AINS 101 EXAM UPDATED 2026 ANSWERS AND
QUESTIONS SET A+
Risk - ✔✔Uncertainty about outcomes. Can be negative or positive
✔✔Transferring - ✔✔The act of transferring the financial consequences of unanticipated
events to an insurer
✔✔Pooling - ✔✔All insureds share the costs of eachothers' losses. Insurers combine all
premiums collected to pay losses as they occur
✔✔Personal Insurance (Property) - ✔✔Protects an insured's assets by covering the
cost of repairing or replacing property that is damaged, lost, or destroyed.
✔✔Personal Insurance (Liability) - ✔✔Provides payments for injury to others or damage
to other's property for which the insured is legally responsible. Also covers the cost to
defend the insured against related lawsuits
✔✔Personal Insurance (Health) - ✔✔Protects individuals and families from financial
losses caused by sickness or accidents
✔✔Personal P&C Insurance (Homeowners) - ✔✔Provides protection when people's
homes and/or belongings are damaged or stolen and liability coverage for situations
such as the family dog biting a desk
✔✔Personal Auto Insurance - ✔✔If insured is at fault in an accident, provides coverage
for personal bodily injury to another person or damage to another person's auto. Also
provides coverage for damaged to insured auto (not wear + tear). Legally required
✔✔Personal Umbrella Insurance - ✔✔Provides additional protection for people with a
high potential for large liability losses
✔✔Commercial Property Insurance - ✔✔Covers damage to buildings or their contents
that results from fire, vandalism, and other causes of loss
,✔✔Commercial Crime Insurance - ✔✔Protects against losses from theft of business
property and money, including employee theft
✔✔Commercial General Liability - ✔✔Protects a business against its legal liability to
others for bodily injury or property damage
✔✔Commercial Auto Insurance - ✔✔Covers liability for bodily injury and property
damage caused by the use of the businesses' autos and also damage to the business
own autos when they are in an accident
✔✔Workers Compensation - ✔✔Covers legally required benefits that businesses are
required to pay to their employees for job-related injuries and illnesses
✔✔Commercial Umbrella Insurance - ✔✔Provides additional liability limits beyond those
provided by other commercial policies, protecting a business in the event of large
liability loss
✔✔Stock Insurers (Private Insurers) - ✔✔Objective is to earn a profit, and they attract
stockholders by the expectation of investment returns. Many large PC insurers are this.
✔✔Mutual Insurers (Private Insurers) - ✔✔Share profits, pay dividends to policyholders
as a return of a portion of premiums paid. Some large insurers and many regional
insurers are this.
✔✔Surplus Lines Insurers (Private Insurers) - ✔✔Provide insurance coverages
unavailable in the standard market
✔✔Reinsurance (Private Insurers) - ✔✔Allows a primary insurer to transfer some loss
exposures to another insurer, the reinsurer. It can help a small insurer provide
insurance for large accounts.
✔✔What role does the government play in insurance? - ✔✔- If a type of insurance is
required, the government makes sure it is available at a reasonable price
- Reduces time or resources needed to obtain insurance coverage
- Can help find insurance for accounts that private insurers are unwilling or unable to
provide
✔✔Pure Risk - ✔✔A chance of loss or no loss, but no chance of gain.
✔✔Speculative Risk - ✔✔A chance of loss, no loss, or gain.
✔✔Hazard Risk - ✔✔Arises from property, liability, or personnel loss exposures
, ✔✔Operational Risk - ✔✔Arises from people, processes, systems, or controls
✔✔Financial Risk - ✔✔Arises from the effect of market forces on financial assets or
liabilities
✔✔Strategic Risk - ✔✔Arises from trends in the economy or society
✔✔Artificial Intelligence - ✔✔Allows computers to perform tasks that require critical
thinking, such as making decisions. Allows robots to work alongside humans and cars
and to operate without human drivers.
✔✔Smart Sensors - ✔✔Detect and measure objects or conditions continuously to warn
of problems or malfunctions. May trigger a response to an issue, which helps reduce
losses.
✔✔Computer Vision - ✔✔Helps a machine recognize an object and respond to it as a
human would
✔✔Three Primary Reasons for Insurance Regulation - ✔✔1. To protect consumers
2. To maintain insurer solvency
3. To protect destructive competition
✔✔What is shown on an insurer's income statement? - ✔✔Total Revenue, Expenses,,
Net Income
✔✔Insurer's Balance Sheet - ✔✔Includes Assets, Liabilities, and Policyholder's surplus.
✔✔Policyholder's surplus - ✔✔Assets minus Liabilities
✔✔Combined Ratio Use - ✔✔Indicates whether an insurer is making an underwriting
loss or gain. Loss Ratio = how much of the premium dollar pays for losses and
adjustments. Expense Ratio = How much of the premium dollar is used to pay the
insurer's expenses.
✔✔Combined Ratio Formula - ✔✔Combined Ratio = Loss Ratio + Expense Ratio
✔✔How to interpret the combined ratio - ✔✔A combined ratio less than 100 means the
insurer is making a UW profit. More than 100 means the insurer is not making a UW
profit. Ex. A combined ratio of 85 means it is earning 15 cents profit from UW on every
dollar of premium.
