Pearson VUE Property Insurance Practice Exam questions and answers 2024

S is purchasing a Commercial Property policy to cover a commercial building with a replacement cost of $100,000. The policy includes an 80 percent Coinsurance clause. To avoid a coinsurance penalty in the event of a partial loss, S should purchase a policy with minimum limits of AT LEAST which of the following amounts? A. $100,000 B. $90,000 C. $80,000 D. $20,000 C The MAXIMUM amount a policy will pay in the event of a loss is called the: A. coinsurance amount B. deductible C. limit of liability D. pro rata return C The National Flood Insurance Program provides coverage for losses caused by all of the following occurrences EXCEPT: A. mudslides B. runoff from heavy rain C. overflow of tidal waters D. water-main breakage D Special Form or Open Perils coverage: A. Provides coverage against the named perils B. Provides coverage against scheduled risks C. Is limited by the named exclusions D. Includes no exclusions C Which of the following businesses would be eligible for a Businessowners policy? A. Auto body shop B. Theater C. Branch bank D. Barber shop D During a tornado, a barn is destroyed when a section of its wall is blown down, knocking over a lantern, which sets the barn on fire. The proximate cause of loss is the: A. fire B. collapse of the wall C. tornado D. smoke C A fire in an insured's restaurant burns the kitchen walls and causes smoke damage to the entire interior. Water used to extinguish the fire causes extensive damage to floors and furnishings. The water damage is best described as: A. a time element loss B. a consequential loss C. a direct loss D. an indirect loss C Which of the following terms is defined as the uncertainty of future outcome? A. Risk B. Hazard C. Peril D. Cause A The Personal Liability section of a Homeowners policy covers which of the following options? A. Damage to an insured's property caused by a visitor B. Bodily injury to a resident caused by a neighbor's dog C. Property damage caused by war D. Bodily injury caused by the personal activities of an insured D An insured owns an antique marble statue valued at $3,000, which is covered under a Personal Articles Floater. Damage to the statue would be covered in all of the following situations EXCEPT: A. it was accidentally damaged by a housekeeper B. it was damaged in a flood C. a guest of the insured maliciously damaged it D. the insured threw it D Which of the following sources may be used to provide property insurability information? A. Police records B. Physical inspections C. Checking account statements D. Lie detector tests B All of the following perils are covered under a Building and Business Personal Property Coverage Form with a Causes of Loss-Basic Form attached EXCEPT: A. smoke B. sprinkler leakage C. sinkhole collapse D. earth movement D X insures a home for $100,000 under a Dwelling Property Broad Form (DP-2). If a flood causes $1,000 in damage to the home's contents, which of the following MAXIMUM amounts will X's insurer pay? A. $0 B. $800 C. $900 D. $1,000 A In order to issue a written binder for a commercial property policy, what is the MINIMUM consideration a producer must secure from an applicant? A. A promise to pay the premium B. A signature on a premium finance agreement C. Payment of six months' premium D. Payment of twelve months' premium A An insured owns a set of six drawing pens designed and used by Benjamin Franklin. Each pen is worth $1,000 alone, but the set is worth $12,000. One pen is destroyed by a covered peril. Under the Pair and Set clause, the insurer will pay a MAXIMUM of which of the following amounts? A. $1,000 B. $2,000 C. $7,000 D. $12,000 C Pro-rata cancellation occurs when: A. a policy is nonrenewed B. a mortgage has been satisfied C. an insured cancels a policy at inception D. an insurer cancels a policy at any time D Inland Marine insurance is commonly used to insure all of the following items EXCEPT: A. automobiles B. stamps C. camera equipment D. jewelry A A primary obligation of an insurer is to: A. pay the claims covered under the policy B. provide a financial statement with each policy C. make inspections and surveys of insured property D. prepare an inventory after a loss A An applicant's statement included in the insurance contract that the property to be insured has an operable sprinkler system is: A. agency binding authority B. a warranty C. a representation D. an affidavit B Which of the following terms BEST describes continuous and repeated exposure to conditions that are neither expected nor intended by the insured? A. Negligence B. Liability C. Accident D. Occurrence D Which of the following statements about a mortgagee's rights under the Dwelling Property Basic Form (DP-1) is INCORRECT? A. No act by the insured will jeopardize the mortgagee's rights. B. The mortgagee may file a Proof of Loss if the insured fails to do so. C. The mortgagee is entitled to receive prior notice of a policy's cancellation. D. The mortgagee may abandon the insured property to the insurer. D A Commercial Property policy specifies which of the following responsibilities as a duty of the insured? A. To return the policy if it is canceled by the insurer B. To provide a sworn Proof of Loss statement if requested by the company C. To pay the mortgagee in full in the event of a total loss D. To pay premiums within thirty days after receiving an invoice B An insured's HO-2 Form has a $100,000 coverage limit on the dwelling and a $50,000 Personal Property limit with the standard deductible. If a sailboat valued at $1,500 is stolen from the insured's premises, the insured will collect a MAXIMUM of which of the following amounts? A. $1,000 B. $1,250 C. $1,400 D. $1,500 B