AINS 103 UPDATED ACTUAL EXAM
QUESTIONS AND CORRECT ANSWERS FULL
SOLUTION GRADED A+
◉ As a single mother on a very tight budget, Ciara is tempted to
skimp on her insurance. However, her friend Mehmet tells her not to
skimp on insurance, because it will help manage her cash flows.
Which one of the following examples best illustrates Mehmet's point?
A. Ciara needs her car to get to her job, and she needs her job to make
car payments and pay for her car insurance.
B. When her car's windshield breaks, Ciara has to pay only $100 of
the $600 cost of replacing it.
C. When her car's transmission goes out a month after the warranty
expires, Ciara is faced with a $1,100 repair bill.
D. Ciara finds it difficult to come up with a $787 auto insurance
premium every six months. Answer: When her car's windshield
breaks, Ciara has to pay only $100 of the $600 cost of replacing it.
◉ Which one of the following statements is correct regarding the
benefits provided by insurance?
A. Insurance reduces the financial consequences of loss exposures but
not the related uncertainty.
,B. The primary role of insurance is to meet mandatory insurance
requirements.
C. The reduction in losses paid by insurers due to risk control
measures benefits individual insureds but not society as a whole.
D. Insurance helps reduce the financial burden to society by
compensating accident victims. Answer: Insurance helps reduce the
financial burden to society by compensating accident victims.
◉ Shelton Industries experienced a fire in its manufacturing plant.
Several employees suffered burns and smoke inhalation injuries as
they tried to escape the building. Which one of Shelton Industries'
commercial property-casualty policies would pay for the employees'
injuries and illnesses? Answer: Workers compensation insurance
◉ A homeowners policy is a type of Answer: Personal property-
casualty insurance policy.
◉ Which one of the following correctly describes a reason for
government involvement in property-casualty insurance?
A. Selling insurance provides the government with a non-tax source
of revenues and profits.
B. Government programs can meet legitimate public demands unmet
by private insurers.
C. Competition from government plans keeps private insurer's
premiums competitive.
,D. Preventing high-risk individuals or activities from being insured is
in the public interest. Answer: Government programs can meet
legitimate public demands unmet by private insurers.
◉ Insurance Company wrote a commercial liability policy for a
manufacturer of off-road motorcycles. The potential costs of the
insured's loss exposure exceed Insurance Company's capacity.
Insurance Company could consider which one of the following types
of contractual transferring agreement to meet its needs? Answer:
Reinsurance
◉ In an effort to reduce expenses, increase profitability, and reduce
human errors; ABC Insurance Company decided to automate most of
its personal lines underwriting function. The company now uses
standardized application forms that are submitted electronically to one
of the company's regional offices. At each regional office, a computer
with a scanner reads the applications. The computer has been
programmed with acceptable answers to the questions. If the answers
on the application are all acceptable, the policy is automatically
issued. Rejected applications are automatically forwarded to a human
underwriter who reviews them. The use of this technology has
reduced the company's expense ratio by two and a half percent, and
reduced the time it takes to issue a policy. ABC Insurance Company's
use of computers to evaluate applications electronically is an
application of
A. Radiant sensors.
B. Artificial intelligence.
C. Answer: Artificial intelligence.
, ◉ Jimmy decided to buy a house in his neighborhood that had been
foreclosed on by the bank that held the mortgage. He is hoping to do
some renovation and repair work on the house, and then sell it for a
quick profit. What type of risk is this? Answer: Speculative Risk
◉ Which one of the following best describes the concept of pooling?
A. The financial consequences of unanticipated losses are transferred
to an insurer.
B. Risk management is concerned with positive and negative risks.
C. Insureds share the cost of each other's losses.
D. Insurance benefits society as a whole. Answer: Insureds share the
cost of each other's losses.
◉ Which one of the following represents uncertainty about outcomes
that can be negative or positive?
