Texas Property & Casualty Insurance
exam with correct answers
A condition or situation that presents a possibility of loss is a (an): - correct answer>> exposure
The purpose of insurance is to: - correct answer>> transfer risk
Which hazard can be described as a careless attitude or general indifference on the part of the insured
toward the occurrence of loss? - correct answer>> morale
Which risk is insurable? - correct answer>> pure
With regard to insurance, risk can be defined as: - correct answer>> uncertainty regarding loss
Treating risk by purchasing insurance is an example of what type of risk management? - correct
answer>> transfer
Robert and Carolyn live in a busy city and decide that not owning a car is the solution to not experience
having a car stolen. What method describes this philosophy? - correct answer>> avoidance
Dishonesty on the part of an insured is an example of what? - correct answer>> a moral hazard
What is an example of reduction as a method of handling risk? - correct answer>> Installing a burglar
alarm
Driving too fast and not wearing a seat belt are examples of? - correct answer>> morale hazard
The risk that involves the chance of both loss and gain is? - correct answer>> speculative risk
Self-insurance is an example of what kind of risk treatment? - correct answer>> Retention
,If John's father transfers ownership of a house to John, can John buy insurance? - correct answer>> Yes
because he has an insurable interest.
Fire would be an example of a what? - correct answer>> peril
What is the actual cause of a loss? - correct answer>> peril
What kind of risk is the stock market? - correct answer>> speculative risk
A ____ is a condition that increases the chance of loss. - correct answer>> hazard
Faulty wiring causes a fire that destroys a building. The faulty wiring is considered to be a(n): - correct
answer>> hazard
A chance, possibility, or uncertainty of loss is known as? - correct answer>> risk
Examples of perils are_____? - correct answer>> fire, wind and lightning
Indemnity insurance will _____? - correct answer>> restores insured to pre-loss condition
The types of hazards are_____? - correct answer>> moral, morale, and physical
________ is when people with a greater than average exposure to loss to purchase insurance. - correct
answer>> Adverse selection
Methods of handling risk are avoidance, reduction, retention, transfer and _____. - correct answer>>
Sharing (ARRTS)
,Elements of insurable risk are calculable, affordable, non-catastrophic, homogenous, accidental and
_____. - correct answer>> Measurable (CANHAM)
Myron, who is 16, signs a contract to lease a car. This would probably not be considered a valid contract
under the law because _____. - correct answer>> He is not competent at 16.
Ben bought an automobile four years ago for $15,000. Today it is worth $6,000. According to the
principle of indemnity, how much should Ben receive if the car is totally demolished? - correct answer>>
$6,000
Harry Arne and his cousin each own 50% of a $160,000 duplex. Suppose Harry purchases $160,000 of
insurance on the home. If it burns to the ground, how much would Harry collect? - correct answer>>
$80,000
Under a unilateral contract, which parties are legally bound to perform under the contract? - correct
answer>> Insurer only
Which part of an insurance policy describes the responsibilities and obligations of both the insurance
company and the insured under the policy? - correct answer>> Conditions
The insuring agreement section of a policy describes the ____ you are insured against. - correct
answer>> perils
The elements of a valid contract are legal purpose, consideration, competent parties, and _____. -
correct answer>> Offer and acceptance
Both parties rely on statements made to each other when writing a contract. This is known as? - correct
answer>> Utmost good faith
The limits of liability are found in which of the following sections of a casualty policy? - correct answer>>
Declarations
, An insurance company issued a homeowners policy that included ambiguous language regarding how a
loss was settled. The insured sued the insurance company and won. The judge stated that due to the
ambiguous language in the contract the decision must be made in favor of the insured. The judge was
basing this decision on which of the following types of insurance contract? - correct answer>> Contract
of adhesion
A policy may be amended only with a(n): - correct answer>> endorsement
The procedure for resolving a disagreement between an insured and an insurance company about a loss
is described in which of the following parts of an insurance policy? - correct answer>> Conditions
Who does a personal contract protect? - correct answer>> The individual who owns the property.
Which one of the following terms indicates that an insurance contract contains the enforceable
promises of only one party? - correct answer>> Unilateral
The principle that restores someone to the condition he enjoyed before a loss is_____? - correct
answer>> indemnity
Bryce owns a $50,000 lake cabin that he has insured for $40,000. He sustains a $5,000 covered loss.
According to the principle of indemnity, how much will his insurer pay? - correct answer>> $5000
The _____ page in an insurance contract contains information about the risk, the effective date of
coverage, deductible, premium amounts, coinsurance percentage, and location of the insured property.
