MICHIGAN PROPERTY & CASUALTY
INSURANCE EXAM WITH 100%
CORRECT ANSWERS 2026
Risk correct answer The possibility that a loss will occur
Speculative Risk correct answer Chance of loss or gain
Pure Risk correct answer only the possibility of loss
Peril correct answer cause of loss
Exposure correct answer The potential for accidents and other losses
Direct Loss correct answer Loss that is a direct result of a peril, such as fire.
Indirect Loss correct answer Loss that is a result or consequence of a direct loss
Moral Hazard correct answer Arise from a person's character (dishonesty)
Morale Hazard correct answer A condition of carelessness or indifference that increases the
frequency or severity of loss.
Physical Hazard correct answer a physical condition that increases the frequency or severity of
loss
, Sharing risk correct answer Two or more individuals share risk
transfer risk correct answer The purpose of insurance
Avoidance correct answer eliminating certain risk by not engaging in certain activity
Retention correct answer Self-insurance, person will pay for loss
Reduction correct answer Lessening the possibility or severity of a loss.
Law of Large Numbers correct answer A principle stating that the larger the number of similar
exposure units considered, the more closely the losses reported will equal the underlying
probability of loss.
Elements of Insurable Risk correct answer Calculable
Affordable
Non-catastrophic
Homogeneous
Accidental
Measurable
Adverse Selection correct answer risks that have a greater than average chance of loss
Reinsurancd correct answer Transfers risk from one insurer to another
Stock Insurer correct answer Owned by stockholders
INSURANCE EXAM WITH 100%
CORRECT ANSWERS 2026
Risk correct answer The possibility that a loss will occur
Speculative Risk correct answer Chance of loss or gain
Pure Risk correct answer only the possibility of loss
Peril correct answer cause of loss
Exposure correct answer The potential for accidents and other losses
Direct Loss correct answer Loss that is a direct result of a peril, such as fire.
Indirect Loss correct answer Loss that is a result or consequence of a direct loss
Moral Hazard correct answer Arise from a person's character (dishonesty)
Morale Hazard correct answer A condition of carelessness or indifference that increases the
frequency or severity of loss.
Physical Hazard correct answer a physical condition that increases the frequency or severity of
loss
, Sharing risk correct answer Two or more individuals share risk
transfer risk correct answer The purpose of insurance
Avoidance correct answer eliminating certain risk by not engaging in certain activity
Retention correct answer Self-insurance, person will pay for loss
Reduction correct answer Lessening the possibility or severity of a loss.
Law of Large Numbers correct answer A principle stating that the larger the number of similar
exposure units considered, the more closely the losses reported will equal the underlying
probability of loss.
Elements of Insurable Risk correct answer Calculable
Affordable
Non-catastrophic
Homogeneous
Accidental
Measurable
Adverse Selection correct answer risks that have a greater than average chance of loss
Reinsurancd correct answer Transfers risk from one insurer to another
Stock Insurer correct answer Owned by stockholders
