Associate in Insurance
Services (AIS) Exam
Questions And Correct
Answers (Verified
Answers) Plus
Rationales 2025/2026
Q&A | Instant
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1. What is the primary purpose of insurance?
A. To eliminate all financial risk
B. To increase investment returns
C. To transfer and manage risk
D. To guarantee profit
,Rationale: Insurance does not eliminate risk; it transfers
financial consequences of risk from the insured to the
insurer.
2. Which principle requires that only insurable interest exist
at the time of loss in property insurance?
A. Utmost good faith
B. Subrogation
C. Insurable interest
D. Indemnity
Rationale: The insured must have a financial stake in the
insured property at the time of loss.
3. What is indemnity designed to do?
A. Increase profit
B. Restore the insured to pre-loss condition
C. Eliminate deductibles
D. Create profit for the insured
Rationale: Indemnity ensures the insured is restored, not
enriched, after a loss.
4. A deductible is best defined as:
A. Premium discount
B. Policy limit
,C. The amount the insured pays before coverage applies
D. Refund from insurer
Rationale: Deductibles reduce small claims and share risk
between insurer and insured.
5. What is moral hazard?
A. Physical damage risk
B. Dishonesty or behavior increasing loss likelihood due to
insurance
C. Natural disaster risk
D. Investment risk
Rationale: Moral hazard occurs when insureds act
differently because they are covered.
6. Which policy condition limits the insurer’s total payout?
A. Deductible
B. Exclusion
C. Policy limit
D. Premium
Rationale: Policy limits define maximum insurer liability.
7. What is subrogation?
A. Policy cancellation
B. Insurer’s right to recover from a third party after paying a
claim
, C. Premium adjustment
D. Coverage extension
Rationale: The insurer steps into the insured’s legal rights
after loss payment.
8. Which peril is typically covered under a basic property
policy?
A. War
B. Wear and tear
C. Fire
D. Intentional damage by insured
Rationale: Fire is a standard covered peril in basic property
insurance.
9. What does “loss ratio” measure?
A. Profit per policy
B. Claims paid compared to premiums earned
C. Expenses only
D. Investment returns
Rationale: It evaluates insurer performance and risk
exposure.
10. The purpose of underwriting is to:
A. Pay claims
B. Sell policies
Services (AIS) Exam
Questions And Correct
Answers (Verified
Answers) Plus
Rationales 2025/2026
Q&A | Instant
Download Pdf
1. What is the primary purpose of insurance?
A. To eliminate all financial risk
B. To increase investment returns
C. To transfer and manage risk
D. To guarantee profit
,Rationale: Insurance does not eliminate risk; it transfers
financial consequences of risk from the insured to the
insurer.
2. Which principle requires that only insurable interest exist
at the time of loss in property insurance?
A. Utmost good faith
B. Subrogation
C. Insurable interest
D. Indemnity
Rationale: The insured must have a financial stake in the
insured property at the time of loss.
3. What is indemnity designed to do?
A. Increase profit
B. Restore the insured to pre-loss condition
C. Eliminate deductibles
D. Create profit for the insured
Rationale: Indemnity ensures the insured is restored, not
enriched, after a loss.
4. A deductible is best defined as:
A. Premium discount
B. Policy limit
,C. The amount the insured pays before coverage applies
D. Refund from insurer
Rationale: Deductibles reduce small claims and share risk
between insurer and insured.
5. What is moral hazard?
A. Physical damage risk
B. Dishonesty or behavior increasing loss likelihood due to
insurance
C. Natural disaster risk
D. Investment risk
Rationale: Moral hazard occurs when insureds act
differently because they are covered.
6. Which policy condition limits the insurer’s total payout?
A. Deductible
B. Exclusion
C. Policy limit
D. Premium
Rationale: Policy limits define maximum insurer liability.
7. What is subrogation?
A. Policy cancellation
B. Insurer’s right to recover from a third party after paying a
claim
, C. Premium adjustment
D. Coverage extension
Rationale: The insurer steps into the insured’s legal rights
after loss payment.
8. Which peril is typically covered under a basic property
policy?
A. War
B. Wear and tear
C. Fire
D. Intentional damage by insured
Rationale: Fire is a standard covered peril in basic property
insurance.
9. What does “loss ratio” measure?
A. Profit per policy
B. Claims paid compared to premiums earned
C. Expenses only
D. Investment returns
Rationale: It evaluates insurer performance and risk
exposure.
10. The purpose of underwriting is to:
A. Pay claims
B. Sell policies
