ND Property Insurance Revision Exam
Questions All Answered Correct (2025-
2026) Edition.
Insurance - Answer the transfer of financial responsibility associated with a potential of a loss
(risk) to an insurance company, which in turn spreads the cost of unexpected losses to many
individuals.
Law of Large Numbers - Answer Principal stating that the larger the number of similar
exposure units considered, the more closely the losses reported will equal the underlying
probability of loss. This law forms the basis for statistical prediction of loss upon which rates for
insurance are calculated.
Insurable Interest - Answer the insured must have an insurable interest in the person or
property covered by an insurance policy. This means the insured would incur a financial loss if
the insured property was damaged
Risk - Answer the uncertainty or chance of a loss occurring
Pure Risk - Answer Refers to situations that can only result in a loss or no change, no
opportunity for financial gain
Speculative Risk - Answer involves the opportunity for either loss or gain.
Hazard - Answer condition or situation which creates or increases the probability of or extend
of a probable loss from a peril
Moral Hazard - Answer dishonest predisposition on the part of an insured which increases the
change of loss
Morale Hazard - Answer applicants who demonstrate a careless attitude that could increase
the change of loss that would be greater than would otherwise be the case
Physical Hazard - Answer condition of the subject of insurance which creates or increases the
change of loss, such as: structural defects, occupancy, poor housekeeping, or location
,Direct Loss - Answer direct, physical damage to buildings and/or personal property
EX: building that catches fire
Indirect Loss - Answer or consequential losses are considered losses as a result of direct loss.
Usually result from the time it takes to repair or replace damaged property.
Most Common Indirect Losses - Answer homeowners facing extra living expenses while the
home is being repaired
commercial loss of profits while a business is closed for repairs
Actual Cash Value (ACV) - Answer method of valuation reinforces the principle of indemnity
because it recognizes the reduction of value of property as it ages and becomes subject to wear
and tear and obsolescence.
= current replacement cost- depreciation
Replacement COst - Answer the cost to replace damaged property with like kind and quality at
today's price, without any deduction for depreciation
Market Value - Answer method of calculating a loss based upon the amount a willing buyer
would pay to a willing seller for the property prior to the loss.
Stated Value - Answer amount of insurance scheduled in a property policy which is not subject
to any coinsurance requirements in the event of a covered loss
Salvage Value - Answer the estimated value an asset will realize upon its sale at the end of its
useful life.
Proximate Cause - Answer Act or event considered a natural reasonably foreseeable cause of
the damage or event which occurs and damages property or injuries a plaintiff the negligence
must have been the proximate cause of the damage if the injured party is to collect for the
damage. Also referred to as direct liability.
Deductible - Answer a dollar amount an insured must pay on a claim before the insurance
policy provides coverage
, Limits of Liability - Answer the insurers liability for payment as stated in an insurance policy
Coinsurance/ Insurance to Value - Answer .
Occurrence - Answer .
Cancellation - Answer the termination of an in-force insurance policy by either the insured or
the insurer prior to the expiration date shown in the policy. Termination my be voluntary,
involuntary, or in mutual accordance with provisions contained in the policy.
Nonrenewal - Answer termination of an insurance policy at its expiration date by not offering a
continuation of the existing policy or a replacement policy
Vacancy - Answer an insured structure in which no people have been living or working, and no
property have been stored for the period of time required as stated
Liability - Answer .
Absolute Liability - Answer imposed on defendants engaged in hazardous activities, such as
harboring wild animals, using explosives, etc. the injured party does not need to prove
negligence.
Strict Liability - Answer commonly applied in product liability cases, a person/business that
manufactures or sells a product makes an implied warranty that the product is safe. They are
then liable for defective products regardless of fault or negligence.
Vicarious Liability - Answer purpose is to transfer the liability for one person to another person
who would probably have a greater ability to pay.
Negligence - Answer failure to use the care that a reasonable, prudent person whould have
taken under the same or similar circumstances
Binder - Answer a temporary contract of insurance issued by an insurer or its agent that places
insurance in effect prior to the policy being issued
Questions All Answered Correct (2025-
2026) Edition.
