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Property & Casualty practice questions

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Question 1Insurance Principles, Concepts, and Contract Law

The principle of indemnity is intended to:

  1. restore the insured to the pre-loss financial position Correct answer.
  2. guarantee payment of the full policy limit for every covered loss
  3. allow the insured to collect from several policies for a single loss
  4. provide the insured a profit after a covered loss

Explanation

Indemnity means the insured is made whole for the actual financial loss, no better and no worse. It is the reason limits, deductibles, and actual cash value settlements exist, and it discourages using insurance as a source of gain.

Question 2Insurance Principles, Concepts, and Contract Law

Insurable interest in a property policy is generally required to exist:

  1. only when the application is signed
  2. at the time of the loss Correct answer.
  3. at the policy's expiration date
  4. at both the time of application and the time of loss

Explanation

Property insurance requires insurable interest when the loss occurs, because the insured must actually suffer a financial detriment to collect. Life insurance instead tests insurable interest when the contract is formed, since the loss is not financial.

Question 3Insurance Principles, Concepts, and Contract Law

Ambiguous wording in an insurance policy is generally construed in favor of the insured because the policy is:

  1. a unilateral contract binding only on the insured
  2. a negotiated contract drafted jointly by both parties
  3. a contract of adhesion drafted by the insurer Correct answer.
  4. an aleatory contract with unequal exchange of values

Explanation

A contract of adhesion is drafted by one party and offered on a take-it-or-leave-it basis, so the insured has no real say in the wording. Courts apply contra proferentem and resolve ambiguities against the party who wrote the language.

Question 4Insurance Principles, Concepts, and Contract Law

An insurance contract is described as aleatory because:

  1. the contract must be in writing to be enforceable
  2. both parties exchange promises of exactly equal value
  3. performance depends on an uncertain future event Correct answer.
  4. only the insurer makes an enforceable promise

Explanation

Aleatory means the values exchanged are unequal and contingent: a modest premium may buy a large payment, or nothing at all, depending on chance. The element of uncertainty is what separates insurance from an even exchange.

Question 5Insurance Principles, Concepts, and Contract Law

Which of the following is a pure risk?

  1. loss from a decline in stock market prices
  2. a fire damaging a warehouse Correct answer.
  3. loss from a gambler's wager
  4. loss from investing in a new product line

Explanation

Pure risks present only the chance of loss or no loss, which is why they are insurable. Speculative risks carry the possibility of gain as well as loss and are generally not written by insurers.

Question 6Insurance Principles, Concepts, and Contract Law

An insurance contract is unilateral because:

  1. the insurer may change the terms at will
  2. the insured may cancel at any time without consequence
  3. only the insurer makes a legally enforceable promise Correct answer.
  4. both parties are bound to perform from the outset

Explanation

Only the insurer gives a legally enforceable promise to pay covered claims. The insured pays premium as consideration but cannot be compelled to do anything further and simply forfeits coverage by failing to comply with conditions.

Question 7Insurance Principles, Concepts, and Contract Law

An applicant for commercial property coverage states that a wood-frame building is masonry construction. The insurer issues the policy at the lower masonry rate, and a fire later destroys the building. The insurer may:

  1. not deny the claim because the policy was already issued
  2. deny the claim only if the fire was caused by the frame construction
  3. rescind the policy because the misrepresentation was material Correct answer.
  4. void only the coverage for fire losses

Explanation

A misrepresentation is material when the insurer would have acted differently had it known the truth. Construction class directly affects fire rating and premium, so the insurer relied on the false statement and may rescind the entire contract.

Question 8Insurance Principles, Concepts, and Contract Law

A representation differs from a warranty in that a representation:

  1. is written into the policy and becomes a condition of coverage
  2. must be literally and exactly true to keep coverage in force
  3. is a statement believed true and need only be substantially true Correct answer.
  4. is presumed material in every case regardless of the loss

Explanation

A representation is a statement of fact the applicant believes to be true, and it need only be substantially true and material to the risk. A warranty is part of the policy itself and must be literally true, although many states soften that rule by statute.

Question 9Insurance Principles, Concepts, and Contract Law

An insurer learns of a policyholder's breach of a condition but continues to accept premium payments for several months. This conduct most likely results in:

  1. waiver of the right to deny coverage Correct answer.
  2. automatic rescission of the policy from inception
  3. subrogation against the insured
  4. an increase in the policy limits

Explanation

Waiver is the voluntary surrender of a known right. By continuing to accept premium after learning of the breach, the insurer gives up the ability to rely on that breach as a basis for denying coverage.

