25 Free Pennsylvania P&C Exam Practice Questions (2026)
How to Use This Pennsylvania Question Set
The Pennsylvania Property and Casualty examination (PSI Series 16-06) has 150 scored multiple-choice questions and 170 minutes to answer them, and 70% raw — 105 correct — is a pass. PSI may add 5 to 10 unscored experimental questions on top of the 150, and you will not be told which ones they are. Pennsylvania has not required a pre-licensing course for any license line, including property and casualty, since Act 142 of 2024 took effect on April 29, 2025.
The content outline weights Insurance Regulation heaviest at 20% of the exam (30 of 150 items), the largest single section, and Pennsylvania law is not confined to it: the outline weaves state-specific rules through sections 1, 3, 4 through 9, 11 and 12 rather than collecting them in one block. These 25 questions come from LanePrep's Pennsylvania Property & Casualty quiz bank and are sampled in roughly that proportion across all eight tested course chapters: General Insurance Concepts & Property and Casualty Basics, Dwelling and Homeowners Policies, the Personal Automobile Policy, Commercial Property, Businessowners & Crime Insurance, Commercial General Liability & Commercial Automobile, Workers' Compensation and Other Property & Casualty Lines, and the two chapters on Pennsylvania Insurance Regulation and Law. Each question shows its chapter, so a miss tells you which chapter to go back to.
The set is not a predictor on its own. Twenty-five questions cannot cover every objective on a 150-question exam spread across thirteen content-outline sections. What it does show is whether the general property and casualty material has stuck and whether Pennsylvania's own rules — the Motor Vehicle Financial Responsibility Law's tort election, the Unfair Insurance Practices Act, the FAIR Plan, the Workers' Compensation Act's exclusive remedy — are in place.
Work them before you read the answer. Every question has the explanation folded underneath it. Guessing and then reading is worth more than reading and then agreeing.
Practice Questions 1-11: General Insurance, Property Basics and Personal Lines
General Insurance Concepts and Property and Casualty Basics make up 22% of the exam (33 of 150 items) on their own — tested here through the elements of a valid contract, the difference between a domestic and a foreign insurer, the reasonable expectations doctrine, aggregate-limit math on a commercial general liability policy, the federal Terrorism Risk Insurance Act, and functional replacement cost. Dwelling and Homeowners Policy Concepts add coverage-form questions: what Coverage B pays for automatically under a DP-3, the HO-3's open-peril dwelling paired with named-peril personal property, and a standard exclusion both forms share. The Personal Automobile Policy closes the section with the arithmetic behind split liability limits and the bodily-injury requirement for uninsured motorists coverage.
Question 1 (Chapter 1)
A Pennsylvania homeowner installs a security system to reduce the chance of burglary. Which risk-handling method does this action represent?
- A) Avoidance
- B) Reduction
- C) Retention
- D) Sharing
Show answer & explanation
Answer: B
Installing a security system lowers the probability or severity of a loss, which is the definition of risk reduction. Avoidance would be not owning a home at all, retention would be self-insuring the risk, and sharing would involve distributing the risk among a group like a cooperative.
Question 2 (Chapter 1)
An insurance company incorporated in Ohio but licensed to sell policies in Pennsylvania is classified as which type of insurer?
- A) Domestic insurer
- B) Foreign insurer
- C) Alien insurer
- D) Mutual insurer
Show answer & explanation
Answer: B
A foreign insurer is incorporated in another U.S. state but does business in Pennsylvania. A domestic insurer is incorporated in Pennsylvania, an alien insurer is incorporated outside the U.S., and mutual refers to ownership structure, not geographic classification.
Question 3 (Chapter 1)
A producer tells a client that their policy covers flood damage, although the policy explicitly excludes it. The client relies on this statement and suffers a flood loss. Which legal concept may allow the client to recover despite the policy exclusion?
- A) Indemnity
- B) Subrogation
- C) Coinsurance
- D) Reasonable expectations
Show answer & explanation
Answer: D
The reasonable expectations doctrine may override policy language if the insurer's representative led the insured to believe coverage existed. Indemnity refers to restoring the insured to pre-loss condition, subrogation is the insurer's right to pursue third parties, and coinsurance relates to penalty for underinsurance.
