AINS 101 Exam (2025 updated) QUESTIONS AND
ANSWERS (DETAILED & ELABORATED) fully solved
As a single mother on a very tight budget, Ciara is tempted to skimp on her
insurance. However, her friend Mehmet tells her not to skimp on insurance,
because it will help manage her cash flows. Which one of the following examples
best illustrates Mehmet's point?
A. Ciara needs her car to get to her job, and she needs her job to make car
payments and pay for her car insurance.
B. When her car's windshield breaks, Ciara has to pay only $100 of the $600 cost
of replacing it.
C. When her car's transmission goes out a month after the warranty expires, Ciara
is faced with a $1,100 repair bill.
D. Ciara finds it difficult to come up with a $787 auto insurance premium every six
months. - (ANSWER)When her car's windshield breaks, Ciara has to pay only $100
of the $600 cost of replacing it.
Which one of the following statements is correct regarding the benefits provided
by insurance?
A. Insurance reduces the financial consequences of loss exposures but not the
related uncertainty.
B. The primary role of insurance is to meet mandatory insurance requirements.
C. The reduction in losses paid by insurers due to risk control measures benefits
individual insureds but not society as a whole.
,D. Insurance helps reduce the financial burden to society by compensating
accident victims. - (ANSWER)Insurance helps reduce the financial burden to
society by compensating accident victims.
Shelton Industries experienced a fire in its manufacturing plant. Several
employees suffered burns and smoke inhalation injuries as they tried to escape
the building. Which one of Shelton Industries' commercial property-casualty
policies would pay for the employees' injuries and illnesses? - (ANSWER)Workers
compensation insurance
A homeowners policy is a type of - (ANSWER)Personal property-casualty
insurance policy.
Which one of the following correctly describes a reason for government
involvement in property-casualty insurance?
A. Selling insurance provides the government with a non-tax source of revenues
and profits.
B. Government programs can meet legitimate public demands unmet by private
insurers.
C. Competition from government plans keeps private insurer's premiums
competitive.
D. Preventing high-risk individuals or activities from being insured is in the public
interest. - (ANSWER)Government programs can meet legitimate public demands
unmet by private insurers.
,Insurance Company wrote a commercial liability policy for a manufacturer of off-
road motorcycles. The potential costs of the insured's loss exposure exceed
Insurance Company's capacity. Insurance Company could consider which one of
the following types of contractual transferring agreement to meet its needs? -
(ANSWER)Reinsurance
In an effort to reduce expenses, increase profitability, and reduce human errors;
ABC Insurance Company decided to automate most of its personal lines
underwriting function. The company now uses standardized application forms
that are submitted electronically to one of the company's regional offices. At each
regional office, a computer with a scanner reads the applications. The computer
has been programmed with acceptable answers to the questions. If the answers
on the application are all acceptable, the policy is automatically issued. Rejected
applications are automatically forwarded to a human underwriter who reviews
them. The use of this technology has reduced the company's expense ratio by two
and a half percent, and reduced the time it takes to issue a policy. ABC Insurance
Company's use of computers to evaluate applications electronically is an
application of
A. Radiant sensors.
B. Artificial intelligence.
C. - (ANSWER)Artificial intelligence.
Jimmy decided to buy a house in his neighborhood that had been foreclosed on
by the bank that held the mortgage. He is hoping to do some renovation and
repair work on the house, and then sell it for a quick profit. What type of risk is
this? - (ANSWER)Speculative Risk
, Which one of the following best describes the concept of pooling?
A. The financial consequences of unanticipated losses are transferred to an
insurer.
B. Risk management is concerned with positive and negative risks.
C. Insureds share the cost of each other's losses.
D. Insurance benefits society as a whole. - (ANSWER)Insureds share the cost of
each other's losses.
Which one of the following represents uncertainty about outcomes that can be
negative or positive?
A. Loss exposure
B. Transfer
C. Risk
D. Pooling - (ANSWER)Risk
Coverage for money and other business property from various causes of loss such
as burglary, robbery, theft, and employee dishonesty typically is provided by -
(ANSWER)Commercial crime insurance.
