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Xcel Chapter Exams With Correct Detailed Answers.
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Xcel Chapter Exams With Correct Detailed Answers.
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Xcel Chapter Exams With CorrectDetailed Answers.
Which 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? -
ANSWER- It is a distribution of excess funds accumulated by the insurer on
participating policies
Which of the following is NOT a benefit of insurance? - ANSWER- Losses 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? - ANSWER- Reinsurance
Which of the following is a type of insurance where an insurer transfers loss exposures
from policies written for its insurerds? - ANSWER- Reinsurance
When a mutual insurer becomes a stock company, the process is called - ANSWER-
Demutualization
Which of the following describes the increase in the probability of a loss due to an
insureds dishonest tendencies? - ANSWER- moral hazard
An insurer having a large number of similar exposure unit it's considered important
because - ANSWER- The 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? -
ANSWER- Loss exposure
, Which of the following is a situation where there is a possibility of either a loss or a
gain? - ANSWER- Speculative risk
Restoring an insured to the same condition as before a loss is known as - ANSWER-
principle of indemnity
Which of these statements correctly describes risk? - ANSWER- Pure risk is the only
insurable risk
Moral hazard is described as the - ANSWER- increased 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"? - ANSWER- Law of large
numbers
Which of the following refers to a condition that may increase the chance of a loss? -
ANSWER- hazard
Which of the following would NOT be accomplished with the purchase of an insurance
policy? - ANSWER- Risk is eliminated
All of the following circumstances must be met for a loss retention to be an effective risk
management technique, EXCEPT - ANSWER- Probability of loss is unknown
Which of the following is NOT an element of an insurable risk? - ANSWER- The loss
must be catastrophic
Which type of risk is gambling? - ANSWER- Speculative risk
Which of the following is NOT considered a definition of a risk? - ANSWER- The cause
of loss
Which of the following is NOT a requirement of a contract? - ANSWER- Equal
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? - ANSWER- Rescind the policy
Restoring an insured to the same condition as before a loss is an example of the
principle of - ANSWER- Indemnity
A unilateral contract is one in which - ANSWER- only one party (the insurer) makes any
kind of legally enforceable promise
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