Introduction Insurance EXAM GRADED
A LATEST VERSION 300 QUESTIONS
AND ANSWERS
the uncertainty or possibility of financial loss. There are two kinds: - CORRECT ANSWER risk
- speculative and pure risk
chance of financial loss with possibility of gain or loss. this is not insurable.
Ex: gambling - CORRECT ANSWER speculative risk
chance of financial loss with no possibility of gain. the only potential outcome is loss - CORRECT
ANSWER pure risk
unintended unforeseen damage or injury measurable in financial terms - CORRECT ANSWER loss
the actual cause of a loss. the reason the loss occurred
Ex: tornado - wind - CORRECT ANSWER peril
anything that increases the liklihood (frequency) of a loss occurring or the severity of a loss. - CORRECT
ANSWER hazard
what are the 3 types of hazard - CORRECT ANSWER 1) physical hazard: arises form material or
structural features. Ex: icy road / oily rags
2) moral hazard: arises from morality or ethics of insured. Ex: arson / fraud
3) morale hazard: arises from human carelessness or irresponsibility. Ex: cell phone / garage door
risk management - CORRECT ANSWER is the process of 1) identifying exposure to risk and 2) deciding
how to handle the financial risk.
,the four risk management techniques (options) are? - CORRECT ANSWER 1) Reduce: reduce the risk by
lowering the exposure, ie loss control
2) Retain: assume the risk, ie self-insure or deductible
3) Avoid: eliminate the risk, ie do not engage in the activity
4) Transfer the financial risk through the purchase of insurance
insurance - CORRECT ANSWER a social device for the transfer of an individual's financial risk to a large
number of people. by pooling the risk among a large number of similar exposures, each individual's cost
is smaller
Main point "transfer of financial risk"
Law of Large Numbers - CORRECT ANSWER insurer uses this mathematical principle to statistically
predict future losses. It states that "the larger the number of similar exposure units, the more
predictable the future total losses become"
the Law of Large Numbers does not consider _____ losses - CORRECT ANSWER individual
insurance policy - CORRECT ANSWER a legally bindng contract between the insurance company and the
insured. contracts create obligations that are subject to the general law of contracts and are enforceable
by the judicial system
insurance is between 2 parties - CORRECT ANSWER - insurer
- insured
is a temporary insurance contract. provides temporary protection for a maximum period of 90 days (36
O.S. 3622) - CORRECT ANSWER binder
a binder can be ____ or ____ - CORRECT ANSWER written or verbal.
- not necessarily written, delivered, or signed
,6 elements that must exist for a pure risk to be insurable: - CORRECT ANSWER 1. the loss must be
unforeseen (accidental) and unintended form the insured's perspective
2. the loss must create financial loss (not sentimental)
3. the loss must be ascertainable in cause, time, and amount and occur during the policy period
4. the insurer must be able to predict the chance of loss using the "Law of Large Numbers"
5. there must be an economically feasible premium (flood ins money)
6. the insurance must exclude catastrophic loss exposure such as war or nuclear
for insurance to function properly an ______ - CORRECT ANSWER insurable interest must exist
is the financial loss a person suffers when property is destroyed. it is created by 1) ownership; 2) holding
a mortgage; or 3) having a responsibility for property in your care.
- more than one person can share this - CORRECT ANSWER insurable interest
in life and health, the insurable interest must exist only at the time of _____ - CORRECT ANSWER
application
in personal or commercial property & casualty, the insurable interest must exist only at the time of the
_____ - CORRECT ANSWER loss
incorporated insurer owned by its shareholders.
- shareholders are entitled to the profits of the insurance company
- shareholders elect the Board of Directors who hire the management of the company - CORRECT
ANSWER stock company
incorporated insurer owned by its policyowners
- policyowners are entitled to the profits of the insurance company
- policyowners elect the Board of Directors who hire the management of the company - CORRECT
ANSWER mutual company
fraternal - CORRECT ANSWER - an incorporated society, order, or lodge without capital stock.
, - societies are organized as non-profit and provide insurance solely for the benefit of its members.
government insurers - CORRECT ANSWER insurers operated by the Federal Government (NOT work
comp! / controlled 100% by the state)
- flood insurance program / crop insurance / crime insurance
- nuclear energy liability insurance / FDIC / social security
domestic insurer - CORRECT ANSWER formed under the laws of Oklahoma
- home office in OK
foreign insurer - CORRECT ANSWER formed under the laws of another state
- office in OK with Home office in another state
alien insurer - CORRECT ANSWER formed under the laws of another country
- office in OK with home office in another country
property insurance - CORRECT ANSWER covers the financial loss of all types of property, i.e., dwellings,
buildings, contents, and business inventory.
- 1st party going to get check
casualty insurance - CORRECT ANSWER covers liability for legal responsibilities to a third party.
