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Pearson Vue Property Insurance Exam
Practice Questions with Verified Answers
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Consist of 50 multichoice Questions with Answers
- S is purchasing a Commercial Property policy to cover a commercial build- ing with a replacement cost of $100,000. The policy includes an 80 percent Coinsurance clause. To avoid a coinsurance penalty in the event of a partial loss, S should purchase a policy with minimum limits of AT LEAST which of the following amounts?
A. $100, B. $90, C. $80, D. $20, Answer: C
- The MAXIMUM amount a policy will pay in the event of a loss is called the:
A. coinsurance amount
B. deductible
C. limit of liability
D. pro rata return Answer: C
- The National Flood Insurance Program provides coverage for losses caused by all of the following occurrences EXCEPT:
A. mudslides
B. runoff from heavy rain
C. overflow of tidal waters
D. water-main breakage Answer: D
D. Barber shop Answer: D
- During a tornado, a barn is destroyed when a section of its wall is blown down, knocking over a lantern, which sets the barn on fire. The proximate cause of loss is the:
A. fire
B. collapse of the wall
C. tornado
D. smoke Answer: C
- A fire in an insured's restaurant burns the kitchen walls and causes smoke damage to the entire interior. Water used to extinguish the fire causes exten- sive damage to floors and furnishings. The water damage is best described as:
A. a time element loss
B. a consequential loss
C. a direct loss
D. an indirect loss Answer: C
- Which of the following terms is defined as the uncertainty of future out- come?
A. Risk
covered under a Personal Articles Floater. Damage to the statue would be covered in all of the following situations EXCEPT:
A. it was accidentally damaged by a housekeeper
B. it was damaged in a flood
C. a guest of the insured maliciously damaged it
D. the insured threw it Answer: D
- Which of the following sources may be used to provide property insurabil- ity information?
A. Police records
B. Physical inspections
C. Checking account statements
D. Lie detector tests
Answer: B
- All of the following perils are covered under a Building and Business Personal Property Coverage Form with a Causes of Loss-Basic Form attached
- In order to issue a written binder for a commercial property policy, what is the MINIMUM consideration a producer must secure from an applicant?
A. A promise to pay the premium
B. A signature on a premium finance agreement
C. Payment of six months' premium
D. Payment of twelve months' premium Answer: A
- An insured owns a set of six drawing pens designed and used by Benjamin Franklin. Each pen is worth $1,000 alone, but the set is worth $12,000. One pen is destroyed by a covered peril. Under the Pair and Set clause, the insurer will pay a MAXIMUM of which of the following amounts?
A. $1, B. $2,
C. $7,
D. $12,
Answer: C
- Pro-rata cancellation occurs when:
A. a policy is nonrenewed
B. a mortgage has been satisfied
C. an insured cancels a policy at inception
D. an insurer cancels a policy at any time Answer: D
- Inland Marine insurance is commonly used to insure all of the following items EXCEPT:
A. automobiles
B. stamps
C. camera equipment
C. a representation
D. an affidavit Answer: B
- Which of the following terms BEST describes continuous and repeated exposure to conditions that are neither expected nor intended by the insured?
A. Negligence
B. Liability
C. Accident
D. Occurrence Answer: D
- Which of the following statements about a mortgagee's rights under the Dwelling Property Basic Form (DP-1) is INCORRECT?
A. No act by the insured will jeopardize the mortgagee's rights.
B. The mortgagee may file a Proof of Loss if the insured fails to do so.
C. The mortgagee is entitled to receive prior notice of a policy's cancellation.
D. The mortgagee may abandon the insured property to the insurer. Answer: D
- A Commercial Property policy specifies which of the following responsi- bilities as a duty of the insured?
A. To return the policy if it is canceled by the insurer
B. To provide a sworn Proof of Loss statement if requested by the company
C. To pay the mortgagee in full in the event of a total loss
D. To pay premiums within thirty days after receiving an invoice Answer: B
- An insured's HO-2 Form has a $100,000 coverage limit on the dwelling and a $50,000 Personal Property limit with the standard deductible. If a sailboat valued at $1,500 is stolen from the insured's premises, the insured will collect a MAXIMUM of which of the following amounts?
A. $1,
B. Insuring Agreement
C. Conditions
D. Exclusions Answer: B
- All of the following options are examples of insurable interest EXCEPT:
A. a person's interest in property she is buying on contract
B. a tenant's interest in improvements she has made to a leased building
C. a TV repairman's interest in a customer's TV which has been repaired but is still on premises
D. an individual's interest in property her parents will someday leave to her Answer: D
- A family takes their 50 horsepower outboard motor boat to the lake on a trailer towed behind their personal auto. The pleasure boat is appropriately
covered for physical damage under which of the following policies?
A. Dwelling
B. Homeowners
C. Boatowners
D. Yacht Answer: C
- Which of the following policy forms would BEST protect a business that must keep operating after a loss?
A. Extra Expense
B. Business Income
C. Gross Earnings
D. Contingent Business Interruption Answer: A
- Which of the following perils is covered by Broad Form perils but is not
- A building adjacent to an insured's business is severely damaged by fire. Because of the nature of the damage to the adjoining property, the insured is denied access to the business by the fire department. If the insured's property is covered under a Business Income Coverage Form, the insurer will cover the loss of earnings for a MAXIMUM of:
A. three weeks
B. thirty days
C. sixty days
D. six months Answer: A
- Which of the following statements is CORRECT about the Fair Credit Reporting Act?
A. It requires an insurer to send to an applicant a copy of the applicant's credit report.
B. It requires an insurer to obtain a credit report on an applicant.
C. It allows an insurer to obtain a credit report without the applicant's permis- sion.
D. It provides a method for an applicant to correct any incorrect information in the credit report. Answer: D
- The procedure for resolving a disagreement between an insured and an in- surer about a loss is described in which of the following parts of an insurance policy?
A. Declarations
B. Insuring Agreement
C. Conditions
D. Exclusions Answer: C
