AINS 101 Exam Questions with Completely Verified
Answers Graded Perfect Score
6 Steps for a Claim - Correct Answers-i. Acknowledging a claim
ii. Identifying the policy - identify what policy they have and if their coverage applies
iii. Contacting the insured - contact the insured or their representative after you set reserves
(money set aside for a claim that has been reported but not yet settled)
iv. Investigating and documenting the claim - could include inspecting the scene, determine
whether the insured could receive recovery from another party involved which would be
subrogation
v. Determining cause of loss and loss amount - calculates the amount of the loss based on
valuation figures and any policy deductibles that apply
vi. Concluding the claim - prepares loss statement and settles the claim
An Insurer's Income Statement - Correct Answers-1. Insurers prepare financial statements to
show their total revenue, expenses, and net income for a time period such as a year
2. An insurers revenue primarily comes from premiums paid by policyholders
3. Expenses include losses from claims, cost associated with paying those claims, cost associated
with underwriting
4. The income statement includes the calculation of the insured's net income from underwriting
and from investments
5. An insurers "bottom line" or net income before taxes: you add the net underwriting gain/loss
and the net investment income
Benefits of Insurance - Correct Answers-1. Pay for losses: insurance indemnifies (restores to
pre-loss status) individuals and organizations for covered losses
2. Manage cash flow uncertainty: as long as a loss is covered by insurance, the financial effect
on the insured's cash flow will be reduced to deductible payments or loss amounts that exceed
the policy limits
3. Comply with legal requirements: for example, workers compensation insurance and personal
auto insurance meet state legal requirements
, 4. Promote risk control activity: insurance policies may require or provide incentives to insureds
who undertake risk control activities; collected data can be used to prevent or limit losses
5. Insurance allows individuals and organizations to use their resources wisely. It also facilitates
loans, is a source of investment funds, and reduces the burden of losses and injuries on society
Characteristics of Ideally Insurable Loss Exposure - Correct Answers-i. Pure Risk - involves
pure risk, not speculative risk (not having the option for a profit)
ii. Fortuitous Losses - subject to fortuitous loss from the insured's standpoint (meaning the loss
should occur by chance and not by design)
iii. Definite and Measurable - subject to losses that are definite in time, cause, and location
iv. Large Number of Similar Exposure Units - one of a large number of similar exposure units
v. Independent and Not Catastrophic - not subject to a loss that would simultaneously affect
many other similar loss exposures; not catastrophic
vi. Affordable - premiums are economically feasible
Claim - Correct Answers-A request by a person or business seeking compensation from an
insurer for a loss that may be covered by an insurance policy
Claimant - Correct Answers-The party who makes the claim; first party claim - the claimant
makes the claim against his or her own insurance; third party claim - the claimant makes the
claim against someone else's
Combined Ratio - Correct Answers-The sum of the loss ratio and the expense ratio. For
example, a loss ratio of 65 plus an expense ratio of 25 results in a combined ratio of 90. That
means that 90 cents of the premium dollar is used to pay for loss and expenses the insurer
incurs.
Commercial Insurance - Correct Answers-1. Commercial package policy or businessowners
policy: provide business owners with property/crime/liability coverages; now it is under just one
policy but before you had to get several policies
2. Commercial property: covers damage to buildings or their contents that results from
fire/vandalism/other causes of loss
3. Commercial crime: protects against losses from theft of business property and money,
including employee theft
4. Commercial general liability: protects a business against its legal liability to others for bodily
injury and property damage
Answers Graded Perfect Score
6 Steps for a Claim - Correct Answers-i. Acknowledging a claim
ii. Identifying the policy - identify what policy they have and if their coverage applies
iii. Contacting the insured - contact the insured or their representative after you set reserves
(money set aside for a claim that has been reported but not yet settled)
iv. Investigating and documenting the claim - could include inspecting the scene, determine
whether the insured could receive recovery from another party involved which would be
subrogation
v. Determining cause of loss and loss amount - calculates the amount of the loss based on
valuation figures and any policy deductibles that apply
vi. Concluding the claim - prepares loss statement and settles the claim
An Insurer's Income Statement - Correct Answers-1. Insurers prepare financial statements to
show their total revenue, expenses, and net income for a time period such as a year
2. An insurers revenue primarily comes from premiums paid by policyholders
3. Expenses include losses from claims, cost associated with paying those claims, cost associated
with underwriting
4. The income statement includes the calculation of the insured's net income from underwriting
and from investments
5. An insurers "bottom line" or net income before taxes: you add the net underwriting gain/loss
and the net investment income
Benefits of Insurance - Correct Answers-1. Pay for losses: insurance indemnifies (restores to
pre-loss status) individuals and organizations for covered losses
2. Manage cash flow uncertainty: as long as a loss is covered by insurance, the financial effect
on the insured's cash flow will be reduced to deductible payments or loss amounts that exceed
the policy limits
3. Comply with legal requirements: for example, workers compensation insurance and personal
auto insurance meet state legal requirements
, 4. Promote risk control activity: insurance policies may require or provide incentives to insureds
who undertake risk control activities; collected data can be used to prevent or limit losses
5. Insurance allows individuals and organizations to use their resources wisely. It also facilitates
loans, is a source of investment funds, and reduces the burden of losses and injuries on society
Characteristics of Ideally Insurable Loss Exposure - Correct Answers-i. Pure Risk - involves
pure risk, not speculative risk (not having the option for a profit)
ii. Fortuitous Losses - subject to fortuitous loss from the insured's standpoint (meaning the loss
should occur by chance and not by design)
iii. Definite and Measurable - subject to losses that are definite in time, cause, and location
iv. Large Number of Similar Exposure Units - one of a large number of similar exposure units
v. Independent and Not Catastrophic - not subject to a loss that would simultaneously affect
many other similar loss exposures; not catastrophic
vi. Affordable - premiums are economically feasible
Claim - Correct Answers-A request by a person or business seeking compensation from an
insurer for a loss that may be covered by an insurance policy
Claimant - Correct Answers-The party who makes the claim; first party claim - the claimant
makes the claim against his or her own insurance; third party claim - the claimant makes the
claim against someone else's
Combined Ratio - Correct Answers-The sum of the loss ratio and the expense ratio. For
example, a loss ratio of 65 plus an expense ratio of 25 results in a combined ratio of 90. That
means that 90 cents of the premium dollar is used to pay for loss and expenses the insurer
incurs.
Commercial Insurance - Correct Answers-1. Commercial package policy or businessowners
policy: provide business owners with property/crime/liability coverages; now it is under just one
policy but before you had to get several policies
2. Commercial property: covers damage to buildings or their contents that results from
fire/vandalism/other causes of loss
3. Commercial crime: protects against losses from theft of business property and money,
including employee theft
4. Commercial general liability: protects a business against its legal liability to others for bodily
injury and property damage
