Property & Casualty Insurance Exam Practice
Questions with Complete Reliable Solutions
Specific insurance - Answer This type of insurance designates a particular item to be insured
Blanket insurance - Answer This type of insurance covers more than one item of property at a single
location or one more item of property at multiple locations.
Speculative - Answer possibility of both gain and loss. Not insurable.
Pure - Answer only the possibility of loss. Insurable.
What are the 5 methods of managing or handling risk? - Answer avoid, control, retain, and transfer risk.
Hazard - Answer A condition or situation which increases the chance for loss
Physical Hazards - Answer a hazard that arises from the condition, occupancy, or use of the property
itself.
ex: skateboard left on the steps
Moral Hazards - Answer when an individual through carelessness or by irresponsible actions can
increase the possibly for a loss.
ex: person who drives carelessly just because they know they are insured.
Morale Hazards - Answer when a person might create a loss situation on purpose just to collect from the
insurance company.
ex: Prearranged, faked theft of someone's old vehicle so they can get an insurance payout to buy a new
vehicle.
,Replacement Cost - Answer The amount of money it would take to replace a damaged or destroyed item
with one of like kind and quality AT THE TIME OF LOSS. No deduction for depreciation.
Actual Cash Value (ACV) - Answer Replacement Cost, minus depreciation.
Pair and Set Clause - Answer Loss to one item of a pair or set does not constitute loss to the entire pair
or set.
Appraisal - Answer A method of resolving disputes between insurers and insureds over the amount
owed on a covered loss.
-both parties select an appraiser
-the two appraisers select an umpire
-if the appraisers do not agree, the umpire is consulted
-the amount agreed on by 2 out of 3 is the amount that will be paid
Subrogation - Answer An insurer's right to recover the amount of its loss payment from the third party
who is legally responsible for the loss.
Arbitration - Answer this condition is similar to the Appraisal Condition but it is not limited to disputes
over the value of the loss. It may also be used to resolve other areas of disagreement between the
insured and the insurance company.
What does WC SHAVVER stand for? - Answer Windstorm, Civil commotion, Smoke, Hail, Aircraft,
Vehicles, Volcanic eruption, Explosion, Riot
What does BIG AFFECT stand for? - Answer Burglar damage, Ice & snow weight, Glass breakage,
Accidental discharge, Falling objects, Freezing of pipes, Electrical damage, Collapse, Tearing apart.
Insolvency - Answer A financial state that occurs if liabilities are greater than assets.
,Law of Agency - Answer Knowledge of the Agents is Knowledge of the Principal (Insurance Company)
Principal - Answer Insurance Company
What is the ISO? - Answer Insurance Services Office which is an organization established for the benefit
of its member insurance companies. This organization gathers statistics, provides loss costs, drafts policy
forms and coverage provisions and conducts inspections for rate making purposes.
Coinsurance Clause - Answer Requires the insured to carry a minimum specified amount (generally 80%)
of the replacement cost value of the insured property in order for partial losses to be paid in full.
Estoppel - Answer A legal bar to changing or denying a fact because of one's own previous actions or
words to the contrary.
ex: If an insurance company representative intentionally or unintentionally gives the impression that a
specific fact exists when it does not and a client relies on that impression and is damaged a result.
Binder - Answer A temporary contract of insurance, oral or written, offered by an insurer pending
issuance of the policy. Usually written for a period of 30-60 days and remains in force for that period or
until a permanent policy is either issued or denied by the insurer.
Warranty - Answer A provision in a policy that pledges that a condition does exist or will exist at some
time in the future.
Deposit Premium - Answer Tentative charge made at the beginning of certain policies and reinsurance
agreements to be adjusted when the actual earned charge has been later determined.
Audit - Answer Verification of books or accounts to determine their accuracy.
Occurrence - Answer An accident, including continuous or repeated exposure to the same harmful
conditions, which result in bodily injury or property damage.
, Special Damages - Answer type of compensatory damages that reimburse the injured part for direct and
specific expenses involved in the loss. Such as medical expenses, funeral expenses and loss wages.
General Damages - Answer type of compensatory damages that reimburse the injured party for such
things as pain and suffering and disfigurement.
Punitive Damages - Answer type of damages intended to punish the defendant and make an example
out of her to discourage others from behaving the same way.
Proximate Cause - Answer An act, through an uniterrupted chain of events, that can be determined to
be the immediate or actual cause of a loss.
4 elements of negligence - Answer 1. The existence of a DUTY to act in a certain way
2. A FAILURE to live up to this duty
3. An actual INJURY must occur
4. The failure in duty must be the PROXIMATE CAUSE of the injury.
Negligence - Answer An unreasonable or prudent act, A thoughtless or careless act or one committed
out of ignorance. It may be a non-act or omission, but it is NEVER an intentional act.
Casualty Insurance - Answer Refers to coverage designed to address the liability of individuals and
organizations resulting from negligent acts in their personal, business, or professional roles.
Overinsurance - Answer Exists if a property or an insurable interest in property is insured by one or more
insurance contracts against the same hazard in excess of the fair value of the property or of such
interest.
Specific Insurance - Answer Coverage on ONE type of property (real or personal) in ONE location.
Blanket Insurance - Answer A single policy written on an insured's interest for 2 or more different types
of property (dwelling/building and contents) at the same location, or at different locations.
