INSURANCE PERSONAL LINES TN STATE EXAM
QUESTIONS WITH CORRECT ANSWERS 2025/2026
Incidental occupancy - CORRECT ANSWER -minor uses that are accessory to or support the
predominant occupancy
All of the following are characteristics of the dwelling policy EXCEPT:
A.) incidental occupancy of limited service-type exposure is permitted
B.) Dwellings up to 4 family units are eligible.
C.) The dwelling must be owner-occupied.
D.) Coverage includes the dwelling only, contents only, or both. - CORRECT ANSWER -C.) The
dwelling must be owner-occupied.
What are the 3 types of hazards? - CORRECT ANSWER -1. Moral
2. Morale
3. Physical
Define insurance - CORRECT ANSWER -Transfer of risk
What does SANS stand for in transacting insurance ? - CORRECT ANSWER -Sale
Advising
Negotiating
Soliciting
,what are the 2 types of risks? - CORRECT ANSWER -Pure and Speculative
What is pure risk? - CORRECT ANSWER -a risk that presents the chance of loss but no
opportunity for gain
What is speculative risk? - CORRECT ANSWER -a risk situation that includes a chance of loss and
a potential for gain. Speculative risks are not insurable.
What type of risk can never be insured? - CORRECT ANSWER -Speculative risk
What is exposure used to do? - CORRECT ANSWER -Determine the rate
Define exposure - CORRECT ANSWER -A unit of measure used to determine rates charged for
insurance coverage.
Define a physical hazard. - CORRECT ANSWER -A condition of the subject of insurance that
creates or increases the chance of loss
What is a morale hazard? - CORRECT ANSWER -Applicant demonstrates a careless attitude that
could increase the chance of loss
What is moral hazard? - CORRECT ANSWER -A dishonest predisposition on the part of an
insured which increases the chance of loss
What is a peril? - CORRECT ANSWER -cause of loss insured against in an insurance policy
,Property peril is defined as ______________. - CORRECT ANSWER -The loss of physical property
or of its income producing abilities
Casualty peril is defined as _____________. - CORRECT ANSWER -The loss of and/or damage TO
property and resulting LIABILITIES.
What is loss? - CORRECT ANSWER -Reduction in value, destruction, or disappearance of
property or person insured in a policy
True or False? The reduction or destruction (loss) must be due to a peril insured against in the
policy. - CORRECT ANSWER -True.
Hazards are conditions that ———————- the ———————— of an insured loss. -
CORRECT ANSWER -Increase, probability
What are the five elements of insurable risk? - CORRECT ANSWER -1. Due to chance
2. Definite & measurable
3. Statistically predictable
4. Not catastrophic
5. Randomly selected/ large loss exposure
What is adverse selection? - CORRECT ANSWER -insuring of risks that are more prone to losses
than the average risk
How do insurers protect themselves from adverse selection? - CORRECT ANSWER -By refusing
or restricting coverage for bad risks or by charging a higher rate.
, Define the Law of Large Numbers - CORRECT ANSWER -Insurance is spreading risk among a large
pool of ppl w/ similar exposure to loss.
True or False? The larger the number of ppl w/ a similar exposure to loss, the less predictable
actual losses will be. - CORRECT ANSWER -False. The larger the number of ppl w/ a similar
exposure to loss, the more predictable actual losses will be.
What is a named insured? - CORRECT ANSWER -the person or party named on the declarations
page of the policy
What is a first named insured? - CORRECT ANSWER -The first name on the policy & has certain
additional rights and responsibilities that do not apply to other named insureds
What is a additional insured ? - CORRECT ANSWER -The specific interest. Name may not be on
the policy.
Who owns stocks? - CORRECT ANSWER -Stockholders
Who owns a mutual policy? - CORRECT ANSWER -Policy owners
Reciprocal Insurers - CORRECT ANSWER -Attorney in fact
Fraternal Insurer - CORRECT ANSWER -Fraternity
Risk Retention Group is a _________. - CORRECT ANSWER -Liability insurance company owned
by its members
Lloyd's __________________. - CORRECT ANSWER -Are not an insurance company!!!
