NY Life Insurance Chapter 1-General
Insurance Test Questions Well Answered
2026 Guide.
Insurance - Answer The transfer of risk of loss form an individual or a business entity to an
insurance company, which, in turn, spreads the costs of unexpected losses to many individuals.
Risk - Answer the uncertainty or chance of loss occurring
Pure Risk - Answer refers to situations that can only result in a loss or no change. THIS IS THE
ONLY TYPE OF INSURABLE RISK
Speculative Risk - Answer involves the opportunity for either loss or gain. YOU CANNOT
INSURE SPECULATIVE RISKS
Hazards - Answer conditions or situations that increase the probability of an insured loss
occurring
Physical- hazards are those arising from the material, structural, or operational features of a risk
Moral- refer to those applicants that may lie on an application for insurance, or in the past, have
submitted fraudulent claims against an insurer
Morale- refers to an increase in the hazard presented by a risk, arising from the insured's
indifference to loss because of the existence of insurance
Perils - Answer the causes of loss insured against in an insurance policy
Loss - Answer the reduction, decrease, or disappearance of value of the person or property
insured to a policy, caused by a named peril. Insurance provides a means to transfer loss.
Exposure - Answer a unit of measure used to determine rates charged for insurance coverage.
Age, medical history, occupation and sex determine rates. A large number of units having the
same or similar exposure to loss is known as homogeneous.
Avoidance - Answer eliminating exposure to risk.
Retention - Answer the planned assumption of risk by an insured through the use of
deductibles, co-payments, or self-insurance
, Sharing - Answer a method of dealing with risk for a group of individual persons or businesses
with the same or similar exposure to loss to share the losses that occur within that group
Reduction - Answer would include actions such as installing smoke detectors in our homes,
having an annual physical to detect health problems early, or perhaps making a change in our
lifestyles.
Transfer - Answer transferring risk from an individual or group to an insurance company
Elements of Insurable Risks - Answer Due to chance, definite and measurable, statistically
predictable, not catastrophic, randomly selected and large loss exposure
Adverse Selection - Answer the insuring of risks that are more prone to losses than the
average risk
Law of Large Numbers - Answer states that the larger the number of people with a similar
exposure to loss, the more predictable actual losses will be. As the number of people in a risk
pool increases, future losses become more predictable
Stock Comapnies - Answer are owned by the stockholders who provide the capital necessary
to establish and operate the insurance company and who share in any profits or loss
Nonparticipating Policies - Answer policies in which policyowners do not share in profits or
loss
Mutual Companies - Answer owned by the policyowners and issue participating policies.
Participating Policies - Answer policyowners are entitled to dividends (the return of excess
premiums, nontaxable)
Dividends - Answer the return of excess premiums, nontaxable, generated when the
premiums and the earnings combined exceed the actual costs of providing coverage, creating a
surplus. DIVIDENDS ARE NOT GUARANTEED
Fraternal Benefit Society - Answer an organization formed to provide insurance benefits for
members of an affiliated lodge, religious organization, for fraternal organization. Fraternals sell
only to their members and are considered charitable institutions, and not insurers. They are not
subject to all of the regulations that apply to the insurers.
Insurance Test Questions Well Answered
2026 Guide.
Insurance - Answer The transfer of risk of loss form an individual or a business entity to an
insurance company, which, in turn, spreads the costs of unexpected losses to many individuals.
Risk - Answer the uncertainty or chance of loss occurring
Pure Risk - Answer refers to situations that can only result in a loss or no change. THIS IS THE
ONLY TYPE OF INSURABLE RISK
Speculative Risk - Answer involves the opportunity for either loss or gain. YOU CANNOT
INSURE SPECULATIVE RISKS
Hazards - Answer conditions or situations that increase the probability of an insured loss
occurring
Physical- hazards are those arising from the material, structural, or operational features of a risk
Moral- refer to those applicants that may lie on an application for insurance, or in the past, have
submitted fraudulent claims against an insurer
Morale- refers to an increase in the hazard presented by a risk, arising from the insured's
indifference to loss because of the existence of insurance
Perils - Answer the causes of loss insured against in an insurance policy
Loss - Answer the reduction, decrease, or disappearance of value of the person or property
insured to a policy, caused by a named peril. Insurance provides a means to transfer loss.
Exposure - Answer a unit of measure used to determine rates charged for insurance coverage.
Age, medical history, occupation and sex determine rates. A large number of units having the
same or similar exposure to loss is known as homogeneous.
Avoidance - Answer eliminating exposure to risk.
Retention - Answer the planned assumption of risk by an insured through the use of
deductibles, co-payments, or self-insurance
, Sharing - Answer a method of dealing with risk for a group of individual persons or businesses
with the same or similar exposure to loss to share the losses that occur within that group
Reduction - Answer would include actions such as installing smoke detectors in our homes,
having an annual physical to detect health problems early, or perhaps making a change in our
lifestyles.
Transfer - Answer transferring risk from an individual or group to an insurance company
Elements of Insurable Risks - Answer Due to chance, definite and measurable, statistically
predictable, not catastrophic, randomly selected and large loss exposure
Adverse Selection - Answer the insuring of risks that are more prone to losses than the
average risk
Law of Large Numbers - Answer states that the larger the number of people with a similar
exposure to loss, the more predictable actual losses will be. As the number of people in a risk
pool increases, future losses become more predictable
Stock Comapnies - Answer are owned by the stockholders who provide the capital necessary
to establish and operate the insurance company and who share in any profits or loss
Nonparticipating Policies - Answer policies in which policyowners do not share in profits or
loss
Mutual Companies - Answer owned by the policyowners and issue participating policies.
Participating Policies - Answer policyowners are entitled to dividends (the return of excess
premiums, nontaxable)
Dividends - Answer the return of excess premiums, nontaxable, generated when the
premiums and the earnings combined exceed the actual costs of providing coverage, creating a
surplus. DIVIDENDS ARE NOT GUARANTEED
Fraternal Benefit Society - Answer an organization formed to provide insurance benefits for
members of an affiliated lodge, religious organization, for fraternal organization. Fraternals sell
only to their members and are considered charitable institutions, and not insurers. They are not
subject to all of the regulations that apply to the insurers.
