PA Property and Casualty Insurance Exam Exam Prep Questions And
Answers (202472025)
Recently the local utility company's main power supply depot was damaged by high winds. Mike,
who owns a TV store, wants to make sure he has coverage for damage to all the TV components
demonstrated in his store if the power goes out. What does Mike need to purchase? - ✔✔Utility
Services—Direct Damage Coverage
Thomas has expanded his restaurant to include a parking lot next door with valet service. His
insurance agent is recommending that Thomas buy garagekeepers coverage. He advises Thomas
that all of the following exposures would be covered by this coverage EXCEPT - ✔✔if a car stored
in the parking lot is stolen by a restaurant employee
Which one of the following could be insured under Coverage B of a homeowners policy? - ✔✔A
detached garage rented to a neighbor to store his sports car during the winter
Wilson owns a 4-family apartment building. Which Dwelling Form(s) would provide coverage
against building
damage caused by the freezing of plumbing, heating, air conditioning, and sprinkler systems? -
✔✔DP-2 and DP-3
In a flood policy issued by the NFIP, all of the following would be considered a flood EXCEPT -
✔✔sewer backup into a home
Which one of the following is NOT a supplementary payment provided in the commercial general
liability
policy? - ✔✔Medical Payments
Which of the following amounts is the maximum that an insurer will pay in case of a loss? -
✔✔Limit of liability
Basic property insurance under the FAIR plan covers loss from all of the following EXCEPT: -
✔✔Flood
,The coverages offered by an insurance policy are described in the - ✔✔Insuring agreement
Jane's sister, Maggie, who lives with Jane and just sold her car, drives Jane's sports car to a party.
On the way home, Maggie loses control of the car, hits a parked car, and rolls the car. Maggie dies
as a result of her injuries. What coverage will reimburse Jane for Maggie's funeral expenses? -
✔✔Medical Payments Coverage
The workers compensation benefit for total disability is what percentage of the average weekly
wage? - ✔✔66.67%
Bill's construction company had an experience modification factor added to his workers'
compensation policy. How might this affect his premium? - ✔✔An experience modification factor
is applied as a method of rewarding those employers with better-than-average loss experience and
penalizing those with poorer experience.
When business is placed with a nonadmitted insurer, all of the following are correct EXCEPT -
✔✔an agent can place business directly with a surplus lines company
Two personal auto policies cover 1 vehicle. Company A's limit of liability is $100,000 and
Company B's limit of liability is $300,000. How much will Company A pay for a liability loss in
the event of an accident when the damages total $100,000? - ✔✔$25,000
The other insurance clause for Coverage A in the PAP applies on a pro rata basis. This means that
if 2 or more policies cover 1 vehicle, each insurance company pays the portion that its policy limit
bears to the total of all applicable limits. In this question, there is $400,000 of total coverage
(Company A's $100,000 + Company B's $300,000). This means that Company A has 25% of the
total coverage in force ($100,000 is 25% of $400,000). Therefore, Company A would be
responsible for paying 25% of the $100,000 loss, which equals $25,000.
The covered auto is defined in the policy as all of the following EXCEPT - ✔✔any additional auto
acquired in the past 30 days
,-an additional auto acquired during the policy period is considered a covered auto. However, some
restrictions do apply. For example, if the newly acquired auto is in addition to any vehicle shown
on the
declarations, it must be insured within 14 days of the purchase date. If it replaces one of the cars,
the insured does not need to add it during that policy period.
Which of the following statements about the stacking of uninsured motorist coverage is
CORRECT? - ✔✔It may be waived at the option of the insured.
Which of the following terms is used to describe an empty building that is not being used? -
✔✔vacant
Jim and his family are considering a move to the West Coast but are very concerned about
earthquakes. Jim called an insurance agent for advice. What is the best advice the agent could give
Jim about adequately covering his new home for possible earthquake damage? - ✔✔Adding the
earthquake endorsement will provide the coverage needed.
Jennifer owns a house valued at $500,000. She purchases a policy insuring it for $300,000 with an
80% coinsurance clause and a $1,000 deductible. Faulty wiring causes a fire that results in a loss
of $100,000. How much will the policy pay? - ✔✔$74,000
To satisfy the coinsurance clause requirement, the policyholder must carry coverage in an amount
equal to at least the specified percentage of the total value of the property being insured. In this
case, the value of the property is $500,000. Therefore, the amount of coverage needed to satisfy
the 80% coinsurance requirement is $400,000 ($500,000 x 80%). However, Jennifer's policy limit
is only $300,000. The following formula is used to determine the amount that the insurer will pay
for the loss in this case:
amount of insurance carried ($300,000) ÷ amount of insurance required ($400,000) × amount of
loss ($100,000) - any deductible ($1,000)
The insurance payment in this case is therefore $74,000, after the deductible is applied.
