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Vermont Property & Casualty Practice Exam

20 exam-style questions drawn from the same bank as our full Vermont Property & Casualty course (Vermont Insurance Producer — Property and 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. Which of the following is a speculative risk and therefore NOT insurable?
A business being interrupted by a hurricane.A driver being injured in a collision.An investor's stock losing half its value.A house burning down in a kitchen fire.
2. In an insurance contract, the INSURED's 'consideration' usually takes the form of:
A down payment only, with representations being irrelevant.The signed acceptance of the policy.The promise to pay future claims.The premium payment and the accurate statements on the application.
3. The insurer and insured disagree on the AMOUNT of loss but not on whether the loss is covered. Which policy provision provides a mechanism for resolving the dispute short of litigation?
The abandonment clause.The arbitration clause.The appraisal clause.The subrogation clause.
4. 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.Insurers must write a minimum number of policies in each state before they may file rates with regulators.Each insured's losses can be predicted exactly once enough data is collected about that individual.The more policies an insurer writes, the higher its total premium, regardless of the losses that occur in the pool.
5. Under Vermont's compulsory auto liability statute, 23 V.S.A. §800, what are the statutory MINIMUM liability limits for a private passenger automobile policy?
$15,000 per person / $30,000 per crash / $5,000 property damage per crash$25,000 per person / $50,000 per crash / $25,000 property damage per crash$25,000 per person / $50,000 per crash / $10,000 property damage per crash$50,000 per person / $100,000 per crash / $25,000 property damage per crash
6. A personal UMBRELLA policy may DROP DOWN and pay a loss if:
The underlying policy has a lapse and the insured did not reinstate it.The insured refused to buy underlying insurance.The underlying policy's coverage trigger never occurred.The underlying auto/homeowners liability limits are exhausted for a covered loss.
7. On a commercial auto quote, the underwriter raises the premium because of the MVR (motor vehicle report) for the business's principal driver. What notice must be given to comply with FCRA?
No notice is required, because an MVR is a public driving record and not a consumer report, so FCRA rules do not apply to it.A GLBA privacy notice describing the information collected and the driver's right to opt out of sharing with affiliated companies.A copy of the underwriter's rating worksheet showing the surcharge, delivered only if the driver submits a written request for it.Adverse-action notice identifying the reporting agency and informing the consumer of the right to a free report and to dispute inaccuracies.
8. An umbrella written on a 'following form' basis is BEST described as:
A policy that follows the insured from one state to another, providing coverage only while the insured is traveling away from home.A policy that replaces the underlying coverages entirely, so the insured no longer needs to carry auto or homeowners liability insurance.A policy that mirrors the underlying coverages and exclusions, essentially extending the underlying limits without independently broadening scope.A policy that independently broadens coverage beyond the underlying policies and drops down to cover claims the underlying policies exclude, subject to a retention.
9. An investigation determines the named insured deliberately set fire to her dwelling. A $210,000 mortgage balance is outstanding and the policy contains a standard (union) mortgage clause. The dwelling coverage limit is $250,000. How should the insurer handle the claim?
Pay the mortgagee up to the loan balance of $210,000 and deny the insured; the insurer may then pursue subrogation against the insured.Pay the insured the full $250,000 and leave the mortgagee to recover its $210,000 balance from the insured directly.Pay the full $250,000 dwelling limit to the mortgagee, then refund the insured's premium for the remaining policy term.Deny the entire claim, because the insured's intentional act voids coverage for every party with an interest in the dwelling.
10. A producer issues an oral binder for homeowners insurance. Which statement is true?
Oral binders extend coverage indefinitely until the insurer gives written notice of cancellation, and the terms are whatever the agent and applicant discussed.Oral binders are enforceable only if the insured signs a notarized acknowledgment within 10 days and the insurer countersigns the binder before any loss occurs.An oral binder is a temporary contract of insurance that is enforceable for a limited period (often 30–90 days) until the policy is issued or declined.Oral binders are never enforceable; coverage begins only when the written policy is delivered to the insured and the first premium has been paid.