✔✔Independent Agents and Brokers - ✔✔Both sell insurance products to individuals
and businesses. The broker represents the customer, the agent represents one or more
QUESTIONS SET A+
Risk - ✔✔Uncertainty about outcomes. Can be negative or positive
✔✔Transferring - ✔✔The act of transferring the financial consequences of unanticipated
events to an insurer
✔✔Pooling - ✔✔All insureds share the costs of eachothers' losses. Insurers combine all
premiums collected to pay losses as they occur
✔✔Personal Insurance (Property) - ✔✔Protects an insured's assets by covering the
cost of repairing or replacing property that is damaged, lost, or destroyed.
✔✔Personal Insurance (Liability) - ✔✔Provides payments for injury to others or damage
to other's property for which the insured is legally responsible. Also covers the cost to
defend the insured against related lawsuits
✔✔Personal Insurance (Health) - ✔✔Protects individuals and families from financial
losses caused by sickness or accidents
✔✔Personal P&C Insurance (Homeowners) - ✔✔Provides protection when people's
homes and/or belongings are damaged or stolen and liability coverage for situations
such as the family dog biting a desk
✔✔Personal Auto Insurance - ✔✔If insured is at fault in an accident, provides coverage
for personal bodily injury to another person or damage to another person's auto. Also
provides coverage for damaged to insured auto (not wear + tear). Legally required
✔✔Personal Umbrella Insurance - ✔✔Provides additional protection for people with a
high potential for large liability losses
✔✔Commercial Property Insurance - ✔✔Covers damage to buildings or their contents
that results from fire, vandalism, and other causes of loss
,✔✔Commercial Crime Insurance - ✔✔Protects against losses from theft of business
property and money, including employee theft
✔✔Commercial General Liability - ✔✔Protects a business against its legal liability to
others for bodily injury or property damage
✔✔Commercial Auto Insurance - ✔✔Covers liability for bodily injury and property
damage caused by the use of the businesses' autos and also damage to the business
own autos when they are in an accident
✔✔Workers Compensation - ✔✔Covers legally required benefits that businesses are
required to pay to their employees for job-related injuries and illnesses
✔✔Commercial Umbrella Insurance - ✔✔Provides additional liability limits beyond those
provided by other commercial policies, protecting a business in the event of large
liability loss
✔✔Stock Insurers (Private Insurers) - ✔✔Objective is to earn a profit, and they attract
stockholders by the expectation of investment returns. Many large PC insurers are this.
✔✔Mutual Insurers (Private Insurers) - ✔✔Share profits, pay dividends to policyholders
as a return of a portion of premiums paid. Some large insurers and many regional
insurers are this.
✔✔Surplus Lines Insurers (Private Insurers) - ✔✔Provide insurance coverages
unavailable in the standard market
✔✔Reinsurance (Private Insurers) - ✔✔Allows a primary insurer to transfer some loss
exposures to another insurer, the reinsurer. It can help a small insurer provide
insurance for large accounts.
✔✔What role does the government play in insurance? - ✔✔- If a type of insurance is
required, the government makes sure it is available at a reasonable price
- Reduces time or resources needed to obtain insurance coverage
- Can help find insurance for accounts that private insurers are unwilling or unable to
provide
✔✔Pure Risk - ✔✔A chance of loss or no loss, but no chance of gain.
✔✔Speculative Risk - ✔✔A chance of loss, no loss, or gain.
✔✔Hazard Risk - ✔✔Arises from property, liability, or personnel loss exposures
, ✔✔Operational Risk - ✔✔Arises from people, processes, systems, or controls
✔✔Financial Risk - ✔✔Arises from the effect of market forces on financial assets or
liabilities
✔✔Strategic Risk - ✔✔Arises from trends in the economy or society
✔✔Artificial Intelligence - ✔✔Allows computers to perform tasks that require critical
thinking, such as making decisions. Allows robots to work alongside humans and cars
and to operate without human drivers.
✔✔Smart Sensors - ✔✔Detect and measure objects or conditions continuously to warn
of problems or malfunctions. May trigger a response to an issue, which helps reduce
losses.
✔✔Computer Vision - ✔✔Helps a machine recognize an object and respond to it as a
human would
✔✔Three Primary Reasons for Insurance Regulation - ✔✔1. To protect consumers
2. To maintain insurer solvency
3. To protect destructive competition
✔✔What is shown on an insurer's income statement? - ✔✔Total Revenue, Expenses,,
Net Income
✔✔Insurer's Balance Sheet - ✔✔Includes Assets, Liabilities, and Policyholder's surplus.
✔✔Policyholder's surplus - ✔✔Assets minus Liabilities
✔✔Combined Ratio Use - ✔✔Indicates whether an insurer is making an underwriting
loss or gain. Loss Ratio = how much of the premium dollar pays for losses and
adjustments. Expense Ratio = How much of the premium dollar is used to pay the
insurer's expenses.
✔✔Combined Ratio Formula - ✔✔Combined Ratio = Loss Ratio + Expense Ratio
✔✔How to interpret the combined ratio - ✔✔A combined ratio less than 100 means the
insurer is making a UW profit. More than 100 means the insurer is not making a UW
profit. Ex. A combined ratio of 85 means it is earning 15 cents profit from UW on every
dollar of premium.
✔✔Independent Agents and Brokers - ✔✔Both sell insurance products to individuals
and businesses. The broker represents the customer, the agent represents one or more