- correct answer>> Declarations
The attempt to restore an insured to his pre-loss condition is known as _____. - correct answer>>
indemnification
The insured is looking for the amount of coverage in a property and casualty policy. This information
would be found in the ______. - correct answer>> declarations
exam with correct answers
A condition or situation that presents a possibility of loss is a (an): - correct answer>> exposure
The purpose of insurance is to: - correct answer>> transfer risk
Which hazard can be described as a careless attitude or general indifference on the part of the insured
toward the occurrence of loss? - correct answer>> morale
Which risk is insurable? - correct answer>> pure
With regard to insurance, risk can be defined as: - correct answer>> uncertainty regarding loss
Treating risk by purchasing insurance is an example of what type of risk management? - correct
answer>> transfer
Robert and Carolyn live in a busy city and decide that not owning a car is the solution to not experience
having a car stolen. What method describes this philosophy? - correct answer>> avoidance
Dishonesty on the part of an insured is an example of what? - correct answer>> a moral hazard
What is an example of reduction as a method of handling risk? - correct answer>> Installing a burglar
alarm
Driving too fast and not wearing a seat belt are examples of? - correct answer>> morale hazard
The risk that involves the chance of both loss and gain is? - correct answer>> speculative risk
Self-insurance is an example of what kind of risk treatment? - correct answer>> Retention
,If John's father transfers ownership of a house to John, can John buy insurance? - correct answer>> Yes
because he has an insurable interest.
Fire would be an example of a what? - correct answer>> peril
What is the actual cause of a loss? - correct answer>> peril
What kind of risk is the stock market? - correct answer>> speculative risk
A ____ is a condition that increases the chance of loss. - correct answer>> hazard
Faulty wiring causes a fire that destroys a building. The faulty wiring is considered to be a(n): - correct
answer>> hazard
A chance, possibility, or uncertainty of loss is known as? - correct answer>> risk
Examples of perils are_____? - correct answer>> fire, wind and lightning
Indemnity insurance will _____? - correct answer>> restores insured to pre-loss condition
The types of hazards are_____? - correct answer>> moral, morale, and physical
________ is when people with a greater than average exposure to loss to purchase insurance. - correct
answer>> Adverse selection
Methods of handling risk are avoidance, reduction, retention, transfer and _____. - correct answer>>
Sharing (ARRTS)
,Elements of insurable risk are calculable, affordable, non-catastrophic, homogenous, accidental and
_____. - correct answer>> Measurable (CANHAM)
Myron, who is 16, signs a contract to lease a car. This would probably not be considered a valid contract
under the law because _____. - correct answer>> He is not competent at 16.
Ben bought an automobile four years ago for $15,000. Today it is worth $6,000. According to the
principle of indemnity, how much should Ben receive if the car is totally demolished? - correct answer>>
$6,000
Harry Arne and his cousin each own 50% of a $160,000 duplex. Suppose Harry purchases $160,000 of
insurance on the home. If it burns to the ground, how much would Harry collect? - correct answer>>
$80,000
Under a unilateral contract, which parties are legally bound to perform under the contract? - correct
answer>> Insurer only
Which part of an insurance policy describes the responsibilities and obligations of both the insurance
company and the insured under the policy? - correct answer>> Conditions
The insuring agreement section of a policy describes the ____ you are insured against. - correct
answer>> perils
The elements of a valid contract are legal purpose, consideration, competent parties, and _____. -
correct answer>> Offer and acceptance
Both parties rely on statements made to each other when writing a contract. This is known as? - correct
answer>> Utmost good faith
The limits of liability are found in which of the following sections of a casualty policy? - correct answer>>
Declarations
, An insurance company issued a homeowners policy that included ambiguous language regarding how a
loss was settled. The insured sued the insurance company and won. The judge stated that due to the
ambiguous language in the contract the decision must be made in favor of the insured. The judge was
basing this decision on which of the following types of insurance contract? - correct answer>> Contract
of adhesion
A policy may be amended only with a(n): - correct answer>> endorsement
The procedure for resolving a disagreement between an insured and an insurance company about a loss
is described in which of the following parts of an insurance policy? - correct answer>> Conditions
Who does a personal contract protect? - correct answer>> The individual who owns the property.
Which one of the following terms indicates that an insurance contract contains the enforceable
promises of only one party? - correct answer>> Unilateral
The principle that restores someone to the condition he enjoyed before a loss is_____? - correct
answer>> indemnity
Bryce owns a $50,000 lake cabin that he has insured for $40,000. He sustains a $5,000 covered loss.
According to the principle of indemnity, how much will his insurer pay? - correct answer>> $5000
The _____ page in an insurance contract contains information about the risk, the effective date of
coverage, deductible, premium amounts, coinsurance percentage, and location of the insured property.
- correct answer>> Declarations
The attempt to restore an insured to his pre-loss condition is known as _____. - correct answer>>
indemnification
The insured is looking for the amount of coverage in a property and casualty policy. This information
would be found in the ______. - correct answer>> declarations