Question 4 (Chapter 1)
A Pennsylvania manufacturer purchases a commercial general liability policy with a per-occurrence limit of $1 million and an aggregate limit of $2 million. During the policy period, two separate claims of $800,000 each are paid. What is the remaining aggregate limit available for additional claims?
- A) 200,000
- B) 600,000
- C) 800,000
- D) 400,000
Show answer & explanation
Answer: D
The aggregate limit is the total amount the insurer will pay for all claims during the policy period. Two claims of $800,000 each total $1,600,000. Subtracting this from the $2,000,000 aggregate limit leaves $400,000 available for additional claims. Option A assumes a much larger amount has already been paid. Option B and Option C do not reflect the correct running total.
Question 5 (Chapter 1)
Under the federal Terrorism Risk Insurance Act (TRIA), which of the following is true regarding coverage for certified acts of terrorism in Pennsylvania?
- A) TRIA mandates that all insurers offer terrorism coverage at no additional cost.
- B) TRIA applies only to commercial property policies, not homeowners or auto.
- C) TRIA eliminates the need for insurers to maintain reserves for terrorism losses.
- D) TRIA requires insurers to make terrorism coverage available, but the insured may reject it in writing.
Show answer & explanation
Answer: D
TRIA requires insurers to offer terrorism coverage for certified acts, but the insured has the right to reject it in writing. It does not mandate free coverage, applies to various property and casualty lines, and does not eliminate reserve requirements—it provides a federal backstop after insurer deductibles are met.
Question 6 (Chapter 1)
Which of the following best describes 'functional replacement cost' as a loss valuation method?
- A) Payment based on the cost to replace with new materials of like kind and quality.
- B) Payment based on the market value of the property immediately before the loss.
- C) Payment based on a pre-agreed amount stated in the policy, regardless of actual loss.
- D) Payment based on the cost to replace with materials that perform the same function but may differ in form or efficiency.
Show answer & explanation
Answer: D
Functional replacement cost allows repair or replacement with materials that serve the same function (e.g., using plywood instead of ornate woodwork) but may not be identical. Option A describes replacement cost, B describes market value, and C describes an agreed-value or valued policy.
Question 7 (Chapter 2)
A Pennsylvania homeowner purchases a DP-3 dwelling policy for their primary residence. The policy includes Coverage A for the dwelling at $200,000. Which of the following statements is correct regarding Coverage B (other structures) under this policy?
- A) Coverage B is automatically included at 10% of Coverage A, or $20,000, for structures such as a detached garage.
- B) Coverage B must be purchased separately and is not included unless specifically endorsed.
- C) Coverage B provides coverage for personal property stored in other structures up to 50% of Coverage A.
- D) Coverage B is only available if the other structures are used for business purposes.
Show answer & explanation
Answer: A
Under a dwelling policy (DP-3), Coverage B for other structures is automatically included at 10% of the Coverage A dwelling limit. For a $200,000 dwelling limit, this results in $20,000 of coverage for detached structures like garages or sheds. Option B is incorrect because Coverage B is standard, not optional. Option C confuses Coverage B with Coverage C (personal property). Option D is incorrect because business use may require additional endorsements but does not determine eligibility for Coverage B.
Question 8 (Chapter 2)
Which homeowners policy form provides open peril coverage for the dwelling and other structures, but named peril coverage for personal property?
- A) HO-2
- B) HO-5
- C) HO-8
- D) HO-3
Show answer & explanation
Answer: D
The HO-3 (Special Form) provides open peril (all-risk) coverage for the dwelling (Coverage A) and other structures (Coverage B), while personal property (Coverage C) remains on a named peril basis. The HO-2 is named peril for all coverages, the HO-5 is open peril for both dwelling and personal property, and the HO-8 is a modified form for older homes with functional replacement cost and named peril coverage.
Question 9 (Chapter 2)
Which of the following is a standard exclusion in both dwelling and homeowners policies in Pennsylvania?
