1 | Page
Property and Casualty Insurance Questions
and Answers
Elements for a contract:
Ans: 1) Agreement - offer and acceptance
2) Consideration
3) Competent parties
4) Legal purpose
Payment for medical expenses, loss of wages, funeral expenses, or
the cost to repair or replace damaged property are known as what
type of compensatory damages?
Ans: Special
Which method of loss valuation is contrary to the basic concept of
indemnity?
Ans: Replacement cost
An insured owns several buildings, each at a different location
and insured on a separate policy. What type of coverage does the
insured have?
Ans: Specific
The policy provision found in property insurance policies that
prevents the insured from collecting twice for the same loss is
called
Ans: Subrogation
Losses caused by continuous or repeated exposure to conditions
resulting in injury persons or damage to property that is neither
© 2025 All rights reserved
, 2 | Page
intended nor expected is the definition of which of the following
terms?
Ans: Occurrence
An insured relocated to another state for work. However, she still
owns and insures a house in this state, but has had no one living
in it for 3 months. She is also storing some of furniture and
clothes in the house. From an insurance standpoint, the insured's
house is considered
Ans: Unoccupied
An insured's roof cost $4,000 when installed 5 years ago. It has
been damaged by hail and must be replaced. The new roof will
cost $6,000 at today's prices. If the roof has been depreciating at
$200 per year and the insured's policy is written on the actual cash
value(ACV), how much will the policy pay toward the insured's new
roof?
Ans: $5,000
An insured carries a property policy on her home in the amount
of $250,000. A bank is shown as the mortgagor in the policy. Last
month the insured made her final mortgage payment, but did not
remove the bank from the policy. In the event of a covered loss to
her home, how much will the bank receive?
Ans: Nothing
What type of damages may be awarded by the court to create
disincentives that discourage behavior that is deemed highly
undesirable by society?
Ans: Punitive
A tornado that destroys property would be an example of which
of the following?
Ans: A Peril
© 2025 All rights reserved
, 3 | Page
The insured's house is located one mile from the county's new
landfill and across the road from the entrance of a rock quarry. It
would cost $150,000 to rebuild the house if something happened
to it, but when the insured tried to sell it, the best offer he
received was $80,000. The insurance company will insure the
house for only $80,000. What method of valuation is used to
insure this property?
Ans: Market Value
An insured is applying for a casualty insurance policy. One of the
conditions of the policy allows the insurance company to inspect
the insured's books at the end of the policy term to make sure
sufficient premium has been collected for the exposure she plans
to insure. Which condition is part of the insured's policy?
Ans: Deposit premium audit
All of the following statements concerning coinsurance are true
EXCEPT
Ans: The coinsurance formula will also be applied to total losses.
A situation in which a person can only lose or have no change
represents
Ans: Pure risk
A policy condition that stipulates how the amount of damaged or
lost property will be determined if the insured and the principal
do not agree is known as
Ans: Appraisal
An insured has a liability policy that sets the amount for all
claims that arise from a single incident at $50,000. Which type of
limit of liability does this insured's policy have?
Ans: Per occurrence
Which of the following is NOT an element of negligence?
© 2025 All rights reserved
, 4 | Page
Ans: Libel
-duty, breach, and unbroken chain are
Insurable interest in the property covered in a policy must be
proven
Ans: At time of loss
A building is insured, but no one has lived or worked in it for 10
years. The building is completely empty of any furniture or
personal belongings. From an insurance standpoint, the building is
considered
Ans: Vacant
For the purpose of insurance, risk is defined as
Ans: The uncertainty or chance of loss
Which law is the foundation of the statistical prediction of loss
upon which rates for insurance are calculated?
Ans: Law of large numbers
The legal process that gives the insurer, after payment of a loss,
the right to seek recovery from a third party that was responsible
for the loss is known as
Ans: Subrogation
What is a Certificate of Insurance?
Ans: A written document showing the types and amounts of insurance
that have been issued to the insured
A $100,000 house insured on a policy with an 80% coinsurance
requirement has a fire that caused $40,000 of damage; the owner
has a policy with $60,000 coverage. How much can the owner
collect for his loss?
