100+ Free Michigan Surplus Lines Practice Questions

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What is the penalty for unlicensed surplus lines activity in Michigan?

Fines, potential criminal charges, and policies may be voidable

Required to pay double the exam fee

A verbal warning only

No penalty if the insured is satisfied

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Free Surplus Lines Insurance Practice Test by State 2026: 2,300+ Questions22 min read

2026 Statistics

Key Facts: Michigan Surplus Lines Exam

65-75%

First-Time Pass Rate

Industry Data

77%

Passing Score

Michigan DIFS

Exam Questions

Plus pretest items

1 hour

Exam Duration

PSI

$41

Exam Fee

PSI

P&C Required

Prerequisite

Michigan DIFS

Michigan requires surplus lines brokers to pass a PSI-administered exam with a notably high 77% passing score. The exam covers E&S markets, Michigan DIFS regulations, diligent search, and tax compliance. You must hold an active Michigan P&C producer license to qualify.

Sample Michigan Surplus Lines Practice Questions

Try these sample questions to test your Michigan Surplus Lines exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1What is the primary purpose of surplus lines insurance?

A.To provide coverage for risks that the admitted market cannot or will not insure

B.To offer lower premiums than standard market insurance

C.To replace admitted insurers for all commercial policies

D.To provide government-backed coverage for uninsurable risks

Explanation: Surplus lines insurance exists to provide coverage for risks that admitted carriers cannot or will not insure due to their unique, hazardous, or hard-to-place nature. The surplus lines market acts as a safety valve ensuring coverage availability when the standard admitted market cannot accommodate the risk.

2What is the passing score for the Michigan surplus lines broker exam?

A.77%

B.70%

C.75%

D.80%

Explanation: Michigan requires a 77% passing score for the surplus lines broker exam — significantly higher than the 70% required by most other states. With 60 scored questions, you need at least 47 correct answers to pass. This higher bar reflects Michigan's commitment to ensuring broker competency.

3What is Lloyd's of London?

A.An insurance marketplace where syndicates underwrite and share risks

B.A single insurance company headquartered in London

C.A British government regulatory body for insurance

D.A reinsurance company that backs all surplus lines policies

Explanation: Lloyd's of London is not an insurance company but rather a marketplace where individual syndicates (groups of underwriters) come together to underwrite and share risks. Each syndicate is managed by a managing agent and accepts its own portion of risk on policies placed through the Lloyd's market.

4What prerequisite must a candidate meet before taking the Michigan surplus lines broker exam?

A.Hold an active Michigan Property & Casualty producer license

B.Complete a 60-hour surplus lines pre-licensing course

C.Have at least 5 years of insurance industry experience

D.Be endorsed by an admitted insurance company

Explanation: Michigan requires surplus lines broker exam candidates to hold an active Michigan Property & Casualty producer license. This ensures candidates have foundational insurance knowledge before specializing in the more complex surplus lines market.

5What is a 'diligent search' in surplus lines insurance?

A.A documented effort to place coverage with admitted insurers before using the surplus lines market

B.A background investigation of the surplus lines insurer

C.A financial audit of the non-admitted insurer's reserves

D.An investigation into the insured's loss history

Explanation: A diligent search is the documented process of attempting to place coverage with admitted (licensed) insurers before turning to surplus lines. Michigan requires brokers to demonstrate that the admitted market was unable to provide the needed coverage before placing it with a non-admitted insurer.

6How many scored questions are on the Michigan surplus lines broker exam?

A.60

B.50

C.75

D.100

Explanation: The Michigan surplus lines broker exam has 60 scored questions plus additional pretest items. Combined with the 77% passing requirement, you need at least 47 correct answers on the scored questions — leaving very little room for error compared to most states.

7What is an 'alien insurer' in surplus lines terminology?

A.An insurer domiciled outside the United States

B.An insurer operating without any license anywhere

C.A foreign insurer domiciled in another U.S. state

D.An insurer that only writes policies for foreign nationals

Explanation: An alien insurer is one domiciled outside the United States, such as Lloyd's of London syndicates or European insurance companies. This is distinct from a 'foreign' insurer which is domiciled in another U.S. state. Alien insurers face additional eligibility requirements including U.S. trust fund maintenance.

8Which entity administers the Michigan surplus lines broker exam?

A.PSI

B.Pearson VUE

C.Prometric

D.Michigan DIFS directly

Explanation: Michigan uses PSI as its testing vendor for the surplus lines broker exam. The exam costs $41, and candidates register through PSI's candidate portal. PSI operates testing centers throughout Michigan and nationally.

9What is the Nonadmitted and Reinsurance Reform Act (NRRA)?

A.Federal legislation that established the home state rule for surplus lines taxation

B.A Michigan state law requiring surplus lines broker registration with DIFS

C.An international treaty governing Lloyd's operations in the U.S.

