Kentucky Property & Casualty Insurance Practice Exam Free - 2026

• A. 14 days, because cancellation within the first 60 days requires only 14 days
• B. 20 days, the same as for a personal auto policy
• C. 30 days, with proof of mailing
• D. 75 days, because the policy has been in effect more than 60 days

Correct answer: D. 75 days, because the policy has been in effect more than 60 days

Explanation: KRS 304.20-320(2)(b) requires a cancellation notice for property and casualty insurance to be mailed or delivered at least fourteen (14) days before the effective date if the cancellation is for nonpayment of premium or occurs within sixty (60) days of issuance, and at least seventy-five (75) days before the effective date if the policy has been in effect more than sixty (60) days; after 60 days the reason must also be one listed in KRS 304.20-330, which includes a change in risk that substantially increases a hazard. Because this policy has been in force more than 60 days and the reason is not nonpayment, 75 days applies; 20 days is the auto rule under KRS 304.20-040, and 30 days is not a cancellation period. See KRS 304.20-320.

• A. Until the policy is issued or 90 days from its effective date, whichever is shorter
• B. Until the policy is issued or 30 days, whichever is shorter
• C. Binders must be in writing; an oral binder is void
• D. Indefinitely, until the insurer cancels it

Correct answer: A. Until the policy is issued or 90 days from its effective date, whichever is shorter

Explanation: KRS 304.14-220 provides that binders or other contracts for temporary insurance may be made orally or in writing, include the usual terms of the policy, and are not valid beyond issuance of the policy or beyond ninety (90) days from the binder's effective date, whichever is shorter; extension beyond 90 days requires the commissioner's written approval, and the section does not apply to life, health, or title insurance. Oral binders are expressly permitted, 30 days is not the statutory limit, and binders are not indefinite. See KRS 304.14-220.

• A. $100,000 per claimant and $1,000 for unearned premium
• B. $300,000 per claimant for the loss and up to $10,000 per policy for return of unearned premium
• C. The full $400,000 loss and the $600 premium
• D. $500,000 per claimant with no unearned-premium coverage

Correct answer: B. $300,000 per claimant for the loss and up to $10,000 per policy for return of unearned premium

Explanation: KRS 304.36-080(1)(a)2 obligates the association to pay the full amount of covered workers' compensation claims, an amount not exceeding ten thousand dollars ($10,000) per policy for return of unearned premium, up to $500,000 per insured event for cybersecurity insurance claims, and an amount not exceeding three hundred thousand dollars ($300,000) per claimant for all other covered claims. The association therefore does not pay the full $400,000; $100,000 and $500,000 are not the general per-claimant cap; and unearned premium is covered up to $10,000. See KRS 304.36-080.

• A. No; coverage is required only for employers with five or more employees
• B. No; coverage is elective for all private employers in Kentucky
• C. Yes; any employer with one or more employees in Kentucky, other than one engaged solely in agriculture, is mandatorily subject to the Act
• D. No; coverage is required only for full-time employees

Correct answer: C. Yes; any employer with one or more employees in Kentucky, other than one engaged solely in agriculture, is mandatorily subject to the Act

Explanation: KRS 342.630(1) makes any person, other than one engaged solely in agriculture, that has in Kentucky one (1) or more employees subject to the chapter a mandatorily covered employer; KRS 342.640(1) defines employees to include every person, including a minor, in the service of an employer under any contract of hire, and KRS 342.340 requires such employers to insure their liability with an authorized carrier or qualify as a self-insurer. There is no five-employee or full-time-only threshold, and the Act is mandatory rather than elective. See KRS 342.630.

• A. farm policies exclude tractors, so each one needs a separate auto policy
• B. vehicles and equipment may not all fit neatly under farm property coverage
• C. federal crop insurance already covers farm vehicles, so duplicate coverage must be avoided
• D. the farm liability section already covers vehicles registered for public road use

Correct answer: B. vehicles and equipment may not all fit neatly under farm property coverage

Explanation: Farm vehicles and mobile equipment may require careful classification and separate or endorsed coverage.

• A. whether guest injuries can be paid from the farm property coverage limit
• B. whether workers compensation will respond to injuries suffered by paying guests
• C. whether agritourism or business liability exposures need special coverage
• D. whether crop insurance should be increased to reflect the added event income

Correct answer: C. whether agritourism or business liability exposures need special coverage

Explanation: Public events can create liability exposures beyond ordinary farm operations. Coverage should be reviewed and endorsed if needed.

• A. boilers, electrical systems, or mechanical equipment
• B. buildings, outdoor fences, and detached structures
• C. inventory, raw materials, and finished goods in storage
• D. vehicles, trailers, and mobile equipment driven on public roads

Correct answer: A. boilers, electrical systems, or mechanical equipment

Explanation: Equipment breakdown coverage addresses covered breakdown events involving certain mechanical, electrical, or pressure equipment.

• A. a boiler that fails from years of ordinary wear and tear
• B. a lightning strike that ignites a fire inside the building wiring system
• C. a machine destroyed by flooding of the basement machine room
• D. a covered electrical system failure damaging business equipment

Correct answer: D. a covered electrical system failure damaging business equipment

Explanation: Equipment breakdown coverage focuses on covered breakdowns of equipment, not general liability, theft of autos, or advertising injury.

• A. a refrigerator is stolen along with the goods stored inside it
• B. refrigerated goods spoil after covered refrigeration equipment fails
• C. food is contaminated by an employee's deliberate tampering
• D. inventory in cold storage is damaged by a fire that spreads through the warehouse

Correct answer: B. refrigerated goods spoil after covered refrigeration equipment fails

Explanation: Spoilage coverage can help with perishable property damaged because of a covered equipment breakdown, when included.

• A. property forms cover the breakdown itself but exclude the fire that follows it
• B. property forms exclude fire damage to equipment, so a second policy is needed
• C. standard property forms may exclude or limit mechanical breakdown losses
• D. equipment breakdown is required by law once a business owns a boiler

Correct answer: C. standard property forms may exclude or limit mechanical breakdown losses

Explanation: Standard property coverage may not fully cover mechanical or electrical breakdown exposures. Equipment breakdown fills that gap when properly added.

• A. lost profits during the period the equipment is out of service
• B. scheduled preventive maintenance performed to avoid a future breakdown
• C. the cost of replacing spoiled inventory that resulted from the breakdown
• D. extra costs to speed up repairs or replacement after a covered breakdown

Correct answer: D. extra costs to speed up repairs or replacement after a covered breakdown

Explanation: Expediting expense coverage can help pay reasonable extra costs to make temporary repairs or speed permanent repairs after a covered breakdown.

• A. equipment breakdown
• B. personal umbrella only
• C. life nonforfeiture options
• D. health coinsurance

Correct answer: A. equipment breakdown

Explanation: Boiler and machinery exposures are classic equipment breakdown concerns.