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Iowa Life and Health Insurance Test
Questions and Correct Answers
Risk Pooling Ans: A group sharing the possibility of a loss. Risk
transferred from individual to group.
Law of Large Numbers Ans: The principle that the larger the
number of individual risks in a group, the more certainty there is
as to the amount of loss incurred in any period. This is based on
the science of probability and the experience of mortality and
morbidity statistics.
Speculative Risk Ans: Involves the chance of both loss or gain.
Pure Risk Ans: Involves only the chance of loss, no possibility of a
gain or profit.
Peril Ans: Immediate specific event that causes a loss.
Hazard Ans: Anything that increases the likelihood of loss through
peril.
Physical Hazard Ans: a physical condition that increases the
frequency or severity of loss
Moral Hazard Ans: When the actions of the insured increase the
likelihood that a loss will happen
Morale Hazard Ans: A condition of carelessness or indifference
that increases the frequency or severity of loss.
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Which type of risk is insurable? Pure or speculative? Ans: Pure
only because speculative involves a chance of gain.
Reciprocal Insurer Ans: Insurance company characterized by the
fact its policyholders insure the risks of other policyholders.
Reinsurer Ans: an arrangement by which an insurance company
transfers or sells a portion of the risk to another insurer.
Domestic Insurer Ans: An insurance company that conducts
business in the state of incorporation.
Foreign Insurer Ans: An insurer licensed to operate in a state but
incorporated in another state.
Alien Insurer Ans: An insurer domiciled in a country other than
the United States.
Twisting Ans: A form of misrepresentation in which an agent
persuades an insured/owner to cancel, lapse, or switch policies,
even when it's to the insured's disadvantage.
Misrepresentation Ans: A false statement or lie about an insureds
policy or a policy of a competitor.
Misuse of Premiums Ans: Diverting premiums for personal use.
Rebating Ans: when the insurer offers money or something of
value in return for the customers service
NAIC Ans: National Association of Insurance Commissioners, an
organization composed of insurance commissioners from all 50
states, the District of Columbia and the 4 U.S territories, formed to
resolve insurance regulatory issues.
© 2025 All rights reserved
Iowa Life and Health Insurance Test
Questions and Correct Answers
Risk Pooling Ans: A group sharing the possibility of a loss. Risk
transferred from individual to group.
Law of Large Numbers Ans: The principle that the larger the
number of individual risks in a group, the more certainty there is
as to the amount of loss incurred in any period. This is based on
the science of probability and the experience of mortality and
morbidity statistics.
Speculative Risk Ans: Involves the chance of both loss or gain.
Pure Risk Ans: Involves only the chance of loss, no possibility of a
gain or profit.
Peril Ans: Immediate specific event that causes a loss.
Hazard Ans: Anything that increases the likelihood of loss through
peril.
Physical Hazard Ans: a physical condition that increases the
frequency or severity of loss
Moral Hazard Ans: When the actions of the insured increase the
likelihood that a loss will happen
Morale Hazard Ans: A condition of carelessness or indifference
that increases the frequency or severity of loss.
© 2025 All rights reserved
, 2 | Page
Which type of risk is insurable? Pure or speculative? Ans: Pure
only because speculative involves a chance of gain.
Reciprocal Insurer Ans: Insurance company characterized by the
fact its policyholders insure the risks of other policyholders.
Reinsurer Ans: an arrangement by which an insurance company
transfers or sells a portion of the risk to another insurer.
Domestic Insurer Ans: An insurance company that conducts
business in the state of incorporation.
Foreign Insurer Ans: An insurer licensed to operate in a state but
incorporated in another state.
Alien Insurer Ans: An insurer domiciled in a country other than
the United States.
Twisting Ans: A form of misrepresentation in which an agent
persuades an insured/owner to cancel, lapse, or switch policies,
even when it's to the insured's disadvantage.
Misrepresentation Ans: A false statement or lie about an insureds
policy or a policy of a competitor.
Misuse of Premiums Ans: Diverting premiums for personal use.
Rebating Ans: when the insurer offers money or something of
value in return for the customers service
NAIC Ans: National Association of Insurance Commissioners, an
organization composed of insurance commissioners from all 50
states, the District of Columbia and the 4 U.S territories, formed to
resolve insurance regulatory issues.
© 2025 All rights reserved
