AINS 101 Insurance Prep Exam Questions
and Answers 2025/2026 A+ Graded 100%
Verified
What three concepts are pertinent to understanding insurance? - ANS- Risk
Transfer
Pooling
If Katherine has an insurance policy that covers property damage to her bicycle shop,
how does that affect her budget? - ANS- She has to budget for the insurance premium,
but not for the full cost of rebuilding her shop.
Who benefits from insurance - ANS- Those with losses it pays, but also society as a
whole
What type of insurance would an insured purchase to protect a new sports car? - ANS-
personal auto insurance
A fire destroys Sarah's restaurant. What type of insurance would cover the damages to
the restaurant? - ANS- property insurance
Someone broke into mikes house while he was away on vacation. This robber stole his
expensive guitar. What type of insurance would cover the loss? - ANS- Homeowners
insurance would provide protection against damage to or theft of mikes home and or
belongings.
Christopher works for a private insurer tht provides insurance coverages unavailable in
the standard market. What kind of insurer does Christopher work for? - ANS- Surplus
lines insurer
Under what circumstances would the government participate in insurance? - ANS- When
private insurers are unable or unwilling to satisfy legitimate insurance needs
What are some examples of federal government insurance plans? - ANS- National Flood
Insurance Program and the Terrorism Risk Insurance Program.
Into what two categories can rick be classified? - ANS- Pure and speculative risk
, What are the four quadrants of risk? - ANS- Hazard, Operational, Financial, Strategic
Which quadrant of risk arises from trends in th economy and society? - ANS- Strategic
risk arises from trends in the economy and society
Can you name the three reasons why insurance is regulated? - ANS- To protect
consumers
To maintain insurer solvency
To prevent destructive competition
A series of intense wildfires are devastating the west coast. Which objective of insurance
regulation is therefore in jeopardy? - ANS- In a natural disaster were affecting a
particular geographic area, maintaining insurer solvency would be in jeopardy one of the
reasons regulators enact and to maintain and enhance their financial that affect lots of
policyholders at onc doesnt deplete insurers resources, thereby preventing insurers
from aging claims
When reviewing the balance sheet, which item give the best indication of an insurers
overall economic health? - ANS- Policyholders surplus: which shows how much cash an
insurer has o hand for emergencies, unexpected losses & expansion of its business
What does an insurer's income statement show? - ANS- Shows revenue, expenses & net
income for a particular period of time
Mary would like to understand the profitability of the underwriting department she works
for. If the combined ratio is $0.97, what profit was achieved for each premium dollar the
insurer earned? - ANS- A combined ratio of less than 100 indicates a profit- in this case
the UW dep. gains a $0.03 profit for every premium dollar earned. For every $1.00 in
premium, the insurer pays$0.97 for losses and expenses
Identify the two ratios that make up the combined ratio. - ANS- The combined ratio is the
sum of the loss ratio which measures how much of each remount dollar the insurer uses
to pay losses & loss adjustments expenses and the expens ration, which indicates how
much of each premium dollar is used to pay the insurers expenses, such as employee
wages, marketing cost. And so forth.
Describe how insurance is marketed? - ANS- Through independent agents and brokers,
exclusive agencies,direct writers, and distribution channels
Regarding how they sell insurance, what do agents and brokers have in common and
what is different about them? - ANS- Both agents and brokers sell insurance products to
individuals and businesses and provide policy services. The broker represents the
customer, while the agent represents one or more insurers.
and Answers 2025/2026 A+ Graded 100%
Verified
What three concepts are pertinent to understanding insurance? - ANS- Risk
Transfer
Pooling
If Katherine has an insurance policy that covers property damage to her bicycle shop,
how does that affect her budget? - ANS- She has to budget for the insurance premium,
but not for the full cost of rebuilding her shop.
Who benefits from insurance - ANS- Those with losses it pays, but also society as a
whole
What type of insurance would an insured purchase to protect a new sports car? - ANS-
personal auto insurance
A fire destroys Sarah's restaurant. What type of insurance would cover the damages to
the restaurant? - ANS- property insurance
Someone broke into mikes house while he was away on vacation. This robber stole his
expensive guitar. What type of insurance would cover the loss? - ANS- Homeowners
insurance would provide protection against damage to or theft of mikes home and or
belongings.
Christopher works for a private insurer tht provides insurance coverages unavailable in
the standard market. What kind of insurer does Christopher work for? - ANS- Surplus
lines insurer
Under what circumstances would the government participate in insurance? - ANS- When
private insurers are unable or unwilling to satisfy legitimate insurance needs
What are some examples of federal government insurance plans? - ANS- National Flood
Insurance Program and the Terrorism Risk Insurance Program.
Into what two categories can rick be classified? - ANS- Pure and speculative risk
, What are the four quadrants of risk? - ANS- Hazard, Operational, Financial, Strategic
Which quadrant of risk arises from trends in th economy and society? - ANS- Strategic
risk arises from trends in the economy and society
Can you name the three reasons why insurance is regulated? - ANS- To protect
consumers
To maintain insurer solvency
To prevent destructive competition
A series of intense wildfires are devastating the west coast. Which objective of insurance
regulation is therefore in jeopardy? - ANS- In a natural disaster were affecting a
particular geographic area, maintaining insurer solvency would be in jeopardy one of the
reasons regulators enact and to maintain and enhance their financial that affect lots of
policyholders at onc doesnt deplete insurers resources, thereby preventing insurers
from aging claims
When reviewing the balance sheet, which item give the best indication of an insurers
overall economic health? - ANS- Policyholders surplus: which shows how much cash an
insurer has o hand for emergencies, unexpected losses & expansion of its business
What does an insurer's income statement show? - ANS- Shows revenue, expenses & net
income for a particular period of time
Mary would like to understand the profitability of the underwriting department she works
for. If the combined ratio is $0.97, what profit was achieved for each premium dollar the
insurer earned? - ANS- A combined ratio of less than 100 indicates a profit- in this case
the UW dep. gains a $0.03 profit for every premium dollar earned. For every $1.00 in
premium, the insurer pays$0.97 for losses and expenses
Identify the two ratios that make up the combined ratio. - ANS- The combined ratio is the
sum of the loss ratio which measures how much of each remount dollar the insurer uses
to pay losses & loss adjustments expenses and the expens ration, which indicates how
much of each premium dollar is used to pay the insurers expenses, such as employee
wages, marketing cost. And so forth.
Describe how insurance is marketed? - ANS- Through independent agents and brokers,
exclusive agencies,direct writers, and distribution channels
Regarding how they sell insurance, what do agents and brokers have in common and
what is different about them? - ANS- Both agents and brokers sell insurance products to
individuals and businesses and provide policy services. The broker represents the
customer, while the agent represents one or more insurers.
