Georgia P&C Exam: Insurance Terms and
Related Concepts Exam Questions Answered
Correctly 2026 update
Insurance - CORRECT ANSWERS A contractual relationship that exists when one party (the
insurer) for a consideration (the premium) agrees to reimburse another party (the insured) for loss to a
specified subject (the risk) caused by designated contingencies (hazards or perils). The term "assurance,"
commonly used in England, is considered synonymous with "insurance." A thing providing protection
against a possible eventuality.
Law of Large Numbers - CORRECT ANSWERS makes it possible for insurance company
actuaries (i.e., insurance mathematicians) to predict losses among a group of similar risks, as long as
there are a sufficiently large number of risks to observe. This explains the requirement that, to be
insurable, the risk must be part of a large group of similar risks that the insurance company can use to
predict future losses.
Insurable Interest - CORRECT ANSWERS An insurance policyowner's financial interest in the
person or property being insured. In general, insurance policy applicants must always have an insurable
interest in the person or property they are seeking to insure.
Risk - CORRECT ANSWERS 1) Uncertainty arising from the possible occurrence of given
events. (2) The insured or the property to which an insurance policy relates.
Pure Risk - CORRECT ANSWERS The risk involved in situations that present the opportunity
for loss but no opportunity for gain.
Speculative Risk - CORRECT ANSWERS Uncertainty about an event under consideration that
could produce either a profit or a loss, such as a business venture or a gambling transaction. A pure risk
is generally insurable while speculative risk is usually not.
Hazard - CORRECT ANSWERS is a condition that increases the likely occurrence of a peril or
the likely severity of a loss.
, Moral Hazard - CORRECT ANSWERS are the tendencies or traits of an individual that increase
the chance of a loss. Alcoholism, smoking, and bad credit are examples of moral hazards.
Morale Hazard - CORRECT ANSWERS are also individual tendencies, but they arise from a
state of mind, attitude, or indifference to loss. Not locking one's car or driving recklessly are examples of
morale hazards.
Physical Hazard - CORRECT ANSWERS are physical conditions that increase the chance of loss.
For instance, dangerous conditions or activities are physical hazards that increase the chance of injury or
death. Diseases are physical hazards because they increase chance of death.
Peril - CORRECT ANSWERS cause of loss
Loss - CORRECT ANSWERS (1) The basis of a claim for damages under the terms of a policy.
(2) Loss of assets resulting from a pure risk. Broadly categorized, the types of losses of concern to risk
managers include personnel loss, property loss, time element loss, and legal liability loss.
Direct Loss - CORRECT ANSWERS Loss incurred due to direct damage to property. is the
immediate result of an event caused by a covered peril.
Indirect Loss - CORRECT ANSWERS income and expense loss resulting from inability to use
damaged property.
Actual Cash Value - CORRECT ANSWERS the payment you receive is based on the
replacement cost of an item minus depreciation
Replacement Cost - CORRECT ANSWERS defined in the policy as the cost to replace the
damaged property with materials of like kind and quality, without any deduction for depreciation.
Related Concepts Exam Questions Answered
Correctly 2026 update
Insurance - CORRECT ANSWERS A contractual relationship that exists when one party (the
insurer) for a consideration (the premium) agrees to reimburse another party (the insured) for loss to a
specified subject (the risk) caused by designated contingencies (hazards or perils). The term "assurance,"
commonly used in England, is considered synonymous with "insurance." A thing providing protection
against a possible eventuality.
Law of Large Numbers - CORRECT ANSWERS makes it possible for insurance company
actuaries (i.e., insurance mathematicians) to predict losses among a group of similar risks, as long as
there are a sufficiently large number of risks to observe. This explains the requirement that, to be
insurable, the risk must be part of a large group of similar risks that the insurance company can use to
predict future losses.
Insurable Interest - CORRECT ANSWERS An insurance policyowner's financial interest in the
person or property being insured. In general, insurance policy applicants must always have an insurable
interest in the person or property they are seeking to insure.
Risk - CORRECT ANSWERS 1) Uncertainty arising from the possible occurrence of given
events. (2) The insured or the property to which an insurance policy relates.
Pure Risk - CORRECT ANSWERS The risk involved in situations that present the opportunity
for loss but no opportunity for gain.
Speculative Risk - CORRECT ANSWERS Uncertainty about an event under consideration that
could produce either a profit or a loss, such as a business venture or a gambling transaction. A pure risk
is generally insurable while speculative risk is usually not.
Hazard - CORRECT ANSWERS is a condition that increases the likely occurrence of a peril or
the likely severity of a loss.
, Moral Hazard - CORRECT ANSWERS are the tendencies or traits of an individual that increase
the chance of a loss. Alcoholism, smoking, and bad credit are examples of moral hazards.
Morale Hazard - CORRECT ANSWERS are also individual tendencies, but they arise from a
state of mind, attitude, or indifference to loss. Not locking one's car or driving recklessly are examples of
morale hazards.
Physical Hazard - CORRECT ANSWERS are physical conditions that increase the chance of loss.
For instance, dangerous conditions or activities are physical hazards that increase the chance of injury or
death. Diseases are physical hazards because they increase chance of death.
Peril - CORRECT ANSWERS cause of loss
Loss - CORRECT ANSWERS (1) The basis of a claim for damages under the terms of a policy.
(2) Loss of assets resulting from a pure risk. Broadly categorized, the types of losses of concern to risk
managers include personnel loss, property loss, time element loss, and legal liability loss.
Direct Loss - CORRECT ANSWERS Loss incurred due to direct damage to property. is the
immediate result of an event caused by a covered peril.
Indirect Loss - CORRECT ANSWERS income and expense loss resulting from inability to use
damaged property.
Actual Cash Value - CORRECT ANSWERS the payment you receive is based on the
replacement cost of an item minus depreciation
Replacement Cost - CORRECT ANSWERS defined in the policy as the cost to replace the
damaged property with materials of like kind and quality, without any deduction for depreciation.
