Exam (elaborations)
AINS 21 - SEGMENT A QUESTIONS AND ANSWERS
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AINS 21 - SEGMENT A QUESTIONS AND ANSWERS
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AINS 21 - SEGMENT A QUESTIONS AND ANSWERSFrom a risk management viewpoint, insurance is used to A. Prevent the cost of losses
B. Reduce the cost of losses
C. Transfer the cost of losses
D. Isolate the cost of losses. - Answers-C. Transfer the cost of losses.
A loss exposure is:
A. Any condition that presents the possibility of a loss.
B. Any condition that precludes the chance of loss.
C. The same thing as a peril.
D. The same thing as a hazard. - Answers-A. Any condition that present the possibility
of a loss.
Some loss exposures are not easy to retain, avoid, or control. What risk management
technique is frequently used to treat such exposures?
A. Reinsurance
B. Prevention
C. Transfer
D. Reunderwriting - Answers-C. Transfer
Insurance is not the only risk management transfer technique. When circumstances are
appropriate, transfer can be accomplished through
A. Retention
B. Noninsurance transfer techniques
C. Avoidance
D. Loss prevention - Answers-B. Noninsurance transfer techniques
Another name for liability insurance is
A. First-party insurance
B. Second-party insurance
C. Third-party insurance
D. Multiple-party insurance - Answers-C. Third party insurance
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. Risk transfer
B. Retention
C. Loss control
D. Avoidance - Answers-A. Risk transfer
,Retention 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. The record keeping associated with the retained losses.
B. Availability of insurer loss settlement services.
C. The potential for financial ruin.
D. The unavailability of insurer loss control services. - Answers-C. The potential for
financial ruin.
Life insurance that provides coverage for a specified period with no cash value is called
A. Universal life
B. Long-term care insurance
C. Term life insurance
D. Whole life - Answers-C. Term life insurance
A small business owner concerned about something happening and not being able to
work or earn a living for an extended period of time due to an accident should purchase
A. Disability insurance
B. Personal liability of insurance
C. Universal life insurance
D. Medical insurance - Answers-A. Disability insurance
A policy that combines property, crime and liability coverage into one policy is referred
to as:
A. Commercial umbrella policy
B. Commercial package policy
C. Workers compensation policy
D. Employee dishonesty policy - Answers-B. Commercial package policy
Coverage for money, securities, and other property from various causes of loss such as
burglary, robbery, theft, and employee dishonesty typically is provided by
A. Professional liability insurance.
B. Inland marine insurance.
C. Commercial crime insurance.
D. Ocean marine insurance. - Answers-C. Commercial crime insurance.
Term life insurance
A. Allows the policyholder to borrow against policy savings.
B. Provides protection for a specified period with no cash value.
C. Accrues a cash value.
D. Provides lifetime protection - Answers-B. Provides protection for a specified period
with no cash value.
The process of restoring an individual or organization to a pre-loss financial condition is
the process of
A. Subrogation.
B. Indemnification.
, C. Loss mitigation.
D. Premium rebating. - Answers-B. Indemnification.
Which one of the following statements is correct with respect to characteristics of
insurable loss exposures?
A. Private insurance is suitable for risks where the probability and timing of loss is
known.
B. If losses are not fortuitous, premiums could increase for all policyholders.
C. If a loss is fortuitous, the chance of loss could increase as soon as a policy is issued.
D. If the insured has control over whether or when a loss will occur, the risk is attractive
to insure. - Answers-B. If losses are not fortuitous, premiums could increase for all
policyholders.
Adhering to the characteristics of an ideally insurable loss exposure in selling insurance
help assure that
A. The insurer is able to predict the amount and timing of each future loss.
B. The losses associated with it typically involve small amounts.
C. The insurer is able to charge a premium that the insured can afford to pay.
D. The insurer can charge a high premium for the coverage. - Answers-C. The insurer is
able to charge a premium that the insured can afford to pay.
Private insurers are reluctant to provide windstorm insurance on coastal properties. This
is because the loss exposures fail to meet the criterion that ideally insurable exposures
must be
A. Definite and measurable.
B. Independent and not catastrophic.
C. Fortuitous.
D. A large number of similar exposure units. - Answers-B. Independent and not
catastrophic.
Which one of the following statements is correct with regard to risk and ideally insurable
characteristics of loss exposures?
A. An ideally insurable loss exposure should be associated with speculative risk.
B. Indemnification is the process of restoring an insured to a pre-loss financial condition.
C. One purpose of insurance is to enable the insured to profit from a loss.
D. If a loss exposure includes the possibility of gain, it is a more desirable risk to insure.
- Answers-B. Indemnification is the process of restoring an insured to a pre-loss
financial condition.
For insurers to utilize pooling most effectively and prevent catastrophic losses, the
insured exposure units need to be
A. Correlated.
B. Different.
C. Independent.
D. Adjacent. - Answers-C. Independent.
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