PERSONAL LINES COMPREHENSIVE TEST
BANK COMPLETE QUESTIONS AND
ANSWERS PRACTICE SOLUTION VERIFIED
◉ A-1. Insurance is a contract whereby one undertakes to indemnify
another against: Answer: Damage
◉ A-2. A peril is: Answer: The actual cause of a loss.
◉ A-3. The uncertainty or chance of a loss occurring is known as:
Answer: Risk
◉ A-4. Which are the main types of risks? Answer: Pure and
Speculative
◉ A-5. A hazard is best defined as: Answer: Anything that increases
the chance of loss or severity of loss due to a peril.
◉ A-6. A hazard that deals with a person`s mental attitude, behavior
and habits is an example of: Answer: A Moral hazard.
◉ A-7. The law of large numbers is a principal that basically says:
Answer: The larger the amount of information gathered, the more
reliable that information will be.
,◉ A-8. The term loss exposure refers to: Answer: The possibility of a
loss.
◉ A-9. The degree of loss a person/organization faces from suits
brought by a third party refers to: Answer: Liability loss exposure.
◉ A-10. Which of the following is NOT required for a risk to be
ideally insurable?
The loss must be an accident.
The loss must be definite and measurable.
The loss must occur on the insured`s property.
The loss must create economic hardship. Answer: The loss must
occur on the insured's property.
◉ A-11. Any contingent or unknown event, whether past or future,
which may damnify a person having an insurable interest or create a
liability against him/her, may be insured against. The more
unpredictable a loss becomes: Answer: The more insurable it
becomes.
◉ A-12. Restoring the insured back to the condition he or she was in
before the loss occurred is known as: Answer: Indemnification
◉ A-13. The process of reviewing applications for insurance and the
information on the application is: Answer: Underwriting
,◉ A-14. Which of the following is NOT a known private insurer?
Reciprocal Insurance Exchanges
Mutual Insurance Companies
Bond Insurance Companies
Stock Insurance Companies Answer: Bond Insurance companies are
not considered insurers.
◉ A-15. Bob is thinking about obtaining insurance because he just
found out he needs extensive surgery that will require several days in
the hospital. This situation of waiting until the last minute to obtain
insurance is known as: Answer: Adverse selection
◉ A-16. Loss control refers to: Answer: Taking the necessary
precautions that will reduce the risk of a loss.
◉ A-17. Which of the following is the amount of money the insured
pays before the insurer pays for the rest of the claim? Answer:
Deductible
◉ A-18. What is reinsurance? Answer: Reinsurance is the process
whereby the insurer transfers all or part of the risk to another
company.
◉ A-19. Which of the following is defined as `an agreement between
two or more parties enforceable by law?` Answer: A contract.
, ◉ A-20. What are the two types of torts? Answer: Intentional and
Unintentional.
◉ A-21. What is the binding force of a contract? Answer:
Consideration
◉ A-22. What is fraud? Answer: When one party intentionally gives
the other party false information in order to benefit from the unlawful
gain.
◉ A-23. When a right or privilege has been given up, a party cannot
reassert that right or privilege. The process of preventing the party
from reasserting that right or privilege is known as: Answer: Estoppel
◉ A-24. Either party may rescind a contract for what reasons?
Answer: Once signed a contract can never be rescinded.
◉ A-25. Examples of tort law include all of the following EXCEPT:
Libel and slander
Bodily injury
Personal injury
Breach of contract Answer: Breach of contract.
◉ A-26. Substitution of a small certain loss for a large uncertain loss
is: Answer: Insurance
BANK COMPLETE QUESTIONS AND
ANSWERS PRACTICE SOLUTION VERIFIED
◉ A-1. Insurance is a contract whereby one undertakes to indemnify
another against: Answer: Damage
◉ A-2. A peril is: Answer: The actual cause of a loss.
◉ A-3. The uncertainty or chance of a loss occurring is known as:
Answer: Risk
◉ A-4. Which are the main types of risks? Answer: Pure and
Speculative
◉ A-5. A hazard is best defined as: Answer: Anything that increases
the chance of loss or severity of loss due to a peril.
◉ A-6. A hazard that deals with a person`s mental attitude, behavior
and habits is an example of: Answer: A Moral hazard.
◉ A-7. The law of large numbers is a principal that basically says:
Answer: The larger the amount of information gathered, the more
reliable that information will be.
,◉ A-8. The term loss exposure refers to: Answer: The possibility of a
loss.
◉ A-9. The degree of loss a person/organization faces from suits
brought by a third party refers to: Answer: Liability loss exposure.
◉ A-10. Which of the following is NOT required for a risk to be
ideally insurable?
The loss must be an accident.
The loss must be definite and measurable.
The loss must occur on the insured`s property.
The loss must create economic hardship. Answer: The loss must
occur on the insured's property.
◉ A-11. Any contingent or unknown event, whether past or future,
which may damnify a person having an insurable interest or create a
liability against him/her, may be insured against. The more
unpredictable a loss becomes: Answer: The more insurable it
becomes.
◉ A-12. Restoring the insured back to the condition he or she was in
before the loss occurred is known as: Answer: Indemnification
◉ A-13. The process of reviewing applications for insurance and the
information on the application is: Answer: Underwriting
,◉ A-14. Which of the following is NOT a known private insurer?
Reciprocal Insurance Exchanges
Mutual Insurance Companies
Bond Insurance Companies
Stock Insurance Companies Answer: Bond Insurance companies are
not considered insurers.
◉ A-15. Bob is thinking about obtaining insurance because he just
found out he needs extensive surgery that will require several days in
the hospital. This situation of waiting until the last minute to obtain
insurance is known as: Answer: Adverse selection
◉ A-16. Loss control refers to: Answer: Taking the necessary
precautions that will reduce the risk of a loss.
◉ A-17. Which of the following is the amount of money the insured
pays before the insurer pays for the rest of the claim? Answer:
Deductible
◉ A-18. What is reinsurance? Answer: Reinsurance is the process
whereby the insurer transfers all or part of the risk to another
company.
◉ A-19. Which of the following is defined as `an agreement between
two or more parties enforceable by law?` Answer: A contract.
, ◉ A-20. What are the two types of torts? Answer: Intentional and
Unintentional.
◉ A-21. What is the binding force of a contract? Answer:
Consideration
◉ A-22. What is fraud? Answer: When one party intentionally gives
the other party false information in order to benefit from the unlawful
gain.
◉ A-23. When a right or privilege has been given up, a party cannot
reassert that right or privilege. The process of preventing the party
from reasserting that right or privilege is known as: Answer: Estoppel
◉ A-24. Either party may rescind a contract for what reasons?
Answer: Once signed a contract can never be rescinded.
◉ A-25. Examples of tort law include all of the following EXCEPT:
Libel and slander
Bodily injury
Personal injury
Breach of contract Answer: Breach of contract.
◉ A-26. Substitution of a small certain loss for a large uncertain loss
is: Answer: Insurance
