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Alabama Personal Lines Practice Exam

20 exam-style questions drawn from the same bank as our full Alabama Personal Lines course (Alabama Insurance Producer — Personal Lines — Exam Prep). Answer all 20, then grade yourself — most state exams require 70% to pass. Explanations for every question are part of the full course.

1. An insured wants to increase Ordinance or Law coverage from the 10% additional coverage to 50% of Coverage A so the home, built in 1958, can be fully brought to current code. The appropriate solution is:
Increased Ordinance or Law endorsement — raises the additional-coverage percentage from 10% to a higher selected limitWater Backup of Sewers and Drains endorsement — code-upgrade costs are paid from its sublimit on plumbing-related upgradesInflation Guard endorsement — addresses code-upgrade obligations through the renewal-period dwelling-cost adjustment factorExtended Replacement Cost endorsement — automatically pays code-required upgrades as part of the expanded dwelling-reconstruction provision
2. Res ipsa loquitur ('the thing speaks for itself') is a doctrine that:
Imposes strict liability on the defendant for any covered occurrence under the policy regardless of fault, control, or the inherent nature of the underlying activity at issue in the lawsuit pleadingsBars all defenses to the negligence cause of action that the defendant might otherwise raise under contributory negligence, comparative fault, assumption of risk, statute of limitations, or any related affirmative defensePermits punitive damages automatically whenever the doctrine is successfully invoked, without any further showing of malice, fraud, gross negligence, or other heightened culpable mental state on the part of the defendant in the underlying tortPermits an inference of negligence from the circumstances of the loss when the defendant had exclusive control and the event ordinarily would not occur without negligence
3. The PAP Part D (physical damage) typically requires the insured to:
Pay a deductible per occurrence before insurer paymentSubmit a sworn statement to the police only, per the safe-harbor exception that activates only for primary-state filingsPay a fixed surcharge after each loss — required under a separate compliance provision that doesn't reach this fact patternWait six months before claim payment, under the alternative procedure that applies only when both parties stipulate to it in writing
4. After a covered loss, the insured's contractor estimates the home will take 8 months to rebuild. The insured chooses to stay in a much nicer rental for 12 months. The insurer will reimburse ALE for:
Indefinitely until the home is sold or the policy renews under the open-ended-ALE provisionThe full 12 months of the rental lease the insured signed, regardless of reasonable rebuild durationOnly the first 30 days of expenses, with all subsequent additional living expense uninsuredThe shortest time required to repair or replace the damaged property — typically the 8-month rebuild period
5. An insured's home is burglarized. Stolen items include $4,000 of firearms (two rifles and a handgun) and $2,800 of related accessories (scopes, holsters, ammunition). The HO Coverage C special-limit for THEFT of firearms and related equipment is typically $2,500. The insured has no scheduled-property endorsement on the guns. How much does Coverage C pay?
$2,500 — the firearm theft sublimit applies to all firearms-related items together$6,800 — full value paid because firearms are unsublimited Coverage C property$0 — firearms are categorically excluded under all standard HO forms$1,500 — the jewelry/watch sublimit applies because firearms are personal property
6. Which of the following losses would most likely be EXCLUDED under an HO-3 dwelling coverage?
Fire damage from a kitchen grease fireFalling tree onto roofEarth movement (earthquake)Wind damage from a hailstorm
7. Under the federal Fair Credit Reporting Act, when an insurer takes an adverse action based on a consumer report, the insurer must:
Notify the consumer of the action and identify the consumer reporting agency that supplied the reportPay the consumer a fixed penalty under the FCRA private-cause-of-action damages provision for unauthorized release of personal credit data to a non-permitted userWait 30 days before taking the action under the FCRA pre-adverse-action holding period that applies to insurance underwriting decisions based on a consumer reportCancel the policy without notice under the federal Gramm-Leach-Bliley financial-privacy preemption applied to FCRA-triggered underwriting actions on existing policyholders
8. A dwelling is insured for $250,000 with the Increased Dwelling Limit (extended replacement cost) endorsement at 25%. After a total loss the actual reconstruction cost is $310,000 because lumber prices spiked. How much will the policy pay for the dwelling?
$312,500 — the maximum the endorsement allows$275,000 — the endorsement caps at 10% above stated limit$250,000 — extended replacement cost does not raise the dwelling limit$310,000 — within the 25% buffer
9. On a DP-3, dwelling losses are paid on a replacement cost basis if the insured carries:
At least 50% to valueAt least 80% to value100% to valueAt least 70% to value
10. The 'covered auto' definition on a PAP typically includes:
Any vehicle the insured drives, regardless of ownership, with no distinction between owned, borrowed, rented, or company-furnished autos under the PAP's broad permissive-use definition that applies to all driving situationsVehicles listed on the declarations, newly acquired vehicles within the reporting window, temporary substitutes, and certain trailersOnly vehicles listed on the declarations page by VIN and rating territory, with no extension to substitutes or newly acquired autos until a formal endorsement has added the vehicle to the policy at the underwriter's discretionOnly newly acquired vehicles for the first 14 days after purchase, with previously owned vehicles requiring a separate formal endorsement to remain on the covered auto schedule even when they were listed on the prior renewal of the policy
