Page 1 of 31
CALIFORNIA PERSONAL - LINES
INSURANCE
EXAM QUESTIONS AND CORRECT
DETAILED
ANSWERS VERIFIED ANSWERS
An agreement in which an insurer contracts with a third party to insure
itself against losses from insurance policies it issues is known as: - ✔✔✔
Correct Answer > Reinsurance
The insurer the cedes a portion of the risk is known as the: - ✔✔✔ Correct
Answer > Reinsurer
Four Major Categories of Insurers - ✔✔✔ Correct Answer > Property
insurance, Casualty Insurance, Life Insurance and Accident/health
insurance
,Page 2 of 31
Property insurance - ✔✔✔ Correct Answer > Covers direct and indirect
losses- referred to as first party insurance/coverage
Casualty insurance - ✔✔✔ Correct Answer > Includes a wide variety of
unrelated coverages such as auto, workers comp, general liability, crime
insurance aviation insurance, surety bonds, etc...
life insurance - ✔✔✔ Correct Answer > Provides death beds, annuities,
lifetime income
Accident and health insurance - ✔✔✔ Correct Answer > Protects
against loss caused by injury, illness, accidental death and
disability income
The 22 classes/lines of Insurance - ✔✔✔ Correct Answer > Life, Fire
(property), Marine (boat), Title (not free and clear), Surety
(Bonds), disability (injury/sickness), plate glass (glass that breaks),
liability (injury), workers comp (injury on job), common carrier (liability
of goods), boiler/machinery (explosion of tanks/pipes), burglary (theft),
,Page 3 of 31
credit, sprinkler, team (loss caused by use of teams), auto, mortgage,
aircraft, mortgage guarantee, insolvency, legal, misc. (eq, flood)
Private insurer and Government Insurers - ✔✔✔ Correct Answer > Insurance
is provided to the public by two major sources, private and US
Government. Two major insurers are Stock and Mutual
Stock insurer - ✔✔✔ Correct Answer > Non participating! stock holders,
shareholders, stakeholders own and elect the board of directors
(dividends taxable equal return of profit)
Mutual insurer - ✔✔✔ Correct Answer > Participating. Policy holders and
buyers own elect the board of directors. (Dividends not taxable equals
return of premium)
Possibility of just Loss is: - ✔✔✔ Correct Answer > Loss exposure
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Three dimensions that make up Loss Exposure - ✔✔✔ Correct Answer > Type
of value exposed to loss, peril causing the loss, and financial
consequence of loss
Loss due to resignation, retirement, or death of a key employee is what
type of loss exposure - ✔✔✔ Correct Answer > Personnel
Not a benefit of Insurance is: - ✔✔✔ Correct Answer > Risk retention
Other words for Homogenous units - ✔✔✔ Correct Answer > Like or similar
Formula for loss ratio - ✔✔✔ Correct Answer > Loss divided by
premiums
Principle of indemnity - ✔✔✔ Correct Answer > The basic principle behind
Insurance. To restore someone to the same financial condition the
occupied prior to the loss with no intent of loss or gain (to make while).
The intent is to cover the amount of the actual loss only. An insured
cannot collect more than 100% of actual loss. An insured can only be
CALIFORNIA PERSONAL - LINES
INSURANCE
EXAM QUESTIONS AND CORRECT
DETAILED
ANSWERS VERIFIED ANSWERS
An agreement in which an insurer contracts with a third party to insure
itself against losses from insurance policies it issues is known as: - ✔✔✔
Correct Answer > Reinsurance
The insurer the cedes a portion of the risk is known as the: - ✔✔✔ Correct
Answer > Reinsurer
Four Major Categories of Insurers - ✔✔✔ Correct Answer > Property
insurance, Casualty Insurance, Life Insurance and Accident/health
insurance
,Page 2 of 31
Property insurance - ✔✔✔ Correct Answer > Covers direct and indirect
losses- referred to as first party insurance/coverage
Casualty insurance - ✔✔✔ Correct Answer > Includes a wide variety of
unrelated coverages such as auto, workers comp, general liability, crime
insurance aviation insurance, surety bonds, etc...
life insurance - ✔✔✔ Correct Answer > Provides death beds, annuities,
lifetime income
Accident and health insurance - ✔✔✔ Correct Answer > Protects
against loss caused by injury, illness, accidental death and
disability income
The 22 classes/lines of Insurance - ✔✔✔ Correct Answer > Life, Fire
(property), Marine (boat), Title (not free and clear), Surety
(Bonds), disability (injury/sickness), plate glass (glass that breaks),
liability (injury), workers comp (injury on job), common carrier (liability
of goods), boiler/machinery (explosion of tanks/pipes), burglary (theft),
,Page 3 of 31
credit, sprinkler, team (loss caused by use of teams), auto, mortgage,
aircraft, mortgage guarantee, insolvency, legal, misc. (eq, flood)
Private insurer and Government Insurers - ✔✔✔ Correct Answer > Insurance
is provided to the public by two major sources, private and US
Government. Two major insurers are Stock and Mutual
Stock insurer - ✔✔✔ Correct Answer > Non participating! stock holders,
shareholders, stakeholders own and elect the board of directors
(dividends taxable equal return of profit)
Mutual insurer - ✔✔✔ Correct Answer > Participating. Policy holders and
buyers own elect the board of directors. (Dividends not taxable equals
return of premium)
Possibility of just Loss is: - ✔✔✔ Correct Answer > Loss exposure
, Page 4 of 31
Three dimensions that make up Loss Exposure - ✔✔✔ Correct Answer > Type
of value exposed to loss, peril causing the loss, and financial
consequence of loss
Loss due to resignation, retirement, or death of a key employee is what
type of loss exposure - ✔✔✔ Correct Answer > Personnel
Not a benefit of Insurance is: - ✔✔✔ Correct Answer > Risk retention
Other words for Homogenous units - ✔✔✔ Correct Answer > Like or similar
Formula for loss ratio - ✔✔✔ Correct Answer > Loss divided by
premiums
Principle of indemnity - ✔✔✔ Correct Answer > The basic principle behind
Insurance. To restore someone to the same financial condition the
occupied prior to the loss with no intent of loss or gain (to make while).
The intent is to cover the amount of the actual loss only. An insured
cannot collect more than 100% of actual loss. An insured can only be
