CPMSM PRACTICE TEST QUESTIONS WITH CORRECT SOLUTIONS RATED A+

CPMSM PRACTICE TEST QUESTIONS WITH CORRECT SOLUTIONS RATED A+ Your insurance agent is John, and who is the principal in this agency relationship? A. None. B. Your insurance company. C. Your insurance agent. D. You. - CORRECT ANSWER-Your insurance company Your insurance company authorizes your agent to do business with you. Statutory Law Defenses are determined by which of the following? A. Judicial decisions. B. Executive decisions. C. Enactment of Legislatures. D. Administrative decisions. - CORRECT ANSWER-Enactment of Legislatures When legislatures have felt that some Common Law Defenses are not adequate for the time or locale over which they have jurisdiction, they have replaced them with Statutory Defenses. Which of the following determines a loss ratio? A. Multiplying actual cash value of loss by the coinsurance factor. B. Dividing operating expenses by total premium. C. Dividing losses plus loss reserves by total earned premiums. D. Multiplying replacement cost by insurance premium. - CORRECT ANSWER-C. Dividing losses plus loss reserves by total earned premiums Gasoline stained clothes stored by a furnace are considered a ___________. A. Hazard. B. Risk. C. Severity. D. Adverse selection. - CORRECT ANSWER-Hazard If a sidewalk is icy, it is causing which type of hazard? A. A natural hazard. B. A moral hazard. C. A morale hazard. D. A physical hazard. - CORRECT ANSWER-A physical hazard An insurer organized in another state than the state in which it is authorized to do business is known as which type of insurer? A. Domestic. B. Admitted. C. Alien. D. Foreign. - CORRECT ANSWER-Foreign Which of the following best describes a hazard? A. Something that increases the chance of a loss. B. A reduction in, decrease in, or disappearance of, value. C. The possibility of a loss. D. The loss itself. - CORRECT ANSWER-Something that increases the chance of a loss Which type of risk involves the possibility of loss or gain? A. Pure. B. Speculative. C. Insurable. D. Stable. - CORRECT ANSWER-Speculative Which of the following best defines a hazard? It is a cause of loss It increases the risk or severity of loss It eliminates the chance of loss It increases the amount of loss - CORRECT ANSWER-It increases the risk or severity of loss All of the following are options for dealing with risk, except: Avoiding the risk Transferring the risk Subrogating the risk Retaining the risk - CORRECT ANSWER-Subrogating the risk A ___________ is allowed to charge a subscriber more for a pro rata share of losses. Lloyd's Insurer Stock Insurance Company Reciprocal Insurer Fraternal Insurer - CORRECT ANSWER-Reciprocal Insurer All of the following are requirements for recovery of a loss under replacement cost, except: The value of the property is determined at the time of loss