PROPERTY & CASUALTY INSURANCE
PRACTICE EXAM QUESTIONS AND
CORRECT ANSWERS (VERIFIED
ANSWERS) PLUS RATIONALES 2026 Q&A
| INSTANT DOWNLOAD PDF
1. Which of the following is a peril?
A. Negligence
B. Fire
C. Deductible
D. Hazard
Answer: B
Rationale: A peril is the cause of loss; fire is a covered cause of
loss.
2. A physical hazard is best described as:
A. Intent to cause loss
B. A tangible condition that increases risk
C. A source of legal liability
D. A covered peril
,Answer: B
Rationale: A physical hazard is any physical condition that
elevates the chance of loss (e.g., icy steps).
3. The principle of indemnity ensures the insured:
A. Always profits
B. Is restored to the financial position they had before the loss
C. Receives replacement cost only
D. Never receives payment
Answer: B
Rationale: Insurance reimburses for covered losses without
allowing financial gain.
4. Which authority is written in an agent’s contract?
A. Implied
B. Apparent
C. Express
D. Presumed
Answer: C
Rationale: Express authority is explicitly granted through the
written agency agreement.
5. Risk that cannot be avoided is known as:
,A. Speculative risk
B. Retained risk
C. Pure risk
D. Guaranteed risk
Answer: C
Rationale: Pure risk involves only the chance of loss, not gain,
and is insurable.
6. A binder provides:
A. Premium estimates
B. Temporary insurance coverage
C. Underwriting guidelines
D. Proof of claim payment
Answer: B
Rationale: Binders give immediate, temporary coverage until
the policy is issued.
7. Negligence is defined as:
A. A crime
B. Strict liability
C. Failure to use reasonable care
D. Intentional harm
Answer: C
, Rationale: Negligence occurs when reasonable care is not
taken, causing unintended harm.
8. Liability insurance pays:
A. Only for property damage
B. For expenses of the at-fault party
C. For bodily injury or property damage the insured becomes
legally liable for
D. Only intentional acts
Answer: C
Rationale: Liability policies cover legal liabilities for injury or
damage to others.
9. Split limits 100/300/50 indicate:
A. Property limits only
B. Deductibles
C. BI per person/BI per accident/PD per accident
D. Only PD coverage
Answer: C
Rationale: Auto split limits list bodily injury per person, total
bodily injury per accident, and property damage.
10. An unbroken chain of events causing a loss is:
PRACTICE EXAM QUESTIONS AND
CORRECT ANSWERS (VERIFIED
ANSWERS) PLUS RATIONALES 2026 Q&A
| INSTANT DOWNLOAD PDF
1. Which of the following is a peril?
A. Negligence
B. Fire
C. Deductible
D. Hazard
Answer: B
Rationale: A peril is the cause of loss; fire is a covered cause of
loss.
2. A physical hazard is best described as:
A. Intent to cause loss
B. A tangible condition that increases risk
C. A source of legal liability
D. A covered peril
,Answer: B
Rationale: A physical hazard is any physical condition that
elevates the chance of loss (e.g., icy steps).
3. The principle of indemnity ensures the insured:
A. Always profits
B. Is restored to the financial position they had before the loss
C. Receives replacement cost only
D. Never receives payment
Answer: B
Rationale: Insurance reimburses for covered losses without
allowing financial gain.
4. Which authority is written in an agent’s contract?
A. Implied
B. Apparent
C. Express
D. Presumed
Answer: C
Rationale: Express authority is explicitly granted through the
written agency agreement.
5. Risk that cannot be avoided is known as:
,A. Speculative risk
B. Retained risk
C. Pure risk
D. Guaranteed risk
Answer: C
Rationale: Pure risk involves only the chance of loss, not gain,
and is insurable.
6. A binder provides:
A. Premium estimates
B. Temporary insurance coverage
C. Underwriting guidelines
D. Proof of claim payment
Answer: B
Rationale: Binders give immediate, temporary coverage until
the policy is issued.
7. Negligence is defined as:
A. A crime
B. Strict liability
C. Failure to use reasonable care
D. Intentional harm
Answer: C
, Rationale: Negligence occurs when reasonable care is not
taken, causing unintended harm.
8. Liability insurance pays:
A. Only for property damage
B. For expenses of the at-fault party
C. For bodily injury or property damage the insured becomes
legally liable for
D. Only intentional acts
Answer: C
Rationale: Liability policies cover legal liabilities for injury or
damage to others.
9. Split limits 100/300/50 indicate:
A. Property limits only
B. Deductibles
C. BI per person/BI per accident/PD per accident
D. Only PD coverage
Answer: C
Rationale: Auto split limits list bodily injury per person, total
bodily injury per accident, and property damage.
10. An unbroken chain of events causing a loss is:
