PA PROPERTY AND CASUALTY EXAM
COMPREHENSIVE STUDY GUIDE 2026 VERIFIED
ANSWERS
◉ Physical Hazard. Answer: individual characteristics that increase
the chances of the cause of loss---(physical condition, past medical
history, birth defect, blindness)
◉ Moral Hazard. Answer: tendencies towards increased risk
(character/reputation)
◉ Morale Hazards. Answer: arise from state of mind that causes
indifference to loss (carelessness)
◉ Elements of insurable risk. Answer: must be definable, accidental,
predictable, law of large #s should apply, create financial hardship,
reasonable premiums, not catastrophic
◉ Exposure. Answer: unit of measurement used to determine rates
charged for insurance coverage
◉ Homogeneous. Answer: large # of units having the same or
similar exposure to loss
,◉ Insurance. Answer: transfers the risk of loss from individual or
entity to insurance company, which spreads the costs of unexpected
losses to many individuals, includes solicitation, negotiations, sale,
and advising on individual concerns, coverage or claims
◉ Loss. Answer: the reduction, decrease, or disappearance of value
of the person or property insured in a policy, caused by a named
peril
◉ Avoidance, retention (reduce premiums), sharing, reduction, and
transfer. Answer: Methods of Handling Risk include...
◉ Avoidance. Answer: eliminating exposure for loss (ex. avoid
airplane crash by not getting in airplane)
◉ Retention. Answer: planned assumption of risk by an insured
through the use of deductibles, co-payments, or self insurance
Purposes are: 1) reduce expenses, improve cash flow 2) increase
control of claim reserving and claim settlements 3) fund for losses
that cannot be insured
◉ Self-Insurance. Answer: when insured accepts responsibility for
loss before the company pays
,◉ Sharing. Answer: method of dealing with risk for a group of
individual persons or businesses with the same similar exposure to
loss to share the losses that occur with that group
◉ Reduction. Answer: lessen the possibility or severity of a loss (ex.
installing smoke detectors, physical to detect health problems, life
style change)
◉ Transfer. Answer: most effective method of decreasing risk, risk or
loss is borne by a third party (Insurance company) so that the
insured is relieved of some of the financial losses
◉ Adverse Selection. Answer: insuring risks that are more prone to
losses than average risk (poorer risks tend to seek insurance or file
claims to a greater extent than better risks) companies can refuse or
restrict coverage for bad risks or charge them a higher rate
◉ Reinsurance. Answer: protects insurance agencies from
catastrophic risks (war/nuclear events)
◉ Stock companies. Answer: owned by stockholders, right of voting
and incurring profits or losses
, ◉ Mutual Companies. Answer: owned by policyholders, share profit
in form of dividends, also have voting rights
◉ Fraternals. Answer: organized welfare plans
◉ Reciprocals. Answer: "members" managed by an attorney in fact
◉ Domestic Insurers. Answer: incorporated in the same state as the
home office
◉ Foreign Insurers. Answer: incorporated in another state/territory
◉ Alien Insurers. Answer: incorporated outside of the U.S
◉ Warranties. Answer: QOT: An application that is made with facts
that are believed to be without doubt true are called...***
◉ Insurer. Answer: QOT: Who is the representative of the insurance
producer?***
◉ appointed by an insurer. Answer: QOT: Producers shall not act as
insured until...***
COMPREHENSIVE STUDY GUIDE 2026 VERIFIED
ANSWERS
◉ Physical Hazard. Answer: individual characteristics that increase
the chances of the cause of loss---(physical condition, past medical
history, birth defect, blindness)
◉ Moral Hazard. Answer: tendencies towards increased risk
(character/reputation)
◉ Morale Hazards. Answer: arise from state of mind that causes
indifference to loss (carelessness)
◉ Elements of insurable risk. Answer: must be definable, accidental,
predictable, law of large #s should apply, create financial hardship,
reasonable premiums, not catastrophic
◉ Exposure. Answer: unit of measurement used to determine rates
charged for insurance coverage
◉ Homogeneous. Answer: large # of units having the same or
similar exposure to loss
,◉ Insurance. Answer: transfers the risk of loss from individual or
entity to insurance company, which spreads the costs of unexpected
losses to many individuals, includes solicitation, negotiations, sale,
and advising on individual concerns, coverage or claims
◉ Loss. Answer: the reduction, decrease, or disappearance of value
of the person or property insured in a policy, caused by a named
peril
◉ Avoidance, retention (reduce premiums), sharing, reduction, and
transfer. Answer: Methods of Handling Risk include...
◉ Avoidance. Answer: eliminating exposure for loss (ex. avoid
airplane crash by not getting in airplane)
◉ Retention. Answer: planned assumption of risk by an insured
through the use of deductibles, co-payments, or self insurance
Purposes are: 1) reduce expenses, improve cash flow 2) increase
control of claim reserving and claim settlements 3) fund for losses
that cannot be insured
◉ Self-Insurance. Answer: when insured accepts responsibility for
loss before the company pays
,◉ Sharing. Answer: method of dealing with risk for a group of
individual persons or businesses with the same similar exposure to
loss to share the losses that occur with that group
◉ Reduction. Answer: lessen the possibility or severity of a loss (ex.
installing smoke detectors, physical to detect health problems, life
style change)
◉ Transfer. Answer: most effective method of decreasing risk, risk or
loss is borne by a third party (Insurance company) so that the
insured is relieved of some of the financial losses
◉ Adverse Selection. Answer: insuring risks that are more prone to
losses than average risk (poorer risks tend to seek insurance or file
claims to a greater extent than better risks) companies can refuse or
restrict coverage for bad risks or charge them a higher rate
◉ Reinsurance. Answer: protects insurance agencies from
catastrophic risks (war/nuclear events)
◉ Stock companies. Answer: owned by stockholders, right of voting
and incurring profits or losses
, ◉ Mutual Companies. Answer: owned by policyholders, share profit
in form of dividends, also have voting rights
◉ Fraternals. Answer: organized welfare plans
◉ Reciprocals. Answer: "members" managed by an attorney in fact
◉ Domestic Insurers. Answer: incorporated in the same state as the
home office
◉ Foreign Insurers. Answer: incorporated in another state/territory
◉ Alien Insurers. Answer: incorporated outside of the U.S
◉ Warranties. Answer: QOT: An application that is made with facts
that are believed to be without doubt true are called...***
◉ Insurer. Answer: QOT: Who is the representative of the insurance
producer?***
◉ appointed by an insurer. Answer: QOT: Producers shall not act as
insured until...***
