Michigan Property & Casualty Insurance Practice Exam Free - 2026

• A. It must be permanent, involve an important body function, and result in a disability rating assigned by a licensed physician
• B. It must be objectively manifested, require surgical intervention, and prevent the person from returning to any gainful employment
• C. It must be subjectively reported by the injured person, involve any body function whatsoever, and affect the person's ability to perform the duties of his or her job
• D. It must be objectively manifested, involve an important body function, and affect the person's general ability to lead his or her normal life

Correct answer: D. It must be objectively manifested, involve an important body function, and affect the person's general ability to lead his or her normal life

Explanation: Michigan defines serious impairment of body function as an impairment that is objectively manifested, meaning observable or perceivable from actual symptoms or conditions by someone other than the injured person; that involves an important body function of great value, significance, or consequence to the injured person; and that affects the person's general ability to lead his or her normal life. Permanence, a disability rating, total loss of employability, and surgery are not elements of the statutory test. See MCL 500.3135(5).

• A. $1,000
• B. $3,000
• C. $5,000
• D. $10,000

Correct answer: B. $3,000

Explanation: The mini-tort cap is $3,000 for motor vehicle accidents occurring after July 1, 2020, raised from the $1,000 limit that applied to earlier accidents, and it reaches only vehicle damage not covered by insurance. Candidates frequently carry forward the old $1,000 figure from pre-reform materials. See MCL 500.3135(3)(e).

• A. She recovers nothing, because mini-tort damages may not be assessed in favor of a party more than 50% at fault
• B. She recovers 40% of her damages, because mini-tort damages are assessed under a pure comparative fault rule
• C. She recovers the full capped amount, because mini-tort recovery is a no-fault remedy that ignores fault
• D. She recovers nothing, because mini-tort damages require that she also meet the tort threshold for noneconomic loss

Correct answer: A. She recovers nothing, because mini-tort damages may not be assessed in favor of a party more than 50% at fault

Explanation: Mini-tort damages in Michigan are assessed on the basis of comparative fault, and no damages may be assessed in favor of a party who is more than 50% at fault; a party exactly 50% at fault may still recover a proportionate amount. The mini-tort exception is a fault-based remedy, and it is separate from the death, serious impairment, or permanent serious disfigurement threshold that governs noneconomic loss claims. See MCL 500.3135(3)(e).

• A. He may recover the full capped amount, because the other driver's fault rather than his own insurance status controls mini-tort recovery
• B. He may recover the capped amount reduced by his percentage of fault, since the lack of security is treated as comparative negligence
• C. He may not recover mini-tort damages, because he did not have the required security in effect for the vehicle he was operating
• D. He may recover mini-tort damages if he purchases the required security within 30 days after the accident and pays any premium due

Correct answer: C. He may not recover mini-tort damages, because he did not have the required security in effect for the vehicle he was operating

Explanation: Michigan bars mini-tort damages in favor of a party who was operating his or her own vehicle at the time of the accident without the security required by MCL 500.3101(1) in effect for that vehicle. The other driver's fault does not cure the claimant's own failure to maintain compulsory security, and coverage purchased after the accident does not restore the claim. See MCL 500.3135(3)(e).

• A. Theft, vandalism, and accidental discharge of water
• B. Falling objects, weight of ice and snow, and freezing of plumbing
• C. Fire, lightning, and internal explosion
• D. All risks of direct physical loss except those specifically excluded

Correct answer: C. Fire, lightning, and internal explosion

Explanation: The basic dwelling form starts with fire, lightning, and internal explosion, with extended coverage perils and vandalism available as additions. Open perils coverage is a special form feature, not a basic form feature. Theft, water discharge, falling objects, and weight of ice and snow belong to the broad form or to separate endorsements.

• A. Both the basic and broad forms settle the dwelling at actual cash value, and replacement cost settlement is available under the special form alone
• B. The basic form settles at replacement cost, while the broad form settles at actual cash value unless the insured carries eighty percent of value
• C. Both forms settle the dwelling at replacement cost without deduction for depreciation, regardless of the amount of insurance carried relative to value
• D. The basic form settles the dwelling on an actual cash value basis, while the broad form provides replacement cost when the coinsurance requirement is met

Correct answer: D. The basic form settles the dwelling on an actual cash value basis, while the broad form provides replacement cost when the coinsurance requirement is met

Explanation: The broad dwelling form adds replacement cost settlement on the dwelling when the insured carries the required percentage of replacement value, while the basic form pays actual cash value. Reversing the two forms misstates the progression from narrow to broad coverage. Replacement cost is not unique to the special form, which mainly changes the perils rather than the valuation rule.

