AINS 21 Practice Questions with correct
Answers 2025/2026 A+ Graded 100%
Verified
Retention is often used in combination with insurance as a way of treating loss
exposures. One of the major downsides of individuals using retention alone is:
A. Availability of insurer loss settlement services.
B. The unavailability of insurer loss control services.
C. The record keeping associated with retained losses.
D. The potential for financial ruin. - ANS- D. The potential for financial ruin
Insurance is not the only risk management transfer technique. When circumstances are
appropriate, transfer can be accomplished through:
A. Loss prevention.
B. Avoidance.
C. Retention.
D. Noninsurance transfer techniques. - ANS- D. Noninsurance transfer techniques
From a risk management viewpoint, insurance is used to:
A. Isolate the cost of losses.
B. Transfer the cost of losses.
C. Reduce the cost of losses.
D. Prevent the cost of losses. - ANS- B. Transfer the cost of losses
Sally is a recent college graduate who lives in the suburbs and drives to work daily in the
city. She recognizes that owning a car creates both property damage and liability
exposures for her and at the same time she has the burden of student loans. For
someone in Sally's circumstances the most practical risk management technique for
dealing with her auto-related loss exposures is:
A. Retention.
B. Avoidance.
C. Loss control.
D. Risk transfer. - ANS- D. Risk Transfer
Harry has a new sports car that is insured with an Insurance Services Office, Inc. (ISO)
Personal Auto Policy sold through his neighborhood agent. Because this is the first new
car he's ever owned, Harry is interested in making sure he is fully covered and
knowledgeable about his insurance policy. Which one of the following is true for Harry?:
,A. Harry can rest assured that if his new car is a total loss, he can expect to make a profit
while being restored to his pre-loss financial position.
B. As the policy is a contract of utmost good faith, both his insurer and his agent are the
parties expected to be ethical in their dealings with one another.
C. Harry understands his policy is modular one, combining various coverage forms and
other documents especially tailored to his needs.
D. An insurance contract, like the ISO policy Harry purchased, has certain additional
characteristics other than those of typical valid con - ANS- D. An insurance contract, like
the ISO policy Harry purchased, has certain additional characteristics other than those of
typical valid contracts.
Which one of the following is true regarding a homeowners policy?
A. Most include coverage for theft of contents within the home.
B. It only provides property coverage.
C. It only provides liability coverage.
D. It excludes losses caused by wind and lightning. - ANS- A. Most include coverage for
theft of contents within the home
Liability coverage to individuals and families for bodily injury and property damage
arising from the insured's personal premises or activities is typically provided by
Select one:
A. Personal liability insurance.
B. Professional liability insurance.
C. Commercial general liability insurance.
D. Auto liability insurance. - ANS- A. Personal liability insurance
Life insurance that provides coverage for a specified period with no cash value is called
Select one:
A. Universal life.
B. Long-term care insurance.
C. Term life insurance.
D. Whole life. - ANS- C. Term Life Insurance
The two primary types of health insurance coverage are
Select one:
A. Disability Income and Sickness.
B. Sickness and Accident.
C. Accident and Medical.
D. Medical and Disability Income. - ANS- D. Medical and Disability Income
Coverage for miscellaneous types of property such as movable property, goods in
domestic transit, and property used in transportation and communication, typically is
provided by
, Select one:
A. Crime insurance.
B. Auto physical damage insurance.
C. Inland marine insurance.
D. Business income insurance. - ANS- C. Inland marine insurance
All of the following are types of private insurers, EXCEPT:
Select one:
A. Reciprocal insurance exchanges
B. State workers compensation funds
C. Stock insurers
D. Mutual insurers - ANS- B. State workers compensation funds
A reinsurance company
Select one:
A. Transfers losses to a primary insurer.
B. Provides primary insurance for loss exposures that private insurers are unwilling to
provide.
C. Is formed to write all or part of the insurance for a parent company.
D. Assumes loss exposures from a primary insurer. - ANS- D. Assumes loss exposures
from a primary insurer
A stock insurer differs from a reciprocal insurance exchange in which one of the
following ways?
Select one:
A. A stock insurer provides insurance to its policyholder-owners. A reciprocal insurance
exchange provides insurance to investors.
B. Stockholders own a stock insurer. Subscribers own a reciprocal insurance exchange.
C. Both are formed to provide profit to investors. However, the stock insurer is managed
through a board of directors.
D. Both are owned by stockholders. However, the reciprocal insurance exchange
provides coverage to investors. - ANS- B. Stockholders own a stock insurer. Subscribers
own a reciprocal insurance exchange.
All of the following describe Lloyd's, EXCEPT:
Select one:
A. Operated by syndicates
B. Primarily insurers unusual exposures
C. Insurance underwritten by a Name
D. An insurance and reinsurance marketplace - ANS- B. Primarily insurers unusual
exposures
A company interested in improving cash flow should consider meeting its insurance
needs through which one of the following types of insurance organizations?
