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WISCONSIN INSURANCE EXAM QUESTIONS WITH VERIFIED ANSWERS
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WISCONSIN INSURANCE EXAM QUESTIONS WITH VERIFIED ANSWERS
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WISCONSIN INSURANCE EXAMQUESTIONS WITH VERIFIED ANSWERS
Risk - Answer-Not Knowing what will happen in the future and the possibility the
outcome will be negative
Defined As:
Chance of Loss
Possibility of Loss
Uncertainty of Loss
Types of Loss - Answer-1. Financial
-Loss of house to loss of life
2. Non-Financial
-Loss of Friendship
Speculative Risk - Answer-I win or I lose
Pure Risk - Answer-I lose or I do not lose
Peril - Answer-The actual cause of a loss
Natural, Human, Economical, etc
Hazard - Answer-Situations or factors that may increase the possibility of a loss
Common Types:
Physical - Bad Breaks, ice on sidewalk
Moral - Dishonest Tendencies
Morale - Having a careless attitude because of coverage
Legal - Federal and/or state regulations must be followed
The process of risk management - Answer-1. Identify the Objectives
2. Identify the Risks
3. Evaluate the Risks
How to deal with risk - Answer-Avoid (Don;t fly, hang glide, mountain climb etc)
Retain (Self insure)
Transfer (Social vehicle for insurance)
Share (incorporate or add a partner)
Reduce (install fire alarms, stop smoking, etc)
Rules of Risk Management - Answer-1. Don't Risk more than you can afford to lose
2. Consider the odds
, 3. Don't risk a lot for a little
4. Priority for purchasing insurance
Pooling - Answer-Spread of risk
Law of Large numbers - Answer-Allows for predictability of risk
Assessable Policy - Answer-Policyholder takes risk of loss
Non-Assessable Policy - Answer-Transfer risk taking to a 3rd party (Insurance
Company)
Insurable Risk - Answer-1. Losses reasonable to predict
2. Losses must be definite and measurable
3. Losses must not be catastrophic
4. Losses must use randomness of selection
5. Losses avoid adverse selection
Adverse selection - Answer-Trying to get a policy for events that are already occurring,
or are knowingly going to happen (Life insurance policy before committing suicide,
home insurance while a fire is destroying home, etc)
Insurable Interest - Answer-Deemed to have if the possibility exists of suffering financial
or economic harm as a result of damage or destruction to person or property
1. For life and health
- Yourself, Spouse, and Dependent Children
- Only has to be present at time of application
2. For property and causality insurance
- Must be present at time of application and also at the time of loss/claim
Insurance Policy - Answer-Legal and binding contract, subject to contract law
There Principles that apply - Answer-1. Unilateral (One-Way)
2. Adhesion (Stick to)
3. Aleatory
Unilateral (One-Way) - Answer-One party to to the contract/policy, the insurance co.
makes a promise to pay. No other party makes any promise
Adhesion (Stick to) - Answer-"Take it or leave it"
Can shop around
Aleatory - Answer-A contract in which the consideration or monetary value between the
parties is not equal
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