Personal Lines Insurance Exam UPDATED
ACTUAL Exam Questions and CORRECT
Answers
Conditional Contract - CORRECT ANSWER - While it provides considerable coverage, a
property and casualty insurance policy will not pay benefits unless specific actions defined in the
policy are taken by the policy holder when submitting a claim, due to the fact that the policy is
a(n):
Liability coverage of section II - CORRECT ANSWER - The six ISO homeowners policy
forms all offer the same:
Permitted incidental occupancies endorsement - CORRECT ANSWER - is used for
incidental types of businesses that are conducted on the residence premises.
(e.g., Tiffany gives piano lessons to several young students who come to her home after school.)
Incurred losses by its earned premiums - CORRECT ANSWER - An insurance company's
loss ratio is determined by dividing the insurer's:
Applicant - CORRECT ANSWER - In a standard insurance sales transaction involving an
applicant, a producer, and an insurance company, which party is the offeror?
Gramm-Leach-Bliley (GLB) Act - CORRECT ANSWER - Excalibur Insurance Company
sends periodic (annually) privacy notices to all customers to comply with which federal law?
incurred losses and earned premiums - CORRECT ANSWER - The two things that an
insurance company's loss ratio compares are:
a DP 1 policy (does not include "other coverage") - CORRECT ANSWER - Caleb wants a
dwelling policy that will protect the trees and shrubs on his property. He should therefore avoid
buying:
,only the insurer makes an enforceable promise - CORRECT ANSWER - Although the
policyholder must pay premiums to keep an insurance policy in force, the policy is considered a
unilateral policy because:
adverse selection (the tendency of persons who are more likely to have a claim to buy and
maintain insurance) - CORRECT ANSWER - A homeowner who owns a vicious dog may
be more inclined to purchase liability insurance than one who doesn't. What is this an example
of?
Robin's policy will pay all but $1000, Joe's policy will pay $900, and Joe will pay $100. -
CORRECT ANSWER - Joes personal auto policy (PAP) has a $100 deductible for
collision coverage on his sedan but no physical damage coverage on his old truck. When the
truck is being repaired, Joe borrows Robin's new sports car and crashes it. Robin's collision
coverage has a $1000 deductible. Who will pay for the sports car's repairs?
personal contract - CORRECT ANSWER - The typical property and casualty insurance
policy contains a provision expressly prohibiting the policyholder from assigning policy
ownership to another party w/o the insurer's written consent because the policy is a(n):
It has a 1% chance of being flooded in any given year. - CORRECT ANSWER - Ina's
home is located in a special flood hazard area (SFHA). What does this mean w/ respect to the
area's tendency to flood?
The PAP's territory includes the United States, its territories or possessions, and Canada, but not
Mexico. - CORRECT ANSWER - Charlene's PAP provides coverage not only in her home
state but also when she is driving her car in all the following areas EXCEPT:
commercial tractor-trailer combination - CORRECT ANSWER - Which is least likely to
be considered a "covered auto" in a personal auto policy (PAP)?
false advertising - CORRECT ANSWER - In a radio advertisement for her insurance
agency, Jasmin knowingly makes statements that could deceive listeners about the products of a
competitor. What has Jasmine committed?
,December 21 - CORRECT ANSWER - Acme Insurance intends to cancel Melanie's auto
insurance policy on Dec. 31 because she has not paid the annual premium. Acme must mail or
deliver the notice of cancellation to Melanie no later than...
Appoint the producer as its agent - CORRECT ANSWER - What must an insurance
company do to make a producer its agent?
-appointment of a person responsible for complying with state laws
-payment of requires fees
-activities remain within the scope of the business's purposes - CORRECT ANSWER -
What are the conditions for licensing a business entity as a producer in Iowa?
attractive nuisance
(a party can be held liable for maintaining something on its property that is attractive to curious
children even though the children are trespassers.) - CORRECT ANSWER - Bill's children
have grown up and moved away, but the tree house that he built for them now draws other
neighborhood children despite his handmade "No Trespassing" sign. If a neighbor's child is
injured by falling from the tree house, Bill might be held liable for the child's injuries under what
legal doctrine or principle?
