Free property insurance practice questions

These are the property questions from our free sample: policy forms, insurance terms, and the contract law that governs how a policy is read. The answer and the explanation are shown on each one, including why the wrong options are wrong, which is usually the more useful half.

This is the part of the examination that transfers between states, so it is worth learning properly once.

1. Which perils does an HO-3 cover on the dwelling itself?

• A. Only the perils named in the policy
• B. All risks of direct physical loss except those excluded
• C. Only fire, lightning and windstorm
• D. Only perils the insured schedules by endorsement

Answer: B. The HO-3 insures the dwelling and other structures on an open-perils basis, meaning any direct physical loss is covered unless the policy excludes it. Named-perils coverage describes the HO-2 and the contents side of an HO-3, not its dwelling coverage. Fire, lightning and windstorm alone describe basic dwelling forms, and scheduling by endorsement describes inland marine floaters.

2. Which homeowners form is designed for a tenant who rents rather than owns?

• A. HO-2
• B. HO-6
• C. HO-4
• D. HO-8

Answer: C. The HO-4 is the tenants form. It covers personal property and liability but provides no coverage on the building, which the landlord insures. The HO-2 and HO-8 are owner-occupant homeowners forms, and the HO-6 is written for a unit owner in a condominium rather than a renter.

3. What is a Commercial Package Policy?

• A. A single-peril contract covering fire alone
• B. Two or more commercial coverage parts in one contract
• C. A contract sold only to homeowners associations statewide
• D. A reinsurance treaty between two insurers

Answer: B. A Commercial Package Policy assembles two or more coverage parts, such as property and general liability, under one declarations page and one set of common conditions. It is not restricted to a single peril or to any particular class of insured, and it is a direct contract with the insured rather than an arrangement between insurers.

4. Which statement about the National Flood Insurance Program is correct?

• A. Flood coverage is automatically included in every homeowners policy
• B. It covers only commercial buildings
• C. It pays for a flooded vehicle parked at the insured dwelling
• D. It exists because flood is excluded by standard property forms

Answer: D. Standard homeowners and dwelling forms exclude flood, so the National Flood Insurance Program was created to make cover available. Flood is therefore not automatically included, the program is not limited to commercial buildings, and vehicles are covered by the comprehensive section of an auto policy rather than by flood insurance.

5. When must insurable interest exist in a property insurance contract?

• A. Only when the policy is first issued
• B. At the time of loss
• C. Only when the policy renews
• D. It is never required for property insurance

Answer: B. Property insurance requires insurable interest at the time of loss, because the purpose is to indemnify actual financial harm. Requiring it only at issue or only at renewal would let someone collect after selling the property, and insurable interest is a fundamental requirement rather than an optional one.

6. Which of the following is a pure risk rather than a speculative risk?

• A. Opening a new restaurant
• B. Buying shares in a company
• C. A house being destroyed by fire
• D. Entering a wager on a sporting result

Answer: C. Pure risk offers only the possibility of loss or no loss, which is why it is insurable. A house burning down fits that description. Starting a business, investing and wagering all carry the chance of gain as well as loss, making them speculative and generally uninsurable.

7. A building worth $400,000 carries an 80 percent coinsurance clause but is insured for only $240,000. Ignoring the deductible, what is the effect on a partial loss?

• A. The claim is denied in full for underinsurance
• B. The insurer pays the whole of the partial loss
• C. The insured shares the loss, having carried too little
• D. The policy limit rises automatically to the required amount

Answer: C. Eighty percent of $400,000 requires $320,000 of insurance, and only $240,000 was carried, so the coinsurance clause reduces the recovery in proportion. The claim is not denied outright, the insurer does not pay in full, and the clause reduces the payment rather than raising the limit.

8. Which information is found in the declarations page of a property policy?

• A. The full wording of every policy exclusion
• B. The named insured, policy period and covered property
• C. The insurer's own claims handling manual
• D. The producer's commission schedule for the year

Answer: B. The declarations page identifies who is insured, what is insured, for how much and for how long. Exclusions appear in the body of the form, claims manuals are internal insurer documents, and commission arrangements are between the insurer and the producer rather than part of the contract with the insured.

9. After paying a claim, an insurer pursues the driver who caused the damage. Which right is it exercising?

• A. Subrogation
• B. Appraisal
• C. Coinsurance
• D. Abandonment

Answer: A. Subrogation transfers the insured's right of recovery against a responsible third party to the insurer once the claim is paid, which supports indemnity by placing the cost on the party at fault. Appraisal resolves value disputes, coinsurance concerns adequacy of the limit, and abandonment concerns surrendering damaged property to the insurer.

If the explanations are the part you find useful, that is the design. Every question in the paid bank carries one, and they are written to explain the distractors rather than only the key. The full practice sample runs ten questions across all eight domains with the answers withheld until you submit.