Personal Lines Practice Exam.
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1. When submitting an application to sit for this exam, what fee must the applicant pay?
- A. $29
- B. $39
- C. $49
- D. $59
Show answer & explanation
Answer: B
The stated exam fee is $39. The surrounding dollar amounts are plausible-looking distractors.2. During registration, a candidate reviews the exam parameters. Which statement about the examination is accurate based on the official program details?
- A. It has fewer than 100 scoreable questions and a 120-minute limit
- B. It has 100 scoreable questions, a 120-minute limit, and a $39 fee
- C. It has 100 scoreable questions but no fixed time limit
- D. It has 100 scoreable questions, a 120-minute limit, and a $59 fee
Show answer & explanation
Answer: B
The exam has 100 scoreable questions, a 120-minute time limit, and a $39 fee — the only option consistent with all three stated facts.3. Which statement about the exam's fee and time allotment is accurate?
- A. The fee is $39 and the time limit is 120 minutes
- B. The fee is $39 and the time limit is 90 minutes
- C. The fee is $59 and the time limit is 120 minutes
- D. The fee is $59 and the time limit is 90 minutes
Show answer & explanation
Answer: A
The documented fee is $39 and the documented time limit is 120 minutes; only option A pairs both correctly.4. Which of the following correctly pairs the exam's question count with its time allowance?
- A. 100 questions in 90 minutes
- B. 120 questions in 100 minutes
- C. 100 questions in 120 minutes
- D. 120 questions in 120 minutes
Show answer & explanation
Answer: C
The exam pairs 100 scoreable questions with a 120-minute time limit. The other options transpose or alter one of the two figures.5. A candidate reads that the exam is scored on 100 questions within a fixed time window. Which description of the overall exam structure is consistent with the published format?
- A. 100 scoreable questions administered within a 120-minute limit
- B. 120 scoreable questions administered within a 100-minute limit
- C. 100 scoreable questions administered within a 60-minute limit
- D. 60 scoreable questions administered within a 120-minute limit
Show answer & explanation
Answer: A
The format is 100 scoreable questions with a 120-minute limit; option A correctly matches both figures while the others swap or alter them.6. A homeowners policy insures the dwelling under Coverage A for $300,000. Based on the typical relationship between coverages, what is the usual limit for Coverage C personal property?
- A. $30,000
- B. $150,000
- C. $240,000
- D. $300,000
Show answer & explanation
Answer: B
Coverage C personal property is typically set at 50 percent of Coverage A. Fifty percent of $300,000 is $150,000. (Coverage B other structures, by comparison, is typically 10 percent of Coverage A.)7. An insured's parked car is damaged when a hailstorm shatters the windshield and a deer later strikes the vehicle. Which personal auto coverage responds to these losses?
- A. Collision
- B. Comprehensive (other than collision)
- C. Part A liability
- D. Uninsured motorists
Show answer & explanation
Answer: B
Comprehensive (other than collision) pays for losses such as fire, theft, vandalism, glass breakage, flood, and hitting an animal. Collision, by contrast, pays for damage from impact with another vehicle or object or from overturn.8. An insured is injured by an at-fault driver who does carry liability insurance, but whose limits are too low to cover the full loss. Which coverage is designed to respond?
- A. Uninsured motorists coverage
- B. Underinsured motorists coverage
- C. Medical payments coverage
- D. Comprehensive coverage
Show answer & explanation
Answer: B
Underinsured motorists coverage applies when the at-fault driver has insurance but with limits too low to cover the loss. Uninsured motorists coverage instead applies when the at-fault driver has no insurance or is a hit-and-run driver.9. An applicant wants the broadest homeowners protection available, insuring both the dwelling and personal property on an open perils basis. Which form should the producer recommend?
- A. The HO-2 broad form
- B. The HO-3 form
- C. The HO-5 comprehensive form
- D. A named perils dwelling form
Show answer & explanation
Answer: C
The HO-5 comprehensive form insures both the dwelling and personal property on an open perils basis, providing the broadest coverage. The HO-3 insures the dwelling on an open perils basis but personal property only on a named perils basis, and the HO-2 insures both on a named perils basis.10. Under a named perils property policy, who bears the burden of proving that the loss resulted from a covered cause?
