Property & Casualty Insurance License Exam Study Guide

The numbers you need to know

The Property & Casualty exam gives you 130 scoreable questions to answer in 150 minutes, with a passing score of 70%. The exam fee is $49.

What 70% actually means for you

Seventy percent of 130 scoreable questions works out to 91 correct answers. Framed the other way: you can miss up to 39 questions and still pass. That is a generous margin — do not let one confusing scenario question rattle you.

Pacing strategy

• 150 minutes for 130 questions gives you a little over one minute per question (about 69 seconds).
• Definition and vocabulary questions (peril vs. hazard, subrogation, indemnity) should take 20–30 seconds — bank that time.
• Spend the banked time on calculation questions like coinsurance penalties and split-limit payouts, which reward careful arithmetic.
• Flag and skip anything that stalls you past two minutes; with a 39-question cushion, momentum matters more than any single item.

Peril vs. hazard: keep them straight

A peril is the actual cause of loss — fire, windstorm, theft, or lightning. A hazard is any condition that increases the likelihood or severity of a loss. The exam loves to swap these: the fire is the peril; the oily rags stacked next to the furnace are the hazard.

Moral vs. morale hazard

• Moral hazard — a dishonest tendency, such as intentionally causing a loss to collect insurance proceeds. Think morals = dishonesty.
• Morale hazard — indifference or carelessness because insurance exists, such as leaving a door unlocked. Think attitude, not intent.

Memory hook: moral = malicious, morale = lazy.

Named perils vs. open perils — who has to prove what

• In a named perils policy, the burden of proof is on the insured to show the loss was caused by a peril listed in the policy.
• An open perils policy covers all direct physical losses except those specifically excluded — which shifts the burden of proof to the insurer to demonstrate an exclusion applies.

Burden of proof follows the structure of the form: if the policy lists what is covered, you prove your loss is on the list; if it lists what is not covered, the insurer proves your loss is on that list.

Exclusions that appear even in open perils forms

Open perils is broad, not unlimited. Common exclusions include flood, earthquake, war, nuclear hazard, wear and tear, and intentional acts. Expect at least one question where the tempting wrong answer assumes an open perils form covers flood.

Proximate cause

Proximate cause is the primary event that sets in motion an unbroken chain of events leading to the loss. Example logic the exam tests: if a covered peril starts the chain, damage at the end of that unbroken chain traces back to it.

Time management is one of the most controllable factors on exam day. Because you have 150 minutes for 130 questions, you can afford a deliberate two-pass approach rather than agonizing over any single item.

A two-pass approach

1. First pass — answer what you know. Move through the exam quickly, answering every question you're confident about. Flag anything that requires calculation or careful reading of a scenario.
2. Second pass — return to flagged items. With your confident answers banked, spend your remaining time on the questions you flagged. Never leave a question blank; an educated guess is better than no answer.

Watch your budget

Aim to keep your average near one minute per question so you preserve a buffer. Since 70% is the passing bar, prioritize securing the questions within your strengths before burning minutes on the hardest few. A steady pace across the full 150 minutes lets you review flagged answers without rushing at the end.

The six coverages — learn them as a ladder

Every homeowners policy contains six coverage parts:

• Coverage A — Dwelling
• Coverage B — Other structures
• Coverage C — Personal property
• Coverage D — Loss of use
• Coverage E — Personal liability
• Coverage F — Medical payments to others

A–D protect property; E–F protect against liability. Standard percentages keyed off Coverage A: Coverage B is typically 10% of Coverage A and Coverage C is typically 50% of Coverage A. So a $300,000 dwelling limit typically implies $30,000 for other structures and $150,000 for personal property — the exam tests exactly this arithmetic.

The three forms, ranked by breadth

• HO-2 (broad form) — dwelling and personal property both on a named perils basis. Narrowest of the three.
• HO-3 (the most-tested form) — dwelling and other structures on an open perils basis, but personal property on a named perils basis. The split treatment is the single most common HO question.
• HO-5 (comprehensive form) — both dwelling and personal property on an open perils basis. The broadest coverage.

Quick recall: HO-2 = named/named, HO-3 = open/named, HO-5 = open/open.

Two traps built into homeowners questions

• Insurance-to-value: the dwelling should be insured to at least 80% of its full replacement cost to avoid a coinsurance penalty.
• Valuables: jewelry, furs, and firearms carry special theft sublimits — full protection requires a scheduled personal property endorsement. If a question mentions a stolen engagement ring and a large dollar amount, the answer almost always involves scheduling.

Understanding the cost of the exam upfront helps you budget for your licensing journey. The exam itself carries a fee of $49, payable when you schedule your test.

Planning your total cost

While the $49 exam fee is a fixed, known cost, remember that it is only one component of becoming licensed. Candidates commonly also budget for study materials, a pre-licensing course, and potential retake fees. Because a 70% passing score is required, investing in solid preparation before your first attempt can save you a repeat $49 fee.

Getting the most from your attempt

Treat the $49 exam fee as a reason to prepare thoroughly. A candidate who studies to comfortably clear the 70% threshold on the first try avoids paying the fee again — making preparation the most cost-effective part of the process.

Part A — Liability

Part A liability pays for bodily injury and property damage the insured becomes legally responsible for, and it also defends the insured. Most states require drivers to carry at least minimum liability limits to satisfy financial responsibility laws.