© 2025 All rights reserved
Property and Casualty Insurance Questions
and Answers
Elements for a contract:
Ans: 1) Agreement - offer and acceptance
2) Consideration
3) Competent parties
4) Legal purpose
Payment for medical expenses, loss of wages, funeral expenses, or
the cost to repair or replace damaged property are known as what
type of compensatory damages?
Ans: Special
Which method of loss valuation is contrary to the basic concept of
indemnity?
Ans: Replacement cost
An insured owns several buildings, each at a different location
and insured on a separate policy. What type of coverage does the
insured have?
Ans: Specific
The policy provision found in property insurance policies that
prevents the insured from collecting twice for the same loss is
called
Ans: Subrogation
Losses caused by continuous or repeated exposure to conditions
resulting in injury persons or damage to property that is neither
© 2025 All rights reserved
, 2 | Page
intended nor expected is the definition of which of the following
terms?
Ans: Occurrence
An insured relocated to another state for work. However, she still
owns and insures a house in this state, but has had no one living
in it for 3 months. She is also storing some of furniture and
clothes in the house. From an insurance standpoint, the insured's
house is considered
Ans: Unoccupied
An insured's roof cost $4,000 when installed 5 years ago. It has
been damaged by hail and must be replaced. The new roof will
cost $6,000 at today's prices. If the roof has been depreciating at
$200 per year and the insured's policy is written on the actual cash
value(ACV), how much will the policy pay toward the insured's new
roof?
Ans: $5,000
An insured carries a property policy on her home in the amount
of $250,000. A bank is shown as the mortgagor in the policy. Last
month the insured made her final mortgage payment, but did not
remove the bank from the policy. In the event of a covered loss to
her home, how much will the bank receive?
Ans: Nothing
What type of damages may be awarded by the court to create
disincentives that discourage behavior that is deemed highly
undesirable by society?
Ans: Punitive
A tornado that destroys property would be an example of which
of the following?
Ans: A Peril
© 2025 All rights reserved
, 3 | Page
The insured's house is located one mile from the county's new
landfill and across the road from the entrance of a rock quarry. It
would cost $150,000 to rebuild the house if something happened
to it, but when the insured tried to sell it, the best offer he
received was $80,000. The insurance company will insure the
house for only $80,000. What method of valuation is used to
insure this property?
Ans: Market Value
An insured is applying for a casualty insurance policy. One of the
conditions of the policy allows the insurance company to inspect
the insured's books at the end of the policy term to make sure
sufficient premium has been collected for the exposure she plans
to insure. Which condition is part of the insured's policy?
Ans: Deposit premium audit
All of the following statements concerning coinsurance are true
EXCEPT
Ans: The coinsurance formula will also be applied to total losses.
A situation in which a person can only lose or have no change
represents
Ans: Pure risk
A policy condition that stipulates how the amount of damaged or
lost property will be determined if the insured and the principal
do not agree is known as
Ans: Appraisal
An insured has a liability policy that sets the amount for all
claims that arise from a single incident at $50,000. Which type of
limit of liability does this insured's policy have?
Ans: Per occurrence
Which of the following is NOT an element of negligence?
© 2025 All rights reserved
, 4 | Page
Ans: Libel
-duty, breach, and unbroken chain are
Insurable interest in the property covered in a policy must be
proven
Ans: At time of loss
A building is insured, but no one has lived or worked in it for 10
years. The building is completely empty of any furniture or
personal belongings. From an insurance standpoint, the building is
considered
Ans: Vacant
For the purpose of insurance, risk is defined as
Ans: The uncertainty or chance of loss
Which law is the foundation of the statistical prediction of loss
upon which rates for insurance are calculated?
Ans: Law of large numbers
The legal process that gives the insurer, after payment of a loss,
the right to seek recovery from a third party that was responsible
for the loss is known as
Ans: Subrogation
What is a Certificate of Insurance?
Ans: A written document showing the types and amounts of insurance
that have been issued to the insured
A $100,000 house insured on a policy with an 80% coinsurance
requirement has a fire that caused $40,000 of damage; the owner
has a policy with $60,000 coverage. How much can the owner
collect for his loss?
© 2025 All rights reserved
