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AINS 21 PRACTICE QUESTIONS AND ANSWERS
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AINS 21 PRACTICE QUESTIONS AND ANSWERS
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AINS 21 PRACTICE QUESTIONS AND ANSWERSRetention is often used in combination with insurance as a way of treating loss
exposures. One of the major downsides of individuals using retention alone is:
A. Availability of insurer loss settlement services.
B. The unavailability of insurer loss control services.
C. The record keeping associated with retained losses.
D. The potential for financial ruin. - Answers-D. The potential for financial ruin
Insurance is not the only risk management transfer technique. When circumstances are
appropriate, transfer can be accomplished through:
A. Loss prevention.
B. Avoidance.
C. Retention.
D. Noninsurance transfer techniques. - Answers-D. Noninsurance transfer techniques
From a risk management viewpoint, insurance is used to:
A. Isolate the cost of losses.
B. Transfer the cost of losses.
C. Reduce the cost of losses.
D. Prevent the cost of losses. - Answers-B. Transfer the cost of losses
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:
A. Retention.
B. Avoidance.
C. Loss control.
D. Risk transfer. - Answers-D. Risk Transfer
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?:
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. 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 with one another.
C. Harry understands his policy is modular one, combining various coverage forms and
other documents especially tailored to his needs.
D. An insurance contract, like the ISO policy Harry purchased, has certain additional
characteristics other than those of typical valid con - Answers-D. An insurance contract,
,like the ISO policy Harry purchased, has certain additional characteristics other than
those of typical valid contracts.
A reinsurance company
Select one:
A. Transfers losses to a primary insurer.
B. Provides primary insurance for loss exposures that private insurers are unwilling to
provide.
C. Is formed to write all or part of the insurance for a parent company.
D. Assumes loss exposures from a primary insurer. - Answers-D. Assumes loss
exposures from a primary insurer
A stock insurer differs from a reciprocal insurance exchange in which one of the
following ways?
Select one:
A. A stock insurer provides insurance to its policyholder-owners. A reciprocal insurance
exchange provides insurance to investors.
B. Stockholders own a stock insurer. Subscribers own a reciprocal insurance exchange.
C. Both are formed to provide profit to investors. However, the stock insurer is managed
through a board of directors.
D. Both are owned by stockholders. However, the reciprocal insurance exchange
provides coverage to investors. - Answers-B. Stockholders own a stock insurer.
Subscribers own a reciprocal insurance exchange.
All of the following describe Lloyd's, EXCEPT:
Select one:
A. Operated by syndicates
B. Primarily insurers unusual exposures
C. Insurance underwritten by a Name
D. An insurance and reinsurance marketplace - Answers-B. Primarily insurers unusual
exposures
A company interested in improving cash flow should consider meeting its insurance
needs through which one of the following types of insurance organizations?
Select one:
A. Stock insurers
B. Mutual insurers
C. Captive insurers
D. Reciprocal insurance exchanges - Answers-C. Captive Insurers
Which one of the following correctly describes a reason for government involvement in
property-casualty insurance?
A. Selling insurance provides the government with a non-tax source of revenues and
profits
B. Government programs can meet legitimate public demands unmet by private insurers
C. Competition from government plans keep private insurer's premiums competitive
, D. Preventing high-risk individuals or activities from being insured is in the public
interest - Answers-B. Government programs can meet legitimate public demands unmet
by private insurers
Which one of the following statements concerning government insurance programs is
true?
A. Businesses seeking flood insurance under the National Flood Insurance Program
(NFIP) must purchase it at local federal government offices
B. Fair Access to Insurance Requirements (FAIR) plans make basic property insurance
available to property owners who can't get it otherwise
C. The federal government provides workers compensation insurance to employers who
cannot get it from private insurers
D. Various state insurance programs provide crop insurance for perils such as
drought,disease, excessive rain and hail - Answers-B. Fair Access to Insurance
Requirements (FAIR) plans make basic property insurance available to property owners
who can't get it otherwise
State government involvement in Workers Compensation Insurance involves all of the
following, EXCEPT:
A. Competing with private insurers
B. Providing coverage through insurance pools
C. Functioning as an exclusive insurer
D. Operating as a residual market - Answers-Providing coverage through insurance
pools
Which one of the following is true regarding a homeowners policy?
A. Most include coverage for theft of contents within the home.
B. It only provides property coverage.
C. It only provides liability coverage.
D. It excludes losses caused by wind and lightning. - Answers-A. Most include coverage
for theft of contents within the home
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. Personal liability insurance.
B. Professional liability insurance.
C. Commercial general liability insurance.
D. Auto liability insurance. - Answers-A. Personal liability insurance
Life insurance that provides coverage for a specified period with no cash value is called
Select one:
A. Universal life.
B. Long-term care insurance.
C. Term life insurance.
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