Louisiana Property & Casualty Insurance:
Key Concepts and Principles Actual Study
Guide | Latest Edition
1. Insurance - ANSWER A device for spreading the chance of financial loss
among a large number of people: the small losses of the many pay for the
large losses of the few.
2. Risk - ANSWER Uncertainty of loss.
3. Pure risk - ANSWER Only the possibility of loss exists; insurable.
4. A situation in which a person can experience only a loss and no gain
presents what type of risk? - ANSWER Pure Risk
5. When would a misrepresentation on an insurance application be considered
fraud? - ANSWER When it is intentional and material.
6. What is a risk? - ANSWER Uncertainty of Loss
7. What is a warranty in an insurance contract? - ANSWER An absolutely true
statement upon which the validity of the policy depends.
8. What are the 3 types of agent authority? - ANSWER Express, Implied, and
Apparent
,9. In insurance contracts, when is the offer usually made? - ANSWER When
the insurance application is submitted.
10.What does indemnify mean in insurance? - ANSWER To restore an insured
to the same financial status as before a loss.
11.What is the term for the causes of loss insured against in an insurance
policy? - ANSWER Peril
12.In the agent/insurer relationship, who is considered the principal? -
ANSWER Insurer
13.What provision states that if a policy allows for greater benefits than the
financial loss incurred, the insured may be compensated only for the amount
lost? - ANSWER Indemnity
14.According to the law of agency, who represents the principal? - ANSWER
Agent/Producer
15.A situation in which a person can experience only a loss and no gain
presents what type of risk? - ANSWER Pure Risk
16.In insurance contracts, when does acceptance usually occur? - ANSWER
When the insurer approves a prepaid application.
17.What are the methods of managing risk? - ANSWER Avoidance
Transfer
Sharing
,Retention
Reduction
18.What document is required for an insurance company to transact insurance?
- ANSWER Certificate of Authority
19.What type of authority is based on the agent's actions or words? - ANSWER
Apparent
20.What is consideration in an insurance contract? - ANSWER Consideration
is something of value that each party gives to the other. Consideration on the
part of the insurer is binding.
21.A tornado that destroys a property would be an example of what? -
ANSWER Peril
22.What type of insurer is formed under the laws of another state? - ANSWER
Foreign
23.What are the 5 characteristics of an ideally insurable risk? - ANSWER 1.
due to chance
2. definite and measurable
3. statistically predictable
4. not catastrophic
5. randomly selected
24.Wagering on a sporting event is known as what type of risk? - ANSWER
Speculative
, 25.Insurance contracts are aleatory in nature. What does that mean? -
ANSWER Unequal values are exchanged between the parties to a contract.
26.What does the term unilateral contract mean? - ANSWER A unilateral
contract is a one-sided contract. This means only one party makes an
enforceable promise.
27.Insurers are classified according to their domicile. What are the 3 types of
insurers? - ANSWER Domestic, Foreign, and Alien
28.What do individuals use to transfer their risk of loss to a larger group? -
ANSWER Insurance
29.What are the 4 elements of an insurance contract? - ANSWER Agreement
(Offer and Acceptance)
Consideration
Competent Parties
Legal Purpose
30.If an insurer holds a certificate of authority, it is known as what type of
insurer? - ANSWER Authorized or Admitted
31.Conditions that increase the chance of a loss are known as what? -
ANSWER Hazards
32.What are the 3 types of hazards? - ANSWER Physical, Moral, and Morale
Key Concepts and Principles Actual Study
Guide | Latest Edition
1. Insurance - ANSWER A device for spreading the chance of financial loss
among a large number of people: the small losses of the many pay for the
large losses of the few.
2. Risk - ANSWER Uncertainty of loss.
3. Pure risk - ANSWER Only the possibility of loss exists; insurable.
4. A situation in which a person can experience only a loss and no gain
presents what type of risk? - ANSWER Pure Risk
5. When would a misrepresentation on an insurance application be considered
fraud? - ANSWER When it is intentional and material.
6. What is a risk? - ANSWER Uncertainty of Loss
7. What is a warranty in an insurance contract? - ANSWER An absolutely true
statement upon which the validity of the policy depends.
8. What are the 3 types of agent authority? - ANSWER Express, Implied, and
Apparent
,9. In insurance contracts, when is the offer usually made? - ANSWER When
the insurance application is submitted.
10.What does indemnify mean in insurance? - ANSWER To restore an insured
to the same financial status as before a loss.
11.What is the term for the causes of loss insured against in an insurance
policy? - ANSWER Peril
12.In the agent/insurer relationship, who is considered the principal? -
ANSWER Insurer
13.What provision states that if a policy allows for greater benefits than the
financial loss incurred, the insured may be compensated only for the amount
lost? - ANSWER Indemnity
14.According to the law of agency, who represents the principal? - ANSWER
Agent/Producer
15.A situation in which a person can experience only a loss and no gain
presents what type of risk? - ANSWER Pure Risk
16.In insurance contracts, when does acceptance usually occur? - ANSWER
When the insurer approves a prepaid application.
17.What are the methods of managing risk? - ANSWER Avoidance
Transfer
Sharing
,Retention
Reduction
18.What document is required for an insurance company to transact insurance?
- ANSWER Certificate of Authority
19.What type of authority is based on the agent's actions or words? - ANSWER
Apparent
20.What is consideration in an insurance contract? - ANSWER Consideration
is something of value that each party gives to the other. Consideration on the
part of the insurer is binding.
21.A tornado that destroys a property would be an example of what? -
ANSWER Peril
22.What type of insurer is formed under the laws of another state? - ANSWER
Foreign
23.What are the 5 characteristics of an ideally insurable risk? - ANSWER 1.
due to chance
2. definite and measurable
3. statistically predictable
4. not catastrophic
5. randomly selected
24.Wagering on a sporting event is known as what type of risk? - ANSWER
Speculative
, 25.Insurance contracts are aleatory in nature. What does that mean? -
ANSWER Unequal values are exchanged between the parties to a contract.
26.What does the term unilateral contract mean? - ANSWER A unilateral
contract is a one-sided contract. This means only one party makes an
enforceable promise.
27.Insurers are classified according to their domicile. What are the 3 types of
insurers? - ANSWER Domestic, Foreign, and Alien
28.What do individuals use to transfer their risk of loss to a larger group? -
ANSWER Insurance
29.What are the 4 elements of an insurance contract? - ANSWER Agreement
(Offer and Acceptance)
Consideration
Competent Parties
Legal Purpose
30.If an insurer holds a certificate of authority, it is known as what type of
insurer? - ANSWER Authorized or Admitted
31.Conditions that increase the chance of a loss are known as what? -
ANSWER Hazards
32.What are the 3 types of hazards? - ANSWER Physical, Moral, and Morale
