AINS 21 - Segment A
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1. 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.: C. Transfer the cost of losses.
2. 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.: A. Any condition that present the possibility of a loss.
3. 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: C. Transfer
4. Insurance is not the only risk management transfer technique. When circum-
stances are appropriate, transfer can be accomplished through
A. Retention
B. Noninsurance transfer techniques
C. Avoidance
D. Loss prevention: B. Noninsurance transfer techniques
5. Another name for liability insurance is
A. First-party insurance
B. Second-party insurance
C. Third-party insurance
D. Multiple-party insurance: C. Third party insurance
6. 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
, AINS 21 - Segment A
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A. Risk transfer
B. Retention
C. Loss control
D. Avoidance: A. Risk transfer
7. 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.: C. The potential for financial ruin.
8. Life insurance that provides coverage for a specified period with no cash value
is called
A. Universal life
B. Long-term care insurance
C. Term life insurance
D. Whole life: C. Term life insurance
9. 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
A. Disability insurance
B. Personal liability of insurance
C. Universal life insurance
D. Medical insurance: A. Disability insurance
10. A policy that combines property, crime and liability coverage into one policy
is referred to as:
A. Commercial umbrella policy
B. Commercial package policy
C. Workers compensation policy
D. Employee dishonesty policy: B. Commercial package policy
11. Coverage for money, securities, and other property from various causes
of loss such as burglary, robbery, theft, and employee dishonesty typically is
, AINS 21 - Segment A
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provided by
A. Professional liability insurance.
B. Inland marine insurance.
C. Commercial crime insurance.
D. Ocean marine insurance.: C. Commercial crime insurance.
12. Term life insurance
A. Allows the policyholder to borrow against policy savings.
B. Provides protection for a specified period with no cash value.
C. Accrues a cash value.
D. Provides lifetime protection: B. Provides protection for a specified period with no cash value.
13. 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.: B. Indemnification.
14. Which one of the following statements is correct with respect to character-
istics 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.: B. If losses are not fortuitous, premiums could increase for all policyholders.
15. 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.: C. The insurer is able to
charge a premium that the insured can afford to pay.
, AINS 21 - Segment A
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16. 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.: B. Independent and not catastrophic.
17. 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.: B. Indemnification is the process of restoring an insured to a pre-loss financial condition.
18. For insurers to utilize pooling most effectively and prevent catastrophic
losses, the insured exposure units need to be
A. Correlated.
B. Different.
C. Independent.
D. Adjacent.: C. Independent.
19. Oscar's custom-built vehicle looks like a sausage sandwich on wheels. He
plans to drive it to special events at schools around the country where it will
serve as a mobile billboard to promote his product. Oscar is surprised to learn
that insurers are reluctant to insure his vehicle because it fails to meet one
of the ideal characteristics of an insurable risk. Which characteristic is Oscar's
vehicle least likely to meet?
Choose one answer.
A. Definite and measurable
B. Independent and not catastrophic
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1. 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.: C. Transfer the cost of losses.
2. 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.: A. Any condition that present the possibility of a loss.
3. 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: C. Transfer
4. Insurance is not the only risk management transfer technique. When circum-
stances are appropriate, transfer can be accomplished through
A. Retention
B. Noninsurance transfer techniques
C. Avoidance
D. Loss prevention: B. Noninsurance transfer techniques
5. Another name for liability insurance is
A. First-party insurance
B. Second-party insurance
C. Third-party insurance
D. Multiple-party insurance: C. Third party insurance
6. 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
, AINS 21 - Segment A
Study online at https://quizlet.com/_hrx851
A. Risk transfer
B. Retention
C. Loss control
D. Avoidance: A. Risk transfer
7. 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.: C. The potential for financial ruin.
8. Life insurance that provides coverage for a specified period with no cash value
is called
A. Universal life
B. Long-term care insurance
C. Term life insurance
D. Whole life: C. Term life insurance
9. 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
A. Disability insurance
B. Personal liability of insurance
C. Universal life insurance
D. Medical insurance: A. Disability insurance
10. A policy that combines property, crime and liability coverage into one policy
is referred to as:
A. Commercial umbrella policy
B. Commercial package policy
C. Workers compensation policy
D. Employee dishonesty policy: B. Commercial package policy
11. Coverage for money, securities, and other property from various causes
of loss such as burglary, robbery, theft, and employee dishonesty typically is
, AINS 21 - Segment A
Study online at https://quizlet.com/_hrx851
provided by
A. Professional liability insurance.
B. Inland marine insurance.
C. Commercial crime insurance.
D. Ocean marine insurance.: C. Commercial crime insurance.
12. Term life insurance
A. Allows the policyholder to borrow against policy savings.
B. Provides protection for a specified period with no cash value.
C. Accrues a cash value.
D. Provides lifetime protection: B. Provides protection for a specified period with no cash value.
13. 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.: B. Indemnification.
14. Which one of the following statements is correct with respect to character-
istics 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.: B. If losses are not fortuitous, premiums could increase for all policyholders.
15. 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.: C. The insurer is able to
charge a premium that the insured can afford to pay.
, AINS 21 - Segment A
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16. 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.: B. Independent and not catastrophic.
17. 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.: B. Indemnification is the process of restoring an insured to a pre-loss financial condition.
18. For insurers to utilize pooling most effectively and prevent catastrophic
losses, the insured exposure units need to be
A. Correlated.
B. Different.
C. Independent.
D. Adjacent.: C. Independent.
19. Oscar's custom-built vehicle looks like a sausage sandwich on wheels. He
plans to drive it to special events at schools around the country where it will
serve as a mobile billboard to promote his product. Oscar is surprised to learn
that insurers are reluctant to insure his vehicle because it fails to meet one
of the ideal characteristics of an insurable risk. Which characteristic is Oscar's
vehicle least likely to meet?
Choose one answer.
A. Definite and measurable
B. Independent and not catastrophic
