P&C General Practice 3

Question 1

Under the personal auto policy (PAP), which coverage pays for damage to the insured's own vehicle caused by a collision with another car?

Accepted Answer

Collision coverage

Answer

Collision coverage under the PAP pays for damage to the insured's vehicle resulting from its collision with another vehicle or object.

Question 2

An insured files a false claim by inflating the value of stolen property. This is an example of:

Accepted Answer

Soft fraud

Answer

Soft fraud (also called opportunistic fraud) involves exaggerating or inflating a legitimate claim, as opposed to hard fraud, which involves staging or inventing a loss entirely.

Question 3

Which endorsement to a homeowners policy provides coverage for earthquake damage?

Accepted Answer

Earthquake endorsement (HO-10)

Answer

The earthquake endorsement (commonly referenced as HO-10 or a similar state-specific form) is added to a homeowners policy to cover earthquake damage, which is excluded under standard forms.

Question 4

A liability policy with a $1 million per-occurrence limit and a $3 million aggregate limit has paid $2.5 million in claims this policy year. What is the maximum the insurer will pay for the next single covered claim?

Accepted Answer

$500,000

Answer

With $2.5 million paid against a $3 million aggregate, only $500,000 of aggregate capacity remains, capping payment on any subsequent claim regardless of the per-occurrence limit.

Question 5

What does the term 'pro rata cancellation' mean in insurance?

Accepted Answer

The insurer returns the unearned premium proportional to the unused policy period

Answer

Pro rata cancellation refunds the exact unearned portion of the premium based on the number of days remaining in the policy period, with no penalty.

Property & Casualty Insurance License Test Practice Test

Property & Casualty Insurance License Test Practice Test

P&C General Practice 3