Arizona Personal Lines questions
with 100% correct answers
Insurance - answer Transfer of risk of loss From an
individual or business entity to an insurance company.
Which in turn spreads the costs of loss.
Person - answer Individual, business entity, association,
organization, society, partnership, trust, or corporation.
Risk - answer Uncertainty or chance of loss occurring.
What are the 2 types of Risk and which one is insurable ?
- answer Pure Risk; Insurable and Speculative; Not
insurable
Exposure - answer Unit of measure used to determine
rates charged for insurance coverage.
Homogeneous - answer Large number of units, with the
same or similar exposure loss.
Hazards - answer Conditions or situations that increase
the probability of an insured loss occurring.
,What are the 3 types of Hazards ? - answer Physical,
moral, morale
Physical - answer Individual characteristics; physical
condition, past medical history, or condition at birth.
Moral - answer Knowing right from wrong, but choosing
wrong; Lying or committing a wrongful act.
Morale - answer State of mind that causes indifference to
loss; Attitude towards things, carelessness.
Perils - answer Cause of loss insured against.
Loss - answer Reduction, decrease, or disappearance of
value of the person or property, that is insured.
What are the methods to handling a risk ? - answer
Avoidance, retention, sharing, reduction, and transfer.
Avoidance - answer Eliminating exposure of loss. For
example; afraid of dying in a car crash, choose to never
drive.
,Retention - answer Planned assumption of risk, which the
insured takes responsibility for through deductibles, co-
payments, or self-insurance.
What is the purpose of Retention ? - answer The purpose
of retention is to reduce expenses and improve cash flow,
increase control of claim reserving and claims
settlements, and fund for losses that can't be insured.
Sharing (Reciprocal Exchange Agreement) - answer A
method of dealing with risk for an individual or group with
the same or similar exposure by sharing the losses.
Reduction - answer Attempt to lessen the possibility or
severity of a loss.
Transfer - answer The other party will borne the
responsibility of the loss and expenses.
5 elements of insurable risk - answer Due to chance,
definite and measurable, statistically predictable, not
catastrophic, and randomly selected and large loss
exoposure.
, What is adverse selection ? - answer Insuring of risks that
are more prone to losses than the average risk. Used in
order to protect insurance companies.
Law of Large Numbers - answer The larger number of
people with similar exposure to loss, more predictable
losses will be.
Reinusracne - answer Contract under which one company
indemnifies another company for part of all liabilities.
What is the purpose of reinsurance ? - answer To protect
insurers ( company ) against catastrophic losses.
What are the 2 parties in a reinsurance contract called
and their roles ? - answer Ceding Insurer; insurance
company receiving insurance from another company.
Assuming insurer; insurance company covering the other.
( Reinsurer )
Facultative Reinsurance ( Agreement ) - answer When
reinsurance is purchased on a specific policy. Underwrite
each application separately.
with 100% correct answers
Insurance - answer Transfer of risk of loss From an
individual or business entity to an insurance company.
Which in turn spreads the costs of loss.
Person - answer Individual, business entity, association,
organization, society, partnership, trust, or corporation.
Risk - answer Uncertainty or chance of loss occurring.
What are the 2 types of Risk and which one is insurable ?
- answer Pure Risk; Insurable and Speculative; Not
insurable
Exposure - answer Unit of measure used to determine
rates charged for insurance coverage.
Homogeneous - answer Large number of units, with the
same or similar exposure loss.
Hazards - answer Conditions or situations that increase
the probability of an insured loss occurring.
,What are the 3 types of Hazards ? - answer Physical,
moral, morale
Physical - answer Individual characteristics; physical
condition, past medical history, or condition at birth.
Moral - answer Knowing right from wrong, but choosing
wrong; Lying or committing a wrongful act.
Morale - answer State of mind that causes indifference to
loss; Attitude towards things, carelessness.
Perils - answer Cause of loss insured against.
Loss - answer Reduction, decrease, or disappearance of
value of the person or property, that is insured.
What are the methods to handling a risk ? - answer
Avoidance, retention, sharing, reduction, and transfer.
Avoidance - answer Eliminating exposure of loss. For
example; afraid of dying in a car crash, choose to never
drive.
,Retention - answer Planned assumption of risk, which the
insured takes responsibility for through deductibles, co-
payments, or self-insurance.
What is the purpose of Retention ? - answer The purpose
of retention is to reduce expenses and improve cash flow,
increase control of claim reserving and claims
settlements, and fund for losses that can't be insured.
Sharing (Reciprocal Exchange Agreement) - answer A
method of dealing with risk for an individual or group with
the same or similar exposure by sharing the losses.
Reduction - answer Attempt to lessen the possibility or
severity of a loss.
Transfer - answer The other party will borne the
responsibility of the loss and expenses.
5 elements of insurable risk - answer Due to chance,
definite and measurable, statistically predictable, not
catastrophic, and randomly selected and large loss
exoposure.
, What is adverse selection ? - answer Insuring of risks that
are more prone to losses than the average risk. Used in
order to protect insurance companies.
Law of Large Numbers - answer The larger number of
people with similar exposure to loss, more predictable
losses will be.
Reinusracne - answer Contract under which one company
indemnifies another company for part of all liabilities.
What is the purpose of reinsurance ? - answer To protect
insurers ( company ) against catastrophic losses.
What are the 2 parties in a reinsurance contract called
and their roles ? - answer Ceding Insurer; insurance
company receiving insurance from another company.
Assuming insurer; insurance company covering the other.
( Reinsurer )
Facultative Reinsurance ( Agreement ) - answer When
reinsurance is purchased on a specific policy. Underwrite
each application separately.
