AINS 101 CORRECT FINAL EXAMS QUESTIONS AND
ANSWERS RATED A+
✔✔What three concepts are pertinent to understanding insurance? - ✔✔Risk,
Transferring, and Pooling
✔✔What are the three common types of personal and commercial insurance? -
✔✔Personal insurance, Personal Property-Casualty Insurance, and Commercial
Insurance
✔✔What is personal insurance? - ✔✔1. Property insurance protects an insured's assets
by covering the cost of repairing or replacing property that is damaged, los or destroyed.
It can also cover related lost income or extra expenses.
2. Liability insurance provides payments for injury to others or damage to others'
property for which the insured is legally responsible. It also covers the cost to defend
the insured against related lawsuits.
3. Although not the focus of this content, life insurance replaces the income-earning
potential lost through death. It also helps to pay expenses related to an insured's death.
4. Health insurance protects individuals and families from financial losses caused by
sickness and accidents.
✔✔What is personal property-casualty insurance? - ✔✔1. Homeowners—Provides
protection when people's homes and/ or belongings are damaged or stolen and liability
coverage for situations such as the family dog biting a guest.
2. Personal auto—If the insured is at fault in an accident, provides coverage for bodily
injury to another person or damage to another person's auto. Also provides coverage for
damage to the insured auto (not wear and tear). Typically legally required.
3. Personal umbrella—Provides additional protection for people with a high potential for
large liability losses.
✔✔What is commercial insurance? - ✔✔1. Many businesses purchase a commercial
package policy or a businessowners policy, both of which provide business owners with
property, crime, and liability coverages.
,2. Common types of commercial property-casualty insurance: a. Commercial property—
Covers damage to buildings or their contents that results from fire, vandalism, and other
causes of loss. b. Commercial crime—Protects against losses from theft of business
property and money, including employee theft. c. Commercial general liability—Protects
a business against its legal liability to others for bodily injury and property damage. d.
Commercial auto—Covers liability for bodily injury and property damage caused by the
use of the business's autos and also damage to the business's own autos when they
are in an accident. e. Workers compensation—Covers legally required benefits that
businesses are required to pay to their employees for jobrelated injuries and illnesses. f.
Commercial umbrella—Provides additional liability limits beyond those provided by
other commercial policies, protecting a business in the event of a large liability loss.
✔✔What are the main types of commercial property-casualty insurance? -
✔✔Commercial property, commercial crime, commercial general liability, commercial
auto, workers compensation, and commercial umbrella
✔✔What are the four main private insurers? - ✔✔1. Many of the largest property-
casualty insurers in the U.S. are stock insurers. Stock insurers' objective is to earn a
profit, and they attract stockholders by the expectation of investment returns.
2. Mutual insurers include some large national insurers and many regional insurers. To
share profits, mutual insurers pay dividends to policyholders as a return of a portion of
premiums paid.
3. Surplus lines insurers provide insurance coverages unavailable in the standard
market.
4. Reinsurance allows a primary insurer to transfer some loss exposures to another
insurer, the reinsurer. It can help a small insurer provide insurance for large accounts.
✔✔What role does government insurance play? - ✔✔1. When private insurers are
unable or unwilling to satisfy legitimate insurance needs, government programs can.
2. If a government requires a type of insurance, such as a state's requiring workers
compensation insurance, then it must ensure that the insurance is available at a
reasonable price.
3. Providing convenience to insureds, by reducing either the time or the resources
needed to obtain insurance coverage, adds to the efficiency of the market.
4. The government may participate in insurance to accomplish social goals and reduce
risk to society.
✔✔What is the difference between pure and speculative risk? - ✔✔1. Pure and
speculative risks must often be managed differently, and insurance is just one of many
risk management techniques.
