General Insurance Essentials Exam Questions with Correct Answers Graded A+
insurance - Answers Is a contract in which (the second party) the insurer, for monetary consideration
agrees to reimburse the insured (the first party) for a loss or liability for a (third party) loss on a stated
subject caused by specified hazards or perils
Can there be insurance if there is no risk? - Answers No
Risk - Answers Is the chance of loss. It is the possible loss or destruction of property, or the incurring of a
liability
Risk is also referred to as - Answers The subject of the insurance contract (the policy)
E.g. the house, the car that is insured
Speculative Risk - Answers Is a situation where there can be a financial loss, or a financial gain
E.g. buying stocks, betting, buying a lottery ticket, or starting a new business
Is speculative risk insurable? - Answers No
Pure risk - Answers It is a situation where there is a chance of loss, or no loss, but there is no chance of
gain
Insurance only deals with what type of risk? - Answers Pure Risk
Is speculative risk insurable? Why or why not? - Answers Not insurable because there is a chance of
profit, the outcomes of speculative risk are too volatile, and speculative risk cannot be measured in an
accurate way to establish an appropriate premium
Give and example of pure risk and the losses a person my suffer - Answers The owner of automobile has
a chance of financial loss if their car is involved in an accident. The owner may suffer injuries and may
incur medical expenses due to these injuries, and may not be able to work. their vehicle also may be
damaged
Name the types of insurable risks? - Answers 1. personal risks
2. Property risks
3. Liability Risks
Describe personal risks - Answers It is the chance of loss arising from a person's own bodily injury, loss of
life, or loss of income from: death, physical disability (resulting from accident or sickness), old age, and
unemployment
Describe Property Risks - Answers It is the chance of loss involving the destruction or damage to
property. There are types of property risks:
, 1. Direct losses - are those involving damage to or destruction of the insured property
2. Indirect losses - occur as a result of the direct losses
Give two examples of direct losses - Answers 1. cost of repairing a collision damaged car
2. The cost of repairing a house damaged by fire
Give an example of an indirect loss - Answers A person rents their basement. The apartment has a sewer
backup. The renter moved out, due to the sewer backup, and the insured lost rental income — the
indirect loss
Describe Liability Risks - Answers Is the chance of the insured having a loss, from their obligation to pay
damages because of injury, death to a third party or damage to a third party's property. It is based on
the insured's negligent acts as it relates to the following:
- the insured's conduct
- the insured's operation of automobiles, aircrafts, boats, snowmobiles, trains, trucks, etc.
- the ownership or occupancy (or both) of property
- the manufacturing of products
- the insured's doing of professional services
Name the classes of insurance - Answers 1. Personal Lines
2. Commercial Lines
3. Specialty Risks
Describe Personal Lines - Answers Insurance relating to individuals in their private capacity
E.g. home and contents, automobiles, cottages, boats, jewellery, etc
Describe Commercial Lines - Answers Insurance relating to commercial operations
E.g. professional offices, trucking operations, construction vehicles and contractors and other similar
businesses
Describe Specialty Risks - Answers Insurance related to marine exposure, and high risk mining, and
industrial operations, etc.
High exposure subjects
Peril - Answers The event that caused a loss covered by the policy (the insurance contract)
Give examples of a peril - Answers Fire, hail, windstorm, sewer backup
insurance - Answers Is a contract in which (the second party) the insurer, for monetary consideration
agrees to reimburse the insured (the first party) for a loss or liability for a (third party) loss on a stated
subject caused by specified hazards or perils
Can there be insurance if there is no risk? - Answers No
Risk - Answers Is the chance of loss. It is the possible loss or destruction of property, or the incurring of a
liability
Risk is also referred to as - Answers The subject of the insurance contract (the policy)
E.g. the house, the car that is insured
Speculative Risk - Answers Is a situation where there can be a financial loss, or a financial gain
E.g. buying stocks, betting, buying a lottery ticket, or starting a new business
Is speculative risk insurable? - Answers No
Pure risk - Answers It is a situation where there is a chance of loss, or no loss, but there is no chance of
gain
Insurance only deals with what type of risk? - Answers Pure Risk
Is speculative risk insurable? Why or why not? - Answers Not insurable because there is a chance of
profit, the outcomes of speculative risk are too volatile, and speculative risk cannot be measured in an
accurate way to establish an appropriate premium
Give and example of pure risk and the losses a person my suffer - Answers The owner of automobile has
a chance of financial loss if their car is involved in an accident. The owner may suffer injuries and may
incur medical expenses due to these injuries, and may not be able to work. their vehicle also may be
damaged
Name the types of insurable risks? - Answers 1. personal risks
2. Property risks
3. Liability Risks
Describe personal risks - Answers It is the chance of loss arising from a person's own bodily injury, loss of
life, or loss of income from: death, physical disability (resulting from accident or sickness), old age, and
unemployment
Describe Property Risks - Answers It is the chance of loss involving the destruction or damage to
property. There are types of property risks:
, 1. Direct losses - are those involving damage to or destruction of the insured property
2. Indirect losses - occur as a result of the direct losses
Give two examples of direct losses - Answers 1. cost of repairing a collision damaged car
2. The cost of repairing a house damaged by fire
Give an example of an indirect loss - Answers A person rents their basement. The apartment has a sewer
backup. The renter moved out, due to the sewer backup, and the insured lost rental income — the
indirect loss
Describe Liability Risks - Answers Is the chance of the insured having a loss, from their obligation to pay
damages because of injury, death to a third party or damage to a third party's property. It is based on
the insured's negligent acts as it relates to the following:
- the insured's conduct
- the insured's operation of automobiles, aircrafts, boats, snowmobiles, trains, trucks, etc.
- the ownership or occupancy (or both) of property
- the manufacturing of products
- the insured's doing of professional services
Name the classes of insurance - Answers 1. Personal Lines
2. Commercial Lines
3. Specialty Risks
Describe Personal Lines - Answers Insurance relating to individuals in their private capacity
E.g. home and contents, automobiles, cottages, boats, jewellery, etc
Describe Commercial Lines - Answers Insurance relating to commercial operations
E.g. professional offices, trucking operations, construction vehicles and contractors and other similar
businesses
Describe Specialty Risks - Answers Insurance related to marine exposure, and high risk mining, and
industrial operations, etc.
High exposure subjects
Peril - Answers The event that caused a loss covered by the policy (the insurance contract)
Give examples of a peril - Answers Fire, hail, windstorm, sewer backup
