General Insurance Exam Questions And Answers

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General Insurance Exam Questions And Answers - Quiz

These General insurance exam questions and answers cover general insurance concepts. It is designed to help you evaluate your comprehension of the general insurance concepts for which you will be tested in your insurance license qualification exam. The questions are intended to resemble the types of queries and the range of content on your insurance license qualification exam. Let's start with the practice test. All the best! You can share these general insurance exam questions and answers with others, also.


Questions and Answers
  • 1. 

    Medical payments under a homeowners policy are available for expenses resulting from an injury to which of the following?

    • A.

      The named insured

    • B.

      A residence employee

    • C.

      A person who is at the insured location without permission

    • D.

      Any regular resident of the insured's household who pays rent

    Correct Answer
    B. A residence employee
    Explanation
    Medical payments under a homeowners policy are available for expenses resulting from an injury to a residence employee. This means that if a residence employee, such as a nanny or a housekeeper, gets injured while working at the insured's home, the homeowners policy will cover their medical expenses.

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  • 2. 

    Some property insurance policies provide for payment of the full policy limit in the event of a total loss by a covered peril, regardless of the actual value of the property. These policies are known as which of the following?

    • A.

      Indemnity policies

    • B.

      ACV policies

    • C.

      Valued or agreed amount policies

    • D.

      Market value policies

    Correct Answer
    C. Valued or agreed amount policies
    Explanation
    Valued or agreed amount policies provide for payment of the full policy limit in the event of a total loss by a covered peril, regardless of the actual value of the property. These policies are different from ACV (actual cash value) policies, which only pay for the depreciated value of the property at the time of the loss. Indemnity policies, on the other hand, reimburse the policyholder for the actual amount of the loss up to the policy limit. Market value policies pay out based on the current market value of the property.

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  • 3. 

    When an uninterrupted chain of events resulting from a negligent act causes a loss, that act is considered to be which of the following?

    • A.

      An assumption of risk

    • B.

      An intervening cause

    • C.

      The proximate cause of loss

    • D.

      A matter of strict liability

    Correct Answer
    C. The proximate cause of loss
    Explanation
    The proximate cause of loss refers to a negligent act that directly leads to a loss through an uninterrupted chain of events. It is the primary cause that sets in motion a sequence of events, ultimately resulting in the loss. This concept is important in determining liability and causation in legal cases. It is different from an assumption of risk, which involves voluntarily accepting the potential risks associated with an activity, an intervening cause, which is an unforeseeable event that breaks the chain of causation, and strict liability, which holds a party liable regardless of fault.

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  • 4. 

    Policies issued under the National Flood Insurance Program provide removal coverage for property removed to protect it from the flood. This coverage applies at another location for up to how many days?

    • A.

      60 days

    • B.

      45 days

    • C.

      30 days

    • D.

      15 days

    Correct Answer
    B. 45 days
    Explanation
    Policies issued under the National Flood Insurance Program provide coverage for property that is removed to protect it from a flood. This coverage applies at another location for up to 45 days. This means that if a property needs to be temporarily relocated to a safer area due to the risk of flooding, the insurance policy will cover the property for up to 45 days at the new location.

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  • 5. 

    In legal terms, the actions of one party might have the effect of giving up a known right. When this occurs, the party has created which of the following?

    • A.

      Unilateral contract

    • B.

      Representation

    • C.

      Warranty

    • D.

      Waiver

    Correct Answer
    D. Waiver
    Explanation
    In legal terms, when one party voluntarily and intentionally gives up a known right, it is referred to as a waiver. This means that the party has chosen not to enforce or exercise a specific right, even though they have the option to do so. A waiver can be explicit or implied and is a common concept in contract law and other legal contexts.

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  • 6. 

    When the special causes of loss form are attached to a commercial property coverage part, coverage for theft of furs and fur garments is limited to how much?

    • A.

      $2,500

    • B.

      $2,000

    • C.

      $1,500

    • D.

