CIP - C120 Underwriting Essentials
Exam 2026 Questions and Answers
Definition #1 - Correct answer-An underwriter is an insurance professional
employed to accept or reject risk on behalf of an insurer
Definition #2 - Correct answer-An underwriter is an investor of shareholder capital
Definition #3 - Correct answer-An underwriter is an insurance professional
employed to implement an insurer's strategic plan
Complete Definition - Correct answer-An underwriter is an insurance professional
who invests the capital of an insurer's shareholders by accepting or rejecting risk to
implement an insurer's strategic plan
Speculative Risk - Correct answer-exists where there is a chance of either gain or
loss
Pure Risk - Correct answer-exists where there is only a chance of loss
Contract - Correct answer-an agreement between legally capable parties for a
consideration demonstrating intent to do something which is legal
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, Consideration - Correct answer-is money or a thing or act of value that one party
gives or promises in exchange for the act or promise of the other party; it is the
evidence that the parties intend to be bound by the contract
Insurable Interest - Correct answer-exists when the insurance buyer stands in such
a legal relationship to the object of insurance as to be financially benefited by its
continued existence or financially prejudiced by its loss or damage.
Indemnify - Correct answer-to return someone after a loss to the same financial
position he or she enjoyed immediately before the loss
Insurance Policy - Correct answer-a document that provides evidence of a contract
of insurance. It states in detail the terms of the contract - that is, the terms of the
agreement between insurer and the insured.
Frequency of loss - Correct answer-the ratio of the number of losses to the number
of exposure units
Severity of loss - Correct answer-the average size of losses
Additional Insured - Correct answer-any party not automatically included as an
insured but entitled to a certain degree of protection under the policy
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
Exam 2026 Questions and Answers
Definition #1 - Correct answer-An underwriter is an insurance professional
employed to accept or reject risk on behalf of an insurer
Definition #2 - Correct answer-An underwriter is an investor of shareholder capital
Definition #3 - Correct answer-An underwriter is an insurance professional
employed to implement an insurer's strategic plan
Complete Definition - Correct answer-An underwriter is an insurance professional
who invests the capital of an insurer's shareholders by accepting or rejecting risk to
implement an insurer's strategic plan
Speculative Risk - Correct answer-exists where there is a chance of either gain or
loss
Pure Risk - Correct answer-exists where there is only a chance of loss
Contract - Correct answer-an agreement between legally capable parties for a
consideration demonstrating intent to do something which is legal
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
, Consideration - Correct answer-is money or a thing or act of value that one party
gives or promises in exchange for the act or promise of the other party; it is the
evidence that the parties intend to be bound by the contract
Insurable Interest - Correct answer-exists when the insurance buyer stands in such
a legal relationship to the object of insurance as to be financially benefited by its
continued existence or financially prejudiced by its loss or damage.
Indemnify - Correct answer-to return someone after a loss to the same financial
position he or she enjoyed immediately before the loss
Insurance Policy - Correct answer-a document that provides evidence of a contract
of insurance. It states in detail the terms of the contract - that is, the terms of the
agreement between insurer and the insured.
Frequency of loss - Correct answer-the ratio of the number of losses to the number
of exposure units
Severity of loss - Correct answer-the average size of losses
Additional Insured - Correct answer-any party not automatically included as an
insured but entitled to a certain degree of protection under the policy
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
