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South Dakota Personal Lines Practice Exam

20 exam-style questions drawn from the same bank as our full South Dakota Personal Lines course (South Dakota 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. Which is an example of pure risk?
Buying lottery ticketsInvesting in stocksDriving a car (potential for liability)Starting a business
2. Which is the best example of a morale (not moral) hazard?
Worn brakes on a vehicle that the named insured has neglected to repair before driving itAn insured leaving a car unlocked in a parking lot because 'theft is covered anyway'An insured filing a false claim by inflating the inventory list on the proof-of-loss formStoring flammable solvents in a basement near a gas water heater inside the dwelling structure
3. A washing-machine supply hose suddenly bursts at 2 a.m. while the family is asleep, releasing roughly 400 gallons of water into the laundry room and adjacent finished basement before being discovered. There is no flood, no sewer backup, and no gradual leak — the failure was abrupt. The insured has an HO-3. How does the policy respond?
Covered — sudden and accidental discharge of water from a plumbing system is covered under HO-3 Coverage A (open-peril dwelling) and is a named peril under Coverage CCovered, but only the failed appliance itself; resulting damage to the dwelling and contents is excluded as a consequential-loss bar under the formExcluded — interior water-discharge damage requires a separately-purchased water-backup-of-sewers-and-drains endorsement to restore coverage from the base exclusionExcluded — all water damage of any kind is excluded under HO forms unless separately-purchased flood insurance is in force at the time of loss
4. Actual cash value (ACV) is most commonly calculated as:
Original purchase priceMarket value at time of saleReplacement cost without depreciationReplacement cost minus depreciation
5. Collision coverage applies to:
Damage to the insured's auto from impact with another object or upsetTheft of the auto from the insured's residence or any other parking locationBodily injury to the insured caused by an at-fault driver in a collisionDamage to other people's property arising from a covered auto accident
6. 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$0 — firearms are categorically excluded under all standard HO forms$6,800 — full value paid because firearms are unsublimited Coverage C property$1,500 — the jewelry/watch sublimit applies because firearms are personal property
7. An insured carrying PIP is injured in an auto accident. His medical bills total $4,500, he loses $2,000 in wages while recovering, and his spouse pays $300 for replacement household services. Which of these are typically payable under PIP?
Medical, lost wages, and replacement services — all three are standard PIP benefitsOnly medical — PIP never pays wages or servicesOnly medical and wages — replacement services require a separate endorsementOnly lost wages — medical must go through health insurance first
8. A warranty in an insurance contract:
Is a statement believed to be true at the time it was made, judged under the reasonable-belief test that ordinarily governs representations and not strict warrantiesIs a guarantee made by the insured that, if breached, can void the policy regardless of materialityAlways requires written form under the statute-of-frauds writing requirement that ordinarily applies to insurance contracts running longer than one yearCannot affect coverage because warranty doctrine has been entirely abolished by the NAIC model act and replaced with a materiality-based representation standard
9. 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?
$275,000 — the endorsement caps at 10% above stated limit$250,000 — extended replacement cost does not raise the dwelling limit$312,500 — the maximum the endorsement allows$310,000 — within the 25% buffer
10. An HO-3 includes an 80% coinsurance clause for replacement-cost loss settlement. The dwelling's RC at the time of loss is $400,000; the policy carries $240,000 of Coverage A. A partial covered fire loss of $50,000 occurs. Ignoring the deductible, the insurer will pay:
$30,000 — coinsurance penalty: ($240,000 / $400,000) × $50,000$37,500 — coinsurance penalty: ($240,000 / $320,000) × $50,000$240,000 — the full Coverage A limit$50,000 — RC is paid on partial losses regardless of coinsurance
11. Six weeks after issuing a new HO-3, the underwriter discovers that the insured failed to disclose a felony arson conviction from eight years ago — a material misrepresentation on the application. Under standard cancellation rules in most states' insurance codes, the carrier may:
Cancel only after referring the file to the state fraud bureau for a formal §401-type investigation and written findingNot cancel at all once issued, because misrepresentation rescission rights expire 30 days after binding under most state codesCancel only at the next renewal date under the state's continuation-of-coverage rule, which bars mid-term cancellation for in-force policiesCancel with the short notice period allowed during the initial underwriting window for material misrepresentation
