AINS 101
| Complete Exam Prep with Practice Questions, Answers
& Detailed Explanations
This Exam Includes
• AINS 101 exam preparation
Practice questions
Correct answers
Detailed explanations
Insurance terminology
,AINS 101 | Complete Exam Prep with Practice
Questions, Answers & Detailed Explanations
1. The two main sectors of the insurance industry are:
A. Property-casualty insurance and health-disability insurance
B. Life-health insurance and auto-home insurance
C. Property-casualty insurance and life-health insurance
D. Commercial insurance and personal insurance
Answer: C
Rationale: (Page 1, #1) The text explicitly states, "The two main
sectors of the insurance industry are: Property-casualty insurance
and life-health insurance."
2. An insurance contract is considered a "contract of utmost
good faith" because:
A. The insurer must always pay all claims presented.
B. It imposes an obligation for ethical practices and behaviors on
all parties.
C. The insured has more bargaining power than the insurer.
D. The terms are written in complex legal language.
Answer: B
Rationale: (Page 1, #2) "Because insurance contracts impose an
, obligation for ethical practices and behaviors on the parties while
dealing with one another, an insurance contract is called a:
Contract of utmost good faith."
3. Why are earned premiums shown on an insurer's income
statement?
A. They represent the total amount of premiums collected during
the year.
B. They are considered revenues for the portion of coverage
already provided.
C. They represent the amount of money owed to policyholders.
D. They are a liability that must be paid back if a policy is
cancelled.
Answer: B
Rationale: (Page 1, #3) Earned premiums are shown on an
income statement "because they are: Revenues." By definition
(Page 4, #55), earned premiums correspond to the part of the
policy period that has already occurred, meaning the insurer has
"earned" that revenue by providing coverage.
4. A potential consequence of destructive competition in the
insurance industry is:
A. Lower premiums for all consumers.
| Complete Exam Prep with Practice Questions, Answers
& Detailed Explanations
This Exam Includes
• AINS 101 exam preparation
Practice questions
Correct answers
Detailed explanations
Insurance terminology
,AINS 101 | Complete Exam Prep with Practice
Questions, Answers & Detailed Explanations
1. The two main sectors of the insurance industry are:
A. Property-casualty insurance and health-disability insurance
B. Life-health insurance and auto-home insurance
C. Property-casualty insurance and life-health insurance
D. Commercial insurance and personal insurance
Answer: C
Rationale: (Page 1, #1) The text explicitly states, "The two main
sectors of the insurance industry are: Property-casualty insurance
and life-health insurance."
2. An insurance contract is considered a "contract of utmost
good faith" because:
A. The insurer must always pay all claims presented.
B. It imposes an obligation for ethical practices and behaviors on
all parties.
C. The insured has more bargaining power than the insurer.
D. The terms are written in complex legal language.
Answer: B
Rationale: (Page 1, #2) "Because insurance contracts impose an
, obligation for ethical practices and behaviors on the parties while
dealing with one another, an insurance contract is called a:
Contract of utmost good faith."
3. Why are earned premiums shown on an insurer's income
statement?
A. They represent the total amount of premiums collected during
the year.
B. They are considered revenues for the portion of coverage
already provided.
C. They represent the amount of money owed to policyholders.
D. They are a liability that must be paid back if a policy is
cancelled.
Answer: B
Rationale: (Page 1, #3) Earned premiums are shown on an
income statement "because they are: Revenues." By definition
(Page 4, #55), earned premiums correspond to the part of the
policy period that has already occurred, meaning the insurer has
"earned" that revenue by providing coverage.
4. A potential consequence of destructive competition in the
insurance industry is:
A. Lower premiums for all consumers.