Bill answers "no" to a question asking if he has ever declares bankruptcy, knowing that 8 years
ago he filed for bankruptcy protection.
(Misrepresentation is a false statement of a material fact.) - CORRECT ANSWER - What
is an example of misrepresentation on an insurance application?
Coverage A
(covers structures attached to the dwelling) - CORRECT ANSWER - Leopoldo's two-car
garage is connected to his house by an enclosed breezeway. Which coverage of his homeowners
insurance policy applies to his garage?
, $20,000 - CORRECT ANSWER - In Iowa, what is the minimum required limit in an auto
insurance policy for coverage of bodily injury?
a person applying to buy insurance on his retail business in a crime-ridden neighborhood -
CORRECT ANSWER - What is an example of adverse selection?
-Investigating suspected violations of the insurance code
-Enforcing Insurance laws
-Issuing regulations to administer the insurance code - CORRECT ANSWER - What
powers are granted to the Iowa Commissioner of Insurance?
subrogation
(stipulates the insurer's rights to recover damages from a third party when the insurer has
provided payment to the insured for a loss.) - CORRECT ANSWER - Owen's house is
damaged when Latrice's car crashes into it. After Owen's insurer pays to repair the house, the
insurer tries to recover its costs from Latrice. What provision in Owen's policy gives the insurer
this right?
HO3
(insures dwelling and other structures on an open perils basis, and personal property on a named
perils basis.) - CORRECT ANSWER - Which ISO homeowners insurance form provides
open perils coverage on the dwelling and named perils coverage on personal property?
$1,500
(the most an insurer will pay for a loss to a nonowned trailer is $1,500.) - CORRECT
ANSWER - Ada borrows a friend's camping trailer. She tows it behind her car during a
road trip until the trailer is damaged in a crash on the highway. Ada's PAP includes collision
coverage on the trailer as a nonowned auto, subject to what limit?
-issue an order to cease and desist
-hold a hearing
ACTUAL Exam Questions and CORRECT
Answers
Conditional Contract - CORRECT ANSWER - While it provides considerable coverage, a
property and casualty insurance policy will not pay benefits unless specific actions defined in the
policy are taken by the policy holder when submitting a claim, due to the fact that the policy is
a(n):
Liability coverage of section II - CORRECT ANSWER - The six ISO homeowners policy
forms all offer the same:
Permitted incidental occupancies endorsement - CORRECT ANSWER - is used for
incidental types of businesses that are conducted on the residence premises.
(e.g., Tiffany gives piano lessons to several young students who come to her home after school.)
Incurred losses by its earned premiums - CORRECT ANSWER - An insurance company's
loss ratio is determined by dividing the insurer's:
Applicant - CORRECT ANSWER - In a standard insurance sales transaction involving an
applicant, a producer, and an insurance company, which party is the offeror?
Gramm-Leach-Bliley (GLB) Act - CORRECT ANSWER - Excalibur Insurance Company
sends periodic (annually) privacy notices to all customers to comply with which federal law?
incurred losses and earned premiums - CORRECT ANSWER - The two things that an
insurance company's loss ratio compares are:
a DP 1 policy (does not include "other coverage") - CORRECT ANSWER - Caleb wants a
dwelling policy that will protect the trees and shrubs on his property. He should therefore avoid
buying:
,only the insurer makes an enforceable promise - CORRECT ANSWER - Although the
policyholder must pay premiums to keep an insurance policy in force, the policy is considered a
unilateral policy because:
adverse selection (the tendency of persons who are more likely to have a claim to buy and
maintain insurance) - CORRECT ANSWER - A homeowner who owns a vicious dog may
be more inclined to purchase liability insurance than one who doesn't. What is this an example
of?