11. A fire makes an insured's HO-3 dwelling uninhabitable. The family rents a comparable house for $3,200/month while their home is being repaired. Their normal mortgage, utilities, and food costs at home averaged $2,800/month. How much will Coverage D Loss of Use reimburse per month, assuming the limit is adequate?
$400 — the difference between rental and normal costs (additional living expense)$2,800 — the family's normal monthly cost of living at the damaged home$3,200 — the full monthly rental cost paid for the substitute residenceNothing — Coverage D applies only to fair rental value, not insured-family displacement
12. An insured's 1965 home is destroyed by fire. Coverage A is $280,000 and replacement cost matches. However, current building codes require seismic retrofitting, updated wiring to current NEC standards, and modern egress windows — code-upgrade costs that add $42,000 to the rebuild. The base HO-3 generally excludes ordinance-or-law costs. Which endorsement addresses this?
Increased Coverage C endorsement raising personal-property limits to absorb the additional code-driven reconstruction costs as a Coverage C extension at lossOrdinance or law coverage endorsement, which pays the additional cost to rebuild to current code requirementsInflation guard endorsement, which steps up Coverage A automatically at renewal to mirror local construction-cost inflation indices and code-required upgradesIdentity theft expense endorsement filed under Section II as a residual-coverage extension for any post-loss out-of-pocket regulatory compliance expense
13. A homeowners policy can also broaden coverage on small but valuable property classes by adding a:
Mortgage clauseScheduled Personal Property EndorsementStandard fire formLoss assessment endorsement
14. An insured's PIP pays $10,000 in medical bills after a covered accident. The insured then recovers $50,000 in a tort settlement from the at-fault driver. The PIP insurer files a lien against the settlement for the $10,000 it paid. This process is called:
Subrogation — the PIP insurer recovers from the third-party tortfeasor's payment to prevent double recoveryCoinsurance — the insured shares the loss with the carrier on a pro-rata basis under the standard property-style coinsurance formulaReinsurance — the PIP insurer transfers the underlying loss to a treaty reinsurer under the standard ceding agreement at year-endSalvage — the insurer takes title to the damaged property of the at-fault driver under the standard salvage-recovery provision
15. Which dwelling form is similar in scope to the homeowners HO-2 form?
DP-8DP-1DP-2DP-3
16. An insured has an HO-3 with a $2,500 special limit on silverware. A theft destroys $4,000 of sterling silverware. Without endorsement, how much of the loss is paid?
Full Coverage C limit$4,000 less the deductible$0$2,500
17. An insured's pit bull bites a delivery driver on the front porch. The driver requires surgery costing $46,000 and sues the insured for $200,000 total damages. The HO-3 carries Coverage E $300,000 with NO dog-bite or animal-liability exclusion endorsement. The dog has no prior bite history. How does Coverage E respond?
Covered only when the insured can prove the dog was provoked by the injured party, with the burden of proof on the insured to establish provocationCovered — Section II pays bodily injury caused by domestic animals owned by the insured, up to the Coverage E limitExcluded — dog bites are universally excluded under HO forms regardless of breed or any prior-bite history of the animal causing the injuryExcluded — pit bulls are categorically uninsurable under Section II as a matter of underwriting policy in every standard HO-3 filing without exception
18. An insured who voluntarily admits fault and pays a third-party claimant before notifying the insurer:
May have breached the policy's cooperation/no-voluntary-payments condition, which can jeopardize coverage for that lossOwes the insurer the amount paid under the post-loss disgorgement provision that requires the insured to repay any unauthorized third-party settlement made before insurer noticeWill be reimbursed automatically by the carrier under the supplementary-payments extension that pays the insured back for any reasonable expenses incurred at the loss sceneHas fulfilled their duties properly under the prompt-mitigation provision of the casualty policy that requires the insured to take immediate steps to limit the loss
19. An insured uses his personal vehicle to deliver food via a gig-economy app three nights a week. He does not disclose this on his application or renewal. He is involved in a wreck while between deliveries (logged into the app, awaiting an order). The PAP will most likely:
Pay because gig-economy delivery app drivers are statutorily covered under personal auto policies the same way resident-relative family members are insured under the standard household-coverage provision of the PAP formPay subject to a 20% coinsurance penalty for the undisclosed delivery use under the PAP's standard 'use-misclassification' partial-payment formula filed and approved as a permitted rating-correction remedyPay the entire claim because between-delivery periods while a gig driver is awaiting an order are treated as personal use under the PAP's standard 'private-passenger-use' coverage extension provision in every state's filingDeny under the public/livery or 'transportation network company' exclusion, which is commonly written to exclude the entire period from logging in until the passenger or food is delivered
20. A PAP insured swerves to avoid a deer at 50 mph, leaves the roadway, and hits a tree. The car is totaled. The damage is paid under:
Collision — impact with a stationary objectComprehensive — animal-related lossUM — no other driver involvedLiability — single-vehicle accidents

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