ARIZONA- PROPERTY AND CASUALTY EXAM
2025 QUESTIONS AND ANSWERS
1. Describe the relationship between insurance and financial responsibility in
the context of risk.
Insurance transfers the financial responsibility of potential losses
from individuals to an insurance company.
Insurance eliminates all financial responsibility for losses.
Insurance increases the financial burden on individuals.
Insurance only covers physical assets, not financial responsibility.
2. A risk-retention group is a liability insurance company owned by ______ _.
The stockholders.
State of CA.
By the owners of the RRG.
The State Guarantee Association.
3. What document must an insurer receive in order to transact insurance in
this state?
Certificate of authority
Admitted insurer license
Commissioner's certificate
Guarantee Association clearance
4. If a group of individuals decides to form a reciprocal insurance
arrangement to cover their property risks, what would be a key benefit of
this approach?
No need for underwriting processes
, Individual coverage without shared responsibility
Shared risk among members
Guaranteed lower premiums than stock insurance
5. Who owns a mutual insurance company?
Policyholders
Board of Directors
Investors
Stockholders
6. What is the term used to describe a claim made against an insurance
policy?
Peril
Risk
Loss
Hazard
7. Insurance is a means of:
transferring risk
avoiding risk
retaining risk
eliminating risk
8. Which of the following statements regarding mutual companies and
stock companies is correct? Mutual companies are owned by their
policyholders and offer participating policies a share in the profits of the
company through the payment of policy dividends. Stock companies are
owned by the stockholders and usually offer nonparticipating policies.
, III only
II only
I only
I and II
9. An insurer that is authorized to do business in the state is issued a:
Master contract
Certificate of authority
Statement of approval
Letter of permission
10. An insurance organization that does not issue insurance policies but
provides a meeting place for underwriters to conduct business is known
as a
Capital stock company
Fraternal society
Mutual company
Lloyd's association
11. Which of the following is a requirement of an insurable risk?
The insured event must be within the control of the insured.
The risk must be speculative in nature.
The insured risk must be catastrophic in nature.
A covered loss must be definite as to time, cause, and location.
12. Which of the following is NOT a goal of risk retention?
To increase control of claim reserving and claims settlements
, To minimize the insured's level of liability in the event of loss
To reduce expenses and improve cash flow
To fund losses that cannot be insured
13. What term is used to describe the causes of loss that are covered by an
insurance policy?
Perils
Hazards
Liabilities
Risks
14. If an insured individual experiences a fire that destroys their property,
which aspect of their insurance policy would determine if they can file a
claim?
The perils covered by the insurance policy
The amount of the premium paid
The moral hazards associated with the property
The type of insurer
15. Self-insuring is an example of what type of risk?
Risk Avoidance
Risk Reduction
Risk Retention
Risk Transfer
16. Which of the following best describes Lloyd's of London?
an association which furnished procedures and physical
facilities for its members who write insurance
2025 QUESTIONS AND ANSWERS
1. Describe the relationship between insurance and financial responsibility in
the context of risk.
Insurance transfers the financial responsibility of potential losses
from individuals to an insurance company.
Insurance eliminates all financial responsibility for losses.
Insurance increases the financial burden on individuals.
Insurance only covers physical assets, not financial responsibility.
2. A risk-retention group is a liability insurance company owned by ______ _.
The stockholders.
State of CA.
By the owners of the RRG.
The State Guarantee Association.
3. What document must an insurer receive in order to transact insurance in
this state?
Certificate of authority
Admitted insurer license
Commissioner's certificate
Guarantee Association clearance
4. If a group of individuals decides to form a reciprocal insurance
arrangement to cover their property risks, what would be a key benefit of
this approach?
No need for underwriting processes
, Individual coverage without shared responsibility
Shared risk among members
Guaranteed lower premiums than stock insurance
5. Who owns a mutual insurance company?
Policyholders
Board of Directors
Investors
Stockholders
6. What is the term used to describe a claim made against an insurance
policy?
Peril
Risk
Loss
Hazard
7. Insurance is a means of:
transferring risk
avoiding risk
retaining risk
eliminating risk
8. Which of the following statements regarding mutual companies and
stock companies is correct? Mutual companies are owned by their
policyholders and offer participating policies a share in the profits of the
company through the payment of policy dividends. Stock companies are
owned by the stockholders and usually offer nonparticipating policies.
, III only
II only
I only
I and II
9. An insurer that is authorized to do business in the state is issued a:
Master contract
Certificate of authority
Statement of approval
Letter of permission
10. An insurance organization that does not issue insurance policies but
provides a meeting place for underwriters to conduct business is known
as a
Capital stock company
Fraternal society
Mutual company
Lloyd's association
11. Which of the following is a requirement of an insurable risk?
The insured event must be within the control of the insured.
The risk must be speculative in nature.
The insured risk must be catastrophic in nature.
A covered loss must be definite as to time, cause, and location.
12. Which of the following is NOT a goal of risk retention?
To increase control of claim reserving and claims settlements
, To minimize the insured's level of liability in the event of loss
To reduce expenses and improve cash flow
To fund losses that cannot be insured
13. What term is used to describe the causes of loss that are covered by an
insurance policy?
Perils
Hazards
Liabilities
Risks
14. If an insured individual experiences a fire that destroys their property,
which aspect of their insurance policy would determine if they can file a
claim?
The perils covered by the insurance policy
The amount of the premium paid
The moral hazards associated with the property
The type of insurer
15. Self-insuring is an example of what type of risk?
Risk Avoidance
Risk Reduction
Risk Retention
Risk Transfer
16. Which of the following best describes Lloyd's of London?
an association which furnished procedures and physical
facilities for its members who write insurance
