AINS 21 practice exam Latest Update
Actual Questions and Answers with
complete solutions
An insurance producer’s primary responsibility is to:
Correct answers: Serve the needs and best interests of the client.
Which of the following best defines a hazard?
Correct answers: A condition that increases the chance of a loss occurring.
In insurance, what does the term "indemnify" mean?
Correct answers: To restore the insured to the same financial position as before the
loss.
An insurer must have an insurable interest in the subject of insurance at what point in
time?
Correct answers: At the time of the loss.
Which insurance principle prevents an insured from profiting from a loss?
Correct answers: Indemnity.
A representation in an insurance application is considered to be:
Correct answers: A statement believed to be true to the best of the applicant’s
knowledge.
What is the purpose of a binder in insurance?
Correct answers: To provide temporary evidence of insurance until a policy is issued.
Which of the following is NOT a type of agent authority?
Correct answers: Assumed authority.
,A waiver is best described as:
Correct answers: The voluntary relinquishment of a known right.
An insurance contract is considered what type of contract?
Correct answers: A contract of adhesion.
What is the term for the cause of a loss?
Correct answers: Peril.
Which of the following is an example of a morale hazard?
Correct answers: Carelessness due to indifference.
A policy that covers all risks of physical loss except those specifically excluded is known
as:
Correct answers: An open perils (all-risks) form.
What does the term "subrogation" allow an insurer to do?
Correct answers: Pursue a third party that caused the loss to recover paid amounts.
The requirement that the insured must prove a loss before receiving payment is known
as:
Correct answers: The burden of proof is on the insured.
Which of the following is a characteristic of insurance?
Correct answers: Transfer of risk from an individual to a group.
A written request for insurance that becomes part of the policy is called:
Correct answers: An application.
Which of these is an element of an insurable risk?
Correct answers: The loss must be definite in time and place.
What does "utmost good faith" mean in an insurance contract?
Correct answers: Both parties are bound to a high standard of honesty and disclosure.
,In property insurance, what does "actual cash value" typically mean?
Correct answers: Replacement cost minus depreciation.
What is the purpose of an exclusion in an insurance policy?
Correct answers: To remove coverage for certain perils, losses, or property.
An insured fails to pay the premium by the due date. What provision allows a grace
period for payment in many policies?
Correct answers: Grace period provision.
Which document amends or changes an existing insurance policy?
Correct answers: An endorsement.
What is the term for a persistent danger or condition that increases the chance of a
loss?
Correct answers: Hazard.
An insured's misstatement of a material fact on an application, if discovered, could lead
to:
Correct answers: Rescission of the contract by the insurer.
A condition in a policy that requires the insured to give written notice of loss within a
specified time is an example of:
Correct answers: A policy condition.
In liability insurance, what does the insurer promise to do for the insured?
Correct answers: Pay on behalf of the insured for covered losses and provide a legal
defense.
A building is insured for $200,000 but its actual cash value at the time of loss is
$250,000. If a $50,000 loss occurs, how much will the insurer pay (assuming no
deductible)?
Correct answers: $50,000 (the amount of the loss, subject to policy limits).
, What is the purpose of a deductible in an insurance policy?
Correct answers: To eliminate small claims and reduce premiums.
What type of risk involves the possibility of gain or loss?
Correct answers: Speculative risk.
Which of the following is a pure risk?
Correct answers: The risk of a house fire.
A contract is legally binding only if it contains:
Correct answers: Consideration.
What is the term for the process of selecting and classifying risks?
Correct answers: Underwriting.
The uncertainty of loss is known as:
Correct answers: Risk.
A person who relies on the information provided by an applicant without independent
verification is relying on:
Correct answers: Representations.
The process of determining the value of a loss is called:
Correct answers: Appraisal.
When must an insurable interest exist in life insurance?
Correct answers: At the inception of the policy.
An insurer that is formed under the laws of a state other than the one in which it is
operating is called:
Correct answers: A foreign insurer.
What is the primary function of an insurance company’s actuary?
Correct answers: To calculate premiums and reserves based on statistical data.
