25 Free California Property & Casualty Exam Practice Questions (2026)

Question 1 (Chapter 1)

An individual decides to open a high-stakes illegal gambling den in their basement and seeks to purchase a commercial liability policy to cover potential losses from police raids. Why would an insurer refuse this based on the elements of a contract?

• A) The contract lacks competent parties.
• B) The contract lacks a legal purpose.
• C) The contract lacks consideration from the insurer.
• D) The contract is aleatory in nature.

Question 2 (Chapter 1)

A licensed insurance producer in California receives a premium payment from an insured and deposits it into their personal checking account before forwarding it to the insurer. Which provision of the Insurance Code is violated?

• A) Section 1729.2, regarding reporting administrative actions.
• B) Section 1733, regarding fiduciary duty of producers.
• C) Section 1726(a), regarding internet advertisements.
• D) Section 1708, regarding license surrender.

Question 3 (Chapter 1)

Which statement correctly describes the difference between an agent and a broker under the California Insurance Code?

• A) An agent represents the insurer, while a broker represents the insured.
• B) A broker can bind coverage without the insurer's consent, while an agent cannot.
• C) An agent must hold a surplus lines license to place business with non-admitted insurers, while a broker does not.
• D) A broker is paid by the insurer, while an agent is paid by the insured.

Question 4 (Chapter 1)

A licensed insurance producer in California is discussing a client's personal auto policy. The producer states, 'This policy provides broad coverage for any damage to your vehicle, regardless of fault.' Which of the following best describes the legal and ethical implications of this statement under California law?

• A) The statement violates the Unfair Practices Act because it is a false, misleading, or deceptive act or misrepresentation regarding the benefits or coverage of a policy.
• B) The statement is permissible as a general description of collision coverage, which is standard in personal auto policies.
• C) The statement is acceptable because producers are allowed to use persuasive language as long as the policy actually provides the coverage described.
• D) The statement is only problematic if the client relies on it and suffers a loss; otherwise, it is considered puffery and not actionable.

Question 5 (Chapter 2)

An insured purchases a dwelling policy with replacement cost coverage on the dwelling. After a total loss from a wildfire declared a state of emergency, the insured elects to rebuild at a different location. Which statement is correct regarding the insurer's obligation under California Insurance Code §2051.5?

• A) The insurer must pay the full replacement cost of the dwelling at the new location, regardless of land value.
• B) The insurer is only obligated to pay the actual cash value of the dwelling at the original location.
• C) The insurer may deduct the land value at the new location from the replacement cost payment.
• D) The insurer must pay the replacement cost of the dwelling at the original location only; rebuilding elsewhere voids coverage.

Question 6 (Chapter 2)

Under the California Residential Property Insurance Disclosure Statement requirements (§§10101-10102), which of the following is true regarding the disclosure form?

• A) The disclosure form must be provided to the insured at the time of policy issuance and renewal.
• B) The disclosure form is considered part of the insurance policy and overrides conflicting policy language.
• C) The disclosure form includes the exact replacement cost of the dwelling as determined by the insurer.
• D) The disclosure form is only required for commercial property policies.

Question 7 (Chapter 3)

A homeowner owns a duplex and lives in one unit while renting out the other. Both units become uninhabitable for two months due to a covered fire. The homeowner's HO-3 policy covers their primary residence. They also have a Dwelling Policy (DP-2 Broad Form) for the rental unit. Which of the following statements correctly describes how lost income and additional expenses would be covered?

• A) The HO-3 policy would cover the lost rental income from the tenant's unit, and the DP-2 would cover the homeowner's additional living expenses.
• B) The HO-3 policy would cover the homeowner's additional living expenses, and the DP-2 policy would cover the lost rental income from the tenant's unit.
• C) Both policies would cover additional living expenses for the homeowner, but neither would cover lost rental income.
• D) Neither policy would cover lost income or additional living expenses, as these are indirect losses.

Question 8 (Chapter 3)

A homeowner is comparing an HO-3 Special Form policy with an HO-5 Comprehensive Form policy for their primary residence. They are particularly concerned about ensuring the broadest possible coverage for their valuable personal belongings, including jewelry, artwork, and electronics. Which of the following statements accurately describes the primary difference in personal property coverage between these two forms?

• A) The HO-3 covers personal property only for named perils, while the HO-5 provides open-peril coverage for personal property.
• B) Both HO-3 and HO-5 provide open-peril coverage for personal property, but HO-5 has higher sub-limits for certain categories of items.
• C) The HO-3 covers personal property at replacement cost, whereas the HO-5 covers it at actual cash value unless endorsed.
• D) Neither HO-3 nor HO-5 covers personal property for theft unless a specific endorsement is added.

