LML4805 – INSURANCE LAW EXAM
PACK PRACTICE TEST QUESTIONS
AND ANSWERS 2026 UPDATED
VERSION VERIFIED A+
◉ Blanket insurance.
Answer: This type of insurance covers more than one item of property at
a single location or one more items of property at multiple locations.
◉ Speculative.
Answer: possibility of both gain and loss. Not insurable.
◉ Pure.
Answer: only the possibility of loss. Insurable.
◉ What are the 5 methods of managing or handling risk?.
Answer: avoid, control, retain, and transfer risk.
◉ Hazard.
Answer: A condition or situation which increases the chance for loss
◉ Physical Hazards.
Answer: a hazard that arises from the condition, occupancy, or use of the
property itself.
,ex: skateboard left on the steps
◉ Moral Hazards.
Answer: when an individual through carelessness or by irresponsible
actions can increase the possibly for a loss.
ex: person who drives carelessly just because they know they are
insured.
◉ Morale Hazards.
Answer: when a person might create a loss situation on purpose just to
collect from the insurance company.
ex: Prearranged, faked theft of someone's old vehicle so they can get an
insurance payout to buy a new vehicle.
◉ Replacement Cost.
Answer: The amount of money it would take to replace a damaged or
destroyed item with one of like kind and quality AT THE TIME OF
LOSS. No deduction for depreciation.
◉ Actual Cash Value (ACV).
Answer: Replacement Cost, minus depreciation.
,◉ Pair and Set Clause.
Answer: Loss to one item of a pair or set does not constitute loss to the
entire pair or set.
◉ Appraisal.
Answer: A method of resolving disputes between insurers and insureds
over the amount owed on a covered loss.
-both parties select an appraiser
-the two appraisers select an umpire
-if the appraisers do not agree, the umpire is consulted
-the amount agreed on by 2 out of 3 is the amount that will be paid
◉ Subrogation.
Answer: An insurer's right to recover the amount of its loss payment
from the third party who is legally responsible for the loss.
◉ Arbitration.
Answer: this condition is similar to the Appraisal Condition but it is not
limited to disputes over the value of the loss. It may also be used to
resolve other areas of disagreement between the insured and the
insurance company.
◉ What does WC SHAVVER stand for?.
, Answer: Windstorm, Civil commotion, Smoke, Hail, Aircraft, Vehicles,
Volcanic eruption, Explosion, Riot
◉ What does BIG AFFECT stand for?.
Answer: Burglar damage, Ice & snow weight, Glass breakage,
Accidental discharge, Falling objects, Freezing of pipes, Electrical
damage, Collapse, Tearing apart.
◉ Insolvency.
Answer: A financial state that occurs if liabilities are greater than assets.
◉ Law of Agency.
Answer: Knowledge of the Agents is Knowledge of the Principal
(Insurance Company)
◉ Principal.
Answer: Insurance Company
◉ What is the ISO?.
Answer: Insurance Services Office which is an organization established
for the benefit of its member insurance companies. This organization
gathers statistics, provides loss costs, drafts policy forms and coverage
provisions and conducts inspections for rate making purposes.
◉ Coinsurance Clause.
PACK PRACTICE TEST QUESTIONS
AND ANSWERS 2026 UPDATED
VERSION VERIFIED A+
◉ Blanket insurance.
Answer: This type of insurance covers more than one item of property at
a single location or one more items of property at multiple locations.
◉ Speculative.
Answer: possibility of both gain and loss. Not insurable.
◉ Pure.
Answer: only the possibility of loss. Insurable.
◉ What are the 5 methods of managing or handling risk?.
Answer: avoid, control, retain, and transfer risk.
◉ Hazard.
Answer: A condition or situation which increases the chance for loss
◉ Physical Hazards.
Answer: a hazard that arises from the condition, occupancy, or use of the
property itself.
,ex: skateboard left on the steps
◉ Moral Hazards.
Answer: when an individual through carelessness or by irresponsible
actions can increase the possibly for a loss.
ex: person who drives carelessly just because they know they are
insured.
◉ Morale Hazards.
Answer: when a person might create a loss situation on purpose just to
collect from the insurance company.
ex: Prearranged, faked theft of someone's old vehicle so they can get an
insurance payout to buy a new vehicle.
◉ Replacement Cost.
Answer: The amount of money it would take to replace a damaged or
destroyed item with one of like kind and quality AT THE TIME OF
LOSS. No deduction for depreciation.
◉ Actual Cash Value (ACV).
Answer: Replacement Cost, minus depreciation.
,◉ Pair and Set Clause.
Answer: Loss to one item of a pair or set does not constitute loss to the
entire pair or set.
◉ Appraisal.
Answer: A method of resolving disputes between insurers and insureds
over the amount owed on a covered loss.
-both parties select an appraiser
-the two appraisers select an umpire
-if the appraisers do not agree, the umpire is consulted
-the amount agreed on by 2 out of 3 is the amount that will be paid
◉ Subrogation.
Answer: An insurer's right to recover the amount of its loss payment
from the third party who is legally responsible for the loss.
◉ Arbitration.
Answer: this condition is similar to the Appraisal Condition but it is not
limited to disputes over the value of the loss. It may also be used to
resolve other areas of disagreement between the insured and the
insurance company.
◉ What does WC SHAVVER stand for?.
, Answer: Windstorm, Civil commotion, Smoke, Hail, Aircraft, Vehicles,
Volcanic eruption, Explosion, Riot
◉ What does BIG AFFECT stand for?.
Answer: Burglar damage, Ice & snow weight, Glass breakage,
Accidental discharge, Falling objects, Freezing of pipes, Electrical
damage, Collapse, Tearing apart.
◉ Insolvency.
Answer: A financial state that occurs if liabilities are greater than assets.
◉ Law of Agency.
Answer: Knowledge of the Agents is Knowledge of the Principal
(Insurance Company)
◉ Principal.
Answer: Insurance Company
◉ What is the ISO?.
Answer: Insurance Services Office which is an organization established
for the benefit of its member insurance companies. This organization
gathers statistics, provides loss costs, drafts policy forms and coverage
provisions and conducts inspections for rate making purposes.
◉ Coinsurance Clause.
