Welcome to our comprehensive bank of 50 Property & Casualty (P&C) Insurance practice exam questions.
The Property and Casualty state licensing exam tests your ability to apply policy forms, liability concepts, and regulatory rules to real-world scenarios. To help you evaluate your test readiness, these 50 original questions cover the core national syllabus tested by major testing administrators (PSI, Pearson VUE, and Prometric).
Every question includes four answer choices, a verified answer key, a full conceptual explanation, and a high-yield Exam Trap tip highlighting common test-day mistakes.
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Answered: 0/50
1
General Insurance Principles
Questions 1 to 10 · Risk, Hazards, Contracts & Indemnity
1General Insurance Principles
Which of the following scenarios represents an insurable pure risk?
2General Insurance Principles
A homeowner chooses a $2,500 property deductible instead of a $500 deductible to lower their annual premium. Which risk management technique does this decision illustrate?
3General Insurance Principles
In property and casualty insurance terminology, which of the following correctly pairs a peril with a hazard?
4General Insurance Principles
An insured regularly leaves their vehicle unlocked with the ignition keys on the dashboard while shopping, stating: "If it gets stolen, my insurance company will buy me a new car." What type of hazard does this attitude represent?
5General Insurance Principles
Under the principle of indemnity, what is the primary purpose of a property and casualty insurance contract?
6General Insurance Principles
When must an insurable interest exist in property and casualty insurance contracts for a claim to be legally enforceable?
7General Insurance Principles
After an insurance company pays a $15,000 claim to an insured whose parked vehicle was totaled by an at-fault driver, the insurer sues that at-fault driver to recover its payment. What legal right is the insurer exercising?
8General Insurance Principles
Because insurance contracts are drafted exclusively by the insurer with terms accepted on a "take-it-or-leave-it" basis by the applicant, courts rule that any ambiguous policy wording must be interpreted in favor of the policyholder. What contract characteristic does this describe?
9General Insurance Principles
An insured pays an annual auto premium of $900. Three weeks into the policy term, the vehicle is struck by an uninsured driver, resulting in a $45,000 claim payout. This unequal exchange of monetary value between the parties illustrates that insurance is a(n):
10General Insurance Principles
An applicant intentionally states on a property application that a building is equipped with a functioning central burglar alarm to obtain a discount, knowing that no alarm system has ever been installed. This statement constitutes a:
2
Property Insurance & Homeowners Policies
Questions 11 to 20 · HO Forms, Dwelling DP Policies & Coinsurance
11Property & Homeowners Policies
Under a standard ISO HO-3 (Special Form) homeowners policy, what is the perils coverage structure for the dwelling (Coverage A) versus personal property (Coverage C)?
12Property & Homeowners Policies
Which Homeowners policy form is designed specifically for tenants renting an apartment or single-family residence?
13Property & Homeowners Policies
How does an HO-5 (Comprehensive Form) policy differ primarily from an HO-3 (Special Form) policy?
14Property & Homeowners Policies
A homeowner owns an older Victorian home with handcrafted woodwork and ornate plaster walls where the cost to replace the structure ($450,000) significantly exceeds the current market value ($180,000). Which policy form is tailored for this scenario?
15Property & Homeowners Policies
Which dwelling policy form provides open-perils protection for the dwelling structure and named-perils protection for personal property?
16Property & Homeowners Policies
A commercial warehouse insured for $400,000 suffers a partial roof collapse resulting in a $60,000 loss. The replacement cost of the building is $600,000, and the policy includes an 80% coinsurance clause. Ignoring any deductible, how much will the insurer pay?
17Property & Homeowners Policies
In property loss adjustment, which valuation method calculates indemnity as current replacement cost minus physical depreciation?
18Property & Homeowners Policies
Under Homeowners policy Coverage C (Personal Property), which of the following categories of property is subject to a specific internal sub-limit for the peril of theft?
19Property & Homeowners Policies
A severe kitchen fire renders a single-family home uninhabitable for three months while repairs are underway. The insured incurs $12,000 in hotel bills and restaurant expenses. Under which Homeowners coverage section will these expenses be reimbursed?
