Free CAPP Basic Provisions of Insurance exam Practice Questions

Sample Practice Questions

Try these 10 sample questions from the CAPP Basic Provisions of Insurance exam practice bank. Each includes the answer and explanation. Continue with the interactive practice above to review the full question set.

1. 1An insured's attorney argues that an FCIC loss adjustment handbook conflicts with a provision of the Federal Crop Insurance Act. Under the order of precedence in the Agreement to Insure, which authority controls?

   1. A. The Federal Crop Insurance Act itself
   2. B. The regulations at 7 CFR chapter IV
   3. C. The terms of the crop insurance policy
   4. D. The FCIC procedures in the handbook

   Answer: A

   Explanation: The Agreement to Insure provides: "If there is a conflict between the Act, the regulations published at 7 CFR chapter IV, the policy, and the FCIC procedures, the order of precedence is: (1) the Act; (2) the regulations; (3) the policy; and (4) the FCIC procedures." Because the Act ranks first and FCIC procedures rank last, the Act controls over a conflicting handbook provision.

   Reference: Common Crop Insurance Policy (CCIP), Basic Provisions (27.1-BR) — Preamble, Agreement to Insure, first order-of-precedence sentence

2. 2While adjusting a claim, you find that a term in the county Special Provisions conflicts with a term in the Crop Provisions for the same crop, and no Catastrophic Risk Protection Endorsement applies. Which document's term controls?

   1. A. The Special Provisions for the county
   2. B. The Crop Provisions for the insured crop
   3. C. The Basic Provisions of the policy
   4. D. The Commodity Exchange Price Provisions

   Answer: A

   Explanation: The Agreement to Insure states: "If a conflict exists among the policy, the order of precedence is: (1) the Catastrophic Risk Protection Endorsement, as applicable; (2) the Special Provisions; (3) the actuarial documents; (4) the Commodity Exchange Price Provisions, as applicable; (5) the Crop Provisions; and (6) these Basic Provisions." The Special Provisions rank second and the Crop Provisions fifth, so the Special Provisions term controls.

   Reference: Common Crop Insurance Policy (CCIP), Basic Provisions (27.1-BR) — Preamble, Agreement to Insure, order of precedence within the policy

3. 3An approved insurance provider becomes insolvent before paying an indemnity that is owed on a valid claim. Under the Basic Provisions, who is responsible for the amounts owed on that claim?

   1. A. A State insurance guarantee fund
   2. B. The Federal Crop Insurance Corporation
   3. C. The insured's crop insurance agent
   4. D. The Farm Service Agency county office

   Answer: B

   Explanation: The preamble states that if the insurance provider is insolvent or otherwise unable to perform under its reinsurance agreement, "your claim will be settled in accordance with the provisions of this policy and FCIC will be responsible for any amounts owed. No State guarantee fund will be liable for your loss." FCIC, not a State guarantee fund, the agent, or FSA, is responsible.

   Reference: Common Crop Insurance Policy (CCIP), Basic Provisions (27.1-BR) — Preamble, insolvency paragraph

4. 4A crop insurance agent tells an insured by phone that the agent will waive the acreage reporting date for the insured's farm this year. What is the effect of the agent's promise under the policy?

   1. A. It is binding once the agent confirms the waiver in writing
   2. B. It is binding if the loss adjuster later concurs in the waiver
   3. C. No effect; only an authorized written agreement can alter it
   4. D. It becomes binding once a USDA employee approves the waiver

   Answer: C

   Explanation: The preamble provides: "The provisions of the policy may not be waived or varied in any way by us, our insurance agent or any other contractor or employee of ours, or any employee of USDA unless the policy specifically authorizes a waiver or modification by written agreement." Neither the agent, the adjuster, nor a USDA employee can waive a policy term outside an authorized written agreement.

   Reference: Common Crop Insurance Policy (CCIP), Basic Provisions (27.1-BR) — Preamble, waiver sentence

5. 5Which of the following situations meets the Basic Provisions definition of abandoning an insured crop?

   1. A. Leaving hail-destroyed acreage unharvested as most area producers would
   2. B. Ending care after an insured flood made further crop care impossible
   3. C. Delaying harvest because an insured cause of loss prevented harvesting
   4. D. Not harvesting in a timely manner when no insured cause prevented harvest

   Answer: D

   Explanation: Section 1 defines abandon as "Failure to continue to care for the crop, providing care so insignificant as to provide no benefit to the crop, or failure to harvest in a timely manner, unless an insured cause of loss prevents you from properly caring for or harvesting the crop or causes damage to it to the extent that most producers of the crop on acreage with similar characteristics in the area would not normally further care for or harvest it." Untimely harvest with no insured cause preventing it is abandonment; the other three fall within the stated exception.

