AU 61 EXAM QUESTIONS AND
ANSWERS. VERIFIED 2025/2026.
Which aspect of a property policy is least likely to vary among different carriers? - ANS Policy
conditions
Output Policy - ANS A streamlined policy combining separate types of coverage (ie building,
BPP, BI/EE) all on the same declarations page and same insuring agreement
4 Categories of Package Policies - ANS Single combination policies
Minimum requirement combination policies
Indivisible combination policies
Nonstandard combination policies
Simple Combination Policy - ANS Each line is quoted monoline and combined for ease. No
discount applies, and UW may use a more restricrive form
Minimum Requirement Combination Policy - ANS Package policy with a slight discount
applied if the insured meets certain minimums in coverage to reduce chances of adverse
selection
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,Indivisible Combination Policy - ANS Package policy offering coverage as an all or nothing
approach. Little room for customization, and also helps reduce adverse selection. Common
example is a BOP
Nonstandard Combination Policy - ANS Package policy that is usually manuscript, written to
the insured's requirements. Allows maximum flexibility but is usually limited to large accounts
Predictive Modeling - ANS A process in which historical data based on behaviors and events
are blended with multiple variables and used to construct models of anticipated future
outcomes. In short, it kinda forecasts results given a set of data
Insurable Interest - ANS An interest in the subject of insurance policy that is not unduly
remote, and would cause the interested party to suffer financial loss if an insured event
occurred
Factual Expectancy - ANS A situation in which a party experiences an economic advantage if
an insured event does not occur, or, conversely, economic harm of the event does occur
Fee Simple Estate - ANS A full ownership interest in property with the unconditional right to
dispose of it. Passes to the estate when the owner dies
Joint Tenancy - ANS A concurrently owned and undivided interest in an estate that transfers
to a surviving joint tenant upon the death of the other. Presents no special problems to the
underwriter
Tenancy by the Entirety - ANS A special type of joint tenancy applicable only to married
couples in specific states. When one passes, it transfers entirely to the other through the rights
of survivorship. Underwritten much like a fee simple estate
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,Life Tenant (Life Estate) - ANS A person entitled to exclusive possession of real property and
to all income the land produces for the duration of that person's life, or the life of someone
else. Terminates on death and does not pass to the estate. It can be sold, however ownership
passes to the remainderman on the death of the original life tenant
Remainder Estate - ANS The right granted an individual (a remainderman) to hold an estate
following the death of a life tenant
Remainderman - ANS The individual who acquires an estate following the death of a life
tenant and who acquires a fee simple property estate in the property
Replacement Cost - ANS The cost to repair or replace property using new materials of like
kind and quality, with no deduction for depreciation
Actual Cash Value (ACV) - ANS Cost to replace property with new property of like kind and
quality less depreciation.
Functional Valuation Method - ANS A valuation method in which the insurer is required to
pay no more than the cost to repair or replace the damaged or destroyed property that is its
functional equivalent
Insurance to Value - ANS Insurance written for an amount approximating the full value of the
asset(s) insured
Coinsurance Condition - ANS A condition that requires the insured to carry insurance equal to
at least a specified percentage of the Actual Cash Value (ACV) of the property insured
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, Insurance-to-Value Provision - ANS A privision in property insurance policies thay encourages
insureds to purchase an amount of insurance that is equal to, or close to, the value of the
covered property
Agreed Value Optional Coverage - ANS Optional coverage that suspends the Coinsurance
condition if the insured carries the amount of insurance agreed to by the insurer and insured
Blanket Insurance - ANS Insurance that covers either of the following with one limit of
insurance: (1) one type of property in one or more separately rated buildings or (2) two or more
types of property in one or more separately rated buildings
Blanket Limit - ANS The maximum dollar amount the insurer will pay for two or more items
or classes of property at one or more locations
Inflation Guard Optional Coverage - ANS Coverage for the effects of inflation that
automatically increases the limit of insuranve by the percentage of annual increase shown in
the declarations. Protects against a policy paying too little because of coinsurance clause, if
insured value of property is insufficient due to inflation
Agreed Value Method - ANS A method of valuing property in which the insurer and the
insured agree, at the time the policy is written, on the maximum amount that will be paid in the
event of a total loss
Market Value - ANS The price at which a particular piece of property could be sold on the
open market by an unrelated buyer and seller
Measurements of Potential Loss Severity - ANS (1) Policy amount
(2) Amount subject
(3) Normal Loss Expectancy (NLE)
4 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
ANSWERS. VERIFIED 2025/2026.
