CPCU 530 - Practice Exam Questions and
Answers (Solved Papers)2025 RATED A+
Miguel seeks to insure his personal auto to comply with state regulations. He contacts an insurance
agent who provides Miguel with a personal auto policy with Atlas Motorist Insurance Company
("Atlas"). Which one of the following best describes the contractual relationship between Miguel
and Atlas? - CORRECT ANSWERS An express contract
Maria owns a commercial building and places insurance with Bastion Insurance. Because the
annual premium is high, and cash is tight, Maria decides to enter into a premium finance
agreement with Finance Co. ("Finance"). Under the premium finance agreement, Finance pays
Bastion the full annual premium and Maria pays Finance a monthly amount for the premium, a fee
and interest. At the midpoint of the policy year, which one of the following best describes Maria's
premium finance agreement with Finance? - CORRECT ANSWERS A bilateral contract
Daniel offers a ride to Lily, a ten-year-old, and takes her to his house where he locks her in his
cellar and demands money from Lily's parents to secure her return. The parents agree to pay and
Lily is returned, but Daniel never receives the money. He sues Lily's parents for breach of contract.
Which one of the following explains why Daniel's contract with Lily's parents is not legally binding?
- CORRECT ANSWERS It lacks a legal purpose.
Tool Corporation has operated successfully for decades, but in recent years stiff price competition
from overseas suppliers and a lack of skilled labor at affordable prices have made the company
unprofitable. Tool Company has incurred substantial debt to keep the operation running and save
jobs, but they can no longer access bank financing. Tool Company believes that it can return to
profitability if it reorganizes. Under which chapter of the bankruptcy code should Tool Corporation
file? - CORRECT ANSWERS Chapter 11
Located in a small midwestern town, Bin's Deli hires youthful workers and pays hourly wages. None
of their employees are members of a protected class. Which one of the following legal concepts
permits Bin's Deli to release any of its employees at any time for any reason, or no reason? -
CORRECT ANSWERS Employment at will
Fernanda runs a warehouse in New Jersey. The business is successful because it has major highway
access and is close to major consumer markets. Manufacturers from around the country store
goods bound for Northeastern customers at Fernanda's warehouse. Given the large amount of
goods stored by others in her warehouse, Fernanda is concerned about her exposure if something
happens to the warehouse or the goods, so she seek advice from a lawyer about how to limit her
exposure to loss. Which one of the following best describes Fernanda's options in addressing this
liability? - CORRECT ANSWERS UCC Article 7 permits Fernanda to limit her liability through
terms in the warehouse receipt.
In February, Ann contracts with Mahdi to deliver clean garden top soil for $30 a cubic yard to
Mahdi's farm in Pennsylvania. No time for delivery is stated in their contract but the parties
understand that Mahdi wants to use the soil for this year's planting season. In March, Ann delivers
,garden soil that is contaminated and Mahdi refuses to pay because he believes Ann breached their
agreement. Which one of the following best describes how a court would rule on Mahdi's claim
that Ann breached their agreement? - CORRECT ANSWERS The court would find for Mahdi
because Ann's goods are non-conforming.
Diego and Georgia meet in a bar and enjoy cocktails together. Diego has many more drinks than
Georgia and is stumbling and slurring his speech. Sensing an opportunity, Georgia proposes that
Diego sell her his expensive Swiss wristwatch for a mere $100 and Diego agrees. The next day,
Georgia appears at Diego's office with $100 asking for the wristwatch. Which one of the following
arguments is best for Diego to avoid the contract? - CORRECT ANSWERS Diego lacked
capacity to enter into a contract because he was inebriated.
Erin has worked full-time for the last five years as a librarian for a law firm with 100 attorneys
located in a large downtown office building. Erin and her husband are happy to announce that Erin
is expecting a baby in six months. She inquires with the law firm's human resources department
about her rights for parental leave under the Family Medical Leave Act (FMLA). Which one of the
following best describes what the law firm must offer Erin under the FMLA? - CORRECT ANSWERS
The law firm must offer Erin up to 12 weeks of unpaid leave in a 12-month period, with no loss of
accrued employment benefits.
Tile Roofing is a contractor specializing in roof installation for homes and commercial accounts.
