New York Life Insurance Exam
Preparation Guide Questions and
Answers 100% PASS
Insurance—ANSWER--Insurance transfers risk from an individual or group to a company
Risk—ANSWER--Pure Risk-insurable because it involves a chance of loss only. Speculative
Risk-not insurable because it involves a chance of loss or gain, i.e. gambling.
Exposure—ANSWER--The financial amount or chance of a loss that one could incur
Hazard—ANSWER--Gives rise to a peril. There are three kinds of hazards: Physical - physical
condition: medical history, blindness, deafness. Moral - a lie: filing a false claim or a lie on an
application. Morale - an indifference to loss: driving recklessly, speeding
Peril—ANSWER--The cause of a loss (fire, accident, flood)
Loss—ANSWER--A reduction in the quantity, quality, or value of something
S.T.A.R.R—ANSWER--Sharing - distributing risk among a similar group (condo owners).
Transfer - the loss is handled by another party. Avoidance - simply avoiding the risk (choose
not to fly). Reduction - lessen the possibility of loss, (install a smoke alarm). Retention -
accepting the risk and confronting it when it occurs (self-insured)
, Elements of Insurable Risk—ANSWER--1. Due to chance - chance of loss beyond insured's
control. 2. Must be definite and measurable - loss must have definite time, place, and
amount. 3. Must be predictable - number of losses must be statistically predictable. 4. Loss
cannot be catastrophic - there must be limits that the loss cannot exceed. 5. Exposure must
be large - insurer must be able to predict losses based on the law of large numbers. 6.
Exposure must be randomly selected - insurer must have a fair proportion of both good and
poor risks
Adverse Selection—ANSWER--Less favorable insurance risk (example: poor health) seek to
continue insurance in greater numbers than other risks
Law of Large Numbers—ANSWER--Predicts the number of deaths that should occur within a
similar group of people (exposure) within a given period of time. The larger the number, the
more accurate the prediction
Insurers—ANSWER--Stock - Owned by stockholders (shareholders). Issue nonparticipating
policies (nonpar). Mutual - Owned by policyowners (policyholders). Issue participating
policies (par). Pay dividends to policyholders which are a refund of excess premiums paid.
Fraternal Benefit Societies (Fraternals) - Not for profit organization. Benevolent and
charitable brotherhood. Membership based on religious, national or ethnic lines. Must be a
member to receive benefits
Certificate of Authority—ANSWER--License granted by the state that allows an insurance
company to conduct business in the lines specified in that state
© 2026 Copyright. All Rights Reserved. This document is
protected by copyright law, Copyrighted By Brittie Donald
Preparation Guide Questions and
Answers 100% PASS
Insurance—ANSWER--Insurance transfers risk from an individual or group to a company
Risk—ANSWER--Pure Risk-insurable because it involves a chance of loss only. Speculative
Risk-not insurable because it involves a chance of loss or gain, i.e. gambling.
Exposure—ANSWER--The financial amount or chance of a loss that one could incur
Hazard—ANSWER--Gives rise to a peril. There are three kinds of hazards: Physical - physical
condition: medical history, blindness, deafness. Moral - a lie: filing a false claim or a lie on an
application. Morale - an indifference to loss: driving recklessly, speeding
Peril—ANSWER--The cause of a loss (fire, accident, flood)
Loss—ANSWER--A reduction in the quantity, quality, or value of something
S.T.A.R.R—ANSWER--Sharing - distributing risk among a similar group (condo owners).
Transfer - the loss is handled by another party. Avoidance - simply avoiding the risk (choose
not to fly). Reduction - lessen the possibility of loss, (install a smoke alarm). Retention -
accepting the risk and confronting it when it occurs (self-insured)
, Elements of Insurable Risk—ANSWER--1. Due to chance - chance of loss beyond insured's
control. 2. Must be definite and measurable - loss must have definite time, place, and
amount. 3. Must be predictable - number of losses must be statistically predictable. 4. Loss
cannot be catastrophic - there must be limits that the loss cannot exceed. 5. Exposure must
be large - insurer must be able to predict losses based on the law of large numbers. 6.
Exposure must be randomly selected - insurer must have a fair proportion of both good and
poor risks
Adverse Selection—ANSWER--Less favorable insurance risk (example: poor health) seek to
continue insurance in greater numbers than other risks
Law of Large Numbers—ANSWER--Predicts the number of deaths that should occur within a
similar group of people (exposure) within a given period of time. The larger the number, the
more accurate the prediction
Insurers—ANSWER--Stock - Owned by stockholders (shareholders). Issue nonparticipating
policies (nonpar). Mutual - Owned by policyowners (policyholders). Issue participating
policies (par). Pay dividends to policyholders which are a refund of excess premiums paid.
Fraternal Benefit Societies (Fraternals) - Not for profit organization. Benevolent and
charitable brotherhood. Membership based on religious, national or ethnic lines. Must be a
member to receive benefits
Certificate of Authority—ANSWER--License granted by the state that allows an insurance
company to conduct business in the lines specified in that state
© 2026 Copyright. All Rights Reserved. This document is
protected by copyright law, Copyrighted By Brittie Donald