- A) Windstorm
- B) Fire
- C) Water damage from sewer or drain backup
- D) Theft
Show answer & explanation
Answer: C
Water damage from sewer or drain backup is a standard exclusion in both dwelling and homeowners policies unless added by endorsement (e.g., water and sewer backup endorsement). Windstorm is a covered peril in dwelling (DP-2, DP-3) and homeowners policies; fire is a basic covered peril; and theft is covered under dwelling policies with endorsement (DP 04 72) and is included in homeowners personal property coverage.
Question 10 (Chapter 3)
A Pennsylvania driver's Personal Automobile Policy shows liability limits of 100/300/100. If the driver is at fault in an accident causing $120,000 in property damage to multiple vehicles, what is the maximum the insurer will pay for property damage under this policy?
- A) $120,000
- B) $300,000
- C) $500,000
- D) $100,000
Show answer & explanation
Answer: D
The liability limits 100/300/100 represent $100,000 bodily injury per person, $300,000 bodily injury per accident, and $100,000 property damage per accident. The property damage limit is $100,000, so the insurer will pay no more than this amount for property damage, regardless of the number of vehicles damaged. Option A is incorrect as it matches the damage amount but ignores the policy limit. Option B is the bodily injury per accident limit. Option C is not a standard limit split.
Question 11 (Chapter 3)
A Pennsylvania driver's Personal Automobile Policy includes uninsured motorists coverage. The driver is injured in a hit-and-run accident where the at-fault driver flees and cannot be identified. Which of the following is required for the uninsured motorists coverage to apply?
- A) The accident must be reported to police within 24 hours.
- B) The insured must have collision coverage on the policy.
- C) The insured must have medical payments coverage on the policy.
- D) The insured must have sustained bodily injury.
Show answer & explanation
Answer: D
Uninsured motorists coverage under the Personal Automobile Policy applies only for bodily injury sustained by the insured. While prompt reporting is advisable and may be required by state law or policy conditions, the PAP itself does not specify a 24-hour police report requirement for UM coverage. Collision and medical payments coverages are not prerequisites for UM bodily injury coverage. Option D correctly states that bodily injury must be sustained for the coverage to trigger.
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Practice Questions 12-18: Commercial Property, Liability and Workers' Compensation
Commercial Property, Businessowners and Commercial Crime (Chapter 4), Commercial General Liability and Commercial Automobile (Chapter 5), and Workers' Compensation and Other Property and Casualty Lines (Chapter 6) together carry 37% of the exam's weight: 7% Commercial Property, 3% Businessowners Policy Property, 2% Commercial Crime, 7% Commercial General Liability, 5% Commercial Automobile, 5% Workers' Compensation and 8% Other Types of Property and Casualty Insurance. These seven questions cover Business Income valuation after a covered loss, the base Commercial Crime form's employee-theft insuring agreement, the Ordinance or Law endorsement's demolition-cost coverage, an occurrence-form CGL trigger, a commercial auto combined-single-limit calculation, an occupational-disease classification under the Workers' Compensation Act, and a commercial umbrella policy's self-insured retention.
Question 12 (Chapter 4)
A Pennsylvania business owner has a Commercial Property policy with Business Income coverage. After a covered fire loss, the business is unable to operate for two months. Which of the following is MOST likely to be considered when determining the Business Income loss amount?
- A) The cost to repair or replace the damaged building.
- B) The total revenue the business would have generated during the period of restoration.
- C) The extra expenses incurred to expedite the repair of the building.
- D) The net income (profit or loss) before taxes that would have been earned had the loss not occurred, plus continuing normal operating expenses, including payroll.
Show answer & explanation
Answer: D
Business Income coverage compensates for the loss of net income (profit or loss before taxes) that the business would have earned had no direct physical loss occurred, plus continuing normal operating expenses, including payroll. It does not cover the cost to repair the building (that's under the Building coverage form, A is incorrect). It is not based on total revenue (B is incorrect, as expenses are deducted). Extra expenses to expedite repair are covered under a separate Extra Expense coverage form, not Business Income (C is incorrect).
Question 13 (Chapter 4)
A Pennsylvania jeweler purchases a Commercial Crime policy. Which of the following Crime coverage forms would provide coverage for loss of the jeweler's own gold and silver inventory due to theft by an employee?