Recently several Tile Roofing workers have fallen and suffered significant injuries because the
workers do not have any safety harnesses preventing falls. Under which one of the following
employee welfare laws would Tile Roofing potentially be subject to civil or criminal penalties? -
CORRECT ANSWERS Occupational Safety and Health Act
Mustafa met with his insurance agent Lucy to obtain a businessowners policy. Lucy helped Mustafa
complete an application and sent the signed application along with Mustafa's premium check to
Delmond Insurance Co. Delmond never responded to Mustafa. Ninety days later, Mustafa had a
loss to his business that would have been covered by the Delmond policy. If Mustafa files suit
against Delmond to receive compensation for his loss, - CORRECT ANSWERS Mustafa will
win, if Delmond's s delay on his application was unreasonable.
Larissa has a property policy covering her auto repair shop. The shop is totally destroyed by a fire.
The process of determining whether and to what extent this specific loss is covered under Larissa's
property policy is known as - CORRECT ANSWERS Policy analysis.
Which one of the following statements distinguishes estoppel from waiver? - CORRECT ANSWERS
Waiver is contractual in nature and rests upon agreement between parties.
With a contract of indemnity, the insurer agrees, in the event of a covered loss, to pay - CORRECT
ANSWERS An amount directly related to the amount of loss.
Which one of the following statements is true regarding warranties? - CORRECT ANSWERS
Warranties may be either material or immaterial and are part of the final contract.
If an insurance producer tells an insured that the insured's policy covers something that it does
not, the producer might be liable - CORRECT ANSWERS For misrepresentation.
,Cintriell Insurance issued a commercial property insurance policy to Oscar. Cintriell's insurance
application asked applicants to rate the condition of their buildings and Oscar stated that his
building was in "good" condition. The Cintriell application did not explicitly label the insured's
building rating as a warranty and the application did not state that it is considered part of the
insurance policy. If a dispute arose, a court would most likely view Oscar's statement about the
condition of his building as a - CORRECT ANSWERS Representation, because it is not clear
that the parties intended it to be a warranty and the statement was not incorporated into the
policy.
Magnus, an agent for Insurance Company, received a call from Carla about orally binding coverage
on her home at closing which was today. To be effective an agreement to insure must have,
whether oral or written, which one of the following components? - CORRECT ANSWERS
The object or premises if any to be insured
Which one of the following reinforces the principle of indemnity? - CORRECT ANSWERS
Subrogation
Cian purchased a house with money loaned to him by Keithly Mortgage Co. (KMC). Cian obtained a
homeowner policy from Melfor Insurance—containing a standard mortgage clause—which
covered the house for damage due to windstorm. A windstorm destroyed Cian's house three years
later. Which one of the following correctly states who is entitled to the proceeds payable under
Cian's homeowner policy? - CORRECT ANSWERS KMC, as its interests appear.
Aaron had recently purchased a home. He called an insurance agent to secure a policy. Aaron told
the agent that he needed immediate homeowners coverage for $345,000. The agent told Aaron
that his home was covered. Under these circumstances, is Aaron covered? - CORRECT ANSWERS
Yes, there is coverage because the agent's oral agreement is binding.
Anna had an auto insurance policy written by Hallbinger Insurance Co. Anna had an accident with
Beatrice. Beatrice sued Anna and was awarded $100,000 by a jury and the verdict was entered as a
judgment against Anna. Beatrice demanded that Hallbinger pay this judgment. Hallbinger refused
and Beatrice sued Hallbinger. Hallbinger moved to dismiss the lawsuit, claiming that Beatrice had
no right to sue Hallbinger. Which one of the following correctly states how the court will rule on
Hallbinger's motion? - CORRECT ANSWERS The motion will be denied and the suit against
Hallbinger will continue if the state allows garnishment actions.
Which one of the following special characteristics of insurance contracts reflects the idea that
insurance companies should be able to select persons who will be insured by them? - CORRECT
ANSWERS Nontransferable contract
Linnea has a liability policy covering her auto repair shop. Someone slips and falls on the premises.
One policy analysis question to ask to make a determination of whether the slip and fall claim is
covered under Linnea's liability insurance policy is - CORRECT ANSWERS Does an exclusion
apply?
Tobias applied for business insurance with Gulford Insurance. Gulford's application asked if Tobias
had been refused insurance previously and he replied he had not. In fact, he was refused by Argot
, Insurance five years ago due to poor credit history. Gulford issued the policy to Tobias. Tobias lived
in a state with a contribute-to-loss statute. If Gulford ultimately discovers Tobias' incorrect
statement about prior refusal of insurance, it should - CORRECT ANSWERS Do nothing—
Tobias' misrepresentation could not contribute to destruction of the property.
Which one of the following is the result of an insurer's waiver, estoppel, or election? - CORRECT
ANSWERS The insurer is prevented from reviving a defense it forfeited earlier.
