New Jersey Property & Casualty Insurance Practice Exam Free - 2026

• A. $250,000
• B. $75,000
• C. $500,000
• D. $1,000,000

Correct answer: A. $250,000

Explanation: Standard-policy PIP provides medical expense benefits for reasonable, necessary and appropriate treatment in an amount not to exceed $250,000 per person per accident. See N.J.S.A. 39:6A-4.

• A. Mandatory BI of $15,000/$30,000
• B. Mandatory BI of $25,000/$50,000
• C. No BI option at all
• D. No BI by default, but optional coverage of $10,000 for injury or death of one or more persons per accident

Correct answer: D. No BI by default, but optional coverage of $10,000 for injury or death of one or more persons per accident

Explanation: The Basic policy contains no bodily injury liability coverage by default; the insured may add optional coverage of $10,000 on account of injury to, or death of, one or more persons in any one accident. See N.J.S.A. 39:6A-3.1.

• A. $250,000 PIP and $25,000 property damage
• B. $15,000 PIP per person per accident and $5,000 property damage liability
• C. $75,000 PIP and $10,000 property damage
• D. $50,000 PIP and $15,000 property damage

Correct answer: B. $15,000 PIP per person per accident and $5,000 property damage liability

Explanation: The Basic policy provides PIP medical expense benefits of $15,000 per person per accident (up to $250,000 only for permanent or significant brain or spinal cord injury or trauma-center care) and $5,000 of property damage liability. See N.J.S.A. 39:6A-3.1.

• A. No; only death permits suit under this option
• B. No; she waived all noneconomic claims permanently
• C. Yes; a displaced fracture is one of the statutory threshold injuries permitting a noneconomic loss suit
• D. Yes, but only if her medical bills exceed $15,000

Correct answer: C. Yes; a displaced fracture is one of the statutory threshold injuries permitting a noneconomic loss suit

Explanation: Under the limitation on lawsuit option, suit for noneconomic loss is allowed only for death, dismemberment, significant disfigurement or significant scarring, displaced fractures, loss of a fetus, or a permanent injury within a reasonable degree of medical probability. See N.J.S.A. 39:6A-8.

• A. Insurance that covers the insured's legal liability for damage to others' property
• B. Insurance that protects physical property against damage or loss
• C. Insurance that pays a fixed amount based on the market value of real estate
• D. Insurance that indemnifies lenders when a borrower defaults on a mortgage loan

Correct answer: B. Insurance that protects physical property against damage or loss

Explanation: Property insurance protects physical property (buildings, personal property, equipment) against damage or loss from covered perils such as fire, theft, or natural disasters.

• A. Insurance covering damage to the insured's own buildings and personal property
• B. Insurance covering financial loss from the death or disability of a key employee
• C. Insurance covering legal liability for injuries or damage caused to others
• D. Insurance covering loss of business income when operations are suspended by a fire

Correct answer: C. Insurance covering legal liability for injuries or damage caused to others

Explanation: Casualty insurance (liability insurance) covers the insured's legal liability for injuries to others or damage to their property. It protects against claims and lawsuits from third parties.

• A. The policy's face value
• B. The market value of stocks
• C. The full cost to replace an item new
• D. Replacement cost minus depreciation

Correct answer: D. Replacement cost minus depreciation

Explanation: Actual cash value (ACV) is the value of property at the time of loss, calculated as replacement cost minus depreciation. It reflects what the property was worth just before it was damaged or destroyed.

• A. Coverage that pays to replace damaged property with new items of like kind and quality
• B. Coverage that pays the current market value of damaged property less depreciation
• C. Coverage that pays the original purchase price of damaged property regardless of age
• D. Coverage that pays an agreed amount fixed at policy issue regardless of actual value

Correct answer: A. Coverage that pays to replace damaged property with new items of like kind and quality

Explanation: Replacement cost coverage pays to replace or repair damaged property with new items of similar kind and quality, without deducting for depreciation. It provides more complete recovery than ACV coverage.

• A. A condition that increases the chance of a loss occurring
• B. A specific cause of loss that may trigger a claim
• C. The uncertainty that a financial loss will occur
• D. The financial harm that results from a covered event

Correct answer: B. A specific cause of loss that may trigger a claim

Explanation: A peril is a specific cause of loss or event that may result in damage and trigger an insurance claim, such as fire, theft, windstorm, or vandalism.

• A. A policy that covers every peril except those listed
• B. A policy that covers listed perils and any similar ones
• C. A policy that covers only specifically listed perils
• D. A policy that covers only items listed on a schedule

Correct answer: C. A policy that covers only specifically listed perils

Explanation: A named perils (or specified perils) policy only covers losses caused by perils specifically listed in the policy. If a peril isn't named, it isn't covered.

• A. A policy covering the causes of loss that are specifically listed in the form
• B. A policy covering every cause of loss with no exclusions of any kind
• C. A policy covering all causes of loss up to an unlimited amount with no deductible
• D. A policy covering all causes of loss except those specifically excluded

Correct answer: D. A policy covering all causes of loss except those specifically excluded

Explanation: An open perils (all-risk) policy covers all causes of loss except those specifically excluded in the policy. It provides broader coverage than named perils policies.

• A. Restoring the insured to their pre-loss financial condition
• B. Paying the insured the full policy limit after any covered loss
• C. Recovering the claim payment from the party who caused the loss
• D. Placing the insured in a better financial position than before

Correct answer: A. Restoring the insured to their pre-loss financial condition

Explanation: Indemnification is the principle of restoring the insured to the same financial position they were in before the loss occurred - no better and no worse. It prevents profit from insurance claims.