AINS 101 EXAM WITH 110+ QUESTIONS AND
CORRECT ANSWERS
Marco has been approved for a car insurance policy with a low premium because on
his application he gave an address in a low-crime area. However, the actual address at
which he lives and parks his car is in a high-crime area. What is this an example of? a.
Growing capacity
b. Adverse selection
c. Creating surplus
d. Following underwriting guidelines - ANSWER -b. Adverse selection
Emily is the underwriter for Marco's account. What is one way she could detect and
minimize instances of adverse selection such as this? a. Increase auto policy
premiums
b. Ensure adequate policyholders' surplus
c. Monitor the book of business for unusual patterns of policy growth or losses
d. Alter the underwriting guidelines - ANSWER -c. Monitor the book of business for
unusual patterns of policy growth or losses
These underwriters evaluate individual insurance applications and policy renewals and
manage their own books of business. In many ways, they are the public face of the
Underwriting Department - ANSWER -field underwriters
These underwriters make large-scale decisions about coverage, pricing, lines of
business, and the overall risk selection process - ANSWER -corporate underwriters
What do underwriters evaluate to determine the appropriate classification for a
commercial operation?
a. the insurer's book of business
b. specific characteristics of the insured's operation
c. the producer's years of experience on the job
d. policy holders' surplus - ANSWER -b. specific characteristics of the insured's
operation
Exposure unit to the type of insurance it's typically used for:
Each vehicle - ANSWER -auto
Exposure unit to the type of insurance it's typically used for:
Each $100 of insured value - ANSWER -commercial property
,Exposure unit to the type of insurance it's typically used for:
Each $1,000 of gross sales - ANSWER -general liability
Exposure unit to the type of insurance it's typically used for:
Each $1,000 of insured value - ANSWER -homeowners
Exposure unit to the type of insurance it's typically used for:
Each $100 of payroll - ANSWER -workers comp
Maria accidentally rear-ended Kenneth at a stop light. After the two made sure they
were both uninjured, they exchanged insurance information. Shortly afterward, Kenneth
called Maria's insurer and talked to Javier to report the damages to his car.
______ is the claim's representative. - ANSWER -Javier
Maria accidentally rear-ended Kenneth at a stop light. After the two made sure they
were both uninjured, they exchanged insurance information. Shortly afterward, Kenneth
called Maria's insurer and talked to Javier to report the damages to his car.
_____ is the claimant. - ANSWER -Kenneth
Belinda is a claims professional who works outside her organization's office. She
generally handles claims that require investigating the scene of a loss; resolving
complex investigative issues; and meeting with insureds, claimants, lawyers, and others
involved in a claim. What type of claims representative is she? a. Telephone claims
representative
b. Claims manager
c. Claims supervisor
d. Field claims representative - ANSWER -d. Field claims representative
If Tania needed to consult an accident-scene reconstruction specialist, she would have
been engaged in which one of these claims hand ling activities?
a. Investigating and documenting the claim.
b. Contacting the insured or the insured's representative
c. Identifying the policy that may cover the claim
d. Acknowledging a claim and assigning it to the claims representative - ANSWER -a.
Investigating and documenting the claim.
Using the previous example, let's say the couch destroyed in the fire has a ten-year
lifespan and replacement value of $800. If it was four years old and insured for its actual
cash value, how much would the policyholder receive? a. $480
b. $800
c. $380
,d. $600 - ANSWER -a. $480
Which of the following is an example of a legal requirement for individuals that could be
met through insurance?
a. contributing to the growth of the organization
b. paying for losses
c. obtaining personal auto insurance
d. providing a source of investment funds - ANSWER -c. obtaining personal auto
insurance
The best indication of an insurer's overall financial health is the - ANSWER
policyholders surplus (It shows how much cash an insurer has on hand for
emergencies, unexpected losses, and expansion of business)
Combined ratio = - ANSWER -loss ratio + expense ratio
expense ratio = - ANSWER -incurred underwriting expenses / written premiums
loss ratio = - ANSWER -incurred losses (including loss adjustment expenses) / earned
premiums
A fire destroys the kitchen in Rob and Laurie's home. Which insurance policy would
provide coverage for the damage?
