K
C
LO
AINS 101 EXAM PREP
YC
QUESTIONS WITH CORRECT
ANSWERS ALL VERIFIED BY
D
AN EXPERT A+ GRADED
U
(LATEST UPDATE)
ST
As a single mother on a very tight budget, Ciara is tempted to skimp on her insurance. However,
her friend Mehmet tells her not to skimp on insurance, because it will help manage her cash
flows. Which one of the following examples best illustrates Mehmet's point?
A. Ciara needs her car to get to her job, and she needs her job to make car payments and pay
for her car insurance.
,B. When her car's windshield breaks, Ciara has to pay only $100 of the $600 cost of replacing it.
C. When her car's transmission goes out a month after the warranty expires, Ciara is faced with
a $1,100 repair bill.
D. Ciara finds it difficult to come up with a $787 auto insurance premium every six months. -
ANS When her car's windshield breaks, Ciara has to pay only $100 of the $600 cost of
replacing it.
Which one of the following statements is correct regarding the benefits provided by insurance?
A. Insurance reduces the financial consequences of loss exposures but not the related
K
uncertainty.
B. The primary role of insurance is to meet mandatory insurance requirements.
C. The reduction in losses paid by insurers due to risk control measures benefits individual
C
insureds but not society as a whole.
D. Insurance helps reduce the financial burden to society by compensating accident victims. -
ANS Insurance helps reduce the financial burden to society by compensating accident victims.
LO
Shelton Industries experienced a fire in its manufacturing plant. Several employees suffered
burns and smoke inhalation injuries as they tried to escape the building. Which one of Shelton
Industries' commercial property-casualty policies would pay for the employees' injuries and
illnesses? - ANS Workers compensation insurance
YC
A homeowners policy is a type of - ANS Personal property-casualty insurance policy.
Which one of the following correctly describes a reason for government involvement in
property-casualty insurance?
D
A. Selling insurance provides the government with a non-tax source of revenues and profits.
B. Government programs can meet legitimate public demands unmet by private insurers.
C. Competition from government plans keeps private insurer's premiums competitive.
U
D. Preventing high-risk individuals or activities from being insured is in the public interest. - ANS
Government programs can meet legitimate public demands unmet by private insurers.
ST
Insurance Company wrote a commercial liability policy for a manufacturer of off-road
motorcycles. The potential costs of the insured's loss exposure exceed Insurance Company's
capacity. Insurance Company could consider which one of the following types of contractual
transferring agreement to meet its needs? - ANS Reinsurance
In an effort to reduce expenses, increase profitability, and reduce human errors; ABC Insurance
Company decided to automate most of its personal lines underwriting function. The company
now uses standardized application forms that are submitted electronically to one of the
company's regional offices. At each regional office, a computer with a scanner reads the
applications. The computer has been programmed with acceptable answers to the questions. If
the answers on the application are all acceptable, the policy is automatically issued. Rejected
,applications are automatically forwarded to a human underwriter who reviews them. The use of
this technology has reduced the company's expense ratio by two and a half percent, and
reduced the time it takes to issue a policy. ABC Insurance Company's use of computers to
evaluate applications electronically is an application of
A. Radiant sensors.
B. Artificial intelligence.
C. - ANS Artificial intelligence.
Jimmy decided to buy a house in his neighborhood that had been foreclosed on by the bank
K
that held the mortgage. He is hoping to do some renovation and repair work on the house, and
then sell it for a quick profit. What type of risk is this? - ANS Speculative Risk
C
Which one of the following best describes the concept of pooling?
A. The financial consequences of unanticipated losses are transferred to an insurer.
LO
B. Risk management is concerned with positive and negative risks.
C. Insureds share the cost of each other's losses.
D. Insurance benefits society as a whole. - ANS Insureds share the cost of each other's losses.
Which one of the following represents uncertainty about outcomes that can be negative or
YC
positive?
A. Loss exposure
B. Transfer
C. Risk
D. Pooling - ANS Risk
D
Coverage for money and other business property from various causes of loss such as burglary,
robbery, theft, and employee dishonesty typically is provided by - ANS Commercial crime
U
insurance.
The insurance agent suggested that Sally's Snack Shop buy a policy that combines property,
ST
crime, and liability coverages into one policy. This is referred to as a(n) - ANS Commercial
Package Policy (CCP)
Which one of the following describes the characteristics of a mutual insurance company?
A. A corporation owned by policyholders that provides insurance to its policyholders.
B. An unincorporated association that provides reciprocal coverage to subscribers.
C. An unincorporated association that earns profits for its individual investors.
D. A corporation owned by stockholders that earns profits for the stockholders. - ANS A
corporation owned by policyholders that provides insurance to its policyholders.
