PEARSON VUE: PROPERTY INSURANCE PRACTICE EXAM QUESTIONS AND ANSWERS PRACTICE
QUESTIONS WITH SOLUTIONS NEWEST | ALREADY GRADED A+
Question 1
S is purchasing a Commercial Property policy to cover a commercial building with a
replacement cost of $100,000. The policy includes an 80 percent Coinsurance clause. To avoid a
coinsurance penalty in the event of a partial loss, S should purchase a policy with minimum
limits of AT LEAST which of the following amounts?
A) $100,000
B) $90,000
C) $80,000
D) $20,000
E) $75,000
Correct Answer: C)
Question 2
The MAXIMUM amount a policy will pay in the event of a loss, as stated in the declarations
page, is called the:
A) Coinsurance amount
B) Deductible
C) Limit of liability
D) Pro rata return
E) Actual Cash Value
Correct Answer: C) limit of liability
Rationale: The limit of liability represents the face amount of the policy or the maximum
dollar amount the insurer is contractually obligated to pay for any single covered
occurrence.
Question 3
The National Flood Insurance Program (NFIP) provides coverage for losses caused by all of the
following occurrences EXCEPT:
A) Mudslides caused by accumulations of water on or under the ground
B) Runoff from heavy rain
C) Overflow of inland or tidal waters
D) Water-main breakage
E) Rapid accumulation of surface waters
Correct Answer: D) water-main breakage
Rationale: Flood insurance is designed for "natural" overflows of water. A water-main
breakage is considered a plumbing or utility failure rather than a natural flood event and is
generally excluded under NFIP definitions.
Question 4
Which of the following best describes "Special Form" or "Open Perils" coverage?
A) It provides coverage against a specific list of named perils
, 2
B) It provides coverage against scheduled risks only
C) It provides coverage for all risks of loss except those specifically excluded
D) It includes no exclusions whatsoever
E) It is the least expensive type of property coverage
Correct Answer: C) Is limited by the named exclusions
Rationale: In an Open Perils (Special Form) policy, every risk of direct physical loss is
covered unless the policy specifically lists it as an exclusion. This is the opposite of a Named
Peril policy, which only covers what is listed.
Question 5
Which of the following businesses would typically be eligible for a Businessowners policy
(BOP)?
A) Auto body shop
B) Large manufacturing plant
C) Theater
) Branch bank
E) Barber shop
Correct Answer: E) Barber shop
Rationale: A Businessowners Policy (BOP) is designed for small to medium-sized businesses
with relatively low-risk operations. Service businesses like barber shops are eligible,
whereas high-risk or large-scale operations like theaters or auto body shops are generally
excluded.
Question 6
During a tornado, a barn is destroyed when a section of its wall is blown down, knocking over a
lantern, which sets the barn on fire. The "proximate cause" of the entire loss is the:
A) Fire
B) Collapse of the wall
C) Tornado
D) Smoke
E) Lantern
Correct Answer: C) tornado
Rationale: The proximate cause is the initial event in an unbroken chain of events that leads
to a loss. Since the tornado caused the wall collapse, which caused the fire, the tornado is
the primary cause.
Question 7
A fire in an insured's restaurant burns the kitchen walls and causes smoke damage. Water used by
firefighters to extinguish the fire causes extensive damage to floors. The water damage is best
described as:
A) A time element loss
, 3
B) A consequential loss
C) A direct loss
D) An indirect loss
E) A liability loss
Correct Answer: C) a direct loss
Rationale: Direct loss is physical damage to property. Because the fire (a covered peril)
necessitated the use of water, the water damage is considered a direct result of the fire and
is covered as a direct loss.
Question 8
Which of the following insurance terms is defined as the "uncertainty of future outcome" or the
chance of loss?
A) Risk
B) Hazard
C) Peril
D) Proximate Cause
E) Indemnity
Correct Answer: A) Risk
Rationale: Risk is the fundamental concern of insurance, defined as the uncertainty or
chance of a financial loss occurring.
Question 9
The Personal Liability section (Coverage E) of a Homeowners policy covers which of the
following?
A) Damage to an insured's own lawnmower
B) Bodily injury to a resident of the home caused by the insured
C) Property damage caused by acts of war
D) Bodily injury to a third party caused by the personal activities of an insured
E) Professional mistakes made by the insured at their office
Correct Answer: D) Bodily injury caused by the personal activities of an insured
Rationale: Personal Liability provides coverage if a claim is made or a suit is brought
against an insured for damages because of bodily injury or property damage caused by an
occurrence to which this coverage applies.
Question 10
An insured owns an antique statue valued at $3,000, covered under a Personal Articles Floater.
