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AINS 21 EXAM QUESTIONS AND ANSWERS
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AINS 21 EXAM QUESTIONS AND ANSWERS
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AINS 21 EXAM QUESTIONS AND ANSWERSRating agencies such as Dun & Bradstreet (D&B) provide
Select one:
A. Data on credit ratings of businesses.Correct. Rating agencies provide data on credit
ratings of businesses.
B. Data on motor vehicle reports.
C. Information about business operations' safety records.
D. Aggregate loss experience data. - Answers-A. Data on credit ratings of businesses.
Which one of the following statements is correct regarding the benefits of insurance?
Select one:
A. One disadvantage of insurance is that it promotes inefficient use of policyholders'
funds.
B. Insurers generally do not provide incentives to organizations to implement risk control
measures.
C. Insurance policies typically cannot be used to provide evidence of financial
resources.
D. Contractors must usually provide evidence of liability insurance before a construction
contract is granted - Answers-D. Contractors must usually provide evidence of liability
insurance before a construction contract is granted
As a single mother on a very tight budget, Ciara is tempted to skimp on her insurance.
However, her friend Mehmet tells her not to skimp on insurance, because it will help
manage her cash flows. Which one of the following examples best illustrates Mehmet's
point?
Select one:
A. When her car's transmission goes out a month after the warranty expires, Ciara is
faced with a $1,100 repair bill.
B. Ciara needs her car to get to her job, and she needs her job to make car payments
and pay for her car insurance.
C. Ciara finds it difficult to come up with a $787 auto insurance premium every six
months.
D. When her car's windshield breaks, Ciara has to pay only $100 of the $600 cost of
replacing it. - Answers-D. When her car's windshield breaks, Ciara has to pay only $100
of the $600 cost of replacing it.
Excella Insurance is a private insurer operating in the state of Arkansas. It primarily sells
personal auto and homeowners policies and complies with all the necessary licensing
and regulations required. Which one of the following is true for Excella in regard to this?
Select one:
A. Excella must fully comply with insurance regulations so that the federal government
does not revoke its license.
B. Paying expenses and making a reasonable profit is the ultimate measure of the
insurer's success.
,C. Excella strives to make sure its revenue is equal to or less than its expenses and
claim payments to remain financially viable.
D. State insurance regulators are only one of many stakeholders that are interested in
an insurer's financial health. - Answers-D. State insurance regulators are only one of
many stakeholders that are interested in an insurer's financial health.
Some loss exposures are not easy to retain, avoid, or control. Which one of the
following risk management techniques is frequently used to treat such exposures?
Select one:
A. Reunderwriting
B. Prevention
C. Transfer
D. Reinsurance - Answers-C. Transfer
From a risk management viewpoint, insurance is used to
Select one:
A. Isolate the cost of losses.
B. Transfer the cost of losses.
C. Prevent the cost of losses.
D. Reduce the cost of losses. - Answers-B. Transfer the cost of losses.
Harry has a new sports car that is insured with an Insurance Services Office, Inc. (ISO)
Personal Auto Policy sold through his neighborhood agent. Because this is the first new
car he's ever owned, Harry is interested in making sure he is fully covered and
knowledgeable about his insurance policy. Which one of the following is true for Harry?
Select one:
A. Harry can rest assured that if his new car is a total loss, he can expect to make a
profit while being restored to his pre-loss financial position.
B. Harry understands his policy is modular one, combining various coverage forms and
other documents especially tailored to his needs.
C. An insurance contract, like the ISO policy Harry purchased, has certain additional
characteristics other than those of typical valid contracts.
D. As the policy is a contract of utmost good faith, both his insurer and his agent are the
parties expected to be ethical in their dealings - Answers-C. An insurance contract, like
the ISO policy Harry purchased, has certain additional characteristics other than those
of typical valid contracts.
Sally is a recent college graduate who lives in the suburbs and drives to work daily in
the city. She recognizes that owning a car creates both property damage and liability
exposures for her and at the same time she has the burden of student loans. For
someone in Sally's circumstances the most practical risk management technique for
dealing with her auto-related loss exposures is
Select one:
A. Risk transfer.
B. Retention.
C. Loss control.
,D. Avoidance. - Answers-A. Risk transfer
Which one of the following is true regarding a homeowners policy?
Select one:
A. It excludes losses caused by wind and lightning.
B. It only provides property coverage.
C. It only provides liability coverage.
D. Most include coverage for theft of contents within the home. - Answers-D. Most
include coverage for theft of contents within the home.
Which one of the following statements is correct regarding the benefits that insurance
provides?
Select one:
A. Insurance provides a source of investment funds for insurers but not for insureds.
B. Investment income helps keep insurance premiums at a reasonable level.
Correct. Investment income helps keep insurance premiums at a reasonable level.
C. Insurers are prohibited from investing in such things as research or technological
advancements.
D. The premiums collected by insurers must be held in cash to be available to pay
claims. - Answers-B. Investment income helps keep insurance premiums at a
reasonable level.
Which one of the following is an opportunity cost of insurance?
Select one:
A. An insurer's loss on invested premiums
B. The cost of claims payments that would not have been necessary if insureds'
carelessness had not caused losses
C. The payment of commissions to agents
D. An insured's funds that could be invested elsewhere if purchasing insurance were not
necessary - Answers-D. An insured's funds that could be invested elsewhere if
purchasing insurance were not necessary
Which one of the following describes the characteristics of a mutual insurance
company?
Select one:
A. A corporation owned by policyholders that provides insurance to its policyholders.
Correct. A mutual insurer is owned by its policyholders and formed as a corporation for
the purpose of providing insurance to them.
B. A corporation owned by stockholders that earns profits for the stockholders.
C. An unincorporated association that earns profits for its individual investors.
D. An unincorporated association that provides reciprocal coverage to subscribers. -
Answers-A. A corporation owned by policyholders that provides insurance to its
policyholders.
The two primary types of health insurance coverage are
, Select one:
A. Accident and Medical.
B. Medical and Disability Income.
C. Sickness and Accident.
D. Disability Income and Sickness. - Answers-B. Medical and Disability Income
Liability coverage to individuals and families for bodily injury and property damage
arising from the insured's personal premises or activities is typically provided by
Select one:
A. Professional liability insurance.
B. Commercial general liability insurance.
C. Auto liability insurance.
D. Personal liability insurance. - Answers-D. Personal liability insurance.
Coverage for miscellaneous types of property such as movable property, goods in
domestic transit, and property used in transportation and communication, typically is
provided by
Select one:
A. Business income insurance.
B. Inland marine insurance.
C. Auto physical damage insurance.
D. Crime insurance. - Answers-B. Inland marine insurance
A policy that combines property, crime, and liability coverages into one policy is referred
to as a(n)
Select one:
A. Workers compensation policy.
B. Employee dishonesty policy.
C. Commercial umbrella policy.
D. Commercial package policy (CPP). - Answers-D. Commercial package policy (CPP).
All of the following describe Lloyd's, EXCEPT:
Select one:
A. Insurance underwritten by a Name
B. Operated by syndicates
C. An insurance and reinsurance marketplace
D. Primarily insurers unusual exposures - Answers-D. Primarily insurers unusual
exposures
A mutual insurance company is owned by
Select one:
A. Mutual funds.
B. Policyholders.
C. Independent investors.
D. State insurance departments. - Answers-B. Policyholders.
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