Which one of the following would most likely be recognized by a court as something that an
insurer could properly waive? - CORRECT ANSWERS Policy notice of loss requirements
Samuel applied for auto insurance with Barnley Insurance. The application asked Samuel to
estimate his annual mileage. He drove 10,000 miles last year, and believing that he would do the
same next year he placed this mileage on the application. Barnley issued an auto policy, but
Samuel ended up driving 15,000 miles. Samuel's mileage estimate will result in Barnley - CORRECT
ANSWERS Taking no action because Samuel gave an opinion and had no fraudulent intent.
Martin visited his insurance agent Laura to discuss his insurance needs. Laura recommended that
Martin purchase a businessowners policy and Martin agreed with Laura's recommendation. Laura
helped Martin complete an insurance application and she sent the completed and signed
application to Blythe Insurance Co., along with Martin's premium payment check. Blithe cashed
Martin's check, issued the policy, and mailed the policy to Martin. Blythe's actions were - CORRECT
ANSWERS An acceptance.
Hanna is insured under a life insurance policy written by Cromley Insurance, with a two-year
contestable period. Hanna made a material misrepresentation about her health in her insurance
application. Hanna died five years after Cromley issued the policy to her. Which one of the
following statements correctly describes how Cromley should handle a claim under Hanna's life
insurance policy submitted by Hanna's survivors? - CORRECT ANSWERS Pay the claim
because more than two years have passed without contest
An insurance contract is often said to be a contract of adhesion. Which one of the following is the
basis of this characteristic of insurance contracts? - CORRECT ANSWERS The insurer writes
the insurance policy so the insured must "take or leave" the policy.
Katie met with her insurance agent Luke to discuss Katie's insurance needs. Luke recommended
that Katie purchase a renter's policy and Katie agreed with Luke's recommendation. Luke helped
Katie complete a renter's insurance application, Katie signed the application, and Luke sent the
application to the Argot Insurance Company. The submission of the application to Argot was -
CORRECT ANSWERS An offer.
Noncompliance with a warranty concerning one type of covered property will not defeat coverage
for another type of property to which the warranty does not relate, because courts generally
interpret insurance policies as - CORRECT ANSWERS Severable.
Delmond Insurance is a large life insurance company. It is required by state law to include an
incontestable clause in all life insurance policies. Delmond publicly advocated changing state law so
that it can remove this clause from its policies. Which one of the following is Delmond's best
Answers (Solved Papers)2025 RATED A+
Miguel seeks to insure his personal auto to comply with state regulations. He contacts an insurance
agent who provides Miguel with a personal auto policy with Atlas Motorist Insurance Company
("Atlas"). Which one of the following best describes the contractual relationship between Miguel
and Atlas? - CORRECT ANSWERS An express contract
Maria owns a commercial building and places insurance with Bastion Insurance. Because the
annual premium is high, and cash is tight, Maria decides to enter into a premium finance
agreement with Finance Co. ("Finance"). Under the premium finance agreement, Finance pays
Bastion the full annual premium and Maria pays Finance a monthly amount for the premium, a fee
and interest. At the midpoint of the policy year, which one of the following best describes Maria's
premium finance agreement with Finance? - CORRECT ANSWERS A bilateral contract
Daniel offers a ride to Lily, a ten-year-old, and takes her to his house where he locks her in his
cellar and demands money from Lily's parents to secure her return. The parents agree to pay and
Lily is returned, but Daniel never receives the money. He sues Lily's parents for breach of contract.
Which one of the following explains why Daniel's contract with Lily's parents is not legally binding?
- CORRECT ANSWERS It lacks a legal purpose.
Tool Corporation has operated successfully for decades, but in recent years stiff price competition
from overseas suppliers and a lack of skilled labor at affordable prices have made the company
unprofitable. Tool Company has incurred substantial debt to keep the operation running and save
jobs, but they can no longer access bank financing. Tool Company believes that it can return to
profitability if it reorganizes. Under which chapter of the bankruptcy code should Tool Corporation
file? - CORRECT ANSWERS Chapter 11
Located in a small midwestern town, Bin's Deli hires youthful workers and pays hourly wages. None
of their employees are members of a protected class. Which one of the following legal concepts
permits Bin's Deli to release any of its employees at any time for any reason, or no reason? -
CORRECT ANSWERS Employment at will
Fernanda runs a warehouse in New Jersey. The business is successful because it has major highway
access and is close to major consumer markets. Manufacturers from around the country store
goods bound for Northeastern customers at Fernanda's warehouse. Given the large amount of
goods stored by others in her warehouse, Fernanda is concerned about her exposure if something
happens to the warehouse or the goods, so she seek advice from a lawyer about how to limit her
exposure to loss. Which one of the following best describes Fernanda's options in addressing this
liability? - CORRECT ANSWERS UCC Article 7 permits Fernanda to limit her liability through
terms in the warehouse receipt.
