Fundamentals of Insurance 40 Exams
Questions and Answers | Accurate Solutions
with Clear Explanations | Grade A+
• What is the major function of insurance? -✓✓to allow the spread of risk
• What are the five important functions of insurance? -✓✓1) insurance is the
shifting of financial responsibility for a loss
2) payment will be made only in the event of an insured risk
3) the amount of payment is restricted to the amount required to indemnify the
insured
4) insurance covers losses the object may be exposed to
5) the indemnity can be in the form of money or repair/replacement
• What are the three main types of insurance included in broad insurance (property
and casualty) -✓✓Auto insurance
property insurance
liability insurance
(Also known as general insurance)
• Identify the two major types of insurers -✓✓1) private insurers
2)government insurers
• define how stock companies work compared to mutual companies -✓✓Stock
companies exist to turn a profit
Mutual companies exist to provide lower insurance rates for its policy holders
• What type of insurance involves government insurers -✓✓Mandatory auto
insurance, such as ICBC
• identify the two methods of distributing insurance and how the differentiate -
✓✓Direct Writing System
-represent products provided by one company exclusively
Independent brokerage
-represent more than one insurance company
, • Chapter 2 -✓✓
• Define the 3 categories of risk -✓✓Personal
Property
Liability
• Identify the 4 options for dealing with risk -✓✓1) avoidance of risk
2) controlling of risk
3) retention of risk
4) transfer of risk
• What are the two types of risk? Which is insurable? -✓✓1) Pure Risk
2) speculative risk
Only Pure risk is insurable as there is no chance for financial gain
• Define an insurance contract -✓✓an agreement between two or more parties
which is enforceable by law
• What are the five elements required to be present in all contracts -✓✓1)
agreement; an offer made, and accepted
2) consideration; exchange of value between parties
3) legal capacity to contract
4) legality of object; cannot breach laws
5) genuine intention between parties
• What are the three elements exclusively required in an insurance contract -✓✓1)
Insurable interest
2) Utmost good faith
3) Indemnity
• Define endorsements or riders on insurance policies -✓✓acknowledges a change
in the terms of the contract
• Define Floaters -✓✓Used to provide coverage for property having a high degree
of mobility
Questions and Answers | Accurate Solutions
with Clear Explanations | Grade A+
• What is the major function of insurance? -✓✓to allow the spread of risk
• What are the five important functions of insurance? -✓✓1) insurance is the
shifting of financial responsibility for a loss
2) payment will be made only in the event of an insured risk
3) the amount of payment is restricted to the amount required to indemnify the
insured
4) insurance covers losses the object may be exposed to
5) the indemnity can be in the form of money or repair/replacement
• What are the three main types of insurance included in broad insurance (property
and casualty) -✓✓Auto insurance
property insurance
liability insurance
(Also known as general insurance)
• Identify the two major types of insurers -✓✓1) private insurers
2)government insurers
• define how stock companies work compared to mutual companies -✓✓Stock
companies exist to turn a profit
Mutual companies exist to provide lower insurance rates for its policy holders
• What type of insurance involves government insurers -✓✓Mandatory auto
insurance, such as ICBC
• identify the two methods of distributing insurance and how the differentiate -
✓✓Direct Writing System
-represent products provided by one company exclusively
Independent brokerage
-represent more than one insurance company
, • Chapter 2 -✓✓
• Define the 3 categories of risk -✓✓Personal
Property
Liability
• Identify the 4 options for dealing with risk -✓✓1) avoidance of risk
2) controlling of risk
3) retention of risk
4) transfer of risk
• What are the two types of risk? Which is insurable? -✓✓1) Pure Risk
2) speculative risk
Only Pure risk is insurable as there is no chance for financial gain
• Define an insurance contract -✓✓an agreement between two or more parties
which is enforceable by law
• What are the five elements required to be present in all contracts -✓✓1)
agreement; an offer made, and accepted
2) consideration; exchange of value between parties
3) legal capacity to contract
4) legality of object; cannot breach laws
5) genuine intention between parties
• What are the three elements exclusively required in an insurance contract -✓✓1)
Insurable interest
2) Utmost good faith
3) Indemnity
• Define endorsements or riders on insurance policies -✓✓acknowledges a change
in the terms of the contract
• Define Floaters -✓✓Used to provide coverage for property having a high degree
of mobility