11. A homeowner deliberately burns down his own house to collect the insurance proceeds. This conduct reflects which type of hazard?
Moral hazard.Catastrophic hazard.Morale hazard.Physical hazard.
12. An insured owns a seasonal cabin that is unoccupied more than 60 consecutive days each year. Which dwelling-form limitation most directly affects coverage?
Coverage is void entirely while the cabin is unoccupied for any period exceeding 60 consecutive days during the policy termTheft coverage automatically doubles to compensate for the increased vacancy risk, subject to a higher percentage deductibleFire coverage drops to 50% of Coverage A after 60 days of vacancy, with proportional reductions applied to other coveragesVandalism and Malicious Mischief (VMM) and glass breakage are excluded after 60 consecutive days of vacancy
13. A peril is best defined as:
The financial consequence of a loss.The actual cause of loss.The uncertainty concerning the occurrence of loss.A condition that increases the chance of loss.
14. A claims-made CGL policy requires BOTH of the following for coverage to apply:
The claim must be first made against the insured during the policy period AND the injury must have occurred during that same policy period.The injury must occur during the policy period AND the insured must report the claim to the insurer within 30 days of first learning of it.The injury must occur on or after the retroactive date AND the claim must be first made against the insured during the policy period (or extended reporting period).The injury must occur after the retroactive date AND the insured must purchase an extended reporting period before the policy expires.
15. Under 21 V.S.A. chapter 9, which Vermont employers must carry workers' compensation insurance?
Only employers engaged in the construction and building trades in Vermont, and in the other hazardous occupations the Commissioner designatesNone; workers' compensation coverage is voluntary for every Vermont employer, and an injured employee's only remedy is an action in tortOnly employers with five or more employees on the payroll at any one time during the preceding calendar year, part-time workers not countedVirtually all employers with one or more employees; Vermont sets no numerical threshold, and the exclusions are by category rather than by headcount
16. Under a standard ISO HO-3, the special limit for theft of jewelry, watches, and furs is:
$2,500$5,000$1,000$1,500
17. An applicant is asked about prior claims and answers 'none,' though he in fact had a small water claim five years ago that he honestly forgot. The insurer later finds the claim and attempts to rescind. What is the likely outcome?
Rescission only if the misstatement was MATERIAL to the insurer's underwriting decision.Rescission only if the misstatement directly caused the loss for which the claim was made.Rescission, because any untrue statement on the application voids the policy automatically.No rescission, because only an intentional fraud by the applicant justifies rescinding a policy.
18. A Vermont corporation lets its workers' compensation policy lapse and an employee is injured. Under 21 V.S.A. §687(b), who may be held liable for the benefits?
The officers, partners and principals of the uninsured employer, who are personally liableNobody; the injured employee's sole remedy is a negligence action in the Superior CourtOnly the corporation itself, whose separate legal personality shields everyone behind itOnly the injured employee's immediate supervisor at the corporation's Vermont worksite
19. 'Inside the premises, robbery or safe burglary of other property' covers:
Robbery of any property, including money and securities, that is being carried by a messenger off premises.Robbery or safe burglary of property OTHER than money/securities that is located INSIDE the insured's premises.Burglary of property other than money from outside the insured's premises, such as from a parked vehicle.Theft of money and securities from inside the insured's premises by an employee acting alone or with others.
20. A homeowner comes home to find a burst pipe has flooded the kitchen. Which of the following is NOT an insured duty after loss under a standard ISO homeowners policy?
Give prompt notice to the insurance company or its agentProtect the property from further damage, making reasonable and necessary temporary repairsIndependently hire a contractor and complete permanent repairs before the insurer can inspectCooperate with the insurer's investigation, including submitting to a sworn examination under oath if required

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