Nevada Property & Casualty Insurance Exam (Units 1-6) questions with answers

Nevada Property & Casualty Insurance Exam |\ |\ |\ |\ |\ |\




(Units 1-6) questions with answers |\ |\ |\ |\




What is a Risk? (2 types) - CORRECT ANSWERS ✔✔Risk =
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possibility a loss will occur |\ |\ |\ |\




*Speculative risk = possibility of loss/gain (gambling); not |\ |\ |\ |\ |\ |\ |\ |\


covered
*Pure = only possibility of loss (chance of being in car accident);
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covered


Direct loss + Indirect loss - CORRECT ANSWERS ✔✔Direct =
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physical loss (lightning hits house) |\ |\ |\ |\




Indirect = consequence of physical loss (loss of rental income
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due to fire, causing loss of profits to landlord)
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What is a Hazard? (3 types) - CORRECT ANSWERS ✔✔anything
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that increases the chance of loss; hazards don't cause losses, but
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makes them more likely.
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1) Physical: hazard can be seen (wet floor sign)
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2) Morale: carelessness/state of mind (leaving doors unlocked)
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3) Moral: dishonesty (lies)
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,Methods of handling risk (STARR - 5) - CORRECT ANSWERS ✔✔1)
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Sharing: 2 or more individuals/businesses agree to pay portion of
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loss incurred
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2) Transfer: what happens in insurance. transfer of risk from
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insured to the insurer |\ |\ |\




3) Avoidance: eliminating particular risk by not engaging in
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certain activity (individual who doesn't drive avoids risk of
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injuring someone) |\




4) Retention: if you don't have car insurance to pay for damages
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you caused to another person, you have retained that risk
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5) Reduction: lessening the chance that a loss will occur
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(installing sprinklers in building reduces damage caused by fire)
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Parties to an insurance contract (3): - CORRECT ANSWERS ✔✔1st
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party: me (insured)
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2nd party: insurer
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3rd party: the other guy
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Adverse selection: - CORRECT ANSWERS ✔✔the tendency for
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higher-risk individuals to get insurance vs individuals
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representing an average level of risk |\ |\ |\ |\ |\




Reinsurance: - CORRECT ANSWERS ✔✔insurance for insurers |\ |\ |\ |\ |\ |\

, helps insurance companies spread their risk from one insurer to
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another


Stock insurers VS Mutual insurers: - CORRECT ANSWERS ✔✔Stock
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insurer: business formed as a corporation; owned by
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stockholders


Mutual insurer: owned by policyholders (customers)
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*members who have insurance are called certificate holders;
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(fraternal policies says that certificate holders may be assessed
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additional charges if premiums aren't sufficient to pay claims
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during a given period; open contracts)
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Subscribers (Reciprocal insurers) - CORRECT ANSWERS|\ |\ |\ |\ |\ |\


✔✔Subscribers = unincorporated groups of people that agree to |\ |\ |\ |\ |\ |\ |\ |\ |\


insure each other's losses under a contract.
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*managed by Attorney in-fact |\ |\ |\




Lloy'd Association - CORRECT ANSWERS ✔✔insurance provided
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by underwriters
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-insures unusual risks (body parts of athletes, hair/feet of
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celebrities)