AINS PRACTICE EXAM WITH CORRECT ANSWERS

AINS PRACTICE EXAM WITH CORRECT ANSWERS Which two of the four quadrants of risk are classified as pure risks? Select one: A. Hazard risks and operational risks B. Hazard risks and strategic risks C. Operational risks and financial risks D. Financial risks and strategic risks - CORRECT ANSWER-A. Hazard risks and operational risks Correct. Hazard risks and operational risks are pure risks. Because insurance contracts impose an obligation for ethical practices and behaviors on the parties while dealing with one another, an insurance contract is called a Select one: A. Contract of indemnity. B. Contract of adhesion. C. Contract of utmost good faith. D. Conditional contract. - CORRECT ANSWER-C. Contract of utmost good faith. Correct.Insurance contacts are considered contracts of utmost good faith because both parties are obligated to ethical practices and behaviors while dealing with one another. Winston is skimming through his new personal auto policy that just arrived. Winston discovers that every insurance policy is represented through a collection of policy provisions. He discovers all of the following policy provisions, EXCEPT: Select one: A. Conditions B. Definitions C. Exceptions D. Declarations - CORRECT ANSWER-C. Exceptions Correct. Winston finds the policy provisions of conditions, definitions, and declarations. The other two main provisions in a policy are the insuring agreement, and the exclusions. Sean was driving and caused an injury to a pedestrian named Wilbur. In the context of the resulting claim made to Sean's insurance company and assigned to Andrea in the claims department, Sean and Wilbur and Andrea are, respectively, Select one: A. Claimant and claims representative and insured B. Claimant and insured and claims representative C. Insured and claimant and claims representative D. Claims representative and insured and claimant - CORRECT ANSWER-C. Insured and claimant and claims representative Correct. In this scenario, Sean and Wilbur and Andrea, are, respectively, insured (Sean), claimant (Wilbur), and claims representative (Andrea). Risk control can assist the claims department by Select one: A. Reporting the existence of new operations. B. Designing product recall procedures. C. Developing safety management programs. D. Providing laboratory analyses. - CORRECT ANSWER-D. Providing laboratory analyses. Correct. Risk control can assist the claims department by providing laboratory analyses. When the Smiths purchased their first home, they were required to purchase a homeowners insurance policy in order to get a mortgage. Because they did not have a lot of extra money in their budget, they wanted to buy as little insurance coverage as possible. The Smiths' insurance agent advised them that if they purchase an insurance policy that adequately covers damage to their home and personal property, they only have to budget for the insurance premium, rather than the full cost of rebuilding the house and replacing its contents. Which one of the following key components of insurance is the insurance agent explaining to the Smiths? Select one: A. Risk B. Pooling C. Transfer D. Risk control - CORRECT ANSWER-C. Transfer Correct. The insurance agent is explaining the concept of transferring the financial consequences of unanticipated events to an insurer. Because the insurance company usually determines policy wording and the insured has little choice but to "take it or leave it," an insurance contract is a Select one: A. Bilateral contract. B. Nontransferable contract. C. Contract of indemnity. D. Contract of adhesion. - CORRECT ANSWER-D. Contract of adhesion. Correct. Insurance is considered a contract of adhesion because one party, the insured, must adhere to the contract as written by the other party (the insurer). The insurer determines the wording of the policy, and the insured has little choice but to take it or leave it. Which one of the following is the correct formula for calculating an insurer's combined ratio? Select one: A. Loss ratio + expense ratio B. Loss ratio + underwriting ratio C. Investment income ratio + overall operating ratio D. Investment income ratio + premium income ratio - CORRECT ANSWER-A. Loss ratio + expense ratio Correct. The combined ratio formula is the sum of the loss ratio and expense ratio. For a loss exposure to be ideally insurable it must be definite in Select one: A. Value, extent, and consequences. B. Duration, damage, and cost. C. Scope, origin, and coverage. D. Time, cause, and location. - CORRECT ANSWER-D. Time, cause, and location. For a loss exposure to be ideally insurable it must be definite in time, cause, and location. Allian Insurance Company is a growing regional insurer selling policies in three states, specializing in personal auto and homeowners policies. Which one of the following is most likely true regarding Allian and the policies it sells? Select one: