AINS 21 - SEGMENT A EXAM
WITH CORRECT ANSWERS
2025
From a risk management viewpoint, insurance is used to A. Prevent the cost
of losses
B. Reduce the cost of losses
C. Transfer the cost of losses
D. Isolate the cost of losses. ( correct answers ) C. Transfer
the cost of losses.
A loss exposure is:
A. Any condition that presents the possibility of a loss.
B. Any condition that precludes the chance of loss.
C. The same thing as a peril.
D. The same thing as a hazard. ( correct answers ) A.
Any condition that present the possibility of a loss.
Some loss exposures are not easy to retain, avoid, or control. What risk
management technique is frequently used to treat such exposures?
A. Reinsurance
B. Prevention
C. Transfer
D. Reunderwriting ( correct answers ) C. Transfer
Insurance is not the only risk management transfer technique. When
circumstances are appropriate, transfer can be accomplished through
A. Retention
B. Noninsurance transfer techniques
C. Avoidance
D. Loss prevention ( correct answers ) B. Noninsurance transfer
techniques
Another name for liability insurance is
A. First-party insurance
B. Second-party insurance
C. Third-party insurance
D. Multiple-party insurance ( correct answers ) C. Third
party insurance
Sally is a recent college graduate who lives in the suburbs and drives to
work daily in the city. She recognizes that owning a car creates both
property damage and liability exposures for her and at the same time she
has the burden of student loans. For someone in Sally's circumstances the
most practical risk management technique for dealing with her auto-
related loss exposures is
A. Risk transfer
,B. Retention
C. Loss
control ( correct answers ) A. Risk
D. Avoidance transfer
Retention is often used in combination with insurance as a way of
treating loss exposures. One of the major downsides of individuals
using retention alone is
A. The record keeping associated with the retained losses.
B. Availability of insurer loss settlement services.
C. The potential for financial ruin.
D.The unavailability of insurer loss control services.
( correct answers ) C. The potential for
financial ruin.
Life insurance that provides coverage for a specified period with no
cash value is called
E. Universal life
F. Long-term care insurance
G. Term life insurance
H. Whole life ( correct answers ) C. Term life insurance
A small business owner concerned about something happening and not
being able to work or earn a living for an extended period of time due to an
accident should purchase
I. Disability insurance
J. Personal liability of insurance
K. Universal life insurance
L. Medical insurance ( correct answers ) A. Disability insurance
A policy that combines property, crime and liability coverage into one
policy is referred to as:
M.Commercial umbrella policy
N. Commercial package policy
O. Workers compensation policy
P. Employee dishonesty policy ( correct answers ) B. Commercial
package policy
Coverage for money, securities, and other property from various causes of
loss such as burglary, robbery, theft, and employee dishonesty typically is
provided by
Q. Professional liability insurance.
R. Inland marine insurance.
S. Commercial crime insurance.
T. Ocean marine insurance. ( correct answers ) C. Commercial crime
insurance.
Term life insurance
U. Allows the policyholder to borrow against policy savings.
V. Provides protection for a specified period with no cash value.
W.Accrues a cash value.
X.Provides lifetime protection ( correct answers )B.
Provides protection for a specified period with no cash value.
, The process of restoring an individual or organization to a pre-loss financial
condition is the process of
A. Subrogation.
B. Indemnification.
C. Loss mitigation.
D. Premium rebating.( correct answers ) B. Indemnification.
Which one of the following statements is correct with respect to
characteristics of insurable loss exposures?
A. Private insurance is suitable for risks where the probability and
timing of loss is
known.
B. If losses are not fortuitous, premiums could increase for all
policyholders.
C. If a loss is fortuitous, the chance of loss could increase as soon as a
policy is issued.
D. If the insured has control over whether or when a loss will occur, the risk
is attractive to insure. ( correct answers ) B. If losses are not fortuitous,
premiums could increase for all policyholders.
Adhering to the characteristics of an ideally insurable loss exposure in
selling insurance help assure that
A. The insurer is able to predict the amount and timing of each future loss.
B. The losses associated with it typically involve small amounts.
C. The insurer is able to charge a premium that the insured can afford to pay.
D. The insurer can charge a high premium for the coverage.
( correct answers ) C. The insurer is
able to charge a premium that the insured can afford to pay.
Private insurers are reluctant to provide windstorm insurance on coastal
properties. This is because the loss exposures fail to meet the criterion that
ideally insurable exposures must be
A. Definite and measurable.
B. Independent and not catastrophic.
C. Fortuitous.
D. A large number of similar exposure units. ( correct answers ) B.
Independent and not catastrophic.
Which one of the following statements is correct with regard to risk and
ideally insurable characteristics of loss exposures?
A. An ideally insurable loss exposure should be associated with speculative
risk.
B. Indemnification is the process of restoring an insured to a pre-loss
financial condition.
C. One purpose of insurance is to enable the insured to profit from a loss.
D. If a loss exposure includes the possibility of gain, it is a more desirable
risk to insure. ( correct answers ) B. Indemnification is the process of
restoring an insured to a pre- loss financial condition.
For insurers to utilize pooling most effectively and prevent catastrophic
losses, the insured exposure units need to be
A. Correlated.
WITH CORRECT ANSWERS
2025
From a risk management viewpoint, insurance is used to A. Prevent the cost
of losses
B. Reduce the cost of losses
C. Transfer the cost of losses
D. Isolate the cost of losses. ( correct answers ) C. Transfer
the cost of losses.
A loss exposure is:
A. Any condition that presents the possibility of a loss.
B. Any condition that precludes the chance of loss.
C. The same thing as a peril.
D. The same thing as a hazard. ( correct answers ) A.
Any condition that present the possibility of a loss.
Some loss exposures are not easy to retain, avoid, or control. What risk
management technique is frequently used to treat such exposures?
A. Reinsurance
B. Prevention
C. Transfer
D. Reunderwriting ( correct answers ) C. Transfer
Insurance is not the only risk management transfer technique. When
circumstances are appropriate, transfer can be accomplished through
A. Retention
B. Noninsurance transfer techniques
C. Avoidance
D. Loss prevention ( correct answers ) B. Noninsurance transfer
techniques
Another name for liability insurance is
A. First-party insurance
B. Second-party insurance
C. Third-party insurance
D. Multiple-party insurance ( correct answers ) C. Third
party insurance
Sally is a recent college graduate who lives in the suburbs and drives to
work daily in the city. She recognizes that owning a car creates both
property damage and liability exposures for her and at the same time she
has the burden of student loans. For someone in Sally's circumstances the
most practical risk management technique for dealing with her auto-
related loss exposures is
A. Risk transfer
,B. Retention
C. Loss
control ( correct answers ) A. Risk
D. Avoidance transfer
Retention is often used in combination with insurance as a way of
treating loss exposures. One of the major downsides of individuals
using retention alone is
A. The record keeping associated with the retained losses.
B. Availability of insurer loss settlement services.
C. The potential for financial ruin.
D.The unavailability of insurer loss control services.
( correct answers ) C. The potential for
financial ruin.
Life insurance that provides coverage for a specified period with no
cash value is called
E. Universal life
F. Long-term care insurance
G. Term life insurance
H. Whole life ( correct answers ) C. Term life insurance
A small business owner concerned about something happening and not
being able to work or earn a living for an extended period of time due to an
accident should purchase
I. Disability insurance
J. Personal liability of insurance
K. Universal life insurance
L. Medical insurance ( correct answers ) A. Disability insurance
A policy that combines property, crime and liability coverage into one
policy is referred to as:
M.Commercial umbrella policy
N. Commercial package policy
O. Workers compensation policy
P. Employee dishonesty policy ( correct answers ) B. Commercial
package policy
Coverage for money, securities, and other property from various causes of
loss such as burglary, robbery, theft, and employee dishonesty typically is
provided by
Q. Professional liability insurance.
R. Inland marine insurance.
S. Commercial crime insurance.
T. Ocean marine insurance. ( correct answers ) C. Commercial crime
insurance.
Term life insurance
U. Allows the policyholder to borrow against policy savings.
V. Provides protection for a specified period with no cash value.
W.Accrues a cash value.
X.Provides lifetime protection ( correct answers )B.
Provides protection for a specified period with no cash value.
, The process of restoring an individual or organization to a pre-loss financial
condition is the process of
A. Subrogation.
B. Indemnification.
C. Loss mitigation.
D. Premium rebating.( correct answers ) B. Indemnification.
Which one of the following statements is correct with respect to
characteristics of insurable loss exposures?
A. Private insurance is suitable for risks where the probability and
timing of loss is
known.
B. If losses are not fortuitous, premiums could increase for all
policyholders.
C. If a loss is fortuitous, the chance of loss could increase as soon as a
policy is issued.
D. If the insured has control over whether or when a loss will occur, the risk
is attractive to insure. ( correct answers ) B. If losses are not fortuitous,
premiums could increase for all policyholders.
Adhering to the characteristics of an ideally insurable loss exposure in
selling insurance help assure that
A. The insurer is able to predict the amount and timing of each future loss.
B. The losses associated with it typically involve small amounts.
C. The insurer is able to charge a premium that the insured can afford to pay.
D. The insurer can charge a high premium for the coverage.
( correct answers ) C. The insurer is
able to charge a premium that the insured can afford to pay.
Private insurers are reluctant to provide windstorm insurance on coastal
properties. This is because the loss exposures fail to meet the criterion that
ideally insurable exposures must be
A. Definite and measurable.
B. Independent and not catastrophic.
C. Fortuitous.
D. A large number of similar exposure units. ( correct answers ) B.
Independent and not catastrophic.
Which one of the following statements is correct with regard to risk and
ideally insurable characteristics of loss exposures?
A. An ideally insurable loss exposure should be associated with speculative
risk.
B. Indemnification is the process of restoring an insured to a pre-loss
financial condition.
C. One purpose of insurance is to enable the insured to profit from a loss.
D. If a loss exposure includes the possibility of gain, it is a more desirable
risk to insure. ( correct answers ) B. Indemnification is the process of
restoring an insured to a pre- loss financial condition.
For insurers to utilize pooling most effectively and prevent catastrophic
losses, the insured exposure units need to be
A. Correlated.
