State of Illinois
Illinois Department of Insurance
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Property & Casualty Insurance
Producer Licensing Examination
80 Scored Questions & Verified Solutions
Edition
Page 1
,Introduction
The Illinois Property & Casualty Insurance Producer Licensing Examination is a state-administered test
required for individuals seeking to sell, solicit, or negotiate property and casualty insurance products in
the State of Illinois. This comprehensive study resource contains 80 scored questions — 50 covering
general insurance knowledge and 30 addressing Illinois-specific laws, regulations, and market practices.
Questions are designed to reflect the content and difficulty level of the actual licensing exam and include
detailed rationales citing relevant policy provisions, insurance principles, and Illinois statute references
where applicable. Use this document alongside the official Illinois Insurance Code (215 ILCS 5), the
Illinois Administrative Code, and DOI bulletins to ensure thorough preparation.
Exam Structure
Component Questions Time Allotted Passing Score
Part I — General Knowledge 50 ~2 hours 70% (35 correct)
Part II — Illinois State-Specific 30 ~1 hour Combined with Part I
Total 80 ~3 hours 70% overall (56
correct)
Page 2
,Part I: General Knowledge — Questions 1–50
This section covers fundamental insurance concepts including principles, policy structure, property and
casualty coverages, claims handling, underwriting and rating, and producer ethics. These questions test
the knowledge base required of all property and casualty producers regardless of licensing jurisdiction.
Insurance Fundamentals
1. Which insurance principle states that an insured should be restored to approximately
the same financial position as before the loss?
A. Principle of indemnity
B. Principle of subrogation
C. Principle of utmost good faith
D. Principle of insurable interest
✓ Answer: A. Principle of indemnity
Rationale: The principle of indemnity prevents the insured from profiting from a loss. The insurer pays
only the amount necessary to restore the insured to the financial position enjoyed immediately before
the loss occurred.
2. What is the legal doctrine that allows an insurer, after paying a claim, to pursue a third
party responsible for the loss?
A. Insurable interest
B. Subrogation
C. Utmost good faith
D. Adhesion
✓ Answer: B. Subrogation
Rationale: Subrogation gives the insurer the right to step into the shoes of the insured and recover the
amount paid from a liable third party. This principle upholds the indemnity principle by preventing the
insured from collecting twice.
3. Which of the following best defines 'insurable interest'?
A. The right to assign a policy to another party
B. A financial or other interest in the subject of insurance at the time of loss
C. The maximum amount an insurer will pay for any single loss
Page 3
, D. The deductible amount specified in the policy
✓ Answer: B. A financial or other interest in the subject of insurance at the time of loss
Rationale: Insurable interest exists when the policyholder would suffer a direct financial loss if the
insured property were damaged or destroyed. It must exist at the time of loss for property insurance
and at inception for life insurance.
4. What is the difference between actual cash value (ACV) and replacement cost?
A. ACV deducts depreciation; replacement cost does not
B. Replacement cost deducts depreciation; ACV does not
C. ACV includes inflation; replacement cost does not
D. There is no difference; they are synonymous terms
✓ Answer: A. ACV deducts depreciation; replacement cost does not
Rationale: Actual cash value (ACV) equals replacement cost minus depreciation for age, wear, and
obsolescence. Replacement cost pays the full cost to replace or repair the property with new items of like
kind and quality without deduction for depreciation.
5. The principle of 'utmost good faith' (uberrimae fidei) requires which of the following?
A. The insurer must accept every application submitted
B. Both parties must disclose all material facts relevant to the contract
C. The insured must pay the premium within 30 days of the policy date
D. The agent must provide the insured with a copy of the policy within 10 days
✓ Answer: B. Both parties must disclose all material facts relevant to the contract
Rationale: Utmost good faith requires both the insurer and the insured to act honestly and disclose all
material facts. Concealment or misrepresentation of material facts may void the policy or result in
denial of a claim.
Policy Structure
6. Which part of an insurance policy contains the insured's name, policy number, coverage
limits, and premium?
