Property & Casualty Insurance: Key Concepts and
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Terms in this set (310)
What is the purpose of insurance? To protect against pure risk.
What is a peril in insurance? A cause of a potential loss, such as fire or lightning.
What is a hazard in insurance? A condition that increases the probability of a loss.
What are the three types of hazards? Physical hazard, moral hazard, and morale hazard.
What does the Law of Large The larger the number of units with similar
Numbers state? exposures, the greater the accuracy in predicting
losses.
What is adverse selection? The tendency of poorer risks to seek insurance
more than better risks.
What is reinsurance? A method used by insurers to spread risk and limit
loss.
, What is a domestic insurer? An insurer organized under the laws of the state in
which it operates.
What is a foreign insurer? An insurer organized under the laws of any state
within the United States other than the one in which
it operates.
What is an alien insurer? An insurer organized under the laws of any
jurisdiction outside of the United States.
What does it mean for an insurer to It is authorized to transact insurance in a particular
be admitted? state.
What is a surplus line? Insurance that must be transacted through a
surplus lines producer or broker when not
available from admitted insurers.
What is the primary function of an To determine acceptable risks.
underwriter?
What is the relationship defined by The relationship where an agent acts on behalf of a
the Law of Agency? principal.
What is express authority? Authority explicitly granted in the producer's
contract.
What is implied authority? Authority that the public assumes the producer has.
What is apparent authority? Created when a producer exceeds the authority
expressed in their contract.
What are the four elements of a legal Competent parties, legal purpose, agreement, and
contract? consideration.
Course Review Exam | Questions with 100%
Correct Answers | Verified | Latest Update 2026
Save
Terms in this set (310)
What is the purpose of insurance? To protect against pure risk.
What is a peril in insurance? A cause of a potential loss, such as fire or lightning.
What is a hazard in insurance? A condition that increases the probability of a loss.
What are the three types of hazards? Physical hazard, moral hazard, and morale hazard.
What does the Law of Large The larger the number of units with similar
Numbers state? exposures, the greater the accuracy in predicting
losses.
What is adverse selection? The tendency of poorer risks to seek insurance
more than better risks.
What is reinsurance? A method used by insurers to spread risk and limit
loss.
, What is a domestic insurer? An insurer organized under the laws of the state in
which it operates.
What is a foreign insurer? An insurer organized under the laws of any state
within the United States other than the one in which
it operates.
What is an alien insurer? An insurer organized under the laws of any
jurisdiction outside of the United States.
What does it mean for an insurer to It is authorized to transact insurance in a particular
be admitted? state.
What is a surplus line? Insurance that must be transacted through a
surplus lines producer or broker when not
available from admitted insurers.
What is the primary function of an To determine acceptable risks.
underwriter?
What is the relationship defined by The relationship where an agent acts on behalf of a
the Law of Agency? principal.
What is express authority? Authority explicitly granted in the producer's
contract.
What is implied authority? Authority that the public assumes the producer has.
What is apparent authority? Created when a producer exceeds the authority
expressed in their contract.
What are the four elements of a legal Competent parties, legal purpose, agreement, and
contract? consideration.
