Property and Casualty Insurance Quiz Ch 1 questions with correct

An individual applied for auto insurance and obtained coverage from ABC Insurance Company. Who is the first party in the contract? A. The insured (customer) B. The insurer (insurance company) C. The agent D. The insured and agent - answersA. The insured (customer) If a fire causes damage to a building, the fire is A. a hazard В. а peril C. a risk D. an exposure - answersВ. а peril Wearing a seat belt in a car is an example of which method of managing risk A. Retain B. Avoid C. Reduce D. Transfer - answersC. Reduce Tiffany leaves her car unlocked when she goes shopping. She figures her car and its contents are insured, so there is no reason to worry. Which type of hazard is this an example of? A. Physical B. Morale C. Careless D. Moral - answersB. Morale A flood is an example of A. a peril B. a moral hazard C. a speculative risk D. a physical hazard - answersA. a peril An insurance company incorporated in Wisconsin and conducting business in Wisconsin is known as a domestic company. What kind of company are they considered if they do business in Minnesota? A. Alien B. Domestic C. Foreign D. Nonadmitted - answersC. Foreign All of the following statements about a stock insurance company are true EXCEPT A. a stock company pays dividends to stockholders B. a stock company is a participating company C. a stock company is a nonparticipating company D. a stock company has shareholders - answersB. a stock company is a participating company What do insurance companies use to help predict how many losses will occur in a group or class of individuals? A. The law of large numbers B. Standard and Poor's Insurance Rating Service C. Risk retention groups D. Adverse selection - answersA. The law of large numbers States require companies to have a license to sell insurance in the state. The license is called A. a certificate of authority B. a reinsurance license C. a producer's license D. an admittance license - answersA. a certificate of authority All of the following are requirements of an insurable pure risk EXCEPT A. premiums must be calculable B. premiums must be affordable C. the risk must be catastrophic for the insurance company D. the loss must have been accidental - answersC. the risk must be catastrophic for the insurance company Insurers may be classified according to their financial strength. This includes all of the following factors EXCEPT A. number of clients B. loss experience C. investment performance