• A. Open perils on the dwelling and other structures, with broad named perils on personal property
• B. Open perils on personal property, with broad named perils on the dwelling and other structures
• C. Open perils on the dwelling, other structures, and personal property alike, subject to the exclusions
• D. Broad named perils on the dwelling and other structures, with basic named perils on personal property

Correct answer: A. Open perils on the dwelling and other structures, with broad named perils on personal property

Explanation: The special form broadens the buildings to open perils, meaning any direct physical loss not excluded, but leaves personal property on the broad form's named perils list. Assuming open perils extends to contents overstates the coverage. Reversing the treatment or keeping both on named perils describes the broad form rather than the special form.

• A. Coverage C, because the structures hold the insured's belongings
• B. Coverage B, other structures
• C. Coverage D, because the structures affect the rental value of the premises
• D. Coverage A, because all structures on the lot are part of the dwelling

Correct answer: B. Coverage B, other structures

Explanation: Coverage B applies to appurtenant private structures separated from the dwelling by clear space, such as detached garages, sheds, and fences. Coverage A is limited to the dwelling itself and attached structures. Coverage C insures personal property regardless of where it is stored, and Coverage D addresses lost rents rather than physical structures.

• A. Coverage E, additional living expense
• B. Coverage C, personal property
• C. Coverage D, fair rental value
• D. Coverage B, other structures

Correct answer: C. Coverage D, fair rental value

Explanation: Fair rental value reimburses the landlord for rent lost while the premises are untenantable because of a covered loss, less any expenses that do not continue. Additional living expense is for an insured who actually lives in the dwelling and must relocate. Personal property and other structures cover physical items rather than lost income.

• A. It is included in all three dwelling forms at ten percent of the Coverage A limit as an additional amount of insurance
• B. It pays the insured's mortgage and property tax payments while the dwelling is uninhabitable after a covered loss
• C. It is designed for dwellings rented to others, while an owner occupant relies on fair rental value coverage instead
• D. It is not automatically included in the basic dwelling form and generally must be added by endorsement

Correct answer: D. It is not automatically included in the basic dwelling form and generally must be added by endorsement

Explanation: The basic dwelling form provides fair rental value but leaves additional living expense to be added, while the broad and special forms include it. It is therefore not present in all forms at a uniform percentage. Owner occupants are exactly who the coverage is meant for, and it reimburses the increase in normal living costs rather than continuing debt payments.

• A. A dwelling policy does not automatically include personal liability or theft coverage, while a homeowners policy does
• B. A dwelling policy automatically includes theft coverage for contents, while a homeowners policy requires a theft endorsement
• C. A dwelling policy includes Section II personal liability coverage automatically, while a homeowners policy requires a liability supplement
• D. A dwelling policy settles the dwelling at replacement cost under every form, while a homeowners policy pays actual cash value on the dwelling

Correct answer: A. A dwelling policy does not automatically include personal liability or theft coverage, while a homeowners policy does

Explanation: The dwelling program is a property-only package, so liability and theft must be added by endorsement, whereas the homeowners package bundles Section II liability and medical payments plus theft coverage. Theft and Section II liability are not automatic under the dwelling program, and valuation depends on which dwelling form is chosen rather than being replacement cost under every form.

• A. A single-family home occupied year round by the owner and her family
• B. A four-family rental dwelling owned by an investor who lives elsewhere
• C. A condominium unit that the insured owns and occupies as a primary residence
• D. An apartment occupied by a tenant who owns the contents but not the building

Correct answer: B. A four-family rental dwelling owned by an investor who lives elsewhere

Explanation: The dwelling program was built for one to four family dwellings including non-owner occupied rentals, which fall outside the owner occupancy requirement of the standard homeowners form. Owner occupied homes, condominium units, and tenant contents each have their own dedicated homeowners forms. The absence of the owner as a resident is what pushes the risk to the dwelling program.