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Arizona Property and Casualty Insurance Exam
ACTUAL QUESTIONS AND ANSWERS LATEST
UPDATE THIS YEAR
Arizona Property and Casualty Insurance Exam preparation package. It includes a detailed, point-form
summary of the exam coverage based on the official PSI (formerly Prometric) Series 13-34 Content
Outline , followed by 250 original, exam-relevant multiple-choice questions, each with an answer and a
summarized rationale.
POINT-FORM SUMMARIZED EXAM COVERAGE (AZ Property & Casualty)
• Exam Format & Logistics:
o Provider: PSI Services (formerly Prometric) .
o Total Questions: 150 scored questions + 15-20 unscored pre-test questions (2.5-hour
time limit) .
o Passing Score: 70% .
o Attempt Limits: After 4 failures, a 12-month lockout period applies before retaking .
• Topic 1 – Insurance Regulation (Arizona-specific) (~9%):
o Producer Licensing: Qualifications, application process, background checks
(fingerprinting), renewal cycle (every 4 years) .
o Insurer Authorization: "Certificate of Authority" requirement .
o Arizona Laws (Title 20): Cancellation & nonrenewal notice periods (e.g., 10 days for
nonpayment, 30 days for personal lines nonrenewal) .
o Producer Legal Duties: Reporting actions (e.g., administrative actions), handling of
premiums, fiduciary responsibility.
o Consumer Protections: Fraud reporting liability (A.R.S. § 20-463), Guaranty Fund.
• Topic 2 – General Insurance Principles (~15%):
o Contract Law: Elements (offer/acceptance, consideration, competent parties, legal
purpose) .
o Legal Characteristics: Adhesion, aleatory, unilateral, conditional, contract of indemnity .
o Legal Doctrines: Reasonable expectations, waiver & estoppel, utmost good faith.
o Concepts: Insurable interest, hazard types (physical, moral, morale), negligence,
indemnity, subrogation.
o Policy Structure: Declarations, insuring agreement, definitions, exclusions, conditions,
endorsements .
o Loss Valuation: Actual Cash Value (ACV = Replacement Cost – Depreciation),
Replacement Cost (RC), Stated Amount, Agreed Value.
o Policy Limits: Per occurrence, per person, aggregate, split limits (e.g., 25/50/15),
combined single limit .
• Topic 3 – Property Insurance (Dwelling, Homeowners, Commercial) (~25%):
o Dwelling Policy (DP): DP-1 (Basic/Bare Bones), DP-2 (Broad), DP-3 (Special/Open Perils) .
o Homeowners (HO): HO-2 (Broad), HO-3 (Special - most common), HO-4 (Contents), HO-
5 (Comprehensive), HO-6 (Condo), HO-8 (Modified/older homes) .
o Coverage Sections: Section I (Property: Dwelling A, Other Structures B, Personal
Property C, Loss of Use D) vs. Section II (Liability: Personal Liability E, Medical Payments
F) .
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o Commercial Package Policy (CPP): Components (Common Declarations, Conditions,
Coverage Parts), Commercial Property, Commercial General Liability (CGL - Occurrence
vs. Claims-made), Commercial Crime, Inland Marine, Equipment Breakdown .
o Key Provisions: Coinsurance clause (80/90/100%), vacancy provisions, ordinance or law,
exclusions (flood, earth movement, intentional loss) .
• Topic 4 – Casualty (Liability & Auto) Insurance (~26%):
o Personal Auto Policy (PAP): Coverages A (Liability), B (Medical Payments), C
(Uninsured/Underinsured Motorist), D (Physical Damage - Collision & Other than
Collision) .
o Arizona Auto Laws: Financial Responsibility Law (limits: 25/50/15), UM/UIM rejection
requirements, Assigned Risk Plan .
o Commercial Auto (CA): Business Auto Coverage Form (BACF), symbols (1-22), MCS-90
endorsement for truckers .
o General Liability: Bodily Injury vs. Personal & Advertising Injury, Products/Completed
Operations hazard, Medical Payments, Supplementary Payments (defense costs).
• Topic 5 – Adjusting Losses (Claims Handling) (~9%):
o Role of the Adjuster: Staff, Independent, vs. Public Adjuster.
o Claims Process: Investigation, documentation, reserve setting, settlement.
o Coverage Disputes: Reservation of Rights (ROR) letter, Non-waiver agreement,
Declaratory judgment.
o Settlement: Releases, subrogation, appraisal, arbitration .