a. Homeowners Policy (Personal Liability)
b. Homeowners Policy (Property)
c. Personal Umbrella Policy
d. Personal Auto Policy - ANSWER -b. Homeowners Policy (Property)
Which insurance policy could protect Rob and Laurie's sandwich shop against losses
from employee theft?
a. Workers Compensation
b. Commercial Crime
c. Commercial Property
d. Commercial General Liability
e. Commercial Auto - ANSWER -b. Commercial Crime
reimburses the insured for the cost of replacing the property, minus depreciation -
ANSWER -actual cash value
The maximum amount that will be paid in the event of a loss is set by the insured and
, insurer at the time the policy is written. - ANSWER -agreed value
reimburses the insured for the cost of replacing the property - ANSWER -replacement
value
_____ reimburse a victim for actual harm - ANSWER -compensatory damages
are awarded to punish a defendant for reckless, malicious, or deceitful acts - ANSWER
-punitive damages
are awarded for specific, identifiable expenses associated with the injured person's loss
- ANSWER -special damages
awarded to compensate a victim for losses such as pain and suffering - ANSWER -
general damages
investing in the stock market is an example of _____ risk - ANSWER -speculative
driving a car is an example of ____ risk - ANSWER -pure
the principle that prevents an insured from profiting from owning an insurance policy -
ANSWER -indemnity
a self-employed hairstylist wants to make sure she's covered in case a client sues her.
Her agent suggests a ____ policy. - ANSWER -manuscript
unique information on the insured; list of forms included in policy - ANSWER -
declarations
Statements containing insurer's promise to make payment - ANSWER -insuring
agreement
provisions stating what the insurer will not cover - ANSWER -exclusions
qualifications on promise to make payment - ANSWER -conditions
words with special meanings in policy - ANSWER -definitions
Which one of the following statements is correct regarding the benefits provided by
insurance? Select one:
A. The reduction in losses paid by insurers due to risk control measures benefits
individual insureds but not society as a whole.
CORRECT ANSWERS
Marco has been approved for a car insurance policy with a low premium because on
his application he gave an address in a low-crime area. However, the actual address at
which he lives and parks his car is in a high-crime area. What is this an example of? a.
Growing capacity
b. Adverse selection
c. Creating surplus
d. Following underwriting guidelines - ANSWER -b. Adverse selection
Emily is the underwriter for Marco's account. What is one way she could detect and
minimize instances of adverse selection such as this? a. Increase auto policy
premiums
b. Ensure adequate policyholders' surplus
c. Monitor the book of business for unusual patterns of policy growth or losses
d. Alter the underwriting guidelines - ANSWER -c. Monitor the book of business for
unusual patterns of policy growth or losses
These underwriters evaluate individual insurance applications and policy renewals and
manage their own books of business. In many ways, they are the public face of the
Underwriting Department - ANSWER -field underwriters
These underwriters make large-scale decisions about coverage, pricing, lines of
business, and the overall risk selection process - ANSWER -corporate underwriters
What do underwriters evaluate to determine the appropriate classification for a
commercial operation?
a. the insurer's book of business
b. specific characteristics of the insured's operation
c. the producer's years of experience on the job
d. policy holders' surplus - ANSWER -b. specific characteristics of the insured's
operation
Exposure unit to the type of insurance it's typically used for:
Each vehicle - ANSWER -auto
Exposure unit to the type of insurance it's typically used for:
Each $100 of insured value - ANSWER -commercial property
,Exposure unit to the type of insurance it's typically used for:
Each $1,000 of gross sales - ANSWER -general liability
Exposure unit to the type of insurance it's typically used for:
Each $1,000 of insured value - ANSWER -homeowners
Exposure unit to the type of insurance it's typically used for:
Each $100 of payroll - ANSWER -workers comp
Maria accidentally rear-ended Kenneth at a stop light. After the two made sure they
were both uninjured, they exchanged insurance information. Shortly afterward, Kenneth
called Maria's insurer and talked to Javier to report the damages to his car.
