AINS 101 EXAM QUESTIONS WITH 100%
CORRECT ANSWERS UPDATED 2024-
2025
Why are insurance regulators concerned about the effects of large catastrophes? -
Answer- Insurers may become insolvent
A stock insurer differs from a reciprocal insurance exchange in which one of the
following ways? - Answer- Stockholders own a stock insurer. Members own a reciprocal
insurance exchange.
Sota's Superstore has recently become an insured of Keithly Insurance Company.
Kaito, Keithly's premium auditor, is being sent to conduct an advance audit. Which one
of the following tasks will Kaito do to assist underwriting? - Answer- Classify the various
exposures
Martina, a premium auditor for Cintriell Insurance Company is conducting a premium
audit for Carolina's Cookies. Carolina mentioned to Martina that she is opening a coffee
shop at another location. By sharing this information, Martina would provide a
contribution to which one of the following insurer functions? - Answer- Underwriting
When the Smiths purchased their first home, they were required to purchase a
homeowners insurance policy in order to get a mortgage. Because they did not have a
lot of extra money in their budget, they wanted to buy as little insurance coverage as
possible. The Smiths' insurance agent advised them that if they purchase an insurance
policy that adequately covers damage to their home and personal property, they only
have to budget for the insurance premium, rather than the full cost of rebuilding the
house and replacing its contents. Which one of the following key components of
insurance is the insurance agent explaining to the Smiths? - Answer- Transfer
John's two-year-old bicycle was stolen. The bicycle's purchase price was $700, its
current replacement cost is $800, and depreciation was estimated at $450. What was
the bicycle's actual cash value? - Answer- $350
Jennie recently purchased a personal auto policy from Westcox Insurers. Three weeks
later, Jennie reported her car was stolen from her driveway during the middle of the day.
Upon further investigation, claims representative Harry finds out the home address he
has on file for Jennie does not match the location where the theft occurred. In light of
this scenario, which one of the following would be particularly helpful for Harry to pursue
concerning Jenny's claim? - Answer- Harry can verify Jennie's address and other
, possible helpful information by reviewing her policy which has her original application
information attached.
As a single mother on a very tight budget, Ciara is tempted to skimp on her insurance.
However, her friend Mehmet tells her not to skimp on insurance, because it will help
manage her cash flows. Which one of the following examples best illustrates Mehmet's
point? - Answer- When her car's windshield breaks, Ciara has to pay only $100 of the
$600 cost of replacing it.
Which one of the following represents uncertainty about outcomes that can be negative
or positive? - Answer- Risk
The insurance agent suggested that Sally's Snack Shop buy a policy that combines
property, crime, and liability coverages into one policy. This is referred to as a(n) -
Answer- Commercial package policy (CPP)
Shelton Industries experienced a fire in its manufacturing plant. Several employees
suffered burns and smoke inhalation injuries as they tried to escape the building. Which
one of Shelton Industries' commercial property-casualty policies would pay for the
employees' injuries and illnesses? - Answer- Workers compensation insurance
An insurer that was formed for the purpose of earning a profit for its stockholders is a -
Answer- Stock insurer
Insurance Company wrote a commercial liability policy for a manufacturer of off-road
motorcycles. The potential costs of the insured's loss exposure exceed Insurance
Company's capacity. Insurance Company could consider which one of the following
types of contractual transferring agreement to meet its needs? - Answer- Reinsurance
Mutual insurance - Answer- provide insurance for their own policyholders
Interinsurance - Answer- another name for a reciprocal
Reciprocal insurance - Answer- provide insurance for their subscribers
Jimmy decided to buy a house in his neighborhood that had been foreclosed on by the
bank that held the mortgage. He is hoping to do some renovation and repair work on the
house, and then sell it for a quick profit. Which one of the following types of risk is this
for Jimmy? - Answer- Speculative risk
Can result in loss or gain - Answer- Speculative Risk
In an effort to reduce expenses, increase profitability, and reduce human errors; ABC
Insurance Company decided to automate most of its personal lines underwriting
function. The company now uses standardized application forms that are submitted
electronically to one of the company's regional offices. At each regional office, a
CORRECT ANSWERS UPDATED 2024-
2025
Why are insurance regulators concerned about the effects of large catastrophes? -
Answer- Insurers may become insolvent
A stock insurer differs from a reciprocal insurance exchange in which one of the
following ways? - Answer- Stockholders own a stock insurer. Members own a reciprocal
insurance exchange.