      $1,000

    Correct Answer
    A. $2,500
    Explanation
    When the special causes of loss form are attached to a commercial property coverage part, coverage for theft of furs and fur garments is limited to $2,500. This means that if furs or fur garments are stolen, the insurance policy will cover up to $2,500 for the loss.  

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  • 7. 

    An insurer's loss ratio is determined by dividing what?

    • A.

      Premiums by combined losses and expenses

    • B.

      Premiums by underwriting losses

    • C.

      Operating expenses by total premiums

    • D.

      Underwriting losses by total premiums

    Correct Answer
    D. Underwriting losses by total premiums
    Explanation
    The loss ratio is used to compare the company's loss experience from year to year. It is calculated by dividing the amount of incurred underwriting losses by the earned premium. It can be calculated separately for individual lines of insurance or the company's entire operations.

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  • 8. 

    Under most property insurance policies, the policy territory includes which of the following?

    • A.

      Only the United States

    • B.

      The United States, its territories and possessions, and Canada

    • C.

      The United States, Canada, and Mexico

    • D.

      All of North America and Europe

    Correct Answer
    B. The United States, its territories and possessions, and Canada
    Explanation
    Under most property insurance policies, the policy territory typically includes the United States, its territories and possessions, and Canada. This means that coverage extends to properties located within the United States, its territories (such as Puerto Rico, Guam, etc.), possessions (such as American Samoa), and Canada. Including these areas in the policy territory ensures that properties situated within these regions are covered by the insurance policy, providing broader protection for policyholders.

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  • 9. 

    Claims-made general liability coverage does not apply to bodily injury or property damage that occurs when?

    • A.

      On the policy's retroactive date

    • B.

      Before the policy's retroactive date

    • C.

      After the policy's retroactive date

    • D.

      Before the effective date, if there is no retroactive date

    Correct Answer
    B. Before the policy's retroactive date
    Explanation
    Claims-made general liability coverage only applies to bodily injury or property damage that occurs after the policy's retroactive date. This means that any claims arising from incidents that happened before the retroactive date are not covered by the policy.

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  • 10. 

    Under liability insurance policies, what does an "aggregate limit" mean?

    • A.

      It is the most the insurer will pay for any one accident.

    • B.

      It is the most the insurer will pay for all losses during any one policy period.

    • C.

      It is the maximum limit for each claim when multiple claimants arise out of the same occurrence.

    • D.

      It is the single largest limit that applies when a loss is covered by two or more policies issued by the same insurer.

    Correct Answer
    B. It is the most the insurer will pay for all losses during any one policy period.
    Explanation
    An "aggregate limit" under liability insurance policies refers to the maximum amount that the insurer will pay for all losses that occur during a specific policy period. This means that regardless of the number of claims or accidents that take place within that period, the insurer will only pay up to the aggregate limit. Once that limit is reached, the insurer will not provide any further coverage for losses.

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  • 11. 

    In the event of a physical damage loss that makes a covered auto unavailable for a period of time, a personal auto policy will provide coverage for transportation expenses at the rate of $20 per day up to how much?

    • A.

      A maximum payment of $300

    • B.

      A maximum payment of $460

    • C.

      A maximum payment of $600

    • D.

      A maximum payment of $740

    Correct Answer
    C. A maximum payment of $600
    Explanation
    In addition to collision and other than collision coverage, if a covered loss makes an insured auto unavailable, a personal auto policy will provide coverage for transportation expenses up to $20 per day, subject to a maximum payment of $600.

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  • 12. 

    Under the business auto coverage part, each of the following is true about the classifications of covered autos, which are designated by numerical symbols shown in the declarations, except for which of the following?

    • A.

      All classes of newly acquired autos are automatically covered.

    • B.

      An insured can select different classifications for various coverages.

    • C.

      "Any auto" is the broadest coverage classification.

    • D.

      "Hired autos" include autos the insured leases, hires, rents, or borrows.

    Correct Answer
    A. All classes of newly acquired autos are automatically covered.
    Explanation
    Under the business auto coverage part, all classes of newly acquired autos are automatically covered. This means that when a business acquires a new vehicle, it is automatically covered under the policy without the need for any additional action or endorsement. This is different from the other statements, which discuss the ability to select different classifications for various coverages, the broadest coverage classification being "any auto," and the inclusion of leased, hired, rented, or borrowed autos under the classification of "hired autos."

