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Vermont Personal Lines Practice Exam

20 exam-style questions drawn from the same bank as our full Vermont Personal Lines course (Vermont 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. A PAP insured totals his 2018 sedan. His policy lists Coverage D Other-Than-Collision and Collision but NO replacement-cost endorsement. The car's pre-loss ACV is $14,800; he still owes $19,200 on the auto loan. His collision deductible is $500. The carrier's payment is:
$19,200, the loan balance$14,800, the ACV in full; deductibles don't apply to total losses$19,200 less the $500 deductible (= $18,700)$14,800, the ACV, less the deductible (= $14,300 paid)
2. A homeowner files a claim. The insurer's adjuster recites the four-part rule for analyzing whether the loss is covered: 'Is there an insured, an insured peril, an insured property, at an insured location, within the policy period?' Which part of the policy is the adjuster applying?
The conditionsThe insuring agreementThe exclusionsThe declarations
3. An insurance contract is described as a contract of adhesion because:
Both parties draft it together through arm's-length negotiation of every term in the policy formThe insured 'adheres' to the take-it-or-leave-it terms drafted by the insurerThe state writes the contract through the prescribed standard-form provisions issued by the regulatorThe agent draws up custom contracts based on each applicant's individual risk profile and exposure factors
4. On a casualty (liability) policy, the insuring agreement typically promises to:
Pay the insured's deductible under the loss-fund retention provision of the standard casualty insuring agreement filingPay damages the insured is legally obligated to pay because of bodily injury or property damage caused by an occurrenceDefend any lawsuit, regardless of subject matter, under the broad duty-to-defend extension that applies to all claimsRepair or replace damaged property of the insured under the first-party physical-damage coverage of the casualty form
5. After a casualty insurer pays a claim and exercises subrogation, recovery from the responsible third party is generally:
Used to reimburse the insurer for payments made, with any excess going to the insured (subject to the made-whole doctrine in many states)Paid to the state as unclaimed property, because a recovery that exceeds the covered loss belongs to neither the insured nor the insurerKept entirely by the insurer, because a subrogation recovery belongs to the carrier that paid the claim regardless of the amount it paidPaid entirely to the insured, because the insured is the party that suffered the loss and the insurer has already been compensated by premium
6. An insured carries an HO-2 broad form. A skunk gets into the basement crawlspace and sprays, requiring $3,400 in odor remediation. The insured argues that 'damage by animals' should be covered because animals are not explicitly excluded. Why does the HO-2 NOT respond to this claim?
Because the loss occurred in the basement, which is excluded territory under the HO-2's below-grade restriction for wildlife-caused contamination lossesBecause the insured failed to mitigate the loss within the standard 72-hour notice window required for wildlife-intrusion claims to remain payableBecause animal damage is a Coverage C special sublimit rather than a Coverage A exclusion, capping the claim at the $250 wildlife-mischief amountBecause the HO-2 covers only the 16 named perils listed, 'damage by wild animals' is not among them, so the loss is not covered regardless of exclusions
7. PAP Part B (Medical Payments) pays:
Reasonable medical expenses for BI to insureds caused by accident, regardless of faultThe deductible on physical damage owed by the insured before comprehensive payment beginsDamage to other people's property arising from a covered auto accident under the policyLost wages of the named insured during the time off work after an accident-related injury
8. An older home's replacement cost is far higher than its market value, making the owner unable to insure to 80% of RCV. Which homeowners form is designed for this situation?
HO-3 (Special Form), automatically waives any coinsurance requirement when replacement cost exceeds market by a wide marginHO-2 (Broad Form), pays full replacement-cost settlement automatically on all covered partial losses without coinsuranceHO-5 (Comprehensive Form), provides agreed-value settlement that waives any replacement-cost coinsurance requirementHO-8 (Modified Coverage Form), settles losses on a modified-ACV basis using common construction materials
9. An insured's laptop and luggage are stolen from a hotel room during a vacation. Coverage C is $100,000 and the loss is $4,000. How does the HO-3 respond?
