AINS 21 practice exam questions and
answers
From an insured's point of view, relative to the concept of agency, little distinction exists
between the
Select one:
A. Insurance agent and the insurance department.
B. Broker and the claimant
C. Insurer and the insurance department.
D. Insurance agent and the insurer - ANSWER>>D. Insurance agent and the insurer
From an insured's point of view, relative to the concept of agency, little distinction exists
between the insurance agent and the insurer.
A person or entity that would suffer a financial loss if property were damaged has
Select one:
A. A contractual interest.
B. A renewable interest.
C. An insurable interest.
D. A discretionary interest. - ANSWER>>C. An insurable interest.
Market conduct regulation focuses on insurers treatment of applicants for insurance insureds
and others who present claims for coverage. Market conduct regulation affects which one of
the following areas of operations?
A, Sales
B. Claims handling
C. Risk control
D. Underwriting - ANSWER>>C. Risk Control
An important question for an insurer to ask when examining customers' needs and
characteristics to select a distribution channel is
Select one:
A. Who is the target market?
B. How quickly can inquiries and transactions be processed?
C. Is the expertise of the current staff adequate?
D. Does cost outweigh the benefit? - ANSWER>>B. How quickly can inquiries and transactions
be processed?
,Which of the following statements is correct regarding characteristics of ideally insurable loss
exposures - ANSWER>>ideally, loss exposures should be spread across a large number of similar
exposure units within the same period
The type of insurance that provides periodic income payments to an insured who is unable to
work because of sickness or injury is - ANSWER>>Disability income insurance
Retention is often used in combination with insurance as a way of treating loss exposures. One
of the major downsides of individuals using retention alone is - ANSWER>>The potential for
financial ruin
A loss exposure is - ANSWER>>Any condition that presents the possibility of a loss
Liability coverage for loss exposures arising from a business organizations premises and
operations, its products, or its completed work is typically provided by - ANSWER>>Commercial
general liability insurance
Though premiums are an obvious cost of insurance, many insureds believe that are too high
because - ANSWER>>Benefits are intangible until loss occurs
Insurance is not the only risk management transfer technique. When circumstances are
appropriate, transfer can be accomplished through - ANSWER>>noninsurance transfer
technique
Which one of the following is an example of a fortuitous loss
A. An unknown vandal spray-paints graffiti on the insured's garage.
B. An insured demolishes a deck that has been allowed to rot.
C. The value of an insured's home decreases due to a lack of maintenance.
D. Insureds intentionally set a fire and burn their house down. - ANSWER>>A. An unknown
vandal spray-paints graffiti on the insured's garage
Which one of the following statements is correct regarding the benefits that insurance provides
- ANSWER>>Investment income helps keep insurance premiums at a reasonable level
Claim buildup is considered to be among which one of the following costs of insurance -
ANSWER>>increased losses
,The primary role of insurance is to - ANSWER>>indemnify individuals and organizations for
covered losses
Coverage for money, securities, and other property from various causes of loss such as
burglary, robbery, theft, and employee dishonesty typically is provided by -
ANSWER>>commercial crime insurance
Which of the following is an opportunity cost of insurance - ANSWER>>An insureds funds that
could be invested elsewhere if purchasing insurance were not necessary
Coverage for miscellaneous types of property such as movable property, goods in domestic
transit, and property use in transportation and communication, typically is provided by -
ANSWER>>inland marine insurance
For insurers to utilize pooling most effectively and prevent catastrophic losses, the insured
exposure units need to be - ANSWER>>independent
Some loss exposures are not easy to retain, avoid, or control. What risk management
techniques is frequently used to treat such exposures - ANSWER>>transfer
Sometimes the existence of insurance encourages losses. the result of this phenomenon is that
in - ANSWER>>increases the total cost of insurance
Pravalt Construction Company pays less than its competitors for workers compensation
insurance because Pravalt has had substantially fewer employee injuries than other firms in its
class. this illustrates which one of the following benefits of insurance - ANSWER>>promote risk
control
As a single mother on a very tight budget, Ciara is tempted to skimp on her insurance. However,
her friend Mehmet tells her not to skimp on insurance, because it will help manage her cash
