STATE FARM P&C LICENSING EXAM
QUESTIONS WITH CORRECT ANSWERS
risk - answer-uncertainty of loss
insurance - answer-transfer of risk from the insured to the insurer
pure risk - answer-no chance of gain; insurable
speculative risk - answer-a chance of loss or gain; not insurable
hazard - answer-something that increases the risk
principle of indemnity - answer-states that the purpose of the policy is to restore the
insured financially to where they were prior to the loss
insurable interest - answer-must exist on a casualty policy at time of loss in order for the
policy to provide coverage
law of large numbers - answer-used to predict the likelihood of loss
actual cash value (acv) - answer-replacement cost minus depreciation
negligence - answer-tort, or a civil wrong;
grounds for a lawsuit.
the failure to act as a reasonable person would in the same circumstances
occurrence - answer-happens over a period of time
binder - answer-may be oral or written;
provides coverage until the policy is issued;
includes all coverages provided by the policy
warranty - answer-literal truth
representation - answer-substantial truth;
in insurance; statements of the applicant/policyowner are representations- true to the
best of their knowledge.
concealment - answer-omission of a material fact
does the insurer have the right to sue a negligent third party for damages paid to an
insured under the concept of subrogation? - answer-yes
QUESTIONS WITH CORRECT ANSWERS
risk - answer-uncertainty of loss
insurance - answer-transfer of risk from the insured to the insurer
pure risk - answer-no chance of gain; insurable
speculative risk - answer-a chance of loss or gain; not insurable
hazard - answer-something that increases the risk
principle of indemnity - answer-states that the purpose of the policy is to restore the
insured financially to where they were prior to the loss
insurable interest - answer-must exist on a casualty policy at time of loss in order for the
policy to provide coverage
law of large numbers - answer-used to predict the likelihood of loss
actual cash value (acv) - answer-replacement cost minus depreciation
negligence - answer-tort, or a civil wrong;
grounds for a lawsuit.
the failure to act as a reasonable person would in the same circumstances
occurrence - answer-happens over a period of time
binder - answer-may be oral or written;
provides coverage until the policy is issued;
includes all coverages provided by the policy
warranty - answer-literal truth
representation - answer-substantial truth;
in insurance; statements of the applicant/policyowner are representations- true to the
best of their knowledge.
concealment - answer-omission of a material fact
does the insurer have the right to sue a negligent third party for damages paid to an
insured under the concept of subrogation? - answer-yes