- 3rd party going to get check
producer (agent) - CORRECT ANSWER appointed by an insurer to transact insurance
underwriter - CORRECT ANSWER gathers information, analyzes exposures, and select risks for the
insurer
- Hanover
A LATEST VERSION 300 QUESTIONS
AND ANSWERS
the uncertainty or possibility of financial loss. There are two kinds: - CORRECT ANSWER risk
- speculative and pure risk
chance of financial loss with possibility of gain or loss. this is not insurable.
Ex: gambling - CORRECT ANSWER speculative risk
chance of financial loss with no possibility of gain. the only potential outcome is loss - CORRECT
ANSWER pure risk
unintended unforeseen damage or injury measurable in financial terms - CORRECT ANSWER loss
the actual cause of a loss. the reason the loss occurred
Ex: tornado - wind - CORRECT ANSWER peril
anything that increases the liklihood (frequency) of a loss occurring or the severity of a loss. - CORRECT
ANSWER hazard
what are the 3 types of hazard - CORRECT ANSWER 1) physical hazard: arises form material or
structural features. Ex: icy road / oily rags
2) moral hazard: arises from morality or ethics of insured. Ex: arson / fraud
3) morale hazard: arises from human carelessness or irresponsibility. Ex: cell phone / garage door
risk management - CORRECT ANSWER is the process of 1) identifying exposure to risk and 2) deciding
how to handle the financial risk.
,the four risk management techniques (options) are? - CORRECT ANSWER 1) Reduce: reduce the risk by
lowering the exposure, ie loss control
2) Retain: assume the risk, ie self-insure or deductible
3) Avoid: eliminate the risk, ie do not engage in the activity
4) Transfer the financial risk through the purchase of insurance
insurance - CORRECT ANSWER a social device for the transfer of an individual's financial risk to a large
number of people. by pooling the risk among a large number of similar exposures, each individual's cost
is smaller
Main point "transfer of financial risk"
Law of Large Numbers - CORRECT ANSWER insurer uses this mathematical principle to statistically
predict future losses. It states that "the larger the number of similar exposure units, the more
predictable the future total losses become"
the Law of Large Numbers does not consider _____ losses - CORRECT ANSWER individual
insurance policy - CORRECT ANSWER a legally bindng contract between the insurance company and the
insured. contracts create obligations that are subject to the general law of contracts and are enforceable
by the judicial system
insurance is between 2 parties - CORRECT ANSWER - insurer
- insured
is a temporary insurance contract. provides temporary protection for a maximum period of 90 days (36
O.S. 3622) - CORRECT ANSWER binder
a binder can be ____ or ____ - CORRECT ANSWER written or verbal.
- not necessarily written, delivered, or signed
,6 elements that must exist for a pure risk to be insurable: - CORRECT ANSWER 1. the loss must be
unforeseen (accidental) and unintended form the insured's perspective
2. the loss must create financial loss (not sentimental)
3. the loss must be ascertainable in cause, time, and amount and occur during the policy period
4. the insurer must be able to predict the chance of loss using the "Law of Large Numbers"
5. there must be an economically feasible premium (flood ins money)
6. the insurance must exclude catastrophic loss exposure such as war or nuclear
for insurance to function properly an ______ - CORRECT ANSWER insurable interest must exist
is the financial loss a person suffers when property is destroyed. it is created by 1) ownership; 2) holding
a mortgage; or 3) having a responsibility for property in your care.
- more than one person can share this - CORRECT ANSWER insurable interest
in life and health, the insurable interest must exist only at the time of _____ - CORRECT ANSWER
application
in personal or commercial property & casualty, the insurable interest must exist only at the time of the
_____ - CORRECT ANSWER loss
incorporated insurer owned by its shareholders.
- shareholders are entitled to the profits of the insurance company
- shareholders elect the Board of Directors who hire the management of the company - CORRECT
ANSWER stock company
incorporated insurer owned by its policyowners
- policyowners are entitled to the profits of the insurance company
- policyowners elect the Board of Directors who hire the management of the company - CORRECT
ANSWER mutual company
fraternal - CORRECT ANSWER - an incorporated society, order, or lodge without capital stock.
, - societies are organized as non-profit and provide insurance solely for the benefit of its members.
government insurers - CORRECT ANSWER insurers operated by the Federal Government (NOT work
comp! / controlled 100% by the state)
- flood insurance program / crop insurance / crime insurance
- nuclear energy liability insurance / FDIC / social security
domestic insurer - CORRECT ANSWER formed under the laws of Oklahoma
- home office in OK
foreign insurer - CORRECT ANSWER formed under the laws of another state
- office in OK with Home office in another state
alien insurer - CORRECT ANSWER formed under the laws of another country
- office in OK with home office in another country
property insurance - CORRECT ANSWER covers the financial loss of all types of property, i.e., dwellings,
buildings, contents, and business inventory.
- 1st party going to get check
casualty insurance - CORRECT ANSWER covers liability for legal responsibilities to a third party.
- 3rd party going to get check
producer (agent) - CORRECT ANSWER appointed by an insurer to transact insurance
underwriter - CORRECT ANSWER gathers information, analyzes exposures, and select risks for the
insurer
- Hanover
