Free California Property & Casualty Practice Exam 2026

California property and casualty insurance exam sample questions and answers

6 of the 150 practice questions, one from each topic, with the answer explained.

1. 1. A car shared through a personal vehicle sharing program is not classed as commercial so long as the owner's sharing revenue:

   • A.Goes to a ride-hail company
   • B.Does not exceed annual costs
   • C.Stays under half of costs
   • D.Is reported to the DMV

   Answer: B. Section 11580.24 keeps the owner's personal auto classification when the sharing is through a program, the sharing revenue does not exceed the annual expenses of owning and operating the car, and the owner does not knowingly allow commercial use.

2. 2. When the insured cancels a policy before expiration, the refund is usually computed:

   • A.At zero, since premium is fully earned at inception
   • B.Pro rata, with no penalty
   • C.At the full premium paid
   • D.Short rate, with a penalty

   Answer: D. Short rate cancellation lets the insurer keep part of the unearned premium to cover expenses. Pro rata refunds apply when the insurer initiates cancellation.

3. 3. A commercial crime policy written on a discovery form covers losses that are:

   • A.Discovered during the policy period
   • B.Sustained during the policy period and reported within 24 hours
   • C.Caused only by outsiders
   • D.Reported to police within one business day

   Answer: A. The discovery form responds to losses discovered during the policy period or the extended discovery period, regardless of when they occurred, even if they began years earlier. The loss sustained form requires the loss to occur during the policy period.

4. 4. Which loss is excluded under every unendorsed homeowners form?

   • A.Fire caused by faulty wiring
   • B.Windstorm damage to the roof
   • C.Flood from surface water
   • D.Theft of a bicycle from the garage

   Answer: C. Water damage from flood, surface water and tidal water is excluded and must be insured through the NFIP or a private flood policy. Windstorm, theft and fire are covered perils.

5. 5. A customer reasonably believes a producer can bind coverage because the insurer let the producer use its letterhead and signage. This is:

   • A.Delegated authority
   • B.Implied authority
   • C.Apparent authority
   • D.Express authority

   Answer: C. Apparent authority is created when the insurer's actions lead a third party to believe the producer has authority. The insurer can be bound even if the agency contract did not grant it.

6. 6. Ocean marine insurance covering the vessel itself is called:

   • A.Hull coverage
   • B.Cargo coverage
   • C.Freight coverage
   • D.Protection and indemnity

   Answer: A. Hull insures the ship, cargo insures the goods, freight insures the shipping charges, and protection and indemnity is the shipowner's liability coverage.