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Maryland Property and Casualty Insurance Exam
with 300 Most recent Practice Questions and
Answers/ Maryland P & C License Test 2025
Insurance Transfers - ...✔✔ANSWER✔✔...the risk of loss
from an individual or business entity to an insurance
company, which in turn spreads the costs of unexpected
losses to many individuals
Risk - ...✔✔ANSWER✔✔...the uncertainty or chance of a
loss occurring
Pure Risk - ...✔✔ANSWER✔✔...refers to situations that
can only result in a loss or no change. No opportunity for
financial gain. Only type of risk insurance companies are
willing to to accept.
Exposure - ...✔✔ANSWER✔✔...a unit of measure used to
determine rates charged for insurance coverage. (E.g.
age of insured, medical history, occupation, gender..etc)
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Homogeneous exposure - ...✔✔ANSWER✔✔...larger
number of units having similar exposure to loss. sharing
risk among members of that group.
Hazard - ...✔✔ANSWER✔✔...conditions or situations that
increase the probability of an insured loss occurring.
Classified as physical, moral, and morale
Physical Hazard - ...✔✔ANSWER✔✔...those arising from
the material, structural, or operational features of the
risk, apart from the persons owning or managing it
Moral Hazard - ...✔✔ANSWER✔✔...those applicants that
may lie on an application for insurance, or in the past
have submitted fraudulent claims against the insurer
Morale Hazard - ...✔✔ANSWER✔✔...an increase in the
hazard presented by a risk, arising from the insured's
indifference to loss because of the existence of
insurance. (E.g "I'm not going to bother fixing this if it
brakes. My insurance will pay to replace it.")
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Perils - ...✔✔ANSWER✔✔...the causes of loss insured
against in a policy.
Loss - ...✔✔ANSWER✔✔...defined as the reduction,
decrease, or disappearance of value of the person or
property insured in a policy, caused by a named peril.
Insurance provides a means to transfer this.
Avoidance - ...✔✔ANSWER✔✔...eliminating exposure to a
loss (E.g. To avoid the risk of a plane crash, one chooses
to never fly.)
Retention
(3 Reasons) - ...✔✔ANSWER✔✔...the planned assumption
of risk by an insured through the use of deductibles, co-
payments, or self insurance.
1) to reduce expenses and improve cash flow
2)to increase control of claim reserving and claim
settlements
3)Fund for losses that cannot be insured
Sharing - ...✔✔ANSWER✔✔...method of dealing with risk
for a group of individual persons or businesses with
Maryland Property and Casualty Insurance Exam
with 300 Most recent Practice Questions and
Answers/ Maryland P & C License Test 2025
Insurance Transfers - ...✔✔ANSWER✔✔...the risk of loss
from an individual or business entity to an insurance
company, which in turn spreads the costs of unexpected
losses to many individuals
Risk - ...✔✔ANSWER✔✔...the uncertainty or chance of a
loss occurring
Pure Risk - ...✔✔ANSWER✔✔...refers to situations that
can only result in a loss or no change. No opportunity for
financial gain. Only type of risk insurance companies are
willing to to accept.
Exposure - ...✔✔ANSWER✔✔...a unit of measure used to
determine rates charged for insurance coverage. (E.g.
age of insured, medical history, occupation, gender..etc)
,2|Page
Homogeneous exposure - ...✔✔ANSWER✔✔...larger
number of units having similar exposure to loss. sharing
risk among members of that group.
Hazard - ...✔✔ANSWER✔✔...conditions or situations that
increase the probability of an insured loss occurring.
Classified as physical, moral, and morale
Physical Hazard - ...✔✔ANSWER✔✔...those arising from
the material, structural, or operational features of the
risk, apart from the persons owning or managing it
Moral Hazard - ...✔✔ANSWER✔✔...those applicants that
may lie on an application for insurance, or in the past
have submitted fraudulent claims against the insurer
Morale Hazard - ...✔✔ANSWER✔✔...an increase in the
hazard presented by a risk, arising from the insured's
indifference to loss because of the existence of
insurance. (E.g "I'm not going to bother fixing this if it
brakes. My insurance will pay to replace it.")
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Perils - ...✔✔ANSWER✔✔...the causes of loss insured
against in a policy.
Loss - ...✔✔ANSWER✔✔...defined as the reduction,
decrease, or disappearance of value of the person or
property insured in a policy, caused by a named peril.
Insurance provides a means to transfer this.
Avoidance - ...✔✔ANSWER✔✔...eliminating exposure to a
loss (E.g. To avoid the risk of a plane crash, one chooses
to never fly.)
Retention
(3 Reasons) - ...✔✔ANSWER✔✔...the planned assumption
of risk by an insured through the use of deductibles, co-
payments, or self insurance.
1) to reduce expenses and improve cash flow
2)to increase control of claim reserving and claim
settlements
3)Fund for losses that cannot be insured
Sharing - ...✔✔ANSWER✔✔...method of dealing with risk
for a group of individual persons or businesses with