- A. The insured, who must show the loss was caused by a covered peril
- B. The insurer, who must demonstrate an exclusion applies
- C. A neutral third-party adjuster appointed by the state
- D. Neither party, because coverage is presumed for all direct losses
Show answer & explanation
Answer: A
In a named perils policy, the burden of proof is on the insured to show the loss was caused by a covered peril. By contrast, an open perils policy covers all direct physical losses except those excluded and shifts the burden to the insurer to demonstrate an exclusion applies.11. A commercial property policy is written with an 80 percent coinsurance requirement. The building is worth $500,000 and the insured carries $300,000 of coverage. A covered loss of $100,000 occurs and the policy has a $1,000 deductible. Applying the coinsurance formula, how much will the insurer pay?
- A. $74,000
- B. $99,000
- C. $100,000
- D. $60,000
Show answer & explanation
Answer: A
The coinsurance formula is amount carried divided by amount required, multiplied by the loss, minus the deductible. The amount required is 80 percent of $500,000, or $400,000. So ($300,000 / $400,000) × $100,000 = $75,000, minus the $1,000 deductible = $74,000.12. An employee is injured on the job and receives statutory workers compensation benefits on a no-fault basis. In most cases, what has the employee given up in exchange for these guaranteed benefits?
- A. The right to receive rehabilitation and death benefits
- B. The right to sue the employer for the work-related injury
- C. The right to have medical expenses paid
- D. The right to a portion of lost wages
Show answer & explanation
Answer: B
Under the exclusive remedy arrangement, the employee generally gives up the right to sue the employer in exchange for guaranteed benefits. Those guaranteed benefits include medical expenses, a portion of lost wages, rehabilitation, and death benefits, all provided on a no-fault basis.13. A homeowners policy is written with Coverage A (dwelling) set at $300,000. Based on the typical relationships built into the form, what is the customary limit for Coverage B, other structures?
- A. $15,000
- B. $30,000
- C. $150,000
- D. $240,000
Show answer & explanation
Answer: B
Coverage B for other structures is typically set at 10 percent of Coverage A. Ten percent of $300,000 is $30,000. By comparison, Coverage C personal property is typically 50 percent of Coverage A, which would be $150,000.14. Following a covered loss, an insured fails to give prompt notice, does nothing to protect the damaged property from further harm, and never submits a signed proof of loss. Which policy provision has the insured failed to satisfy?
- A. The insurable interest requirement
- B. The duties after a loss condition
- C. The principle of indemnity
- D. The subrogation condition
Show answer & explanation
Answer: B
The insured's duties after a loss include giving prompt notice, protecting property from further damage, and submitting a signed proof of loss. The insurable interest requirement concerns suffering a genuine financial loss, indemnity limits recovery to the actual loss, and subrogation lets the insurer pursue a responsible third party.15. An insured is injured by an at-fault driver who does carry auto insurance, but that driver's liability limits are too low to fully cover the insured's damages. Which coverage is designed to respond in this situation?
- A. Uninsured motorists (UM) coverage
- B. Underinsured motorists (UIM) coverage
- C. Medical payments coverage
- D. Comprehensive coverage
Show answer & explanation
Answer: B
Underinsured motorists coverage applies when the at-fault driver has insurance but with limits too low to cover the loss. Uninsured motorists coverage, by contrast, applies when the at-fault driver has no insurance or is a hit-and-run driver.16. A commercial general liability policy is written on an occurrence form. An injury occurs during the policy period, but the claimant does not file suit until three years later, after the policy has expired. How does the occurrence form respond?
- A. It does not respond, because the claim was filed after the policy expired.
- B. It responds, because the injury occurred during the policy period regardless of when the claim is filed.
- C. It responds only if a retroactive date is added by endorsement.
- D. It responds only if an extended reporting period is purchased.
Show answer & explanation
Answer: B
An occurrence form covers injury or damage that occurs during the policy period regardless of when the claim is filed. The retroactive-date and extended-reporting-period features are associated with claims-made forms, which cover only claims first made during the policy period.17. Under a typical workers compensation arrangement, what does an injured employee generally give up in exchange for guaranteed statutory benefits provided on a no-fault basis?
- A. The right to receive medical expense reimbursement.
- B. The right to sue the employer, an arrangement known as the exclusive remedy.
- C. The right to receive any portion of lost wages.
- D. The right to death benefits for surviving dependents.
Show answer & explanation
Answer: B
Workers compensation provides statutory benefits — including medical expenses, lost wages, rehabilitation, and death benefits — on a no-fault basis. In exchange, the employee generally gives up the right to sue the employer, an arrangement known as the exclusive remedy.18. After paying a claim to its insured for damage caused by a negligent third party, an insurer pursues that third party to recover the amount it paid. This right of the insurer is known as which of the following?