Question 9 (Chapter 3)

A homeowner has an HO-3 policy and experiences a loss when a tree falls on the roof during a windstorm, damaging the dwelling and breaking a window. Rain enters through the broken window and damages the interior. Under the efficient proximate cause doctrine, how is this loss treated?

• A) Only the roof and window damage is covered; interior water damage is excluded due to the rain.
• B) The loss is not covered because water damage is excluded, and the rain is considered a new and independent cause.
• C) The insurer pays for the roof and window but can subrogate against the tree owner for the interior damage.
• D) The entire loss is covered because windstorm, a covered peril under the HO-3, is the efficient proximate cause.

Question 10 (Chapter 3)

A California homeowner is interested in purchasing earthquake coverage through the California Earthquake Authority (CEA). They are comparing different policy options and learn about 'reduced-coverage policies.' Which of the following best describes a characteristic of CEA's reduced-coverage policies?

• A) Reduced-coverage policies offer lower deductibles in exchange for higher premiums.
• B) Reduced-coverage policies provide coverage only for the dwelling, excluding personal property and additional living expenses.
• C) Reduced-coverage policies are designed for older homes that do not meet current seismic building codes.
• D) Reduced-coverage policies offer lower limits for dwelling, personal property, and additional living expenses, making them more affordable.

Question 11 (Chapter 4)

A restaurant owner in San Francisco purchases a Commercial Package Policy (CPP) that includes the Building and Personal Property (BPP) coverage form with the special causes of loss form. After a landslide damages the building's foundation, the insurer denies the claim. Which statement best explains the denial?

• A) Landslide damage is only covered under the Broad form, not the Special form.
• B) The BPP form does not cover foundations, only the superstructure of the building.
• C) The restaurant owner failed to maintain the building, voiding coverage for earth movement.
• D) The special causes of loss form excludes all earth movement, including landslides, unless specifically endorsed.

Question 12 (Chapter 4)

A business has a Building and Personal Property (BPP) policy with a limit of $1,000,000 and an 80% coinsurance clause. The building's actual cash value at the time of loss is $1,500,000. A fire causes $200,000 in damage. What amount will the insurer pay for the loss?

• A) $166,667
• B) $200,000
• C) $150,000
• D) $120,000

Question 13 (Chapter 4)

Under a pet insurance policy in California, which of the following must be disclosed in writing at issuance in at least 12-point boldface type according to Cal. Ins. Code §12880.2(f)?

• A) The pet's breed and age
• B) The veterinarian's license number and clinic address
• C) The annual premium and deductible amount only
• D) The Department's mailing address, toll-free number, and website; the insurer's/agent's customer-service contact; a statement to contact the Department only after the insurer has failed to resolve the problem; and advice to contact the broker/agent for assistance if one issued the policy

Question 14 (Chapter 5)

Under California Insurance Code §11750.3, which organization is designated as the advisory organization for workers' compensation in California?

• A) California Workers' Compensation Insurance Rating Bureau (WCIRB)
• B) National Council on Compensation Insurance (NCCI)
• C) Insurance Services Office (ISO)
• D) Workers' Compensation Insurance Rating Bureau of America (WCIRBA)

Question 15 (Chapter 5)

An insurer calculates its loss ratio as 65% and its expense ratio as 30%. What is the insurer's combined ratio?

• A) 35%
• B) 65%
• C) 115%
• D) 95%

Question 16 (Chapter 6)

A California resident purchases a new car on Monday. Their current personal auto policy includes collision coverage on one listed vehicle. According to the ISO Personal Auto Policy provisions adopted in California, when does collision coverage automatically apply to the newly acquired vehicle?

• A) On the day of ownership, provided the insured carries collision on at least one other vehicle.
• B) Immediately upon taking ownership, with no notice required to the insurer.
• C) Only after the insured notifies the insurer within 14 days of acquisition.
• D) After 30 days, unless the insured pays an additional premium for immediate coverage.

Question 17 (Chapter 6)

A California driver carries the state minimum split limits of 30/60/15. They are at fault in an accident that injures three people, with damages of $40,000, $35,000 and $10,000 respectively. How much will their bodily injury liability coverage pay in total?

• A) $85,000 (sum of all injuries)
• B) $90,000 (three times the per-person limit)
• C) $70,000 (each claim capped at the per-person limit)
• D) $60,000 (the per-accident limit)

Question 18 (Chapter 6)

What is the key difference between an umbrella liability policy and an excess liability policy in California personal lines insurance?