Sota's Superstore has recently become an insured of Keithly Insurance Company.
Kaito, Keithly's premium auditor, is being sent to conduct an advance audit. Which one
of the following tasks will Kaito do to assist underwriting? - Answer- Classify the various
exposures
Martina, a premium auditor for Cintriell Insurance Company is conducting a premium
audit for Carolina's Cookies. Carolina mentioned to Martina that she is opening a coffee
shop at another location. By sharing this information, Martina would provide a
contribution to which one of the following insurer functions? - Answer- Underwriting
When the Smiths purchased their first home, they were required to purchase a
homeowners insurance policy in order to get a mortgage. Because they did not have a
lot of extra money in their budget, they wanted to buy as little insurance coverage as
possible. The Smiths' insurance agent advised them that if they purchase an insurance
policy that adequately covers damage to their home and personal property, they only
have to budget for the insurance premium, rather than the full cost of rebuilding the
house and replacing its contents. Which one of the following key components of
insurance is the insurance agent explaining to the Smiths? - Answer- Transfer
John's two-year-old bicycle was stolen. The bicycle's purchase price was $700, its
current replacement cost is $800, and depreciation was estimated at $450. What was
the bicycle's actual cash value? - Answer- $350
Jennie recently purchased a personal auto policy from Westcox Insurers. Three weeks
later, Jennie reported her car was stolen from her driveway during the middle of the day.
Upon further investigation, claims representative Harry finds out the home address he
has on file for Jennie does not match the location where the theft occurred. In light of
this scenario, which one of the following would be particularly helpful for Harry to pursue
concerning Jenny's claim? - Answer- Harry can verify Jennie's address and other
, possible helpful information by reviewing her policy which has her original application
information attached.
As a single mother on a very tight budget, Ciara is tempted to skimp on her insurance.
However, her friend Mehmet tells her not to skimp on insurance, because it will help
manage her cash flows. Which one of the following examples best illustrates Mehmet's
point? - Answer- When her car's windshield breaks, Ciara has to pay only $100 of the
$600 cost of replacing it.
Which one of the following represents uncertainty about outcomes that can be negative
or positive? - Answer- Risk
The insurance agent suggested that Sally's Snack Shop buy a policy that combines
property, crime, and liability coverages into one policy. This is referred to as a(n) -
Answer- Commercial package policy (CPP)
Shelton Industries experienced a fire in its manufacturing plant. Several employees
suffered burns and smoke inhalation injuries as they tried to escape the building. Which
one of Shelton Industries' commercial property-casualty policies would pay for the
employees' injuries and illnesses? - Answer- Workers compensation insurance
An insurer that was formed for the purpose of earning a profit for its stockholders is a -
Answer- Stock insurer
Insurance Company wrote a commercial liability policy for a manufacturer of off-road
motorcycles. The potential costs of the insured's loss exposure exceed Insurance
Company's capacity. Insurance Company could consider which one of the following
types of contractual transferring agreement to meet its needs? - Answer- Reinsurance
Mutual insurance - Answer- provide insurance for their own policyholders
Interinsurance - Answer- another name for a reciprocal
Reciprocal insurance - Answer- provide insurance for their subscribers
Jimmy decided to buy a house in his neighborhood that had been foreclosed on by the
bank that held the mortgage. He is hoping to do some renovation and repair work on the
house, and then sell it for a quick profit. Which one of the following types of risk is this
for Jimmy? - Answer- Speculative risk
Can result in loss or gain - Answer- Speculative Risk
In an effort to reduce expenses, increase profitability, and reduce human errors; ABC
Insurance Company decided to automate most of its personal lines underwriting
function. The company now uses standardized application forms that are submitted
electronically to one of the company's regional offices. At each regional office, a
