PROPERTY AND CASUALTY INSURANCE EXAM
QUESTIONS AND CORRECT ANSWERS (VERIFIED
ANSWERS) Q&A 2027 |INSTANT DOWNLOAD
PDF
1. What is the primary purpose of insurance?
A. To create wealth
B. To eliminate all risks
C. To transfer financial risk
D. To guarantee profits
Correct answer: C. To transfer financial risk
Rationale: Insurance transfers specified financial risks from
an insured to an insurer in exchange for a premium.
2. Which principle requires an insured to have a legitimate
financial interest in the insured property or person?
A. Indemnity
B. Insurable interest
C. Subrogation
D. Contribution
Correct answer: B. Insurable interest
Rationale: Insurable interest means the insured would
suffer a financial or other recognized loss if the insured
event occurs.
3. What does the principle of indemnity seek to
accomplish?
A. Allow the insured to profit from a loss
, B. Restore the insured financially after a covered loss
C. Increase the policy premium
D. Eliminate deductibles
Correct answer: B. Restore the insured financially after a
covered loss
Rationale: Indemnity generally places the insured in
approximately the same financial position held before the
loss.
4. Which of the following is an example of pure risk?
A. Gambling
B. Investing in stocks
C. Possibility of a house fire
D. Starting a business
Correct answer: C. Possibility of a house fire
Rationale: Pure risk involves only the possibility of loss,
rather than the possibility of gain or loss.
5. What is a peril?
A. A condition increasing the chance of loss
B. The cause of a loss
C. The amount of insurance purchased
D. A policy exclusion
Correct answer: B. The cause of a loss
Rationale: A peril is a cause of loss, such as fire, theft,
windstorm, or collision.
6. What is a hazard?
A. The actual loss
, B. The cause of loss
C. A condition that increases the likelihood or severity of
loss
D. The insurance premium
Correct answer: C. A condition that increases the likelihood
or severity of loss
Rationale: Hazards influence the probability or severity of
a loss.
7. Which is an example of a physical hazard?
A. Dishonesty
B. Carelessness
C. Icy steps
D. Intentionally causing a loss
Correct answer: C. Icy steps
Rationale: A physical hazard is a tangible condition that
increases the chance of loss.
8. Which hazard involves dishonesty or intentional
misrepresentation?
A. Physical hazard
B. Moral hazard
C. Legal hazard
D. Property hazard
Correct answer: B. Moral hazard
Rationale: Moral hazards arise from dishonesty or
intentional acts that increase the likelihood of loss.
, 9. Which hazard results from indifference or carelessness?
A. Morale hazard
B. Moral hazard
C. Physical hazard
D. Contractual hazard
Correct answer: A. Morale hazard
Rationale: Morale hazards involve careless attitudes
because insurance protection exists.
10. What is a deductible?
A. The insurer's profit
B. The amount the insured pays before insurance responds
C. The policy premium
D. The policy limit
Correct answer: B. The amount the insured pays before
insurance responds
Rationale: A deductible is the portion of a covered loss
retained by the insured.
11. What is a premium?
A. The amount paid for insurance coverage
B. The amount of a deductible
C. The amount of a claim
D. The insurer's reserve
Correct answer: A. The amount paid for insurance
coverage
Rationale: The premium is the price charged by the insurer
for providing coverage.
QUESTIONS AND CORRECT ANSWERS (VERIFIED
ANSWERS) Q&A 2027 |INSTANT DOWNLOAD
1. What is the primary purpose of insurance?
A. To create wealth
B. To eliminate all risks
C. To transfer financial risk
D. To guarantee profits
Correct answer: C. To transfer financial risk
Rationale: Insurance transfers specified financial risks from
an insured to an insurer in exchange for a premium.
2. Which principle requires an insured to have a legitimate
financial interest in the insured property or person?
A. Indemnity
B. Insurable interest
C. Subrogation
D. Contribution
Correct answer: B. Insurable interest
Rationale: Insurable interest means the insured would
suffer a financial or other recognized loss if the insured
event occurs.
3. What does the principle of indemnity seek to
accomplish?
A. Allow the insured to profit from a loss
, B. Restore the insured financially after a covered loss
C. Increase the policy premium
D. Eliminate deductibles
Correct answer: B. Restore the insured financially after a
covered loss
Rationale: Indemnity generally places the insured in
approximately the same financial position held before the
loss.
4. Which of the following is an example of pure risk?
A. Gambling
B. Investing in stocks
C. Possibility of a house fire
D. Starting a business
Correct answer: C. Possibility of a house fire
Rationale: Pure risk involves only the possibility of loss,
rather than the possibility of gain or loss.
5. What is a peril?
A. A condition increasing the chance of loss
B. The cause of a loss
C. The amount of insurance purchased
D. A policy exclusion
Correct answer: B. The cause of a loss
Rationale: A peril is a cause of loss, such as fire, theft,
windstorm, or collision.
6. What is a hazard?
A. The actual loss
, B. The cause of loss
C. A condition that increases the likelihood or severity of
loss
D. The insurance premium
Correct answer: C. A condition that increases the likelihood
or severity of loss
Rationale: Hazards influence the probability or severity of
a loss.
7. Which is an example of a physical hazard?
A. Dishonesty
B. Carelessness
C. Icy steps
D. Intentionally causing a loss
Correct answer: C. Icy steps
Rationale: A physical hazard is a tangible condition that
increases the chance of loss.
8. Which hazard involves dishonesty or intentional
misrepresentation?
A. Physical hazard
B. Moral hazard
C. Legal hazard
D. Property hazard
Correct answer: B. Moral hazard
Rationale: Moral hazards arise from dishonesty or
intentional acts that increase the likelihood of loss.
, 9. Which hazard results from indifference or carelessness?
A. Morale hazard
B. Moral hazard
C. Physical hazard
D. Contractual hazard
Correct answer: A. Morale hazard
Rationale: Morale hazards involve careless attitudes
because insurance protection exists.
10. What is a deductible?
A. The insurer's profit
B. The amount the insured pays before insurance responds
C. The policy premium
D. The policy limit
Correct answer: B. The amount the insured pays before
insurance responds
Rationale: A deductible is the portion of a covered loss
retained by the insured.
11. What is a premium?
A. The amount paid for insurance coverage
B. The amount of a deductible
C. The amount of a claim
D. The insurer's reserve
Correct answer: A. The amount paid for insurance
coverage
Rationale: The premium is the price charged by the insurer
for providing coverage.
