ALABAMA INSURANCE: PROPERTY
AND CASUALTY TEST QUESTIONS AND
ANSWERS
An incorporated insurance company which is run by a board of directors is known as - correct answer
✔✔a capital-stock company
Which of the following statements is true regarding a binder?
a. a binder guarantees that a policy will be issued by the insurance company.
b. a binder guarantees coverage and that a policy will be issued
c. a binder does not guarantee that a policy will be issued; it only guarantees temporary coverage.
d. a binder does not afford any coverage, it is merely a snapshot of the coverage in effect at the time it is
issued. - correct answer ✔✔c
Liability imposed by law when someone is involved in an inherently dangerous activity or condition is
known as - correct answer ✔✔absolute liability
Which of the following elements of a contract does the premium represent?
a. offer and acceptance
b. competent parties
c. valid consideration
d. legal purpose - correct answer ✔✔c
Contracts written for a specified amount as agreed to by both the insured and insurer at policy inception
are known as - correct answer ✔✔valued or stated value contracts
All of the following must be present to establish negligence except
a. duty owed and breach of that duty
, b. a proximate cause of loss
c. damages must exist
d. hazardous operations are involved - correct answer ✔✔d
The clause of an insurance contract that provides for equitable handling of loss settlement disputes is
the - correct answer ✔✔appraisal or arbitration clause
The portion of the premium due the insurance company for coverage afforded under the insurance
contract is the - correct answer ✔✔earned premium
Coverage C under the dwelling policy
a. will pay for losses to a detached garage
b. will provide worldwide coverage up to 10% of the coverage C amount
c. pays up to 10% of the Coverage A limit for loss of rental value
d. pays for the expense of removing debris resulting from a covered property loss - correct answer ✔✔b
The coverage provided only by the DP-2 and DP-3 dwelling fire forms is - correct answer ✔✔additional
living expense
Your condominium association assesses your client $5000 for fire damage to the associations laundry
building which was not covered by the association property policy. Your clients unendorsed homeowner
policy will pay - correct answer ✔✔$1000 because this is the max amount available without
endorsement
The dwelling fire form which affords coverage for only the perils of fire, lightning, and internal explosion
is the - correct answer ✔✔DP-1 Basic form
Allen has a personal auto policy with a $50,000 combined single limit of liability. He borrows Ken's car
and strikes a pedestrian. Ken has a $100,000 combined single limit of liability. How much will Allen's
insurer pay if a $125,000 judgement is rendered against Allen? - correct answer ✔✔$25,000
AND CASUALTY TEST QUESTIONS AND
ANSWERS
An incorporated insurance company which is run by a board of directors is known as - correct answer
✔✔a capital-stock company
Which of the following statements is true regarding a binder?
a. a binder guarantees that a policy will be issued by the insurance company.
b. a binder guarantees coverage and that a policy will be issued
c. a binder does not guarantee that a policy will be issued; it only guarantees temporary coverage.
d. a binder does not afford any coverage, it is merely a snapshot of the coverage in effect at the time it is
issued. - correct answer ✔✔c
Liability imposed by law when someone is involved in an inherently dangerous activity or condition is
known as - correct answer ✔✔absolute liability
Which of the following elements of a contract does the premium represent?
a. offer and acceptance
b. competent parties
c. valid consideration
d. legal purpose - correct answer ✔✔c
Contracts written for a specified amount as agreed to by both the insured and insurer at policy inception
are known as - correct answer ✔✔valued or stated value contracts
All of the following must be present to establish negligence except
a. duty owed and breach of that duty
, b. a proximate cause of loss
c. damages must exist
d. hazardous operations are involved - correct answer ✔✔d
The clause of an insurance contract that provides for equitable handling of loss settlement disputes is
the - correct answer ✔✔appraisal or arbitration clause
The portion of the premium due the insurance company for coverage afforded under the insurance
contract is the - correct answer ✔✔earned premium
Coverage C under the dwelling policy
a. will pay for losses to a detached garage
b. will provide worldwide coverage up to 10% of the coverage C amount
c. pays up to 10% of the Coverage A limit for loss of rental value
d. pays for the expense of removing debris resulting from a covered property loss - correct answer ✔✔b
The coverage provided only by the DP-2 and DP-3 dwelling fire forms is - correct answer ✔✔additional
living expense
Your condominium association assesses your client $5000 for fire damage to the associations laundry
building which was not covered by the association property policy. Your clients unendorsed homeowner
policy will pay - correct answer ✔✔$1000 because this is the max amount available without
endorsement
The dwelling fire form which affords coverage for only the perils of fire, lightning, and internal explosion
is the - correct answer ✔✔DP-1 Basic form
Allen has a personal auto policy with a $50,000 combined single limit of liability. He borrows Ken's car
and strikes a pedestrian. Ken has a $100,000 combined single limit of liability. How much will Allen's
insurer pay if a $125,000 judgement is rendered against Allen? - correct answer ✔✔$25,000
