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LOMA 281 Exam Study Guide 2026:
Risk, Insurance Products & Annuities
Q&A
LOMA 281 study guide covering risk and insurance,
regulation, life insurance contracts, term and cash value
products, annuities, policy provisions, ownership rights,
group insurance, and retirement plans. Includes module-
by-module Q&A with rationales for the 2026 integrated
exams. Built for new insurance employees and designation
candidates who need clear, searchable explanations of
core product and contract concepts. Organized by the four
official modules for efficient review.
1. Which of the following best describes the difference between pure risk
and speculative risk?
A) Pure risk involves only the possibility of loss or no loss, while
speculative risk involves the possibility of loss, gain, or no change.
B) Pure risk involves the possibility of gain or loss, while speculative risk
involves only the possibility of loss.
C) Pure risk is always insurable, while speculative risk is never insurable
under any circumstances.
D) Pure risk is created by intentional acts, while speculative risk is created
by accidental events.
Answer: A
Rationale: Pure risk offers only loss or no loss and is generally insurable;
speculative risk offers loss, gain, or no change and is generally not
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insurable. B reverses the definitions, C is too absolute, and D misstates the
source of each risk type.
2. Which type of risk is generally considered insurable?
A) Speculative risk
B) Pure risk
C) Market risk
D) Investment risk
Answer: B
Rationale: Insurers typically insure pure risk because it involves only the
chance of loss or no loss, making it predictable in the aggregate.
3. A person who buys a lottery ticket faces which type of risk?
A) Pure risk
B) Speculative risk
C) Static risk
D) Fundamental risk
Answer: B
Rationale: Buying a lottery ticket involves the possibility of loss (the ticket
price), gain (the prize), or no change, which is speculative risk.
4. Which risk management technique involves purchasing insurance?
A) Avoidance
B) Control
C) Acceptance
D) Transfer
Answer: D
Rationale: Insurance transfers the financial consequences of risk from the
individual to the insurer.
5. Installing smoke detectors in a home is an example of which risk
management technique?
A) Avoidance
B) Loss control
C) Transfer
D) Retention
Answer: B
Rationale: Loss control reduces the frequency or severity of losses; smoke
detectors may reduce the severity of a fire loss.
6. Deciding never to ride a motorcycle is an example of which risk
management technique?
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A) Avoidance
B) Retention
C) Transfer
D) Loss control
Answer: A
Rationale: Avoidance eliminates the risk entirely by not engaging in the
activity that creates it.
7. A person who chooses to bear the financial consequences of a risk
without insurance is using which technique?
A) Avoidance
B) Retention
C) Transfer
D) Sharing
Answer: B
Rationale: Retention (acceptance) means the individual keeps the risk and
bears any resulting loss.
8. In an insurance transaction, the person whose life or health is covered by
the policy is called the:
A) Applicant
B) Policyowner
C) Insured
D) Beneficiary
Answer: C
Rationale: The insured is the person whose life or health is the subject of
the insurance coverage.
9. In an insurance transaction, the person who receives the policy benefit is
called the:
A) Applicant
B) Insured
C) Policyowner
D) Beneficiary
Answer: D
Rationale: The beneficiary is designated to receive the policy proceeds.
10. The person who applies for an insurance policy is called the:
A) Applicant
B) Beneficiary
C) Insured
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D) Assignee
Answer: A
Rationale: The applicant is the person who submits the application for
insurance.
11. The person who owns an insurance policy and has the rights under
the contract is called the:
A) Insured
B) Beneficiary
C) Policyowner
D) Applicant
Answer: C
Rationale: The policyowner holds the contractual rights, such as the right
to name a beneficiary or surrender the policy.
12. Which of the following is a characteristic of pure risk?
A) It can result in a gain.
B) It involves only loss or no loss.
C) It is never insurable.
D) It is created only by intentional acts.
Answer: B
Rationale: Pure risk involves only the possibility of loss or no loss, with no
possibility of gain.
13. Which of the following is an example of speculative risk?
A) A house fire
B) An automobile accident
C) Investing in a new business
D) A premature death
Answer: C
Rationale: Investing in a business can produce a gain, a loss, or no change,
making it speculative risk.
14. Which of the following is an example of pure risk?
A) Gambling at a casino
B) Buying stocks
C) A fire damaging a warehouse
D) Starting a new venture
Answer: C
Rationale: A fire can only cause loss or no loss, so it is a pure risk.
