2026 Actual Insurance Institute C131 Dumps, Updated Exam Questions for Guaranteed Pass

C131 free sample questions and answers

Insurance Institute C131 practice quiz with correct answers for search indexing.

1. Question 1

   A major automotive manufacturer is launching a line of electric vehicles. It intends to outsource the production of the vehicle batteries to a new supplier. The manufacturer's risk manager has requested that the supplier provide evidence of comprehensive vendor liability insurance, before the contract can be finalized. What is the likely reason for the request?

   AThe manufacturer does not want to be held responsible for product liability claims.
   

   BThe manufacturer wants to ensure that the supplier prioritizes its work over other manufacturers.
   

   CThe manufacturer does not want to be held responsible for the supplier's contractual liability claims.
   

   DThe manufacturer wants to be compensated in the event of the supplier's failure to perform the contract.
   

   Correct answer: A

   The correct answer is A. The manufacturer does not want to be held responsible for product liability claims. Vendor liability coverage is relevant when one party sells, distributes, incorporates, or is associated with another party's products. In this case, the electric vehicle manufacturer is outsourcing battery production to a supplier. Batteries are a critical component and can create serious product liability exposures, including fire, explosion, overheating, property damage, bodily injury, product recall, and reputational damage. If a defect in the supplier's battery causes injury or damage, the vehicle manufacturer may be named in a product liability action because the batteries are part of its finished electric vehicles. By requiring evidence of comprehensive vendor liability insurance, the manufacturer is attempting to ensure that the supplier has insurance that can respond to product-related claims arising from the supplier's component. This does not guarantee that the supplier prioritizes the manufacturer's work, and it is not mainly about failure to perform the contract. Contractual liability may be relevant in agreements, but the stronger issue is product liability arising from a defective component supplied by another business. Course topic reference: Manufacturers, Distributors, and Freight Forwarders; Products Liability; Vendor Liability; Supplier and Component Exposures.

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2. Question 2

   XYZ Insurer is known for using the first-in principle. If multiple brokers request quotations for a new applicant, how does XYZ Insurer respond?

   ACooperates with the largest brokerage
   

   BReleases quotes for each broker sequentially
   

   CBlocks itself from dealing with other brokers on the risk
   

   DNegotiates with each broker based on the same terms and conditions
   

   Correct answer: C

   The correct answer is C. Blocks itself from dealing with other brokers on the risk. The first-in principle is a market practice used by some insurers when more than one broker approaches them for the same account. Under this principle, the first broker who submits the risk to the insurer is recognized as having access to that market for that specific account. The insurer will then generally decline to quote or negotiate with later brokers on the same risk unless proper authority changes or market-release procedures are followed. This avoids duplicated underwriting work, conflicting submissions, and disputes between brokers. It also encourages brokers to secure proper client authorization before approaching markets. The insurer does not simply cooperate with the largest brokerage, because that would be unfair and inconsistent with orderly market conduct. It also does not issue sequential quotations to every broker, because that could lead to confusion and inconsistent terms. The first-in principle is about market control and broker recognition for a specific submission. Course topic reference: Introduction to Commercial Insurance; Broker-Market Relationships; Submissions; First-In Principle; Letters of Authority.

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3. Question 3

   The question of whether an employee might convert cash or cheques for her own use would be considered when underwriting which policy coverages?

   ACrime
   

   BLiability
   

   CProperty
   

   DBusiness interruption
   

   Correct answer: A

   The correct answer is A. Crime. The phrase ''convert cash or cheques for her own use'' refers to employee dishonesty, theft, fraud, or misappropriation. These are classic crime insurance exposures. Crime coverage may insure loss of money, securities, or other property resulting from dishonest acts of employees, theft, robbery, burglary, forgery, counterfeit currency, computer fraud, funds transfer fraud, or other crime-related perils, depending on the form. When underwriting crime coverage, the insurer is interested in internal controls, separation of duties, audits, background checks, cash-handling procedures, cheque-signing authority, bank reconciliation, inventory controls, and access to funds. Liability coverage responds to legal liability to third parties, not direct employee theft of the insured's money. Property insurance generally covers physical loss or damage to insured property from covered perils, but it commonly excludes or limits dishonest acts and money/securities losses. Business interruption covers loss of income following insured physical damage, not employee conversion of cash. The correct underwriting focus is therefore crime coverage. Course topic reference: Automobile, Crime, and Bonds; Crime Insurance; Employee Dishonesty; Money and Securities; Internal Controls.

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4. Question 4

   Which type of property loss is commonly covered under the commercial property broad form (CPBF)?

   ADamage to automobiles
   

   BLoss of inventory shortage
   

   CLoss of money and securities
   

   DDamage to a salesperson's samples
   

   Correct answer: D

   The correct answer is D. Damage to a salesperson's samples. A commercial property broad form is designed to insure commercial property such as buildings, equipment, stock, and certain business property, subject to the policy wording, exclusions, and extensions. Salesperson's samples can fall within business property coverage when they are property of the insured and are temporarily away from the premises, depending on the form and applicable limits. This is more consistent with property insurance than the other options. Damage to automobiles is generally excluded because licensed vehicles are normally insured under automobile policies. Loss of inventory shortage is commonly excluded because unexplained shortages may arise from accounting errors, shrinkage, theft without proof, or stocktaking discrepancies. Money and securities are also usually excluded or severely limited under commercial property forms because they are more properly insured under crime coverage or money and securities coverage. The question asks what is commonly covered under the CPBF, and salesperson's samples represent business property that can be insured under the commercial property structure. The broker must still confirm location limits, transit limitations, and whether a separate floater is more appropriate. Course topic reference: Property Coverages; Commercial Property Broad Form; Property Temporarily Away; Exclusions for Autos, Money, and Inventory Shortage.

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5. Question 5

   A broker is trying to convince his large accountancy client to purchase cyber risk insurance. The firm's CEO believes the controls in place managed by a third-party information technology provider are sufficient. The broker provides the CEO with a list of claims that will only be covered if cyber risk insurance is carried. Which type of claim appears on that list?

   AComputer fraud
   

   BOnline extortion
   

   CBusiness interruption due to data breach
   

   DCrisis-management services due to theft of securities
   

   Correct answer: B

   The correct answer is B. Online extortion. Cyber risk insurance is specifically designed to address exposures arising from electronic data, network security, privacy breaches, ransomware, cyber extortion, and technology-dependent business operations. A client may believe that outsourced IT controls are sufficient, but technical controls do not eliminate legal, operational, financial, or reputational cyber risk. Online extortion is a core cyber exposure because criminals may threaten to lock systems, release confidential client information, disrupt operations, or destroy electronic data unless payment is made. Traditional commercial property, crime, or liability policies usually do not respond adequately to this kind of cyber event unless a specific cyber form or cyber endorsement is in place. Computer fraud may be addressed under crime coverage, depending on wording. Theft of securities relates more closely to crime or fidelity coverage. Business interruption from a data breach may also appear in cyber policies, but the most direct and unmistakable cyber-only exposure among the options is online extortion. For an accountancy firm, this is especially important because client financial records and confidential professional information are attractive targets. Course topic reference: Liability; Risk Management; Analyzing Risk Exposures; Cyber Liability and Electronic Data Exposures.

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