QUESTIONS WITH CORRECT ANSWERS 2025/2026
Incidental occupancy - CORRECT ANSWER -minor uses that are accessory to or support the
predominant occupancy
All of the following are characteristics of the dwelling policy EXCEPT:
A.) incidental occupancy of limited service-type exposure is permitted
B.) Dwellings up to 4 family units are eligible.
C.) The dwelling must be owner-occupied.
D.) Coverage includes the dwelling only, contents only, or both. - CORRECT ANSWER -C.) The
dwelling must be owner-occupied.
What are the 3 types of hazards? - CORRECT ANSWER -1. Moral
2. Morale
3. Physical
Define insurance - CORRECT ANSWER -Transfer of risk
What does SANS stand for in transacting insurance ? - CORRECT ANSWER -Sale
Advising
Negotiating
Soliciting
,what are the 2 types of risks? - CORRECT ANSWER -Pure and Speculative
What is pure risk? - CORRECT ANSWER -a risk that presents the chance of loss but no
opportunity for gain
What is speculative risk? - CORRECT ANSWER -a risk situation that includes a chance of loss and
a potential for gain. Speculative risks are not insurable.
What type of risk can never be insured? - CORRECT ANSWER -Speculative risk
What is exposure used to do? - CORRECT ANSWER -Determine the rate
Define exposure - CORRECT ANSWER -A unit of measure used to determine rates charged for
insurance coverage.
Define a physical hazard. - CORRECT ANSWER -A condition of the subject of insurance that
creates or increases the chance of loss
What is a morale hazard? - CORRECT ANSWER -Applicant demonstrates a careless attitude that
could increase the chance of loss
What is moral hazard? - CORRECT ANSWER -A dishonest predisposition on the part of an
insured which increases the chance of loss
What is a peril? - CORRECT ANSWER -cause of loss insured against in an insurance policy
,Property peril is defined as ______________. - CORRECT ANSWER -The loss of physical property
or of its income producing abilities
Casualty peril is defined as _____________. - CORRECT ANSWER -The loss of and/or damage TO
property and resulting LIABILITIES.
What is loss? - CORRECT ANSWER -Reduction in value, destruction, or disappearance of
property or person insured in a policy
True or False? The reduction or destruction (loss) must be due to a peril insured against in the
policy. - CORRECT ANSWER -True.
Hazards are conditions that ———————- the ———————— of an insured loss. -
CORRECT ANSWER -Increase, probability
What are the five elements of insurable risk? - CORRECT ANSWER -1. Due to chance
2. Definite & measurable
3. Statistically predictable
4. Not catastrophic
5. Randomly selected/ large loss exposure
What is adverse selection? - CORRECT ANSWER -insuring of risks that are more prone to losses
than the average risk
How do insurers protect themselves from adverse selection? - CORRECT ANSWER -By refusing
or restricting coverage for bad risks or by charging a higher rate.
, Define the Law of Large Numbers - CORRECT ANSWER -Insurance is spreading risk among a large
pool of ppl w/ similar exposure to loss.
True or False? The larger the number of ppl w/ a similar exposure to loss, the less predictable
actual losses will be. - CORRECT ANSWER -False. The larger the number of ppl w/ a similar
exposure to loss, the more predictable actual losses will be.
What is a named insured? - CORRECT ANSWER -the person or party named on the declarations
page of the policy
What is a first named insured? - CORRECT ANSWER -The first name on the policy & has certain
additional rights and responsibilities that do not apply to other named insureds
What is a additional insured ? - CORRECT ANSWER -The specific interest. Name may not be on
the policy.
Who owns stocks? - CORRECT ANSWER -Stockholders
Who owns a mutual policy? - CORRECT ANSWER -Policy owners
Reciprocal Insurers - CORRECT ANSWER -Attorney in fact
Fraternal Insurer - CORRECT ANSWER -Fraternity
Risk Retention Group is a _________. - CORRECT ANSWER -Liability insurance company owned
by its members
Lloyd's __________________. - CORRECT ANSWER -Are not an insurance company!!!
