State Licensing Exam 20-44 Personal Lines
Agent UPDATED ACTUAL Exam
Questions and CORRECT Answers
Risk - CORRECT ANSWER - The chance of financial loss
Pure risk - CORRECT ANSWER - ONLY the chance of loss
Speculative risk - CORRECT ANSWER - Chance of loss or gain
Insurance - CORRECT ANSWER - Contract whereby one undertakes to indemnify
another or pay or allow a specified amount or benefit upon a contingency; Used to offset the
financial impact of pure risk
Law of large numbers - CORRECT ANSWER - Statistical concept that the more exposure
units, the more likely projections are to equal what actually occurs (Ex: More drivers on the road
means more accidents)
Policy - CORRECT ANSWER - Written contract/agreement for or effecting insurance
(Includes all clauses, riders, endorsements, and papers)
Endorsement - CORRECT ANSWER - A modification to the original policy (changes that
are made)
Contract - CORRECT ANSWER - Legally enforceable obligations made by one or more
people (Can be oral or written)
Offer - CORRECT ANSWER - Made by one or more parties
,Communication - CORRECT ANSWER - __________ of acceptance in the prescribed
manner and time frame
Mutuality of obligation - CORRECT ANSWER - Obligation to act from all parties
Capacity - CORRECT ANSWER - Legal standing to engage in the agreement
Acceptance - CORRECT ANSWER - ___________ of the offer takes place before
consideration
Consideration - CORRECT ANSWER - Value exchanges between the parties
Competency - CORRECT ANSWER - Must have good mental health to engage in
agreement; Ex can't have dementia
Legality - CORRECT ANSWER - Must have legal intent to engage in agreement
Mutual assent - CORRECT ANSWER - Two parties agreed and are prepared to enter a
contract
Statute - CORRECT ANSWER - Written law passed by legislature on the state of federal
level
Invalid - CORRECT ANSWER - Insurance provisions which conflict statutory provisions
are ___________
Binders - CORRECT ANSWER - Coverage effective "bound" prior to issuance of policy
(Can be effective immediately and can be written or oral), 60 days does not require notice of
cancellation
,Property insurance - CORRECT ANSWER - Insurer pays directly to insured or
specifically named interests for property damages
Liability insurance - CORRECT ANSWER - Payment made on behalf of insured to
another for bodily injuries or property damage
Insurance policies - CORRECT ANSWER - _________ can have both property and
liability insurance
Contract characteristics - CORRECT ANSWER - Personal contract, conditional contract,
indemnity contract, contract of adhesions
Personal contract - CORRECT ANSWER - Property and liability insurance policies that
cover losses sustained by persons
Conditional contract - CORRECT ANSWER - The insured has to satisfy certain
conditions for the insurer to pay any claim
Contracts of adhesions - CORRECT ANSWER - Take it or leave it basis, Favor the
insured because the insurance company drafted the contract and had the ability to write exactly
what they wanted and intended CLEARLY!!
Indemnity contract - CORRECT ANSWER - The insured is restored to the approx.
financial condition occupied before the loss (Ensures the insured is no better or worse than
before the loss-Actual cash value)
Indemnity exceptions - CORRECT ANSWER - Replacement cost endorsements "new" for
"old", agreed value, direct payment to claimant in a liability claim
Agreed value - CORRECT ANSWER - Value agreed to at the time the insurance is taken
out
, Insurable interest - CORRECT ANSWER - Actual, lawful and substantial economic
interest in the safety/preservation of the subject
Insurance contract characteristics - CORRECT ANSWER - Declarations page, insuring
agreement, exclusions, conditions
Declarations page - CORRECT ANSWER - Insurance company's name and address,
insured's name and address, subject of insurance, policy period, coverage types and limits,
cost/premium for the policy
Exclusions - CORRECT ANSWER - Establish property, situations, persons or perils not
covered
Reasons for exclusions - CORRECT ANSWER - 1. Duplication of coverage found in
other policies
2. Uninsurable exposures
3. Specialized exposures requiring specialized underwriting and coverage more appropriately
handled in another policy
Conditions - CORRECT ANSWER - Establishes "rights and duties" of the insurance
company and the insured to each other
Subrogation - CORRECT ANSWER - The assignment of recovery from the insured to the
insurance company after a claim payment has been made to the insured
Severability - CORRECT ANSWER - Insurance applies separately to each insured
Loss - CORRECT ANSWER - Reduction and/or destruction in use, value, access, custody
or function of persons, property and/or tangible property values