- A. Indemnity
- B. Insurable interest
- C. Subrogation
- D. Coinsurance
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Answer: C
Subrogation allows the insurer, after paying a claim, to pursue any third party responsible for the loss to recover the amount paid. This is distinct from indemnity, which limits an insured's recovery to the actual amount of the loss to prevent profiting from a loss.19. In a named perils property policy, who bears the burden of proving that the loss resulted from a covered cause?
- A. The insurer, who must show an exclusion applies
- B. The insured, who must show the loss came from a covered peril
- C. A neutral third-party adjuster
- D. The state insurance department
Show answer & explanation
Answer: B
In a named perils policy the burden of proof is on the insured to show the loss was caused by a covered peril. This contrasts with an open perils policy, where the burden shifts to the insurer to demonstrate that an exclusion applies.20. After paying a claim to its insured, an insurer pursues the negligent third party who caused the loss in order to recover the amount it paid. Which policy provision permits this?
- A. Indemnity
- B. Insurable interest
- C. Subrogation
- D. Coinsurance
Show answer & explanation
Answer: C
Subrogation allows the insurer, after paying a claim, to pursue any third party responsible for the loss to recover the amount paid. This works alongside the principle of indemnity, which limits recovery to the actual amount of the loss so the insured does not profit from a loss.21. Under a personal auto policy, the coverage that pays reasonable medical and funeral expenses for the insured and passengers without regard to who was at fault is best described as which of the following?
- A. Uninsured motorists coverage
- B. Medical payments coverage
- C. Part A liability coverage
- D. Collision coverage
Show answer & explanation
Answer: B
Medical payments coverage pays reasonable medical and funeral expenses regardless of fault for the insured and passengers. Uninsured motorists responds to injury from an at-fault uninsured driver, Part A liability pays for injury or damage the insured is legally responsible to others for, and collision pays for impact or overturn damage to the covered auto.22. An insured leaves the front door of their home unlocked because they figure the insurance company will cover any theft loss anyway. This attitude of carelessness because insurance exists is BEST described as which of the following?
- A. A peril
- B. A moral hazard
- C. A morale hazard
- D. A proximate cause
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Answer: C
A morale hazard reflects indifference or carelessness because insurance exists, such as leaving a door unlocked. A moral hazard, by contrast, involves a dishonest tendency such as intentionally causing a loss.23. Under a named perils homeowners policy, who bears the burden of proof when a claim is filed?
- A. The insurer, who must show that an exclusion applies.
- B. The insured, who must show the loss was caused by a covered peril.
- C. A neutral third-party adjuster appointed by the state.
- D. Neither party; named perils policies do not require proof of causation.
Show answer & explanation
Answer: B
In a named perils policy the burden of proof is on the insured to show the loss was caused by a covered peril. The shift of that burden to the insurer is a feature of open perils policies, where the insurer must demonstrate an exclusion applies.24. A personal auto policy shows split limits of 100/300/50. What does the middle number represent?
- A. $300,000 per person for bodily injury
- B. $300,000 per accident for bodily injury
- C. $300,000 per accident for property damage
- D. $300,000 total policy aggregate for the year
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Answer: B
In split limits of 100/300/50, the numbers represent $100,000 per person for bodily injury, $300,000 per accident for bodily injury, and $50,000 per accident for property damage. The middle figure is therefore the per-accident bodily injury limit.25. Under a homeowners policy, which term best describes the actual cause of a loss, such as a fire or windstorm?
- A. A hazard
- B. A peril
- C. An exclusion
- D. A condition
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Answer: B
A peril is the actual cause of loss, such as fire, windstorm, theft, or lightning. A hazard, by contrast, is a condition that increases the likelihood or severity of a loss.26. An insured leaves the front door unlocked because he figures the insurance company will pay for any theft anyway. This attitude of carelessness because coverage exists is an example of what?
- A. A moral hazard
- B. A physical peril
- C. A morale hazard
- D. A proximate cause
Show answer & explanation
Answer: C
A morale hazard reflects indifference or carelessness because insurance exists, such as leaving a door unlocked. A moral hazard, in contrast, involves a dishonest tendency such as intentionally causing a loss to collect proceeds.27. A homeowner wants the broadest possible protection, insuring both the dwelling and personal property on an open perils basis. Which form provides this?
- A. The HO-2 broad form
- B. The HO-3 form
- C. The HO-5 comprehensive form
- D. A named perils dwelling form
Show answer & explanation
Answer: C
The HO-5 comprehensive form insures both the dwelling and personal property on an open perils basis, providing the broadest coverage. The HO-3 insures the dwelling on an open perils basis but personal property only on a named perils basis, and the HO-2 covers both on a named perils basis.28. A personal auto policy shows split limits of 100/300/50. What does the middle figure, 300, represent?
