Sample practice questions

A few real questions from this free bank, with full explanations. Use the practice tool above for the whole set.

1. 1. Personal Auto Policy

   What are California's compulsory minimum personal auto liability split limits?

   • a.$50,000 / $100,000 / $25,000
   • b.$30,000 / $60,000 / $15,000
   • c.$25,000 / $50,000 / $25,000
   • d.$10,000 / $20,000 / $3,000

   Answer: b

   Explanation: Effective January 1, 2025, SB 1107 (the Protect California Drivers Act) set California's compulsory minimum personal auto liability split limits at 30/60/15 — $30,000 per person bodily injury, $60,000 per accident bodily injury, and $15,000 per accident property damage — amending Vehicle Code §16056 and replacing the 15/30/5 limits used from 1967 to 2024. These are floor amounts only; carriers and producers may write higher limits and typically recommend doing so.

   Source: Cal. Veh. Code §16056; Cal. Ins. Code §11580.1(b)

2. 2. California Insurance Code & Ethics

   An insurer reports to law enforcement information about a homeowners claim it reasonably believes is fraudulent. Under §1879.5, the insurer is:

   • a.Immune from civil liability for the disclosure if made in good faith and without malice
   • b.Required to obtain the insured's written consent before making the report
   • c.Required to wait until criminal charges are filed before sharing the file
   • d.Liable for defamation if the suspect is not eventually convicted

   Answer: a

   Explanation: Insurance Code §1879.5 grants insurers, their employees, and authorized agents immunity from civil liability for furnishing information about suspected insurance fraud to the Department of Insurance or law enforcement, provided the disclosure is made in good faith and without fraudulent intent or actual malice.

   Source: Cal. Ins. Code §1879.5

3. 3. Endorsements & Optional Coverages

   Coverage F medical payments to others on a homeowners policy is BEST described as:

   • a.A coverage that pays the medical bills of the named insured and resident relatives only, up to $5,000 per person, with injuries to guests handled instead under Coverage E once negligence is proved
   • b.A property coverage that pays for damage to a visitor's belongings while they are on the residence premises, subject to the same $1,000 special limit the policy applies to theft of currency, and requiring no showing of negligence
   • c.A liability coverage that pays an injured guest's medical expenses only after the insured is found legally at fault, and that shares the single Coverage E limit shown on the declarations page
   • d.A no-fault coverage with a low limit (typically $1,000-$5,000) that pays reasonable medical expenses for non-insured persons injured on the premises or by the insured's activities

   Answer: d

   Explanation: Coverage F is a goodwill, no-fault coverage. It pays reasonable medical expenses, usually limited to $1,000-$5,000 per person, incurred by guests or others (not insureds or regular residents of the household) who are injured on the premises or by the insured's activities off the premises. It pays without proof of legal liability, helping to head off small claims from becoming lawsuits.

   Source: ISO HO Coverage F medical payments to others

4. 4. Property Insurance Fundamentals

   All of the following are classic 'basic form' perils EXCEPT:

   • a.Windstorm and hail
   • b.Smoke
   • c.Fire and lightning
   • d.Earthquake

   Answer: d

   Explanation: The basic peril list (FELLW + extended) includes fire, explosion, lightning, wind/hail, smoke, vehicles, aircraft, vandalism, riot, sinkhole collapse, and volcanic action. EARTHQUAKE is excluded under all standard homeowners and dwelling forms; California requires insurers to OFFER earthquake coverage separately (CEA or stand-alone) under §10081/§10089.

   Source: ISO DP-1 / HO basic peril list

5. 5. General Insurance Principles

   In an insurance course, Lloyd's of London is best described as:

   • a.a marketplace where syndicates of members underwrite risks
   • b.a single large insurer that issues its own policy contracts
   • c.a regulator that licenses insurers doing business overseas
   • d.a reinsurer that accepts only risks other insurers refused

   Answer: a

   Explanation: Lloyd's does not assume risk itself. It provides the market, the framework and the financial safeguards, while individual and corporate members grouped into syndicates accept the risks, which is why the answer calling it one large insurer is wrong. Lloyd's associations write both direct insurance and reinsurance, and they license nobody.

6. 6. Property Insurance Fundamentals

   Under a stated amount arrangement, a covered loss is settled at:

   • a.The greater of the stated sum or repair cost
   • b.The stated sum plus the cost of any salvage
   • c.The lesser of the stated sum or actual value
   • d.The stated sum, whatever the actual value

   Answer: c

   Explanation: A stated amount fixes a ceiling rather than a promise: the insurer pays the smallest of the stated figure, the actual cash value, or what it costs to repair or replace, so the insured is indemnified rather than enriched. Paying the stated sum regardless of value describes an agreed value approach. Choosing the greater of two figures would pay more than the loss.

7. 7. Homeowners Policy (HO)

   The most commonly purchased Homeowners form, which covers the dwelling on an open-perils basis and personal property on a named-perils basis, is the:

   • a.HO-8
   • b.HO-3
   • c.HO-2
   • d.HO-4

   Answer: b

   Explanation: The HO-3 (special form) is the most widely purchased Homeowners policy. It insures the dwelling and other structures on an open-perils basis while covering personal property on a named-perils basis. HO-2 covers both on named-perils, HO-4 is the renters form, and HO-8 is a modified form for older homes. The HO-5 comprehensive form extends open-perils coverage to personal property as well.

8. 8. Homeowners Policy (HO)

   A homeowner's small sailboat, its trailer and its outboard motor are damaged by a covered peril. Under Coverage C on an unendorsed form, the most payable for the boat, trailer and equipment together is:

   • a.$1,000
   • b.$2,500
   • c.$1,500
   • d.$5,000

   Answer: c

   Explanation: Watercraft, together with their trailers, furnishings, equipment and outboard motors, share one $1,500 special limit under Coverage C on the standard form. That single limit covers the boat and everything that goes with it, so a real boat needs its own watercraft policy. The $2,500 figure belongs to firearms, silverware or business property, not watercraft.

9. 9. Personal Auto Policy

   An insured carries a $300,000 combined single limit. In one at-fault accident, two people are injured with claims valued at $200,000 and $50,000, and $80,000 of property is destroyed. Part A pays:

   • a.$330,000, the full value of the claims
   • b.$250,000, the two injury claims
   • c.$300,000, the single limit
   • d.$200,000, a per-person share of it

   Answer: c

   Explanation: One limit answers for the whole accident, so add everything up: $200,000 + $50,000 + $80,000 = $330,000 of damages against a single $300,000 limit. The insurer pays $300,000 and the insured is exposed for the $30,000 difference. The answer that counts only the two injury claims forgets that property damage draws on the same limit, and a combined single limit has no per-person cap to apply.

10. 10. Personal Auto Policy

    The towing and labor costs endorsement on a personal auto policy pays for:

    • a.The full cost of any roadside service, without limit
    • b.Towing and labor done at the place of disablement
    • c.A rental car while the disabled auto is in the shop
    • d.Engine repairs completed later at a repair garage

    Answer: b

    Explanation: The endorsement covers towing plus the labor performed where the auto became disabled, up to the limit shown on the declarations. Work done after the car reaches the garage is the owner's expense, so naming engine repairs puts the claim on the wrong side of that line. A substitute car is transportation expense coverage, a separate grant, and the endorsement carries a stated limit.