LOUISIANA INSURANCE COUNSELOR EXAM
QUESTIONS AND CORRECT ANSWERS (VERIFIED
ANSWERS) Q&A 2027|INSTANT DOWNLOAD PDF
1. What is the primary purpose of insurance?
A. To eliminate all financial risks
B. To transfer certain financial risks from an individual to an
insurer
C. To guarantee investment profits
D. To increase personal income
Rationale: Insurance provides financial protection by
transferring specified risks to an insurer in exchange for a
premium.
Correct Answer: B. To transfer certain financial risks from an
individual to an insurer
2. Which principle requires an insured to have a legitimate
financial interest in the subject of insurance?
A. Indemnity
B. Insurable interest
C. Subrogation
D. Contribution
Rationale: Insurable interest means the policyholder would
suffer a financial or other recognized loss if the insured event
,occurred.
Correct Answer: B. Insurable interest
3. What does indemnity mean in insurance?
A. The insured should profit from a loss
B. The insurer pays every claim regardless of policy terms
C. The insured is restored approximately to the financial
position held before the loss
D. The insured receives double compensation
Rationale: The principle of indemnity is designed to
compensate for covered loss without creating a profit from the
loss.
Correct Answer: C. The insured is restored approximately to the
financial position held before the loss
4. Which party makes the promise to provide insurance
coverage under a policy?
A. Beneficiary
B. Insured
C. Insurer
D. Adjuster
Rationale: The insurer is the company or entity that assumes
the covered risk and provides the contractual benefits.
Correct Answer: C. Insurer
5. What is a premium?
,A. The amount paid by an insurer after a loss
B. The consideration paid for insurance coverage
C. A policy exclusion
D. A deductible
Rationale: A premium is the amount charged by an insurer for
providing insurance coverage.
Correct Answer: B. The consideration paid for insurance
coverage
6. Which of the following is an example of pure risk?
A. Buying stock
B. Starting a business
C. The possibility of suffering a house fire
D. Gambling on a sporting event
Rationale: Pure risk involves the possibility of loss or no loss,
rather than the possibility of gain.
Correct Answer: C. The possibility of suffering a house fire
7. What is a hazard?
A. The actual cause of a loss
B. A condition that increases the likelihood or severity of a loss
C. The amount of insurance purchased
D. The policy premium
Rationale: A hazard increases the chance or potential severity
of a loss.
Correct Answer: B. A condition that increases the likelihood or
severity of a loss
, 8. Which type of hazard involves dishonesty or intentional
acts that increase the chance of loss?
A. Physical hazard
B. Moral hazard
C. Morale hazard
D. Legal hazard
Rationale: A moral hazard arises from dishonesty or intentional
behavior that increases the likelihood of loss.
Correct Answer: B. Moral hazard
9. Which is an example of a physical hazard?
A. Intentionally setting a building on fire
B. Careless attitude toward property
C. Faulty electrical wiring
D. Insurance fraud
Rationale: Physical hazards are tangible conditions that
increase the probability or severity of loss.
Correct Answer: C. Faulty electrical wiring
10. Which principle requires an applicant to provide truthful
and complete information?
A. Utmost good faith
B. Contribution
C. Subrogation
D. Indemnity
QUESTIONS AND CORRECT ANSWERS (VERIFIED
ANSWERS) Q&A 2027|INSTANT DOWNLOAD PDF
1. What is the primary purpose of insurance?
A. To eliminate all financial risks
B. To transfer certain financial risks from an individual to an
insurer
C. To guarantee investment profits
D. To increase personal income
Rationale: Insurance provides financial protection by
transferring specified risks to an insurer in exchange for a
premium.
Correct Answer: B. To transfer certain financial risks from an
individual to an insurer
2. Which principle requires an insured to have a legitimate
financial interest in the subject of insurance?
A. Indemnity
B. Insurable interest
C. Subrogation
D. Contribution
Rationale: Insurable interest means the policyholder would
suffer a financial or other recognized loss if the insured event
,occurred.
Correct Answer: B. Insurable interest
3. What does indemnity mean in insurance?
A. The insured should profit from a loss
B. The insurer pays every claim regardless of policy terms
C. The insured is restored approximately to the financial
position held before the loss
D. The insured receives double compensation
Rationale: The principle of indemnity is designed to
compensate for covered loss without creating a profit from the
loss.
Correct Answer: C. The insured is restored approximately to the
financial position held before the loss
4. Which party makes the promise to provide insurance
coverage under a policy?
A. Beneficiary
B. Insured
C. Insurer
D. Adjuster
Rationale: The insurer is the company or entity that assumes
the covered risk and provides the contractual benefits.
Correct Answer: C. Insurer
5. What is a premium?
,A. The amount paid by an insurer after a loss
B. The consideration paid for insurance coverage
C. A policy exclusion
D. A deductible
Rationale: A premium is the amount charged by an insurer for
providing insurance coverage.
Correct Answer: B. The consideration paid for insurance
coverage
6. Which of the following is an example of pure risk?
A. Buying stock
B. Starting a business
C. The possibility of suffering a house fire
D. Gambling on a sporting event
Rationale: Pure risk involves the possibility of loss or no loss,
rather than the possibility of gain.
Correct Answer: C. The possibility of suffering a house fire
7. What is a hazard?
A. The actual cause of a loss
B. A condition that increases the likelihood or severity of a loss
C. The amount of insurance purchased
D. The policy premium
Rationale: A hazard increases the chance or potential severity
of a loss.
Correct Answer: B. A condition that increases the likelihood or
severity of a loss
, 8. Which type of hazard involves dishonesty or intentional
acts that increase the chance of loss?
A. Physical hazard
B. Moral hazard
C. Morale hazard
D. Legal hazard
Rationale: A moral hazard arises from dishonesty or intentional
behavior that increases the likelihood of loss.
Correct Answer: B. Moral hazard
9. Which is an example of a physical hazard?
A. Intentionally setting a building on fire
B. Careless attitude toward property
C. Faulty electrical wiring
D. Insurance fraud
Rationale: Physical hazards are tangible conditions that
increase the probability or severity of loss.
Correct Answer: C. Faulty electrical wiring
10. Which principle requires an applicant to provide truthful
and complete information?
A. Utmost good faith
B. Contribution
C. Subrogation
D. Indemnity