Robin's policy will pay all but $1000, Joe's policy will pay $900, and Joe will pay $100. -
CORRECT ANSWER - Joes personal auto policy (PAP) has a $100 deductible for
collision coverage on his sedan but no physical damage coverage on his old truck. When the
truck is being repaired, Joe borrows Robin's new sports car and crashes it. Robin's collision
coverage has a $1000 deductible. Who will pay for the sports car's repairs?
personal contract - CORRECT ANSWER - The typical property and casualty insurance
policy contains a provision expressly prohibiting the policyholder from assigning policy
ownership to another party w/o the insurer's written consent because the policy is a(n):
It has a 1% chance of being flooded in any given year. - CORRECT ANSWER - Ina's
home is located in a special flood hazard area (SFHA). What does this mean w/ respect to the
area's tendency to flood?
The PAP's territory includes the United States, its territories or possessions, and Canada, but not
Mexico. - CORRECT ANSWER - Charlene's PAP provides coverage not only in her home
state but also when she is driving her car in all the following areas EXCEPT:
commercial tractor-trailer combination - CORRECT ANSWER - Which is least likely to
be considered a "covered auto" in a personal auto policy (PAP)?
false advertising - CORRECT ANSWER - In a radio advertisement for her insurance
agency, Jasmin knowingly makes statements that could deceive listeners about the products of a
competitor. What has Jasmine committed?
,December 21 - CORRECT ANSWER - Acme Insurance intends to cancel Melanie's auto
insurance policy on Dec. 31 because she has not paid the annual premium. Acme must mail or
deliver the notice of cancellation to Melanie no later than...
Appoint the producer as its agent - CORRECT ANSWER - What must an insurance
company do to make a producer its agent?
-appointment of a person responsible for complying with state laws
-payment of requires fees
-activities remain within the scope of the business's purposes - CORRECT ANSWER -
What are the conditions for licensing a business entity as a producer in Iowa?
attractive nuisance
(a party can be held liable for maintaining something on its property that is attractive to curious
children even though the children are trespassers.) - CORRECT ANSWER - Bill's children
have grown up and moved away, but the tree house that he built for them now draws other
neighborhood children despite his handmade "No Trespassing" sign. If a neighbor's child is
injured by falling from the tree house, Bill might be held liable for the child's injuries under what
legal doctrine or principle?
Bill answers "no" to a question asking if he has ever declares bankruptcy, knowing that 8 years
ago he filed for bankruptcy protection.
(Misrepresentation is a false statement of a material fact.) - CORRECT ANSWER - What
is an example of misrepresentation on an insurance application?
Coverage A
(covers structures attached to the dwelling) - CORRECT ANSWER - Leopoldo's two-car
garage is connected to his house by an enclosed breezeway. Which coverage of his homeowners
insurance policy applies to his garage?
, $20,000 - CORRECT ANSWER - In Iowa, what is the minimum required limit in an auto
insurance policy for coverage of bodily injury?
a person applying to buy insurance on his retail business in a crime-ridden neighborhood -
CORRECT ANSWER - What is an example of adverse selection?
-Investigating suspected violations of the insurance code
-Enforcing Insurance laws
-Issuing regulations to administer the insurance code - CORRECT ANSWER - What
powers are granted to the Iowa Commissioner of Insurance?
subrogation
(stipulates the insurer's rights to recover damages from a third party when the insurer has
provided payment to the insured for a loss.) - CORRECT ANSWER - Owen's house is
damaged when Latrice's car crashes into it. After Owen's insurer pays to repair the house, the
insurer tries to recover its costs from Latrice. What provision in Owen's policy gives the insurer
this right?
HO3
(insures dwelling and other structures on an open perils basis, and personal property on a named
perils basis.) - CORRECT ANSWER - Which ISO homeowners insurance form provides
open perils coverage on the dwelling and named perils coverage on personal property?
$1,500
(the most an insurer will pay for a loss to a nonowned trailer is $1,500.) - CORRECT
ANSWER - Ada borrows a friend's camping trailer. She tows it behind her car during a
road trip until the trailer is damaged in a crash on the highway. Ada's PAP includes collision
coverage on the trailer as a nonowned auto, subject to what limit?
-issue an order to cease and desist
-hold a hearing