• A) An umbrella policy provides broader coverage than the underlying policies, while an excess policy only increases limits on the same coverage.
• B) An excess policy requires a self-insured retention, while an umbrella policy does not.
• C) An umbrella policy is only available for commercial risks, while an excess policy is for personal lines.
• D) There is no difference; the terms are used interchangeably in California.

Question 19 (Chapter 6)

A California driver has an underlying auto policy with $50,000 bodily injury liability limit and purchases a $1 million umbrella policy with a $250 self-insured retention (SIR). If a covered loss occurs that is not covered by the underlying auto policy but is covered by the umbrella, how much will the umbrella policy pay for a $10,000 loss?

• A) $10,000
• B) $0
• C) $250
• D) $9,750

Question 20 (Chapter 7)

A California restaurant owner has a Commercial General Liability policy with Coverage A (bodily injury and property damage liability) and Coverage B (personal and advertising injury liability). A patron slips on a wet floor near the bar, falls, and breaks their wrist. The patron sues the restaurant for medical expenses and pain and suffering. Which coverage applies to this claim?

• A) Coverage B only, as it involves personal injury from the patron's fall.
• B) Both Coverage A and Coverage B, as the fall caused bodily injury and the suit alleges personal injury.
• C) Neither coverage, as slips and falls are excluded under the CGL form.
• D) Coverage A only, as it involves bodily injury from a premises condition.

Question 21 (Chapter 7)

A California employer has a workers' compensation policy. An employee suffers a work-related injury requiring hospitalization and 3 months of physical therapy. The employee receives medical benefits. Which statement is true regarding medical benefits under the California workers' compensation system?

• A) Medical benefits are subject to a 2-year time limit from the date of injury.
• B) Medical benefits are subject to a $10,000 dollar limit per injury.
• C) Medical benefits include all necessary medical care to cure or relieve the effects of the injury, with no time or dollar limits.
• D) Medical benefits exclude physical therapy unless authorized by the treating physician within 30 days of injury.

Question 22 (Chapter 7)

A California employer's workers' compensation policy includes employers' liability coverage. An employee files a lawsuit alleging that the employer failed to provide safety training, knowing that the lack of training would likely cause injury when operating machinery. The employee is injured and sues for damages. Which statement is true regarding the employers' liability coverage?

• A) The claim is covered because employers' liability insurance covers all tort claims by employees for workplace injuries.
• B) The claim is not covered because employers' liability insurance excludes bodily injury arising from the employer's failure to provide a safe workplace.
• C) The claim is not covered because the injury is compensable under workers' compensation, triggering the exclusive remedy.
• D) The claim is covered only if the employee proves the employer acted with malicious intent.

Question 23 (Chapter 8)

A producer is explaining the FAIR Plan to a client who owns a brush-covered property in a high-risk wildfire area. The client asks what perils are covered under a basic FAIR Plan property insurance policy. Which of the following accurately describes the coverage?

• A) The FAIR Plan policy covers all perils except earthquake, flood, and landslide, making it equivalent to a standard HO-3 policy.
• B) The FAIR Plan policy covers fire and extended coverage, but excludes vandalism and malicious mischief unless specifically endorsed.
• C) The FAIR Plan policy covers the same perils as a Difference in Conditions (DIC) policy, including earthquake and flood.
• D) The FAIR Plan policy covers only fire, lightning, explosion, smoke, windstorm or hail, vehicles, and vandalism or malicious mischief.

Question 24 (Chapter 8)

During a claim investigation, an adjuster falsely tells a claimant that their policy does not cover 'smoke damage' from a nearby wildfire, even though the policy explicitly includes smoke as a covered peril. Which California statute is the insurer violating?

• A) The California FAIR Plan Act (§10090).
• B) The Surplus Lines Disclosure Act (§1764.1).
• C) The Unfair Practices Act (§790.03) regarding unfair claims settlement practices.
• D) The Workers' Compensation Exclusive Remedy Doctrine.

Question 25 (Chapter 8)

A risk is placed with the California State Compensation Insurance Fund (SCIF) for workers' compensation coverage. Which of the following statements is true regarding eligibility to place business with SCIF under California Insurance Code §11784?

• A) Only employers who have been declined by three or more admitted workers' compensation insurers are eligible to place business with SCIF.
• B) SCIF only accepts risks that are also placed with the FAIR Plan for property coverage.
• C) Employers must first obtain a certificate of self-insurance before being eligible to place business with SCIF.
• D) Any employer operating in California is eligible to place workers' compensation business with SCIF, regardless of their admission status with other carriers.