AINS 101 EXAM QUESTIONS AND
ANSWERS 2025/2026 ALREADY GRADED
A+
Which one of the following statements is correct regarding the benefits provided by
insurance?
A. Insurance reduces the financial consequences of loss exposures but not the related
uncertainty.
B. The reduction in losses paid by insurers due to risk control measures benefits
individual insureds but not society as a whole.
C. Insurance helps reduce the financial burden to society by compensating accident
victims.
D. The primary role of insurance is to meet mandatory insurance requirements. - ANS- C.
Insurance helps reduce the financial burden to society by compensating accident
victims.
Which one of the following represents uncertainty about outcomes that can be negative
or positive?
A. Risk
B. Transfer
C. Loss exposure
D. Pooling - ANS- A. Risk
The insurance agent suggested that Sally's Snack Shop buy a policy that combines
property, crime, and liability coverages into one policy. This is referred to as a(n)
A. Commercial package policy (CPP).
B. Commercial umbrella policy.
C. Employee dishonesty policy.
D. Workers compensation policy. - ANS- A. Commercial package policy (CPP).
Commercial Umbrella Policy - ANS- Type of policy that provides broad coverage for an
insured's liability over and above liability covered by an underlying contract.
Commercial Crime Insurance - ANS- Coverage for money and other business property
from various causes of loss such as burglary, robbery, theft, and employee dishonesty
An insurer that was formed for the purpose of earning a profit for its stockholders is a
,A. Mutual insurer.
B. Reciprocal insurance exchange.
C. Stock insurer.
D. Captive insurer. - ANS- C. Stock insurer.
Mutual Insurer - ANS- An insurer that is owned by its policyholders and formed as a
corporation for the purpose of providing insurance to them.
Artificial intelligence - ANS- a subdiscipline of computer science that attempts to
simulate human thinking
Mechanical sensors - ANS- monitoring devices that can be used to determine position of
components, force applied, or movement of parts.
Which one of the following best describes the concept of pooling?
A. The financial consequences of unanticipated losses are transferred to an insurer.
B. Insureds share the cost of each other's losses.
C. Risk management is concerned with positive and negative risks.
D. Insurance benefits society as a whole. - ANS- B. Insureds share the cost of each
other's losses.
A type of insurer that is owned by policyholders and may pay dividends to policyholders
as a return of a portion of premiums paid is a
A. Captive insurer.
B. Mutual insurer.
C. Reciprocal insurance exchange.
D. Stock insurer. - ANS- B. Mutual insurer.
Speculative risk - ANS- A chance of loss, no loss, or gain.
Pure risk - ANS- a risk that presents the chance of loss but no opportunity for gain
Strategic risk - ANS- A dramatic ideological shift in corporate policies after a national
election is an example of strategic risk
Carlos is new to the insurance business and is learning about insurance regulation and
what he, now working with Grady Insurance, will need to be aware of regarding the
subject of compliance. Which one of the following will Carlos find is accurate as he better
understands why insurance is regulated?
A. Insurance regulation prevents insurers from covering catastrophic occurrences so
insurers can remain solvent.
B. The U.S. insurance industry is governed by federal laws that protect citizens by
leveling the playing field for insurers and policyholders
, C. Insurance regulation speaks to the types of risks insurers may cover, but does not
play a part in how they invest their profits.
D. Insurance regulation protects customers by guaranteeing insurance is available and
accessible to everyone who needs it. - ANS- D. Insurance regulation protects customers
by guaranteeing insurance is available and accessible to everyone who needs it.
One of the reasons for insurance regulation is to prevent destructive competition. In
which one of the following scenarios would destructive competition be exhibited?
A. North Insurance is trying to break into a specialized type of insurance market that is
generally out of range for most customers; North decides to price its coverages
commensurate with other insurers offering similar policies.
B. South Insurance purposely writes its policies with hard-to-understand terminology
that only its agents can explain, so that its insureds will purchase its products without
asking a lot of questions.
C. West Insurance has had three straight years of record-setting low claims and has
accumulated more than expected profits; it plans on the trend continuing and
overspends on new long-term investments.
D. East Insurance comes up with a new rate structure allowing "preferred customers"
discounted policies when they continually ren - ANS- D. East Insurance comes up with a
new rate structure allowing "preferred customers" discounted policies when they
continually renew year after year; East eventually loses needed revenue but is rewarded
by its competitors leaving the market.
An insurer's financial statement shows a loss reserve and an unearned premium reserve.
These reserves are part of the insurer's
A. Nonadmitted assets.
B. Policyholders' surplus
C. Total liabilities.
D. Admitted assets. - ANS- C. Total liabilities.
Which one of the following is shown on the balance sheet of an insurer?
A. Acquisition expenses
B. Incurred losses
C. Cash and short-term investments
D. Net investment income - ANS- C. Cash and short-term investments
Expense Ratio - ANS- An insurer's incurred underwriting expenses for a given period
divided by its written premiums for the same period.