, A reinsurance company
A. Assumes loss exposures from a primary insurer.
B. Provides primary insurance for loss exposures that private insurers are unwilling to provide.
C. Is formed to write all or part of the insurance for a parent company.
D. Transfers losses to a primary insurer. - ANS Assumes loss exposures from a primary
insurer.
Autonomous Vehicle Applications (AVA) is a start-up company that develops safety technologies
that can be sold to companies that are producing autonomous vehicles. One technology AVA is
K
developing allows an autonomous vehicle to detect, extract, and analyze images; and then to
respond to the images. For example, the technology would detect a presence in a crosswalk,
extract the image, and a computer would analyze the image. When the image was determined
C
to be a human being, the vehicle would slow down or stop until the crosswalk was clear. This
technology, which is designed to capture and analyze images, and to act on the recognition of
the image; is called - ANS Computer Vision
LO
Mutual Fund Company (MFC) offers a wide array of mutual fund options to investors. Each
mutual fund has a different fund objective and set of investment guidelines that apply to the
fund. While MFC gives considerable freedom to its fund portfolio managers, they are required to
abide by the fund's investment guidelines. To monitor compliance, MFC developed a computer
YC
algorithm. The computer algorithm continuously monitors each fund's compliance with
investment guidelines. If a fund manager violates the investment guidelines, the computer
immediately notifies MFC's internal control director, and corrective action is taken. MFC's use of
the computer algorithm to monitor investment compliance and to provide notification when
corrective action is necessary illustrates use of - ANS Artificial Intelligence
D
The primary role of insurance is to - ANS Indemnify individuals and organizations for covered
losses
U
Which one of the following best describes the concept of pooling?
A. Insureds share the cost of each other's losses.
ST
B. Risk management is concerned with positive and negative risks.
C. The financial consequences of unanticipated losses are transferred to an insurer.
D. Insurance benefits society as a whole. - ANS Insureds share the cost of each other's losses.
A type of insurer that is owned by policyholders and may pay dividends to policyholders as a
return of a portion of premiums paid is a - ANS Mutual insurer.
The state of Maryland operates a residual auto plan (the Maryland Auto Insurance Fund—MAIF)
that provides coverage for drivers who are unable to obtain coverage from private insurers.
Which one of the following is the best rationale for the MAIF program?
C
LO
AINS 101 EXAM PREP
YC
QUESTIONS WITH CORRECT
ANSWERS ALL VERIFIED BY
D
AN EXPERT A+ GRADED
U
(LATEST UPDATE)
ST
As a single mother on a very tight budget, Ciara is tempted to skimp on her insurance. However,
her friend Mehmet tells her not to skimp on insurance, because it will help manage her cash
flows. Which one of the following examples best illustrates Mehmet's point?
A. Ciara needs her car to get to her job, and she needs her job to make car payments and pay
for her car insurance.
,B. When her car's windshield breaks, Ciara has to pay only $100 of the $600 cost of replacing it.
C. When her car's transmission goes out a month after the warranty expires, Ciara is faced with
a $1,100 repair bill.
D. Ciara finds it difficult to come up with a $787 auto insurance premium every six months. -
ANS When her car's windshield breaks, Ciara has to pay only $100 of the $600 cost of
replacing it.
Which one of the following statements is correct regarding the benefits provided by insurance?
A. Insurance reduces the financial consequences of loss exposures but not the related
K
uncertainty.
B. The primary role of insurance is to meet mandatory insurance requirements.
C. The reduction in losses paid by insurers due to risk control measures benefits individual
C
insureds but not society as a whole.
D. Insurance helps reduce the financial burden to society by compensating accident victims. -
ANS Insurance helps reduce the financial burden to society by compensating accident victims.
LO
Shelton Industries experienced a fire in its manufacturing plant. Several employees suffered
burns and smoke inhalation injuries as they tried to escape the building. Which one of Shelton
Industries' commercial property-casualty policies would pay for the employees' injuries and
illnesses? - ANS Workers compensation insurance
YC
A homeowners policy is a type of - ANS Personal property-casualty insurance policy.
Which one of the following correctly describes a reason for government involvement in
property-casualty insurance?
D
A. Selling insurance provides the government with a non-tax source of revenues and profits.
B. Government programs can meet legitimate public demands unmet by private insurers.
C. Competition from government plans keeps private insurer's premiums competitive.
U
D. Preventing high-risk individuals or activities from being insured is in the public interest. - ANS
Government programs can meet legitimate public demands unmet by private insurers.
