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Personal Lines Alabama State Exam |
Actual Key Questions With Answers
Of the following statements, which one best summarizes the purpose of
insurance?-correct-answer-It spreads financial risk of loss over a large group to
minimize the loss to any one individual
The law of large numbers is used by insurance companies to help determine what
rates to charge. Which of the following statements is most correct?-correct-
answer-The larger the number of risks combined into one group, the less
uncertainty there will be as to the amount of loss that will be incurred.
A risk that involves both the chance of loss or gain is-correct-answer-Speculative
risk
If you wreck your car and cause $5,000 worth of damage the value of your car will
be reduced. This example best illustrates what insurance principle?-correct-
answer-Insurable interest
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Joe purchases a new home with a replacement value of $420,000. He then insures
it for $300,000 with a $500 deductible. If Joe has a covered loss of $30,000. How
much will his insurance company pay?-correct-answer-$26,200
A nonexclusive agent represents:-correct-answer-More than one insurance
company
A hazard is defined as:-correct-answer-A condition that increases the chance that
a loss will occur.
Insureds who meet the financial requirements and are approved to transact
business in the state are considered _________ or ________ into the state as a
legal insurer.-correct-answer-Authorized/Admitted
Of the following, which is not considered to be a risk management tool?-correct-
answer-Obligatory
The tendency for people with a greater-than average risk to purchase insurance is
called:-correct-answer-Adverse selection
Personal Lines Alabama State Exam |
Actual Key Questions With Answers
Of the following statements, which one best summarizes the purpose of
insurance?-correct-answer-It spreads financial risk of loss over a large group to
minimize the loss to any one individual
The law of large numbers is used by insurance companies to help determine what
rates to charge. Which of the following statements is most correct?-correct-
answer-The larger the number of risks combined into one group, the less
uncertainty there will be as to the amount of loss that will be incurred.
A risk that involves both the chance of loss or gain is-correct-answer-Speculative
risk
If you wreck your car and cause $5,000 worth of damage the value of your car will
be reduced. This example best illustrates what insurance principle?-correct-
answer-Insurable interest
, 2|Page
Joe purchases a new home with a replacement value of $420,000. He then insures
it for $300,000 with a $500 deductible. If Joe has a covered loss of $30,000. How
much will his insurance company pay?-correct-answer-$26,200
A nonexclusive agent represents:-correct-answer-More than one insurance
company
A hazard is defined as:-correct-answer-A condition that increases the chance that
a loss will occur.
Insureds who meet the financial requirements and are approved to transact
business in the state are considered _________ or ________ into the state as a
legal insurer.-correct-answer-Authorized/Admitted
Of the following, which is not considered to be a risk management tool?-correct-
answer-Obligatory
The tendency for people with a greater-than average risk to purchase insurance is
called:-correct-answer-Adverse selection