flows. Which one of the following examples best illustrates Mehmet's point - ANSWER>>When
her car's windshield breaks, Ciara has to pay only $100 of the $600 cost of replacing it
A small business owner concerned about something happening and not being able to work or
earn a living for extended period of time due to an accident should purchase -
ANSWER>>Disability insurance
, Adhering to the characteristics of an ideally insurable loss exposure in selling insurance help
assure that - ANSWER>>The insurer is able to charge a premium that the insured can afford to
pay
Which of the following statements is correct with regard to risk and ideally insurable
characteristics of loss exposures - ANSWER>>indemnification is the process of restoring an
insured to pre-loss financial condition
Which one of the following statements is correct - ANSWER>>insurers investment income helps
keep premiums at reasonable level
Which one of the following statements is correct regarding characteristics of ideally insurable
loss exposures - ANSWER>>Ideally, loss exposures should be spread across a large number of
similar exposure units within the same period
Which one of the following is an operating cost of insurers - ANSWER>>Producers commissions
One of the costs of insurance is said to be opportunity costs. this means that if capital and labor
were not being used in the insurance business, they could be used elsewhere and making other
productive contributions to - ANSWER>>Society
Private insurers are reluctant to provide windstorm insurance on coastal properties. This is
because the loss exposures fail to meet the criteria that ideally insurable exposures must be -
ANSWER>>Independent and not catastrophic
Sally is a recent college graduate who lives in the suburbs and drives to work daily in the city.
she recognizes that owning a car creates both property damage and liability exposures for her
and at the same time she has the burden of student loans. For someone in Sally's circumstances
the most particular risk management technique for dealing with her auto related loss exposures
is - ANSWER>>Risk transfer
Another name for liability insurance is - ANSWER>>third party insurance
A homeowners insurance policy typically includes - ANSWER>>both property and liability
coverage
which one of the following statements is true - ANSWER>>Mutual insurance include some large
national insurers
answers
From an insured's point of view, relative to the concept of agency, little distinction exists
between the
Select one:
A. Insurance agent and the insurance department.
B. Broker and the claimant
C. Insurer and the insurance department.
D. Insurance agent and the insurer - ANSWER>>D. Insurance agent and the insurer
From an insured's point of view, relative to the concept of agency, little distinction exists
between the insurance agent and the insurer.
A person or entity that would suffer a financial loss if property were damaged has
Select one:
A. A contractual interest.
B. A renewable interest.
C. An insurable interest.
D. A discretionary interest. - ANSWER>>C. An insurable interest.
Market conduct regulation focuses on insurers treatment of applicants for insurance insureds
and others who present claims for coverage. Market conduct regulation affects which one of
the following areas of operations?
A, Sales
B. Claims handling
C. Risk control
D. Underwriting - ANSWER>>C. Risk Control
An important question for an insurer to ask when examining customers' needs and
characteristics to select a distribution channel is
Select one:
A. Who is the target market?
B. How quickly can inquiries and transactions be processed?
C. Is the expertise of the current staff adequate?
D. Does cost outweigh the benefit? - ANSWER>>B. How quickly can inquiries and transactions
be processed?
,Which of the following statements is correct regarding characteristics of ideally insurable loss
exposures - ANSWER>>ideally, loss exposures should be spread across a large number of similar
exposure units within the same period
The type of insurance that provides periodic income payments to an insured who is unable to
work because of sickness or injury is - ANSWER>>Disability income insurance
Retention is often used in combination with insurance as a way of treating loss exposures. One
of the major downsides of individuals using retention alone is - ANSWER>>The potential for
financial ruin
A loss exposure is - ANSWER>>Any condition that presents the possibility of a loss
Liability coverage for loss exposures arising from a business organizations premises and
operations, its products, or its completed work is typically provided by - ANSWER>>Commercial
general liability insurance
Though premiums are an obvious cost of insurance, many insureds believe that are too high
because - ANSWER>>Benefits are intangible until loss occurs
Insurance is not the only risk management transfer technique. When circumstances are
appropriate, transfer can be accomplished through - ANSWER>>noninsurance transfer
