Free Oregon Personal Lines Practice Questions

Insurance only deals with pure risk: situations where there's a chance of loss or no loss, but no chance of gain (like your house burning down). Speculative risk involves a chance of loss, no loss, OR gain. That's gambling and investing, and insurers won't touch it. If there's an upside, it's not insurable.

Keep these three straight and you'll bank easy points all day: a peril is the cause of loss (fire, wind, theft), a hazard is something that increases the chance or severity of that loss, and risk is the uncertainty of loss itself. The peril is the thing that actually does the damage.

A physical hazard is a tangible condition that increases the likelihood or severity of a loss: gasoline in the garage, a slippery floor, frayed wiring. You can see or touch it. If it's an attitude problem it's morale; if it's dishonesty it's moral; if it's a physical thing sitting there raising the odds, it's physical.

Indemnity is the whole heartbeat of insurance: you get made whole, not rich. The goal is to put you back where you were financially right before the loss, no better, no worse. That's why you can't insure a $20,000 car for $80,000 and cash in. Insurance reimburses a loss; it doesn't hand out winnings.

A mutual insurer is owned by its policyholders, so a 'dividend' is really a return of overpaid premium, which is why it's generally not taxable. And it's never guaranteed; it depends on the company's results. Stock dividends, by contrast, go to stockholders and are taxable.

An agent represents the insurer (the principal); that's the cornerstone of agency law. A broker, by contrast, represents the insured. So when an agent acts within their authority, the insurer is on the hook for what they do. Agent equals the insurer's rep.

Apparent authority is about appearances: what a reasonable customer believes the agent can do based on how the insurer let the agent act (business cards, signage, company applications). Express authority is spelled out in the contract; implied is what's needed to carry out the express. Apparent is the 'looks legit' bucket.

Representations are statements the applicant believes are true, and they only need to be true to the best of the applicant's knowledge. A warranty is a stronger animal: it's guaranteed to be absolutely true. Concealment is hiding a material fact. For most applications, you're dealing with representations.

Concealment is staying silent about a material fact you know the insurer would want, and if it's intentional, it can void the policy. It's the sin-of-omission version of misrepresentation (which is an active false statement). Both turn on the fact being 'material,' meaning it would have affected the insurer's decision.

A waiver is voluntarily surrendering a known right, say, an insurer choosing not to enforce a policy condition. Estoppel is the follow-on: once you've waived something, you can be legally prevented (estopped) from later trying to enforce it. Waiver is the giving up; estoppel is being held to it.

ACV pays what the damaged property was actually worth at the time of loss: replacement cost minus depreciation for age and wear. It leaves the insured to absorb the depreciation. Hook: ACV equals replacement cost minus depreciation, today's worn-down value.

Replacement cost coverage pays to rebuild or replace with new property of like kind and quality, with no depreciation subtracted, so the insured isn't out-of-pocket for wear and tear. It usually requires meeting a coinsurance or insurance-to-value condition. Hook: replacement cost pays new-for-old, depreciation ignored.

Market value reflects what the property would sell for, including the land and location-driven demand, while replacement cost is purely the cost to rebuild the structure. The two can differ widely. Hook: market value includes the land and the neighborhood; replacement cost is just bricks and labor.

Under named perils, the insured must show the loss was caused by a listed peril. Under open perils (all-risk or special form), coverage is presumed unless the insurer proves an exclusion applies, so the burden shifts to the insurer. Open perils is the broader coverage. Hook: named perils, the insured proves it's covered; open perils, the insurer proves it's excluded.

The deductible is the amount the insured absorbs on each loss, which screens out small, frequent claims and reduces the premium. Hook: the deductible knocks out the small stuff and trims your premium.

The limit of insurance is the most the insurer will pay for a covered loss; amounts above it are the insured's responsibility. Hook: the limit is the ceiling on what the insurer pays.

If the insured met the coinsurance requirement, carrying at least the required percentage of value, no penalty applies and the loss is paid in full up to the limit. The penalty only bites when coverage falls short. Hook: meet the coinsurance requirement and there's no penalty.

Comparative negligence reduces the claimant's award by their percentage of fault, so someone 30% responsible recovers 70% of their damages. It's more forgiving than the older contributory negligence rule, which could bar recovery entirely for any fault at all. Hook: comparative negligence trims your recovery by your share of the blame.

A pro rata provision splits a loss among insurers in proportion to each policy's limit, so a policy carrying half the total coverage pays half the loss. It keeps the insured from collecting more than the actual loss. Hook: pro rata splits the loss by each policy's share of the total limits.

