AINS 101 EXAM PREP WITH
CORRECT ANSWERS 2025
As a single mother on a very tight budget, Ciara is tempted to skimp on her
However, her friend Mehmet tells her not to skimp on insurance, because it will
insurance.
manage her cash flows. Which one of the following examples best illustrates
help
point?
Mehmet's
A. Ciara needs her car to get to her job, and she needs her job to make car
and pay for her car
payments
B. When her car's windshield breaks, Ciara has to pay only $100 of the $600 cost
insurance.
replacing it.
of
C. When her car's transmission goes out a month after the warranty expires, Ciara
faced with a $1,100 repair
is
D. Ciara finds it difficult to come up with a $787 auto insurance premium every
bill.
months. ( correct answers ) When her car's windshield breaks, Ciara has to
six
only $100 of the $600 cost of replacing
pay
it.
Which one of the following statements is correct regarding the benefits provided
by
insurance?
A. Insurance reduces the financial consequences of loss exposures but not the
related
uncertainty.
B. The primary role of insurance is to meet mandatory insurance
C. The reduction in losses paid by insurers due to risk control measures
requirements.
individual insureds but not society as a
benefits
D. Insurance helps reduce the financial burden to society by compensating
whole.
victims. ( correct answers ) Insurance helps reduce the financial burden to
accident
by compensating accident
society
victims.
Shelton Industries experienced a fire in its manufacturing plant. Several
suffered burns and smoke inhalation injuries as they tried to escape the
employees
Which one of Shelton Industries' commercial property-casualty policies would pay
building.
the employees' injuries and illnesses? ( correct answers ) Workers
for
insurance
compensation
A homeowners policy is a type of ( correct answers ) Personal property-
insurance policy.
casualty
,Which one of the following correctly describes a reason for government involvement
in property-casualty insurance?
A. Selling insurance provides the government with a non-tax source of revenues and
profits.
B. Government programs can meet legitimate public demands unmet by
insurers.
private
C. Competition from government plans keeps private insurer's premiums
D. Preventing high-risk individuals or activities from being insured is in the
competitive.
public
interest. ( correct answers ) Government programs can meet legitimate
public
demands unmet by private insurers.
Insurance Company wrote a commercial liability policy for a manufacturer of off-
motorcycles. The potential costs of the insured's loss exposure exceed
road
Company's capacity. Insurance Company could consider which one of the
Insurance
types of contractual transferring agreement to meet its needs? ( correct
following
answers )
Reinsurance
In an effort to reduce expenses, increase profitability, and reduce human errors;
Insurance Company decided to automate most of its personal lines
ABC
function. The company now uses standardized application forms that are
underwriting
submitted
electronically to one of the company's regional offices. At each regional office,
a
computer with a scanner reads the applications. The computer has been
programmed
with acceptable answers to the questions. If the answers on the application are
all
acceptable, the policy is automatically issued. Rejected applications are
automatically
forwarded to a human underwriter who reviews them. The use of this technology
has
reduced the company's expense ratio by two and a half percent, and reduced the
time
it takes to issue a policy. ABC Insurance Company's use of computers to
applications electronically is an application
evaluate
of
A. Radiant
B. Artificial
sensors.
C. ( correct answers ) Artificial
intelligence.
intelligence.
Jimmy decided to buy a house in his neighborhood that had been foreclosed on by
bank that held the mortgage. He is hoping to do some renovation and repair work
the
the house, and then sell it for a quick profit. What type of risk is this? ( correct
on
answers ) Speculative
Risk
Which one of the following best describes the concept of
pooling?
A. The financial consequences of unanticipated losses are transferred to an
insurer.
B. Risk management is concerned with positive and negative
risks.
C. Insureds share the cost of each other's
losses.
,D. Insurance benefits society as a ( correct answers ) Insureds share
whole.
cost of each other's losses. the
Which one of the following represents uncertainty about outcomes that can
be negative or positive?
A. Loss exposure
B.
C.
Transfer
D. Pooling ( correct answers )
Risk
Risk
Coverage for money and other business property from various causes of loss such
burglary, robbery, theft, and employee dishonesty typically is provided by ( correct
as
answers ) Commercial crime
insurance.
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) (
correct answers ) Commercial Package Policy
(CCP)
Which one of the following describes the characteristics of a mutual
insurance company?
A. A corporation owned by policyholders that provides insurance to its
policyholders.
B. An unincorporated association that provides reciprocal coverage to
subscribers.
C. An unincorporated association that earns profits for its individual
investors.
D.A corporation owned by stockholders that earns profits for the stockholders.
A reinsurance
( correct answers ) A corporation owned by policyholders that provides
company
insurance to its policyholders.