Insurance - Answer the transfer of financial responsibility associated with a potential of a loss
(risk) to an insurance company, which in turn spreads the cost of unexpected losses to many
individuals.
Law of Large Numbers - Answer Principal stating that the larger the number of similar
exposure units considered, the more closely the losses reported will equal the underlying
probability of loss. This law forms the basis for statistical prediction of loss upon which rates for
insurance are calculated.
Insurable Interest - Answer the insured must have an insurable interest in the person or
property covered by an insurance policy. This means the insured would incur a financial loss if
the insured property was damaged
Risk - Answer the uncertainty or chance of a loss occurring
Pure Risk - Answer Refers to situations that can only result in a loss or no change, no
opportunity for financial gain
Speculative Risk - Answer involves the opportunity for either loss or gain.
Hazard - Answer condition or situation which creates or increases the probability of or extend
of a probable loss from a peril
Moral Hazard - Answer dishonest predisposition on the part of an insured which increases the
change of loss
Morale Hazard - Answer applicants who demonstrate a careless attitude that could increase
the change of loss that would be greater than would otherwise be the case
Physical Hazard - Answer condition of the subject of insurance which creates or increases the
change of loss, such as: structural defects, occupancy, poor housekeeping, or location
,Direct Loss - Answer direct, physical damage to buildings and/or personal property
EX: building that catches fire
Indirect Loss - Answer or consequential losses are considered losses as a result of direct loss.
Usually result from the time it takes to repair or replace damaged property.
Most Common Indirect Losses - Answer homeowners facing extra living expenses while the
home is being repaired
commercial loss of profits while a business is closed for repairs
Actual Cash Value (ACV) - Answer method of valuation reinforces the principle of indemnity
because it recognizes the reduction of value of property as it ages and becomes subject to wear
and tear and obsolescence.
= current replacement cost- depreciation
Replacement COst - Answer the cost to replace damaged property with like kind and quality at
today's price, without any deduction for depreciation
Market Value - Answer method of calculating a loss based upon the amount a willing buyer
would pay to a willing seller for the property prior to the loss.
Stated Value - Answer amount of insurance scheduled in a property policy which is not subject
to any coinsurance requirements in the event of a covered loss
Salvage Value - Answer the estimated value an asset will realize upon its sale at the end of its
useful life.
Proximate Cause - Answer Act or event considered a natural reasonably foreseeable cause of
the damage or event which occurs and damages property or injuries a plaintiff the negligence
must have been the proximate cause of the damage if the injured party is to collect for the
damage. Also referred to as direct liability.
Deductible - Answer a dollar amount an insured must pay on a claim before the insurance
policy provides coverage
, Limits of Liability - Answer the insurers liability for payment as stated in an insurance policy
Coinsurance/ Insurance to Value - Answer .
Occurrence - Answer .
Cancellation - Answer the termination of an in-force insurance policy by either the insured or
the insurer prior to the expiration date shown in the policy. Termination my be voluntary,
involuntary, or in mutual accordance with provisions contained in the policy.
Nonrenewal - Answer termination of an insurance policy at its expiration date by not offering a
continuation of the existing policy or a replacement policy
Vacancy - Answer an insured structure in which no people have been living or working, and no
property have been stored for the period of time required as stated
Liability - Answer .
Absolute Liability - Answer imposed on defendants engaged in hazardous activities, such as
harboring wild animals, using explosives, etc. the injured party does not need to prove
negligence.
Strict Liability - Answer commonly applied in product liability cases, a person/business that
manufactures or sells a product makes an implied warranty that the product is safe. They are
then liable for defective products regardless of fault or negligence.
Vicarious Liability - Answer purpose is to transfer the liability for one person to another person
who would probably have a greater ability to pay.
Negligence - Answer failure to use the care that a reasonable, prudent person whould have
taken under the same or similar circumstances
Binder - Answer a temporary contract of insurance issued by an insurer or its agent that places
insurance in effect prior to the policy being issued
