Illinois Property and Casualty Insurance Exam
Prep | Questions with 100% Correct Answers |
Verified | Latest Update 2026
Save
Terms in this set (216)
Insurance policy Social device for the transfer of financial risks
Transfer of Risks Through insurance individuals transfer to insurance
companies financial risks they cannot individually
afford. Insurance companies can accept for insured
risks insureds cannot individually afford by
charging a small premium to a large group of
people. The premium is small compared to the size
of the financial risk transferred.
Pure Risk a risk that presents the chance of loss but no
opportunity for gain
Speculative Risk a situation in which either profit or loss is possible
(opportunity to profit or lose) insurance typically
doesn't cover
Pooling risks (for an insurance When large group of people contributes money to
company) a fund out of which their losses can be paid. Larger
the group, the better it works financially
Insured A person covered by an insurance policy and for
whom the insurance company accepts financial risk
,Premium Money paid by the insured to the insurance
company in exchange for the insurance policy
Lapse When a policy is terminated due to nonpayment of
premiums
Endorsement A form added to an insurance policy. Usually
added for additional premium charge to add
additional coverage. Can be added to limit or
restrict coverage
Peril An actual cause of loss that can be insured against
Hazard A condition or operation in property which either
creates or increases the chance of loss by a
covered peril
Risk "Exposure". The likelihood, probability, or degree of
uncertainty that a covered peril will cause loss
Actuarial Tables Statistical tables used in calculating premium rate
tables. They tell the insurance companies how
many people are likely to have claims and how
much the losses are likely to be.
Loss reserves moneys set aside to pay claims in accordance with
the actuarial tables
Actuary An insurance company representative who keeps
track of loss stats and calculates premium rate
tables and loss reserves
, Law of Large Numbers The more people the insurance company insures,
the more accurate the actuarial tables are
Insurable Interest A financial interest (risk) which the insured must
possess AT THE TIME OF LOSS
indemnity Legal concept of one party (insurance company)
standing in place of it making good for another
(the insurers)
Reimbursement Property insurance mean the same
reimbursement and indemnity Both prohibit an insurance company from
reimbursing an insured for more than the actual
amount of loss
Deductible Purpose of deductible is to eliminate small claims
that insured can afford and which would cost the
insurance company to administer
Limits of Liability The maximum amounts which the insurance
company will pay under each coverage.
Aggregate Limit maximum limit of liability that the policy will pay to
all persons who are injured or who incur property
damage in an occurrence
Additional coverages Things specified in HOMEOWNER POLICIES that
the insurance company will pay for in addition to
homeowner policy limits of liability
Prep | Questions with 100% Correct Answers |
Verified | Latest Update 2026
Save
Terms in this set (216)
Insurance policy Social device for the transfer of financial risks
Transfer of Risks Through insurance individuals transfer to insurance
companies financial risks they cannot individually
afford. Insurance companies can accept for insured
risks insureds cannot individually afford by
charging a small premium to a large group of
people. The premium is small compared to the size
of the financial risk transferred.
Pure Risk a risk that presents the chance of loss but no
opportunity for gain
Speculative Risk a situation in which either profit or loss is possible
(opportunity to profit or lose) insurance typically
doesn't cover
Pooling risks (for an insurance When large group of people contributes money to
company) a fund out of which their losses can be paid. Larger
the group, the better it works financially
Insured A person covered by an insurance policy and for
whom the insurance company accepts financial risk
,Premium Money paid by the insured to the insurance
company in exchange for the insurance policy
Lapse When a policy is terminated due to nonpayment of
premiums
Endorsement A form added to an insurance policy. Usually
added for additional premium charge to add
additional coverage. Can be added to limit or
restrict coverage
Peril An actual cause of loss that can be insured against
Hazard A condition or operation in property which either
creates or increases the chance of loss by a
covered peril
Risk "Exposure". The likelihood, probability, or degree of
uncertainty that a covered peril will cause loss
Actuarial Tables Statistical tables used in calculating premium rate
tables. They tell the insurance companies how
many people are likely to have claims and how
much the losses are likely to be.
Loss reserves moneys set aside to pay claims in accordance with
the actuarial tables
Actuary An insurance company representative who keeps
track of loss stats and calculates premium rate
tables and loss reserves
, Law of Large Numbers The more people the insurance company insures,
the more accurate the actuarial tables are
Insurable Interest A financial interest (risk) which the insured must
possess AT THE TIME OF LOSS
indemnity Legal concept of one party (insurance company)
standing in place of it making good for another
(the insurers)
Reimbursement Property insurance mean the same
reimbursement and indemnity Both prohibit an insurance company from
reimbursing an insured for more than the actual
amount of loss
Deductible Purpose of deductible is to eliminate small claims
that insured can afford and which would cost the
insurance company to administer
Limits of Liability The maximum amounts which the insurance
company will pay under each coverage.
Aggregate Limit maximum limit of liability that the policy will pay to
all persons who are injured or who incur property
damage in an occurrence
Additional coverages Things specified in HOMEOWNER POLICIES that
the insurance company will pay for in addition to
homeowner policy limits of liability
