MO Property and Casualty Exam questions with
correct answers 2026
Practice Questions: General Insurance Principles (Questions 1-40)
1. What is the definition of "aleatory" in insurance contract law?
A) Both parties exchange unequal values
B) The contract is prepared by one party and accepted by the other
C) The contract is conditional on an uncertain event
D) The insured must have a financial interest in the subject matter
Answer-: A
Explanation: An aleatory contract involves an exchange of unequal values. The
insured pays a relatively small premium for the promise of a potentially large
benefit if a loss occurs .
2. The tendency for people with a greater-than-average exposure to loss to
purchase insurance is called:
A) Morale hazard
B) Adverse selection
C) Indemnity
D) Subrogation
Answer-: B
Explanation: Adverse selection refers to the tendency of higher-risk individuals to
seek insurance more actively than lower-risk individuals .
3. Abandonment in insurance means:
A) The insured may leave damaged property and claim full value
B) The insured may not abandon property to the insurer and demand full value
,C) The insurer may abandon the policy at any time
D) The agent may abandon the client
Answer-: B
Explanation: The abandonment condition states that the insured may not
abandon property to the insurance company and ask to be reimbursed for its full
value .
4. Actual Cash Value (ACV) is calculated as:
A) Replacement cost minus depreciation
B) Market value at time of loss
C) Original purchase price
D) Replacement cost plus appreciation
Answer-: A
Explanation: ACV is determined by calculating the item's replacement cost and
subtracting an amount for depreciation .
5. Which of the following is an example of absolute liability?
A) A driver running a red light
B) A store owner failing to clean a spill
C) Using explosives in demolition work
D) A doctor misdiagnosing a patient
Answer-: C
Explanation: Absolute liability is imposed by law on those participating in certain
activities considered especially hazardous, such as using explosives, regardless of
negligence .
6. An admitted or authorized insurer in Missouri is:
A) Any company selling insurance online
B) A company that meets the insurance department's standards and is authorized
to do business in the state
,C) A company that only sells through independent agents
D) A company licensed in another state only
Answer-: B
Explanation: An admitted insurer has met the Missouri insurance department's
standards and is authorized to transact business in the state .
7. The condition that requires the insured to meet certain policy requirements
before additional coverages apply is called:
A) Warranties
B) Conditions precedent
C) Extended coverages with reduced limits
D) Appraisal
Answer-: C
Explanation: Additional coverages, coverage extensions, or other coverages often
have reduced or separate limits and require the insured to meet certain policy
requirements before they apply .
8. An additional insured is:
A) The primary policyholder
B) Another individual or business listed on the declarations page
C) The beneficiary of a life insurance policy
D) The agent who sold the policy
Answer-: B
Explanation: An additional insured is another individual or business entity listed
on the declarations page and covered under the policy .
9. The insurance company department responsible for determining rates to be
charged is the:
A) Accounting Department
B) Agency Department
, C) Actuarial and Statistical Department
D) Claims Department
Answer-: C
Explanation: Actuaries in the Actuarial and Statistical Department determine the
rates to be charged for various types of insurance .
10. An aggregate limit applies to:
A) Each individual loss
B) All losses occurring within any one policy period
C) Each occurrence regardless of time
D) Only property damage claims
Answer-: B
Explanation: An aggregate limit is the total limit that applies to all losses occurring
within any one policy period .
11. The appraisal condition provides that:
A) The insurer decides the value of the loss
B) Either party may demand an appraisal of a loss, with each choosing an
appraiser and an umpire selected
C) The insured must accept the insurer's valuation
D) The agent appraises the damage
Answer-: B
Explanation: Under the appraisal condition, either party may demand an
appraisal. Each chooses an appraiser, they select an umpire, and the agreement
of any two determines the final amount .