20Property & Homeowners Policies
Which of the following perils is explicitly EXCLUDED from standard unendorsed Homeowners (HO-2, HO-3, HO-5) and Dwelling (DP-1, DP-2, DP-3) policies?
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3
Casualty, Liability & Personal Auto
Questions 21 to 30 · Negligence, PAP Coverages A–F & Split Limits
21Casualty, Liability & Personal Auto
Which of the following is NOT one of the four essential elements required to establish legal negligence in a civil liability tort claim?
22Casualty, Liability & Personal Auto
A commercial contractor conducts controlled dynamite blasting operations near a highway. Even though the contractor exercised all reasonable care and adhered to safety regulations, vibrations cause structural fractures in an adjacent commercial building. Under which legal doctrine will the contractor be held liable?
23Casualty, Liability & Personal Auto
An employee of an electrical supply company causes a multi-vehicle accident while delivering commercial supplies during regular business hours using a company van. The injured parties sue both the driver and the employer. On what legal basis is the employer liable?
24Casualty, Liability & Personal Auto
An insured carries a Personal Auto Policy with split liability limits of 25/50/25. The insured negligently collides with another car carrying two passengers, causing bodily injury claims of $30,000 for Passenger 1, $15,000 for Passenger 2, and $28,000 in vehicle property damage. What is the maximum total amount the insurer will pay for this accident?
25Casualty, Liability & Personal Auto
Under Part A (Liability Coverage) of the Personal Auto Policy (PAP), how are legal defense costs handled when the insurer defends the insured against a covered lawsuit?
26Casualty, Liability & Personal Auto
Under Part B (Medical Payments Coverage) of the Personal Auto Policy, which of the following individuals would be eligible for coverage following a vehicle collision?
27Casualty, Liability & Personal Auto
Which of the following situations is covered under Part C (Uninsured Motorists Coverage) of the standard Personal Auto Policy?
28Casualty, Liability & Personal Auto
An insured is driving on a rural two-lane highway when a deer leaps into the roadway and collides with the front bumper, causing $6,500 in body damage. Under Part D (Coverage for Damage to Your Auto), this loss is classified as:
29Casualty, Liability & Personal Auto
Under the standard policy territory provisions of the Personal Auto Policy, where is physical and liability coverage valid?
30Casualty, Liability & Personal Auto
How does a Personal Umbrella policy function when a covered personal liability loss is excluded by underlying primary policies (such as a homeowners policy) but covered under the broader terms of the umbrella?
4
Commercial Packages & Workers' Compensation
Questions 31 to 40 · CGL Triggers, Occurrence vs. Claims-Made & BOP
31Commercial Lines & Workers' Comp
Under Coverage A of a Commercial General Liability (CGL) policy, which of the following exposures is covered?
32Commercial Lines & Workers' Comp
A retail competitor files a civil lawsuit against a business owner alleging that the owner made defamatory spoken statements at a trade conference that destroyed the competitor's reputation. Under which section of the CGL policy would defense and indemnity be provided?
33Commercial Lines & Workers' Comp
What is the primary difference between an Occurrence form and a Claims-Made form in Commercial General Liability policies?
34Commercial Lines & Workers' Comp
Under a Claims-Made CGL policy with a Retroactive Date of January 1, 2024, an incident occurs on November 15, 2023, and the formal claim is served on the insured on March 1, 2024. How will the insurer respond?
35Commercial Lines & Workers' Comp
A business owner decides to retire and cancels their Claims-Made CGL policy. To protect against future lawsuits stemming from past work performed while the business was operational, what should the business owner purchase?
36Commercial Lines & Workers' Comp
A plumbing contractor installs a commercial water heater in February. In June, four months after completing the job and leaving the premises, a faulty valve ruptures and floods the building. Under which CGL liability category will this claim be settled?
37Commercial Lines & Workers' Comp
Under the statutory doctrine of Exclusive Remedy in Workers' Compensation insurance, what compromise is established between employers and injured employees?
38Commercial Lines & Workers' Comp
Which of the following is NOT one of the four statutory benefit categories mandated under standard state Workers' Compensation programs?
