General Insurance Essentials - C81 + C82
EXAM 2026 Questions and Answers
What is a hazard? - Correct answer-A condition that may cause a loss to be more
severe
What is a peril? - Correct answer-An event that may give rise to a loss
What is the immediate and effective action in a chain of circumstances that leads
naturally and directly to the loss? - Correct answer-Proximate cause
What is the proximate cause of a loss? - Correct answer-The immediate and
effective cause of the loss or damage
What cause of loss would be insured? - Correct answer-Proximate cause
Which type of risk can be insured? - Correct answer-Pure risk
A firm's decision to change insurers or brokers or accept policy renewal costs
usually requires approval by which of the following? - Correct answer-The firm's
senior management
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
,All costs associated with managing pure risk are known as which of the following?
- Correct answer-Cost of risk
Members of an organization are subject to the possibility of illness, disability, or
premature death. What category is this subject of loss? - Correct answer-Human
assets
What is a consequence of not using a risk management approach to setting up
insurance for a client? - Correct answer-A major loss may not be covered
What is a simple definition of earnings? - Correct answer-The difference between
revenues and expenses—the profits (net income) of a business
What method allows a broker to identify and analyze the risks an organization
faces? - Correct answer-Risk Management
What is a risk management technique whereby the risk of loss is prevented by not
engaging in activities that present the risk? - Correct answer-Avoidance
What is both a pre-loss and a post-loss objective of risk management? - Correct
answer-Social Responsibility
What is the duty of a risk manager? - Correct answer-Identifying loss exposures
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
,Which type of professional would be responsible for educating other corporate
managers about risk and acting as a resource to other managers, in much the same
way as a broker would for a small business client? - Correct answer-Risk Manager
A small, popular coffee shop is severely damaged by fire.Which party has
insurable interest in the coffee shop? - Correct answer-bank that holds a mortgage
on the building in which the coffee shop is located
How can insurance be an aid to credit? - Correct answer-Because it is virtually
impossible to obtain credit without having insurance on the item concerned
How can insurance be an aid to security? - Correct answer-By substituting a certain
premium payment in place of an uncertain loss payment
How can risk be spread? - Correct answer-By volume, diversity of risks, and
diversity of location
What does a broker do? - Correct answer-Acts on behalf of an insured in placing
business with insurance companies
What does it mean to indemnify? - Correct answer-To provide compensation for
loss or expenses incurred
©COPYRIGHT 2025, ALL RIGHTS RESERVED 3
, What is the premium? - Correct answer-The price of insurance protection for a
specified risk for a specified period of time
What is the specific risk covered by life insurance? - Correct answer-The death of
the insured
What type of insurance covers goods in transit on land? - Correct answer-Inland
transportation
What concept upholds the principle of indemnity? - Correct answer-Insurable
Interest
What 3 departments are unique to insurance companies? - Correct answer-
Actuarial, claims, and underwriting
What is facultative reinsurance? - Correct answer-Reinsurance of risks on an
individual case-by-case basis subject to acceptance or rejection by the insurer (the
opposite of Treaty reinsurance)
What is subscribed capital? - Correct answer-The amount of stock sold by a
corporation
What is the basic task of an underwriting department? - Correct answer-Select risks
to insure
©COPYRIGHT 2025, ALL RIGHTS RESERVED 4
EXAM 2026 Questions and Answers
What is a hazard? - Correct answer-A condition that may cause a loss to be more
severe
What is a peril? - Correct answer-An event that may give rise to a loss
What is the immediate and effective action in a chain of circumstances that leads
naturally and directly to the loss? - Correct answer-Proximate cause
What is the proximate cause of a loss? - Correct answer-The immediate and
effective cause of the loss or damage
What cause of loss would be insured? - Correct answer-Proximate cause
Which type of risk can be insured? - Correct answer-Pure risk
A firm's decision to change insurers or brokers or accept policy renewal costs
usually requires approval by which of the following? - Correct answer-The firm's
senior management
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
,All costs associated with managing pure risk are known as which of the following?
- Correct answer-Cost of risk
Members of an organization are subject to the possibility of illness, disability, or
premature death. What category is this subject of loss? - Correct answer-Human
assets
What is a consequence of not using a risk management approach to setting up
insurance for a client? - Correct answer-A major loss may not be covered
What is a simple definition of earnings? - Correct answer-The difference between
revenues and expenses—the profits (net income) of a business
What method allows a broker to identify and analyze the risks an organization
faces? - Correct answer-Risk Management
What is a risk management technique whereby the risk of loss is prevented by not
engaging in activities that present the risk? - Correct answer-Avoidance
What is both a pre-loss and a post-loss objective of risk management? - Correct
answer-Social Responsibility
What is the duty of a risk manager? - Correct answer-Identifying loss exposures
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
,Which type of professional would be responsible for educating other corporate
managers about risk and acting as a resource to other managers, in much the same
way as a broker would for a small business client? - Correct answer-Risk Manager
A small, popular coffee shop is severely damaged by fire.Which party has
insurable interest in the coffee shop? - Correct answer-bank that holds a mortgage
on the building in which the coffee shop is located
How can insurance be an aid to credit? - Correct answer-Because it is virtually
impossible to obtain credit without having insurance on the item concerned
How can insurance be an aid to security? - Correct answer-By substituting a certain
premium payment in place of an uncertain loss payment
How can risk be spread? - Correct answer-By volume, diversity of risks, and
diversity of location
What does a broker do? - Correct answer-Acts on behalf of an insured in placing
business with insurance companies
What does it mean to indemnify? - Correct answer-To provide compensation for
loss or expenses incurred
©COPYRIGHT 2025, ALL RIGHTS RESERVED 3
, What is the premium? - Correct answer-The price of insurance protection for a
specified risk for a specified period of time
What is the specific risk covered by life insurance? - Correct answer-The death of
the insured
What type of insurance covers goods in transit on land? - Correct answer-Inland
transportation
What concept upholds the principle of indemnity? - Correct answer-Insurable
Interest
What 3 departments are unique to insurance companies? - Correct answer-
Actuarial, claims, and underwriting
What is facultative reinsurance? - Correct answer-Reinsurance of risks on an
individual case-by-case basis subject to acceptance or rejection by the insurer (the
opposite of Treaty reinsurance)
What is subscribed capital? - Correct answer-The amount of stock sold by a
corporation
What is the basic task of an underwriting department? - Correct answer-Select risks
to insure
©COPYRIGHT 2025, ALL RIGHTS RESERVED 4
