged property, that may be
necessary to comply with ordinances
, negligence this is the failure to use the degree of reasonable care that is necessary under the
circumstances. Negligence involves a breach of this duty, a carelessness without the
intent to injure.
equipment breakdown policy Steam boiler explosions are covered under which of the following types of property
insurance policies?
- while most property policies exclude coverage for losses caused by boiler explosion,
boiler explosion losses are insurable under an equipment breakdown policy (also known
as a boiler and machinery policy)
a neighbor who "crashes" a party at the property owner's In determining the degree of care that is required by a property owner for the safety of
home people on his or her property, which of the following would be considered a trespasser?
- A party "gate crasher," on the property without the owner's permission, would be
considered a trespasser.
coverage extensions, additional coverages, supplementary A property or liability insurance policy may provide secondary coverages along with the
payments. main coverage in its insuring agreement through coverage extensions, additional
coverages, or supplementary payments
rights of mortgagee in standard mortgage clause The standard mortgage clause of a property insurance policy covering real estate does
not grant the mortgagee more rights than the insured with respect to the exclusions. For
instance, damage caused by an earthquake or flood is excluded for the insured as well as
the mortgagee. The mortgagee may be able to obtain a policy that would cover some of
these perils in the event the insured did not have this coverage.
The mortgagee remains covered if the policy is voided by some act of the insured.
The mortgagee will have advance written notice of a policy cancellation.
Payment for loss to the mortgaged property is made to the mortgagee as well as the
insured.
ordinance or law exclusion Although the direct damage to a building caused by an explosion may be covered under
a property insurance policy, what exclusion might rule out coverage for costs that are
necessary to comply with current building codes?
- An ordinance or law exclusion eliminates coverage for the extra expenses, over and
above the cost of replacing damaged property that might be necessary to comply with
such ordinances. Coverage can usually be obtained through an endorsement.
CASUALTY INSURANCE EXAM PREP |
PRACTICE QUESTIONS, CORRECT ANSWERS
AND STUDY GUIDE
| GRADED A+ | GUARANTEED SUCCESS
Updated 2026 Questions and Answers
100% Verified Exam Prep
,Pro rata The Union Theater had two property policies in place the day it was destroyed in a fire.
How did coverage apply under the policies if each made claim payment in proportion to
the limits of liability contained in the policies?
- When two primary policies provide coverage on a pro-rata basis, they share a loss in
proportion to their limits of liability.
special damages A customer slips and falls on a wet floor in a store, and incurs damages consisting of
emergency room charges, doctor bills, X-rays, and lost earnings from her job when she
couldn't work for two weeks. All of these are examples of:
- special damages are awarded to an injured party for tangible losses that have a specific,
measurable dollar value. Examples include doctor bills, prescriptions, and losses of
income
components of an insurance rate The three components of an insurance rate are loss costs, expenses, and an allowance
for profits and contingencies.
"we" in property insurance policy Throughout an insurance policy, the terms "we," "us," and "our" refer to the insurance
company providing insurance.
Excluded under the maintenance or wear and tear exclusion in addition to wear and tear, the causes of loss typically excluded in this category include
deterioration, rust, smoke from industrial operations, damage by animals owned by the
insured, and damage by birds, vermin, rodents or insects
War This is not a named peril on a property policy; it's an exclusion
No benefit to bailee clause Jack takes his computer to Atlas Computer Repair to have it repaired. The computer is
damaged while at the repair shop. Atlas tells Jack that his homeowners coverage will
cover Atlas since Atlas is a third-party beneficiary of the policy. What provision in Jack's
homeowners policy will eliminate coverage in this situation?
- this preempts coverage for outside parties who are bailees. A bailee is a person or
organization that holds another party's personal property for a certain purpose (usually
for their mutual benefit). The bailee must obtain coverage through its own insurance or
pay for a loss out of its own pocket
Common property insurance exclusions flood, earthquake, nuclear hazard
,replacement value Mrs. Grant's home suffered a fire. The contractor tells Mrs. Grant it will cost $10,000 to
repair the damage and restore her home so it's exactly the same as it was before the fire.
What valuation basis did the contractor explain to Mrs. Grant?
- loss valuation based on replacement value calculates the cost to repay or replace
property with property of like kind and quality
Morale hazard John faces bankruptcy and foreclosure of his home. When he abandons his home to
avoid the attempts of his mortgage company to collect payment of his mortgage, what
type of hazard does John pose to his homeowners insurance company?
- a morale hazard is one that arises from a person's state of mind, attitude, or indifference
to loss
Leakage or seepage exclusion Which property insurance exclusion would eliminate coverage for damage to house
siding caused by drops of condensation falling from a window air conditioner?
- although sudden water damage from a burst pipe is typically covered, most property
insurance policies exclude coverage for situations in which water gradually leaks or
seeps from a plumbing system, air conditioning system, or appliance. Damage of this
type is generally within the insured's control. Insureds are expected to be aware of such
conditions and correct them.
It may deny claim payment. If the insured under a property insurance policy fails to comply with duties outlined in the
policy following a loss, which of the following correctly describes what the insurer will
do?
- if the insured fails to comply with its duties as stated in the policy Conditions, the insurer
may deny coverage
Ordinance or law The air-conditioning unit in Myrna's condo malfunctioned. Water seeped under her
parquet flooring and caused major damage, which was covered by her insurance. The
contractor discovered Myrna's electrical wiring did not meet current building codes and
would also have to be replaced. This additional cost was NOT covered because her
policy contained what type of exclusion?
- Property policies provide coverage to repair or replace the building damage but
provide little or no coverage for the additional costs to comply with current building
codes and ordinances. An ordinance or law exclusion eliminates coverage for the extra
expenses, over and above the cost of replacing damaged property, that may be
necessary to comply with ordinances
, negligence this is the failure to use the degree of reasonable care that is necessary under the
circumstances. Negligence involves a breach of this duty, a carelessness without the
intent to injure.
equipment breakdown policy Steam boiler explosions are covered under which of the following types of property
insurance policies?
- while most property policies exclude coverage for losses caused by boiler explosion,
boiler explosion losses are insurable under an equipment breakdown policy (also known
as a boiler and machinery policy)
a neighbor who "crashes" a party at the property owner's In determining the degree of care that is required by a property owner for the safety of
home people on his or her property, which of the following would be considered a trespasser?
- A party "gate crasher," on the property without the owner's permission, would be
considered a trespasser.
coverage extensions, additional coverages, supplementary A property or liability insurance policy may provide secondary coverages along with the
payments. main coverage in its insuring agreement through coverage extensions, additional
coverages, or supplementary payments
rights of mortgagee in standard mortgage clause The standard mortgage clause of a property insurance policy covering real estate does
not grant the mortgagee more rights than the insured with respect to the exclusions. For
instance, damage caused by an earthquake or flood is excluded for the insured as well as
the mortgagee. The mortgagee may be able to obtain a policy that would cover some of
these perils in the event the insured did not have this coverage.
The mortgagee remains covered if the policy is voided by some act of the insured.
The mortgagee will have advance written notice of a policy cancellation.
Payment for loss to the mortgaged property is made to the mortgagee as well as the
insured.
ordinance or law exclusion Although the direct damage to a building caused by an explosion may be covered under
a property insurance policy, what exclusion might rule out coverage for costs that are
necessary to comply with current building codes?
- An ordinance or law exclusion eliminates coverage for the extra expenses, over and
above the cost of replacing damaged property that might be necessary to comply with
such ordinances. Coverage can usually be obtained through an endorsement.