A morale hazard is an attitude of carelessness: a person takes fewer precautions simply because they know insurance will cover any loss (the why-worry-I'm-insured mindset). It differs from a moral hazard, which involves outright dishonesty. Hook: morale hazard is carelessness from having coverage; moral hazard is dishonesty.

HO-3 insures the dwelling and other structures on an open-perils basis (covered unless excluded) but covers personal property on a named-perils basis. That split is the reason it is the go-to homeowners form. Hook: HO-3 is open perils on the house, named perils on the stuff inside.

HO-6 covers condominium and co-op unit owners. It insures personal property and provides limited building coverage for improvements inside the unit, since the association's master policy covers the structure itself. Hook: HO-6 is the condo form, your belongings plus the walls-in.

Both forms cover the dwelling on open perils, but the HO-5 upgrades personal property to open perils as well, while the HO-3 keeps personal property on named perils. The HO-5 is the broadest standard homeowners form. Hook: HO-5 takes the HO-3 and upgrades the contents to open perils too.

Coverage B insures detached structures such as a garage, shed, or fence, usually for 10% of the Coverage A limit. The owner can raise it by endorsement if needed. Hook: Coverage B is detached structures, normally 10% of the dwelling limit.

Coverage C usually equals about 50% of the Coverage A dwelling limit, though the percentage can be adjusted. It covers the insured's belongings. Hook: Coverage C, personal property, runs about 50% of the dwelling limit.

Raising Coverage C does not lift the special jewelry theft sublimit. Scheduling the ring on a personal articles floater (scheduled personal property endorsement) insures it for its full appraised value, usually on an open-perils basis and often with no deductible. Hook: beat the jewelry sublimit by scheduling the item, not by raising Coverage C.

Because the owner will not occupy it, a homeowners form does not fit. A dwelling policy insures the structure of a rental or non-owner-occupied home, and the tenant separately buys an HO-4 for their own contents. Hook: the rental structure goes on a dwelling policy; the tenant's belongings go on HO-4.

Flood is excluded from homeowners policies and must be insured separately, usually through the National Flood Insurance Program (NFIP) or a private flood policy. Earth movement such as earthquake is likewise excluded. Hook: homeowners never covers flood, that is a separate NFIP policy.

Earth movement, including earthquake, is excluded by the standard homeowners policy, but the insured can usually add earthquake coverage by endorsement or buy a separate earthquake policy. Hook: earthquake is excluded but can be bought back by endorsement.

After a covered loss, current building codes may require costlier rebuilding than the original construction. An ordinance or law endorsement covers that added expense, which the base policy may limit or exclude. Hook: ordinance or law pays the code-upgrade costs when you rebuild.

Part B is Medical Payments coverage, which pays reasonable medical expenses for the insured and passengers hurt in an auto accident, regardless of fault. Hook: Part B is for bodies, the medical payments part.

Liability coverage responds when the insured is legally responsible for injuring someone else or damaging their property, and it also pays the cost of defending the insured. It does not pay for the insured's own car. Hook: liability pays the other guy, both his injuries and his property.

In split limits the first number is the per-person bodily injury cap, the second is the per-accident bodily injury cap, and the third is the property damage cap per accident. So 100/300/50 is 100,000 per person, 300,000 per accident, 50,000 for property. Hook: split limits read per person, per accident, then property damage.

Medical Payments is a no-fault coverage that pays reasonable and necessary medical (and sometimes funeral) expenses for the insured and occupants of the covered auto, no matter who caused the accident. Hook: Med Pay pays your people's medical bills, fault not required.

UM coverage steps in when an at-fault driver has no liability insurance (or cannot be identified, as in a hit-and-run), paying the insured for injuries the other driver should have covered. Hook: uninsured motorist covers you when the at-fault driver has zero insurance.

UIM fills the gap when the at-fault driver does carry liability insurance but the limits run out before the insured's injuries are fully paid. It picks up where the other driver's insufficient coverage stops. Hook: underinsured means they had some coverage, just not enough, and UIM bridges the shortfall.

UM bodily injury pays for the insured's injuries caused by an at-fault driver who is uninsured or who flees the scene. Whether UM also covers property damage varies by state. Hook: UM-BI is for your injuries when the other driver is uninsured or a hit-and-run.

Collision covers damage from the insured's auto colliding with another vehicle or object, or from overturning (upset). Losses like theft, fire, and hail fall under other-than-collision instead. Hook: collision is crashing into something or flipping over.

Other-than-collision, often called comprehensive, covers the non-crash perils: theft, fire, hail, falling objects, vandalism, glass breakage, and animal strikes. Crashing or overturning is collision, not comprehensive. Hook: comprehensive is everything but the crash, fire, theft, hail, and Bambi.

