Free New Jersey Property & Casualty Insurance License Exam Practice Test

Sample NJ P&C practice questions

Try a few representative questions below. Each includes the correct answer and a short explanation — the same style you'll see in the full practice test.

1. Question 1

   A commercial general liability policy is written on an occurrence basis. An injury occurs on March 15, 2023, but the claim is not filed until April 10, 2024. The policy in effect on March 15, 2023, had limits of $100,000 per occurrence and an aggregate limit of $300,000. The policy was replaced by a new policy on January 1, 2024, with limits of $250,000 per occurrence and an aggregate limit of $500,000. Which policy's limits apply to this claim?

   • A.The higher of the two policies' per occurrence limits, but the aggregate limit of the policy in effect when the claim is filed.
   • B.The 2024 policy limits of $250,000 per occurrence and $500,000 aggregate.
   • C.A pro-rata share of both the 2023 and 2024 policy limits based on the time between the occurrence and the claim filing.
   • D.The 2023 policy limits of $100,000 per occurrence and $300,000 aggregate.(Correct)

   Explanation

   An occurrence policy covers claims for events that happen during the policy period, regardless of when the claim is filed. Since the injury occurred on March 15, 2023, the policy in effect at that time is the one that responds to the claim, up to its stated limits.

2. Question 2

   A business owner carries a commercial property policy with a replacement cost valuation and a coinsurance clause of 80%. The building is valued at $1,000,000, and the policy limit is $600,000. A fire causes $200,000 in damages. How much will the insurance company pay for this loss?

   • A.$180,000
   • B.$150,000
   • C.$166,667
   • D.$200,000(Correct)

   Explanation

   Under replacement cost valuation with no coinsurance penalty, the insurer would pay the full amount of the loss, up to the policy limit. The coinsurance clause is used to determine if the policy is underinsured. In this case, the required insurance is 80% of $1,000,000, which is $800,000. Since the policy limit is $600,000, it is underinsured. However, the loss is $200,000, which is less than the policy limit, so the full $200,000 is paid. The coinsurance calculation (Did Have/Should Have) * Loss = Payout ($600,000 / $800,000) * $200,000 = $150,000 would only apply if the loss exceeded the payout based on the limit.

3. Question 3

   Which of the following best describes the purpose of a Business Income (and Extra Expense) coverage form in a commercial property policy?

   • A.To protect the insured against claims for bodily injury or property damage arising from the insured's operations.
   • B.To provide coverage for business property that is temporarily removed from the insured premises.
   • C.To reimburse the insured for lost net income and continuing expenses incurred due to a suspension of operations caused by a covered peril.(Correct)
   • D.To cover the cost of repairing or replacing damaged property after a covered loss.

   Explanation

   The Business Income coverage form is designed to indemnify the insured for loss of earnings and ongoing expenses that continue even when the business operations are interrupted due to a direct physical loss from a covered peril. This helps the business survive the shutdown period.

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