LOMA 281 Exam Study Guide 2026:
Risk, Insurance Products & Annuities
Q&A
LOMA 281 study guide covering risk and insurance,
regulation, life insurance contracts, term and cash value
products, annuities, policy provisions, ownership rights,
group insurance, and retirement plans. Includes module-
by-module Q&A with rationales for the 2026 integrated
exams. Built for new insurance employees and designation
candidates who need clear, searchable explanations of
core product and contract concepts. Organized by the four
official modules for efficient review.
1. Which of the following best describes the difference between pure risk
and speculative risk?
A) Pure risk involves only the possibility of loss or no loss, while
speculative risk involves the possibility of loss, gain, or no change.
B) Pure risk involves the possibility of gain or loss, while speculative risk
involves only the possibility of loss.
C) Pure risk is always insurable, while speculative risk is never insurable
under any circumstances.
D) Pure risk is created by intentional acts, while speculative risk is created
by accidental events.
Answer: A
Rationale: Pure risk offers only loss or no loss and is generally insurable;
speculative risk offers loss, gain, or no change and is generally not
, 2|Page
insurable. B reverses the definitions, C is too absolute, and D misstates the
source of each risk type.
2. Which type of risk is generally considered insurable?
A) Speculative risk
B) Pure risk
C) Market risk
D) Investment risk
Answer: B
Rationale: Insurers typically insure pure risk because it involves only the
chance of loss or no loss, making it predictable in the aggregate.
3. A person who buys a lottery ticket faces which type of risk?
A) Pure risk
B) Speculative risk
C) Static risk
D) Fundamental risk
Answer: B
Rationale: Buying a lottery ticket involves the possibility of loss (the ticket
price), gain (the prize), or no change, which is speculative risk.
4. Which risk management technique involves purchasing insurance?
A) Avoidance
B) Control
C) Acceptance
D) Transfer
Answer: D
Rationale: Insurance transfers the financial consequences of risk from the
individual to the insurer.
5. Installing smoke detectors in a home is an example of which risk
management technique?
A) Avoidance
B) Loss control
C) Transfer
D) Retention
Answer: B
Rationale: Loss control reduces the frequency or severity of losses; smoke
detectors may reduce the severity of a fire loss.
6. Deciding never to ride a motorcycle is an example of which risk
management technique?
, 3|Page
A) Avoidance
B) Retention
C) Transfer
D) Loss control
Answer: A
Rationale: Avoidance eliminates the risk entirely by not engaging in the
activity that creates it.
7. A person who chooses to bear the financial consequences of a risk
without insurance is using which technique?
A) Avoidance
B) Retention
C) Transfer
D) Sharing
Answer: B
Rationale: Retention (acceptance) means the individual keeps the risk and
bears any resulting loss.
8. In an insurance transaction, the person whose life or health is covered by
the policy is called the:
A) Applicant
B) Policyowner
C) Insured
D) Beneficiary
Answer: C
Rationale: The insured is the person whose life or health is the subject of
the insurance coverage.
9. In an insurance transaction, the person who receives the policy benefit is
called the:
A) Applicant
B) Insured
C) Policyowner
D) Beneficiary
Answer: D
Rationale: The beneficiary is designated to receive the policy proceeds.
10. The person who applies for an insurance policy is called the:
A) Applicant
B) Beneficiary
C) Insured
, 4|Page
D) Assignee
Answer: A
Rationale: The applicant is the person who submits the application for
insurance.
11. The person who owns an insurance policy and has the rights under
the contract is called the:
A) Insured
B) Beneficiary
C) Policyowner
D) Applicant
Answer: C
Rationale: The policyowner holds the contractual rights, such as the right
to name a beneficiary or surrender the policy.
12. Which of the following is a characteristic of pure risk?
A) It can result in a gain.
B) It involves only loss or no loss.
C) It is never insurable.
D) It is created only by intentional acts.
Answer: B
Rationale: Pure risk involves only the possibility of loss or no loss, with no
possibility of gain.
13. Which of the following is an example of speculative risk?
A) A house fire
B) An automobile accident
C) Investing in a new business
D) A premature death
Answer: C
Rationale: Investing in a business can produce a gain, a loss, or no change,
making it speculative risk.
14. Which of the following is an example of pure risk?
A) Gambling at a casino
B) Buying stocks
C) A fire damaging a warehouse
D) Starting a new venture
Answer: C
Rationale: A fire can only cause loss or no loss, so it is a pure risk.