Pays $1,000, the standard flat-dollar off-premises sublimit applied regardless of the Coverage C personal-property limit selected at policy inceptionPays up to 10% of Coverage C ($10,000) for property away from the residence premises, the $4,000 loss is covered in fullPays only actual cash value regardless of any replacement-cost endorsement on the policy, because the RCV provision suspends for off-residence-premises lossesNo coverage, off-premises personal property is categorically excluded from Coverage C and routed to a scheduled-property floater for any reimbursement
10. An insured purchased her HO-3 four years ago with Coverage A $300,000. Construction costs have risen sharply, and the home would now cost $375,000 to replace. The insured forgot to review limits at each renewal. Which endorsement is designed to automatically adjust Coverage A each renewal to keep pace with rising construction costs?
Ordinance or law endorsement, which adjusts Coverage A automatically each renewal to track increases in local building-code reconstruction requirementsReplacement cost endorsement on Coverage C extended via rider to Coverage A so that any renewal-period increase in dwelling replacement value is auto-absorbedScheduled personal articles floater applied to the dwelling itself as a stated-value inflation-tracking endorsement for Coverage A limit increasesInflation guard endorsement, which adjusts Coverage A at each renewal by a stated percentage tied to construction-cost inflation
11. The 'covered auto' definition on a PAP typically includes:
Only newly acquired vehicles for the first 14 days after purchase; previously owned vehicles must be re-listed by endorsement at each renewalVehicles listed on the declarations, newly acquired vehicles within the reporting window, temporary substitutes, and certain trailersOnly vehicles listed on the declarations page, with no coverage for a substitute or newly acquired auto until an endorsement adds itAny vehicle the insured drives, regardless of who owns it, with no distinction between owned, borrowed, rented, or employer-furnished autos
12. An HO-3 dwelling burns to the ground. The insured had $200,000 of Coverage A, no extended replacement cost endorsement, and actual reconstruction cost is $235,000. How much does the dwelling coverage pay?
$200,000 plus 25% extended buffer automatically$117,500, half due to underinsurance$235,000, full replacement cost regardless of limit$200,000, the policy limit
13. Defense costs in a personal-lines liability policy are typically:
Capped at $1,000 per claimOutside the limits, they do NOT erode the per-occurrence limitInside the limits of liability, they erode the limitPaid by the insured
14. Under an HO-3, theft of personal property kept in a secondary residence (not the residence premises) is generally:
Limited to $1,000Subject to a $5,000 special limitCovered to the full Coverage C limitExcluded
15. Personal liability policies that respond to the same loss typically use which of the following 'other insurance' approaches?
Pure pro rata only, with every covering carrier paying an exact proportional share of each loss regardless of the policies' own-insurance wordingThe first insurer to receive notice pays the entire loss, and the other carriers owe nothing unless that insurer's limits are exhausted by the claimAll of the policies are void from inception, because concurrent coverage of the same risk is treated as a material misrepresentation to each carrierPrimary/excess language, one policy responds first; others sit excess; or, if both are primary, contribute by equal shares or pro rata by limits
16. Which of the following is NOT a category eligible to be scheduled on a standard Personal Articles Floater?
Musical instrumentsFine artStamp and coin collectionsCommercial fleet vehicles
17. A pro-rata cancellation refund is calculated by:
Returning premium proportional to the unexpired policy period, with no penaltyReturning a flat percentage of the original premium under the minimum-earned premium provision for substandard risksReturning nothing because cancellation forfeits the entire unearned portion under the no-refund minimum-premium clauseSubtracting a penalty from the unearned premium under the short-rate retention schedule for insured-initiated cancellation
18. An insured dies in an auto accident covered by PIP. The insurer pays a lump sum to her surviving spouse and minor children. This benefit is best described as:
A med pay benefit only available if the spouse was in the vehicleA liability payment to the spouse for wrongful deathA PIP survivor benefit, paid in addition to medical and funeral expenseA workers compensation benefit triggered by an off-duty accident
19. A representation on an insurance application must be:
Substantially true and material to the underwriting decisionMade under oath before a notary or other authorized officerAbsolutely true in every detail with no exceptions allowedNotarized by a commissioned officer of the carrier on file
20. 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 limitInflation Guard endorsement, addresses code-upgrade obligations through the renewal-period dwelling-cost adjustment factorWater Backup of Sewers and Drains endorsement, code-upgrade costs are paid from its sublimit on plumbing-related upgradesExtended Replacement Cost endorsement, automatically pays code-required upgrades as part of the expanded dwelling-reconstruction provision

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