Free Pennsylvania Property & Casualty Insurance License Exam Practice Test

Sample PA 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 (CGL) policy's Coverage B (Personal and Advertising Injury Liability) would typically respond to a lawsuit alleging which of the following?

   • A.False arrest, malicious prosecution, libel, slander, or invasion of privacy.(Correct)
   • B.Bodily injury sustained by a customer while on the insured's premises due to a slip and fall.
   • C.Damage to the insured's own business property resulting from a fire.
   • D.Property damage to a client's goods that were in the insured's care, custody, and control.

   Explanation

   Coverage B specifically addresses non-physical injury torts such as libel, slander, false arrest, and invasion of privacy. The other options describe claims typically covered under Coverage A (Bodily Injury and Property Damage Liability) or excluded under standard CGL provisions like care, custody, and control.

2. Question 2

   An insured's Business Income (and Extra Expense) Coverage Form has a coinsurance penalty applied. If the limit of insurance was $500,000, the required coinsurance percentage was 80%, and the actual loss sustained was $100,000, but the business was only closed for 60 days during a period of restoration of 12 months. What is the maximum amount the insurer will pay for the business interruption loss, assuming the policy has no deductible?

   • A.$62,500
   • B.$80,000
   • C.$50,000
   • D.$100,000(Correct)

   Explanation

   The coinsurance penalty is calculated as (Limit of Insurance / Required Coinsurance Amount) * Loss. The required coinsurance amount is 80% of $500,000, which is $400,000. However, Business Income forms typically have a daily limit or a limit based on the period of restoration. Assuming a 12-month period of restoration and no specific daily limitation stated, the full $100,000 loss would be paid if the limit of insurance was sufficient to cover the projected income for that period. The coinsurance clause ensures the insured carries adequate insurance relative to their projected income, but the loss payment is capped by the actual loss incurred and the policy limit. Since the $500,000 limit is well above the $100,000 loss, and the coinsurance requirement is met ($500,000 > $400,000), the full loss is payable. The period of restoration limits how much can be claimed over time, not whether the coinsurance is met.

3. Question 3

   Which of the following best describes the 'actual cash value' (ACV) of a damaged property, as it would be applied in a standard property insurance policy?

   • A.The cost to repair the damaged property, including labor and materials.
   • B.The market value of the property immediately before the loss occurred.
   • C.The cost to replace the damaged property with new property of like kind and quality.
   • D.The replacement cost of the property less a reasonable allowance for depreciation.(Correct)

   Explanation

   Actual cash value (ACV) is generally defined as the replacement cost of the property minus depreciation. Depreciation accounts for the age, wear, and tear of the item. Replacement cost is the cost to repair or replace without depreciation.

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