Fundamentals of Insurance - Practice Exam

Fundamentals of Insurance - Practice Exam Latest Update 2025-2026 Exam 100 Questions with 100% Verified Correct Answers Guaranteed A+

"Negligence" is the most important tort in the study of liability insurance. Negligence is:

• Failing to use that degree of care which a reasonable person would use under the

given circumstances

• Acting prudently, having regard to the circumstances
• Any deliberate violation of the law
• Aiding and abetting another person in the commission of felony - CORRECT

ANSWER: a. Failing to use that degree of care which a reasonable person would use under the given circumstances

A building is worth $360,000 is insured for $90,000 and the policy contains 80% co-

insurance clause. A fire causes $72,000 damage. The insured will cover:

• 18,000
• 22,500
• 72,000

d. 90,000 - CORRECT ANSWER: b. 22,500

A building valued at $120,000 is insured for $30,000 and there is an 80% co-insurance clause on the policy. The building was totally destroyed by fire last weekend. The

insured would receive a settlement of:

• 7,000
• 12,000
• 30,000 1 / 4

d. 37,5000 - CORRECT ANSWER: c. 30,000

A peril if best defined as:

• The chance of a loss
• The occurrence of a loss
• The cause of a loss

d. The result of a loss - CORRECT ANSWER: c. The cause of a loss

A physical hazard is:

• A type of peril
• The same as a moral hazard
• A condition relating to the premises which may cause a peril to occur
• The possibility of a loss due to the character of the insured - CORRECT ANSWER: c.

A condition relating to the premises which may cause a peril to occur

All contracts require that five elements be present if the contract is to be enforceable by law. An insurance contract is enforceable only if it contains the following three additional

interest:

• Insurable Interest, Utmost Good Faith
• Insurable Interest, Consideration, Indemnity
• Insurable Interest, Indemnity, Utmost Good Faith
• Insurable Interest, Indemnity, Genuine Intention - CORRECT ANSWER: c. Insurable

Interest, Indemnity, Utmost Good Faith

All of the following "elements" must be present if your clients legal liability for a tort is to

be established, except one. Pick the exception:

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• The plaintiff was owed a legal duty
• The duty owed to the plaintiff was breached by the defendant
• The defendant's actions was the proximate cause of all damages
• The results of the defendants actions were unforeseeable - CORRECT ANSWER: d.

The results of the defendants actions were unforeseeable

All of the following coverages are provided to commercial property insured under the

broad form, except one. Pick the exception:

• Smoke from agricultural smudging or industrial operations
• Collapse of building due to snow or ice load
• Loss or damage caused by land vehicles

d. Theft of stock and equipment - CORRECT ANSWER: a. Smoke from agricultural

smudging or industrial operations

All of the following details are required to be shown on an application for automobile

insurance, except one. Pick the exception:

• Number of people residing in the insured's household
• Particulars of the insured's automobile
• License, insurance and loss history
• Territory in which the described automobile will chiefly be used - CORRECT

ANSWER: a. Number of people residing in the insured's household

Automobile insurance policies are subject to statutory conditions. One such condition deals with the duties and responsibilities of the insured and insurer when there is a loss or damage to the insured automobile. All of the following are true except one, pick the

exception:

• The insured is entitled to effect only such repairs as re immediately necessary for

protection of the automobile 3 / 4

• The insurer agrees to pay such expenses as are necessary to protect the automobile

from further loss or damage

• The settlement of all losses is determined on the basis of ACV
• When payment is made under the policy, the salvage, if any, is the property of the

insured - CORRECT ANSWER: d. When payment is made under the policy, the

salvage, if any, is the property of the insured

Automobile insurance policies are subject to statutory conditions. One such condition prohibits insureds from driving or operating an automobile in all of the following

circumstances, except one. Pick the exception:

• While the license to drive or operate an automobile is suspended
• Unless they are either authorized by law or qualified to drive
• While they are under the age of 16 or other age at which a license may be issued to

them

• For the transporting of clients or customers to do business with them - CORRECT

ANSWER: d. For the transporting of clients or customers to do business with them

Automobile insurance policies are subject to statutory conditions. One such condition requires that when there has been loss or damage to the insured automobile, the most

immediate requirement upon insured is:

• To notify the repair garage
• To notify the insurer within 30 days
• To protect the automobile from further loss
• To make a full written report to their insurer - CORRECT ANSWER: c. To protect the

automobile from further loss

Business have some unique liability exposure which needs to be properly insured. Your client sells hair care supplies for men and a mail order basis. Which one of the following liability coverage would be most important for such a business?

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