The insurance agent suggested that Sally's Snack Shop buy a policy that combines
property, crime, and liability coverages into one policy. This is referred to as a(n) -
(ANSWER)Commercial Package Policy (CCP)
ANSWERS (DETAILED & ELABORATED) fully solved
As a single mother on a very tight budget, Ciara is tempted to skimp on her
insurance. However, her friend Mehmet tells her not to skimp on insurance,
because it will help manage her cash flows. Which one of the following examples
best illustrates Mehmet's point?
A. Ciara needs her car to get to her job, and she needs her job to make car
payments and pay for her car insurance.
B. When her car's windshield breaks, Ciara has to pay only $100 of the $600 cost
of replacing it.
C. When her car's transmission goes out a month after the warranty expires, Ciara
is faced with a $1,100 repair bill.
D. Ciara finds it difficult to come up with a $787 auto insurance premium every six
months. - (ANSWER)When her car's windshield breaks, Ciara has to pay only $100
of the $600 cost of replacing it.
Which one of the following statements is correct regarding the benefits provided
by insurance?
A. Insurance reduces the financial consequences of loss exposures but not the
related uncertainty.
B. The primary role of insurance is to meet mandatory insurance requirements.
C. The reduction in losses paid by insurers due to risk control measures benefits
individual insureds but not society as a whole.
,D. Insurance helps reduce the financial burden to society by compensating
accident victims. - (ANSWER)Insurance helps reduce the financial burden to
society by compensating accident victims.
Shelton Industries experienced a fire in its manufacturing plant. Several
employees suffered burns and smoke inhalation injuries as they tried to escape
the building. Which one of Shelton Industries' commercial property-casualty
policies would pay for the employees' injuries and illnesses? - (ANSWER)Workers
compensation insurance
A homeowners policy is a type of - (ANSWER)Personal property-casualty
insurance policy.
Which one of the following correctly describes a reason for government
involvement in property-casualty insurance?
A. Selling insurance provides the government with a non-tax source of revenues
and profits.
B. Government programs can meet legitimate public demands unmet by private
insurers.
C. Competition from government plans keeps private insurer's premiums
competitive.
D. Preventing high-risk individuals or activities from being insured is in the public
interest. - (ANSWER)Government programs can meet legitimate public demands
unmet by private insurers.
,Insurance Company wrote a commercial liability policy for a manufacturer of off-
road motorcycles. The potential costs of the insured's loss exposure exceed
Insurance Company's capacity. Insurance Company could consider which one of
the following types of contractual transferring agreement to meet its needs? -
(ANSWER)Reinsurance
In an effort to reduce expenses, increase profitability, and reduce human errors;
ABC Insurance Company decided to automate most of its personal lines
underwriting function. The company now uses standardized application forms
that are submitted electronically to one of the company's regional offices. At each
regional office, a computer with a scanner reads the applications. The computer
has been programmed with acceptable answers to the questions. If the answers
on the application are all acceptable, the policy is automatically issued. Rejected
applications are automatically forwarded to a human underwriter who reviews
them. The use of this technology has reduced the company's expense ratio by two
and a half percent, and reduced the time it takes to issue a policy. ABC Insurance
Company's use of computers to evaluate applications electronically is an
application of
A. Radiant sensors.
B. Artificial intelligence.
C. - (ANSWER)Artificial intelligence.
Jimmy decided to buy a house in his neighborhood that had been foreclosed on
by the bank that held the mortgage. He is hoping to do some renovation and
repair work on the house, and then sell it for a quick profit. What type of risk is
this? - (ANSWER)Speculative Risk
, Which one of the following best describes the concept of pooling?
A. The financial consequences of unanticipated losses are transferred to an
insurer.
B. Risk management is concerned with positive and negative risks.
C. Insureds share the cost of each other's losses.
D. Insurance benefits society as a whole. - (ANSWER)Insureds share the cost of
each other's losses.
Which one of the following represents uncertainty about outcomes that can be
negative or positive?
A. Loss exposure
B. Transfer
C. Risk
D. Pooling - (ANSWER)Risk
Coverage for money and other business property from various causes of loss such
as burglary, robbery, theft, and employee dishonesty typically is provided by -
(ANSWER)Commercial crime insurance.
The insurance agent suggested that Sally's Snack Shop buy a policy that combines
property, crime, and liability coverages into one policy. This is referred to as a(n) -
(ANSWER)Commercial Package Policy (CCP)