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  • 13. 

    Something that might increase the likelihood that a loss will occur is called what?

    • A.

      Peril

    • B.

      Hazard

    • C.

      Risk

    • D.

      Catastrophe

    Correct Answer
    B. Hazard
    Explanation
    A hazard refers to something that can increase the likelihood of a loss occurring. It represents a potential source of danger or harm that can lead to negative consequences. Hazards can be physical, chemical, biological, or environmental in nature. They can include factors such as fire, toxic substances, natural disasters, or unsafe working conditions. Identifying and managing hazards is important in risk assessment and mitigation to prevent or minimize potential losses or damages.

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  • 14. 

    Tom Baxter has an automobile insured by a personal auto policy. He trades in his car and purchases a new private passenger auto as a replacement vehicle. If he does not notify the insurance company, the liability coverage for his replacement vehicle will apply automatically for how long?

    • A.

      10 days

    • B.

      30 days

    • C.

      60 days

    • D.

      Until the end of the policy period

    Correct Answer
    D. Until the end of the policy period
    Explanation
    Under a personal auto policy, if a newly acquired auto replaces another auto, the new vehicle automatically has the broadest coverage for liability, medical payments, and uninsured motorists coverage for any auto shown in the declarations until the end of the policy period.

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  • 15. 

    A device that is used to minimize small nuisance claims and that helps to keep insurance premiums down is called what?

    • A.

      Arbitration

    • B.

      Deductible

    • C.

      Valued policy

    • D.

      Coinsurance

    Correct Answer
    B. Deductible
    Explanation
    A deductible is an amount of money that an insured person must pay out of pocket before their insurance coverage kicks in. It is used to minimize small nuisance claims by discouraging policyholders from filing claims for minor damages or losses. By requiring policyholders to bear a portion of the cost, insurance companies are able to keep insurance premiums down. Therefore, a deductible is a device used to minimize small nuisance claims and help keep insurance premiums low.

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  • 16. 

    Which type of insurance professional does not actually sell insurance coverage but sells advice about insurance coverage?

    • A.

      Excess and surplus lines agent

    • B.

      Solicitor

    • C.

      Consultant

    • D.

      Producer

    Correct Answer
    C. Consultant
    Explanation
    The type of insurance professional who does not actually sell insurance coverage but sells advice about insurance coverage is a Consultant. Unlike producers or agents who directly sell insurance policies, consultants provide guidance and expertise to clients regarding their insurance needs, coverage options, risk management strategies, and other related matters.

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  • 17. 

    Under the NCCI worker's compensation and employers liability policy form, the basic, or minimum, limit for employer's liability coverage is how much per accident?

    • A.

      $50,000 per accident

    • B.

      $100,000 per accident

    • C.

      $250,000 per accident

    • D.

      $500,000 per accident

    Correct Answer
    B. $100,000 per accident
    Explanation
    Employer liability insurance provides coverage for sums the insured becomes legally obligated to pay under common law because of work-related injuries or occupational diseases. A minimum limit of $100,000 per accident applies.

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  • 18. 

    Which dwelling policy forms are named peril forms?

    • A.

      All dwelling forms

    • B.

      The basic and broad forms

    • C.

      The basic form only

    • D.

      The special form only

    Correct Answer
    B. The basic and broad forms
    Explanation
    The named peril forms in dwelling policy are the basic and broad forms. These forms specify the exact perils that are covered by the policy, as opposed to the special form, which operates on an all-risk basis, covering all perils except those specifically excluded.

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  • 19. 

    If general liability "claims-made" coverage is renewed by "occurrence" coverage and the insured purchases a supplemental extended reporting period (ERP), the period for reporting claims under the policy will be extended for how long?

    • A.

      Indefinitely

    • B.

      5 years

    • C.

      3 years

    • D.