- A. $300,000 per person for bodily injury
- B. $300,000 per accident for bodily injury
- C. $300,000 per accident for property damage
- D. $300,000 total policy aggregate
Show answer & explanation
Answer: B
Split limits of 100/300/50 mean $100,000 per person for bodily injury, $300,000 per accident for bodily injury, and $50,000 per accident for property damage. The middle number is therefore the per-accident bodily injury limit.29. A commercial general liability policy is written on an occurrence form. When is a claim covered?
- A. Only if the claim is first made during the policy period
- B. If the injury or damage occurs during the policy period, regardless of when the claim is filed
- C. Only if a retroactive date is endorsed
- D. Only during an extended reporting period
Show answer & explanation
Answer: B
An occurrence form covers injury or damage that occurs during the policy period regardless of when the claim is filed. A claims-made form, by contrast, covers only claims first made during the policy period, often subject to a retroactive date.30. A homeowner's covered dwelling is destroyed by a fire that a faulty appliance started. After the insurer pays the claim, it seeks reimbursement from the appliance manufacturer that was responsible. Which policy condition permits the insurer to do this?
- A. Insurable interest
- B. Indemnity
- C. Subrogation
- D. Pro rata other insurance
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Answer: C
Subrogation allows the insurer, after paying a claim, to pursue any third party responsible for the loss to recover the amount paid. Insurable interest concerns whether the insured suffers a genuine financial loss, indemnity limits recovery to the actual loss, and the pro rata condition divides a loss among multiple insurers.31. A liability policy states that it responds to claims for injury or damage that occurs during the policy period, no matter when the claim is eventually reported. This describes which type of coverage trigger?
- A. A claims-made form
- B. An occurrence form
- C. A retroactive-date form
- D. An extended reporting form
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Answer: B
An occurrence form covers injury or damage that occurs during the policy period regardless of when the claim is filed. A claims-made form, by contrast, covers only claims first made during the policy period and is often subject to a retroactive date.32. An insured intentionally sets fire to insured property in order to collect the policy proceeds. This dishonest tendency is an example of which of the following?
- A. A morale hazard
- B. A moral hazard
- C. A physical peril
- D. A proximate cause
Show answer & explanation
Answer: B
A moral hazard arises from a dishonest tendency, such as intentionally causing a loss to collect proceeds. A morale hazard, in contrast, reflects indifference or carelessness because insurance exists, such as leaving a door unlocked; a peril is the actual cause of loss.33. A homeowner has an HO-3 policy. During a covered claim, how does the coverage basis differ between the dwelling (Coverage A) and personal property (Coverage C)?
- A. Both the dwelling and personal property are covered on an open perils basis.
- B. The dwelling is covered on an open perils basis, while personal property is covered on a named perils basis.
- C. Both the dwelling and personal property are covered on a named perils basis.
- D. The dwelling is covered on a named perils basis, while personal property is covered on an open perils basis.
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Answer: B
The HO-3 insures the dwelling and other structures on an open perils basis but insures personal property on a named perils basis. The HO-5 is the form that extends open perils to both.34. A driver's parked car is damaged when a tree branch falls on it during a storm, and separately the vehicle's windshield is cracked by a flying rock. Which personal auto coverage responds to these losses?
- A. Collision, because the vehicle was struck by objects.
- B. Comprehensive (other than collision).
- C. Part A liability.
- D. Medical payments coverage.
Show answer & explanation
Answer: B
Comprehensive (other than collision) pays for losses such as fire, theft, vandalism, glass breakage, flood, and hitting an animal. Collision, by contrast, pays for damage from impact with another vehicle or object or from overturn, which does not describe a falling branch or glass breakage.35. A commercial property policy contains an 80 percent coinsurance clause. The insured carries less than the required amount. Which of the following correctly describes how the coinsurance penalty amount is calculated?
- A. Amount required divided by amount carried, multiplied by the loss, plus the deductible.
- B. Amount carried divided by amount required, multiplied by the loss, minus the deductible.
- C. The full loss minus the deductible, with no proportional adjustment.
- D. Amount carried multiplied by amount required, divided by the loss.
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Answer: B
The coinsurance formula is amount carried divided by amount required, multiplied by the loss, minus the deductible. Commercial property coinsurance commonly requires the insured to carry 80, 90, or 100 percent of the property's value.