A. Assumes loss exposures from a primary
B. Provides primary insurance for loss exposures that private insurers are unwilling
insurer.
provide.
to
C. Is formed to write all or part of the insurance for a parent
D. Transfers losses to a primary insurer. ( correct answers ) Assumes
company.
exposures from a primary insurer.
loss
Autonomous Vehicle Applications (AVA) is a start-up company that develops
technologies that can be sold to companies that are producing autonomous
safety
vehicles.
One technology AVA is developing allows an autonomous vehicle to detect, extract,
and
analyze images; and then to respond to the images. For example, the technology
would
detect a presence in a crosswalk, extract the image, and a computer would analyze
the
image. When the image was determined to be a human being, the vehicle would
slow
, down or stop until the crosswalk was clear. This technology, which is designed
capture and analyze images, and to act on the recognition of the image; is called (
to
correct answers ) Computer
Vision
Mutual Fund Company (MFC) offers a wide array of mutual fund options to
Each mutual fund has a different fund objective and set of investment guidelines
investors.
apply to the fund. While MFC gives considerable freedom to its fund
that
managers, they are required to abide by the fund's investment guidelines. To
portfolio
compliance, MFC developed a computer algorithm. The computer
monitor
continuously monitors each fund's compliance with investment guidelines. If a
algorithm
manager violates the investment guidelines, the computer immediately notifies
fund
internal control director, and corrective action is taken. MFC's use of the
MFC's
algorithm to monitor investment compliance and to provide notification
computer
corrective action is necessary illustrates use of ( correct answers ) Artificial
when
Intelligence
The primary role of insurance is ( correct answers ) Indemnify individuals
to
organizations for covered and
losses
Which one of the following best describes the concept of
pooling?
A. Insureds share the cost of each other's
B. Risk management is concerned with positive and negative
losses.
risks.
C. The financial consequences of unanticipated losses are transferred to an
insurer.
D. Insurance benefits society as a whole. ( correct answers ) Insureds share the
cost of each other's
losses.
A type of insurer that is owned by policyholders and may pay dividends
policyholders as a return of a portion of premiums paid is a ( correct
to
answers
Mutual insurer.
)
The state of Maryland operates a residual auto plan (the Maryland Auto
Fund—MAIF) that provides coverage for drivers who are unable to obtain
Insurance
from private insurers. Which one of the following is the best rationale for the
coverage
program?
MAIF
A. Private insurers face limited competition, and the state increases
pressures by operating this type of
competitive
B. Auto insurance is compulsory, and the program makes it possible for all drivers
plan.
to
have reasonably priced
insurance.
C. Private insurers overcharge for auto insurance, and the state provides a low-
alternative.
cost
CORRECT ANSWERS 2025
As a single mother on a very tight budget, Ciara is tempted to skimp on her
However, her friend Mehmet tells her not to skimp on insurance, because it will
insurance.
manage her cash flows. Which one of the following examples best illustrates
help
point?
Mehmet's
A. Ciara needs her car to get to her job, and she needs her job to make car
and pay for her car
payments
B. When her car's windshield breaks, Ciara has to pay only $100 of the $600 cost
insurance.
replacing it.
of
C. When her car's transmission goes out a month after the warranty expires, Ciara
faced with a $1,100 repair
is
D. Ciara finds it difficult to come up with a $787 auto insurance premium every
bill.
months. ( correct answers ) When her car's windshield breaks, Ciara has to
six
only $100 of the $600 cost of replacing
pay
it.
Which one of the following statements is correct regarding the benefits provided
by
insurance?
A. Insurance reduces the financial consequences of loss exposures but not the
related
uncertainty.
B. The primary role of insurance is to meet mandatory insurance
C. The reduction in losses paid by insurers due to risk control measures
requirements.
individual insureds but not society as a
benefits
D. Insurance helps reduce the financial burden to society by compensating
whole.
victims. ( correct answers ) Insurance helps reduce the financial burden to
accident
by compensating accident
society
victims.
Shelton Industries experienced a fire in its manufacturing plant. Several
suffered burns and smoke inhalation injuries as they tried to escape the
employees
Which one of Shelton Industries' commercial property-casualty policies would pay
building.
the employees' injuries and illnesses? ( correct answers ) Workers
for
insurance
compensation
A homeowners policy is a type of ( correct answers ) Personal property-
insurance policy.
casualty
,Which one of the following correctly describes a reason for government involvement
in property-casualty insurance?
A. Selling insurance provides the government with a non-tax source of revenues and
profits.
B. Government programs can meet legitimate public demands unmet by
insurers.
private
C. Competition from government plans keeps private insurer's premiums
D. Preventing high-risk individuals or activities from being insured is in the
competitive.
public
interest. ( correct answers ) Government programs can meet legitimate
public
demands unmet by private insurers.
