PROPERTY/CASUALTY ILLINOIS FOR
STATE EXAM QUESTIONS AND
ANSWERS WITH COMPLETE
SOLUTIONS 100% CORRECT
GUARANTEED SUCCESS
ISO (Insurance Services Office) – Answer ✔✔
ISO develops standard property and casualty insurance policy forms that are
approved by state regulators and commonly used by insurance companies.
These policies may be adjusted to meet state requirements
Insurance companies can also customize them to create their own policy
versions
Define Insurance – Answer ✔✔
Insurance is a system that shifts the financial risk of loss from a person or business
to an insurance company, which distributes the cost of losses among many
policyholders
Define Risk – Answer ✔✔
Risk is the uncertainty or possibility that a loss may occur
What Are the Two Types of Risk? – Answer ✔✔
1. Pure Risk
2. Speculative Risk
What are the 2 types of risk? -ANSWER ✔✔Pure and Speculative
,What is the difference between pure and speculative risk? -ANSWER ✔✔only
pure risk is insurable since it can only result in a loss or no change
speculative risk is not insurable since it can result in a loss or gain (like gambling)
What are the 3 types of hazards? -ANSWER ✔✔1) Physical - hazards arising from
the material, structural, or operational features
2) Moral - refers to applicants that may lie on their application
3) Morale - increase the hazard presented by a risk arising from the insured's
indifference to loss because of the existence of insurance (combustible material
near a furnace)
peril -ANSWER ✔✔causes of loss
hazards -ANSWER ✔✔conditions/circumstances that increase the probability of
an insured loss occurring
there are 3 types
direct loss -ANSWER ✔✔direct physical damage to buildings/personal property
*this includes proximate cause: chain of events resulting from a covered peril
, indirect loss/consequential losses -ANSWER ✔✔losses considered a result of
direct loss; this usually results from when repairs begin so it could be additional
living expenses for homeowners or loss of profits for businesses
named peril -ANSWER ✔✔lists of specific perils; no coverage for unlisted perils
open perils (all risk) -ANSWER ✔✔insures against any risk of loss that is not
excluded
Explain the difference between vacancy and unoccupied -ANSWER ✔✔vacancy
refers to a property that has no people or personal property in it for 60 days
unoccupied refers to a property that has no people in it but there is personal
property in it
3 elements of insurable risk -ANSWER ✔✔1. Financial (a monetary interest)
2. Blood (a relative)
3. Business (a business partner)
indemnity -ANSWER ✔✔to reimburse or make whole; permitted to collect only to
the extent of financial loss (cannot gain)
subrogation -ANSWER ✔✔The process by which an insurer can, after it has paid a
loss under the policy, recover the amount paid from any party (other than the
insured) who caused the loss or is otherwise legally liable for the loss.
STATE EXAM QUESTIONS AND
ANSWERS WITH COMPLETE
SOLUTIONS 100% CORRECT
GUARANTEED SUCCESS
ISO (Insurance Services Office) – Answer ✔✔
ISO develops standard property and casualty insurance policy forms that are
approved by state regulators and commonly used by insurance companies.
These policies may be adjusted to meet state requirements
Insurance companies can also customize them to create their own policy
versions
Define Insurance – Answer ✔✔
Insurance is a system that shifts the financial risk of loss from a person or business
to an insurance company, which distributes the cost of losses among many
policyholders
Define Risk – Answer ✔✔
Risk is the uncertainty or possibility that a loss may occur
What Are the Two Types of Risk? – Answer ✔✔
1. Pure Risk
2. Speculative Risk
What are the 2 types of risk? -ANSWER ✔✔Pure and Speculative
,What is the difference between pure and speculative risk? -ANSWER ✔✔only
pure risk is insurable since it can only result in a loss or no change
speculative risk is not insurable since it can result in a loss or gain (like gambling)
What are the 3 types of hazards? -ANSWER ✔✔1) Physical - hazards arising from
the material, structural, or operational features
2) Moral - refers to applicants that may lie on their application
3) Morale - increase the hazard presented by a risk arising from the insured's
indifference to loss because of the existence of insurance (combustible material
near a furnace)
peril -ANSWER ✔✔causes of loss
hazards -ANSWER ✔✔conditions/circumstances that increase the probability of
an insured loss occurring
there are 3 types
direct loss -ANSWER ✔✔direct physical damage to buildings/personal property
*this includes proximate cause: chain of events resulting from a covered peril
, indirect loss/consequential losses -ANSWER ✔✔losses considered a result of
direct loss; this usually results from when repairs begin so it could be additional
living expenses for homeowners or loss of profits for businesses
named peril -ANSWER ✔✔lists of specific perils; no coverage for unlisted perils
open perils (all risk) -ANSWER ✔✔insures against any risk of loss that is not
excluded
Explain the difference between vacancy and unoccupied -ANSWER ✔✔vacancy
refers to a property that has no people or personal property in it for 60 days
unoccupied refers to a property that has no people in it but there is personal
property in it
3 elements of insurable risk -ANSWER ✔✔1. Financial (a monetary interest)
2. Blood (a relative)
3. Business (a business partner)
indemnity -ANSWER ✔✔to reimburse or make whole; permitted to collect only to
the extent of financial loss (cannot gain)
subrogation -ANSWER ✔✔The process by which an insurer can, after it has paid a
loss under the policy, recover the amount paid from any party (other than the
insured) who caused the loss or is otherwise legally liable for the loss.