Reading split limits — the calculation you will see

Split limits of 100/300/50 mean:

• $100,000 per person for bodily injury
• $300,000 per accident for bodily injury
• $50,000 per accident for property damage

Exam approach: apply the per-person cap to each injured victim first, then check the total against the per-accident cap, then handle property damage separately. The order matters — a single victim with $250,000 in injuries recovers only $100,000 under 100/300/50 because the per-person limit binds first.

Physical damage: collision vs. comprehensive

• Collision — damage from impact with another vehicle or object, or from overturn.
• Comprehensive (other than collision) — losses such as fire, theft, vandalism, glass breakage, flood, and hitting an animal.

The two classic trick questions: hitting a deer is comprehensive (animal), while swerving to miss the deer and hitting a tree is collision (object).

UM vs. UIM — the difference is whether any insurance exists

• Uninsured motorists (UM) — pays for bodily injury caused by an at-fault driver who has no insurance or is a hit-and-run driver.
• Underinsured motorists (UIM) — applies when the at-fault driver has insurance, but the limits are too low to cover the loss.

Part B — Medical payments

Medical payments coverage pays reasonable medical and funeral expenses regardless of fault for the insured and passengers. "Regardless of fault" is the phrase the exam keys on — no liability determination is needed.

An effective study plan works backward from the exam's requirements. Since you must score at least 70% across 130 questions, aim to reach a level of readiness where you consistently score comfortably above that line on practice tests — giving yourself a safety margin for exam-day nerves.

Set a target above the minimum

Rather than aiming for exactly 70%, target consistent practice scores in the 80%+ range. This buffer accounts for tricky wording and topics that appear on the real 130-question exam but not in your practice sets.

Simulate real conditions

• Timed practice: Complete full-length practice exams within a 150-minute window to build stamina and confirm your pacing.
• Full-length sets: Practice with question sets that approximate the 130-question load so exam day feels familiar.
• Review misses: After each practice test, study every question you got wrong until you understand why the correct answer is correct.

By rehearsing under the same 150-minute, 130-question, 70%-to-pass conditions, you remove surprises and walk in knowing exactly what the exam demands.

Commercial general liability (CGL)

CGL protects businesses against third-party claims for bodily injury, property damage, and personal and advertising injury. "Third-party" is the anchor concept — CGL never pays the business for damage to its own property.

Occurrence vs. claims-made — a guaranteed exam topic

• Occurrence form — covers injury or damage that occurs during the policy period, regardless of when the claim is filed. The trigger is when the injury happened.
• Claims-made form — covers only claims first made during the policy period, often subject to a retroactive date. The trigger is when the claim is filed.

Test the scenario against the trigger: injury in 2024, claim filed in 2027 — an occurrence policy in force in 2024 responds; a claims-made policy in force only in 2024 does not.

Businessowners policy (BOP)

The BOP is a packaged product for small and medium businesses that combines property and general liability coverage into a single policy. If a question describes a small retail shop wanting property plus liability in one convenient policy, the answer is the BOP.

Workers compensation — the grand bargain

• Provides statutory benefits for job-related injuries: medical expenses, a portion of lost wages, rehabilitation, and death benefits — on a no-fault basis.
• In exchange for guaranteed benefits, the employee generally gives up the right to sue the employer — the exclusive remedy doctrine. This trade-off is the most-tested workers comp concept.
• Benefits and requirements are established by each state's statutes, and most states mandate that employers carry the coverage.
• Part Two — Employers liability covers the employer against lawsuits for work-related injuries that fall outside the workers compensation statute.

Core principles the whole exam is built on

• Insurable interest — the insured must suffer a genuine financial loss, and in property insurance the interest must exist at the time of loss.
• Indemnity — recovery is limited to the actual amount of the loss, preventing profit from a loss. Any answer choice that lets the insured come out ahead violates indemnity and is wrong.
• Subrogation — after paying a claim, the insurer may pursue any third party responsible for the loss to recover the amount paid.

Duties after a loss

The insured must give prompt notice, protect the property from further damage, and submit a signed proof of loss. Note that protecting property from further damage is a duty — an insured who lets a hole in the roof sit through three rainstorms has breached it.

Deductibles

A deductible is the amount the insured pays out of pocket before the insurer pays. It reduces small claims and lowers premiums — remember both effects, since the exam asks why deductibles exist, not just what they are.

The coinsurance formula — memorize and practice it

Commercial property coinsurance requires the insured to carry a stated percentage — commonly 80, 90, or 100 percent — of the property's value. The formula:

(Amount carried ÷ Amount required) × Loss − Deductible = Payment

Worked example (illustrative numbers): a building is worth $200,000 with an 80% coinsurance clause, so the required amount is $160,000. The insured carries only $120,000. A $40,000 loss occurs with a $1,000 deductible:

• $120,000 ÷ $160,000 = 0.75
• 0.75 × $40,000 = $30,000
• $30,000 − $1,000 = $29,000 paid

The insured absorbs the shortfall for being underinsured. Two habits prevent lost points: compute the required amount from the coinsurance percentage first, and subtract the deductible last.

When two policies cover the same loss

The other insurance / pro rata conditions divide the loss among insurers in proportion to their limits — another application of indemnity, since collecting in full from both policies would produce a profit.