   Reference: Common Crop Insurance Policy (CCIP), Basic Provisions (27.1-BR) — Section 1, definition of "Abandon"

6. 6An insured failed to file an acceptable production report, and the prior year's approved yield for the APH database was 160 bushels per acre. What is the most the assigned yield for that APH crop year can be?

   1. A. 104 bushels per acre
   2. B. 120 bushels per acre
   3. C. 96 bushels per acre
   4. D. 128 bushels per acre

   Answer: B

   Explanation: Section 1 defines assigned yield and caps it: "The assigned yield will not be more than 75 percent of the prior year’s approved yield". 75 percent of 160 is 120 bushels per acre. 104 applies 65 percent (the T-Yield fallback percentage) to the wrong base, 96 uses 60 percent, and 128 uses 80 percent.

   Reference: Common Crop Insurance Policy (CCIP), Basic Provisions (27.1-BR) — Section 1, definition of "Assigned yield"

7. 7In one county, an insured farms land the insured owns plus land rented from four landlords: two on a crop share basis and two on a cash basis. Absent optional or enterprise units, how many basic units is the insured entitled to?

   1. A. 5 basic units
   2. B. 2 basic units
   3. C. 3 basic units
   4. D. 4 basic units

   Answer: C

   Explanation: The basic unit definition gives an example in which an insured renting from three crop share and two cash landlords "would be entitled to four units; one for each crop share lease and one that combines the two cash leases and the land you own." Applying the same rule here gives one unit for each of the two crop share leases plus one unit combining the owned land and both cash leases, for 3 basic units.

   Reference: Common Crop Insurance Policy (CCIP), Basic Provisions (27.1-BR) — Section 1, definition of "Basic unit", paragraph (2) example

8. 8To qualify as a beginning farmer or rancher, an individual must not have actively operated and managed a farm or ranch, with an insurable interest in a crop or livestock, for more than how many crop years?

   1. A. 5 crop years
   2. B. 4 crop years
   3. C. 2 crop years
   4. D. 10 crop years

   Answer: D

   Explanation: Section 1 defines a beginning farmer or rancher as "An individual who has not actively operated and managed a farm or ranch in any State, with an insurable interest in a crop or livestock as an owner-operator, landlord, tenant, or sharecropper for more than 10 crop years." The 5-year figure belongs to the veteran farmer or rancher definition and the 2-year figure to the new producer definition.

   Reference: Common Crop Insurance Policy (CCIP), Basic Provisions (27.1-BR) — Section 1, definition of "Beginning farmer or rancher"

9. 9A producer asks for catastrophic risk protection on a crop for which several plans of insurance exist. Under the Basic Provisions definitions, with which plan is catastrophic risk protection unavailable?

   1. A. The yield protection plan
   2. B. An APH plan of insurance
   3. C. The revenue protection plan
   4. D. A dollar amount plan

   Answer: C

   Explanation: Section 1 defines catastrophic risk protection as "The minimum level of coverage offered by FCIC. Catastrophic risk protection is not available with revenue protection." A producer who wants revenue protection must buy additional coverage.

   Reference: Common Crop Insurance Policy (CCIP), Basic Provisions (27.1-BR) — Section 1, definition of "Catastrophic risk protection"

10. 10An insured planted no insurable acreage of the insured crop last year and filed a production report showing zero planted acreage. How is that year handled in the APH database?

    1. A. Continuity is kept and the year is left out of the approved yield
    2. B. Continuity is kept and a zero yield is averaged into the database
    3. C. Continuity is kept and an assigned yield is entered for the year
    4. D. Continuity is kept and a variable T-Yield is entered for the year

    Answer: A

    Explanation: Section 3(f)(8) states: "If no insurable acreage of the insured crop is planted for a year, a production report indicating zero planted acreage will maintain the continuity of production reports for APH record purposes and that calendar year will not be included in the approved yield calculations." No zero, assigned, or T-Yield entry is made for that year.

    Reference: Common Crop Insurance Policy (CCIP), Basic Provisions (27.1-BR) — Section 3(f)(8)