- A) Lessees of Safe Deposit Boxes (CR 04 09)
- B) Securities Deposited with Others (CR 04 10)
- C) Guests' Property (CR 04 11)
- D) Employee Theft, covered under the base Commercial Crime Coverage Form (CR 00 01)
Show answer & explanation
Answer: D
The base Commercial Crime coverage form (CR 00 01) includes Insuring Agreement A, which covers Employee Theft - loss of, or damage to, 'Money, Securities, and Other Property' resulting from theft by an employee. The jeweler's gold and silver inventory would be considered 'Other Property' under this agreement. The other options are specific, limited crime coverages: CR 04 09 covers loss of contents of a safe deposit box held by the insured as a lessee; CR 04 10 covers securities deposited with others (like a bank); CR 04 11 covers guests' property in the insured's premises (e.g., a hotel). None of these cover the jeweler's own inventory stolen by an employee.
Question 14 (Chapter 4)
A Pennsylvania bakery has a Commercial Property policy that includes the Ordinance or Law endorsement (CP 04 05). After a fire destroys 60% of the building, local building codes require the undamaged 40% to be demolished and the entire structure rebuilt to current standards. Which coverage under the Ordinance or Law endorsement applies to the cost of demolishing the undamaged portion and removing debris?
- A) Coverage A: Loss to the Undamaged Portion of the Building
- B) Coverage C: Increased Cost of Construction
- C) Coverage B: Demolition Cost
- D) Business Income coverage, which is a separate coverage form not part of this endorsement
Show answer & explanation
Answer: C
The Ordinance or Law endorsement (CP 04 05) provides three coverages: Coverage A (Loss to the Undamaged Portion of the Building), Coverage B (Demolition Cost), and Coverage C (Increased Cost of Construction). Coverage B specifically pays the cost to demolish and clear the site of the undamaged portion of a building when demolition is required by an ordinance or law. Coverage A addresses the loss in value of the undamaged portion itself, and Coverage C addresses the increased cost to repair or rebuild the damaged portion to meet current code. Business Income coverage is a separate, unrelated coverage form.
Question 15 (Chapter 5)
A Pennsylvania manufacturing company purchases a Commercial General Liability policy with an occurrence trigger. During the policy period, a faulty valve manufactured by the company fails, causing property damage to a customer's equipment. The customer files a claim 18 months after the policy has expired. Which statement is correct regarding coverage under the occurrence-form CGL policy?
- A) Coverage does not apply because the claim was filed after the policy expired.
- B) Coverage applies only if the company purchased an extended reporting period endorsement.
- C) Coverage applies because the faulty valve failure (occurrence) happened during the policy period.
- D) Coverage does not apply because products-completed operations hazards are excluded under occurrence forms.
Show answer & explanation
Answer: C
Under an occurrence-form CGL policy, coverage is triggered when the bodily injury or property damage occurs during the policy period, regardless of when the claim is filed. The faulty valve failure (the occurrence) happened while the policy was in force, so coverage applies. Option A is incorrect because occurrence forms do not require the claim to be filed during the policy period. Option B is incorrect because extended reporting periods (tail coverage) are only relevant for claims-made policies. Option D is incorrect because products-completed operations coverage is a standard part of CGL and is not excluded under occurrence forms.
Question 16 (Chapter 5)
A Pennsylvania trucking company's Commercial Automobile policy includes liability coverage with limits of $750,000 combined single limit. While making a delivery in Philadelphia, the company's tractor-trailer is involved in an accident that results in $600,000 in bodily injury damages and $400,000 in property damage damages. Which statement is correct regarding the insurer's payment under the policy?
- A) The insurer will pay $1,000,000 because the combined single limit applies to each type of damage separately.
- B) The insurer will pay $600,000 for bodily injury and $400,000 for property damage because the policy has separate limits.
- C) The insurer will pay $750,000 because the combined single limit is the maximum amount payable for the total damages from the accident.
- D) The insurer will pay nothing because the damages exceed the combined single limit.