39Commercial Lines & Workers' Comp
Under the Common Policy Conditions of a Commercial Package Policy (CPP), which named insured possesses the legal authority to request policy changes, receive cancellation notices, and pay premiums?
40Commercial Lines & Workers' Comp
A Businessowners Policy (BOP) is a pre-packaged commercial policy designed specifically for which type of commercial risk?
5
State Regulations, Ethics & Traps
Questions 41 to 50 · Commissioner Authority, FAIR Plans & Unfair Practices
41Regulations & Ethics
State insurance regulators (Commissioners, Directors, or Superintendents) hold broad administrative power. Which of the following is an action that state regulators CANNOT legally take?
42Regulations & Ethics
During a sales presentation, an agent tells a prospective client: "You can purchase insurance from our carrier without worry because the State Guaranty Association guarantees full payment of claims if we ever go bankrupt." Why is this statement a violation of insurance law?
43Regulations & Ethics
What is the primary function of state FAIR (Fair Access to Insurance Requirements) Plans in property insurance markets?
44Regulations & Ethics
An insurance producer convinces a policyholder to lapse an existing homeowners policy and purchase a new one with a different carrier by making false and misleading comparisons regarding covered perils. This illegal practice is defined as:
45Regulations & Ethics
A producer promises a commercial client that if they purchase a $10,000 commercial liability policy, the producer will personally return $500 of their commission in cash after policy delivery. What prohibited practice has occurred?
46Regulations & Ethics
An insurance agent deposits client premium checks directly into their agency's general operating checking account and uses those funds to pay agency office rent before forwarding net balances to the insurer. What violation of fiduciary duty has occurred?
47Regulations & Ethics
Property is insured simultaneously by Company A for $50,000 and Company B for $150,000 under policies with identical pro-rata liability clauses. A covered fire causes a $20,000 loss. How much will Company A pay?
48Regulations & Ethics
In standard property insurance contracts, how does "vacancy" differ fundamentally from "unoccupancy"?
49Regulations & Ethics
A retail store owner arrives at work and finds a padlock cut off the rear storage door, with forced entry tool marks on the frame and $8,000 in electronic merchandise missing. Under standard commercial crime definitions, this event is classified as:
50Regulations & Ethics
What is the key legal difference between policy "cancellation" and "nonrenewal"?
Evaluating Your Score
How did you perform on these 50 questions? While passing scores commonly range between 70% and 75% in many jurisdictions, passing standards vary by state and license type. Always check your official state candidate handbook to confirm the exact passing standard for your exam.
| Score Range | Percentage | Diagnostic Assessment | Recommended Next Step |
|---|---|---|---|
| 43 – 50 Correct | 86% – 100% | Strong Exam Readiness | Review your state-specific regulatory chapter and sit for a full timed mock test. |
| 35 – 42 Correct | 70% – 84% | Borderline Passing | Review our P&C Study Guide to reinforce weak areas in commercial triggers or coinsurance math. |
| Fewer than 35 Correct | Below 70% | Foundational Review Needed | Revisit core insurance vocabulary and follow our structured 2-Week Study Plan. |
The 3-Step Forensic Review Method
Simply looking at the correct letter answer does not prepare you for the state exam. Test makers alter scenarios and rephrase options. To ensure permanent retention, analyze every missed question with this three-step framework:
1
Classify the Error
Did you miss the question due to a vocabulary gap (e.g., confusing moral vs. morale), misreading the scenario, or falling for a qualifying word like EXCEPT?
2
Disqualify the Distractors
Force yourself to explain aloud why each of the other three answer options is incorrect. If you cannot explain why Option B is false, you have not fully mastered the concept.
3
Create an "Anti-Trap" Note
Write a one-sentence rule on a digital or physical index card summarizing the concept (e.g., "Under an HO-3, dwelling is open perils but personal property is always named perils.").
Facing an upcoming test retake? Read our breakdown of state retake waiting periods in What Happens If You Fail the Insurance Exam or review how P&C licenses compare to Life & Health in Life vs. Health vs. P&C License.
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