MGRADES
RMI 201 UPDATED ACTUAL Exam
Questions and CORRECT Answers
An insurance company does not want to assume all the risk for their company. They often
purchase insurance from other insurance companies. The shifting of an insured risk from one
insurance company to another is called
A. reinsurance
B. coinsurance
C. underwriting
D. liability insurance - CORRECT ANSWER - A. reinsurance
A Hazard is a condition that creates or increases the frequency or severity of a loss.
True or False - CORRECT ANSWER - True
Chance of loss is defined as the probability that a loss will occur.
True or False - CORRECT ANSWER - True
subjective reasoning - CORRECT ANSWER - Reasoning that is based on personal
feelings or personal values.
objective thinking - CORRECT ANSWER - depends on data and evidence
From the viewpoint of the insurance company, which of the following is a characteristic of an
ideally insurable risk?
A. The loss must be intentional
,MGRADES
B. The loss must be indeterminable
C. There must be a small number of unique loss exposures
D. The chance of loss must be calculable - CORRECT ANSWER - D. The chance of loss
must be calculable
Speculative Risk - CORRECT ANSWER - a situation in which either profit or loss is
possible
Another name for business insurance is commercial insurance
True or False - CORRECT ANSWER - True
diversifiable risk - CORRECT ANSWER - A risk that affects only some individuals,
businesses, or small groups.
The pooling of losses - CORRECT ANSWER - Sharing of losses by the entire group
Adverse Selection - CORRECT ANSWER - tendency of persons with a higher than
average chance of loss to seek insurance at standard rates (average) which, if not controlled by
underwriting, results in higher than expected loss results and could bankrupt an insurance
company.
peril - CORRECT ANSWER - cause of loss
A _______________________is one that is unforeseen and unexpected by the insured and
occurs as a result of chance or accident.
A. Pure loss
B. Deductible
C. Reinsurance
, MGRADES
D. Fortuitous loss - CORRECT ANSWER - D. Fortuitous loss
Reinsurance is when an insurance company buys insurance and transfers part of their risk to
another insurance company.
True or False - CORRECT ANSWER - True
Three ways to manage risks are
choose three
A. luck
B. loss prevention
C. loss reduction
D. inspection
E. deductibles
F. avoidance - CORRECT ANSWER - B. loss prevention
C. loss reduction
F. avoidance
An underwriter is a person who works for an insurance company and analyzes risks and decides
if they should insure the risk or not. They make a decision whether it is a good or bad risk.
True or False - CORRECT ANSWER - True
An example of a non-diversifiable risk is a hurricane
True or False - CORRECT ANSWER - True
RMI 201 UPDATED ACTUAL Exam
Questions and CORRECT Answers
An insurance company does not want to assume all the risk for their company. They often
purchase insurance from other insurance companies. The shifting of an insured risk from one
insurance company to another is called
A. reinsurance
B. coinsurance
C. underwriting
D. liability insurance - CORRECT ANSWER - A. reinsurance
A Hazard is a condition that creates or increases the frequency or severity of a loss.
True or False - CORRECT ANSWER - True
Chance of loss is defined as the probability that a loss will occur.
True or False - CORRECT ANSWER - True
subjective reasoning - CORRECT ANSWER - Reasoning that is based on personal
feelings or personal values.
objective thinking - CORRECT ANSWER - depends on data and evidence
From the viewpoint of the insurance company, which of the following is a characteristic of an
ideally insurable risk?
A. The loss must be intentional
,MGRADES
B. The loss must be indeterminable
C. There must be a small number of unique loss exposures
D. The chance of loss must be calculable - CORRECT ANSWER - D. The chance of loss
must be calculable
Speculative Risk - CORRECT ANSWER - a situation in which either profit or loss is
possible
Another name for business insurance is commercial insurance
True or False - CORRECT ANSWER - True
diversifiable risk - CORRECT ANSWER - A risk that affects only some individuals,
businesses, or small groups.
The pooling of losses - CORRECT ANSWER - Sharing of losses by the entire group
Adverse Selection - CORRECT ANSWER - tendency of persons with a higher than
average chance of loss to seek insurance at standard rates (average) which, if not controlled by
underwriting, results in higher than expected loss results and could bankrupt an insurance
company.
peril - CORRECT ANSWER - cause of loss
A _______________________is one that is unforeseen and unexpected by the insured and
occurs as a result of chance or accident.
A. Pure loss
B. Deductible
C. Reinsurance
, MGRADES
D. Fortuitous loss - CORRECT ANSWER - D. Fortuitous loss
Reinsurance is when an insurance company buys insurance and transfers part of their risk to
another insurance company.
True or False - CORRECT ANSWER - True
Three ways to manage risks are
choose three
A. luck
B. loss prevention
C. loss reduction
D. inspection
E. deductibles
F. avoidance - CORRECT ANSWER - B. loss prevention
C. loss reduction
F. avoidance
An underwriter is a person who works for an insurance company and analyzes risks and decides
if they should insure the risk or not. They make a decision whether it is a good or bad risk.
True or False - CORRECT ANSWER - True
An example of a non-diversifiable risk is a hurricane
True or False - CORRECT ANSWER - True