2. Pure risk, such as the risk of fire, can usually be managed by purchasing insurance.
The speculative risk might be managed by maintaining the property to enhance its
resale value
✔✔What are the four risk quadrants? - ✔✔1. Hazard risk Arises from property, liability,
or personnel loss exposures (Pure)
, 2. Operational risk Arises from people, processes, systems, or controls (Pure)
3. Financial risk Arises from the effect of market forces on financial assets or liabilities
(Speculative)
4. Strategic risk Arises from trends in the economy and society- (Speculative)
✔✔What is hazard risk? - ✔✔Arises from property, liability, or personnel loss exposures
✔✔What is operational risk? - ✔✔Arises from people, processes, systems, or controls
✔✔What is financial risk? - ✔✔Arises from the effect of market forces on financial
assets or liabilities
✔✔What is strategic risk? - ✔✔Arises from trends in the economy and society
✔✔What are three emerging technologies in insurance? - ✔✔1. Artificial intelligence
enables computers to perform tasks that require critical thinking, such as making
decisions. It allows robots to work alongside humans and cars to operate without human
drivers.
2. Sensors detect and measure objects or conditions continuously to warn of problems
or malfunctions. Smart sensors may trigger a response to an issue, which helps reduce
losses.
3. Computer vision helps a machine recognize an object and respond to it as a human
would.
✔✔Examples of federal government insurance plans? - ✔✔National Flood Insurance
Program and the Terrorism Risk Insurance Program.
✔✔What are some ways that insurance regulation protects consumers? - ✔✔1.
Verifying that insurance policies, which can be hard to understand, truly benefit the
customer
2. Requiring insurers to pay legitimate claims and honestly represent the benefits of a
policy
3. Guaranteeing that insurance is available and accessible to everyone who needs it
✔✔Why do regulators enforce rules around insurer solvency? - ✔✔1. To guarantee that
insurers have enough cash on hand to pay for future claims made on all the policies
they issue, even the ones for which they long ago collected the premium
2. To ensure that a catastrophe that affects lots of policyholders at once doesn't deplete
insurers' resources and make them unable to pay claims
3. To prevent an insurer from recklessly investing its profits or engaging in fraudulent
activities that could jeopardize its reserves
✔✔What are the three reasons insurance is regulated? - ✔✔To protect consumers, to
maintain insurer insolvency, and to prevent destructive competition
ANSWERS RATED A+
✔✔What three concepts are pertinent to understanding insurance? - ✔✔Risk,
Transferring, and Pooling
✔✔What are the three common types of personal and commercial insurance? -
✔✔Personal insurance, Personal Property-Casualty Insurance, and Commercial
Insurance
✔✔What is personal insurance? - ✔✔1. Property insurance protects an insured's assets
by covering the cost of repairing or replacing property that is damaged, los or destroyed.
It can also cover related lost income or extra expenses.
2. Liability insurance provides payments for injury to others or damage to others'
property for which the insured is legally responsible. It also covers the cost to defend
the insured against related lawsuits.
3. Although not the focus of this content, life insurance replaces the income-earning
potential lost through death. It also helps to pay expenses related to an insured's death.
4. Health insurance protects individuals and families from financial losses caused by
sickness and accidents.
✔✔What is personal property-casualty insurance? - ✔✔1. Homeowners—Provides
protection when people's homes and/ or belongings are damaged or stolen and liability
coverage for situations such as the family dog biting a guest.
2. Personal auto—If the insured is at fault in an accident, provides coverage for bodily
injury to another person or damage to another person's auto. Also provides coverage for
damage to the insured auto (not wear and tear). Typically legally required.
3. Personal umbrella—Provides additional protection for people with a high potential for
large liability losses.
✔✔What is commercial insurance? - ✔✔1. Many businesses purchase a commercial
package policy or a businessowners policy, both of which provide business owners with
property, crime, and liability coverages.
,2. Common types of commercial property-casualty insurance: a. Commercial property—
Covers damage to buildings or their contents that results from fire, vandalism, and other
causes of loss. b. Commercial crime—Protects against losses from theft of business
property and money, including employee theft. c. Commercial general liability—Protects
a business against its legal liability to others for bodily injury and property damage. d.
Commercial auto—Covers liability for bodily injury and property damage caused by the
use of the business's autos and also damage to the business's own autos when they
are in an accident. e. Workers compensation—Covers legally required benefits that
businesses are required to pay to their employees for jobrelated injuries and illnesses. f.