The financial report for Hometown Insurer contains the following information:
Earned premiums $4,000,000
Written premiums $5,000,000
Net investment income $1,000,000
Incurred Losses $3,000,000
ANSWERS 2025/2026 ALREADY GRADED
A+
Which one of the following statements is correct regarding the benefits provided by
insurance?
A. Insurance reduces the financial consequences of loss exposures but not the related
uncertainty.
B. The reduction in losses paid by insurers due to risk control measures benefits
individual insureds but not society as a whole.
C. Insurance helps reduce the financial burden to society by compensating accident
victims.
D. The primary role of insurance is to meet mandatory insurance requirements. - ANS- C.
Insurance helps reduce the financial burden to society by compensating accident
victims.
Which one of the following represents uncertainty about outcomes that can be negative
or positive?
A. Risk
B. Transfer
C. Loss exposure
D. Pooling - ANS- A. Risk
The insurance agent suggested that Sally's Snack Shop buy a policy that combines
property, crime, and liability coverages into one policy. This is referred to as a(n)
A. Commercial package policy (CPP).
B. Commercial umbrella policy.
C. Employee dishonesty policy.
D. Workers compensation policy. - ANS- A. Commercial package policy (CPP).
Commercial Umbrella Policy - ANS- Type of policy that provides broad coverage for an
insured's liability over and above liability covered by an underlying contract.
Commercial Crime Insurance - ANS- Coverage for money and other business property
from various causes of loss such as burglary, robbery, theft, and employee dishonesty
An insurer that was formed for the purpose of earning a profit for its stockholders is a
,A. Mutual insurer.
B. Reciprocal insurance exchange.
C. Stock insurer.
D. Captive insurer. - ANS- C. Stock insurer.
Mutual Insurer - ANS- An insurer that is owned by its policyholders and formed as a
corporation for the purpose of providing insurance to them.
Artificial intelligence - ANS- a subdiscipline of computer science that attempts to
simulate human thinking
Mechanical sensors - ANS- monitoring devices that can be used to determine position of
components, force applied, or movement of parts.
Which one of the following best describes the concept of pooling?
A. The financial consequences of unanticipated losses are transferred to an insurer.
B. Insureds share the cost of each other's losses.
C. Risk management is concerned with positive and negative risks.
D. Insurance benefits society as a whole. - ANS- B. Insureds share the cost of each
other's losses.
A type of insurer that is owned by policyholders and may pay dividends to policyholders
as a return of a portion of premiums paid is a
A. Captive insurer.
B. Mutual insurer.
C. Reciprocal insurance exchange.
D. Stock insurer. - ANS- B. Mutual insurer.
Speculative risk - ANS- A chance of loss, no loss, or gain.
Pure risk - ANS- a risk that presents the chance of loss but no opportunity for gain
Strategic risk - ANS- A dramatic ideological shift in corporate policies after a national
election is an example of strategic risk
Carlos is new to the insurance business and is learning about insurance regulation and
what he, now working with Grady Insurance, will need to be aware of regarding the
subject of compliance. Which one of the following will Carlos find is accurate as he better
understands why insurance is regulated?
A. Insurance regulation prevents insurers from covering catastrophic occurrences so
insurers can remain solvent.
B. The U.S. insurance industry is governed by federal laws that protect citizens by
leveling the playing field for insurers and policyholders
, C. Insurance regulation speaks to the types of risks insurers may cover, but does not
play a part in how they invest their profits.
D. Insurance regulation protects customers by guaranteeing insurance is available and
accessible to everyone who needs it. - ANS- D. Insurance regulation protects customers
by guaranteeing insurance is available and accessible to everyone who needs it.
One of the reasons for insurance regulation is to prevent destructive competition. In
which one of the following scenarios would destructive competition be exhibited?
A. North Insurance is trying to break into a specialized type of insurance market that is
generally out of range for most customers; North decides to price its coverages
commensurate with other insurers offering similar policies.
B. South Insurance purposely writes its policies with hard-to-understand terminology
that only its agents can explain, so that its insureds will purchase its products without
asking a lot of questions.
C. West Insurance has had three straight years of record-setting low claims and has
accumulated more than expected profits; it plans on the trend continuing and
overspends on new long-term investments.
D. East Insurance comes up with a new rate structure allowing "preferred customers"
discounted policies when they continually ren - ANS- D. East Insurance comes up with a
new rate structure allowing "preferred customers" discounted policies when they
continually renew year after year; East eventually loses needed revenue but is rewarded
by its competitors leaving the market.
An insurer's financial statement shows a loss reserve and an unearned premium reserve.
These reserves are part of the insurer's
A. Nonadmitted assets.
B. Policyholders' surplus
C. Total liabilities.
D. Admitted assets. - ANS- C. Total liabilities.
Which one of the following is shown on the balance sheet of an insurer?
A. Acquisition expenses
B. Incurred losses
C. Cash and short-term investments
D. Net investment income - ANS- C. Cash and short-term investments
Expense Ratio - ANS- An insurer's incurred underwriting expenses for a given period
divided by its written premiums for the same period.
The financial report for Hometown Insurer contains the following information:
Earned premiums $4,000,000
Written premiums $5,000,000
Net investment income $1,000,000
Incurred Losses $3,000,000
