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Arizona Property and Casualty Insurance Exam
QUESTIONS AND VERIFIED ANSWERS LATEST
UPDATE THIS YEAR
Arizona Property and Casualty Insurance Exam
.
Part 1: Exam Coverage Summary (Point Form)
I. Insurance Regulation (6%)
• Licensing requirements (A.R.S. §20-321, 321.01): Minimum age 18, qualifications, application
process
• License maintenance: Renewal every 4 years, report of actions
• Disciplinary actions: Denial, suspension, revocation (up to 12 months maximum), cease and
desist orders, civil penalties ($500-$1000 for privacy violations)
• Claim settlement laws and regulations (A.R.S. §20-461, 462; Rule R20-6-B01)
• Continuing education: 48 hours every 4 years, including 6 hours of ethics
II. Insurance Basics (21%)
• Contract elements: Offer and acceptance, consideration, competent parties, legal purpose
• Contract characteristics: Adhesion, aleatory, personal, unilateral, conditional
• Legal interpretations: Ambiguities, reasonable expectations, indemnity, utmost good faith
• Insurance principles: Insurable interest, hazards (physical, moral, morale), negligence, perils
(named vs. open)
• Loss valuation: Actual cash value, replacement cost, market value, agreed value, stated amount
• Policy structure: Declarations, definitions, insuring agreement, conditions, exclusions,
endorsements
• Common policy provisions: Limits of liability (per occurrence, per person, aggregate),
coinsurance, vacancy/occupancy, assignment, subrogation, standard mortgage clause
• Required provisions: Arizona Property and Casualty Insurance Guaranty Fund,
cancellation/nonrenewal laws, Federal Terrorism Insurance Program
III. Adjusting Losses (30%)
• Adjuster roles: Staff vs. independent vs. public adjuster
• Claim investigation: Duties, file documentation, evidence gathering
• Property losses: Duties after loss, proof of loss, determining value, depreciation, salvage,
settlement options
• Liability losses: Investigation procedures, verifying coverage, determining liability, gathering
evidence and witness statements
• Coverage problems: Reservation of rights letter, nonwaiver agreement, declaratory judgment
• Claims adjustment procedures: Advance payments, releases, subrogation, appraisal, arbitration,
mediation
IV. Dwelling Policy (5%)
• Coverage forms: Basic (DP-1), Broad (DP-2), Special (DP-3)
• Property coverages: Coverage A (Dwelling), B (Other structures), C (Personal property), D (Fair
rental value), E (Additional living expense)
• Arizona endorsements: Special provisions (DP 01 02), automatic increase in insurance (DP 04
11), broad theft coverage (DP 04 72), dwelling under construction (DP 11 43)
• Personal liability supplement
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V. Homeowners Policy (10%)
• Coverage forms: HO-2 (Broad), HO-3 (Special), HO-4 (Renters), HO-5 (Comprehensive), HO-6
(Condo), HO-8 (Modified)
• Section I – Property coverages: Coverage A (Dwelling), B (Other structures), C (Personal
property), D (Loss of use)
• Section II – Liability coverages: Coverage E (Personal liability), F (Medical payments to others)
• Arizona endorsements: Special provisions (HO 01 02), limited fungi/bacteria coverage,
earthquake, scheduled personal property, home day care, business pursuits, watercraft,
personal injury
VI. Auto Insurance (12%)
• Arizona laws: Financial Responsibility Law (Title 28, Chapter 9), required limits (20-266), proof of
insurance, Uninsured/Underinsured Motorist (20-259.01), Arizona Automobile Insurance Plan
• Personal Auto Policy (PAP) : Liability coverage, medical payments, uninsured motorist, damage
to your auto (collision and other than collision)
• Cancellation/nonrenewal: Grounds (20-1631), notice (20-1632), grace period
• Arizona endorsements: PP 01 67, towing and labor, Mexico coverage, joint ownership, UM/UIM
coverage
• Commercial Auto: Business auto, garage, truckers, motor carrier forms; MCS-90 endorsement
VII. Commercial Package Policy (7%)
• Components: Common policy declarations, common policy conditions, coverage parts
• Commercial General Liability (CGL) : Occurrence vs. claims-made, bodily injury/property
damage, personal/advertising injury, medical payments
• Commercial Property: Building and personal property, business income, extra expense; causes
of loss forms (Basic, Broad, Special)
• Crime coverage: Employee theft, forgery, robbery/safe burglary, computer fraud
• Inland Marine: Nationwide Marine definition (Rule R20-6-602), accounts receivable, contractors
equipment, EDP, motor truck cargo
• Equipment breakdown (EB 00 20)
VIII. Law of Large Numbers & Risk
• Law of large numbers: Actual losses become more predictable among larger groups with similar
loss exposure; basis for statistical prediction used to calculate rates
• Reinsurance: Arrangement where primary insurer transfers potential losses to another insurer;
facultative (case-by-case) vs. treaty (blanket arrangement)
