USAA Licensing Exam Questions and Answers| Graded to Pass

Insurance - Correct Answer Transfer of risk from one person or organization to an insurance company Indemnity - Correct Answer The principle to restore the insured to the pre-loss economic or financial condition. Law of Large numbers - Correct Answer Mathematical principle used by insurers to predict losses to charge the appropriate premiums Insurable Interest - Correct Answer Proof that someone stands to lose financially if a loss occurs; must exist at the time of the loss in property and casualty insurance Binder - Correct Answer Temporary insurance contract; commits the company to act as if a policy has been issued Peril - Correct Answer Cause of loss Direct Loss - Correct Answer Immediate actual physical damage to tangible property Indirect loss - Correct Answer Inability to use property as a result of a direct loss Risk - Correct Answer Chance of loss; uncertainty of loss What are the two types of risk? - Correct Answer Speculative and Pure Speculative Risk - Correct Answer Involves the simultaneous chance of gain or loss: is not insurable Pure Risk - Correct Answer a risk that presents the chance of loss but no opportunity for gain (insurable) What are two examples of speculative risk? - Correct Answer Gambling Investing What is an example of your risk? - Correct Answer Car accident Physical hazards include - Correct Answer Visible condition that increases the chance of loss Morale Hazard - Correct Answer Attitude of carelessness or indifference to loss Insurer - Correct Answer The insurance company (a.k.a. second party to the contract) Named Insured - Correct Answer A party named on the declarations who is purchasing the insurance policy (a.k.a. first party to the contract)