Show answer & explanation
Answer: C
A combined single limit (CSL) of $750,000 means the insurer will pay up to $750,000 total for all damages (bodily injury and property damage combined) resulting from any one accident. The total damages are $1,000,000 ($600,000 BI + $400,000 PD), which exceeds the $750,000 limit, so the insurer will pay the maximum limit of $750,000. Option A is incorrect because a CSL does not apply separately to each type of damage; it is a single aggregate limit. Option B is incorrect because the policy does not have separate limits; it has a combined single limit. Option D is incorrect because the insurer pays up to the policy limit, not nothing, when damages exceed the limit.
Question 17 (Chapter 6)
An employee of a Pennsylvania manufacturing company develops carpal tunnel syndrome after years of repetitive motion on an assembly line. The employee files a workers' compensation claim. How is this condition classified under the Pennsylvania Workers' Compensation Act?
- A) As a compensable work-related injury, because it arose in the course of employment even though no single traumatic event caused it.
- B) As an occupational disease only if carpal tunnel syndrome appears on the Act's schedule of listed diseases; otherwise it is not covered.
- C) As a non-compensable condition, because the Act covers only injuries caused by a specific accident.
- D) As a personal illness, because it developed gradually and is therefore not work-related.
Show answer & explanation
Answer: A
Under the Pennsylvania Workers' Compensation Act, an 'injury' includes conditions caused by cumulative or repetitive trauma at work, not only injuries from a single accident. Carpal tunnel syndrome caused by years of repetitive assembly-line work is therefore a compensable work injury. Option B is wrong because compensability does not depend on a schedule of listed diseases. Option C is wrong because Pennsylvania abandoned the requirement of a specific accident. Option D is wrong because the condition arose from the work itself. The exclusive remedy provision still applies, so the employee cannot sue the employer in tort for the condition.
Question 18 (Chapter 6)
A Pennsylvania employer purchases a commercial umbrella policy with a self-insured retention (SIR) of $25,000 and underlying general liability limits of $1 million per occurrence. A claim results in $1.3 million in damages. How much will the umbrella policy pay, assuming the underlying policy pays its limits?
- A) $25,000
- B) $1,000,000
- C) $1,300,000
- D) $300,000
Show answer & explanation
Answer: D
The umbrella policy pays the amount of the loss that exceeds the underlying limits, but only after the self-insured retention (SIR) is satisfied. The underlying policy pays its limit of $1 million. The SIR of $25,000 is the amount the insured must pay before the umbrella responds. The total loss is $1.3 million. The amount exceeding the underlying limit is $300,000 ($1.3M - $1M). Since this exceeds the SIR, the umbrella pays $300,000. Option A is the SIR amount, which the insured pays. Option B is the underlying limit. Option C is the total loss, which is not paid by any single policy.
Practice Questions 19-25: Pennsylvania Insurance Regulation and Law
Insurance Regulation, at 20% of the exam, is the largest single section, and Pennsylvania law runs through it rather than sitting in its own block. These seven questions cover resident producer licensing, a producer's fiduciary duty over premiums under 40 P.S. §310.96, twisting under 40 P.S. §473, the duty to report a felony conviction to the Insurance Department, FAIR Plan eligibility under 40 P.S. §§1600.101-.103, the Workers' Compensation Act's exclusive remedy doctrine (77 P.S. §§72, 481), and the written-notice requirement for a fire insurance binder under 40 P.S. §636.
Question 19 (Chapter 7)
A Pennsylvania resident insurance producer has been living and working in Florida for the past 18 months but maintains a Pennsylvania driver's license and voter registration. The producer wishes to continue selling insurance to Pennsylvania clients while residing in Florida. Which action must the producer take to remain compliant with Pennsylvania licensing law?
- A) Apply for a non-resident license in Florida and surrender the Pennsylvania resident license.
- B) Maintain the Pennsylvania resident license and file an affidavit of continued Pennsylvania residency with the Insurance Department.
- C) No action is required; the resident license remains valid as long as the producer returns to Pennsylvania at least once per year.
- D) Apply for a Pennsylvania non-resident license, as the producer's primary domicile is now Florida.
Show answer & explanation
Answer: D
Under 40 P.S. § 310.3, a resident license is issued only to individuals who maintain their legal residence in Pennsylvania. If the producer has established domicile in Florida (living and working there for 18 months), they no longer qualify as a resident. To legally conduct insurance transactions in Pennsylvania, they must obtain a non-resident license under 40 P.S. § 310.10. Option A is incorrect because surrendering the Pennsylvania license is not required; they may hold both if eligible, but they need the non-resident license to act in PA. Option B is incorrect because an affidavit cannot override the legal definition of residency. Option C is incorrect as there is no such 'once per year' rule in Pennsylvania law.
