MN Property & Casualty exam ACTUAL
QUESTIONS AND CORRECT ANSWERS
First party in the contract - Correct answers✔The insured (customer)
Peril - Correct answers✔A tornado damaged the insured's home
Reduction as a risk management technique - Correct answers✔Wearing a seat belt in a car
Type of hazard - Correct answers✔Morale
Flood - Correct answers✔A peril
Insurance - Correct answers✔______ is a contract that transfers the risk of financial loss from an
individual or business to an insurance company.
Types of risk - Correct answers✔Speculative risk and pure risk.
Types of hazards - Correct answers✔Physical hazards, moral hazards, and morale hazards.
Examples of a peril - Correct answers✔Fire, lightning, theft, and car accident.
Ways of managing risk - Correct answers✔Sharing, transfer, avoidance, retention, and reduction.
,Law of large numbers - Correct answers✔The principle that makes insurance possible; the larger
the group, the more accurately losses can be predicted.
Adverse selection - Correct answers✔The tendency for higher-risk individuals to get and keep
insurance as compared to individuals that represent an average level of risk.
Reinsurance - Correct answers✔Reinsurance is insurance for insurers, transferring risk from one
insurer to another.
Elements of an insurable risk - Correct answers✔Calculable, affordable, non-catastrophic,
homogeneous, accidental, and measurable.
Private vs government insurers - Correct answers✔________ are owned by private entities,
_______insurers are operated by the state or federal government to provide insurance not
available from private insurers.
Elements of a legal insurance contract - Correct answers✔Consideration, legal purpose, offer,
acceptance, and competent parties.
Consideration in insurance contracts - Correct answers✔______ refers to an exchange of value;
the insured provides payment and truthful statements, and the insurer promises to pay for
covered losses.
Difference between offer and acceptance - Correct answers✔An offer is a proposal made by one
party, and acceptance must be unconditional and unqualified.
, Competent parties in insurance contracts - Correct answers✔Both parties must have the legal
capacity to make a contract, meaning they must be of legal age and mentally competent.
Adhesion in insurance contracts - Correct answers✔Adhesion means the contract is written by
one party (the insurer) and the other party (the insured) must adhere to it.
Aleatory contract - Correct answers✔An aleatory contract is one where the value received by
each party is unequal, depending on an uncertain event.
Utmost good faith - Correct answers✔Each party is entitled to a reasonable expectation that the
other party will not try to conceal pertinent information or act deceptively.
Unilateral in insurance contracts - Correct answers✔Only one party (the insurer) is legally bound
to perform under the contract.
Indemnity - Correct answers✔Indemnity means restoring the insured to the financial state they
were in before the loss, without profit.
Difference between representations and warranties - Correct answers✔Representations are
statements believed to be true, while warranties are guaranteed to be true.
Difference between property insurance and casualty insurance - Correct answers✔Property
insurance covers personal belongings and real property, while casualty insurance covers liability
for negligent acts or omissions that cause injury or property damage to others.
QUESTIONS AND CORRECT ANSWERS
First party in the contract - Correct answers✔The insured (customer)
Peril - Correct answers✔A tornado damaged the insured's home
Reduction as a risk management technique - Correct answers✔Wearing a seat belt in a car
Type of hazard - Correct answers✔Morale
Flood - Correct answers✔A peril
Insurance - Correct answers✔______ is a contract that transfers the risk of financial loss from an
individual or business to an insurance company.
Types of risk - Correct answers✔Speculative risk and pure risk.
Types of hazards - Correct answers✔Physical hazards, moral hazards, and morale hazards.
Examples of a peril - Correct answers✔Fire, lightning, theft, and car accident.
Ways of managing risk - Correct answers✔Sharing, transfer, avoidance, retention, and reduction.
,Law of large numbers - Correct answers✔The principle that makes insurance possible; the larger
the group, the more accurately losses can be predicted.
Adverse selection - Correct answers✔The tendency for higher-risk individuals to get and keep
insurance as compared to individuals that represent an average level of risk.
Reinsurance - Correct answers✔Reinsurance is insurance for insurers, transferring risk from one
insurer to another.
Elements of an insurable risk - Correct answers✔Calculable, affordable, non-catastrophic,
homogeneous, accidental, and measurable.
Private vs government insurers - Correct answers✔________ are owned by private entities,
_______insurers are operated by the state or federal government to provide insurance not
available from private insurers.
Elements of a legal insurance contract - Correct answers✔Consideration, legal purpose, offer,
acceptance, and competent parties.
Consideration in insurance contracts - Correct answers✔______ refers to an exchange of value;
the insured provides payment and truthful statements, and the insurer promises to pay for
covered losses.
Difference between offer and acceptance - Correct answers✔An offer is a proposal made by one
party, and acceptance must be unconditional and unqualified.
, Competent parties in insurance contracts - Correct answers✔Both parties must have the legal
capacity to make a contract, meaning they must be of legal age and mentally competent.
Adhesion in insurance contracts - Correct answers✔Adhesion means the contract is written by
one party (the insurer) and the other party (the insured) must adhere to it.
Aleatory contract - Correct answers✔An aleatory contract is one where the value received by
each party is unequal, depending on an uncertain event.
Utmost good faith - Correct answers✔Each party is entitled to a reasonable expectation that the
other party will not try to conceal pertinent information or act deceptively.
Unilateral in insurance contracts - Correct answers✔Only one party (the insurer) is legally bound
to perform under the contract.
Indemnity - Correct answers✔Indemnity means restoring the insured to the financial state they
were in before the loss, without profit.
Difference between representations and warranties - Correct answers✔Representations are
statements believed to be true, while warranties are guaranteed to be true.
Difference between property insurance and casualty insurance - Correct answers✔Property
insurance covers personal belongings and real property, while casualty insurance covers liability
for negligent acts or omissions that cause injury or property damage to others.