Insurance Company wrote a commercial liability policy for a manufacturer of off-
motorcycles. The potential costs of the insured's loss exposure exceed
road
Company's capacity. Insurance Company could consider which one of the
Insurance
types of contractual transferring agreement to meet its needs? ( correct
following
answers )
Reinsurance
In an effort to reduce expenses, increase profitability, and reduce human errors;
Insurance Company decided to automate most of its personal lines
ABC
function. The company now uses standardized application forms that are
underwriting
submitted
electronically to one of the company's regional offices. At each regional office,
a
computer with a scanner reads the applications. The computer has been
programmed
with acceptable answers to the questions. If the answers on the application are
all
acceptable, the policy is automatically issued. Rejected applications are
automatically
forwarded to a human underwriter who reviews them. The use of this technology
has
reduced the company's expense ratio by two and a half percent, and reduced the
time
it takes to issue a policy. ABC Insurance Company's use of computers to
applications electronically is an application
evaluate
of
A. Radiant
B. Artificial
sensors.
C. ( correct answers ) Artificial
intelligence.
intelligence.
Jimmy decided to buy a house in his neighborhood that had been foreclosed on by
bank that held the mortgage. He is hoping to do some renovation and repair work
the
the house, and then sell it for a quick profit. What type of risk is this? ( correct
on
answers ) Speculative
Risk
Which one of the following best describes the concept of
pooling?
A. The financial consequences of unanticipated losses are transferred to an
insurer.
B. Risk management is concerned with positive and negative
risks.
C. Insureds share the cost of each other's
losses.
,D. Insurance benefits society as a ( correct answers ) Insureds share
whole.
cost of each other's losses. the
Which one of the following represents uncertainty about outcomes that can
be negative or positive?
A. Loss exposure
B.
C.
Transfer
D. Pooling ( correct answers )
Risk
Risk
Coverage for money and other business property from various causes of loss such
burglary, robbery, theft, and employee dishonesty typically is provided by ( correct
as
answers ) Commercial crime
insurance.
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) (
correct answers ) Commercial Package Policy
(CCP)
Which one of the following describes the characteristics of a mutual
insurance company?
A. A corporation owned by policyholders that provides insurance to its
policyholders.
B. An unincorporated association that provides reciprocal coverage to
subscribers.
C. An unincorporated association that earns profits for its individual
investors.
D.A corporation owned by stockholders that earns profits for the stockholders.
A reinsurance
( correct answers ) A corporation owned by policyholders that provides
company
insurance to its policyholders.
A. Assumes loss exposures from a primary
B. Provides primary insurance for loss exposures that private insurers are unwilling
insurer.
provide.
to
C. Is formed to write all or part of the insurance for a parent
D. Transfers losses to a primary insurer. ( correct answers ) Assumes
company.
exposures from a primary insurer.
loss
Autonomous Vehicle Applications (AVA) is a start-up company that develops
technologies that can be sold to companies that are producing autonomous
safety
vehicles.
One technology AVA is developing allows an autonomous vehicle to detect, extract,
and
analyze images; and then to respond to the images. For example, the technology
would
detect a presence in a crosswalk, extract the image, and a computer would analyze
the
image. When the image was determined to be a human being, the vehicle would
slow
, down or stop until the crosswalk was clear. This technology, which is designed
capture and analyze images, and to act on the recognition of the image; is called (
to
correct answers ) Computer
Vision
Mutual Fund Company (MFC) offers a wide array of mutual fund options to
Each mutual fund has a different fund objective and set of investment guidelines
investors.
apply to the fund. While MFC gives considerable freedom to its fund
that
managers, they are required to abide by the fund's investment guidelines. To
portfolio
compliance, MFC developed a computer algorithm. The computer
monitor
continuously monitors each fund's compliance with investment guidelines. If a
algorithm
manager violates the investment guidelines, the computer immediately notifies
fund
internal control director, and corrective action is taken. MFC's use of the
MFC's
algorithm to monitor investment compliance and to provide notification
computer
corrective action is necessary illustrates use of ( correct answers ) Artificial
when
Intelligence
The primary role of insurance is ( correct answers ) Indemnify individuals
to
organizations for covered and
losses
Which one of the following best describes the concept of
pooling?
A. Insureds share the cost of each other's
B. Risk management is concerned with positive and negative
losses.
risks.
C. The financial consequences of unanticipated losses are transferred to an
insurer.
D. Insurance benefits society as a whole. ( correct answers ) Insureds share the
cost of each other's
losses.
A type of insurer that is owned by policyholders and may pay dividends
policyholders as a return of a portion of premiums paid is a ( correct
to
answers
Mutual insurer.
)
The state of Maryland operates a residual auto plan (the Maryland Auto
Fund—MAIF) that provides coverage for drivers who are unable to obtain
Insurance
from private insurers. Which one of the following is the best rationale for the
coverage
program?
MAIF
A. Private insurers face limited competition, and the state increases
pressures by operating this type of
competitive
B. Auto insurance is compulsory, and the program makes it possible for all drivers
plan.
to
have reasonably priced
insurance.
C. Private insurers overcharge for auto insurance, and the state provides a low-
alternative.
cost