Actual Questions and Answers with
complete solutions
An insurance producer’s primary responsibility is to:
Correct answers: Serve the needs and best interests of the client.
Which of the following best defines a hazard?
Correct answers: A condition that increases the chance of a loss occurring.
In insurance, what does the term "indemnify" mean?
Correct answers: To restore the insured to the same financial position as before the
loss.
An insurer must have an insurable interest in the subject of insurance at what point in
time?
Correct answers: At the time of the loss.
Which insurance principle prevents an insured from profiting from a loss?
Correct answers: Indemnity.
A representation in an insurance application is considered to be:
Correct answers: A statement believed to be true to the best of the applicant’s
knowledge.
What is the purpose of a binder in insurance?
Correct answers: To provide temporary evidence of insurance until a policy is issued.
Which of the following is NOT a type of agent authority?
Correct answers: Assumed authority.
,A waiver is best described as:
Correct answers: The voluntary relinquishment of a known right.
An insurance contract is considered what type of contract?
Correct answers: A contract of adhesion.
What is the term for the cause of a loss?
Correct answers: Peril.
Which of the following is an example of a morale hazard?
Correct answers: Carelessness due to indifference.
A policy that covers all risks of physical loss except those specifically excluded is known
as:
Correct answers: An open perils (all-risks) form.
What does the term "subrogation" allow an insurer to do?
Correct answers: Pursue a third party that caused the loss to recover paid amounts.
The requirement that the insured must prove a loss before receiving payment is known
as:
Correct answers: The burden of proof is on the insured.
Which of the following is a characteristic of insurance?
Correct answers: Transfer of risk from an individual to a group.
A written request for insurance that becomes part of the policy is called:
Correct answers: An application.
Which of these is an element of an insurable risk?
Correct answers: The loss must be definite in time and place.
What does "utmost good faith" mean in an insurance contract?
Correct answers: Both parties are bound to a high standard of honesty and disclosure.
,In property insurance, what does "actual cash value" typically mean?
Correct answers: Replacement cost minus depreciation.
What is the purpose of an exclusion in an insurance policy?
Correct answers: To remove coverage for certain perils, losses, or property.
An insured fails to pay the premium by the due date. What provision allows a grace
period for payment in many policies?
Correct answers: Grace period provision.
Which document amends or changes an existing insurance policy?
Correct answers: An endorsement.
What is the term for a persistent danger or condition that increases the chance of a
loss?
Correct answers: Hazard.
An insured's misstatement of a material fact on an application, if discovered, could lead
to:
Correct answers: Rescission of the contract by the insurer.
A condition in a policy that requires the insured to give written notice of loss within a
specified time is an example of:
Correct answers: A policy condition.
In liability insurance, what does the insurer promise to do for the insured?
Correct answers: Pay on behalf of the insured for covered losses and provide a legal
defense.
A building is insured for $200,000 but its actual cash value at the time of loss is
$250,000. If a $50,000 loss occurs, how much will the insurer pay (assuming no
deductible)?
Correct answers: $50,000 (the amount of the loss, subject to policy limits).
, What is the purpose of a deductible in an insurance policy?
Correct answers: To eliminate small claims and reduce premiums.
What type of risk involves the possibility of gain or loss?
Correct answers: Speculative risk.
Which of the following is a pure risk?
Correct answers: The risk of a house fire.
A contract is legally binding only if it contains:
Correct answers: Consideration.
What is the term for the process of selecting and classifying risks?
Correct answers: Underwriting.
The uncertainty of loss is known as:
Correct answers: Risk.
A person who relies on the information provided by an applicant without independent
verification is relying on:
Correct answers: Representations.
The process of determining the value of a loss is called:
Correct answers: Appraisal.
When must an insurable interest exist in life insurance?
Correct answers: At the inception of the policy.
An insurer that is formed under the laws of a state other than the one in which it is
operating is called:
Correct answers: A foreign insurer.
What is the primary function of an insurance company’s actuary?
Correct answers: To calculate premiums and reserves based on statistical data.
