Property/Casualty Illinois for State Exam Questions with Correct Answers

ISO (Insurance Services Office) Correct Answer ISO creates standardized property and casualty insurance policies that are approved by states and used as a standard policy for insurers. -they can be modified to comply with state regulations -may be modified to a degree for insurance companies to create their own policy form Define insurance Correct Answer Insurance transfers the risk of loss from an individual or business entity to an insurance company, which in turn spreads the costs of unexpected losses to many individuals Define risk Correct Answer uncertainty concerning the occurrence of a loss What are the 2 types of risk? Correct Answer Pure and Speculative What is the difference between pure and speculative risk? Correct Answer only pure risk is insurable since it can only result in a loss or no change Speculative risk is not insurable since it can result in a loss or gain (like gambling) What are the 3 types of hazards? Correct Answer 1) Physical - hazards arising from the material, structural, or operational features 2) Moral - refers to applicants that may lie on their application 3) Morale - increase the hazard presented by a risk arising from the insured's indifference to loss because of the existence of insurance (combustible material near a furnace) Peril Correct Answer causes of loss Hazards Correct Answer conditions/circumstances that increase the probability of an insured loss occurring There are 3 types Direct loss Correct Answer direct physical damage to buildings/personal property *this includes proximate cause: chain of events resulting from a covered peril Indirect loss/consequential losses Correct Answer losses considered a result of direct loss; this usually results from when repairs begin so it could be additional living expenses for homeowners or loss of profits for businesses