Associate in General Insurance (AINS) Exam
Questions and Correct Answers (Verified
Answers) Plus Rationale 2027 Q&A| Instant
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1.
Which statement best describes the primary purpose of insurance?
A. To eliminate all uncertainty
B. To guarantee a profit for policyholders
C. To transfer the financial consequences of certain risks
D. To prevent all losses from occurring
Rationale: Insurance does not eliminate risk or prevent every loss.
Instead, it allows an individual or organization to transfer specified
financial consequences of potential losses to an insurer in exchange for
a premium.
2.
Which of the following is an example of pure risk?
A. Investing in stocks
B. Starting a new business
,C. The possibility of a house being damaged by fire
D. Purchasing a lottery ticket
Rationale: Pure risk involves only the possibility of loss or no loss. A
house can either suffer fire damage or not. Speculative risks, such as
investments, involve the possibility of gain as well as loss.
3.
What is a peril?
A. A condition that increases the chance of loss
B. An individual's attitude toward risk
C. A cause of loss
D. A method of transferring risk
Rationale: A peril is the direct cause of a loss, such as fire, theft,
windstorm, or collision. A hazard, by contrast, is a condition that
increases the likelihood or severity of a loss.
4.
Which situation is the best example of a physical hazard?
A. Intentionally setting fire to a building
B. Carelessly ignoring a warning sign
C. Worn automobile tires
D. Believing that insurance will pay for every loss
,Rationale: A physical hazard is a tangible condition that increases the
probability or severity of loss. Worn tires can increase the likelihood of
an automobile accident.
5.
What is moral hazard?
A. A physical condition that increases loss frequency
B. Dishonesty or intentional behavior that increases the chance of loss
C. An accidental condition that causes property damage
D. A government requirement for insurance
Rationale: Moral hazard involves dishonesty or intentional actions that
increase the likelihood or severity of a loss. For example, deliberately
damaging insured property to collect insurance proceeds would
represent moral hazard.
6.
Which principle requires an insured to have a legitimate financial or
other recognized interest in the subject of insurance?
A. Indemnity
B. Subrogation
C. Insurable interest
D. Contribution
, Rationale: Insurable interest exists when a person or organization would
experience a financial or other recognized loss if the insured property,
person, or interest were damaged or lost.
7.
What does the principle of indemnity generally seek to accomplish?
A. Allow an insured to profit from a loss
B. Restore the insured financially to approximately the position held
before the loss
C. Guarantee that every loss is fully covered
D. Eliminate the insured's deductible
Rationale: Indemnity is designed to compensate for a covered loss
without allowing the insured to profit from it. The goal is generally to
restore the insured to approximately the financial position that existed
immediately before the loss.
8.
Which of the following is an example of risk avoidance?
A. Purchasing insurance
B. Installing a sprinkler system
C. Deciding not to engage in a particularly hazardous activity
D. Establishing an emergency fund
Questions and Correct Answers (Verified
Answers) Plus Rationale 2027 Q&A| Instant
Download Pdf
1.
Which statement best describes the primary purpose of insurance?
A. To eliminate all uncertainty
B. To guarantee a profit for policyholders
C. To transfer the financial consequences of certain risks
D. To prevent all losses from occurring
Rationale: Insurance does not eliminate risk or prevent every loss.
Instead, it allows an individual or organization to transfer specified
financial consequences of potential losses to an insurer in exchange for
a premium.
2.
Which of the following is an example of pure risk?
A. Investing in stocks
B. Starting a new business
,C. The possibility of a house being damaged by fire
D. Purchasing a lottery ticket
Rationale: Pure risk involves only the possibility of loss or no loss. A
house can either suffer fire damage or not. Speculative risks, such as
investments, involve the possibility of gain as well as loss.
3.
What is a peril?
A. A condition that increases the chance of loss
B. An individual's attitude toward risk
C. A cause of loss
D. A method of transferring risk
Rationale: A peril is the direct cause of a loss, such as fire, theft,
windstorm, or collision. A hazard, by contrast, is a condition that
increases the likelihood or severity of a loss.
4.
Which situation is the best example of a physical hazard?
A. Intentionally setting fire to a building
B. Carelessly ignoring a warning sign
C. Worn automobile tires
D. Believing that insurance will pay for every loss
,Rationale: A physical hazard is a tangible condition that increases the
probability or severity of loss. Worn tires can increase the likelihood of
an automobile accident.
5.
What is moral hazard?
A. A physical condition that increases loss frequency
B. Dishonesty or intentional behavior that increases the chance of loss
C. An accidental condition that causes property damage
D. A government requirement for insurance
Rationale: Moral hazard involves dishonesty or intentional actions that
increase the likelihood or severity of a loss. For example, deliberately
damaging insured property to collect insurance proceeds would
represent moral hazard.
6.
Which principle requires an insured to have a legitimate financial or
other recognized interest in the subject of insurance?
A. Indemnity
B. Subrogation
C. Insurable interest
D. Contribution
, Rationale: Insurable interest exists when a person or organization would
experience a financial or other recognized loss if the insured property,
person, or interest were damaged or lost.
7.
What does the principle of indemnity generally seek to accomplish?
A. Allow an insured to profit from a loss
B. Restore the insured financially to approximately the position held
before the loss
C. Guarantee that every loss is fully covered
D. Eliminate the insured's deductible
Rationale: Indemnity is designed to compensate for a covered loss
without allowing the insured to profit from it. The goal is generally to
restore the insured to approximately the financial position that existed
immediately before the loss.
8.
Which of the following is an example of risk avoidance?
A. Purchasing insurance
B. Installing a sprinkler system
C. Deciding not to engage in a particularly hazardous activity
D. Establishing an emergency fund
