Free AAI Practice Questions

Question 1

During a homeowners review, a client produces an $18,000 appraisal for her engagement ring. Her HO-3 policy has ample overall contents coverage, but a $1,500 jewelry-theft sublimit and no coverage for unexplained disappearance. She wants protection against both theft and accidentally losing the ring. Which proposal addresses both gaps?

Accepted Answer

Schedule the ring for $18,000 with express coverage for theft, accidental loss, and unexplained disappearance.

Answer

Increase Coverage C by $18,000 while retaining the existing causes of loss and special limits.

Answer

Raise the unscheduled jewelry-theft sublimit to $18,000 without changing the covered causes of loss.

Answer

Add replacement-cost valuation for contents while retaining the existing causes of loss and special limits.

Question 2

A retailer asks for $420,000 of property coverage to begin at 5:00 p.m. today, when it takes possession of its new premises. It is now 4:45 p.m., and the insurer's underwriting office is closed. The producer has written authority to bind eligible retail risks up to $500,000; every binding condition has been met, and the retailer has authorized the purchase. How should the producer complete the placement?

Accepted Answer

Exercise the binding authority and issue a binder showing coverage effective at 5:00 p.m.

Answer

Submit the signed application and promise coverage as soon as it reaches the insurer's inbox.

Answer

Wait until an underwriter individually approves the retailer's application.

Answer

Use a certificate of insurance as temporary coverage pending underwriting approval.

Question 3

An agency began the year with 800 client accounts, all eligible for retention. It ended with 840 accounts, including 160 newly acquired during the year. There were no acquisitions of other agencies, account transfers, or other adjustments. The owner points to the larger ending count as evidence that existing clients are staying. What account-retention rate actually belongs on the dashboard?

Accepted Answer

85.0%

Answer

81.0%

Answer

87.5%

Answer

105.0%

Question 4

Driving at dusk, a policyholder swerves to avoid a deer, never touches the animal, and strikes a guardrail. She has both collision and other-than-collision coverage. For the damage to her own car, which classification follows from the event that actually caused the impact?

Accepted Answer

Collision, because the car struck the guardrail rather than the deer.

Answer

Other than collision, because an animal caused the emergency.

Answer

Property damage liability, because the damaged guardrail belongs to someone else.

Answer

Neither physical-damage coverage, because no other vehicle was involved.

Question 5

An underwriter revisits a cabinetmaker's fire exposure after the adjoining property becomes a scrap-tire storage yard. The cabinetmaker's building materials, manufacturing activities, sprinklers, and responding fire department are unchanged. Which part of the COPE assessment has changed?

Accepted Answer

Exposure from neighboring property

Answer

The building's construction

Answer

The cabinetmaker's occupancy

Answer

Protection from sprinklers and fire services

Question 6

A 44-year-old policyowner whose health has deteriorated has term coverage continuing until age 57. His policy permits conversion to designated permanent plans until age 50 without new evidence of insurability. He wants lifelong death protection but proposes waiting until the term coverage ends. Which counsel is accurate?

Accepted Answer

He can convert without new medical evidence, but must act within the age-50 conversion period.

Answer

He can wait until age 57 because continued term premiums preserve all conversion rights.

Answer

His changed health must be accepted through new medical underwriting before he can use the conversion privilege.

Answer

He can renew at age 57 and then convert under the renewal privilege without another deadline.

Question 7

Immediately after a windstorm, a shop owner phones the agency from outside a damaged store and reports a strong gas odor inside. Employees have left, but the owner wants to reenter to photograph damaged stock before filing a claim. What takes priority over the claim documentation?

Accepted Answer

Keep everyone clear and call emergency services from a safe location.

Answer

Finish the insurer's first-notice-of-loss interview before deciding whether the owner should enter the store.

Answer

Have the owner locate the source of the odor before determining whether emergency assistance is needed.

Answer

Ask the owner to photograph the gas equipment and close its valve before contacting emergency responders.

Question 8

A consultant changes errors-and-omissions insurers on January 1, 2026. The calendar-year 2025 policy has a January 1, 2022 retroactive date; its 2026 replacement has a January 1, 2026 retroactive date. Both require a claim to be first made and reported during their respective policy years, and both exclude acts before their retroactive dates. No extended reporting period applies. An October 2024 error produces its first claim in June 2026, reported that day. How do the stated timing conditions apply?

Accepted Answer

Neither policy qualifies: the earlier policy fails the claim-date condition, and the later policy fails the retroactive-date condition.

Answer

The 2025 policy qualifies because the error occurred after its retroactive date.

Answer

The 2026 policy qualifies because the claim was first made and reported during its term.

Answer

Both qualify: the earlier policy encompasses the error date, while the replacement encompasses the claim and report dates.

Question 9

Fire damages a warehouse insured for $720,000 on a replacement-cost basis. At the time of loss, the building's replacement cost is $1,200,000 and its actual cash value is $900,000. The policy has an 80% coinsurance condition based on replacement cost and a $2,000 deductible, subtracted after any coinsurance reduction. There is no agreed-value provision. Covered repairs cost $240,000 and have been completed. What is the insurer's payment?

Accepted Answer

$178,000

Answer

$142,000

Answer

$178,500

Answer

$238,000

Question 10

While selecting an insurer for an electrical-contractor program, an agency reviews a package that covers business personal property only at scheduled premises and expressly excludes tools at job sites or in transit. The target clients carry owned tools and testing equipment to customer locations every day. What must the agency arrange to address that exposure?

Accepted Answer

Contractor's equipment coverage that includes transit and temporary job sites.

Answer

A higher property limit at the scheduled premises.

Answer

Replacement-cost valuation for the tools without changing the policy's covered locations.

Answer

An increased general liability property-damage limit for tools used away from the premises.

Free AAI Practice Questions

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