Rental reimbursement (transportation expense) coverage pays a daily amount for a rental car while the insured's vehicle is being repaired or replaced after a covered loss, usually subject to a daily and total cap. Hook: rental reimbursement keeps you on the road while your car is in the shop.

The dwelling policy is built for residences that fall outside standard homeowners eligibility, especially rentals and non-owner-occupied homes, plus seasonal or older dwellings. Homeowners forms assume the owner lives there. Hook: the DP is the rental and non-owner-occupied house policy.

The dwelling program has three standard forms: DP-1 Basic, DP-2 Broad, and DP-3 Special, in increasing order of coverage breadth. The HO numbers belong to the homeowners program. Hook: dwelling forms are 1 Basic, 2 Broad, 3 Special.

Coverage B is Other Structures, covering detached structures on the premises like a freestanding garage, shed, or fence, just as it does on a homeowners form. Hook: Coverage B is the detached structures, the same in DP and HO.

The DP-2 Broad Form expands the named-perils list well beyond the DP-1, adding perils like weight of ice and snow, accidental water discharge, and falling objects. It remains named perils, just a longer list. Hook: DP-2 is still named perils, just a much longer list than DP-1.

Like the HO-3, the DP-3 splits its basis: the dwelling and other structures get open perils, but personal property is covered on a named-perils basis. Hook: DP-3 is open perils on the building, named perils on the contents, just like HO-3.

Settlement basis is a major dividing line: the DP-1 pays ACV on the dwelling, while the broader DP-2 and DP-3 pay replacement cost when the insured carries enough coverage. Hook: DP-1 means ACV; DP-2 and DP-3 mean replacement cost.

Dwelling forms do not build in theft the way homeowners does; theft is added by endorsement, and the coverage is broader for owner-occupied dwellings than for rentals. Hook: theft is not standard on a DP; add it by endorsement.

The dwelling policy leaves out three things homeowners builds in: liability, theft, and medical payments. Each can be added by endorsement, but none is automatic. Hook: a DP skips liability, theft, and med pay unless you add them.

Seasonal and secondary residences often fail homeowners occupancy requirements, so they are written on a dwelling policy instead. Hook: the vacation or seasonal home usually lands on a dwelling policy.

The DP-2 keeps the named-perils approach but lengthens the peril list and, unlike the DP-1, settles the dwelling on a replacement cost basis. Open perils is the DP-3, not the DP-2. Hook: DP-2 adds perils and upgrades the dwelling to replacement cost, still named perils.

The NFIP is a federal program run through FEMA, offering flood insurance in communities that adopt and enforce floodplain management rules. Private insurers may sell and service it under write-your-own arrangements. Hook: NFIP is federal flood insurance, available where the community participates.

NFIP flood coverage typically does not take effect until about 30 days after purchase, which discourages buying only when a flood is imminent. Limited exceptions apply (such as loan-related purchases). Hook: NFIP usually makes you wait about 30 days, no buying ahead of the storm.

Standard property forms exclude earth movement, but earthquake coverage can be added by endorsement or bought separately, commonly with a deductible expressed as a percentage of the dwelling limit rather than a flat dollar amount. The NFIP covers flood, not quake. Hook: earthquake is excluded but buy-back-able, usually with a percentage deductible.

Scheduling valuables like jewelry, furs, or fine arts is done on a personal articles floater, which is a personal inland marine form. Hook: the personal articles floater is inland marine for your valuables.

Protection and indemnity (P&I) is the liability portion of ocean marine, covering the owner's legal liability for bodily injury and property damage arising from the vessel, including crew injury and damage to other ships. Hull covers the vessel, cargo covers the goods, P&I covers the liability. Hook: P&I is the liability piece of ocean marine.

Aviation risks (hull and liability for aircraft) are excluded from standard personal lines and must be written on specialized aviation policies. Hook: planes need aviation insurance, never the home or auto policy.

A surety bond is a three-party guarantee: the surety guarantees to the obligee that the principal will perform an obligation. Insurance, by contrast, is a two-party contract covering accidental loss. Hook: surety is three parties and a guarantee; insurance is two parties and a loss.

Unlike insurance, a surety expects the principal to ultimately bear the loss, so after paying the obligee the surety can seek reimbursement from the principal. Hook: the surety pays, then comes back to the principal to be repaid.

A performance bond is a surety bond guaranteeing the contractor will complete the project according to the contract; if not, the surety makes the obligee whole. Hook: performance bonds guarantee the job gets finished.

Title insurance covers losses from title defects, such as liens, errors in records, or competing ownership claims, that already existed but surface after the property is bought. Hook: title insurance protects against ownership defects hiding in the property's past.