Property & Casualty Insurance Practice Test
P&C Insurance Flood, Surety & Other Coverages Practice Questions
Flood, Surety & Other Coverages makes up 4 of every 50 questions on a Tigertest P&C Insurance practice test. Here are 10 of the 16 questions on it, each with the answer and the reason.
Updated by the Tigertest team. Based on the general (national) portion of the property and casualty producer exam outlines. State laws and the state portion are not covered.
1. The National Flood Insurance Program is administered by:
- A.Each state's insurance department
- B.The Federal Emergency Management Agency
- C.The Department of Housing and Urban Development
- D.Private insurers using their own capital
Answer: B. FEMA runs the NFIP and sets its rates and forms. Private insurers may sell and service the policies under the Write Your Own program, but the federal government bears the risk.
2. A newly purchased NFIP policy usually takes effect after a waiting period of:
- A.10 days
- B.60 days
- C.No waiting period
- D.30 days
Answer: D. The standard waiting period is 30 days from purchase. An exception applies when flood coverage is required at a loan closing.
3. Under the NFIP regular program, the maximum building coverage for a single-family home is:
- A.$250,000
- B.$100,000
- C.$1,000,000
- D.$500,000
Answer: A. Residential buildings are limited to $250,000 and contents to $100,000. Non-residential buildings can be insured up to $500,000.
4. Contents under an NFIP dwelling policy are settled at:
- A.Replacement cost
- B.Functional replacement cost
- C.Actual cash value
- D.Agreed value
Answer: C. NFIP pays replacement cost on a single-family principal residence insured to at least 80 percent of value, but contents are always ACV.
5. The NFIP defines a flood as a general and temporary condition of partial or complete inundation of:
- A.A single building's basement or crawl space
- B.Any land owned or leased by the insured
- C.Two or more acres or two or more properties
- D.Five or more adjoining properties
Answer: C. The definition requires a general condition affecting two or more acres of normally dry land or two or more properties, from overflow of inland or tidal waters, rapid runoff or mudflow. Water confined to one basement from a burst pipe is not a flood.
6. Under the NFIP Write Your Own program, private insurers:
- A.Sell and service NFIP policies for a fee
- B.Insure flood risk with their own capital
- C.Cover only commercial buildings and contents
- D.Set their own flood rates and forms
Answer: A. WYO companies issue and adjust NFIP policies in their own names for a fee, but rates and forms are federal and losses are paid from the NFIP, which bears the risk. Private flood insurance is a separate market.
7. In a surety bond, the party who promises to perform the obligation is the:
- A.Obligee
- B.Surety
- C.Beneficiary
- D.Principal
Answer: D. The principal is the contractor or other party whose performance is guaranteed. The obligee is the party protected, and the surety guarantees performance.
8. The party protected by a surety bond is the:
- A.Principal
- B.Obligee
- C.Surety
- D.Guarantor
Answer: B. The obligee, such as a project owner, receives payment from the surety if the principal fails to perform. The surety then recovers from the principal.
9. Unlike an insurance policy, a surety bond:
- A.Is a two-party contract with the obligee
- B.Seeks repayment from the principal
- C.Pays regardless of fault or negligence
- D.Cannot be canceled by any party
Answer: B. Suretyship is a three-party guarantee priced as a service fee that expects no losses, and the principal must reimburse the surety for any payment. Insurance anticipates losses and does not seek repayment from its insured.
10. A contractor's bond that guarantees the project will be completed according to the contract is a:
- A.Maintenance bond
- B.Fidelity bond
- C.Payment bond
- D.Performance bond
Answer: D. A performance bond guarantees completion. A payment bond guarantees subcontractors and suppliers are paid, and a maintenance bond guarantees the work against defects for a period after completion.
Practice all 16 flood, surety & other coverages questions, and the rest of the 200-question bank, in the free P&C Insurance training sets. Questions you miss come back until you have mastered them.
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