Commercial umbrella—Provides additional liability limits beyond those provided by
other commercial policies, protecting a business in the event of a large liability loss.
✔✔What are the main types of commercial property-casualty insurance? -
✔✔Commercial property, commercial crime, commercial general liability, commercial
auto, workers compensation, and commercial umbrella
✔✔What are the four main private insurers? - ✔✔1. Many of the largest property-
casualty insurers in the U.S. are stock insurers. Stock insurers' objective is to earn a
profit, and they attract stockholders by the expectation of investment returns.
2. Mutual insurers include some large national insurers and many regional insurers. To
share profits, mutual insurers pay dividends to policyholders as a return of a portion of
premiums paid.
3. Surplus lines insurers provide insurance coverages unavailable in the standard
market.
4. Reinsurance allows a primary insurer to transfer some loss exposures to another
insurer, the reinsurer. It can help a small insurer provide insurance for large accounts.
✔✔What role does government insurance play? - ✔✔1. When private insurers are
unable or unwilling to satisfy legitimate insurance needs, government programs can.
2. If a government requires a type of insurance, such as a state's requiring workers
compensation insurance, then it must ensure that the insurance is available at a
reasonable price.
3. Providing convenience to insureds, by reducing either the time or the resources
needed to obtain insurance coverage, adds to the efficiency of the market.
4. The government may participate in insurance to accomplish social goals and reduce
risk to society.
✔✔What is the difference between pure and speculative risk? - ✔✔1. Pure and
speculative risks must often be managed differently, and insurance is just one of many
risk management techniques.
2. Pure risk, such as the risk of fire, can usually be managed by purchasing insurance.
The speculative risk might be managed by maintaining the property to enhance its
resale value
✔✔What are the four risk quadrants? - ✔✔1. Hazard risk Arises from property, liability,
or personnel loss exposures (Pure)
, 2. Operational risk Arises from people, processes, systems, or controls (Pure)
3. Financial risk Arises from the effect of market forces on financial assets or liabilities
(Speculative)
4. Strategic risk Arises from trends in the economy and society- (Speculative)
✔✔What is hazard risk? - ✔✔Arises from property, liability, or personnel loss exposures
✔✔What is operational risk? - ✔✔Arises from people, processes, systems, or controls
✔✔What is financial risk? - ✔✔Arises from the effect of market forces on financial
assets or liabilities
✔✔What is strategic risk? - ✔✔Arises from trends in the economy and society
✔✔What are three emerging technologies in insurance? - ✔✔1. Artificial intelligence
enables computers to perform tasks that require critical thinking, such as making
decisions. It allows robots to work alongside humans and cars to operate without human
drivers.
2. Sensors detect and measure objects or conditions continuously to warn of problems
or malfunctions. Smart sensors may trigger a response to an issue, which helps reduce
losses.
3. Computer vision helps a machine recognize an object and respond to it as a human
would.
✔✔Examples of federal government insurance plans? - ✔✔National Flood Insurance
Program and the Terrorism Risk Insurance Program.
✔✔What are some ways that insurance regulation protects consumers? - ✔✔1.
Verifying that insurance policies, which can be hard to understand, truly benefit the
customer
2. Requiring insurers to pay legitimate claims and honestly represent the benefits of a
policy
3. Guaranteeing that insurance is available and accessible to everyone who needs it
✔✔Why do regulators enforce rules around insurer solvency? - ✔✔1. To guarantee that
insurers have enough cash on hand to pay for future claims made on all the policies
they issue, even the ones for which they long ago collected the premium
2. To ensure that a catastrophe that affects lots of policyholders at once doesn't deplete
insurers' resources and make them unable to pay claims
3. To prevent an insurer from recklessly investing its profits or engaging in fraudulent
activities that could jeopardize its reserves
✔✔What are the three reasons insurance is regulated? - ✔✔To protect consumers, to
maintain insurer insolvency, and to prevent destructive competition