Question 20 (Chapter 7)
A newly licensed Pennsylvania property and casualty producer receives their first commission check from an insurer for a policy sold. The producer deposits the check into their personal checking account and uses the funds to pay personal bills. Which statement best describes the producer's action under Pennsylvania law?
- A) This is permissible as long as the producer reconciles the account monthly and retains records of the insurance funds.
- B) This is allowed if the producer notifies the insurer in writing within 30 days of depositing the funds.
- C) This is permissible only if the producer has obtained written consent from the insurer to commingle funds.
- D) This violates the producer's fiduciary responsibility under 40 P.S. § 310.96 and may result in disciplinary action.
Show answer & explanation
Answer: D
Under 40 P.S. § 310.96, insurance producers are fiduciaries of funds received from insurers or insureds. Commingling insurance funds with personal funds in a personal account is a breach of fiduciary duty, regardless of record-keeping or notification. Options A, B, and C are incorrect because no exception permits depositing insurance commissions into a personal account for personal use; the funds must be kept in a separate, identifiable fiduciary capacity until properly disbursed.
Question 21 (Chapter 7)
A Pennsylvania insurance producer is accused of twisting by a competitor. Which of the following producer actions, if proven, would constitute twisting under Pennsylvania law?
- A) Offering a client a $100 gift card to purchase a policy from the producer's insurer instead of a competitor's.
- B) Failing to disclose that a policy does not cover flood damage when the client lives in a flood-prone area.
- C) Inducing a policyholder to drop an existing life insurance policy and purchase a similar one from another insurer using misrepresentations about the new policy's benefits.
- D) Providing a client with a comparative quote from three different insurers for the same coverage.
Show answer & explanation
Answer: C
Twisting, defined under 40 P.S. § 473, occurs when a producer induces a policyholder to drop or surrender an existing insurance policy and purchase a similar one from another insurer through misrepresentations or incomplete comparisons. Option C describes this exact scenario. Option A describes rebating (inducement via gift), which is prohibited under 40 P.S. § 1171.5(a)(8) but is not twisting. Option B describes potential misrepresentation but not the inducement to replace a policy. Option D is permissible and not a prohibited act.
Question 22 (Chapter 7)
A Pennsylvania insurance producer is convicted of a felony unrelated to insurance activities. Under Pennsylvania law, what is the producer's duty regarding this conviction?
- A) The producer has no duty to report non-insurance-related criminal convictions to the Insurance Department.
- B) The producer must report the conviction only if it involves dishonesty or breach of trust.
- C) The producer must promptly report the conviction to the Insurance Department, without waiting for the next license renewal.
- D) The producer must report the conviction to the Insurance Department only at the time of license renewal.
Show answer & explanation
Answer: C
Under 40 P.S. § 310.78, a licensed producer has a duty to promptly report any administrative or criminal action -- including a felony conviction -- to the Insurance Department, regardless of whether the conviction is related to insurance activities, and without waiting for the next renewal cycle. Options A, B, and D are incorrect: the duty applies to all criminal actions, not just insurance-related or dishonesty-based ones, and it is not deferred to renewal.
Question 23 (Chapter 8)
Under the Pennsylvania FAIR Plan (40 P.S. §§ 1600.101-.103), what types of property are eligible for coverage?
- A) Only one- to four-family owner-occupied dwellings.
- B) Only commercial and industrial buildings.
- C) Personal property such as contents and tenants' improvements and betterments.
- D) Both residential and commercial properties.
Show answer & explanation
Answer: D
The Pennsylvania FAIR Plan (40 P.S. §§ 1600.101-.103) provides property insurance for both residential and commercial properties that are unable to obtain coverage in the voluntary market. It is not limited to owner-occupied dwellings, commercial/industrial only, or personal property alone; it covers a broad range of property types for eligible applicants.