Which aspect of a property policy is least likely to vary among different carriers? - ANS Policy
conditions
Output Policy - ANS A streamlined policy combining separate types of coverage (ie building,
BPP, BI/EE) all on the same declarations page and same insuring agreement
4 Categories of Package Policies - ANS Single combination policies
Minimum requirement combination policies
Indivisible combination policies
Nonstandard combination policies
Simple Combination Policy - ANS Each line is quoted monoline and combined for ease. No
discount applies, and UW may use a more restricrive form
Minimum Requirement Combination Policy - ANS Package policy with a slight discount
applied if the insured meets certain minimums in coverage to reduce chances of adverse
selection
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,Indivisible Combination Policy - ANS Package policy offering coverage as an all or nothing
approach. Little room for customization, and also helps reduce adverse selection. Common
example is a BOP
Nonstandard Combination Policy - ANS Package policy that is usually manuscript, written to
the insured's requirements. Allows maximum flexibility but is usually limited to large accounts
Predictive Modeling - ANS A process in which historical data based on behaviors and events
are blended with multiple variables and used to construct models of anticipated future
outcomes. In short, it kinda forecasts results given a set of data
Insurable Interest - ANS An interest in the subject of insurance policy that is not unduly
remote, and would cause the interested party to suffer financial loss if an insured event
occurred
Factual Expectancy - ANS A situation in which a party experiences an economic advantage if
an insured event does not occur, or, conversely, economic harm of the event does occur
Fee Simple Estate - ANS A full ownership interest in property with the unconditional right to
dispose of it. Passes to the estate when the owner dies
Joint Tenancy - ANS A concurrently owned and undivided interest in an estate that transfers
to a surviving joint tenant upon the death of the other. Presents no special problems to the
underwriter
Tenancy by the Entirety - ANS A special type of joint tenancy applicable only to married
couples in specific states. When one passes, it transfers entirely to the other through the rights
of survivorship. Underwritten much like a fee simple estate
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,Life Tenant (Life Estate) - ANS A person entitled to exclusive possession of real property and
to all income the land produces for the duration of that person's life, or the life of someone
else. Terminates on death and does not pass to the estate. It can be sold, however ownership
passes to the remainderman on the death of the original life tenant
Remainder Estate - ANS The right granted an individual (a remainderman) to hold an estate
following the death of a life tenant
Remainderman - ANS The individual who acquires an estate following the death of a life
tenant and who acquires a fee simple property estate in the property
Replacement Cost - ANS The cost to repair or replace property using new materials of like
kind and quality, with no deduction for depreciation
Actual Cash Value (ACV) - ANS Cost to replace property with new property of like kind and
quality less depreciation.
Functional Valuation Method - ANS A valuation method in which the insurer is required to
pay no more than the cost to repair or replace the damaged or destroyed property that is its
functional equivalent
Insurance to Value - ANS Insurance written for an amount approximating the full value of the
asset(s) insured
Coinsurance Condition - ANS A condition that requires the insured to carry insurance equal to
at least a specified percentage of the Actual Cash Value (ACV) of the property insured
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, Insurance-to-Value Provision - ANS A privision in property insurance policies thay encourages
insureds to purchase an amount of insurance that is equal to, or close to, the value of the
covered property
Agreed Value Optional Coverage - ANS Optional coverage that suspends the Coinsurance
condition if the insured carries the amount of insurance agreed to by the insurer and insured
Blanket Insurance - ANS Insurance that covers either of the following with one limit of
insurance: (1) one type of property in one or more separately rated buildings or (2) two or more
types of property in one or more separately rated buildings
Blanket Limit - ANS The maximum dollar amount the insurer will pay for two or more items
or classes of property at one or more locations
Inflation Guard Optional Coverage - ANS Coverage for the effects of inflation that
automatically increases the limit of insuranve by the percentage of annual increase shown in
the declarations. Protects against a policy paying too little because of coinsurance clause, if
insured value of property is insufficient due to inflation
Agreed Value Method - ANS A method of valuing property in which the insurer and the
insured agree, at the time the policy is written, on the maximum amount that will be paid in the
event of a total loss
Market Value - ANS The price at which a particular piece of property could be sold on the
open market by an unrelated buyer and seller
Measurements of Potential Loss Severity - ANS (1) Policy amount
(2) Amount subject
(3) Normal Loss Expectancy (NLE)
4 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