12. Assignment condition in an insurance policy specifies that:
A) The policy may be freely transferred
B) The policy may not be transferred without the insurer's written consent unless
the named insured dies
correct answers 2026
Practice Questions: General Insurance Principles (Questions 1-40)
1. What is the definition of "aleatory" in insurance contract law?
A) Both parties exchange unequal values
B) The contract is prepared by one party and accepted by the other
C) The contract is conditional on an uncertain event
D) The insured must have a financial interest in the subject matter
Answer-: A
Explanation: An aleatory contract involves an exchange of unequal values. The
insured pays a relatively small premium for the promise of a potentially large
benefit if a loss occurs .
2. The tendency for people with a greater-than-average exposure to loss to
purchase insurance is called:
A) Morale hazard
B) Adverse selection
C) Indemnity
D) Subrogation
Answer-: B
Explanation: Adverse selection refers to the tendency of higher-risk individuals to
seek insurance more actively than lower-risk individuals .
3. Abandonment in insurance means:
A) The insured may leave damaged property and claim full value
B) The insured may not abandon property to the insurer and demand full value
,C) The insurer may abandon the policy at any time
D) The agent may abandon the client
Answer-: B
Explanation: The abandonment condition states that the insured may not
abandon property to the insurance company and ask to be reimbursed for its full
value .
4. Actual Cash Value (ACV) is calculated as:
A) Replacement cost minus depreciation
B) Market value at time of loss
C) Original purchase price
D) Replacement cost plus appreciation
Answer-: A
Explanation: ACV is determined by calculating the item's replacement cost and
subtracting an amount for depreciation .
5. Which of the following is an example of absolute liability?
A) A driver running a red light
B) A store owner failing to clean a spill
C) Using explosives in demolition work
D) A doctor misdiagnosing a patient
Answer-: C
Explanation: Absolute liability is imposed by law on those participating in certain
activities considered especially hazardous, such as using explosives, regardless of
negligence .
6. An admitted or authorized insurer in Missouri is:
A) Any company selling insurance online
B) A company that meets the insurance department's standards and is authorized
to do business in the state
,C) A company that only sells through independent agents
D) A company licensed in another state only
Answer-: B
Explanation: An admitted insurer has met the Missouri insurance department's
standards and is authorized to transact business in the state .
7. The condition that requires the insured to meet certain policy requirements
before additional coverages apply is called:
A) Warranties
B) Conditions precedent
C) Extended coverages with reduced limits
D) Appraisal
Answer-: C
Explanation: Additional coverages, coverage extensions, or other coverages often
have reduced or separate limits and require the insured to meet certain policy
requirements before they apply .
8. An additional insured is:
A) The primary policyholder
B) Another individual or business listed on the declarations page
C) The beneficiary of a life insurance policy
D) The agent who sold the policy
Answer-: B
Explanation: An additional insured is another individual or business entity listed
on the declarations page and covered under the policy .
9. The insurance company department responsible for determining rates to be
charged is the:
A) Accounting Department
B) Agency Department
, C) Actuarial and Statistical Department
D) Claims Department
Answer-: C
Explanation: Actuaries in the Actuarial and Statistical Department determine the
rates to be charged for various types of insurance .
10. An aggregate limit applies to:
A) Each individual loss
B) All losses occurring within any one policy period
C) Each occurrence regardless of time
D) Only property damage claims
Answer-: B
Explanation: An aggregate limit is the total limit that applies to all losses occurring
within any one policy period .
11. The appraisal condition provides that:
A) The insurer decides the value of the loss
B) Either party may demand an appraisal of a loss, with each choosing an
appraiser and an umpire selected
C) The insured must accept the insurer's valuation
D) The agent appraises the damage
Answer-: B
Explanation: Under the appraisal condition, either party may demand an
appraisal. Each chooses an appraiser, they select an umpire, and the agreement
of any two determines the final amount .
12. Assignment condition in an insurance policy specifies that:
A) The policy may be freely transferred
B) The policy may not be transferred without the insurer's written consent unless
the named insured dies