Question 10Insurance Principles, Concepts, and Contract Law

After paying a covered loss, an insurer's right of subrogation allows it to:

  1. raise the insured's premium at renewal
  2. pursue the responsible third party for the amount paid Correct answer.
  3. cancel the policy without notice
  4. recover from the insured's other policies first

Explanation

Subrogation substitutes the insurer for the insured against the party who caused the loss, up to the amount the insurer paid. It supports indemnity by preventing double recovery and by shifting the cost to the party at fault.

Question 11Insurance Principles, Concepts, and Contract Law

A building valued at $500,000 is insured for $300,000 under a policy with an 80% coinsurance clause and no deductible. A covered loss of $100,000 occurs. How much will the policy pay?

  1. $60,000
  2. $80,000
  3. $100,000
  4. $75,000 Correct answer.

Explanation

Coinsurance requires a limit of at least 80% of value, or $400,000 here. The insured carried $300,000, which is 75% of the requirement, so the claim pays 75% of the $100,000 loss, or $75,000.

Question 12Insurance Principles, Concepts, and Contract Law

An insurance binder provides:

  1. coverage only after the first premium is earned
  2. permanent coverage that cannot be cancelled
  3. temporary evidence of coverage pending issuance Correct answer.
  4. a promise to consider the application at a later date

Explanation

A binder is temporary evidence that coverage is in force while the policy is being written. It incorporates the terms of the policy to be issued and remains subject to that policy's cancellation condition.

Question 13Insurance Principles, Concepts, and Contract Law

An applicant intentionally fails to disclose a material fact that the application specifically asks about. This conduct is:

  1. concealment, which may let the insurer void the policy Correct answer.
  2. waiver, which binds the insurer to pay the claim
  3. estoppel, which prevents the insurer from cancelling
  4. subrogation, which transfers the loss to a third party

Explanation

Concealment is the intentional withholding of a material fact from the insurer. Where the hidden fact would have affected the underwriting decision, the insurer may rescind the policy.

Question 14Insurance Principles, Concepts, and Contract Law

Installing automatic sprinklers to limit the extent of damage after a fire starts is an example of:

  1. loss reduction Correct answer.
  2. loss prevention
  3. risk avoidance
  4. risk transfer

Explanation

Loss reduction measures limit the severity of a loss once it has begun, such as sprinklers, fire doors, or salvage operations. Loss prevention, by contrast, aims to stop the loss from occurring at all.

Question 15Insurance Principles, Concepts, and Contract Law

An insurer may be bound by an agent's act even without actual authority when the act falls within the agent's:

  1. express written authority
  2. implied authority to bind coverage in new lines
  3. fiduciary duty owed to the insurer
  4. apparent authority as a third party sees it Correct answer.

Explanation

Apparent authority arises when the insurer's words or conduct lead a reasonable third party to believe the agent has authority. The insurer can be bound on that basis even where the agent's actual authority is absent.

Question 16Insurance Principles, Concepts, and Contract Law

Under a standard mortgagee clause, if the insured's own acts void the policy as to the insured, the mortgagee:

  1. loses all rights under the policy along with the insured
  2. may collect only the outstanding loan balance from the insured
  3. may still recover up to the amount of its interest Correct answer.
  4. must pay the premium to keep coverage in force

Explanation

The mortgagee clause protects the lender's interest independently of the insured's conduct. The mortgagee may recover up to the amount of its interest even when the insured's acts void the policy as to the insured, subject to the mortgagee's own policy obligations.

Question 17Insurance Principles, Concepts, and Contract Law

Two policies cover the same property on the same basis: Policy A has a $100,000 limit and Policy B has a $200,000 limit. A $60,000 covered loss occurs, and both policies use pro rata contribution by limits. Policy A pays:

  1. $60,000
  2. $30,000
  3. $20,000 Correct answer.
  4. $40,000

Explanation

Under contribution by limits, each policy pays the proportion its limit bears to the total limits available. Policy A's share is $100,000 divided by $300,000, or one-third of the $60,000 loss, which is $20,000.