Questions with Complete Reliable Solutions
Specific insurance - Answer This type of insurance designates a particular item to be insured
Blanket insurance - Answer This type of insurance covers more than one item of property at a single
location or one more item of property at multiple locations.
Speculative - Answer possibility of both gain and loss. Not insurable.
Pure - Answer only the possibility of loss. Insurable.
What are the 5 methods of managing or handling risk? - Answer avoid, control, retain, and transfer risk.
Hazard - Answer A condition or situation which increases the chance for loss
Physical Hazards - Answer a hazard that arises from the condition, occupancy, or use of the property
itself.
ex: skateboard left on the steps
Moral Hazards - Answer when an individual through carelessness or by irresponsible actions can
increase the possibly for a loss.
ex: person who drives carelessly just because they know they are insured.
Morale Hazards - Answer when a person might create a loss situation on purpose just to collect from the
insurance company.
ex: Prearranged, faked theft of someone's old vehicle so they can get an insurance payout to buy a new
vehicle.
,Replacement Cost - Answer The amount of money it would take to replace a damaged or destroyed item
with one of like kind and quality AT THE TIME OF LOSS. No deduction for depreciation.
Actual Cash Value (ACV) - Answer Replacement Cost, minus depreciation.
Pair and Set Clause - Answer Loss to one item of a pair or set does not constitute loss to the entire pair
or set.
Appraisal - Answer A method of resolving disputes between insurers and insureds over the amount
owed on a covered loss.
-both parties select an appraiser
-the two appraisers select an umpire
-if the appraisers do not agree, the umpire is consulted
-the amount agreed on by 2 out of 3 is the amount that will be paid
Subrogation - Answer An insurer's right to recover the amount of its loss payment from the third party
who is legally responsible for the loss.
Arbitration - Answer this condition is similar to the Appraisal Condition but it is not limited to disputes
over the value of the loss. It may also be used to resolve other areas of disagreement between the
insured and the insurance company.
What does WC SHAVVER stand for? - Answer Windstorm, Civil commotion, Smoke, Hail, Aircraft,
Vehicles, Volcanic eruption, Explosion, Riot
What does BIG AFFECT stand for? - Answer Burglar damage, Ice & snow weight, Glass breakage,
Accidental discharge, Falling objects, Freezing of pipes, Electrical damage, Collapse, Tearing apart.
Insolvency - Answer A financial state that occurs if liabilities are greater than assets.
,Law of Agency - Answer Knowledge of the Agents is Knowledge of the Principal (Insurance Company)
Principal - Answer Insurance Company
What is the ISO? - Answer Insurance Services Office which is an organization established for the benefit
of its member insurance companies. This organization gathers statistics, provides loss costs, drafts policy
forms and coverage provisions and conducts inspections for rate making purposes.
Coinsurance Clause - Answer Requires the insured to carry a minimum specified amount (generally 80%)
of the replacement cost value of the insured property in order for partial losses to be paid in full.
Estoppel - Answer A legal bar to changing or denying a fact because of one's own previous actions or
words to the contrary.
ex: If an insurance company representative intentionally or unintentionally gives the impression that a
specific fact exists when it does not and a client relies on that impression and is damaged a result.
Binder - Answer A temporary contract of insurance, oral or written, offered by an insurer pending
issuance of the policy. Usually written for a period of 30-60 days and remains in force for that period or
until a permanent policy is either issued or denied by the insurer.
Warranty - Answer A provision in a policy that pledges that a condition does exist or will exist at some
time in the future.
Deposit Premium - Answer Tentative charge made at the beginning of certain policies and reinsurance
agreements to be adjusted when the actual earned charge has been later determined.
Audit - Answer Verification of books or accounts to determine their accuracy.
Occurrence - Answer An accident, including continuous or repeated exposure to the same harmful
conditions, which result in bodily injury or property damage.
, Special Damages - Answer type of compensatory damages that reimburse the injured part for direct and
specific expenses involved in the loss. Such as medical expenses, funeral expenses and loss wages.
General Damages - Answer type of compensatory damages that reimburse the injured party for such
things as pain and suffering and disfigurement.
Punitive Damages - Answer type of damages intended to punish the defendant and make an example
out of her to discourage others from behaving the same way.
Proximate Cause - Answer An act, through an uniterrupted chain of events, that can be determined to
be the immediate or actual cause of a loss.
4 elements of negligence - Answer 1. The existence of a DUTY to act in a certain way
2. A FAILURE to live up to this duty
3. An actual INJURY must occur
4. The failure in duty must be the PROXIMATE CAUSE of the injury.
Negligence - Answer An unreasonable or prudent act, A thoughtless or careless act or one committed
out of ignorance. It may be a non-act or omission, but it is NEVER an intentional act.
Casualty Insurance - Answer Refers to coverage designed to address the liability of individuals and
organizations resulting from negligent acts in their personal, business, or professional roles.
Overinsurance - Answer Exists if a property or an insurable interest in property is insured by one or more
insurance contracts against the same hazard in excess of the fair value of the property or of such
interest.
Specific Insurance - Answer Coverage on ONE type of property (real or personal) in ONE location.
Blanket Insurance - Answer A single policy written on an insured's interest for 2 or more different types
of property (dwelling/building and contents) at the same location, or at different locations.