______ is the claim's representative. - ANSWER -Javier
Maria accidentally rear-ended Kenneth at a stop light. After the two made sure they
were both uninjured, they exchanged insurance information. Shortly afterward, Kenneth
called Maria's insurer and talked to Javier to report the damages to his car.
_____ is the claimant. - ANSWER -Kenneth
Belinda is a claims professional who works outside her organization's office. She
generally handles claims that require investigating the scene of a loss; resolving
complex investigative issues; and meeting with insureds, claimants, lawyers, and others
involved in a claim. What type of claims representative is she? a. Telephone claims
representative
b. Claims manager
c. Claims supervisor
d. Field claims representative - ANSWER -d. Field claims representative
If Tania needed to consult an accident-scene reconstruction specialist, she would have
been engaged in which one of these claims hand ling activities?
a. Investigating and documenting the claim.
b. Contacting the insured or the insured's representative
c. Identifying the policy that may cover the claim
d. Acknowledging a claim and assigning it to the claims representative - ANSWER -a.
Investigating and documenting the claim.
Using the previous example, let's say the couch destroyed in the fire has a ten-year
lifespan and replacement value of $800. If it was four years old and insured for its actual
cash value, how much would the policyholder receive? a. $480
b. $800
c. $380
,d. $600 - ANSWER -a. $480
Which of the following is an example of a legal requirement for individuals that could be
met through insurance?
a. contributing to the growth of the organization
b. paying for losses
c. obtaining personal auto insurance
d. providing a source of investment funds - ANSWER -c. obtaining personal auto
insurance
The best indication of an insurer's overall financial health is the - ANSWER
policyholders surplus (It shows how much cash an insurer has on hand for
emergencies, unexpected losses, and expansion of business)
Combined ratio = - ANSWER -loss ratio + expense ratio
expense ratio = - ANSWER -incurred underwriting expenses / written premiums
loss ratio = - ANSWER -incurred losses (including loss adjustment expenses) / earned
premiums
A fire destroys the kitchen in Rob and Laurie's home. Which insurance policy would
provide coverage for the damage?
a. Homeowners Policy (Personal Liability)
b. Homeowners Policy (Property)
c. Personal Umbrella Policy
d. Personal Auto Policy - ANSWER -b. Homeowners Policy (Property)
Which insurance policy could protect Rob and Laurie's sandwich shop against losses
from employee theft?
a. Workers Compensation
b. Commercial Crime
c. Commercial Property
d. Commercial General Liability
e. Commercial Auto - ANSWER -b. Commercial Crime
reimburses the insured for the cost of replacing the property, minus depreciation -
ANSWER -actual cash value
The maximum amount that will be paid in the event of a loss is set by the insured and
, insurer at the time the policy is written. - ANSWER -agreed value
reimburses the insured for the cost of replacing the property - ANSWER -replacement
value
_____ reimburse a victim for actual harm - ANSWER -compensatory damages
are awarded to punish a defendant for reckless, malicious, or deceitful acts - ANSWER
-punitive damages
are awarded for specific, identifiable expenses associated with the injured person's loss
- ANSWER -special damages
awarded to compensate a victim for losses such as pain and suffering - ANSWER -
general damages
investing in the stock market is an example of _____ risk - ANSWER -speculative
driving a car is an example of ____ risk - ANSWER -pure
the principle that prevents an insured from profiting from owning an insurance policy -
ANSWER -indemnity
a self-employed hairstylist wants to make sure she's covered in case a client sues her.
Her agent suggests a ____ policy. - ANSWER -manuscript
unique information on the insured; list of forms included in policy - ANSWER -
declarations
Statements containing insurer's promise to make payment - ANSWER -insuring
agreement
provisions stating what the insurer will not cover - ANSWER -exclusions
qualifications on promise to make payment - ANSWER -conditions
words with special meanings in policy - ANSWER -definitions
Which one of the following statements is correct regarding the benefits provided by
insurance? Select one:
A. The reduction in losses paid by insurers due to risk control measures benefits
individual insureds but not society as a whole.