All of the following are basic parts of an insurance contract EXCEPT - ✔✔binders
, The 4 basic parts of an insurance contract are - ✔✔declarations, insuring agreement, conditions,
and exclusions
How would a loss be adjusted under a homeowners policy with an insurance-to-value clause if a
homeowner
failed to carry coverage of at least 80% of the replacement cost of the home? - ✔✔Payment of the
actual cash value or a proportional share of the loss, whichever is greater
Failure to carry insurance of at least 80% of the replacement cost value results in the payment of
the greater of these 2 sums: the actual cash value, or the result of dividing the policy limit by 80%
of the replacement cost, multiplied by the cost to repair or replace, less the deductible.
Ralph asks his insurance agent to explain how the homeowners policy covers stolen jewelry. The
agent spends some time explaining how, when, where, and what jewelry theft coverage exists in
the policy. As a result, Ralph believes that his $5,000 watch is covered in full under the basic
policy. After the watch is stolen, Ralph is surprised to learn that he has only limited coverage.
What legal doctrine might Ralph rely upon to get full coverage for his loss? - ✔✔Estoppel
Ralph may use the legal doctrine of estoppel. Ralph relied on his agent to provide an honest and
detailed explanation of his homeowners coverage. The agent overstated the coverage and gave
Ralph a false sense of what was covered. The insurance company will be responsible for covering
the full loss, since Ralph believed he did have the appropriate amount.
Harold owns a sports bar. As a promotion, he offers customers tastings of new German beers. One
customer, after several samples, drives off and injures another person. The injured party sues the
driver and Harold. Harold's commercial general liability policy will - ✔✔not cover the loss
because of the liquor liability exclusion
-The CGL excludes liability arising out of the sales or service of alcoholic beverages. The
exception is for the casual host who simply serves alcoholic drinks. An example would be a
clothing store that serves champagne to its customers. The clothing store is in the clothing business
and not the business of selling alcoholic beverages; hence, it is a casual host. Because Harold owns
a bar and is using the beer samples as a promotion for the bar, he could not be considered a casual
host.
Answers (202472025)
Recently the local utility company's main power supply depot was damaged by high winds. Mike,
who owns a TV store, wants to make sure he has coverage for damage to all the TV components
demonstrated in his store if the power goes out. What does Mike need to purchase? - ✔✔Utility
Services—Direct Damage Coverage
Thomas has expanded his restaurant to include a parking lot next door with valet service. His
insurance agent is recommending that Thomas buy garagekeepers coverage. He advises Thomas
that all of the following exposures would be covered by this coverage EXCEPT - ✔✔if a car stored
in the parking lot is stolen by a restaurant employee
Which one of the following could be insured under Coverage B of a homeowners policy? - ✔✔A
detached garage rented to a neighbor to store his sports car during the winter
Wilson owns a 4-family apartment building. Which Dwelling Form(s) would provide coverage
against building
damage caused by the freezing of plumbing, heating, air conditioning, and sprinkler systems? -
✔✔DP-2 and DP-3
In a flood policy issued by the NFIP, all of the following would be considered a flood EXCEPT -
✔✔sewer backup into a home
Which one of the following is NOT a supplementary payment provided in the commercial general
liability
policy? - ✔✔Medical Payments
Which of the following amounts is the maximum that an insurer will pay in case of a loss? -
✔✔Limit of liability
Basic property insurance under the FAIR plan covers loss from all of the following EXCEPT: -
✔✔Flood
,The coverages offered by an insurance policy are described in the - ✔✔Insuring agreement
Jane's sister, Maggie, who lives with Jane and just sold her car, drives Jane's sports car to a party.
On the way home, Maggie loses control of the car, hits a parked car, and rolls the car. Maggie dies
as a result of her injuries. What coverage will reimburse Jane for Maggie's funeral expenses? -
✔✔Medical Payments Coverage
The workers compensation benefit for total disability is what percentage of the average weekly
wage? - ✔✔66.67%
Bill's construction company had an experience modification factor added to his workers'
compensation policy. How might this affect his premium? - ✔✔An experience modification factor
is applied as a method of rewarding those employers with better-than-average loss experience and
penalizing those with poorer experience.