• Topic 6 – Other Coverages & Options (~6%):
o Businessowners Policy (BOP): Standardized package for small to mid-sized businesses.
o Workers Compensation: Benefits for work-related injuries (Medical, Disability, Rehab,
Death).
o Umbrella/Excess Liability: Extra layer of liability coverage above primary policies .
o **Farm & Ranch, Flood (NFIP), Earthquake endorsements .
1. An insurance producer in Arizona who fails to pay the renewal fee before the license expiration
date is subject to what consequence?
A) Automatic suspension for 30 days only
B) Permanent revocation without reinstatement
C) Forfeiture of the license and all renewal rights
D) A grace period with late fees but possible lapse of authority
Answer: D
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Rationale: Arizona requires renewal every 4 years ; failure to pay results in lapse, though a
reinstatement period with fees may apply, but authority to transact ceases .
2. Which of the following is an essential element required for a valid insurance contract?
A) A written binder filed with the state DOI
B) Notarized signatures from all named insureds
C) An offer and unconditional acceptance by the insurer
D) Consideration provided by both the insured and the insurer
Answer: D
Rationale: Consideration is one of the four essential elements of a legal contract (offer/acceptance,
consideration, competent parties, legal purpose) .
3. The Arizona Department of Insurance and Financial Institutions (DIFI) requires fingerprinting of
applicants primarily to:
A) Create a quick access photo ID card for the producer
B) Conduct a criminal background check for disqualifying offenses
C) Verify the age requirement of 21 years old
D) Track continuing education compliance
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Answer: B
Rationale: DIFI requires background checks to ensure candidates have not committed disqualifying
criminal offenses .
4. The part of an insurance policy that states the insurer’s promise to pay for covered losses is called
the:
A) Declarations
B) Insuring Agreement
C) Exclusions
D) Conditions
Answer: B
Rationale: The Insuring Agreement is the specific section where the insurer outlines coverage and
promises to pay for losses .
5. A fire destroys a commercial building. The insurer pays the actual cash value immediately, but the
insured had a replacement cost policy. The insured must repair the building to collect the difference
between ACV and RC. This process is enforced by the principle of:
A) Subrogation
Arizona Property and Casualty Insurance Exam
ACTUAL QUESTIONS AND ANSWERS LATEST
UPDATE THIS YEAR
Arizona Property and Casualty Insurance Exam preparation package. It includes a detailed, point-form
summary of the exam coverage based on the official PSI (formerly Prometric) Series 13-34 Content
Outline , followed by 250 original, exam-relevant multiple-choice questions, each with an answer and a
summarized rationale.
POINT-FORM SUMMARIZED EXAM COVERAGE (AZ Property & Casualty)
• Exam Format & Logistics:
o Provider: PSI Services (formerly Prometric) .
o Total Questions: 150 scored questions + 15-20 unscored pre-test questions (2.5-hour
time limit) .
o Passing Score: 70% .
o Attempt Limits: After 4 failures, a 12-month lockout period applies before retaking .
• Topic 1 – Insurance Regulation (Arizona-specific) (~9%):
o Producer Licensing: Qualifications, application process, background checks
(fingerprinting), renewal cycle (every 4 years) .
o Insurer Authorization: "Certificate of Authority" requirement .
o Arizona Laws (Title 20): Cancellation & nonrenewal notice periods (e.g., 10 days for
nonpayment, 30 days for personal lines nonrenewal) .
o Producer Legal Duties: Reporting actions (e.g., administrative actions), handling of
premiums, fiduciary responsibility.
o Consumer Protections: Fraud reporting liability (A.R.S. § 20-463), Guaranty Fund.
• Topic 2 – General Insurance Principles (~15%):
o Contract Law: Elements (offer/acceptance, consideration, competent parties, legal
purpose) .
o Legal Characteristics: Adhesion, aleatory, unilateral, conditional, contract of indemnity .
o Legal Doctrines: Reasonable expectations, waiver & estoppel, utmost good faith.
o Concepts: Insurable interest, hazard types (physical, moral, morale), negligence,
indemnity, subrogation.
o Policy Structure: Declarations, insuring agreement, definitions, exclusions, conditions,
endorsements .
o Loss Valuation: Actual Cash Value (ACV = Replacement Cost – Depreciation),
Replacement Cost (RC), Stated Amount, Agreed Value.
o Policy Limits: Per occurrence, per person, aggregate, split limits (e.g., 25/50/15),
combined single limit .