ST
Insurance Company wrote a commercial liability policy for a manufacturer of off-road
motorcycles. The potential costs of the insured's loss exposure exceed Insurance Company's
capacity. Insurance Company could consider which one of the following types of contractual
transferring agreement to meet its needs? - ANS Reinsurance
In an effort to reduce expenses, increase profitability, and reduce human errors; ABC Insurance
Company decided to automate most of its personal lines underwriting function. The company
now uses standardized application forms that are submitted electronically to one of the
company's regional offices. At each regional office, a computer with a scanner reads the
applications. The computer has been programmed with acceptable answers to the questions. If
the answers on the application are all acceptable, the policy is automatically issued. Rejected
,applications are automatically forwarded to a human underwriter who reviews them. The use of
this technology has reduced the company's expense ratio by two and a half percent, and
reduced the time it takes to issue a policy. ABC Insurance Company's use of computers to
evaluate applications electronically is an application of
A. Radiant sensors.
B. Artificial intelligence.
C. - ANS Artificial intelligence.
Jimmy decided to buy a house in his neighborhood that had been foreclosed on by the bank
K
that held the mortgage. He is hoping to do some renovation and repair work on the house, and
then sell it for a quick profit. What type of risk is this? - ANS Speculative Risk
C
Which one of the following best describes the concept of pooling?
A. The financial consequences of unanticipated losses are transferred to an insurer.
LO
B. Risk management is concerned with positive and negative risks.
C. Insureds share the cost of each other's losses.
D. Insurance benefits society as a whole. - ANS Insureds share the cost of each other's losses.
Which one of the following represents uncertainty about outcomes that can be negative or
YC
positive?
A. Loss exposure
B. Transfer
C. Risk
D. Pooling - ANS Risk
D
Coverage for money and other business property from various causes of loss such as burglary,
robbery, theft, and employee dishonesty typically is provided by - ANS Commercial crime
U
insurance.
The insurance agent suggested that Sally's Snack Shop buy a policy that combines property,
ST
crime, and liability coverages into one policy. This is referred to as a(n) - ANS Commercial
Package Policy (CCP)
Which one of the following describes the characteristics of a mutual insurance company?
A. A corporation owned by policyholders that provides insurance to its policyholders.
B. An unincorporated association that provides reciprocal coverage to subscribers.
C. An unincorporated association that earns profits for its individual investors.
D. A corporation owned by stockholders that earns profits for the stockholders. - ANS A
corporation owned by policyholders that provides insurance to its policyholders.
, A reinsurance company
A. Assumes loss exposures from a primary insurer.
B. Provides primary insurance for loss exposures that private insurers are unwilling to provide.
C. Is formed to write all or part of the insurance for a parent company.
D. Transfers losses to a primary insurer. - ANS Assumes loss exposures from a primary
insurer.
Autonomous Vehicle Applications (AVA) is a start-up company that develops safety technologies
that can be sold to companies that are producing autonomous vehicles. One technology AVA is
K
developing allows an autonomous vehicle to detect, extract, and analyze images; and then to
respond to the images. For example, the technology would detect a presence in a crosswalk,
extract the image, and a computer would analyze the image. When the image was determined
C
to be a human being, the vehicle would slow down or stop until the crosswalk was clear. This
technology, which is designed to capture and analyze images, and to act on the recognition of
the image; is called - ANS Computer Vision
LO
Mutual Fund Company (MFC) offers a wide array of mutual fund options to investors. Each
mutual fund has a different fund objective and set of investment guidelines that apply to the
fund. While MFC gives considerable freedom to its fund portfolio managers, they are required to
abide by the fund's investment guidelines. To monitor compliance, MFC developed a computer
YC
algorithm. The computer algorithm continuously monitors each fund's compliance with
investment guidelines. If a fund manager violates the investment guidelines, the computer
immediately notifies MFC's internal control director, and corrective action is taken. MFC's use of
the computer algorithm to monitor investment compliance and to provide notification when
corrective action is necessary illustrates use of - ANS Artificial Intelligence
D
The primary role of insurance is to - ANS Indemnify individuals and organizations for covered
losses
U
Which one of the following best describes the concept of pooling?
A. Insureds share the cost of each other's losses.
ST
B. Risk management is concerned with positive and negative risks.
C. The financial consequences of unanticipated losses are transferred to an insurer.
D. Insurance benefits society as a whole. - ANS Insureds share the cost of each other's losses.
A type of insurer that is owned by policyholders and may pay dividends to policyholders as a
return of a portion of premiums paid is a - ANS Mutual insurer.
The state of Maryland operates a residual auto plan (the Maryland Auto Insurance Fund—MAIF)
that provides coverage for drivers who are unable to obtain coverage from private insurers.
Which one of the following is the best rationale for the MAIF program?
