AINS 21 EXAM WITH CORRECT
ANSWERS 2025
What is insurance? ( correct answers ) It's a transfer system, business, and
contract.
What is a transfer system in insurance? ( correct answers ) One party
(the insured), transfers the risk of financial loss to another party (the
insurer). [Essentially, I'm giving the risk of financial loss to someone else so
that I can keep my financial standing.]
What are covered losses? ( correct answers ) These are
costs that insurers pay for and are in the contract that both parties agree to
in the beginning (wind damage, car accident, etc). The costs vary on what
coverage one purchases.
What are premiums? ( correct answers ) Periodic payments from the
insured to the insurer to protect them from potential costs.
What does transferring the risk allow? ( correct answers ) This allows
the insured to give periodic payments (premiums) to the insurer to protect
them from those potential costs and remain in good financial standing.
What is "sharing the premiums?" ( correct answers ) This technique
allows the insurer to put all their premiums into a pool paid by their insured
customers. This allows them to dip into this pool of paid premiums to cover
a single claim (thus, the more paying customers, the better).
What is a loss exposure?( correct answers ) This is any condition or
situation that presents the *possibility* of a loss.
What is a common loss exposure that every home has? ( correct
answers ) Fire exposure, because every home has electricity in it
(unless there is an exception).
What is the law of large numbers? ( correct answers ) The law states: as
long as the number of similar but independent exposure units increases, the
relative accuracy of predictions about future losses based on these exposure
units also increases.
How is the law of large numbers applied to insurance? ( correct
answers ) Houses and cars are
similar exposure units (things that are insured), but are independent because
they are not subject to the same event. For example: a homeowner is
uncertain whether a fire will damage his or her home and transfers this
uncertainty to an insurance company. The insurance company insures
thousands of homes whose owners face the same uncertainty! Because
they insure such a large number of homes
, like this one, they can predict with a better deal of accuracy the number of
homes that actually will be damaged by fire! That will allow them to
determine the amount of premiums that it needs to pay for the fire losses
during that period.
What are the three major types of loss exposures? ( correct answers ) 1)
Property 2) Liability 3) Human/Personal and personnel.
What is a property loss exposure? ( correct answers ) This is a
possibility of some property being lost in an accident.
What is real property? ( correct answers ) Land or any property attached
to it.
What is an example of real property? ( correct answers )
A home owner purchases a lot and then
builds a house and a pool on that said lot. Anything permanent/stationary on
that lot is considered real property.
What is personal property? ( correct answers ) Anything
that is not real property.
What is an example of personal property? ( correct
answers ) A car, computer, TV, clothes,
furniture, on a lot. These are not stationary.
What is a liability loss exposure? ( correct answers ) This is any condition
or situation that presents the possibility that a liability loss will occur.
What is a liability loss exposure? ( correct answers ) This is a claim for
monetary damages because of injury to another party or damage to another
party's property. The possibility of a claim alleging legal responsibility of a
person or business for injury or damage suffered by another party. Often,
these claims result in lawsuits. (includes negligence).
What is a human/personal loss exposure? ( correct
answers ) Financial loss to
individual/family because of death, disability or unemployment.
What is a personnel loss exposure? ( correct answers )
This generally refers to a loss caused by death, disability, retirement, or
resignation of key employees.
What characteristics define an ideally insurable loss exposure? ( correct
answers ) Large number of similar exposure units (better predictions),
losses that are accidental (these occur less and have more control by the
insured), definite and measurable (measurable in dollars and time for
practical reasons), non-catastrophic (independent), economically feasible
(opportunity costs).
What is an independent exposure? ( correct answers ) This is an exposure
that is not exposed to an exact same event as another exposure. Hurricane
areas are often not independent exposures since they all have an almost
exact risk of being damaged by a hurricane.
ANSWERS 2025
What is insurance? ( correct answers ) It's a transfer system, business, and
contract.
What is a transfer system in insurance? ( correct answers ) One party
(the insured), transfers the risk of financial loss to another party (the
insurer). [Essentially, I'm giving the risk of financial loss to someone else so
that I can keep my financial standing.]
What are covered losses? ( correct answers ) These are
costs that insurers pay for and are in the contract that both parties agree to
in the beginning (wind damage, car accident, etc). The costs vary on what
coverage one purchases.
What are premiums? ( correct answers ) Periodic payments from the
insured to the insurer to protect them from potential costs.
What does transferring the risk allow? ( correct answers ) This allows
the insured to give periodic payments (premiums) to the insurer to protect
them from those potential costs and remain in good financial standing.
What is "sharing the premiums?" ( correct answers ) This technique
allows the insurer to put all their premiums into a pool paid by their insured
customers. This allows them to dip into this pool of paid premiums to cover
a single claim (thus, the more paying customers, the better).
What is a loss exposure?( correct answers ) This is any condition or
situation that presents the *possibility* of a loss.
What is a common loss exposure that every home has? ( correct
answers ) Fire exposure, because every home has electricity in it
(unless there is an exception).
What is the law of large numbers? ( correct answers ) The law states: as
long as the number of similar but independent exposure units increases, the
relative accuracy of predictions about future losses based on these exposure
units also increases.
How is the law of large numbers applied to insurance? ( correct
answers ) Houses and cars are
similar exposure units (things that are insured), but are independent because
they are not subject to the same event. For example: a homeowner is
uncertain whether a fire will damage his or her home and transfers this
uncertainty to an insurance company. The insurance company insures
thousands of homes whose owners face the same uncertainty! Because
they insure such a large number of homes
, like this one, they can predict with a better deal of accuracy the number of
homes that actually will be damaged by fire! That will allow them to
determine the amount of premiums that it needs to pay for the fire losses
during that period.
What are the three major types of loss exposures? ( correct answers ) 1)
Property 2) Liability 3) Human/Personal and personnel.
What is a property loss exposure? ( correct answers ) This is a
possibility of some property being lost in an accident.
What is real property? ( correct answers ) Land or any property attached
to it.
What is an example of real property? ( correct answers )
A home owner purchases a lot and then
builds a house and a pool on that said lot. Anything permanent/stationary on
that lot is considered real property.
What is personal property? ( correct answers ) Anything
that is not real property.
What is an example of personal property? ( correct
answers ) A car, computer, TV, clothes,
furniture, on a lot. These are not stationary.
What is a liability loss exposure? ( correct answers ) This is any condition
or situation that presents the possibility that a liability loss will occur.
What is a liability loss exposure? ( correct answers ) This is a claim for
monetary damages because of injury to another party or damage to another
party's property. The possibility of a claim alleging legal responsibility of a
person or business for injury or damage suffered by another party. Often,
these claims result in lawsuits. (includes negligence).
What is a human/personal loss exposure? ( correct
answers ) Financial loss to
individual/family because of death, disability or unemployment.
What is a personnel loss exposure? ( correct answers )
This generally refers to a loss caused by death, disability, retirement, or
resignation of key employees.
What characteristics define an ideally insurable loss exposure? ( correct
answers ) Large number of similar exposure units (better predictions),
losses that are accidental (these occur less and have more control by the
insured), definite and measurable (measurable in dollars and time for
practical reasons), non-catastrophic (independent), economically feasible
(opportunity costs).
What is an independent exposure? ( correct answers ) This is an exposure
that is not exposed to an exact same event as another exposure. Hurricane
areas are often not independent exposures since they all have an almost
exact risk of being damaged by a hurricane.
