ILLINOIS PROPERTY INSURANCE EXAM –
BASIC PRINCIPLES | COMPREHENSIVE
EXAM PREP, PRACTICE QUESTIONS,
CORRECT ANSWERS AND STUDY GUIDE
| GRADED A+ | GUARANTEED SUCCESS
Updated 2026 Questions and Answers
100% Verified Exam Prep
, The Insured The person or organization who is protected by the insurance policy and for whom the
insurance company accepts financial risk
The Premium The money paid by the insured to the insurance company in exchange for the insurance
policy. Must be enough to pay commissions, marketing cost, administrative costs, and
provide a loss reserve
A Lapse When a policy is terminated due to nonpayment of premiums
An Endorsement A form added to an insurance policy. It is usually added for an additional premium charge
to add additional coverage.
A Peril An actual cause of loss than can be insured against. Most Common = fire
A Hazard A condition or operation in property which either creates or increases the change of loss
by a covered peril. Example = frayed wiring
Risk The likelihood, probability or degree of uncertainty that a covered peril will cause a loss
Actuarial Tables Statistical tables used in calculating premium rate tables. They tell the insurance
companies how many people are likely to have claims and how much the losses are likely
to be.
Loss reserves Money set aside to pay claims in accordance with the actuarial tables
Actuary An insurance company representative who keeps track of loss statistics and calculates
premium rate tables and loss reserves
Law of large numbers The more people the insurance company insures, the more accurate the actuarial tables
will be
Insurable Interest -A financial interest (risk) which the insured must posses at the time of the loss.
-Is the person in the position to lose money?
-Ex. property owner, mortgagee, lien holder
BASIC PRINCIPLES | COMPREHENSIVE
EXAM PREP, PRACTICE QUESTIONS,
CORRECT ANSWERS AND STUDY GUIDE
| GRADED A+ | GUARANTEED SUCCESS
Updated 2026 Questions and Answers
100% Verified Exam Prep
, The Insured The person or organization who is protected by the insurance policy and for whom the
insurance company accepts financial risk
The Premium The money paid by the insured to the insurance company in exchange for the insurance
policy. Must be enough to pay commissions, marketing cost, administrative costs, and
provide a loss reserve
A Lapse When a policy is terminated due to nonpayment of premiums
An Endorsement A form added to an insurance policy. It is usually added for an additional premium charge
to add additional coverage.
A Peril An actual cause of loss than can be insured against. Most Common = fire
A Hazard A condition or operation in property which either creates or increases the change of loss
by a covered peril. Example = frayed wiring
Risk The likelihood, probability or degree of uncertainty that a covered peril will cause a loss
Actuarial Tables Statistical tables used in calculating premium rate tables. They tell the insurance
companies how many people are likely to have claims and how much the losses are likely
to be.
Loss reserves Money set aside to pay claims in accordance with the actuarial tables
Actuary An insurance company representative who keeps track of loss statistics and calculates
premium rate tables and loss reserves
Law of large numbers The more people the insurance company insures, the more accurate the actuarial tables
will be
Insurable Interest -A financial interest (risk) which the insured must posses at the time of the loss.
-Is the person in the position to lose money?
-Ex. property owner, mortgagee, lien holder