When business is placed with a nonadmitted insurer, all of the following are correct EXCEPT -
✔✔an agent can place business directly with a surplus lines company
Two personal auto policies cover 1 vehicle. Company A's limit of liability is $100,000 and
Company B's limit of liability is $300,000. How much will Company A pay for a liability loss in
the event of an accident when the damages total $100,000? - ✔✔$25,000
The other insurance clause for Coverage A in the PAP applies on a pro rata basis. This means that
if 2 or more policies cover 1 vehicle, each insurance company pays the portion that its policy limit
bears to the total of all applicable limits. In this question, there is $400,000 of total coverage
(Company A's $100,000 + Company B's $300,000). This means that Company A has 25% of the
total coverage in force ($100,000 is 25% of $400,000). Therefore, Company A would be
responsible for paying 25% of the $100,000 loss, which equals $25,000.
The covered auto is defined in the policy as all of the following EXCEPT - ✔✔any additional auto
acquired in the past 30 days
,-an additional auto acquired during the policy period is considered a covered auto. However, some
restrictions do apply. For example, if the newly acquired auto is in addition to any vehicle shown
on the
declarations, it must be insured within 14 days of the purchase date. If it replaces one of the cars,
the insured does not need to add it during that policy period.
Which of the following statements about the stacking of uninsured motorist coverage is
CORRECT? - ✔✔It may be waived at the option of the insured.
Which of the following terms is used to describe an empty building that is not being used? -
✔✔vacant
Jim and his family are considering a move to the West Coast but are very concerned about
earthquakes. Jim called an insurance agent for advice. What is the best advice the agent could give
Jim about adequately covering his new home for possible earthquake damage? - ✔✔Adding the
earthquake endorsement will provide the coverage needed.
Jennifer owns a house valued at $500,000. She purchases a policy insuring it for $300,000 with an
80% coinsurance clause and a $1,000 deductible. Faulty wiring causes a fire that results in a loss
of $100,000. How much will the policy pay? - ✔✔$74,000
To satisfy the coinsurance clause requirement, the policyholder must carry coverage in an amount
equal to at least the specified percentage of the total value of the property being insured. In this
case, the value of the property is $500,000. Therefore, the amount of coverage needed to satisfy
the 80% coinsurance requirement is $400,000 ($500,000 x 80%). However, Jennifer's policy limit
is only $300,000. The following formula is used to determine the amount that the insurer will pay
for the loss in this case:
amount of insurance carried ($300,000) ÷ amount of insurance required ($400,000) × amount of
loss ($100,000) - any deductible ($1,000)
The insurance payment in this case is therefore $74,000, after the deductible is applied.
All of the following are basic parts of an insurance contract EXCEPT - ✔✔binders
, The 4 basic parts of an insurance contract are - ✔✔declarations, insuring agreement, conditions,
and exclusions
How would a loss be adjusted under a homeowners policy with an insurance-to-value clause if a
homeowner
failed to carry coverage of at least 80% of the replacement cost of the home? - ✔✔Payment of the
actual cash value or a proportional share of the loss, whichever is greater
Failure to carry insurance of at least 80% of the replacement cost value results in the payment of
the greater of these 2 sums: the actual cash value, or the result of dividing the policy limit by 80%
of the replacement cost, multiplied by the cost to repair or replace, less the deductible.
Ralph asks his insurance agent to explain how the homeowners policy covers stolen jewelry. The
agent spends some time explaining how, when, where, and what jewelry theft coverage exists in
the policy. As a result, Ralph believes that his $5,000 watch is covered in full under the basic
policy. After the watch is stolen, Ralph is surprised to learn that he has only limited coverage.
What legal doctrine might Ralph rely upon to get full coverage for his loss? - ✔✔Estoppel
Ralph may use the legal doctrine of estoppel. Ralph relied on his agent to provide an honest and
detailed explanation of his homeowners coverage. The agent overstated the coverage and gave
Ralph a false sense of what was covered. The insurance company will be responsible for covering
the full loss, since Ralph believed he did have the appropriate amount.
Harold owns a sports bar. As a promotion, he offers customers tastings of new German beers. One
customer, after several samples, drives off and injures another person. The injured party sues the
driver and Harold. Harold's commercial general liability policy will - ✔✔not cover the loss
because of the liquor liability exclusion
-The CGL excludes liability arising out of the sales or service of alcoholic beverages. The
exception is for the casual host who simply serves alcoholic drinks. An example would be a
clothing store that serves champagne to its customers. The clothing store is in the clothing business
and not the business of selling alcoholic beverages; hence, it is a casual host. Because Harold owns
a bar and is using the beer samples as a promotion for the bar, he could not be considered a casual
host.
