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Xcel chapter examsWhich of the following is a contract that involves one party which indemnifies another
when a loss arises from an unknown event? - answer Insurance policy
Which of the following is NOT a characteristic of reinsurance? - answer Increases the
unearned premium reserve
Which of the following is an insurer established by a parent company for the purpose of
insuring the parent company's loss exposures? - answer Captive insurer
A participating company is also referred to as which type of insurer? - answer Mutual
insurer
What is a participating life insurance policy? - answer Contract that allows the
policyowner to receive a share of surplus in the form of policy dividends
Which of the following statements regarding a life insurance policy dividend is TRUE? -
answerIt is a distribution of excess funds accumulated by the insurer on participating
policies
Which of the following is NOT a benefit of insurance? - answerLosses due to fraud are
eliminated
An insurer enters into a contract with a third-party to insure itself against losses from
insurance policies it issues. What is the agreement called? - answerReinsurance
Which of the following is a type of insurance where an insurer transfers loss exposures
from policies written for its insurerds? - answerReinsurance
When a mutual insurer becomes a stock company, the process is called -
answerDemutualization
Which of the following describes the increase in the probability of a loss due to an
insureds dishonest tendencies? - answermoral hazard
An insurer having a large number of similar exposure unit it's considered important
because - answerThe greater the number insured, the more accurately the insurer can
predict losses and set appropriate premiums
, Which of the following is considered to be any situation that has the potential for loss? -
answerLoss exposure
Which of the following is a situation where there is a possibility of either a loss or a
gain? - answerSpeculative risk
Restoring an insured to the same condition as before a loss is known as -
answerprinciple of indemnity
Which of these statements correctly describes risk? - answerPure risk is the only
insurable risk
Moral hazard is described as the - answerincreased chance of a loss because of an
insured's dishonest tendencies
Which of the following best describes the statement "The more times and event is
repeated, the more predictable the outcome becomes"? - answerLaw of large numbers
Which of the following refers to a condition that may increase the chance of a loss? -
answerhazard
Which of the following would NOT be accomplished with the purchase of an insurance
policy? - answerRisk is eliminated
All of the following circumstances must be met for a loss retention to be an effective risk
management technique, EXCEPT - answerProbability of loss is unknown
Which of the following is NOT an element of an insurable risk? - answerThe loss must
be catastrophic
Which type of risk is gambling? - answerSpeculative risk
Which of the following is NOT considered a definition of a risk? - answerThe cause of
loss
Which of the following is NOT a requirement of a contract? - answerEqual consideration
is required between the involved parties
If a material warranty violation on the part of the insured is found, what recourse does
an insurer have? - answerRescind the policy
Restoring an insured to the same condition as before a loss is an example of the
principle of - answerIndemnity
A unilateral contract is one in which - answeronly one party (the insurer) makes any kind
of legally enforceable promise
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