1
Delaware Insurance Exam Chapter 1 Practice Questions & Answers 2026/2027 | Verified
Study Guide & Exam Prep
100 Questions with Verified Answers
Study Guide Note: This practice exam covers Chapter 1 foundational insurance concepts for
the Delaware Life & Health Producer licensing exam. The content aligns with the 2026/2027
Pearson VUE Delaware Insurance Licensing Candidate Handbook and Title 18 of the
Delaware Code . The Delaware exam consists of 50 general scored questions plus 40 state-
specific scored questions for Life Producer candidates .
Section 1: Basic Insurance Concepts & Principles (Questions 1–20)
1. What is the primary purpose of insurance?
A. Investment growth
B. Risk transfer
C. Tax reductiona
D. Profit generation
Answer: B. Insurance exists to transfer financial risk from an individual to an insurer in
exchange for a premium .
2. Which principle states that the insured should not profit from a loss?
A. Indemnity
B. Insurable interest
C. Subrogation
D. Contribution
Answer: A. Indemnity ensures compensation only restores the insured to their prior
financial position, preventing profit from loss .
3. What is insurable interest?
A. Ownership of property
B. Financial interest in loss
C. Emotional attachment
D. Legal liability
Answer: B. Insurable interest requires that the policyholder would suffer a financial loss if
the insured event occurs .
4. Which term describes the cause of loss?
A. Hazard
B. Peril
,2
C. Risk
D. Exposure
Answer: B. A peril is the specific cause of loss, such as fire or theft .
5. What is a hazard?
A. Cause of loss
B. Condition increasing risk
C. Insurance contract
D. Type of policy
Answer: B. Hazards increase the likelihood or severity of a loss .
6. What is the term for the tendency of risks with higher probability of loss to purchase
and maintain insurance more often than lower-risk individuals?
A. Adverse selection
B. Moral hazard
C. Speculative risk
D. Pure risk
Answer: A. Adverse selection is the tendency of higher-risk individuals to seek and maintain
insurance more often than lower-risk individuals .
7. Which type of risk involves only the possibility of loss or no loss?
A. Speculative risk
B. Pure risk
C. Investment risk
D. Business risk
Answer: B. Pure risks involve only loss or no loss and are insurable. Speculative risks involve
both gain and loss .
8. What is the law of large numbers used for in insurance?
A. Limiting coverage
B. Predicting future losses more accurately
C. Increasing moral hazard
D. Reducing underwriting
Answer: B. The law of large numbers enables insurers to predict future losses more
accurately by analyzing larger data sets .
9. What is the term for the amount the insured pays before insurance coverage begins?
A. Premium
B. Deductible
, 3
C. Copayment
D. Policy limit
Answer: B. The deductible is what the insured pays before coverage begins .
10. What is a copayment?
A. Monthly premium
B. Fixed fee per service
C. Deductible
D. Policy limit
Answer: B. Copayment is a set amount paid for medical services .
11. What is coinsurance?
A. Fixed payment
B. Percentage of cost shared
C. Full coverage
D. Deductible
Answer: B. Coinsurance splits costs between insurer and insured on a percentage basis .
12. What is an admitted (authorized) insurer?
A. An insurer that only sells online
B. An insurance company authorized and licensed to transact business in a particular state
C. An insurer incorporated outside the United States
D. An insurer with no state license
Answer: B. An admitted (authorized) insurer is an insurance company authorized and
licensed to transact business in a particular state .
13. What is an alien insurer?
A. An insurer from another state
B. An insurance company incorporated outside the United States
C. An unauthorized insurer
D. A domestic insurer
Answer: B. An alien insurer is an insurance company incorporated outside the United States
.
14. What is a foreign insurer?
A. An insurer incorporated outside the United States
B. An insurer incorporated in another state but operating in this state
C. An unauthorized insurer
D. A domestic insurer
Delaware Insurance Exam Chapter 1 Practice Questions & Answers 2026/2027 | Verified
Study Guide & Exam Prep
100 Questions with Verified Answers
Study Guide Note: This practice exam covers Chapter 1 foundational insurance concepts for
the Delaware Life & Health Producer licensing exam. The content aligns with the 2026/2027
Pearson VUE Delaware Insurance Licensing Candidate Handbook and Title 18 of the
Delaware Code . The Delaware exam consists of 50 general scored questions plus 40 state-
specific scored questions for Life Producer candidates .
Section 1: Basic Insurance Concepts & Principles (Questions 1–20)
1. What is the primary purpose of insurance?
A. Investment growth
B. Risk transfer
C. Tax reductiona
D. Profit generation
Answer: B. Insurance exists to transfer financial risk from an individual to an insurer in
exchange for a premium .
2. Which principle states that the insured should not profit from a loss?
A. Indemnity
B. Insurable interest
C. Subrogation
D. Contribution
Answer: A. Indemnity ensures compensation only restores the insured to their prior
financial position, preventing profit from loss .
3. What is insurable interest?
A. Ownership of property
B. Financial interest in loss
C. Emotional attachment
D. Legal liability
Answer: B. Insurable interest requires that the policyholder would suffer a financial loss if
the insured event occurs .
4. Which term describes the cause of loss?
A. Hazard
B. Peril
,2
C. Risk
D. Exposure
Answer: B. A peril is the specific cause of loss, such as fire or theft .
5. What is a hazard?
A. Cause of loss
B. Condition increasing risk
C. Insurance contract
D. Type of policy
Answer: B. Hazards increase the likelihood or severity of a loss .
6. What is the term for the tendency of risks with higher probability of loss to purchase
and maintain insurance more often than lower-risk individuals?
A. Adverse selection
B. Moral hazard
C. Speculative risk
D. Pure risk
Answer: A. Adverse selection is the tendency of higher-risk individuals to seek and maintain
insurance more often than lower-risk individuals .
7. Which type of risk involves only the possibility of loss or no loss?
A. Speculative risk
B. Pure risk
C. Investment risk
D. Business risk
Answer: B. Pure risks involve only loss or no loss and are insurable. Speculative risks involve
both gain and loss .
8. What is the law of large numbers used for in insurance?
A. Limiting coverage
B. Predicting future losses more accurately
C. Increasing moral hazard
D. Reducing underwriting
Answer: B. The law of large numbers enables insurers to predict future losses more
accurately by analyzing larger data sets .
9. What is the term for the amount the insured pays before insurance coverage begins?
A. Premium
B. Deductible
, 3
C. Copayment
D. Policy limit
Answer: B. The deductible is what the insured pays before coverage begins .
10. What is a copayment?
A. Monthly premium
B. Fixed fee per service
C. Deductible
D. Policy limit
Answer: B. Copayment is a set amount paid for medical services .
11. What is coinsurance?
A. Fixed payment
B. Percentage of cost shared
C. Full coverage
D. Deductible
Answer: B. Coinsurance splits costs between insurer and insured on a percentage basis .
12. What is an admitted (authorized) insurer?
A. An insurer that only sells online
B. An insurance company authorized and licensed to transact business in a particular state
C. An insurer incorporated outside the United States
D. An insurer with no state license
Answer: B. An admitted (authorized) insurer is an insurance company authorized and
licensed to transact business in a particular state .
13. What is an alien insurer?
A. An insurer from another state
B. An insurance company incorporated outside the United States
C. An unauthorized insurer
D. A domestic insurer
Answer: B. An alien insurer is an insurance company incorporated outside the United States
.
14. What is a foreign insurer?
A. An insurer incorporated outside the United States
B. An insurer incorporated in another state but operating in this state
C. An unauthorized insurer
D. A domestic insurer
