ESTUDYR
AINS 21 GLOSSARY MOST TESTED QUESTIONS AND
ANSWERS GRADED A+ WITH RATIONALES
What is a loss exposure?
A. A guaranteed loss event
B. A measure of premium only
C. Any condition or situation that presents the possibility of a loss
D. A legal requirement to buy insurance
Rationale: Loss exposure is any circumstance that creates the potential for loss.
What does the law of large numbers state?
A. Larger companies always profit more
B. Loss frequency increases over time
C. Outcomes become unpredictable with scale
D. As the number of similar independent exposure units increases, predictions about losses
become more accurate
Rationale: Larger data sets improve predictive accuracy in insurance.
What is an exposure unit?
A. The smallest building insured
B. A reinsurance treaty
C. A measure of the loss exposure assumed by the insurer (used for pricing)
D. The deductible amount on a policy
Rationale: Exposure units quantify the item/project being insured (e.g., per vehicle).
What defines property loss exposure?
A. Any liability claim only
B. A required inspection
C. Any condition or situation that presents the possibility that a property loss will happen
D. The property’s market value
Rationale: Property loss exposure concerns potential physical loss to property.
Which of the following is real property?
A. A laptop computer
B. A parking meter
C. Land, buildings, and structures attached to the land
D. Inventory in a warehouse
Rationale: Real property = land and permanently attached structures.
,ESTUDYR
What is personal property?
A. Land and buildings
B. All tangible or intangible property that is not real property
C. Government-owned infrastructure
D. The land’s mineral rights
Rationale: Personal property = movable items and intangible assets not part of realty.
Net income is defined as:
A. Gross revenue only
B. Total liabilities minus assets
C. Revenue minus expenses and taxes during a given time period
D. Premiums collected minus claims paid
Rationale: Net income = profit after expenses and taxes.
What is net income loss?
A. Direct property damage only
B. A premium refund
C. An indirect loss caused by reduced revenue, increased expenses, or both
D. Investment loss only
Rationale: Net income loss arises from business interruption effects.
What is liability loss exposure?
A. A guaranteed settlement amount
B. A regulatory penalty only
C. Any condition that presents possibility of a claim alleging legal responsibility for injury or
damage
D. Property depreciation
Rationale: Liability exposure deals with risk of legal claims against insured.
A liability loss is:
A. Only reputational harm
B. A tax assessment
C. A claim for monetary damages because of injury or property damage to another party
D. A policy cancellation
Rationale: Liability loss = monetary claim arising from legal responsibility.
What is personal loss exposure?
A. Risk only to businesses
B. Property theft only
C. Possibility of financial loss to an individual/family from death, sickness, injury, or
,ESTUDYR
unemployment
D. Cybersecurity breach only
Rationale: Personal exposures affect individual financial well-being.
Personnel loss exposure relates to:
A. Only employee theft
B. Reputation damage
C. Financial loss to a business due to death, disability, retirement, or resignation of key
employees
D. Property damage from staff negligence
Rationale: Personnel exposures are tied to workforce changes affecting operations.
To indemnify means to:
A. Deny a claim
B. Increase premiums
C. Restore the party to the financial position held before the loss
D. Cancel coverage
Rationale: Indemnity principle: restore to pre-loss financial status, not better.
Fire and allied line insurance covers:
A. Liability claims from fires only
B. Theft of intangible property
C. Direct damage to or loss of insured property from fire and related perils
D. Cyber events caused by fires
Rationale: Fire & allied lines cover property damage from fire & allied perils.
Business income insurance (business interruption) covers:
A. Only direct property repairs
B. Employee bonuses
C. Loss of net income or additional expenses caused by a covered property loss
D. Regulatory fines
Rationale: It replaces lost income and extra costs during the suspension.
Crime insurance protects against:
A. Only burglary to buildings
B. Cyber extortion exclusively
C. Losses of money, securities, merchandise, etc., from burglary, theft, robbery, employee
dishonesty
D. Workers compensation claims
Rationale: Crime forms cover theft, fraud, and dishonesty exposures.
, ESTUDYR
Ocean marine insurance covers:
A. Inland trucking only
B. Carriers on highways
C. Ships and cargo against fire, lightning, and perils of the sea
D. Warehouse inventory only
Rationale: Ocean marine addresses maritime transportation risks.
Inland marine insurance covers:
A. Only ocean vessels
B. Fixed buildings on land
C. Miscellaneous movable property, goods in domestic transit, and transport/communication
property
D. Employee benefits programs
Rationale: Inland marine historically covers goods in transit and movable equipment.
Auto physical damage insurance covers:
A. Liability for injury to others
B. Only theft
C. Loss/damage to specified vehicles from collision, fire, theft, or other causes
D. Business interruption of auto dealerships
Rationale: Physical damage (collision/OTC) covers vehicle damage to the insured’s vehicle.
Auto liability insurance insures:
A. The vehicle itself only
B. The driver’s personal life insurance
C. An insured’s legal liability from ownership, maintenance, or use of an automobile
D. Only medical payments to passengers
Rationale: Auto liability pays third-party bodily injury/property damage legally owed.
Commercial general liability (CGL) insurance covers:
A. Only product recall costs
B. Employee health benefits
C. Liability exposures from premises/operations, products, or completed work
D. Directors & officers suits only
Rationale: CGL is the broad liability policy for business operations and products.
