AINS 101 Exam Prep/137 Questions and Answers Graded
A+ 2024
Loss exposure - Answer- any condition or situation that presents a possibility of loss,
whether or not an actual loss occurs
Premium - Answer- the price of the insurance coverage provided for a specified period
Indemnify - Answer- to restore a party who has sustained a loss to the same financial position
that party held before the loss occurred
Insured - Answer- any person or organization who is insured under an insurance policy
Property-casualty insurance - Answer- one of the two main sectors of the insurance industry
encompassing numerous types of insurance, most of which cover the financial consequences
of damage to one's own property or legal liability to others
Life-health insurance - Answer- one of the two main sectors of the insurance industry
encompassing numerous types of insurance that cover the financial
Stock insurer - Answer- an insurer that is owned by its stockholders and formed as a
corporation for the purpose of earning a profit for the stockholders
Mutual insurer - Answer- an insurer that is owned by its policyholders and formed as a
corporation for the purpose of providing insurance to them
Surplus-lines insurer - Answer- a non-admitted insurer that is eligible to insure risks that have
been exported by a surplus lines licensee in accordance with a surplus lines law
Reinsurance - Answer- the transfer of insurance risk from one insurer to another through a
contractual agreement under which one insurer (the reinsurer) agrees, in return for a
,reinsurance premium, to indemnify another insurer (the primary insurer) for some or all of
the financial consequences of certain loss exposures covered by the primary's insurance
policies
Pure risk - Answer- a chance of loss or no loss, but no chance of gain
Speculative risk - Answer- a chance of loss, no loss, or gain
Solvency - Answer- the ability of an insurer to meet its financial obligations as they become
due, even those resulting from insured losses that may be claimed several years in the future
Income statement - Answer- the financial statement that reports an organization's profit or
loss for a specific period by comparing the revenues generated with the expenses incurred to
produce those revenues
Earned premiums - Answer- the portion of the written premiums that apply to the part of the
policy period that has already occurred
Underwriting income - Answer- income an insurer earns from premiums paid by
policyholders minus incurred losses and underwriting expenses
Balance sheet - Answer- the financial statement that reports the assets, liabilities, and owner's
equity of an organization as of a specific date
Policyholder's surplus - Answer- an insurer's assets minus its liabilities, which represents its
net worth
Loss adjustment expenses - Answer- the expense that an insurer incurs to investigate, defend,
and settle claims according to the terms specified in the insurance policy
, Assets - Answer- types of property, both tangible and intangible, owned by an entity
Liabilities - Answer- financial obligations, or debts, owned by a company to another entity
usually the policyholder in the case of an insurer
Investment income - Answer- interest, dividends, and net capital gains received by an insurer
from the insurer's financial assets, minus its investment expenses
Loss reserve - Answer- an estimate of the amount of money the insurer expects to pay in the
future for losses that have occurred
Unearned premium reserve - Answer- an insurer liability representing the amount of
premiums received from policyholders that are not yet earned
Loss ratio - Answer- a ratio that measures losses and loss adjustment expenses against
earned premiums and that reflects the percentage of premiums being consumed by losses
Expense ratio - Answer- an insurer's incurred underwriting expenses for a given period
divided by its written premiums for the same period
Combined ratio - Answer- a profitability ratio that indicates whether an insurer has made an
underwriting loss or gain
Independent agency - Answer- a business, operated for the benefit of its owner that sells
insurance, usually as a representative of several unrelated insurers
Exclusive agency marketing system - Answer- an insurance marketing system under which
agents contract to sell insurance exclusively for one insurer
A+ 2024
Loss exposure - Answer- any condition or situation that presents a possibility of loss,
whether or not an actual loss occurs
Premium - Answer- the price of the insurance coverage provided for a specified period
Indemnify - Answer- to restore a party who has sustained a loss to the same financial position
that party held before the loss occurred
Insured - Answer- any person or organization who is insured under an insurance policy
Property-casualty insurance - Answer- one of the two main sectors of the insurance industry
encompassing numerous types of insurance, most of which cover the financial consequences
of damage to one's own property or legal liability to others
Life-health insurance - Answer- one of the two main sectors of the insurance industry
encompassing numerous types of insurance that cover the financial
Stock insurer - Answer- an insurer that is owned by its stockholders and formed as a
corporation for the purpose of earning a profit for the stockholders
Mutual insurer - Answer- an insurer that is owned by its policyholders and formed as a
corporation for the purpose of providing insurance to them
Surplus-lines insurer - Answer- a non-admitted insurer that is eligible to insure risks that have
been exported by a surplus lines licensee in accordance with a surplus lines law
Reinsurance - Answer- the transfer of insurance risk from one insurer to another through a
contractual agreement under which one insurer (the reinsurer) agrees, in return for a
,reinsurance premium, to indemnify another insurer (the primary insurer) for some or all of
the financial consequences of certain loss exposures covered by the primary's insurance
policies
Pure risk - Answer- a chance of loss or no loss, but no chance of gain
Speculative risk - Answer- a chance of loss, no loss, or gain
Solvency - Answer- the ability of an insurer to meet its financial obligations as they become
due, even those resulting from insured losses that may be claimed several years in the future
Income statement - Answer- the financial statement that reports an organization's profit or
loss for a specific period by comparing the revenues generated with the expenses incurred to
produce those revenues
Earned premiums - Answer- the portion of the written premiums that apply to the part of the
policy period that has already occurred
Underwriting income - Answer- income an insurer earns from premiums paid by
policyholders minus incurred losses and underwriting expenses
Balance sheet - Answer- the financial statement that reports the assets, liabilities, and owner's
equity of an organization as of a specific date
Policyholder's surplus - Answer- an insurer's assets minus its liabilities, which represents its
net worth
Loss adjustment expenses - Answer- the expense that an insurer incurs to investigate, defend,
and settle claims according to the terms specified in the insurance policy
, Assets - Answer- types of property, both tangible and intangible, owned by an entity
Liabilities - Answer- financial obligations, or debts, owned by a company to another entity
usually the policyholder in the case of an insurer
Investment income - Answer- interest, dividends, and net capital gains received by an insurer
from the insurer's financial assets, minus its investment expenses
Loss reserve - Answer- an estimate of the amount of money the insurer expects to pay in the
future for losses that have occurred
Unearned premium reserve - Answer- an insurer liability representing the amount of
premiums received from policyholders that are not yet earned
Loss ratio - Answer- a ratio that measures losses and loss adjustment expenses against
earned premiums and that reflects the percentage of premiums being consumed by losses
Expense ratio - Answer- an insurer's incurred underwriting expenses for a given period
divided by its written premiums for the same period
Combined ratio - Answer- a profitability ratio that indicates whether an insurer has made an
underwriting loss or gain
Independent agency - Answer- a business, operated for the benefit of its owner that sells
insurance, usually as a representative of several unrelated insurers
Exclusive agency marketing system - Answer- an insurance marketing system under which
agents contract to sell insurance exclusively for one insurer
