AINS 21 Practice Exam UPDATED
ACTUAL QUESTIONS AND CORRECT
ANSWERS
when selecting a distribution channel, which one of the following is important consideration
with regard to customer needs and characteristics - CORRECT ANSWER
Which of the following statements is correct regarding characteristics of ideally insurable loss
exposures - CORRECT ANSWER ideally, loss exposures should be spread across a
large number of similar exposure units within the same period
The type of insurance that provides periodic income payments to an insured who is unable to
work because of sickness or injury is - CORRECT ANSWER Disability income
insurance
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 - CORRECT
ANSWER The potential for financial ruin
A loss exposure is - CORRECT ANSWER Any condition that presents the possibility
of a loss
Liability coverage for loss exposures arising from a business organizations premises and
operations, its products, or its completed work is typically provided by - CORRECT
ANSWER Commercial general liability insurance
Though premiums are an obvious cost of insurance, many insureds believe that are too high
because - CORRECT ANSWER Benefits are intangible until loss occurs
Insurance is not the only risk management transfer technique. When circumstances are
appropriate, transfer can be accomplished through - CORRECT
ANSWER noninsurance transfer technique
,Which one of the following is an example of a fortuitous loss - CORRECT
ANSWER An unknown vandal spray-paints graffiti on the insured's garage
Which one of the following statements is correct regarding the benefits that insurance
provides - CORRECT ANSWER Investment income helps keep insurance premiums at
a reasonable level
Claim buildup is considered to be among which one of the following costs of insurance -
CORRECT ANSWER increased losses
The primary role of insurance is to - CORRECT ANSWER indemnify individuals and
organizations for covered losses
Coverage for money, securities, and other property from various causes of loss such as
burglary, robbery, theft, and employee dishonesty typically is provided by - CORRECT
ANSWER commercial crime insurance
Which of the following is an opportunity cost of insurance - CORRECT ANSWER An
insureds funds that could be invested elsewhere if purchasing insurance were not necessary
Coverage for miscellaneous types of property such as movable property, goods in domestic
transit, and property use in transportation and communication, typically is provided by -
CORRECT ANSWER inland marine insurance
For insurers to utilize pooling most effectively and prevent catastrophic losses, the insured
exposure units need to be - CORRECT ANSWER independent
Some loss exposures are not easy to retain, avoid, or control. What risk management
techniques is frequently used to treat such exposures - CORRECT ANSWER transfer
,Sometimes the existence of insurance encourages losses. the result of this phenomenon is that
in - CORRECT ANSWER increases the total cost of insurance
Pravalt Construction Company pays less than its competitors for workers compensation
insurance because Pravalt has had substantially fewer employee injuries than other firms in
its class. this illustrates which one of the following benefits of insurance - CORRECT
ANSWER promote risk control
As a single mother on a very tight budget, Ciara is tempted to skimp on her insurance.
However, her friend Mehmet tells her not to skimp on insurance, because it will help manage
her cash flows. Which one of the following examples best illustrates Mehmet's point -
CORRECT ANSWER When her car's windshield breaks, Ciara has to pay only $100 of
the $600 cost of replacing it
A small business owner concerned about something happening and not being able to work or
earn a living for extended period of time due to an accident should purchase - CORRECT
ANSWER Disability insurance
Adhering to the characteristics of an ideally insurable loss exposure in selling insurance help
assure that - CORRECT ANSWER The insurer is able to charge a premium that the
insured can afford to pay
Which of the following statements is correct with regard to risk and ideally insurable
characteristics of loss exposures - CORRECT ANSWER indemnification is the process
of restoring an insured to pre-loss financial condition
Which one of the following statements is correct - CORRECT ANSWER insurers
investment income helps keep premiums at reasonable level
Which one of the following statements is correct regarding characteristics of ideally insurable
los exposures - CORRECT ANSWER Ideally, loss exposures should be spread across a
large number of similar exposure units within the same period
, Which one of the following is an operating cost of insurers - CORRECT
ANSWER Producers commissions
One of the costs of insurance is said to be opportunity costs. this means that if capital and
labor were not being used in the insurance business, they could be used elsewhere and
making other productive contributions to - CORRECT ANSWER Society
Private insurers are reluctant to provide windstorm insurance on coastal properties. This is
because the loss exposures fail to meet the criteria that ideally insurable exposures must be -
CORRECT ANSWER Independent and not catastrophic
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 particular risk management technique for dealing with her auto
related loss exposures is - CORRECT ANSWER Risk transfer
Another name for liability insurance is - CORRECT ANSWER third party insurance
A homeowners insurance policy typically includes - CORRECT ANSWER both
property and liability coverage
which one of the following statements is true - CORRECT ANSWER Mutual insurance
include some large national insurers
An insurer that was formed for the purpose of earning a profit for its stockholders is a -
CORRECT ANSWER Stock insurer
which of the following is generally exempt from state insurance regulations pertaining to
policy forms and rates - CORRECT ANSWER Surplus line insurers