12. A dwelling fire policy is most appropriate for which of the following insureds?
A condominium unit ownerAn owner-occupant of a single-family home who qualifies for an HO policyA renter in an apartmentA landlord renting out a single-family home to tenants
13. An insured has an HO-3 with Coverage C limit $90,000. He adds a refinished cello to his musical-instrument collection (replacement cost $14,000). He wants the cello fully covered against any cause of loss, with no deductible, and including mysterious disappearance. Which approach is BEST?
No action is needed because the unendorsed HO-3 Coverage C already provides full-value, open-peril worldwide coverage on any musical instrument the insured ownsAdd a scheduled personal property endorsement (or personal articles floater) for the cello, providing open-peril coverage, no deductible, and broader perils than base Coverage CAdd an ordinance or law endorsement that covers the cello as code-required musical equipment under the additional-restoration provision of the homeowners formIncrease the Coverage C personal-property limit by $14,000 so the cello's full replacement cost is absorbed within the unscheduled aggregate limit for personal property
14. Under the standard ISO HO-3, what is the default Coverage B limit for other structures?
50% of Coverage A2% of Coverage A10% of Coverage A20% of Coverage A
15. On an unendorsed HO-3, which coverage applies to personal property?
Coverage BCoverage CCoverage ACoverage D
16. Stated value (or stated amount) on a policy generally means:
Replacement cost up to that amount without depreciation deduction, applied through the same coinsurance-test mechanism that controls loss settlement on the standard ISO HO-3 owner-occupied homeowners formAgreed value with no other limitations beyond the appraisal that was filed at policy issuance, used identically to the way agreed-value settlement operates on a scheduled fine-art class under an open-peril inland marine floaterA guarantee that the stated amount will always be paid in full on total loss without any deduction, depreciation, or coinsurance penalty, mirroring how agreed value functions on a scheduled inland marine PAF written on an open-peril basisAn amount declared by the insured at policy issuance that caps the recovery, but the loss settlement is the lesser of stated amount, ACV, or repair cost
17. When two policies cover the same loss on the same property, the typical 'other insurance' provision in property forms specifies:
Only one policy responds; the others are voided ab initio under the non-concurrent coverage forfeiture ruleLoss is shared pro rata based on each policy's limit relative to total insuranceThe newer policy responds first under the most-recently-issued policy priority rule of standard property formsThe insured collects the full limit from each policy under the stacking provision applicable to concurrent policies
18. What is the default Coverage E (Personal Liability) limit on an unendorsed homeowners policy?
$25,000$50,000$100,000$300,000
19. A landlord owns a single-family rental dwelling. She wants minimum-premium coverage on the dwelling against fire, lightning, and a few other basic perils — she does not need open-peril coverage and is willing to accept named-peril limits. She wants the cheapest dwelling-fire form available. Which DP form fits?
DP-3 special form, which provides open-peril dwelling coverage with replacement-cost settlement at the highest premium in the dwelling-fire program filingDP-2 broad form, which covers an expanded named-peril list including water discharge, weight of ice/snow, and falling objects at higher premium than DP-1DP-1 basic form, which covers a short list of basic perils (fire, lightning, internal explosion) plus optional ECE (extended coverage endorsement) perilsHO-3 — DP forms cannot be written for rental properties under residence-premises eligibility restrictions in the dwelling-fire program filings
20. An insured's sterling silver flatware (worth $4,000) is stolen. The unendorsed HO-3 sublimit on theft of silverware, goldware, and pewterware is $2,500. What is paid (ignoring deductible)?
$1,000 — the money/bullion sublimit applies to silver$0 — theft of silver is categorically excluded by form$4,000 — full replacement cost paid under Coverage C$2,500 — special theft sublimit on silverware

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