Damage to the statue would be covered in all situations EXCEPT:
A) It was accidentally knocked over by a housekeeper
B) It was damaged by a flood in the basement
C) A guest maliciously broke it
D) The insured threw it against a wall during an argument
QUESTIONS WITH SOLUTIONS NEWEST | ALREADY GRADED A+
Question 1
S is purchasing a Commercial Property policy to cover a commercial building with a
replacement cost of $100,000. The policy includes an 80 percent Coinsurance clause. To avoid a
coinsurance penalty in the event of a partial loss, S should purchase a policy with minimum
limits of AT LEAST which of the following amounts?
A) $100,000
B) $90,000
C) $80,000
D) $20,000
E) $75,000
Correct Answer: C)
Question 2
The MAXIMUM amount a policy will pay in the event of a loss, as stated in the declarations
page, is called the:
A) Coinsurance amount
B) Deductible
C) Limit of liability
D) Pro rata return
E) Actual Cash Value
Correct Answer: C) limit of liability
Rationale: The limit of liability represents the face amount of the policy or the maximum
dollar amount the insurer is contractually obligated to pay for any single covered
occurrence.
Question 3
The National Flood Insurance Program (NFIP) provides coverage for losses caused by all of the
following occurrences EXCEPT:
A) Mudslides caused by accumulations of water on or under the ground
B) Runoff from heavy rain
C) Overflow of inland or tidal waters
D) Water-main breakage
E) Rapid accumulation of surface waters
Correct Answer: D) water-main breakage
Rationale: Flood insurance is designed for "natural" overflows of water. A water-main
breakage is considered a plumbing or utility failure rather than a natural flood event and is
generally excluded under NFIP definitions.
Question 4
Which of the following best describes "Special Form" or "Open Perils" coverage?
A) It provides coverage against a specific list of named perils
, 2
B) It provides coverage against scheduled risks only
C) It provides coverage for all risks of loss except those specifically excluded
D) It includes no exclusions whatsoever
E) It is the least expensive type of property coverage
Correct Answer: C) Is limited by the named exclusions
Rationale: In an Open Perils (Special Form) policy, every risk of direct physical loss is
covered unless the policy specifically lists it as an exclusion. This is the opposite of a Named
Peril policy, which only covers what is listed.
Question 5
Which of the following businesses would typically be eligible for a Businessowners policy
(BOP)?
A) Auto body shop
B) Large manufacturing plant
C) Theater
) Branch bank
E) Barber shop
Correct Answer: E) Barber shop
Rationale: A Businessowners Policy (BOP) is designed for small to medium-sized businesses
with relatively low-risk operations. Service businesses like barber shops are eligible,
whereas high-risk or large-scale operations like theaters or auto body shops are generally
excluded.
Question 6
During a tornado, a barn is destroyed when a section of its wall is blown down, knocking over a
lantern, which sets the barn on fire. The "proximate cause" of the entire loss is the:
A) Fire
B) Collapse of the wall
C) Tornado
D) Smoke
E) Lantern
Correct Answer: C) tornado
Rationale: The proximate cause is the initial event in an unbroken chain of events that leads
to a loss. Since the tornado caused the wall collapse, which caused the fire, the tornado is
the primary cause.
Question 7
A fire in an insured's restaurant burns the kitchen walls and causes smoke damage. Water used by
firefighters to extinguish the fire causes extensive damage to floors. The water damage is best
described as:
A) A time element loss
, 3
B) A consequential loss
C) A direct loss
D) An indirect loss
E) A liability loss
Correct Answer: C) a direct loss
Rationale: Direct loss is physical damage to property. Because the fire (a covered peril)
necessitated the use of water, the water damage is considered a direct result of the fire and
is covered as a direct loss.
Question 8
Which of the following insurance terms is defined as the "uncertainty of future outcome" or the
chance of loss?
A) Risk
B) Hazard
C) Peril
D) Proximate Cause
E) Indemnity
Correct Answer: A) Risk
Rationale: Risk is the fundamental concern of insurance, defined as the uncertainty or
chance of a financial loss occurring.
Question 9
The Personal Liability section (Coverage E) of a Homeowners policy covers which of the
following?
A) Damage to an insured's own lawnmower
B) Bodily injury to a resident of the home caused by the insured
C) Property damage caused by acts of war
D) Bodily injury to a third party caused by the personal activities of an insured
E) Professional mistakes made by the insured at their office
Correct Answer: D) Bodily injury caused by the personal activities of an insured
Rationale: Personal Liability provides coverage if a claim is made or a suit is brought
against an insured for damages because of bodily injury or property damage caused by an
occurrence to which this coverage applies.
Question 10
An insured owns an antique statue valued at $3,000, covered under a Personal Articles Floater.
Damage to the statue would be covered in all situations EXCEPT:
A) It was accidentally knocked over by a housekeeper
B) It was damaged by a flood in the basement
C) A guest maliciously broke it
D) The insured threw it against a wall during an argument
