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Vermont Casualty Practice Exam

20 exam-style questions drawn from the same bank as our full Vermont Casualty course (Vermont Insurance Producer - Casualty - 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. A homeowner sells her house and attempts to assign the homeowners policy to the buyer without telling the insurer. The assignment is ineffective because insurance is a:
Unilateral contract, so only the insurer's promise is enforceablePersonal contract, insuring the insured's interest rather than the propertyConditional contract, so the insured must first comply with all dutiesContract of adhesion, so ambiguities are construed against the drafter
2. Insurance is based on the LAW OF LARGE NUMBERS, which means:
The greater the number of similar exposure units, the more predictable losses become, allowing accurate rate-setting.Each insured's losses can be predicted exactly once enough data is collected about that individual.Insurers must write a minimum number of policies in each state before they may file rates with regulators.The more policies an insurer writes, the higher its total premium, regardless of the losses that occur in the pool.
3. A plaintiff proves $40,000 in medical expenses and $60,000 in lost wages. The jury also awards $100,000 for 'pain and suffering.' How are these damages categorized?
$100,000 is economic/special; $100,000 is non-economic/general; no punitive.$100,000 is economic/special; $100,000 is punitive; no non-economic.$60,000 is economic/special; $140,000 is non-economic/general; no punitive.$200,000 is all economic/special; none is non-economic; no punitive.
4. The LAW OF LARGE NUMBERS is important to insurers because:
As the number of similar exposure units increases, the actual loss experience becomes more predictable and closer to the expected loss.As the number of exposure units decreases, the loss experience becomes more stable, allowing insurers to charge lower rates to smaller pools.As the number of exposure units increases, each individual insured's losses can be predicted with certainty, so underwriting each risk is unnecessary.It allows insurers to avoid paying catastrophic losses by limiting the number of policies written in any one territory.
5. Under the Businessowners common policy conditions, where the insurer cancels the policy the return premium is computed:
On a short rate basis, the insurer retaining an acquisition allowanceBy reference to the losses paid during the expired portionOn a pro rata basis for the unexpired portion of the policy periodBy forfeiting the entire premium already paid by the insured
6. In a surety bond, who are the three parties and what does each do?
Principal performs, obligee receives the performance, surety guarantees itPrincipal guarantees, obligee performs, surety receives the performancePrincipal and obligee jointly perform, and the surety adjudicates disputesPrincipal receives, obligee guarantees, surety performs the obligation
7. Besides the owner, the party with an insurable interest in a financed car is the
ManufacturerLienholderPassengerDealer
8. A general contractor is named as an additional insured on a subcontractor's CGL policy for a jobsite project. Which statement BEST describes the GC's insurable interest in the sub's CGL?
The GC has no insurable interest because it does not own the sub's operations or equipmentThe GC's insurable interest arises from its legal exposure to suits stemming from the sub's operations on the projectThe GC's insurable interest is limited to the physical property on the jobsite, not liability exposureThe AI endorsement itself creates the insurable interest where none existed before
9. The third permitted ground for cancelling a Vermont automobile policy under 8 V.S.A. §4223 is suspension or revocation of the driver's licence of:
The named insured, or a household member or customary operatorThe named insured alone, and no other person whateverThe named insured, or any person named in the declarationsAny person who has ever driven the insured vehicle at any time
10. Under ISO CGL language, 'occurrence' is defined as:
Any event during the policy period that results in a claim against the insured, whether intentional or accidentalAn accident, including continuous or repeated exposure to substantially the same general harmful conditionsThe date on which a claim is first made against the insured during the policy period, regardless of the injury dateA sudden and accidental event only, excluding any injury caused by continuous or repeated exposure over time
11. The decrease in a property's value due to age, wear and obsolescence is
SalvageAppreciationAmortizationDepreciation
12. In property insurance, insurable interest must exist at which point?
At each renewalWhen the policy is issuedAt applicationAt the time of loss
13. An insured leaves a loaded firearm accessible to children. This carelessness is best classified as:
Morale (attitudinal) hazardMoral hazardSpeculative hazardPhysical hazard
14. Which part of a casualty policy identifies the named insured, the policy period and the limits of liability?
The insuring agreementThe declarationsThe conditionsThe exclusions
15. Under Personal Auto Policy Part A Liability, SUPPLEMENTARY PAYMENTS are:
Paid in addition to the limit of liability, and include defence costsPaid only after the insured has exhausted the limit of liabilityPaid only where the insurer declines to provide a defencePaid within the limit of liability, reducing the amount left for damages
16. The INSPECTIONS AND SURVEYS condition provides that any inspection the insurer makes:
Must be carried out annually or the policy becomes voidableIs a warranty to the insured and the public that the premises are safeIs for insurance purposes and is not a warranty that conditions are safeMust be paid for by the insured as a condition of the coverage
17. Under 8 V.S.A. §4712, the notice a Vermont insurer must give to cancel for nonpayment of premium is:
30 days, against 45 days for any other permitted ground10 days, against 45 days for any other permitted ground15 days, against 30 days for any other permitted ground15 days, against 45 days for any other permitted ground
18. A casualty exposure arises primarily out of:
First-party direct physical damage to the insured's own building and business contentsThe insured's potential legal liability to others for bodily injury or property damageThe insured's speculative gains and losses on equity and commodity market positionsPure speculation on outcomes the insured has no control over, such as market prices
19. Under 18 U.S.C. §1033(e), a person convicted of a felony involving dishonesty or breach of trust may work in the business of insurance only if:
The person's employer files a surety bond with the state regulatorTen years have elapsed since the sentence was completely dischargedThe person obtains written consent from the state insurance regulatorThe conviction is expunged by the court that originally entered it
20. Which statement correctly distinguishes pure risk from speculative risk?
Pure risk offers a chance of loss or no loss, with no possibility of gainPure risk is a risk whose frequency is known but whose severity is unknownPure risk offers a chance of gain, loss or no change in the insured's positionPure risk is any risk an underwriter has agreed to accept at a standard rate

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