NJ Property Insurance State
Exam Questions and Answers
100% PASS
Risk—ANSWER-The chance of loss
Pure Risks—ANSWER-Only pure risks (not speculative risks, like gambling)
are insurable
Peril—ANSWER-Cause of loss. Examples: Fire; Explosion; Windstorm; Flood;
Theft; Collision
Hazard—ANSWER-A condition that increases the chance of a peril
occurring. Three types of hazards: Moral, Morale, and Physical
To be insurable—ANSWER-Risk must be definable, measurable, beyond the
insured's control, common to a large group of people, and not catastrophic
Basic Risk and Loss Factors—ANSWER-Risk; Loss; Exposure; Peril; Hazard
Loss—ANSWER-An unwelcomed and unplanned reduction in economic
value
, Direct Loss—ANSWER-The immediate result of an event caused by a covered
peril. Example: A home is severely damaged by fire, the damage to the
building is considered a direct loss.
Indirect Damage Loss—ANSWER-A more remote ramification than a direct
loss, but is still a result of loss from a covered peril. Example: Because a
home suffering fire damage is temporarily uninhabitable the home owner
will incur additional living expenses, over and above the home owner's
normal expenses, until the house has been repaired. These additional living
expenses are an indirect loss that follows the direct loss of the home.
Exposure—ANSWER-The state of being subject to a possible loss.
Moral Hazard—ANSWER-The tendencies or traits of an individual that
increase the chance of a loss. Alcoholism, smoking, and bad credit are
examples of moral hazards.
Morale Hazard—ANSWER-Individual tendencies, but they arise from a state
of mind, attitude, indifference to loss. Not locking one's car or driving
recklessly are examples of morale hazards.
Physical Hazard—ANSWER-Physical conditions that increase the chance of
loss. For instance, dangerous conditions or activities are physical hazards
that increase the chance of injury or death. Diseases are physical hazards
because they increase chance of death.
Legal Hazards—ANSWER-Legal or regulatory environment characteristics
that affect an insurer's ability to provide insurance at a premium that fairly
reflects its loss exposures.
© 2026 Copyright. All Rights Reserved. This document is
protected by copyright law, Copyrighted By Katelyn Whitman
Exam Questions and Answers
100% PASS
Risk—ANSWER-The chance of loss
Pure Risks—ANSWER-Only pure risks (not speculative risks, like gambling)
are insurable
Peril—ANSWER-Cause of loss. Examples: Fire; Explosion; Windstorm; Flood;
Theft; Collision
Hazard—ANSWER-A condition that increases the chance of a peril
occurring. Three types of hazards: Moral, Morale, and Physical
To be insurable—ANSWER-Risk must be definable, measurable, beyond the
insured's control, common to a large group of people, and not catastrophic
Basic Risk and Loss Factors—ANSWER-Risk; Loss; Exposure; Peril; Hazard
Loss—ANSWER-An unwelcomed and unplanned reduction in economic
value
, Direct Loss—ANSWER-The immediate result of an event caused by a covered
peril. Example: A home is severely damaged by fire, the damage to the
building is considered a direct loss.
Indirect Damage Loss—ANSWER-A more remote ramification than a direct
loss, but is still a result of loss from a covered peril. Example: Because a
home suffering fire damage is temporarily uninhabitable the home owner
will incur additional living expenses, over and above the home owner's
normal expenses, until the house has been repaired. These additional living
expenses are an indirect loss that follows the direct loss of the home.
Exposure—ANSWER-The state of being subject to a possible loss.
Moral Hazard—ANSWER-The tendencies or traits of an individual that
increase the chance of a loss. Alcoholism, smoking, and bad credit are
examples of moral hazards.
Morale Hazard—ANSWER-Individual tendencies, but they arise from a state
of mind, attitude, indifference to loss. Not locking one's car or driving
recklessly are examples of morale hazards.
Physical Hazard—ANSWER-Physical conditions that increase the chance of
loss. For instance, dangerous conditions or activities are physical hazards
that increase the chance of injury or death. Diseases are physical hazards
because they increase chance of death.
Legal Hazards—ANSWER-Legal or regulatory environment characteristics
that affect an insurer's ability to provide insurance at a premium that fairly
reflects its loss exposures.
© 2026 Copyright. All Rights Reserved. This document is
protected by copyright law, Copyrighted By Katelyn Whitman