• Adverse selection: Insuring risks more prone to losses than average
IX. Insurance Company Types
• Stock insurer: Owned by stockholders; issues nonparticipating policies
• Mutual insurer: Owned by policyholders; issues participating policies; pays dividends as refund
of excess premiums
• Reciprocal exchange: Unincorporated aggregation of subscribers; chief administrator called
"attorney-in-fact"
• Fraternal benefit society: Nonprofit; delivers benefits to members of religious or fraternal
organizations
• Lloyd's Association: Does NOT issue policies; provides meeting facility for underwriters
• Captive insurer: Owned by corporation to serve that organization's needs
X. Underwriting & Rating
• Underwriting: Process of reviewing applications and classifying risks; decide whether to issue
policy and at what rates
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• Class rating: Rate charged to group with similar exposures (common for auto)
• Experience rating: Insured's past experience helps determine premium
• Judgment rating: Each exposure individually evaluated; rate determined by underwriter's
judgment
• Loss ratio formula: (Incurred losses + loss adjustment expenses) / premiums earned
• Manual rates: Rates established by similarity of risk
XI. Agent Authority
• Express authority: Stated in contract
• Implied authority: Assumed necessary to conduct business
• Apparent authority: Appearance of relationship based on principal's actions/words
Section A: Insurance Regulation & Licensing (Questions 1-20)
Question 1
A 19-year-old individual wants to apply for an insurance producer license in Arizona. What is the
minimum age requirement for licensure?
A) 16 years old
B) 18 years old
C) 21 years old
D) 25 years old
Answer: B
Rationale: The minimum age for a producer license in Arizona is 18 years old .
Question 2
An Arizona-licensed insurance producer's birthday is June 15. When will their license expire?
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A) June 15 of each year
B) December 31 of each year
C) The final day of their birthday month (June 30)
D) January 1 following their birthday
Answer: C
Rationale: Individual licenses expire on the final day of the producer's birthday month .
Question 3
An insurance producer's license has lapsed. They have a grace period of how long to reinstate the
license without retaking the exam?
A) 6 months
B) 1 year
C) 2 years
D) 3 years
Answer: B
*Rationale: Producers have a 1-year period to reinstate a lapsed license .*
Arizona Property and Casualty Insurance Exam
QUESTIONS AND VERIFIED ANSWERS LATEST
UPDATE THIS YEAR
Arizona Property and Casualty Insurance Exam
.
Part 1: Exam Coverage Summary (Point Form)
I. Insurance Regulation (6%)
• Licensing requirements (A.R.S. §20-321, 321.01): Minimum age 18, qualifications, application
process
• License maintenance: Renewal every 4 years, report of actions
• Disciplinary actions: Denial, suspension, revocation (up to 12 months maximum), cease and
desist orders, civil penalties ($500-$1000 for privacy violations)
• Claim settlement laws and regulations (A.R.S. §20-461, 462; Rule R20-6-B01)
• Continuing education: 48 hours every 4 years, including 6 hours of ethics
II. Insurance Basics (21%)
• Contract elements: Offer and acceptance, consideration, competent parties, legal purpose
• Contract characteristics: Adhesion, aleatory, personal, unilateral, conditional
• Legal interpretations: Ambiguities, reasonable expectations, indemnity, utmost good faith
• Insurance principles: Insurable interest, hazards (physical, moral, morale), negligence, perils
(named vs. open)
• Loss valuation: Actual cash value, replacement cost, market value, agreed value, stated amount
• Policy structure: Declarations, definitions, insuring agreement, conditions, exclusions,
endorsements
• Common policy provisions: Limits of liability (per occurrence, per person, aggregate),
coinsurance, vacancy/occupancy, assignment, subrogation, standard mortgage clause
• Required provisions: Arizona Property and Casualty Insurance Guaranty Fund,
cancellation/nonrenewal laws, Federal Terrorism Insurance Program
III. Adjusting Losses (30%)
• Adjuster roles: Staff vs. independent vs. public adjuster
• Claim investigation: Duties, file documentation, evidence gathering
• Property losses: Duties after loss, proof of loss, determining value, depreciation, salvage,
settlement options
• Liability losses: Investigation procedures, verifying coverage, determining liability, gathering
evidence and witness statements
• Coverage problems: Reservation of rights letter, nonwaiver agreement, declaratory judgment
• Claims adjustment procedures: Advance payments, releases, subrogation, appraisal, arbitration,
mediation
IV. Dwelling Policy (5%)
• Coverage forms: Basic (DP-1), Broad (DP-2), Special (DP-3)
• Property coverages: Coverage A (Dwelling), B (Other structures), C (Personal property), D (Fair
rental value), E (Additional living expense)
