What is the definition of a risk that is insurable?
a.Risk is defined as a chance or the possibility of financial loss; only pure risks are
insurable as there is no possibility of a gain
b.A chance of a loss or gain
c.A risk where there is a possibility of a gain
d.A chance for insurance coverage Answer – a
What is an insurance policy?
a.A binder that offers initial insurance coverage
b.An oral agreement related to insurance
c.A temporary agreement for insurance coverage
d.A written agreement or contract for insurance coverage Answer – d.
What is an insurance binder?
a.An agreement with an insurer for coverage
b.A temporary agreement for insurance coverage subject to the decision of the insurer
c.A permanent agreement for insurance coverage
d.An agreement with an agent Answer – b
The term casualty is related to all the following insurance lines except?
a.Life and health insurance
b.Marine insurance
c.Insurance on property
d.Liability insurance Answer – a
What is the mathematical concept where the actual results from an event being
measured will equal the predicted or expected results as the number of units or trials
increases? Answer – The concept of The Law of Large Numbers.
What insurance principle acts to place an insured in the same or similar financial
position after a loss as was prior to the loss event?
a.The indemnity principle
b.The waiver principle
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c.The principle of utmost good faith
d.The principle of subrogation Answer – a
What type of contract prevents an insured from transferring the interest of an insurance
policy to another?
a.A personal contract
b.An indemnity contract
c.A subrogation contract
d.A contract of good faith Answer – a
What type of contract is one where the obligation of the insurer is to perform the terms
of the contract and is based on the insured satisfying certain conditions?
a.A binding contract
b.A personal contract
c.A conditional contract
d.An adhesion contract Answer – c
What type of contract is it that the insured cannot negotiate the terms of the contract
and must accept the terms specified in the contract?
a.An indemnity contract
b.A conditional contract
c.A contract of adhesion
d.A personal contract Answer – c
What type of interest (financial or legal) in property must an insured have to benefit from
a loss that is insured?
a.Insurable interest
b.An adhesion interest
c.An indemnity interest
d.A personal interest Answer – a
What insurance doctrine states that a cause of a loss and all other directly related
events flowing from the same cause of the loss would be considered as one event?
a.The doctrine of insurable interest
b.The doctrine of proximate cause
c.The loss doctrine
d.The doctrine of classification Answer – b
John got in an accident that damaged his automobile, what would be considered as
what type of loss?
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a.Direct loss
b.Insured loss
c.Insurable loss
d.Indirect loss Answer – a
John’s home was totally destroyed by fire that resulted in him moving his family to a
hotel. The cost of the hotel would be considered as what type of loss?
a.A direct loss
b.Direct expenses
c.An indirect loss
d.Insured loss Answer – c
What insurance clause is related to a lender or creditor’s interest in real property and
the insurer would pay losses to all parties that have an interest in the same property?
a.Subrogation clause
b.Mortgage or mortgagee clause
c.Property loss clause
d.Loss payable or payee clause Answer – b
What insurance clause is related to a creditor’s interest in personal property such as an
auto?
a.The property interest clause
b.The mortgage or mortgagee clause
c.The creditor interest clause
d.The loss payable or loss payee clause Answer – d
Which of the following is not a legal requirement for a contract?
a.All are legal requirements
b.The contract must have a legal purpose and transfer of consideration (something of
value such as payment of insurance premiums)
c.There must be a valid offer and a voluntary acceptance
d.The parties to the contract must have legal capacity to contract Answer – a
What insurance loss settlement method is defined as the cost to replace the item less
allowance for depreciation, and is the common method used for settlement of personal
property losses?
a.Scheduled settlement method
b.Valued or stated settlement method
c.Actual cash value settlement method
d.Replacement cost (RC) settlement method Answer – c