Question 18Insurance Principles, Concepts, and Contract Law

A handwritten endorsement on a policy conflicts with the printed form. In resolving the conflict, a court will generally enforce:

  1. the printed form, because it was filed with the state insurance department
  2. whichever version is more favorable to the insurer
  3. the handwritten endorsement, since specific terms prevail Correct answer.
  4. neither, because the conflict makes the policy void

Explanation

When provisions conflict, the more specific governs the more general, and handwritten terms outrank typed terms, which in turn outrank printed wording. Handwriting is treated as the clearest expression of the parties' actual intent.

Question 19Insurance Principles, Concepts, and Contract Law

A policy condition requiring a sworn proof of loss is a condition precedent to recovery, which means that:

  1. the insured must satisfy it before the duty to pay arises Correct answer.
  2. the insurer must pay first and investigate afterward
  3. the requirement may be ignored if the loss is relatively small
  4. the insurer waives the condition by requesting an examination under oath

Explanation

A condition precedent must be met before the insurer's obligation to pay is triggered. The insured must therefore furnish the required proof of loss within the stated time unless the insurer waives the requirement or is not prejudiced by the delay.

Question 20Insurance Principles, Concepts, and Contract Law

A business owner deliberately burns a failing store in order to collect insurance proceeds. This is an example of:

  1. adverse selection
  2. a moral hazard Correct answer.
  3. a morale hazard
  4. a physical hazard

Explanation

Moral hazard is the intentional, dishonest behavior that insurance may encourage, such as arson for profit. Morale hazard, by contrast, refers to carelessness or indifference created by the presence of insurance.

Question 21General Policy Provisions, Conditions, and Exclusions

Which section of a standard property insurance policy identifies the named insured, the policy period, the limits of insurance, and the property being insured?

  1. The conditions
  2. The exclusions
  3. The insuring agreement
  4. The declarations Correct answer.

Explanation

The declarations page personalizes the policy by recording the named insured, policy term, limits, deductibles, and a description of the covered property. The other sections of the policy depend on the facts stated there.

Question 22General Policy Provisions, Conditions, and Exclusions

What is the primary function of the insuring agreement in a property policy?

  1. It identifies the property, limits, and policy period
  2. It states the insurer's promise to pay for covered loss or damage Correct answer.
  3. It removes specified perils from the coverage grant
  4. It lists the duties the insured must perform after a loss

Explanation

The insuring agreement is the coverage grant: it identifies the perils insured against and the insurer's promise to pay for resulting loss. Everything else in the form either supports, limits, or conditions that promise.

Question 23General Policy Provisions, Conditions, and Exclusions

How does a straight deductible apply to a covered property loss?

  1. The deductible reduces the policy limit for every loss during the policy term
  2. The insurer pays the deductible amount and the insured pays the rest of the loss
  3. The deductible applies only when the loss exceeds the policy limit
  4. The insured pays the deductible and the insurer pays the covered remainder Correct answer.

Explanation

A straight deductible is subtracted from each covered loss, and the insurer pays the balance of the covered amount subject to the limit of insurance. It is applied loss by loss rather than to the limit itself.

Question 24General Policy Provisions, Conditions, and Exclusions

Under most property and casualty policies, what is the effect of the insured transferring the policy to another person without the insurer's written consent?

  1. Coverage continues for the new owner but at a reduced limit
  2. The policy transfers automatically with the property to the new owner
  3. The assignment is generally void, and the new owner may have no coverage Correct answer.
  4. The policy stays with the original named insured and is otherwise unaffected

Explanation

Insurance is a personal contract, so assignment requires the insurer's written consent. A purported transfer without consent is generally void and does not give the new owner coverage.

Question 25General Policy Provisions, Conditions, and Exclusions

Which cause of loss is typically excluded under a standard homeowners property form?

  1. Accidental discharge from a plumbing system
  2. Windstorm damage to the roof
  3. Intentional loss committed by the insured Correct answer.
  4. Fire started by a faulty electrical outlet

Explanation

Property insurance responds to fortuitous events. Deliberate acts by the insured are outside the scope of coverage because paying for them would defeat the purpose of insurance.

Question 26General Policy Provisions, Conditions, and Exclusions

Which of the following is a typical duty of the insured after a covered loss?

  1. Increasing the policy limit to the replacement cost of the damaged property
  2. Paying the premium for the following policy year in advance
  3. Obtaining a building permit before any repairs begin
  4. Giving prompt notice of the loss to the insurer Correct answer.