A. Insuring agreement
B. Conditions
Page 4
Illinois Department of Insurance
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━━━━━━━━━━━
Property & Casualty Insurance
Producer Licensing Examination
80 Scored Questions & Verified Solutions
Edition
Page 1
,Introduction
The Illinois Property & Casualty Insurance Producer Licensing Examination is a state-administered test
required for individuals seeking to sell, solicit, or negotiate property and casualty insurance products in
the State of Illinois. This comprehensive study resource contains 80 scored questions — 50 covering
general insurance knowledge and 30 addressing Illinois-specific laws, regulations, and market practices.
Questions are designed to reflect the content and difficulty level of the actual licensing exam and include
detailed rationales citing relevant policy provisions, insurance principles, and Illinois statute references
where applicable. Use this document alongside the official Illinois Insurance Code (215 ILCS 5), the
Illinois Administrative Code, and DOI bulletins to ensure thorough preparation.
Exam Structure
Component Questions Time Allotted Passing Score
Part I — General Knowledge 50 ~2 hours 70% (35 correct)
Part II — Illinois State-Specific 30 ~1 hour Combined with Part I
Total 80 ~3 hours 70% overall (56
correct)
Page 2
,Part I: General Knowledge — Questions 1–50
This section covers fundamental insurance concepts including principles, policy structure, property and
casualty coverages, claims handling, underwriting and rating, and producer ethics. These questions test
the knowledge base required of all property and casualty producers regardless of licensing jurisdiction.
Insurance Fundamentals
1. Which insurance principle states that an insured should be restored to approximately
the same financial position as before the loss?
A. Principle of indemnity
B. Principle of subrogation
C. Principle of utmost good faith
D. Principle of insurable interest
✓ Answer: A. Principle of indemnity
Rationale: The principle of indemnity prevents the insured from profiting from a loss. The insurer pays
only the amount necessary to restore the insured to the financial position enjoyed immediately before
the loss occurred.
2. What is the legal doctrine that allows an insurer, after paying a claim, to pursue a third
party responsible for the loss?
A. Insurable interest
B. Subrogation
C. Utmost good faith
D. Adhesion
✓ Answer: B. Subrogation
Rationale: Subrogation gives the insurer the right to step into the shoes of the insured and recover the
amount paid from a liable third party. This principle upholds the indemnity principle by preventing the
insured from collecting twice.
3. Which of the following best defines 'insurable interest'?
A. The right to assign a policy to another party
B. A financial or other interest in the subject of insurance at the time of loss
C. The maximum amount an insurer will pay for any single loss
Page 3
, D. The deductible amount specified in the policy
✓ Answer: B. A financial or other interest in the subject of insurance at the time of loss
Rationale: Insurable interest exists when the policyholder would suffer a direct financial loss if the
insured property were damaged or destroyed. It must exist at the time of loss for property insurance
and at inception for life insurance.
4. What is the difference between actual cash value (ACV) and replacement cost?
A. ACV deducts depreciation; replacement cost does not
B. Replacement cost deducts depreciation; ACV does not
C. ACV includes inflation; replacement cost does not
D. There is no difference; they are synonymous terms
✓ Answer: A. ACV deducts depreciation; replacement cost does not
Rationale: Actual cash value (ACV) equals replacement cost minus depreciation for age, wear, and
obsolescence. Replacement cost pays the full cost to replace or repair the property with new items of like
kind and quality without deduction for depreciation.
5. The principle of 'utmost good faith' (uberrimae fidei) requires which of the following?
A. The insurer must accept every application submitted
B. Both parties must disclose all material facts relevant to the contract
C. The insured must pay the premium within 30 days of the policy date
D. The agent must provide the insured with a copy of the policy within 10 days
✓ Answer: B. Both parties must disclose all material facts relevant to the contract
Rationale: Utmost good faith requires both the insurer and the insured to act honestly and disclose all
material facts. Concealment or misrepresentation of material facts may void the policy or result in
denial of a claim.
Policy Structure
6. Which part of an insurance policy contains the insured's name, policy number, coverage
limits, and premium?
A. Insuring agreement
B. Conditions
Page 4
