Property Casualty Exam Questions & Answers 2026 (11–20)

Question 1

The primary purpose of a deductible in a property policy is to:

TheoryPractice · Accepted Answer

Eliminate small claims and reduce premiums. Deductibles eliminate frequent small claims, reducing the insurer's administrative costs and the policyholder's premium while keeping the insured financially involved in the loss.

Question 2

A valued policy differs from an indemnity-based property policy in that, in the event of total loss, it pays:

TheoryPractice · Accepted Answer

The face amount agreed upon at issuance. A valued policy pays a predetermined, agreed amount upon total loss rather than requiring proof of actual value. Many states mandate valued policy treatment for total fire losses to real property.

Question 3

Two insurers cover the same property: Company A for $300,000 and Company B for $100,000. A $40,000 loss occurs and both contribute on a pro rata (proportional) basis. How much does Company A pay?

TheoryPractice · Accepted Answer

$30,000. Total coverage is $400,000; Company A carries 75% ($300,000/$400,000). On a pro rata basis it pays 75% of the $40,000 loss = $30,000, with Company B paying the remaining $10,000.

Question 4

Loss of business income while a damaged store is repaired is best classified as a(n):

TheoryPractice · Accepted Answer

Indirect (consequential) loss. Direct loss is physical damage to property. Indirect or consequential loss, such as lost income or extra expense, results from the direct loss and is covered under time-element coverages.

Question 5

After paying a property claim, an insurer pursues recovery from the negligent party who caused the damage. This right is called:

TheoryPractice · Accepted Answer

Subrogation. Subrogation allows the insurer, after indemnifying the insured, to step into the insured's legal rights and recover from the at-fault third party, preventing the insured from collecting twice.

Question 6

A standard mortgagee (mortgage) clause in a property policy protects the lender by:

TheoryPractice · Accepted Answer

Preserving the lender's coverage even if the insured's own act voids it. Under the standard mortgage clause, the mortgagee's interest is protected separately, so the lender can still collect even if the insured's act or neglect would otherwise void the insured's claim.

Question 7

Many property forms reduce or suspend coverage when a building has been vacant for more than a stated period, commonly:

TheoryPractice · Accepted Answer

60 days. Standard commercial property forms typically suspend certain perils and reduce other loss payments by a set percentage once a building has been vacant beyond 60 consecutive days before the loss.

Question 8

Business income coverage typically begins paying:

TheoryPractice · Accepted Answer

After a 72-hour waiting period following direct physical loss. Business income (interruption) coverage commonly includes a 72-hour waiting period after a covered direct physical loss before income loss is reimbursed, then pays for the restoration period.

Question 9

Extra expense coverage is designed primarily to pay for:

TheoryPractice · Accepted Answer

Additional costs to continue operating after a covered loss. Extra expense coverage reimburses the added costs a business incurs to keep operating or to speed resumption after a covered loss, such as renting temporary space or equipment.

Question 10

Most property policies provide an additional coverage for debris removal that applies to:

TheoryPractice · Accepted Answer

The cost to remove debris of covered property after a covered loss. Debris removal is an additional coverage that pays the cost to remove the debris of covered property damaged by a covered peril, usually subject to a percentage cap and time limit.

Property Casualty Exam Questions & Answers 2026 (11–20)

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