PA Life, Accident, & Health Insurance Exam
ACTUAL QUESTIONS AND CORRECT
ANSWERS
Insurance - Correct answers✔defined as the transfer of PURE risk to the insurance company in
consideration for a premium.
The chance of loss without any chance of gain is called - Correct answers✔pure risk
Speculative risk - Correct answers✔has the possibility for gain or loss and is not insurable.
Risk is defined as the - Correct answers✔chance of loss.
A condition that could result in a loss is known as an - Correct answers✔exposure
A hazard is something that increases - Correct answers✔the chance of loss.
The presence of a physical hazard - Correct answers✔increases the chance of a loss occurring.
A peril is - Correct answers✔defined as a cause of loss, such as fire.
To be insurable, - Correct answers✔losses must be calculable.
The law of large numbers - Correct answers✔allows insurers to predict claims more accurately.
,The law of large numbers applies to - Correct answers✔groups of people, not to individuals.
The more people in the group, - Correct answers✔the more accurate the predictions are.
Most insurers buy reinsurance - Correct answers✔to protect themselves in the event of a
catastrophic loss.
Insurance laws are not required - Correct answers✔to be uniform from one state to another.
A stock insurer - Correct answers✔may pay dividends to its shareholders (stockholders), but they
may not be guaranteed.
A reciprocal insurance company is managed by an - Correct answers✔attorney-in-fact.
An unincorporated association of individuals who insure each other is known as - Correct
answers✔a reciprocal insurer.
The government offers insurance primarily based upon - Correct answers✔social needs, such as
flood insurance and workers compensation, but does not offer insurance for the purpose of
preventing fraud.
A foreign company - Correct answers✔has their home office in another state.
An insurer incorporated outside of the U.S. who sells in the U.S. is - Correct answers✔an alien
company.
, A producer may be personally liable when - Correct answers✔violating the producer's contract.
Producers represent - Correct answers✔the insurance company, not the insured.
Independent producers - Correct answers✔own their own accounts and are not insurance
company employees.
Producers have - Correct answers✔express, implied and apparent authority.
The authority a producer - Correct answers✔has that is written in his or her contract is known as
express authority.
A producer's binding authority (if any) - Correct answers✔is expressed (written down) in the
producer's contract with the insurer the producer represents.
The authority not expressly (written) granted, - Correct answers✔but is actual authority the
producer has to transact normal business activities, is known as implied authority.
The elements of a legal contract may be remembered - Correct answers✔by the acronym C-O-
AL (consideration, offer, acceptance, legal purpose and legal capacity).
A requirement for a valid contract - Correct answers✔is offer and acceptance, or mutual
agreement.
Advertising the availability of insurance is not - Correct answers✔considered to be an offer.
ACTUAL QUESTIONS AND CORRECT
ANSWERS
Insurance - Correct answers✔defined as the transfer of PURE risk to the insurance company in
consideration for a premium.
The chance of loss without any chance of gain is called - Correct answers✔pure risk
Speculative risk - Correct answers✔has the possibility for gain or loss and is not insurable.
Risk is defined as the - Correct answers✔chance of loss.
A condition that could result in a loss is known as an - Correct answers✔exposure
A hazard is something that increases - Correct answers✔the chance of loss.
The presence of a physical hazard - Correct answers✔increases the chance of a loss occurring.
A peril is - Correct answers✔defined as a cause of loss, such as fire.
To be insurable, - Correct answers✔losses must be calculable.
The law of large numbers - Correct answers✔allows insurers to predict claims more accurately.
,The law of large numbers applies to - Correct answers✔groups of people, not to individuals.
The more people in the group, - Correct answers✔the more accurate the predictions are.
Most insurers buy reinsurance - Correct answers✔to protect themselves in the event of a
catastrophic loss.
Insurance laws are not required - Correct answers✔to be uniform from one state to another.
A stock insurer - Correct answers✔may pay dividends to its shareholders (stockholders), but they
may not be guaranteed.
A reciprocal insurance company is managed by an - Correct answers✔attorney-in-fact.
An unincorporated association of individuals who insure each other is known as - Correct
answers✔a reciprocal insurer.
The government offers insurance primarily based upon - Correct answers✔social needs, such as
flood insurance and workers compensation, but does not offer insurance for the purpose of
preventing fraud.
A foreign company - Correct answers✔has their home office in another state.
An insurer incorporated outside of the U.S. who sells in the U.S. is - Correct answers✔an alien
company.
, A producer may be personally liable when - Correct answers✔violating the producer's contract.
Producers represent - Correct answers✔the insurance company, not the insured.
Independent producers - Correct answers✔own their own accounts and are not insurance
company employees.
Producers have - Correct answers✔express, implied and apparent authority.
The authority a producer - Correct answers✔has that is written in his or her contract is known as
express authority.
A producer's binding authority (if any) - Correct answers✔is expressed (written down) in the
producer's contract with the insurer the producer represents.
The authority not expressly (written) granted, - Correct answers✔but is actual authority the
producer has to transact normal business activities, is known as implied authority.
The elements of a legal contract may be remembered - Correct answers✔by the acronym C-O-
AL (consideration, offer, acceptance, legal purpose and legal capacity).
A requirement for a valid contract - Correct answers✔is offer and acceptance, or mutual
agreement.
Advertising the availability of insurance is not - Correct answers✔considered to be an offer.