Answers 2025/2026 A+ Graded 100%
Verified
Retention is often used in combination with insurance as a way of treating loss
exposures. One of the major downsides of individuals using retention alone is:
A. Availability of insurer loss settlement services.
B. The unavailability of insurer loss control services.
C. The record keeping associated with retained losses.
D. The potential for financial ruin. - ANS- D. The potential for financial ruin
Insurance is not the only risk management transfer technique. When circumstances are
appropriate, transfer can be accomplished through:
A. Loss prevention.
B. Avoidance.
C. Retention.
D. Noninsurance transfer techniques. - ANS- D. Noninsurance transfer techniques
From a risk management viewpoint, insurance is used to:
A. Isolate the cost of losses.
B. Transfer the cost of losses.
C. Reduce the cost of losses.
D. Prevent the cost of losses. - ANS- B. Transfer the cost of losses
Sally is a recent college graduate who lives in the suburbs and drives to work daily in the
city. She recognizes that owning a car creates both property damage and liability
exposures for her and at the same time she has the burden of student loans. For
someone in Sally's circumstances the most practical risk management technique for
dealing with her auto-related loss exposures is:
A. Retention.
B. Avoidance.
C. Loss control.
D. Risk transfer. - ANS- D. Risk Transfer
Harry has a new sports car that is insured with an Insurance Services Office, Inc. (ISO)
Personal Auto Policy sold through his neighborhood agent. Because this is the first new
car he's ever owned, Harry is interested in making sure he is fully covered and
knowledgeable about his insurance policy. Which one of the following is true for Harry?:
,A. Harry can rest assured that if his new car is a total loss, he can expect to make a profit
while being restored to his pre-loss financial position.
B. As the policy is a contract of utmost good faith, both his insurer and his agent are the
parties expected to be ethical in their dealings with one another.
C. Harry understands his policy is modular one, combining various coverage forms and
other documents especially tailored to his needs.
D. An insurance contract, like the ISO policy Harry purchased, has certain additional
characteristics other than those of typical valid con - ANS- D. An insurance contract, like
the ISO policy Harry purchased, has certain additional characteristics other than those of
typical valid contracts.
Which one of the following is true regarding a homeowners policy?
A. Most include coverage for theft of contents within the home.
B. It only provides property coverage.
C. It only provides liability coverage.
D. It excludes losses caused by wind and lightning. - ANS- A. Most include coverage for
theft of contents within the home
Liability coverage to individuals and families for bodily injury and property damage
arising from the insured's personal premises or activities is typically provided by
Select one:
A. Personal liability insurance.
B. Professional liability insurance.
C. Commercial general liability insurance.
D. Auto liability insurance. - ANS- A. Personal liability insurance
Life insurance that provides coverage for a specified period with no cash value is called
Select one:
A. Universal life.
B. Long-term care insurance.
C. Term life insurance.
D. Whole life. - ANS- C. Term Life Insurance
The two primary types of health insurance coverage are
Select one:
A. Disability Income and Sickness.
B. Sickness and Accident.
C. Accident and Medical.
D. Medical and Disability Income. - ANS- D. Medical and Disability Income
Coverage for miscellaneous types of property such as movable property, goods in
domestic transit, and property used in transportation and communication, typically is
provided by
, Select one:
A. Crime insurance.
B. Auto physical damage insurance.
C. Inland marine insurance.
D. Business income insurance. - ANS- C. Inland marine insurance
All of the following are types of private insurers, EXCEPT:
Select one:
A. Reciprocal insurance exchanges
B. State workers compensation funds
C. Stock insurers
D. Mutual insurers - ANS- B. State workers compensation funds
A reinsurance company
Select one:
A. Transfers losses to a primary insurer.
B. Provides primary insurance for loss exposures that private insurers are unwilling to
provide.
C. Is formed to write all or part of the insurance for a parent company.
D. Assumes loss exposures from a primary insurer. - ANS- D. Assumes loss exposures
from a primary insurer
A stock insurer differs from a reciprocal insurance exchange in which one of the
following ways?
Select one:
A. A stock insurer provides insurance to its policyholder-owners. A reciprocal insurance
exchange provides insurance to investors.
B. Stockholders own a stock insurer. Subscribers own a reciprocal insurance exchange.
C. Both are formed to provide profit to investors. However, the stock insurer is managed
through a board of directors.
D. Both are owned by stockholders. However, the reciprocal insurance exchange
provides coverage to investors. - ANS- B. Stockholders own a stock insurer. Subscribers
own a reciprocal insurance exchange.
All of the following describe Lloyd's, EXCEPT:
Select one:
A. Operated by syndicates
B. Primarily insurers unusual exposures
C. Insurance underwritten by a Name
D. An insurance and reinsurance marketplace - ANS- B. Primarily insurers unusual
exposures
A company interested in improving cash flow should consider meeting its insurance
needs through which one of the following types of insurance organizations?