Agent UPDATED ACTUAL Exam
Questions and CORRECT Answers
Risk - CORRECT ANSWER - The chance of financial loss
Pure risk - CORRECT ANSWER - ONLY the chance of loss
Speculative risk - CORRECT ANSWER - Chance of loss or gain
Insurance - CORRECT ANSWER - Contract whereby one undertakes to indemnify
another or pay or allow a specified amount or benefit upon a contingency; Used to offset the
financial impact of pure risk
Law of large numbers - CORRECT ANSWER - Statistical concept that the more exposure
units, the more likely projections are to equal what actually occurs (Ex: More drivers on the road
means more accidents)
Policy - CORRECT ANSWER - Written contract/agreement for or effecting insurance
(Includes all clauses, riders, endorsements, and papers)
Endorsement - CORRECT ANSWER - A modification to the original policy (changes that
are made)
Contract - CORRECT ANSWER - Legally enforceable obligations made by one or more
people (Can be oral or written)
Offer - CORRECT ANSWER - Made by one or more parties
,Communication - CORRECT ANSWER - __________ of acceptance in the prescribed
manner and time frame
Mutuality of obligation - CORRECT ANSWER - Obligation to act from all parties
Capacity - CORRECT ANSWER - Legal standing to engage in the agreement
Acceptance - CORRECT ANSWER - ___________ of the offer takes place before
consideration
Consideration - CORRECT ANSWER - Value exchanges between the parties
Competency - CORRECT ANSWER - Must have good mental health to engage in
agreement; Ex can't have dementia
Legality - CORRECT ANSWER - Must have legal intent to engage in agreement
Mutual assent - CORRECT ANSWER - Two parties agreed and are prepared to enter a
contract
Statute - CORRECT ANSWER - Written law passed by legislature on the state of federal
level
Invalid - CORRECT ANSWER - Insurance provisions which conflict statutory provisions
are ___________
Binders - CORRECT ANSWER - Coverage effective "bound" prior to issuance of policy
(Can be effective immediately and can be written or oral), 60 days does not require notice of
cancellation
,Property insurance - CORRECT ANSWER - Insurer pays directly to insured or
specifically named interests for property damages
Liability insurance - CORRECT ANSWER - Payment made on behalf of insured to
another for bodily injuries or property damage
Insurance policies - CORRECT ANSWER - _________ can have both property and
liability insurance
Contract characteristics - CORRECT ANSWER - Personal contract, conditional contract,
indemnity contract, contract of adhesions
Personal contract - CORRECT ANSWER - Property and liability insurance policies that
cover losses sustained by persons
Conditional contract - CORRECT ANSWER - The insured has to satisfy certain
conditions for the insurer to pay any claim
Contracts of adhesions - CORRECT ANSWER - Take it or leave it basis, Favor the
insured because the insurance company drafted the contract and had the ability to write exactly
what they wanted and intended CLEARLY!!
Indemnity contract - CORRECT ANSWER - The insured is restored to the approx.
financial condition occupied before the loss (Ensures the insured is no better or worse than
before the loss-Actual cash value)
Indemnity exceptions - CORRECT ANSWER - Replacement cost endorsements "new" for
"old", agreed value, direct payment to claimant in a liability claim
Agreed value - CORRECT ANSWER - Value agreed to at the time the insurance is taken
out
, Insurable interest - CORRECT ANSWER - Actual, lawful and substantial economic
interest in the safety/preservation of the subject
Insurance contract characteristics - CORRECT ANSWER - Declarations page, insuring
agreement, exclusions, conditions
Declarations page - CORRECT ANSWER - Insurance company's name and address,
insured's name and address, subject of insurance, policy period, coverage types and limits,
cost/premium for the policy
Exclusions - CORRECT ANSWER - Establish property, situations, persons or perils not
covered
Reasons for exclusions - CORRECT ANSWER - 1. Duplication of coverage found in
other policies
2. Uninsurable exposures
3. Specialized exposures requiring specialized underwriting and coverage more appropriately
handled in another policy
Conditions - CORRECT ANSWER - Establishes "rights and duties" of the insurance
company and the insured to each other
Subrogation - CORRECT ANSWER - The assignment of recovery from the insured to the
insurance company after a claim payment has been made to the insured
Severability - CORRECT ANSWER - Insurance applies separately to each insured
Loss - CORRECT ANSWER - Reduction and/or destruction in use, value, access, custody
or function of persons, property and/or tangible property values
