Free Property and Casualty Adjuster Examination Practice Questions

Sample Practice Questions

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

1. 1An insurer wants a more reliable estimate of aggregate losses from comparable houses. Which change best uses the law of large numbers?

   1. A. Pool many independent homes with comparable exposures.
   2. B. Raise each home's deductible while keeping the same pool.
   3. C. Increase each home's coverage limit within the same pool.
   4. D. Extend each home's policy term within the same pool.

   Answer: A

   Explanation: NAIC explains that as membership rises, "there is greater certainty about the total losses" the pool will suffer. Adding independent comparable exposures improves the aggregate estimate; changing a contract term for the same exposures does not enlarge the pool.

   Reference: A Regulator's Introduction to the Insurance Industry — Chapter 2, Important Insurance Concepts, p. 7

2. 2A property policy's insuring agreement broadly covers accidental damage, while its exclusion expressly removes loss caused by gradual wear. Which policy part makes the wear claim outside coverage?

   1. A. The policy declarations
   2. B. The insuring agreement
   3. C. The policy exclusions
   4. D. The policy conditions

   Answer: C

   Explanation: NAIC explains, "The exclusions section outlines specific coverages or perils not covered by your policy." The stated wear exclusion qualifies the otherwise broad insuring agreement.

   Reference: Understanding Your Homeowners or Renter's Policy — The four policy parts, exclusions section

3. 3A dwelling suffers direct accidental damage from a cause that is not named under DP-2 and is not excluded under DP-3. Which statement correctly describes the dwelling-form coverage distinction?

   1. A. DP-1 responds because its basic form covers every unlisted cause.
   2. B. DP-2 responds because broad form does not require a named cause.
   3. C. DP-3 may respond because its special form covers unexcluded causes.
   4. D. DP-3 cannot respond unless the cause is named in its schedule.

   Answer: C

   Explanation: NAIC says DP-3 "Covers all perils except those explicitly excluded in the policy" for the dwelling; DP-2 instead lists additional named perils. The unlisted but unexcluded cause fits DP-3, while DP-2 still requires a named peril.

   Reference: NAIC Homeowners Market Data Call Definitions — Policy form definitions, DP-2 and DP-3, p. 1

4. 4A covered driver is at fault in an auto accident and damages a neighbor's fence. Which personal-auto coverage addresses the neighbor's property-damage claim?

   1. A. Bodily Injury Liability
   2. B. Property Damage Liability
   3. C. Collision
   4. D. Comprehensive

   Answer: B

   Explanation: NAIC states, "Property damage liability insurance pays for any damage you cause" to others' property. The neighbor's fence is third-party property; the other coverages concern injury or the insured's own car.

   Reference: NAIC Consumer Auto Insurance — Liability, Property Damage Liability

5. 5A commercial venture outside the usual small-business BOP category wants one policy package combining property and liability coverages. Which policy structure fits that request?

   1. A. Commercial package policy
   2. B. Businessowners policy
   3. C. Commercial general liability policy
   4. D. Commercial property coverage part

   Answer: A

   Explanation: The NAIC says a CPP provides "a broad package of property and liability coverages for commercial ventures" outside those served by BOPs. The monoline choices omit one requested coverage and the BOP assumes different eligibility.

   Reference: NAIC Property and Casualty Product Matrix — Product matrix, Commercial Package

6. 6A developer's unfinished building and materials intended for its construction suffer a covered property loss. Which commercial property form is designed around this construction-stage exposure?

   1. A. Building and Personal Property Coverage Form
   2. B. Builders Risk Coverage Form
   3. C. Business Income Coverage Form
   4. D. Condominium Commercial Unit-Owners Form

   Answer: B

   Explanation: The NAIC describes builders risk as coverage that "insures against loss to buildings in the course of construction" and includes incidental materials. The other forms address different insured interests.

   Reference: NAIC Property and Casualty Product Matrix — Product matrix, Builders Risk

7. 7An employer discovers that its cashier stole company cash. Which commercial crime or bond protection is aimed at the employer's loss from the employee's dishonest act?

   1. A. Employee dishonesty or fidelity protection
   2. B. Outside-premises burglary protection
   3. C. Forgery and alteration protection
   4. D. Computer fraud transfer protection

   Answer: A

   Explanation: NAIC defines fidelity as "a bond or policy covering an employer's loss resulting from an employee's dishonest act." Theft by the employer's cashier fits that exposure, rather than the other listed crime mechanisms.

   Reference: NAIC Glossary of Insurance Terms — Glossary, Fidelity

8. 8A construction contractor is the principal on a surety bond and defaults on its contractual obligation. Which party is entitled to the bond's payment or completion protection?

   1. A. The principal
   2. B. The surety
   3. C. The obligee
   4. D. The producer

   Answer: C

   Explanation: NAIC describes a surety bond as the guarantor's obligation to "pay a second party (obligee)" when the principal defaults. The obligee, rather than the defaulting principal or guarantor, receives the promised protection.

   Reference: NAIC Glossary of Insurance Terms — Glossary, Surety Bond

9. 9After a storm, an adjuster learns that the insured plans to remove damaged contents before inspection. What should the adjuster advise to preserve evidence of the original loss?

   1. A. Photograph and inventory damaged items before debris removal.
   2. B. Photograph remaining items only after debris has been hauled away.
   3. C. Inventory only replacement purchases after damaged items are discarded.
   4. D. Wait until final settlement to create a list of affected contents.

   Answer: A

   Explanation: NAIC advises, "Before removing any debris or belongings, document all losses." Photographs and an itemized list preserve the pre-cleanup condition for inspection and claim evaluation.

   Reference: Navigating the Claims Process: Recover & Rebuild — Immediately after the disaster

10. 10Who compensates an independent adjuster as defined by Kentucky law?

    1. A. Only the insured claimant
    2. B. An insurer or self-insurer
    3. C. Only the Department of Insurance
    4. D. Only a court

    Answer: B

    Explanation: KRS 304.9-020(9)(b) says an independent adjuster "Is compensated by an insurer or self-insurer." That distinguishes the role from a public adjuster compensated by or for an insured.

    Reference: Krs 304 9 020 — KRS 304.9-020(9)