State Farm Insurance Exam Review Q&A

State Farm Insurance Exam Review
Q&A




 What transfers the risk of loss from an individual or business entity to an insurance company - correct
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answers Insurance l




 The uncertainty of a risk or loss occurring - correct answers risk
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 A risk that can only result in a loss or no change with no opportunity for financial gain - correct answers
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pure risk l




 A risk that allows an opportunity for loss or gain (such as gambling) - correct answers speculative risk
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 CONDITIONS or SITUATIONS that increase the chance of a loss occurring (such as lifestyle, health
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conditions, scuba diving, sky diving) - correct answers hazards
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 The CAUSES of loss...(like fire, explosion, windstorm, flood, theft, collision) - correct answers perils
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 insurance for an untimely death (died from heart attack) - correct answers life insurance
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 insurance for sickness or accidental injury (got cancer or broken bones) - correct answers health
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insurance

,  insurance for the loss of physical property (wind storm damaged the house) - correct answers
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property insurance l




 insurance for the loss or damage of property and resulting liabilities (guy fell off the ladder while
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working on the roof) - correct answers casualty insurance l l l l l l l l




 the reduction, decrease or disappearance of value from the person or property insured. - correct
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answers loss l




 a method used to transfer the loss from the person or property to the insurance company - correct
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answers insurance l




 A unit of measurement used for determining rates charged for certain coverages (insurances) -
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correct answers exposure l l




 you decide not to fly in an airplane because it's too dangerous so you AVOID it. This is called risk - correct
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answers avoidance
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 to reduce expenses and cash flow, increase control of claim settlements, and to fund losses that can't
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be insured are called risk - correct answers retention
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 dealing with risk for a group of individuals that have the same type of exposure to loss is called risk -
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correct answers sharing l l




 installing smoke detectors, having annual physicals, and lifestyle changes all reduce the chance of
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loss. This is called risk - correct answers reduction
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 The most effective way to handle risk so a loss becomes the responsibility of the insurance company is
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called (pass the responsibility to someone else) - correct answers transfer
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 Losses due to chance, that are definite and measurable, that are predictable, and that are not
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catastrophic are called ELEMENTS OF INSURABLE - correct answers risks l l l l l l l l l