technique
Which one of the following is an example of a fortuitous loss
A. An unknown vandal spray-paints graffiti on the insured's garage.
B. An insured demolishes a deck that has been allowed to rot.
C. The value of an insured's home decreases due to a lack of maintenance.
D. Insureds intentionally set a fire and burn their house down. - ANSWER>>A. An unknown
vandal spray-paints graffiti on the insured's garage
Which one of the following statements is correct regarding the benefits that insurance provides
- ANSWER>>Investment income helps keep insurance premiums at a reasonable level
Claim buildup is considered to be among which one of the following costs of insurance -
ANSWER>>increased losses
,The primary role of insurance is to - ANSWER>>indemnify individuals and organizations for
covered losses
Coverage for money, securities, and other property from various causes of loss such as
burglary, robbery, theft, and employee dishonesty typically is provided by -
ANSWER>>commercial crime insurance
Which of the following is an opportunity cost of insurance - ANSWER>>An insureds funds that
could be invested elsewhere if purchasing insurance were not necessary
Coverage for miscellaneous types of property such as movable property, goods in domestic
transit, and property use in transportation and communication, typically is provided by -
ANSWER>>inland marine insurance
For insurers to utilize pooling most effectively and prevent catastrophic losses, the insured
exposure units need to be - ANSWER>>independent
Some loss exposures are not easy to retain, avoid, or control. What risk management
techniques is frequently used to treat such exposures - ANSWER>>transfer
Sometimes the existence of insurance encourages losses. the result of this phenomenon is that
in - ANSWER>>increases the total cost of insurance
Pravalt Construction Company pays less than its competitors for workers compensation
insurance because Pravalt has had substantially fewer employee injuries than other firms in its
class. this illustrates which one of the following benefits of insurance - ANSWER>>promote risk
control
As a single mother on a very tight budget, Ciara is tempted to skimp on her insurance. However,
her friend Mehmet tells her not to skimp on insurance, because it will help manage her cash
flows. Which one of the following examples best illustrates Mehmet's point - ANSWER>>When
her car's windshield breaks, Ciara has to pay only $100 of the $600 cost of replacing it
A small business owner concerned about something happening and not being able to work or
earn a living for extended period of time due to an accident should purchase -
ANSWER>>Disability insurance
, Adhering to the characteristics of an ideally insurable loss exposure in selling insurance help
assure that - ANSWER>>The insurer is able to charge a premium that the insured can afford to
pay
Which of the following statements is correct with regard to risk and ideally insurable
characteristics of loss exposures - ANSWER>>indemnification is the process of restoring an
insured to pre-loss financial condition
Which one of the following statements is correct - ANSWER>>insurers investment income helps
keep premiums at reasonable level
Which one of the following statements is correct regarding characteristics of ideally insurable
loss exposures - ANSWER>>Ideally, loss exposures should be spread across a large number of
similar exposure units within the same period
Which one of the following is an operating cost of insurers - ANSWER>>Producers commissions
One of the costs of insurance is said to be opportunity costs. this means that if capital and labor
were not being used in the insurance business, they could be used elsewhere and making other
productive contributions to - ANSWER>>Society
Private insurers are reluctant to provide windstorm insurance on coastal properties. This is
because the loss exposures fail to meet the criteria that ideally insurable exposures must be -
ANSWER>>Independent and not catastrophic
Sally is a recent college graduate who lives in the suburbs and drives to work daily in the city.
she recognizes that owning a car creates both property damage and liability exposures for her
and at the same time she has the burden of student loans. For someone in Sally's circumstances
the most particular risk management technique for dealing with her auto related loss exposures
is - ANSWER>>Risk transfer
Another name for liability insurance is - ANSWER>>third party insurance
A homeowners insurance policy typically includes - ANSWER>>both property and liability
coverage
which one of the following statements is true - ANSWER>>Mutual insurance include some large
national insurers
