WEBCE COMMERCIAL LINES 101
EXAMINATION PAPER COMPLETE
QUESTIONS CORRECT ANSWERS
⩥ Named Insured/Insured. Answer: The policyholder
⩥ Financial Definition of Insurance. Answer: A financial agreement
involving the redistribution of financial losses
⩥ Legal Definition of Insurance. Answer: A contractual agreement in
which one party (the insurer) agrees to compensate or indemnify another
party (the insured) for fortuitous losses
⩥ Loss Pooling. Answer: the sharing of total losses sustained by a few
members of the insured group
⩥ Payment of Accidental or Fortuitous Losses. Answer: Allows the
insurer to more accurately predict future losses
,⩥ Transfer of Risk. Answer: Involves the transfer of risk from the
insured to the insurer which is normally a larger entity more financially
able to absorb the loss
⩥ Indemnification. Answer: The act of an insurer compensating the
insured for a covered loss with the goal to put the insured back in the
same financial position he or she was in prior to the loss
⩥ Loss. Answer: The basis of a claim for damages under the terms of the
policy
⩥ Planned Losses. Answer: Include expenses such as depreciation on a
piece of factory equipment or on a commercial vehicle
⩥ Is insurance designed to cover planned losses or accidental losses?.
Answer: Accidental losses
⩥ Direct Loss. Answer: An insurable loss that is the immediate result of
a covered cause of loss (fire to an office building)
⩥ Indirect Loss. Answer: An insurable loss that is a consequential result
of a direct loss (expenses entailed in renting other commercial property
because of a fire to your office building)
⩥ Peril. Answer: The cause of the loss
,⩥ Named Perils Policy. Answer: The policy specifically lists the covered
perils
⩥ All Risks Policy. Answer: Provides broader protection and covers any
accidental loss, subject to a host of policy exclusions
⩥ Exclusion. Answer: A policy provision that identifies losses that are
not covered
⩥ Hazard. Answer: A condition or conditions that increases the
probability of a loss
⩥ Physical Hazard. Answer: A physical condition or situation that
increases the possibility of loss (outdated or frayed wiring in a factory)
⩥ Moral Hazard. Answer: Intentional acts committed by the insured that
either create or exaggerate a loss and is measured by the character of the
insured and the circumstances surrounding the subject of the insurance
⩥ Morale Hazard. Answer: Implies an indifference to loss simply
because the existence of insurance (a way to mitigate this hazard is to
insist on high deductibles)
, ⩥ Proximate Cause. Answer: A substantial factor in setting events in
motion that cause a loss
⩥ Risk. Answer: The uncertainty arising from the possible occurrence of
given events (also referred as the insured or the property to which an
insurance policy applies)
⩥ Pure Risk. Answer: The risk involved in situations that present the
opportunity for loss but no opportunity for gain (generally insurable)
⩥ Speculative Risk. Answer: The uncertainty about an event under
consideration that could produce either a profit, no change in a financial
position, or a loss (generally create risks that did not previously exist so
is generally uninsurable)
⩥ Risk Classification. Answer: Insurers place their applicants for
insurance in well-defined homogeneous classes based on the probability
of loss
⩥ Tort. Answer: A civil wrong, other than breach of contract or a
criminal act, giving rise to legal liability (can result from negligence,
intentional acts, or strict liability)
⩥ Liability. Answer: The obligation to pay a monetary award for injury
or damage caused by ones negligence
EXAMINATION PAPER COMPLETE
QUESTIONS CORRECT ANSWERS
⩥ Named Insured/Insured. Answer: The policyholder
⩥ Financial Definition of Insurance. Answer: A financial agreement
involving the redistribution of financial losses
⩥ Legal Definition of Insurance. Answer: A contractual agreement in
which one party (the insurer) agrees to compensate or indemnify another
party (the insured) for fortuitous losses
⩥ Loss Pooling. Answer: the sharing of total losses sustained by a few
members of the insured group
⩥ Payment of Accidental or Fortuitous Losses. Answer: Allows the
insurer to more accurately predict future losses
,⩥ Transfer of Risk. Answer: Involves the transfer of risk from the
insured to the insurer which is normally a larger entity more financially
able to absorb the loss
⩥ Indemnification. Answer: The act of an insurer compensating the
insured for a covered loss with the goal to put the insured back in the
same financial position he or she was in prior to the loss
⩥ Loss. Answer: The basis of a claim for damages under the terms of the
policy
⩥ Planned Losses. Answer: Include expenses such as depreciation on a
piece of factory equipment or on a commercial vehicle
⩥ Is insurance designed to cover planned losses or accidental losses?.
Answer: Accidental losses
⩥ Direct Loss. Answer: An insurable loss that is the immediate result of
a covered cause of loss (fire to an office building)
⩥ Indirect Loss. Answer: An insurable loss that is a consequential result
of a direct loss (expenses entailed in renting other commercial property
because of a fire to your office building)
⩥ Peril. Answer: The cause of the loss
,⩥ Named Perils Policy. Answer: The policy specifically lists the covered
perils
⩥ All Risks Policy. Answer: Provides broader protection and covers any
accidental loss, subject to a host of policy exclusions
⩥ Exclusion. Answer: A policy provision that identifies losses that are
not covered
⩥ Hazard. Answer: A condition or conditions that increases the
probability of a loss
⩥ Physical Hazard. Answer: A physical condition or situation that
increases the possibility of loss (outdated or frayed wiring in a factory)
⩥ Moral Hazard. Answer: Intentional acts committed by the insured that
either create or exaggerate a loss and is measured by the character of the
insured and the circumstances surrounding the subject of the insurance
⩥ Morale Hazard. Answer: Implies an indifference to loss simply
because the existence of insurance (a way to mitigate this hazard is to
insist on high deductibles)
, ⩥ Proximate Cause. Answer: A substantial factor in setting events in
motion that cause a loss
⩥ Risk. Answer: The uncertainty arising from the possible occurrence of
given events (also referred as the insured or the property to which an
insurance policy applies)
⩥ Pure Risk. Answer: The risk involved in situations that present the
opportunity for loss but no opportunity for gain (generally insurable)
⩥ Speculative Risk. Answer: The uncertainty about an event under
consideration that could produce either a profit, no change in a financial
position, or a loss (generally create risks that did not previously exist so
is generally uninsurable)
⩥ Risk Classification. Answer: Insurers place their applicants for
insurance in well-defined homogeneous classes based on the probability
of loss
⩥ Tort. Answer: A civil wrong, other than breach of contract or a
criminal act, giving rise to legal liability (can result from negligence,
intentional acts, or strict liability)
⩥ Liability. Answer: The obligation to pay a monetary award for injury
or damage caused by ones negligence
