Property Casualty Exam Questions & Answers 2026 (1–10)

Question 1

For a property insurance policy to be valid, the insured generally must have an insurable interest in the covered property at what point?

TheoryPractice · Accepted Answer

At the time of the loss. Property insurance is a contract of indemnity, so the insured must have an insurable interest (a financial stake) in the property at the time of loss in order to collect, unlike life insurance where interest need only exist at inception.

Question 2

In insurance terminology, the actual cause of a loss, such as fire or windstorm, is called a:

TheoryPractice · Accepted Answer

Peril. A peril is the immediate cause of loss (fire, theft, hail). A hazard is a condition that increases the chance or severity of a peril, so the two terms are distinct.

Question 3

Oily rags stored next to a furnace, which increase the likelihood of a fire, are an example of which type of hazard?

TheoryPractice · Accepted Answer

Physical hazard. A physical hazard is a tangible condition of the property or surroundings that increases the chance of loss. Moral and morale hazards relate to a person's dishonesty or carelessness, not physical conditions.

Question 4

An insured who leaves a house unlocked and the keys in the car because 'insurance will cover it' is displaying which type of hazard?

TheoryPractice · Accepted Answer

Morale hazard. Morale hazard is carelessness or indifference to loss because the insured has coverage. Moral hazard, by contrast, involves deliberate dishonesty such as arson or fraud.

Question 5

Under most standard property policies, actual cash value (ACV) is generally calculated as:

TheoryPractice · Accepted Answer

Replacement cost minus depreciation. ACV equals the cost to replace the property with new property of like kind and quality, less depreciation for age, wear, and obsolescence. This prevents the insured from profiting from a loss.

Question 6

A property loss is settled on a replacement cost basis. This means the claim is paid:

TheoryPractice · Accepted Answer

Without deduction for depreciation. Replacement cost coverage pays to repair or replace damaged property with new property of like kind and quality, with no deduction for depreciation, subject to policy limits and any conditions.

Question 7

A building valued at $500,000 carries an 80% coinsurance clause. The owner insured it for $300,000 and suffers a $100,000 loss. Ignoring any deductible, how much will the insurer pay?

TheoryPractice · Accepted Answer

$75,000. Required amount is 80% of $500,000 = $400,000. The payment equals (carried / required) x loss = ($300,000 / $400,000) x $100,000 = $75,000. The insured shares the remainder as a coinsurance penalty.

Question 8

A structure worth $200,000 has an 80% coinsurance requirement. It is insured for $160,000 and sustains a $40,000 loss with a $1,000 deductible. What does the insurer pay?

TheoryPractice · Accepted Answer

$39,000. Carried ($160,000) meets the required amount (80% x $200,000 = $160,000), so no coinsurance penalty applies. The insurer pays the full loss less the deductible: $40,000 - $1,000 = $39,000.

Question 9

A property form that covers all causes of loss except those specifically excluded is known as a(n):

TheoryPractice · Accepted Answer

Open perils (all-risk) form. An open perils, or all-risk, form covers any cause of loss unless it is excluded. A named perils form covers only the perils that are specifically listed in the policy.

Question 10

Under a named perils policy, the burden of proving that a loss was caused by a covered peril rests with the:

TheoryPractice · Accepted Answer

Insured. Under a named perils form, the insured must show the loss resulted from a listed peril. Under open perils, the insurer must prove an exclusion applies to deny coverage.

Property Casualty Exam Questions & Answers 2026 (1–10)

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