Free Property Practice Questions

Sample Practice Questions

Try these 10 sample questions from the Property practice bank. Each includes the answer and explanation. Continue with the interactive practice above to review the full question set.

1. 1An owner wants the broad-form homeowners policy that covers the house and belongings for the perils specifically listed in the policy. Which form is it?

   1. A. HO-2
   2. B. HO-3
   3. C. HO-5
   4. D. HO-8

   Answer: A

   Explanation: "These policies list EVERY covered peril. The policy will not pay for any peril not listed." The HO-2 broad form uses listed perils; HO-3 and HO-5 have broader dwelling grants, and HO-8 serves a modified older-home valuation need.

   Reference: Ohio Department of Insurance Homeowners Insurance Guide — Homeowners Insurance Guide, policy forms, HO-2 & HO-4

2. 2An insurer adds many independent, similar buildings to a fire risk pool. What should the law of large numbers improve?

   1. A. Aggregate actual losses become more predictable relative to expected losses
   2. B. Each building's own loss becomes more predictable in exact dollars
   3. C. Each building's fire probability falls as more buildings join the pool
   4. D. Average severity per damaged building falls as the pool grows

   Answer: A

   Explanation: "the larger the number of exposure units independently exposed to loss, the greater the probability that actual loss experience will equal expected loss" A larger pool makes aggregate outcomes more likely to approach expectations; it does not change each building's fire probability or severity.

   Reference: West Virginia Insurance Commission 2016 Auto Survey Glossary — Insurance glossary, Law of Large Numbers

3. 3An insured needs to verify the named insured and property identified in a policy. Which section primarily supplies those identifying details?

   1. A. The declarations
   2. B. The exclusions
   3. C. The loss conditions
   4. D. The subrogation clause

   Answer: A

   Explanation: "It identifies the parties in the contract and the subject of coverage." The declarations identify the parties and subject property.

   Reference: Washington Office of the Insurance Commissioner Consumer Insurance Glossary — Consumer Insurance Glossary, Declarations

4. 4A District insurer asks which official must ensure that federal insurance laws applicable in the District are faithfully executed. Who holds that duty?

   1. A. The Mayor acting as tax collector
   2. B. The Commissioner of Insurance, Securities, and Banking
   3. C. The NAIC president
   4. D. The Attorney General as receiver

   Answer: B

   Explanation: The controlling statute says: "It shall be the duty of the Commissioner to see that all laws of the United States relating to insurance or insurance companies, benefit orders, associations, and others doing insurance business in the District are faithfully executed." Therefore the Commissioner holds that duty.

   Reference: Dc Code 31 202 — D.C. Code § 31-202(a)

5. 5A homeowner insurer develops rates for use in the District. Which core statutory standard must those rates satisfy?

   1. A. They must be identical for every risk
   2. B. They must not be excessive, inadequate, or unfairly discriminatory
   3. C. They must always be lower than neighboring states
   4. D. They must exclude catastrophe hazards

   Answer: B

   Explanation: The rate statute provides: "Rates for insurance within the scope of this chapter shall not be excessive, inadequate, or unfairly discriminatory."

   Reference: Chapter 27. Regulation of Casualty and Other Insurance Rates. | D.C. Law Library — D.C. Code § 31-2703(a)

6. 6Which function belongs specifically to the District Industry Placement Facility?

   1. A. Providing basic property or homeowners insurance when it cannot be obtained through the normal market
   2. B. Paying covered property claims after a member insurer becomes insolvent, a Guaranty Association function
   3. C. Administering the written producer examination, the examination provider's function
   4. D. Licensing and disciplining insurance producers, the Commissioner's function

   Answer: A

   Explanation: The chapter seeks equitable distribution of responsibility for insuring qualified District property "for which insurance cannot be obtained through the normal insurance market."

   Reference: Chapter 50. Insurance Placement. | D.C. Law Library — D.C. Code § 31-5001(4)

7. 7A producer compares a standard HO-3 for a house and its contents. Which description correctly distinguishes the two property coverages?

   1. A. Both dwelling and contents use named perils.
   2. B. The dwelling uses open perils; contents use named perils.
   3. C. The dwelling uses named perils; contents use open perils.
   4. D. Both dwelling and contents use open perils.

   Answer: B

   Explanation: "The HO-3 is the most common homeowners policy today. Instead of listing the perils it does cover, the HO-3 policy lists the perils it does not cover. The policy will pay when the building damage is caused by any peril (subject to limitations in the policy) that is not on the list of exclusions. The HO-3 coverage for contents (personal property rather than the structure) is identical to the HO-2." HO-3 dwelling coverage is open-perils while contents retain the HO-2 named-perils approach.

   Reference: Ohio Department of Insurance Homeowners Insurance Guide — Homeowners Insurance Guide, HO-3 The Special Form

8. 8A person wants to insure a house owned by an unrelated stranger and has no legal financial stake in it. Which essential property-insurance requirement is missing?

   1. A. A deductible payable on each covered claim
   2. B. An insurable interest in the property
   3. C. A mortgage clause protecting a lender
   4. D. A binder for temporary proof of coverage

   Answer: B

   Explanation: "For homeowner insurance, this is when a person has a legal financial interest in the property" Without a legal financial interest, the applicant lacks insurable interest.

   Reference: Washington Office of the Insurance Commissioner Consumer Insurance Glossary — Consumer Insurance Glossary, Insurable interest

9. 9A claims analyst first needs to locate the policy's affirmative description of what is covered. Which part of the contract supplies that grant?

   1. A. The exclusion provisions
   2. B. The insuring agreement
   3. C. The cancellation conditions
   4. D. The appraisal provision

   Answer: B

   Explanation: "The portion of an insurance contract that describes what is covered." The insuring agreement states the affirmative coverage grant.

   Reference: California Department of Insurance Commercial Insurance Guide — Commercial Insurance Guide, Glossary—Insuring Agreement

10. 10During a producer-discipline hearing, the Commissioner needs sworn testimony and relevant records. What may the Commissioner do?

    1. A. Contract with the NAIC to perform ministerial licensing functions
    2. B. Examine a licensed insurer at least once every five years
    3. C. Administer oaths and issue subpoenas for witnesses and documents
    4. D. Review a proposed homeowner rate for up to 90 days

    Answer: C

    Explanation: D.C. law provides that "the Commissioner may administer oaths to witnesses and issue subpoenas for witnesses and documents." The hearing may therefore use both tools.

    Reference: Chapter 11A. Insurance Producers. | D.C. Law Library — D.C. Code § 31-1131.12(b)(3)