Explanation

The duties after loss condition requires prompt notice so the insurer can investigate while the facts are fresh. Other typical duties include protecting the property from further damage, preparing an inventory, and submitting a proof of loss.

Question 27General Policy Provisions, Conditions, and Exclusions

A building with a replacement value of $1,000,000 is insured for $600,000 under a policy containing an 80% coinsurance clause. A covered loss of $100,000 occurs, and the policy limit is $600,000. Ignoring any deductible, how much does the insurer pay?

  1. $75,000 Correct answer.
  2. $60,000
  3. $80,000
  4. $100,000

Explanation

Required insurance is 80% of $1,000,000, or $800,000. The insured carried $600,000, so the payment is ($600,000 / $800,000) x $100,000 = $75,000.

Question 28General Policy Provisions, Conditions, and Exclusions

After paying a covered claim, the insurer's right of subrogation allows it to do which of the following?

  1. Cancel the policy without the notice normally required
  2. Increase the insured's limit by the amount it recovers
  3. Pursue the party that caused the loss, up to the amount it paid Correct answer.
  4. Recover the insured's deductible from the insured

Explanation

Subrogation transfers the insured's right of recovery against the responsible third party to the insurer once the claim has been paid. Its purpose is to place the cost on the party at fault and to prevent double recovery by the insured.

Question 29General Policy Provisions, Conditions, and Exclusions

When the insured and the insurer disagree only about the amount of a covered property loss, the appraisal provision typically provides for which process?

  1. The policy being voided until the parties agree on a value
  2. A court trial as the exclusive method of resolving the dispute
  3. Each party selects a competent appraiser, and an umpire resolves differences Correct answer.
  4. The insurer's estimate controlling because it drafted the policy

Explanation

Appraisal is a contractual method for resolving valuation disputes: each side chooses an appraiser, and if the appraisers disagree they select an umpire whose award settles the amount. Questions of coverage are not decided through appraisal.

Question 30General Policy Provisions, Conditions, and Exclusions

An insured holds two property policies that both cover the same loss on the same property. How do the insurers typically respond under the other insurance condition?

  1. Neither policy pays because having two policies voids both
  2. The insured chooses one policy, and the other insurer pays nothing
  3. The policy issued first in time pays the entire loss
  4. Each insurer shares the loss, often in proportion to its limit of insurance Correct answer.

Explanation

Other insurance conditions prevent overindemnification by allocating the loss among the policies, commonly on a pro rata basis by limits or by making one policy excess over the other.

Question 31General Policy Provisions, Conditions, and Exclusions

An insurer cancels a policy midterm and returns unearned premium on a pro rata basis. What does that mean?

  1. The refund is computed using the short-rate table
  2. The refund is proportional to the unused portion of the policy term Correct answer.
  3. The refund is reduced by a cancellation penalty
  4. The refund equals the full annual premium

Explanation

A pro rata refund returns exactly the premium allocable to the unused days of the term, with no penalty. Insurers typically use this method when they initiate the cancellation.

Question 32General Policy Provisions, Conditions, and Exclusions

How does the standard mortgage clause protect a mortgagee's interest in insured property?

  1. The mortgagee is permitted to increase the policy limits without the named insured's consent
  2. The mortgagee's protection ends automatically if the insured cancels the policy
  3. The mortgagee is paid to the extent of its interest and receives notice of cancellation Correct answer.
  4. The mortgagee is required to pay any additional premium the insurer charges for the coverage

Explanation

The mortgage clause gives the lender independent rights: loss payments are made to the mortgagee to the extent of its interest, and the mortgagee is notified of cancellation, nonrenewal, or material change.

Question 33General Policy Provisions, Conditions, and Exclusions

What happens under a typical property form when a covered dwelling has been vacant beyond the period stated in the policy?

  1. It extends full coverage to the vacant building at no extra premium
  2. It reduces or suspends coverage for certain perils such as vandalism Correct answer.
  3. It automatically cancels the policy as of the vacancy date
  4. It converts the policy to a commercial property form

Explanation

Property forms restrict certain perils, commonly vandalism, glass breakage, and water damage, after a stated period of vacancy or unoccupancy because the risk of undetected loss is much higher.

Question 34General Policy Provisions, Conditions, and Exclusions

An insured deliberately overstates the value of damaged property in a proof of loss. Under the concealment or fraud condition, the insurer may do which of the following?