      60 days

    Correct Answer
    A. Indefinitely
    Explanation
    A supplemental extending reporting period provides an unlimited extension of the time for reporting covered claims. However, in order for a claim to be covered, it must not have occurred before the retroactive date and not after the policy expiration date.

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  • 20. 

    Under liability insurance policies, what does the term "personal injury" usually mean?

    • A.

      Injury for such things as libel, slander, false arrest, or invasion of privacy.

    • B.

      Only bodily injuries are suffered by individuals.

    • C.

      Any form of injury that affects a person, including bodily injury, property damage, financial injury, and damage to one's reputation.

    • D.

      Injuries suffered by named insureds or family members who are insured under personal lines policies.

    Correct Answer
    A. Injury for such things as libel, slander, false arrest, or invasion of privacy.
    Explanation
    The term "personal injury" under liability insurance policies usually refers to injury for things such as libel, slander, false arrest, or invasion of privacy. This means that if someone is harmed due to any of these actions, they may be covered under the liability insurance policy. It does not solely refer to bodily injuries, but includes other forms of injury that affect a person, such as damage to reputation or financial injury.

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  • 21. 

    Under a personal auto policy, if an insured already has physical damage coverage for at least one vehicle, a new vehicle will be automatically covered from the date it is acquired as long as the insured notifies the insurer and requests the coverage within how many days?

    • A.

      30 days

    • B.

      14 days

    • C.

      10 days

    • D.

      7 days

    Correct Answer
    B. 14 days
    Explanation
    If an insured already has physical damage coverage for at least one vehicle under their personal auto policy, a new vehicle will be automatically covered from the date it is acquired as long as the insured notifies the insurer and requests the coverage within 14 days.

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  • 22. 

    Which of the following is not true about difference in conditions (DIC) insurance?

    • A.

      DIC policies provide property and liability coverages.

    • B.

      Traditional perils (such as fire, lightning, and so on) are usually excluded by DIC policies.

    • C.

      DIC supplements other coverages and fills insurance gaps.

    • D.

      DIC can provide considerable protection at a reasonable cost.

    Correct Answer
    A. DIC policies provide property and liability coverages.
    Explanation
    DIC policies do provide broad property coverage intended to supplement other coverages and fill insurance gaps. For this reason, DIC policies typically exclude coverage for traditional perils such as fire, lightning, and extended coverage perils. DIC policies do not provide any liability coverage.

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  • 23. 

    If coverage for personal liability and medical payments is attached to a dwelling policy, what basic limit of coverage applies to medical payments unless a higher amount is purchased?

    • A.

      $500 per person

    • B.

      $1,000 per person

    • C.

      $2,500 per person

    • D.

      $5,000 per person

    Correct Answer
    B. $1,000 per person
    Explanation
    Under a dwelling policy, if the endorsement is included, the basic limit of coverage is $1,000 per person for medical payments to others. However, this is a minimum limit, and higher limits can be purchased.

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  • 24. 

    Under which type of marketing system do agents or agencies operate as independent businesses but agree to represent only one insurance company?

    • A.

      Direct writer system

    • B.

      Exclusive of the captive agency system

    • C.

      Direct response system

    • D.

      Independent agency system

    Correct Answer
    B. Exclusive of the captive agency system
    Explanation
    In the exclusive captive agency system, the insurance company contracts with agencies, which are independent businesses, to represent and sell insurance only for that insurance company.

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  • 25. 

    A commercial property coverage part with the basic causes of loss form attached covers all of the following perils except which one?

    • A.

      Windstorm

    • B.

      Explosion

    • C.

      Volcanic eruption

    • D.

      Sprinkler leakage

    Correct Answer
    C. Volcanic eruption
    Explanation
    The commercial property coverage part with the basic causes of loss form attached covers all perils except for volcanic eruption. This means that if there is damage or loss to the commercial property due to windstorm, explosion, or sprinkler leakage, it will be covered by the insurance policy. However, if the damage or loss is caused by a volcanic eruption, it will not be covered.

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  • Current Version
  • Apr 09, 2024
    Quiz Edited by
    ProProfs Editorial Team
  • Feb 24, 2009
    Quiz Created by
    Fsspc
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