A. Loss exposure
B. Transfer
C. Risk
D. Pooling Answer: Risk
◉ Coverage for money and other business property from various
causes of loss such as burglary, robbery, theft, and employee
QUESTIONS AND CORRECT ANSWERS FULL
SOLUTION GRADED A+
◉ As a single mother on a very tight budget, Ciara is tempted to
skimp on her insurance. However, her friend Mehmet tells her not to
skimp on insurance, because it will help manage her cash flows.
Which one of the following examples best illustrates Mehmet's point?
A. Ciara needs her car to get to her job, and she needs her job to make
car payments and pay for her car insurance.
B. When her car's windshield breaks, Ciara has to pay only $100 of
the $600 cost of replacing it.
C. When her car's transmission goes out a month after the warranty
expires, Ciara is faced with a $1,100 repair bill.
D. Ciara finds it difficult to come up with a $787 auto insurance
premium every six months. Answer: When her car's windshield
breaks, Ciara has to pay only $100 of the $600 cost of replacing it.
◉ Which one of the following statements is correct regarding the
benefits provided by insurance?
A. Insurance reduces the financial consequences of loss exposures but
not the related uncertainty.
,B. The primary role of insurance is to meet mandatory insurance
requirements.
C. The reduction in losses paid by insurers due to risk control
measures benefits individual insureds but not society as a whole.
D. Insurance helps reduce the financial burden to society by
compensating accident victims. Answer: Insurance helps reduce the
financial burden to society by compensating accident victims.
◉ Shelton Industries experienced a fire in its manufacturing plant.
Several employees suffered burns and smoke inhalation injuries as
they tried to escape the building. Which one of Shelton Industries'
commercial property-casualty policies would pay for the employees'
injuries and illnesses? Answer: Workers compensation insurance
◉ A homeowners policy is a type of Answer: Personal property-
casualty insurance policy.
◉ Which one of the following correctly describes a reason for
government involvement in property-casualty insurance?
A. Selling insurance provides the government with a non-tax source
of revenues and profits.
B. Government programs can meet legitimate public demands unmet
by private insurers.
C. Competition from government plans keeps private insurer's
premiums competitive.
,D. Preventing high-risk individuals or activities from being insured is
in the public interest. Answer: Government programs can meet
legitimate public demands unmet by private insurers.
◉ Insurance Company wrote a commercial liability policy for a
manufacturer of off-road motorcycles. The potential costs of the
insured's loss exposure exceed Insurance Company's capacity.
Insurance Company could consider which one of the following types
of contractual transferring agreement to meet its needs? Answer:
Reinsurance
◉ In an effort to reduce expenses, increase profitability, and reduce
human errors; ABC Insurance Company decided to automate most of
its personal lines underwriting function. The company now uses
standardized application forms that are submitted electronically to one
of the company's regional offices. At each regional office, a computer
with a scanner reads the applications. The computer has been
programmed with acceptable answers to the questions. If the answers
on the application are all acceptable, the policy is automatically
issued. Rejected applications are automatically forwarded to a human
underwriter who reviews them. The use of this technology has
reduced the company's expense ratio by two and a half percent, and
reduced the time it takes to issue a policy. ABC Insurance Company's
use of computers to evaluate applications electronically is an
application of
A. Radiant sensors.
B. Artificial intelligence.
C. Answer: Artificial intelligence.
, ◉ Jimmy decided to buy a house in his neighborhood that had been
foreclosed on by the bank that held the mortgage. He is hoping to do
some renovation and repair work on the house, and then sell it for a
quick profit. What type of risk is this? Answer: Speculative Risk
◉ Which one of the following best describes the concept of pooling?
A. The financial consequences of unanticipated losses are transferred
to an insurer.
B. Risk management is concerned with positive and negative risks.
C. Insureds share the cost of each other's losses.
D. Insurance benefits society as a whole. Answer: Insureds share the
cost of each other's losses.
◉ Which one of the following represents uncertainty about outcomes
that can be negative or positive?
A. Loss exposure
B. Transfer
C. Risk
D. Pooling Answer: Risk
◉ Coverage for money and other business property from various
causes of loss such as burglary, robbery, theft, and employee