  1. Pay only the portion of the claim that is undisputed
  2. Pay the claim but refer the insured to a state fraud bureau
  3. Deny the entire claim and void coverage for that loss Correct answer.
  4. Reduce the payment by the amount of the overstatement

Explanation

The concealment or fraud condition voids the policy as to the claim when the insured willfully misrepresents material facts. The remedy is denial of the whole claim, not a proportional adjustment.

Question 35General Policy Provisions, Conditions, and Exclusions

What does a liberalization clause accomplish when the insurer adopts a broader coverage form during the policy period?

  1. It requires the insured to request an endorsement and pay a fee
  2. It automatically extends the broader coverage to the existing policy Correct answer.
  3. It applies only at the next renewal of the policy
  4. It cancels the policy and requires a replacement form

Explanation

The liberalization clause automatically gives insureds the benefit of broader coverage the insurer adopts in its forms during the policy period, at no additional premium and without an endorsement.

Question 36General Policy Provisions, Conditions, and Exclusions

In property insurance, actual cash value is best described as which of the following?

  1. Replacement cost minus depreciation Correct answer.
  2. The cost to replace the property with new property of like kind and quality
  3. The original purchase price of the damaged property
  4. The market value of the entire insured building

Explanation

Actual cash value reflects the property's value at the time of loss and is commonly calculated as replacement cost less depreciation. It is the default loss settlement basis in many property forms.

Question 37General Policy Provisions, Conditions, and Exclusions

An insurer pays a total loss of $80,000 on a policy with a $100,000 limit. The damaged property is later sold as salvage for $6,000. How are the salvage proceeds handled?

  1. The insured receives the salvage proceeds in addition to the claim payment
  2. The insurer credits the proceeds to the insured as unearned premium
  3. The insurer keeps the salvage proceeds because it paid the full loss Correct answer.
  4. The salvage proceeds are divided equally between the two parties

Explanation

Once the insurer pays the full loss, the salvage becomes the insurer's property and any sale proceeds offset its payment. Allowing the insured to keep both the payment and the salvage would produce a recovery greater than the loss.

Question 38General Policy Provisions, Conditions, and Exclusions

Under a replacement cost policy, the insurer may initially pay only the actual cash value of the damaged property. What must the insured generally do to collect the withheld amount?

  1. Pay the premium for the next policy term in advance
  2. Actually repair or replace the damaged property Correct answer.
  3. Obtain a building permit for the repair work
  4. Submit a sworn proof of loss listing the original cost

Explanation

Replacement cost coverage commonly includes a holdback of the depreciation portion until the property is actually repaired or replaced, which confirms that the insured incurred the full replacement expense.

Question 39General Policy Provisions, Conditions, and Exclusions

What does an agreed value provision in a property policy do?

  1. It fixes the value in advance and waives coinsurance Correct answer.
  2. It limits recovery to the property's fair market value
  3. It requires the insurer to reappraise the property each year
  4. It guarantees that the property will not depreciate

Explanation

An agreed value provision sets the insured value in advance, often supported by an appraisal, and suspends the coinsurance requirement because the limit is accepted as adequate. Losses are then settled without a coinsurance penalty.

Question 40General Policy Provisions, Conditions, and Exclusions

An adjuster assures an insured in writing that a claim reported after the deadline will still be honored, and the insured relies on that assurance. Which doctrine most likely prevents the insurer from later denying the claim on timeliness grounds?

  1. Coinsurance
  2. Abandonment
  3. Subrogation
  4. Estoppel Correct answer.

Explanation

Estoppel bars a party from asserting a right after its own conduct induced the other party to rely on it to that party's detriment. A written assurance on which the insured reasonably relied can therefore prevent a later denial.

Question 41Property Insurance Basics and Coverage Forms

For a property insurance claim to be payable, when must the insured generally have an insurable interest in the damaged property?

  1. Only when the application is submitted
  2. At the time of the loss Correct answer.
  3. Only at the inception of the policy, regardless of later events
  4. Continuously from application through policy expiration

Explanation

Property insurance indemnifies actual financial loss, so the insured must hold an insurable interest in the property on the date of loss. An owner who sold the building before the fire, for example, has no recoverable interest even though a policy was in force at inception.

Question 42Property Insurance Basics and Coverage Forms

Which policy section identifies the named insured, describes the covered property, and states the policy period and limits of insurance?