• Arizona endorsements: Special provisions (DP 01 02), automatic increase in insurance (DP 04
11), broad theft coverage (DP 04 72), dwelling under construction (DP 11 43)
• Personal liability supplement
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V. Homeowners Policy (10%)
• Coverage forms: HO-2 (Broad), HO-3 (Special), HO-4 (Renters), HO-5 (Comprehensive), HO-6
(Condo), HO-8 (Modified)
• Section I – Property coverages: Coverage A (Dwelling), B (Other structures), C (Personal
property), D (Loss of use)
• Section II – Liability coverages: Coverage E (Personal liability), F (Medical payments to others)
• Arizona endorsements: Special provisions (HO 01 02), limited fungi/bacteria coverage,
earthquake, scheduled personal property, home day care, business pursuits, watercraft,
personal injury
VI. Auto Insurance (12%)
• Arizona laws: Financial Responsibility Law (Title 28, Chapter 9), required limits (20-266), proof of
insurance, Uninsured/Underinsured Motorist (20-259.01), Arizona Automobile Insurance Plan
• Personal Auto Policy (PAP) : Liability coverage, medical payments, uninsured motorist, damage
to your auto (collision and other than collision)
• Cancellation/nonrenewal: Grounds (20-1631), notice (20-1632), grace period
• Arizona endorsements: PP 01 67, towing and labor, Mexico coverage, joint ownership, UM/UIM
coverage
• Commercial Auto: Business auto, garage, truckers, motor carrier forms; MCS-90 endorsement
VII. Commercial Package Policy (7%)
• Components: Common policy declarations, common policy conditions, coverage parts
• Commercial General Liability (CGL) : Occurrence vs. claims-made, bodily injury/property
damage, personal/advertising injury, medical payments
• Commercial Property: Building and personal property, business income, extra expense; causes
of loss forms (Basic, Broad, Special)
• Crime coverage: Employee theft, forgery, robbery/safe burglary, computer fraud
• Inland Marine: Nationwide Marine definition (Rule R20-6-602), accounts receivable, contractors
equipment, EDP, motor truck cargo
• Equipment breakdown (EB 00 20)
VIII. Law of Large Numbers & Risk
• Law of large numbers: Actual losses become more predictable among larger groups with similar
loss exposure; basis for statistical prediction used to calculate rates
• Reinsurance: Arrangement where primary insurer transfers potential losses to another insurer;
facultative (case-by-case) vs. treaty (blanket arrangement)
• Adverse selection: Insuring risks more prone to losses than average
IX. Insurance Company Types
• Stock insurer: Owned by stockholders; issues nonparticipating policies
• Mutual insurer: Owned by policyholders; issues participating policies; pays dividends as refund
of excess premiums
• Reciprocal exchange: Unincorporated aggregation of subscribers; chief administrator called
"attorney-in-fact"
• Fraternal benefit society: Nonprofit; delivers benefits to members of religious or fraternal
organizations
• Lloyd's Association: Does NOT issue policies; provides meeting facility for underwriters
• Captive insurer: Owned by corporation to serve that organization's needs
X. Underwriting & Rating
• Underwriting: Process of reviewing applications and classifying risks; decide whether to issue
policy and at what rates
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• Class rating: Rate charged to group with similar exposures (common for auto)
• Experience rating: Insured's past experience helps determine premium
• Judgment rating: Each exposure individually evaluated; rate determined by underwriter's
judgment
• Loss ratio formula: (Incurred losses + loss adjustment expenses) / premiums earned
• Manual rates: Rates established by similarity of risk
XI. Agent Authority
• Express authority: Stated in contract
• Implied authority: Assumed necessary to conduct business
• Apparent authority: Appearance of relationship based on principal's actions/words
Section A: Insurance Regulation & Licensing (Questions 1-20)
Question 1
A 19-year-old individual wants to apply for an insurance producer license in Arizona. What is the
minimum age requirement for licensure?
A) 16 years old
B) 18 years old
C) 21 years old
D) 25 years old
Answer: B
Rationale: The minimum age for a producer license in Arizona is 18 years old .
Question 2
An Arizona-licensed insurance producer's birthday is June 15. When will their license expire?
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A) June 15 of each year
B) December 31 of each year
C) The final day of their birthday month (June 30)
D) January 1 following their birthday
Answer: C
Rationale: Individual licenses expire on the final day of the producer's birthday month .
Question 3
An insurance producer's license has lapsed. They have a grace period of how long to reinstate the
license without retaking the exam?
A) 6 months
B) 1 year
C) 2 years
D) 3 years
Answer: B
*Rationale: Producers have a 1-year period to reinstate a lapsed license .*
