Xcel chapter exams
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
What does the insurance term "indemnity" refer to? - Answer-Make whole
Express power given to an agent in an agency agreement is - Answer-the authority to represent the
insurer
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
What does the insurance term "indemnity" refer to? - Answer-Make whole
Express power given to an agent in an agency agreement is - Answer-the authority to represent the
insurer