In February, Ann contracts with Mahdi to deliver clean garden top soil for $30 a cubic yard to
Mahdi's farm in Pennsylvania. No time for delivery is stated in their contract but the parties
understand that Mahdi wants to use the soil for this year's planting season. In March, Ann delivers
,garden soil that is contaminated and Mahdi refuses to pay because he believes Ann breached their
agreement. Which one of the following best describes how a court would rule on Mahdi's claim
that Ann breached their agreement? - CORRECT ANSWERS The court would find for Mahdi
because Ann's goods are non-conforming.
Diego and Georgia meet in a bar and enjoy cocktails together. Diego has many more drinks than
Georgia and is stumbling and slurring his speech. Sensing an opportunity, Georgia proposes that
Diego sell her his expensive Swiss wristwatch for a mere $100 and Diego agrees. The next day,
Georgia appears at Diego's office with $100 asking for the wristwatch. Which one of the following
arguments is best for Diego to avoid the contract? - CORRECT ANSWERS Diego lacked
capacity to enter into a contract because he was inebriated.
Erin has worked full-time for the last five years as a librarian for a law firm with 100 attorneys
located in a large downtown office building. Erin and her husband are happy to announce that Erin
is expecting a baby in six months. She inquires with the law firm's human resources department
about her rights for parental leave under the Family Medical Leave Act (FMLA). Which one of the
following best describes what the law firm must offer Erin under the FMLA? - CORRECT ANSWERS
The law firm must offer Erin up to 12 weeks of unpaid leave in a 12-month period, with no loss of
accrued employment benefits.
Tile Roofing is a contractor specializing in roof installation for homes and commercial accounts.
Recently several Tile Roofing workers have fallen and suffered significant injuries because the
workers do not have any safety harnesses preventing falls. Under which one of the following
employee welfare laws would Tile Roofing potentially be subject to civil or criminal penalties? -
CORRECT ANSWERS Occupational Safety and Health Act
Mustafa met with his insurance agent Lucy to obtain a businessowners policy. Lucy helped Mustafa
complete an application and sent the signed application along with Mustafa's premium check to
Delmond Insurance Co. Delmond never responded to Mustafa. Ninety days later, Mustafa had a
loss to his business that would have been covered by the Delmond policy. If Mustafa files suit
against Delmond to receive compensation for his loss, - CORRECT ANSWERS Mustafa will
win, if Delmond's s delay on his application was unreasonable.
Larissa has a property policy covering her auto repair shop. The shop is totally destroyed by a fire.
The process of determining whether and to what extent this specific loss is covered under Larissa's
property policy is known as - CORRECT ANSWERS Policy analysis.
Which one of the following statements distinguishes estoppel from waiver? - CORRECT ANSWERS
Waiver is contractual in nature and rests upon agreement between parties.
With a contract of indemnity, the insurer agrees, in the event of a covered loss, to pay - CORRECT
ANSWERS An amount directly related to the amount of loss.
Which one of the following statements is true regarding warranties? - CORRECT ANSWERS
Warranties may be either material or immaterial and are part of the final contract.
If an insurance producer tells an insured that the insured's policy covers something that it does
not, the producer might be liable - CORRECT ANSWERS For misrepresentation.
,Cintriell Insurance issued a commercial property insurance policy to Oscar. Cintriell's insurance
application asked applicants to rate the condition of their buildings and Oscar stated that his
building was in "good" condition. The Cintriell application did not explicitly label the insured's
building rating as a warranty and the application did not state that it is considered part of the
insurance policy. If a dispute arose, a court would most likely view Oscar's statement about the
condition of his building as a - CORRECT ANSWERS Representation, because it is not clear
that the parties intended it to be a warranty and the statement was not incorporated into the
policy.
Magnus, an agent for Insurance Company, received a call from Carla about orally binding coverage
on her home at closing which was today. To be effective an agreement to insure must have,
whether oral or written, which one of the following components? - CORRECT ANSWERS
The object or premises if any to be insured
Which one of the following reinforces the principle of indemnity? - CORRECT ANSWERS
Subrogation
Cian purchased a house with money loaned to him by Keithly Mortgage Co. (KMC). Cian obtained a
homeowner policy from Melfor Insurance—containing a standard mortgage clause—which
covered the house for damage due to windstorm. A windstorm destroyed Cian's house three years
later. Which one of the following correctly states who is entitled to the proceeds payable under
Cian's homeowner policy? - CORRECT ANSWERS KMC, as its interests appear.