• Topic 3 – Property Insurance (Dwelling, Homeowners, Commercial) (~25%):
o Dwelling Policy (DP): DP-1 (Basic/Bare Bones), DP-2 (Broad), DP-3 (Special/Open Perils) .
o Homeowners (HO): HO-2 (Broad), HO-3 (Special - most common), HO-4 (Contents), HO-
5 (Comprehensive), HO-6 (Condo), HO-8 (Modified/older homes) .
o Coverage Sections: Section I (Property: Dwelling A, Other Structures B, Personal
Property C, Loss of Use D) vs. Section II (Liability: Personal Liability E, Medical Payments
F) .
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o Commercial Package Policy (CPP): Components (Common Declarations, Conditions,
Coverage Parts), Commercial Property, Commercial General Liability (CGL - Occurrence
vs. Claims-made), Commercial Crime, Inland Marine, Equipment Breakdown .
o Key Provisions: Coinsurance clause (80/90/100%), vacancy provisions, ordinance or law,
exclusions (flood, earth movement, intentional loss) .
• Topic 4 – Casualty (Liability & Auto) Insurance (~26%):
o Personal Auto Policy (PAP): Coverages A (Liability), B (Medical Payments), C
(Uninsured/Underinsured Motorist), D (Physical Damage - Collision & Other than
Collision) .
o Arizona Auto Laws: Financial Responsibility Law (limits: 25/50/15), UM/UIM rejection
requirements, Assigned Risk Plan .
o Commercial Auto (CA): Business Auto Coverage Form (BACF), symbols (1-22), MCS-90
endorsement for truckers .
o General Liability: Bodily Injury vs. Personal & Advertising Injury, Products/Completed
Operations hazard, Medical Payments, Supplementary Payments (defense costs).
• Topic 5 – Adjusting Losses (Claims Handling) (~9%):
o Role of the Adjuster: Staff, Independent, vs. Public Adjuster.
o Claims Process: Investigation, documentation, reserve setting, settlement.
o Coverage Disputes: Reservation of Rights (ROR) letter, Non-waiver agreement,
Declaratory judgment.
o Settlement: Releases, subrogation, appraisal, arbitration .
• Topic 6 – Other Coverages & Options (~6%):
o Businessowners Policy (BOP): Standardized package for small to mid-sized businesses.
o Workers Compensation: Benefits for work-related injuries (Medical, Disability, Rehab,
Death).
o Umbrella/Excess Liability: Extra layer of liability coverage above primary policies .
o **Farm & Ranch, Flood (NFIP), Earthquake endorsements .
1. An insurance producer in Arizona who fails to pay the renewal fee before the license expiration
date is subject to what consequence?
A) Automatic suspension for 30 days only
B) Permanent revocation without reinstatement
C) Forfeiture of the license and all renewal rights
D) A grace period with late fees but possible lapse of authority
Answer: D
, Page 3 of 143
Rationale: Arizona requires renewal every 4 years ; failure to pay results in lapse, though a
reinstatement period with fees may apply, but authority to transact ceases .
2. Which of the following is an essential element required for a valid insurance contract?
A) A written binder filed with the state DOI
B) Notarized signatures from all named insureds
C) An offer and unconditional acceptance by the insurer
D) Consideration provided by both the insured and the insurer
Answer: D
Rationale: Consideration is one of the four essential elements of a legal contract (offer/acceptance,
consideration, competent parties, legal purpose) .
3. The Arizona Department of Insurance and Financial Institutions (DIFI) requires fingerprinting of
applicants primarily to:
A) Create a quick access photo ID card for the producer
B) Conduct a criminal background check for disqualifying offenses
C) Verify the age requirement of 21 years old
D) Track continuing education compliance
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Answer: B
Rationale: DIFI requires background checks to ensure candidates have not committed disqualifying
criminal offenses .
4. The part of an insurance policy that states the insurer’s promise to pay for covered losses is called
the:
A) Declarations
B) Insuring Agreement
C) Exclusions
D) Conditions
Answer: B
Rationale: The Insuring Agreement is the specific section where the insurer outlines coverage and
promises to pay for losses .
5. A fire destroys a commercial building. The insurer pays the actual cash value immediately, but the
insured had a replacement cost policy. The insured must repair the building to collect the difference
between ACV and RC. This process is enforced by the principle of:
A) Subrogation
