WI Insurance Licensing 22-12 Practice Questions
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1. Unilateral Which of the following legal terms indicates that a life insurance contract contains
Only one party the legally enforceable promise of only one party?
to the contract Adhesion
is legally bound Unilateral
to do anything, Conditional
in insurance; the Aleatory
insurer (insurance
company)
2. Moral hazard The owner of a camera store is worried that her new employees may help
moral hazard is themselves to items from inventory without paying for them. What kind of hazard
a situation where does this describe?
one party en-
gages in risky be-
havior or fails to
act in good faith in
a way that raises
cost for the insur-
er.
3. Pat pays his insur- All of the following statements describe risk avoidance EXCEPT:
ance premium. Bill will not fly in an airplane
paying the premi- Wendy keeps her money out of the stock market
um does not elim- pat pays his insurance premium
inate any expo- john never drives a car
sure to risk that
poses a potential
loss.
4. only pure risks are Which of the following statements is correct?
insurable. only speculative risks are insurable
pure risks involve only pure risks are insurable
, WI Insurance Licensing 22-12 Practice Questions
Study online at https://quizlet.com/_do7esr
only the chance both pure risks and speculative risks are insurable
of loss, there is neither pure not speculative risks are insurable
no possibility of
gain/profit.
5. transferring. Buying insurance is one of the most effective ways of _____________ risk.
"transfer of risk"
from a person
to an insurance
company.
6. Indemnity What principle of insurance states that the insured should be restored to approx-
One is entitled imately the same financial position that existed prior to the loss?
to payment from
the insurer only
if they have suf-
fered a loss and
only to the extent
of the financial
loss sustained.
7. replacement cost Actual cash value consists of:
minus deprecia-
tion
8. at time of applica- In life and health insurance, when does insurable interest need to exist?
tion/at the incep-
tion of the insur-
ance coverage
9. cannot be negoti- A contract of adhesion is one that:
ated Can never be cancelled
a contract of ad- is valid for only one year
, WI Insurance Licensing 22-12 Practice Questions
Study online at https://quizlet.com/_do7esr
hesion is one pre- cannot be negotiated
pared by the in- involves the use of an oral binder
surance company
and is either ac-
cepted or rejected
by the insured.
10. actual cash value All of the following are common exceptions to the principle of indemnity EXCEPT:
replacement cost coverage
life insurance policy
stated or face amount policy
actual cash value
11. there are small An insurable risk has all of the following characteristics EXCEPT:
number of similar the loss produces financial distress
risk exposures the loss is accidental
there are a small number of similar risk exposures
the loss must not be catastrophic to the insurer
12. Insurer (insur- Reinsurance is typically carried by:
ance company)
13. peril What term best describes something that causes a loss?
14. profiting Indemnity helps prevent:
15. indemnity The payment of a loss by the insurance company to the insured, but for no more
than the actual amount of the loss and does not allow the insured to make a
profit out of the loss describes:
16. Credit Life Which of the following products pays off the credit if the insured borrower dies?
Involuntary Unemployment Insurance
Guaranteed Auto Protection
Study online at https://quizlet.com/_do7esr
1. Unilateral Which of the following legal terms indicates that a life insurance contract contains
Only one party the legally enforceable promise of only one party?
to the contract Adhesion
is legally bound Unilateral
to do anything, Conditional
in insurance; the Aleatory
insurer (insurance
company)
2. Moral hazard The owner of a camera store is worried that her new employees may help
moral hazard is themselves to items from inventory without paying for them. What kind of hazard
a situation where does this describe?
one party en-
gages in risky be-
havior or fails to
act in good faith in
a way that raises
cost for the insur-
er.
3. Pat pays his insur- All of the following statements describe risk avoidance EXCEPT:
ance premium. Bill will not fly in an airplane
paying the premi- Wendy keeps her money out of the stock market
um does not elim- pat pays his insurance premium
inate any expo- john never drives a car
sure to risk that
poses a potential
loss.
4. only pure risks are Which of the following statements is correct?
insurable. only speculative risks are insurable
pure risks involve only pure risks are insurable
, WI Insurance Licensing 22-12 Practice Questions
Study online at https://quizlet.com/_do7esr
only the chance both pure risks and speculative risks are insurable
of loss, there is neither pure not speculative risks are insurable
no possibility of
gain/profit.
5. transferring. Buying insurance is one of the most effective ways of _____________ risk.
"transfer of risk"
from a person
to an insurance
company.
6. Indemnity What principle of insurance states that the insured should be restored to approx-
One is entitled imately the same financial position that existed prior to the loss?
to payment from
the insurer only
if they have suf-
fered a loss and
only to the extent
of the financial
loss sustained.
7. replacement cost Actual cash value consists of:
minus deprecia-
tion
8. at time of applica- In life and health insurance, when does insurable interest need to exist?
tion/at the incep-
tion of the insur-
ance coverage
9. cannot be negoti- A contract of adhesion is one that:
ated Can never be cancelled
a contract of ad- is valid for only one year
, WI Insurance Licensing 22-12 Practice Questions
Study online at https://quizlet.com/_do7esr
hesion is one pre- cannot be negotiated
pared by the in- involves the use of an oral binder
surance company
and is either ac-
cepted or rejected
by the insured.
10. actual cash value All of the following are common exceptions to the principle of indemnity EXCEPT:
replacement cost coverage
life insurance policy
stated or face amount policy
actual cash value
11. there are small An insurable risk has all of the following characteristics EXCEPT:
number of similar the loss produces financial distress
risk exposures the loss is accidental
there are a small number of similar risk exposures
the loss must not be catastrophic to the insurer
12. Insurer (insur- Reinsurance is typically carried by:
ance company)
13. peril What term best describes something that causes a loss?
14. profiting Indemnity helps prevent:
15. indemnity The payment of a loss by the insurance company to the insured, but for no more
than the actual amount of the loss and does not allow the insured to make a
profit out of the loss describes:
16. Credit Life Which of the following products pays off the credit if the insured borrower dies?
Involuntary Unemployment Insurance
Guaranteed Auto Protection
