Property and Casualty Illinois
Practice Exam Questions And
Correct Answers (Verified
Answers) Plus Rationales
2025/2026 Q&A | Instant
Download Pdf
1. What is the purpose of insurance?
A. To eliminate all risk
B. To make a profit
C. To transfer risk from an individual to an insurer
D. To prevent loss
Answer: C
Insurance transfers financial risk from the insured to the
insurer in exchange for premium.
2. Risk that involves the possibility of loss or gain is called:
A. Pure risk
B. Speculative risk
C. Static risk
D. Fundamental risk
,Answer:
Speculative risk includes chance of gain or loss, such as
investing.
3. A peril is best defined as:
A. Cause of risk
B. Cause of loss
C. Financial burden
D. Type of hazard
Answer: B
A peril is the specific cause of a loss, such as fire or theft.
4. What type of hazard involves careless behavior?
A. Physical hazard
B. Moral hazard
C. Morale hazard
D. Legal hazard
Answer: C
Morale hazard reflects carelessness or indifference to loss.
5. Which of the following is an example of a physical
hazard?
A. Fraud
B. Broken handrail
,C. Gambling
D. Dishonesty
Answer: B
Physical hazards involve tangible conditions that increase
risk.
6. The pooling of risks spreads losses among:
A. One insured
B. Brokers
C. Many policyholders
D. Government agencies
Answer: C
Risk pooling spreads losses across many insured individuals.
7. The legal contract between insurer and insured is called:
A. Binder
B. Application
C. Policy
D. Declaration
Answer: C
A policy is the formal contract outlining coverage terms.
8. The section of the policy listing the insured’s name and
coverage limits is:
, A. Conditions
B. Endorsements
C. Declarations
D. Exclusions
Answer: C
Declarations summarize key coverage details.
9. Which term refers to the insurer’s promise to pay?
A. Warranty
B. Insuring agreement
C. Exclusion
D. Rider
Answer: B
The insuring agreement defines coverage provided.
10. A deductible is:
A. Fee charged to agent
B. Amount paid by insured before insurer pays
C. Commission
D. Policy limit
Answer: B
Deductibles reduce small claims and lower premiums.
11. Which of the following is an example of indemnity?
Practice Exam Questions And
Correct Answers (Verified
Answers) Plus Rationales
2025/2026 Q&A | Instant
Download Pdf
1. What is the purpose of insurance?
A. To eliminate all risk
B. To make a profit
C. To transfer risk from an individual to an insurer
D. To prevent loss
Answer: C
Insurance transfers financial risk from the insured to the
insurer in exchange for premium.
2. Risk that involves the possibility of loss or gain is called:
A. Pure risk
B. Speculative risk
C. Static risk
D. Fundamental risk
,Answer:
Speculative risk includes chance of gain or loss, such as
investing.
3. A peril is best defined as:
A. Cause of risk
B. Cause of loss
C. Financial burden
D. Type of hazard
Answer: B
A peril is the specific cause of a loss, such as fire or theft.
4. What type of hazard involves careless behavior?
A. Physical hazard
B. Moral hazard
C. Morale hazard
D. Legal hazard
Answer: C
Morale hazard reflects carelessness or indifference to loss.
5. Which of the following is an example of a physical
hazard?
A. Fraud
B. Broken handrail
,C. Gambling
D. Dishonesty
Answer: B
Physical hazards involve tangible conditions that increase
risk.
6. The pooling of risks spreads losses among:
A. One insured
B. Brokers
C. Many policyholders
D. Government agencies
Answer: C
Risk pooling spreads losses across many insured individuals.
7. The legal contract between insurer and insured is called:
A. Binder
B. Application
C. Policy
D. Declaration
Answer: C
A policy is the formal contract outlining coverage terms.
8. The section of the policy listing the insured’s name and
coverage limits is:
, A. Conditions
B. Endorsements
C. Declarations
D. Exclusions
Answer: C
Declarations summarize key coverage details.
9. Which term refers to the insurer’s promise to pay?
A. Warranty
B. Insuring agreement
C. Exclusion
D. Rider
Answer: B
The insuring agreement defines coverage provided.
10. A deductible is:
A. Fee charged to agent
B. Amount paid by insured before insurer pays
C. Commission
D. Policy limit
Answer: B
Deductibles reduce small claims and lower premiums.
11. Which of the following is an example of indemnity?