Personal liability insurance provides:
A. Business malpractice coverage
B. Automobile liability exclusively
C. Liability coverage to individuals/families for bodily injury and property damage from
AINS 21 GLOSSARY MOST TESTED QUESTIONS AND
ANSWERS GRADED A+ WITH RATIONALES
What is a loss exposure?
A. A guaranteed loss event
B. A measure of premium only
C. Any condition or situation that presents the possibility of a loss
D. A legal requirement to buy insurance
Rationale: Loss exposure is any circumstance that creates the potential for loss.
What does the law of large numbers state?
A. Larger companies always profit more
B. Loss frequency increases over time
C. Outcomes become unpredictable with scale
D. As the number of similar independent exposure units increases, predictions about losses
become more accurate
Rationale: Larger data sets improve predictive accuracy in insurance.
What is an exposure unit?
A. The smallest building insured
B. A reinsurance treaty
C. A measure of the loss exposure assumed by the insurer (used for pricing)
D. The deductible amount on a policy
Rationale: Exposure units quantify the item/project being insured (e.g., per vehicle).
What defines property loss exposure?
A. Any liability claim only
B. A required inspection
C. Any condition or situation that presents the possibility that a property loss will happen
D. The property’s market value
Rationale: Property loss exposure concerns potential physical loss to property.
Which of the following is real property?
A. A laptop computer
B. A parking meter
C. Land, buildings, and structures attached to the land
D. Inventory in a warehouse
Rationale: Real property = land and permanently attached structures.
,ESTUDYR
What is personal property?
A. Land and buildings
B. All tangible or intangible property that is not real property
C. Government-owned infrastructure
D. The land’s mineral rights
Rationale: Personal property = movable items and intangible assets not part of realty.
Net income is defined as:
A. Gross revenue only
B. Total liabilities minus assets
C. Revenue minus expenses and taxes during a given time period
D. Premiums collected minus claims paid
Rationale: Net income = profit after expenses and taxes.
What is net income loss?
A. Direct property damage only
B. A premium refund
C. An indirect loss caused by reduced revenue, increased expenses, or both
D. Investment loss only
Rationale: Net income loss arises from business interruption effects.
What is liability loss exposure?
A. A guaranteed settlement amount
B. A regulatory penalty only
C. Any condition that presents possibility of a claim alleging legal responsibility for injury or
damage
D. Property depreciation
Rationale: Liability exposure deals with risk of legal claims against insured.
A liability loss is:
A. Only reputational harm
B. A tax assessment
C. A claim for monetary damages because of injury or property damage to another party
D. A policy cancellation
Rationale: Liability loss = monetary claim arising from legal responsibility.
What is personal loss exposure?
A. Risk only to businesses
B. Property theft only
C. Possibility of financial loss to an individual/family from death, sickness, injury, or
,ESTUDYR
unemployment
D. Cybersecurity breach only
Rationale: Personal exposures affect individual financial well-being.
Personnel loss exposure relates to:
A. Only employee theft
B. Reputation damage
C. Financial loss to a business due to death, disability, retirement, or resignation of key
employees
D. Property damage from staff negligence
Rationale: Personnel exposures are tied to workforce changes affecting operations.
To indemnify means to:
A. Deny a claim
B. Increase premiums
C. Restore the party to the financial position held before the loss
D. Cancel coverage
Rationale: Indemnity principle: restore to pre-loss financial status, not better.
Fire and allied line insurance covers:
A. Liability claims from fires only
B. Theft of intangible property
C. Direct damage to or loss of insured property from fire and related perils
D. Cyber events caused by fires
Rationale: Fire & allied lines cover property damage from fire & allied perils.
Business income insurance (business interruption) covers:
A. Only direct property repairs
B. Employee bonuses
C. Loss of net income or additional expenses caused by a covered property loss
D. Regulatory fines
Rationale: It replaces lost income and extra costs during the suspension.
Crime insurance protects against:
A. Only burglary to buildings
B. Cyber extortion exclusively
C. Losses of money, securities, merchandise, etc., from burglary, theft, robbery, employee
dishonesty
D. Workers compensation claims
Rationale: Crime forms cover theft, fraud, and dishonesty exposures.
, ESTUDYR
Ocean marine insurance covers:
A. Inland trucking only
B. Carriers on highways
C. Ships and cargo against fire, lightning, and perils of the sea
D. Warehouse inventory only
Rationale: Ocean marine addresses maritime transportation risks.
Inland marine insurance covers:
A. Only ocean vessels
B. Fixed buildings on land
C. Miscellaneous movable property, goods in domestic transit, and transport/communication
property
D. Employee benefits programs
Rationale: Inland marine historically covers goods in transit and movable equipment.
Auto physical damage insurance covers:
A. Liability for injury to others
B. Only theft
C. Loss/damage to specified vehicles from collision, fire, theft, or other causes
D. Business interruption of auto dealerships
Rationale: Physical damage (collision/OTC) covers vehicle damage to the insured’s vehicle.
Auto liability insurance insures:
A. The vehicle itself only
B. The driver’s personal life insurance
C. An insured’s legal liability from ownership, maintenance, or use of an automobile
D. Only medical payments to passengers
Rationale: Auto liability pays third-party bodily injury/property damage legally owed.
Commercial general liability (CGL) insurance covers:
A. Only product recall costs
B. Employee health benefits
C. Liability exposures from premises/operations, products, or completed work
D. Directors & officers suits only
Rationale: CGL is the broad liability policy for business operations and products.
Personal liability insurance provides:
A. Business malpractice coverage
B. Automobile liability exclusively
C. Liability coverage to individuals/families for bodily injury and property damage from
