NC STATE PERSONAL LINES STUDY GUIDE |
COMPREHENSIVE EXAM PREP, PRACTICE
QUESTIONS, CORRECT ANSWERS AND
EXAM REVIEW
| GRADED A+ | GUARANTEED SUCCESS
Updated 2026 Questions and Answers
100% Verified Exam Prep
, What is Insurance? A plan of spreading the risk of possible loss over a large number of people. It protects
against the uncertainty (risk) of when a financial loss may occur.
Speculative risk? A risk that may result in gain or loss (i.e. buying stock or gambling).
Pure risk? A risk that only has the chance of loss. These are the subject of insurance protection. (not
all pure risks are insurable risks)
Insurable risk A risk that the insurance company is willing to accept.
What are the characteristics of an insurable risk? - Low probability of loss occurring
- Less than catastrophic results
- Loss must be measurable
- Loss must be significant
- Loss must be accidental or unintended
Probability Measures the chance of an event occurring, the measure of uncertainty.
What is the Law of Large Numbers? A Mathematical principle that makes it possible to predict future losses, based upon prior
experience. As a larger number of events are included, the difference between actual
and expected results becomes smaller.
Spread of Risk (geographic dispersion) Spreading exposed units over a large area to avoid high losses.
Adverse Selection The increased tendency of people to wait until they have a higher probability of risk of
loss to buy or maintain insurance coverage. (Inclusion of deductible does not reduce the
risk.)
Risk Retention When liability of a loss is maintained by an individual by not purchasing insurance.
COMPREHENSIVE EXAM PREP, PRACTICE
QUESTIONS, CORRECT ANSWERS AND
EXAM REVIEW
| GRADED A+ | GUARANTEED SUCCESS
Updated 2026 Questions and Answers
100% Verified Exam Prep
, What is Insurance? A plan of spreading the risk of possible loss over a large number of people. It protects
against the uncertainty (risk) of when a financial loss may occur.
Speculative risk? A risk that may result in gain or loss (i.e. buying stock or gambling).
Pure risk? A risk that only has the chance of loss. These are the subject of insurance protection. (not
all pure risks are insurable risks)
Insurable risk A risk that the insurance company is willing to accept.
What are the characteristics of an insurable risk? - Low probability of loss occurring
- Less than catastrophic results
- Loss must be measurable
- Loss must be significant
- Loss must be accidental or unintended
Probability Measures the chance of an event occurring, the measure of uncertainty.
What is the Law of Large Numbers? A Mathematical principle that makes it possible to predict future losses, based upon prior
experience. As a larger number of events are included, the difference between actual
and expected results becomes smaller.
Spread of Risk (geographic dispersion) Spreading exposed units over a large area to avoid high losses.
Adverse Selection The increased tendency of people to wait until they have a higher probability of risk of
loss to buy or maintain insurance coverage. (Inclusion of deductible does not reduce the
risk.)
Risk Retention When liability of a loss is maintained by an individual by not purchasing insurance.