D.A regulation that prohibits alien insurers from writing surplus lines

Explanation: The NRRA, enacted as part of the Dodd-Frank Act in 2010, established that the insured's home state has sole regulatory authority over surplus lines taxation. This simplified multi-state surplus lines transactions by eliminating the need for complex premium allocation across states.

10What is DIFS and what role does it play in Michigan surplus lines regulation?

A.The Department of Insurance and Financial Services — Michigan's primary insurance regulatory authority

B.A federal agency that oversees all state surplus lines markets

C.A private organization that rates surplus lines insurers

D.A surplus lines stamping office for the Great Lakes region

Explanation: DIFS (Department of Insurance and Financial Services) is Michigan's primary regulatory authority for all insurance activities, including surplus lines. DIFS handles broker licensing, maintains the eligible surplus lines insurer list, enforces compliance, collects surplus lines premium tax, and conducts broker examinations.

About the Michigan Surplus Lines Exam

The Michigan Surplus Lines Broker exam tests your knowledge of surplus lines markets, Michigan surplus lines law, diligent search requirements, premium taxation, and compliance obligations. Michigan has one of the highest passing scores at 77% (vs 70% in most states). Candidates must hold an active MI P&C license. The exam has 60 scored questions plus pretest items with a 1-hour time limit.

Questions

60 scored questions

Time Limit

1 hour

Passing Score

77%

Exam Fee

$41 (PSI)

Michigan Surplus Lines Exam Content Outline

30%

Surplus Lines Markets

Lloyd's of London, London market syndicates, alien insurers, domestic surplus lines carriers, market access, and placement procedures

25%

Michigan Surplus Lines Law

Michigan Insurance Code surplus lines provisions, DIFS regulations, licensing requirements, and broker responsibilities under the higher 77% standard

20%

Diligent Search & Eligibility

Michigan diligent search documentation, declination requirements, eligible surplus lines insurer qualifications, and non-admitted insurer standards

25%

Taxation & Compliance

Michigan surplus lines premium tax rates, reporting deadlines, record-keeping requirements, and penalties for violations

How to Pass the Michigan Surplus Lines Exam

What You Need to Know

Passing score: 77%
Exam length: 60 questions
Time limit: 1 hour
Exam fee: $41

Keys to Passing

Complete 500+ practice questions
Score 80%+ consistently before scheduling
Focus on highest-weighted sections
Use our AI tutor for tough concepts

Michigan Surplus Lines Study Tips from Top Performers

1Prepare for the higher 77% passing score — you need at least 47 out of 60 correct, leaving very little room for error

2Focus on Michigan DIFS surplus lines regulations and how they differ from the standard 70% states

3Master the diligent search process including Michigan-specific documentation requirements and declination standards

4Learn the structure of Lloyd's of London including syndicates, managing agents, and how Lloyd's coverages work

5Understand Michigan surplus lines premium tax rates, reporting deadlines, and record retention requirements

6Take timed practice exams to build speed — 60 questions in 1 hour gives you only 1 minute per question

Frequently Asked Questions

Why is Michigan's surplus lines passing score higher than other states?

Michigan requires a 77% passing score for the surplus lines broker exam, compared to the typical 70% in most states. This higher bar reflects Michigan's commitment to ensuring surplus lines brokers have a thorough understanding of non-admitted insurance markets. You need at least 47 correct answers out of 60 scored questions.

How many questions are on the Michigan surplus lines exam?

The Michigan surplus lines exam has 60 scored questions plus additional pretest questions that do not count toward your score. You have 1 hour to complete the exam, and you need a score of 77% or higher to pass — one of the highest thresholds nationally.

What topics does the Michigan surplus lines exam cover?

The exam covers four main areas: surplus lines markets and operations (Lloyd's, alien insurers), Michigan surplus lines law and DIFS regulations, diligent search requirements and insurer eligibility, and surplus lines taxation and compliance including premium tax and reporting obligations.

What is DIFS and how does it regulate surplus lines in Michigan?

DIFS is the Michigan Department of Insurance and Financial Services. It oversees surplus lines broker licensing, maintains the list of eligible non-admitted insurers, enforces surplus lines tax collection, and ensures compliance with Michigan's surplus lines statutes. DIFS is the primary regulatory authority for all insurance activities in Michigan.

How does the NRRA affect Michigan surplus lines?

The Nonadmitted and Reinsurance Reform Act (NRRA) established that only the insured's home state can regulate surplus lines taxation. For Michigan, this means the state collects surplus lines premium tax on policies where the insured's home state is Michigan, regardless of where the risk is located.

How long should I study for the Michigan surplus lines exam?

Plan for 25-45 hours over 2-4 weeks. The higher 77% passing score means you need stronger preparation than for most state surplus lines exams. Focus extra time on Michigan DIFS regulations, diligent search procedures, and premium tax calculations.