ACTUAL QUESTIONS AND CORRECT
ANSWERS
when selecting a distribution channel, which one of the following is important consideration
with regard to customer needs and characteristics - CORRECT ANSWER
Which of the following statements is correct regarding characteristics of ideally insurable loss
exposures - CORRECT ANSWER ideally, loss exposures should be spread across a
large number of similar exposure units within the same period
The type of insurance that provides periodic income payments to an insured who is unable to
work because of sickness or injury is - CORRECT ANSWER Disability income
insurance
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 - CORRECT
ANSWER The potential for financial ruin
A loss exposure is - CORRECT ANSWER Any condition that presents the possibility
of a loss
Liability coverage for loss exposures arising from a business organizations premises and
operations, its products, or its completed work is typically provided by - CORRECT
ANSWER Commercial general liability insurance
Though premiums are an obvious cost of insurance, many insureds believe that are too high
because - CORRECT ANSWER Benefits are intangible until loss occurs
Insurance is not the only risk management transfer technique. When circumstances are
appropriate, transfer can be accomplished through - CORRECT
ANSWER noninsurance transfer technique
,Which one of the following is an example of a fortuitous loss - CORRECT
ANSWER An unknown vandal spray-paints graffiti on the insured's garage
Which one of the following statements is correct regarding the benefits that insurance
provides - CORRECT ANSWER Investment income helps keep insurance premiums at
a reasonable level
Claim buildup is considered to be among which one of the following costs of insurance -
CORRECT ANSWER increased losses
The primary role of insurance is to - CORRECT ANSWER indemnify individuals and
organizations for covered losses
Coverage for money, securities, and other property from various causes of loss such as
burglary, robbery, theft, and employee dishonesty typically is provided by - CORRECT
ANSWER commercial crime insurance
Which of the following is an opportunity cost of insurance - CORRECT ANSWER An
insureds funds that could be invested elsewhere if purchasing insurance were not necessary
Coverage for miscellaneous types of property such as movable property, goods in domestic
transit, and property use in transportation and communication, typically is provided by -
CORRECT ANSWER inland marine insurance
For insurers to utilize pooling most effectively and prevent catastrophic losses, the insured
exposure units need to be - CORRECT ANSWER independent
Some loss exposures are not easy to retain, avoid, or control. What risk management
techniques is frequently used to treat such exposures - CORRECT ANSWER transfer
,Sometimes the existence of insurance encourages losses. the result of this phenomenon is that
in - CORRECT ANSWER increases the total cost of insurance
Pravalt Construction Company pays less than its competitors for workers compensation
insurance because Pravalt has had substantially fewer employee injuries than other firms in
its class. this illustrates which one of the following benefits of insurance - CORRECT
ANSWER promote risk control
As a single mother on a very tight budget, Ciara is tempted to skimp on her insurance.
However, her friend Mehmet tells her not to skimp on insurance, because it will help manage
her cash flows. Which one of the following examples best illustrates Mehmet's point -
CORRECT ANSWER When her car's windshield breaks, Ciara has to pay only $100 of
the $600 cost of replacing it
A small business owner concerned about something happening and not being able to work or
earn a living for extended period of time due to an accident should purchase - CORRECT
ANSWER Disability insurance
Adhering to the characteristics of an ideally insurable loss exposure in selling insurance help
assure that - CORRECT ANSWER The insurer is able to charge a premium that the
insured can afford to pay
Which of the following statements is correct with regard to risk and ideally insurable
characteristics of loss exposures - CORRECT ANSWER indemnification is the process
of restoring an insured to pre-loss financial condition
Which one of the following statements is correct - CORRECT ANSWER insurers
investment income helps keep premiums at reasonable level
Which one of the following statements is correct regarding characteristics of ideally insurable
los exposures - CORRECT ANSWER Ideally, loss exposures should be spread across a
large number of similar exposure units within the same period
, Which one of the following is an operating cost of insurers - CORRECT
ANSWER Producers commissions
One of the costs of insurance is said to be opportunity costs. this means that if capital and
labor were not being used in the insurance business, they could be used elsewhere and
making other productive contributions to - CORRECT ANSWER Society
Private insurers are reluctant to provide windstorm insurance on coastal properties. This is
because the loss exposures fail to meet the criteria that ideally insurable exposures must be -
CORRECT ANSWER Independent and not catastrophic
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 particular risk management technique for dealing with her auto
related loss exposures is - CORRECT ANSWER Risk transfer
Another name for liability insurance is - CORRECT ANSWER third party insurance
A homeowners insurance policy typically includes - CORRECT ANSWER both
property and liability coverage
which one of the following statements is true - CORRECT ANSWER Mutual insurance
include some large national insurers
An insurer that was formed for the purpose of earning a profit for its stockholders is a -
CORRECT ANSWER Stock insurer
which of the following is generally exempt from state insurance regulations pertaining to
policy forms and rates - CORRECT ANSWER Surplus line insurers
