PROPERTY AND CASUALTY
INSURANCE EXAM QUESTIONS AND
ANSWERS WITH VERIFIED SOLUTIONS
100% CORRECT RATED A+ NEWLY
UPDATED 2025
Specific Insurance
✔✔ Insurance that covers a particular, clearly identified item or property.
Blanket Insurance
✔✔ Insurance that provides coverage for multiple items or locations under one
policy.
Speculative Risk
✔✔ Involves the chance of both gain and loss. This type of risk is not insurable.
Pure Risk
✔✔ Involves only the possibility of loss with no chance of gain. This is insurable.
5 Methods of Risk Management
✔✔ Avoid, Control, Retain, Transfer, and Share risk.
Hazard
✔✔ A condition or situation that increases the likelihood or severity of a loss.
Physical Hazard
✔✔ A tangible condition that increases the chance of loss.
Example: A skateboard left on stairs.
,Moral Hazard
✔✔ Arises from an individual’s behavior or character, increasing risk due to
irresponsibility.
Example: Driving carelessly because you have insurance.
Morale Hazard
✔✔ Occurs when someone deliberately creates a loss situation to benefit from
insurance.
Example: Faking a theft to get a payout.
Replacement Cost
✔✔ The current cost to replace damaged property with a similar item, with no
depreciation deduction.
Actual Cash Value (ACV)
✔✔ Replacement cost minus depreciation.
Pair and Set Clause
✔✔ Loss to one item of a set does not mean loss to the entire set.
Appraisal
✔✔ A process to settle disputes over the value of a loss.
Each party chooses an appraiser
The appraisers choose an umpire
If they disagree, 2 out of 3 must agree on the amount
,Subrogation
✔✔ The insurer's legal right to recover its payout from a third party responsible for
the loss.
Arbitration
✔✔ A dispute resolution process similar to appraisal, but used for disagreements
beyond just the loss amount.
WC SHAVVER (Perils often covered under basic policies)
✔✔ Windstorm, Civil Commotion, Smoke, Hail, Aircraft, Vehicles, Volcanic
Eruption, Explosion, Riot
BIG AFFECT (Perils covered under broad form policies)
✔✔ Burglary damage, Ice or snow weight, Glass breakage, Accidental discharge
of water, Falling objects, Freezing, Electrical surge, Collapse, Tearing apart of
appliances
Insolvency
✔✔ A situation where liabilities exceed assets — i.e., financial failure.
Law of Agency
✔✔ An agent’s knowledge and actions are legally considered to be those of the
principal (insurance company).
Principal
✔✔ The insurance company represented by the agent.
, ISO (Insurance Services Office)
✔✔ An organization that supports insurers by providing statistical data, drafting
policy forms, setting rates, and offering inspection services.
Coinsurance Clause
✔✔ Requires the insured to carry a specified percentage (commonly 80%) of a
property’s value. If not met, partial losses may not be fully covered.
Estoppel
✔✔ A legal principle preventing someone from reversing a stance if their past
words or actions caused another to rely on it to their detriment.
Example: An insurer can't deny coverage after previously indicating it was
included.
Binder - ANSWER✔✔A temporary contract of insurance, oral or written, offered
by an insurer pending issuance of the policy. Usually written for a period of 30-60
days and remains in force for that period or until a permanent policy is either
issued or denied by the insurer.
Warranty - ANSWER✔✔A provision in a policy that pledges that a condition does
exist or will exist at some time in the future.
Deposit Premium - ANSWER✔✔Tentative charge made at the beginning of
certain policies and reinsurance agreements to be adjusted when the actual earned
charge has been later determined.
Audit - ANSWER✔✔Verification of books or accounts to determine their
accuracy.
INSURANCE EXAM QUESTIONS AND
ANSWERS WITH VERIFIED SOLUTIONS
100% CORRECT RATED A+ NEWLY
UPDATED 2025
Specific Insurance
✔✔ Insurance that covers a particular, clearly identified item or property.
Blanket Insurance
✔✔ Insurance that provides coverage for multiple items or locations under one
policy.
Speculative Risk
✔✔ Involves the chance of both gain and loss. This type of risk is not insurable.
Pure Risk
✔✔ Involves only the possibility of loss with no chance of gain. This is insurable.
5 Methods of Risk Management
✔✔ Avoid, Control, Retain, Transfer, and Share risk.
Hazard
✔✔ A condition or situation that increases the likelihood or severity of a loss.
Physical Hazard
✔✔ A tangible condition that increases the chance of loss.
Example: A skateboard left on stairs.
,Moral Hazard
✔✔ Arises from an individual’s behavior or character, increasing risk due to
irresponsibility.
Example: Driving carelessly because you have insurance.
Morale Hazard
✔✔ Occurs when someone deliberately creates a loss situation to benefit from
insurance.
Example: Faking a theft to get a payout.
Replacement Cost
✔✔ The current cost to replace damaged property with a similar item, with no
depreciation deduction.
Actual Cash Value (ACV)
✔✔ Replacement cost minus depreciation.
Pair and Set Clause
✔✔ Loss to one item of a set does not mean loss to the entire set.
Appraisal
✔✔ A process to settle disputes over the value of a loss.
Each party chooses an appraiser
The appraisers choose an umpire
If they disagree, 2 out of 3 must agree on the amount
,Subrogation
✔✔ The insurer's legal right to recover its payout from a third party responsible for
the loss.
Arbitration
✔✔ A dispute resolution process similar to appraisal, but used for disagreements
beyond just the loss amount.
WC SHAVVER (Perils often covered under basic policies)
✔✔ Windstorm, Civil Commotion, Smoke, Hail, Aircraft, Vehicles, Volcanic
Eruption, Explosion, Riot
BIG AFFECT (Perils covered under broad form policies)
✔✔ Burglary damage, Ice or snow weight, Glass breakage, Accidental discharge
of water, Falling objects, Freezing, Electrical surge, Collapse, Tearing apart of
appliances
Insolvency
✔✔ A situation where liabilities exceed assets — i.e., financial failure.
Law of Agency
✔✔ An agent’s knowledge and actions are legally considered to be those of the
principal (insurance company).
Principal
✔✔ The insurance company represented by the agent.
, ISO (Insurance Services Office)
✔✔ An organization that supports insurers by providing statistical data, drafting
policy forms, setting rates, and offering inspection services.
Coinsurance Clause
✔✔ Requires the insured to carry a specified percentage (commonly 80%) of a
property’s value. If not met, partial losses may not be fully covered.
Estoppel
✔✔ A legal principle preventing someone from reversing a stance if their past
words or actions caused another to rely on it to their detriment.
Example: An insurer can't deny coverage after previously indicating it was
included.
Binder - ANSWER✔✔A temporary contract of insurance, oral or written, offered
by an insurer pending issuance of the policy. Usually written for a period of 30-60
days and remains in force for that period or until a permanent policy is either
issued or denied by the insurer.
Warranty - ANSWER✔✔A provision in a policy that pledges that a condition does
exist or will exist at some time in the future.
Deposit Premium - ANSWER✔✔Tentative charge made at the beginning of
certain policies and reinsurance agreements to be adjusted when the actual earned
charge has been later determined.
Audit - ANSWER✔✔Verification of books or accounts to determine their
accuracy.