Aaron had recently purchased a home. He called an insurance agent to secure a policy. Aaron told
the agent that he needed immediate homeowners coverage for $345,000. The agent told Aaron
that his home was covered. Under these circumstances, is Aaron covered? - CORRECT ANSWERS
Yes, there is coverage because the agent's oral agreement is binding.
Anna had an auto insurance policy written by Hallbinger Insurance Co. Anna had an accident with
Beatrice. Beatrice sued Anna and was awarded $100,000 by a jury and the verdict was entered as a
judgment against Anna. Beatrice demanded that Hallbinger pay this judgment. Hallbinger refused
and Beatrice sued Hallbinger. Hallbinger moved to dismiss the lawsuit, claiming that Beatrice had
no right to sue Hallbinger. Which one of the following correctly states how the court will rule on
Hallbinger's motion? - CORRECT ANSWERS The motion will be denied and the suit against
Hallbinger will continue if the state allows garnishment actions.
Which one of the following special characteristics of insurance contracts reflects the idea that
insurance companies should be able to select persons who will be insured by them? - CORRECT
ANSWERS Nontransferable contract
Linnea has a liability policy covering her auto repair shop. Someone slips and falls on the premises.
One policy analysis question to ask to make a determination of whether the slip and fall claim is
covered under Linnea's liability insurance policy is - CORRECT ANSWERS Does an exclusion
apply?
Tobias applied for business insurance with Gulford Insurance. Gulford's application asked if Tobias
had been refused insurance previously and he replied he had not. In fact, he was refused by Argot
, Insurance five years ago due to poor credit history. Gulford issued the policy to Tobias. Tobias lived
in a state with a contribute-to-loss statute. If Gulford ultimately discovers Tobias' incorrect
statement about prior refusal of insurance, it should - CORRECT ANSWERS Do nothing—
Tobias' misrepresentation could not contribute to destruction of the property.
Which one of the following is the result of an insurer's waiver, estoppel, or election? - CORRECT
ANSWERS The insurer is prevented from reviving a defense it forfeited earlier.
Which one of the following would most likely be recognized by a court as something that an
insurer could properly waive? - CORRECT ANSWERS Policy notice of loss requirements
Samuel applied for auto insurance with Barnley Insurance. The application asked Samuel to
estimate his annual mileage. He drove 10,000 miles last year, and believing that he would do the
same next year he placed this mileage on the application. Barnley issued an auto policy, but
Samuel ended up driving 15,000 miles. Samuel's mileage estimate will result in Barnley - CORRECT
ANSWERS Taking no action because Samuel gave an opinion and had no fraudulent intent.
Martin visited his insurance agent Laura to discuss his insurance needs. Laura recommended that
Martin purchase a businessowners policy and Martin agreed with Laura's recommendation. Laura
helped Martin complete an insurance application and she sent the completed and signed
application to Blythe Insurance Co., along with Martin's premium payment check. Blithe cashed
Martin's check, issued the policy, and mailed the policy to Martin. Blythe's actions were - CORRECT
ANSWERS An acceptance.
Hanna is insured under a life insurance policy written by Cromley Insurance, with a two-year
contestable period. Hanna made a material misrepresentation about her health in her insurance
application. Hanna died five years after Cromley issued the policy to her. Which one of the
following statements correctly describes how Cromley should handle a claim under Hanna's life
insurance policy submitted by Hanna's survivors? - CORRECT ANSWERS Pay the claim
because more than two years have passed without contest
An insurance contract is often said to be a contract of adhesion. Which one of the following is the
basis of this characteristic of insurance contracts? - CORRECT ANSWERS The insurer writes
the insurance policy so the insured must "take or leave" the policy.
Katie met with her insurance agent Luke to discuss Katie's insurance needs. Luke recommended
that Katie purchase a renter's policy and Katie agreed with Luke's recommendation. Luke helped
Katie complete a renter's insurance application, Katie signed the application, and Luke sent the
application to the Argot Insurance Company. The submission of the application to Argot was -
CORRECT ANSWERS An offer.
Noncompliance with a warranty concerning one type of covered property will not defeat coverage
for another type of property to which the warranty does not relate, because courts generally
interpret insurance policies as - CORRECT ANSWERS Severable.
Delmond Insurance is a large life insurance company. It is required by state law to include an
incontestable clause in all life insurance policies. Delmond publicly advocated changing state law so
that it can remove this clause from its policies. Which one of the following is Delmond's best
