Xcel chapter exam questions and
answers21
Which of the following is a contract that involves one party which indemnifies another when a
loss arises from an unknown event? - ANSWERS-Insurance policy
Which of the following is NOT a characteristic of reinsurance? - ANSWERS-Increases the
unearned premium reserve
Which of the following is an insurer established by a parent company for the purpose of
insuring the parent company's loss exposures? - ANSWERS-Captive insurer
A participating company is also referred to as which type of insurer? - ANSWERS-Mutual insurer
What is a participating life insurance policy? - ANSWERS-Contract that allows the policyowner to
receive a share of surplus in the form of policy dividends
Which of the following statements regarding a life insurance policy dividend is TRUE? -
ANSWERS-It is a distribution of excess funds accumulated by the insurer on participating
policies
Which of the following is NOT a benefit of insurance? - ANSWERS-Losses due to fraud are
eliminated
An insurer enters into a contract with a third-party to insure itself against losses from insurance
policies it issues. What is the agreement called? - ANSWERS-Reinsurance
,Which of the following is a type of insurance where an insurer transfers loss exposures from
policies written for its insurerds? - ANSWERS-Reinsurance
When a mutual insurer becomes a stock company, the process is called - ANSWERS-
Demutualization
Which of the following describes the increase in the probability of a loss due to an insureds
dishonest tendencies? - ANSWERS-moral hazard
An insurer having a large number of similar exposure unit it's considered important because -
ANSWERS-The greater the number insured, the more accurately the insurer can predict losses
and set appropriate premiums
Which of the following is considered to be any situation that has the potential for loss? -
ANSWERS-Loss exposure
Which of the following is a situation where there is a possibility of either a loss or a gain? -
ANSWERS-Speculative risk
Restoring an insured to the same condition as before a loss is known as - ANSWERS-principle of
indemnity
Which of these statements correctly describes risk? - ANSWERS-Pure risk is the only insurable
risk
Moral hazard is described as the - ANSWERS-increased chance of a loss because of an insured's
dishonest tendencies
Which of the following best describes the statement "The more times and event is repeated,
the more predictable the outcome becomes"? - ANSWERS-Law of large numbers
, Which of the following refers to a condition that may increase the chance of a loss? - ANSWERS-
hazard
Which of the following would NOT be accomplished with the purchase of an insurance policy? -
ANSWERS-Risk is eliminated
All of the following circumstances must be met for a loss retention to be an effective risk
management technique, EXCEPT - ANSWERS-Probability of loss is unknown
Which of the following is NOT an element of an insurable risk? - ANSWERS-The loss must be
catastrophic
Which type of risk is gambling? - ANSWERS-Speculative risk
Which of the following is NOT considered a definition of a risk? - ANSWERS-The cause of loss
Which of the following is NOT a requirement of a contract? - ANSWERS-Equal consideration is
required between the involved parties
If a material warranty violation on the part of the insured is found, what recourse does an
insurer have? - ANSWERS-Rescind the policy
Restoring an insured to the same condition as before a loss is an example of the principle of -
ANSWERS-Indemnity
A unilateral contract is one in which - ANSWERS-only one party (the insurer) makes any kind of
legally enforceable promise
answers21
Which of the following is a contract that involves one party which indemnifies another when a
loss arises from an unknown event? - ANSWERS-Insurance policy
Which of the following is NOT a characteristic of reinsurance? - ANSWERS-Increases the
unearned premium reserve
Which of the following is an insurer established by a parent company for the purpose of
insuring the parent company's loss exposures? - ANSWERS-Captive insurer
A participating company is also referred to as which type of insurer? - ANSWERS-Mutual insurer
What is a participating life insurance policy? - ANSWERS-Contract that allows the policyowner to
receive a share of surplus in the form of policy dividends
Which of the following statements regarding a life insurance policy dividend is TRUE? -
ANSWERS-It is a distribution of excess funds accumulated by the insurer on participating
policies
Which of the following is NOT a benefit of insurance? - ANSWERS-Losses due to fraud are
eliminated
An insurer enters into a contract with a third-party to insure itself against losses from insurance
policies it issues. What is the agreement called? - ANSWERS-Reinsurance
,Which of the following is a type of insurance where an insurer transfers loss exposures from
policies written for its insurerds? - ANSWERS-Reinsurance
When a mutual insurer becomes a stock company, the process is called - ANSWERS-
Demutualization
Which of the following describes the increase in the probability of a loss due to an insureds
dishonest tendencies? - ANSWERS-moral hazard
An insurer having a large number of similar exposure unit it's considered important because -
ANSWERS-The greater the number insured, the more accurately the insurer can predict losses
and set appropriate premiums
Which of the following is considered to be any situation that has the potential for loss? -
ANSWERS-Loss exposure
Which of the following is a situation where there is a possibility of either a loss or a gain? -
ANSWERS-Speculative risk
Restoring an insured to the same condition as before a loss is known as - ANSWERS-principle of
indemnity
Which of these statements correctly describes risk? - ANSWERS-Pure risk is the only insurable
risk
Moral hazard is described as the - ANSWERS-increased chance of a loss because of an insured's
dishonest tendencies
Which of the following best describes the statement "The more times and event is repeated,
the more predictable the outcome becomes"? - ANSWERS-Law of large numbers
, Which of the following refers to a condition that may increase the chance of a loss? - ANSWERS-
hazard
Which of the following would NOT be accomplished with the purchase of an insurance policy? -
ANSWERS-Risk is eliminated
All of the following circumstances must be met for a loss retention to be an effective risk
management technique, EXCEPT - ANSWERS-Probability of loss is unknown
Which of the following is NOT an element of an insurable risk? - ANSWERS-The loss must be
catastrophic
Which type of risk is gambling? - ANSWERS-Speculative risk
Which of the following is NOT considered a definition of a risk? - ANSWERS-The cause of loss
Which of the following is NOT a requirement of a contract? - ANSWERS-Equal consideration is
required between the involved parties
If a material warranty violation on the part of the insured is found, what recourse does an
insurer have? - ANSWERS-Rescind the policy
Restoring an insured to the same condition as before a loss is an example of the principle of -
ANSWERS-Indemnity
A unilateral contract is one in which - ANSWERS-only one party (the insurer) makes any kind of
legally enforceable promise