  1. Insuring agreement
  2. Conditions
  3. Declarations Correct answer.
  4. Exclusions

Explanation

The declarations page personalizes the policy by listing who is insured, what and where the property is, the coverage dates, the limits, and the deductible. The other sections contain the promise to pay, the duties of the parties, and the coverage limitations.

Question 43Property Insurance Basics and Coverage Forms

Actual cash value is most accurately described as which of the following?

  1. The price the insured originally paid for the property
  2. The amount required to rebuild the property with new materials
  3. Replacement cost minus an allowance for depreciation Correct answer.
  4. The outstanding balance of any mortgage on the property

Explanation

Actual cash value reflects the worth of the property immediately before the loss, traditionally computed as replacement cost less depreciation. Some forms define ACV differently, but the depreciation-based definition is the standard one.

Question 44Property Insurance Basics and Coverage Forms

A property policy carries a $2,500 deductible. A covered loss of $9,000 occurs and no other insurance applies. What amount does the insurer pay?

  1. $2,500
  2. $6,500 Correct answer.
  3. $9,000
  4. $11,500

Explanation

The deductible is subtracted from the covered loss before payment, so the insurer pays $9,000 minus $2,500, or $6,500. The deductible represents the insured's retained share of each covered loss to which it applies.

Question 45Property Insurance Basics and Coverage Forms

Which homeowners form is written for a tenant who rents a house or apartment and insures personal property and personal liability but not the building?

  1. HO-8
  2. HO-6
  3. HO-4 Correct answer.
  4. HO-3

Explanation

The HO-4 contents broad form is the tenants form; it covers the renter's personal property, loss of use, and liability. The building itself is the landlord's responsibility and is insured under the landlord's own policy.

Question 46Property Insurance Basics and Coverage Forms

After paying a claim for damage caused by a negligent third party, an insurer's right to seek recovery from that third party is called:

  1. Salvage
  2. Subrogation Correct answer.
  3. Appraisal
  4. Contribution

Explanation

Subrogation transfers to the insurer, to the extent of its payment, the insured's right to recover from the party that caused the loss. It prevents double recovery by the insured and places the cost on the responsible party.

Question 47Property Insurance Basics and Coverage Forms

Flood damage is excluded by unendorsed homeowners and commercial property forms. How is flood coverage for a building usually obtained?

  1. By increasing the building limit to full replacement cost at renewal
  2. Through a separate flood policy, such as NFIP coverage Correct answer.
  3. By purchasing an ordinance or law endorsement
  4. By adding the flood peril to the special causes of loss form

Explanation

Flood is excluded under standard property forms, so the peril must be insured separately, most often through the National Flood Insurance Program or a private flood carrier. The special causes of loss form does not add flood, because the water damage exclusion still applies.

Question 48Property Insurance Basics and Coverage Forms

A building with a replacement cost of $1,000,000 is insured for $600,000 under an 80% coinsurance clause. A covered loss of $100,000 occurs and no other insurance applies. Ignoring any deductible, what does the insurer pay?

  1. $80,000
  2. $100,000
  3. $60,000
  4. $75,000 Correct answer.

Explanation

The required amount of insurance is 80% of $1,000,000, or $800,000. Because only $600,000 was carried, the payment is ($600,000 divided by $800,000) times $100,000, which equals $75,000, leaving the insured to absorb the $25,000 penalty.

Question 49Property Insurance Basics and Coverage Forms

Which peril is covered by the broad causes of loss form but not by the basic causes of loss form?

  1. Volcanic action
  2. Weight of ice, snow, or sleet Correct answer.
  3. Riot, riot attending a strike, or civil commotion
  4. Windstorm or hail

Explanation

The broad form adds perils such as breakage of glass, falling objects, weight of ice, snow, or sleet, and accidental discharge of water to the basic list. Windstorm, hail, riot, and volcanic action already appear in the basic form.

Question 50Property Insurance Basics and Coverage Forms

Coverage under a special causes of loss form applies to:

  1. Only those perils specifically listed in the form as covered
  2. Fire, lightning, and explosion only
  3. All direct physical loss unless the loss is excluded Correct answer.
  4. Only perils named in the policy declarations page

Explanation

The special form is an open peril form: it insures risks of direct physical loss and then removes coverage through specific exclusions. The insurer, rather than the insured, bears the burden of showing that an exclusion applies.