Question 24 (Chapter 8)
A Pennsylvania-licensed insurer wants to introduce a new commercial property insurance form. Under 40 P.S. § 510, what must the insurer do before using the form in Pennsylvania?
- A) Submit the form to the NAIC for model law compliance review.
- B) Obtain a certificate of authority specifically for commercial property lines.
- C) File the form with the PID for approval at least 30 days prior to use.
- D) Provide 60 days' notice to all policyholders of the form change.
Show answer & explanation
Answer: C
Under 40 P.S. § 510, an insurer must file insurance policy forms with the Pennsylvania Insurance Department for approval before they can be used in the Commonwealth. There is no requirement to submit forms to the NAIC, obtain a separate certificate of authority for specific lines, or provide notice to policyholders for form approval. The PID reviews the form for compliance with state law and regulations.
Question 25 (Chapter 8)
An insurer issues a binder for fire coverage on a newly constructed commercial building. Which statement accurately reflects the requirements for that binder under 40 P.S. § 636?
- A) The binder must be in writing and state the coverage afforded.
- B) The binder may be oral as long as the insurer follows up with a written policy.
- C) The binder can omit a description of the coverage as long as the policy is issued promptly.
- D) The binder does not need to identify the named insured.
Show answer & explanation
Answer: A
40 P.S. § 636 requires binders for coverage under the Standard Fire Policy to be in writing and to specify the coverage afforded. Oral binders, binders omitting the coverage description, and binders omitting the named insured are not permissible.
The Mistakes That Cost Marks
Stopping an aggregate-limit calculation after one claim. A commercial general liability aggregate limit caps total payments for the policy period, not per claim. Two $800,000 claims against a $2 million aggregate leave $400,000 available, not the full $1.2 million a per-claim reading would suggest.
Assuming TRIA is free or automatic. The federal Terrorism Risk Insurance Act requires insurers to make coverage for certified acts of terrorism available, not to provide it at no charge, and the insured may reject it in writing.
Confusing functional replacement cost with replacement cost. Functional replacement cost pays to repair or replace with materials that perform the same function but may differ in form — plywood instead of ornate woodwork — while replacement cost pays for like kind and quality without that substitution.
Treating a producer's premium-handling duty as optional. 40 P.S. §310.96 makes every producer a fiduciary over funds received from insurers or insureds. Depositing a client's premium into a personal or business operating account, even with a detailed ledger showing the amount held, is commingling — a violation regardless of record-keeping.
Forgetting that workers' compensation's exclusive remedy is the default, not the exception. An employee injured on the job generally cannot sue the employer in tort under 77 P.S. §§72, 481, even for alleged negligence. Employers' liability coverage responds only to the narrow exceptions carved out of that doctrine, not to ordinary workplace injury claims.
Citing the pre-licensing course as if it still applies. Act 142 of 2024 removed Pennsylvania's pre-licensing education requirement for every license line, effective April 29, 2025. Continuing education after licensing is unaffected, but there is no pre-exam course requirement left to describe.
Your Next Step
How did you score?
- 19 or more correct (76%+): You are comfortably above the 70% raw pass mark. Book the exam, then spend the remaining days on the two topic sets that go deeper than this sample: personal auto and the Motor Vehicle Financial Responsibility Law, and Pennsylvania P&C law, where the Unfair Insurance Practices Act, the FAIR Plan and the Workers' Compensation Act live.
- 13-18 correct: You are in range but not comfortably so, and close to half of first-time candidates fail this exam. Note the chapter of every question you missed and work those chapters first, then take the two topic sets above; they test the same material at closer range.
- Under 13 correct: You need the material, not more questions. Start with the study plan in how to pass the Pennsylvania Property & Casualty exam on your first try and work through the audio chapters before testing yourself again. The 2025 first-time pass rate was 53.4%, and Pennsylvania does not publish how repeat candidates do — there is no reason to expect a second attempt with the same preparation to go better.
Chapters 1 and 9 of the LanePrep Pennsylvania course are free at /pa/p-and-c/preview — full audio and the chapter quiz, no signup. For a full-length timed run, try the practice exam.
Exam format, fees and pass rates come from the PSI Candidate Information Booklet and the PSI content outline Series 16-06 Property and Casualty. Read October 2026.
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