AINS 101 Exam Prep | Questions and
Answers | 2026 Update | 100% Correct
As a single mother on a very tight budget, Ciara is tempted to skimp on her insurance.
However, her friend Mehmet tells her not to skimp on insurance, because it will help
manage her cash flows. Which one of the following examples best illustrates Mehmet's
point?
A. Ciara needs her car to get to her job, and she needs her job to make car payments
and pay for her car insurance.
B. When her car's windshield breaks, Ciara has to pay only $100 of the $600 cost of
replacing it.
C. When her car's transmission goes out a month after the warranty expires, Ciara is
faced with a $1,100 repair bill.
D. Ciara finds it difficult to come up with a $787 auto insurance premium every six
months. -CORRECTANSWER When her car's windshield breaks, Ciara has to pay only
$100 of the $600 cost of replacing it.
Which one of the following statements is correct regarding the benefits provided by
insurance?
A. Insurance reduces the financial consequences of loss exposures but not the related
uncertainty.
,B. The primary role of insurance is to meet mandatory insurance requirements.
C. The reduction in losses paid by insurers due to risk control measures benefits
individual insureds but not society as a whole.
D. Insurance helps reduce the financial burden to society by compensating accident
victims. -CORRECTANSWER Insurance helps reduce the financial burden to society by
compensating accident victims.
Shelton Industries experienced a fire in its manufacturing plant. Several employees
suffered burns and smoke inhalation injuries as they tried to escape the building. Which
one of Shelton Industries' commercial property-casualty policies would pay for the
employees' injuries and illnesses? -CORRECTANSWER Workers compensation
insurance
A homeowners policy is a type of -CORRECTANSWER Personal property-casualty
insurance policy.
Which one of the following correctly describes a reason for government involvement in
property-casualty insurance?
A. Selling insurance provides the government with a non-tax source of revenues and
profits.
B. Government programs can meet legitimate public demands unmet by private
insurers.
,C. Competition from government plans keeps private insurer's premiums competitive.
D. Preventing high-risk individuals or activities from being insured is in the public
interest. -CORRECTANSWER Government programs can meet legitimate public
demands unmet by private insurers.
Insurance Company wrote a commercial liability policy for a manufacturer of off-road
motorcycles. The potential costs of the insured's loss exposure exceed Insurance
Company's capacity. Insurance Company could consider which one of the following
types of contractual transferring agreement to meet its needs? -CORRECTANSWER
Reinsurance
In an effort to reduce expenses, increase profitability, and reduce human errors; ABC
Insurance Company decided to automate most of its personal lines underwriting
function. The company now uses standardized application forms that are submitted
electronically to one of the company's regional offices. At each regional office, a
computer with a scanner reads the applications. The computer has been programmed
with acceptable CORRECTANSWERs to the questions. If the CORRECTANSWERs on
the application are all acceptable, the policy is automatically issued. Rejected
applications are automatically forwarded to a human underwriter who reviews them. The
use of this technology has reduced the company's expense ratio by two and a half
percent, and reduced the time it takes to issue a policy. ABC Insurance Company's use
of computers to evaluate applications electronically is an application of
, A. Radiant sensors.
B. Artificial intelligence.
C. -CORRECTANSWER Artificial intelligence.
Jimmy decided to buy a house in his neighborhood that had been foreclosed on by the
bank that held the mortgage. He is hoping to do some renovation and repair work on the
house, and then sell it for a quick profit. What type of risk is this? -CORRECTANSWER
Speculative Risk
Which one of the following best describes the concept of pooling?
A. The financial consequences of unanticipated losses are transferred to an insurer.
B. Risk management is concerned with positive and negative risks.
C. Insureds share the cost of each other's losses.
D. Insurance benefits society as a whole. -CORRECTANSWER Insureds share the cost
of each other's losses.
Which one of the following represents uncertainty about outcomes that can be negative
or positive?
A. Loss exposure
B. Transfer
C. Risk
Answers | 2026 Update | 100% Correct
As a single mother on a very tight budget, Ciara is tempted to skimp on her insurance.
However, her friend Mehmet tells her not to skimp on insurance, because it will help
manage her cash flows. Which one of the following examples best illustrates Mehmet's
point?
A. Ciara needs her car to get to her job, and she needs her job to make car payments
and pay for her car insurance.
B. When her car's windshield breaks, Ciara has to pay only $100 of the $600 cost of
replacing it.
C. When her car's transmission goes out a month after the warranty expires, Ciara is
faced with a $1,100 repair bill.
D. Ciara finds it difficult to come up with a $787 auto insurance premium every six
months. -CORRECTANSWER When her car's windshield breaks, Ciara has to pay only
$100 of the $600 cost of replacing it.
Which one of the following statements is correct regarding the benefits provided by
insurance?
A. Insurance reduces the financial consequences of loss exposures but not the related
uncertainty.
,B. The primary role of insurance is to meet mandatory insurance requirements.
C. The reduction in losses paid by insurers due to risk control measures benefits
individual insureds but not society as a whole.
D. Insurance helps reduce the financial burden to society by compensating accident
victims. -CORRECTANSWER Insurance helps reduce the financial burden to society by
compensating accident victims.
Shelton Industries experienced a fire in its manufacturing plant. Several employees
suffered burns and smoke inhalation injuries as they tried to escape the building. Which
one of Shelton Industries' commercial property-casualty policies would pay for the
employees' injuries and illnesses? -CORRECTANSWER Workers compensation
insurance
A homeowners policy is a type of -CORRECTANSWER Personal property-casualty
insurance policy.
Which one of the following correctly describes a reason for government involvement in
property-casualty insurance?
A. Selling insurance provides the government with a non-tax source of revenues and
profits.
B. Government programs can meet legitimate public demands unmet by private
insurers.
,C. Competition from government plans keeps private insurer's premiums competitive.
D. Preventing high-risk individuals or activities from being insured is in the public
interest. -CORRECTANSWER Government programs can meet legitimate public
demands unmet by private insurers.
Insurance Company wrote a commercial liability policy for a manufacturer of off-road
motorcycles. The potential costs of the insured's loss exposure exceed Insurance
Company's capacity. Insurance Company could consider which one of the following
types of contractual transferring agreement to meet its needs? -CORRECTANSWER
Reinsurance
In an effort to reduce expenses, increase profitability, and reduce human errors; ABC
Insurance Company decided to automate most of its personal lines underwriting
function. The company now uses standardized application forms that are submitted
electronically to one of the company's regional offices. At each regional office, a
computer with a scanner reads the applications. The computer has been programmed
with acceptable CORRECTANSWERs to the questions. If the CORRECTANSWERs on
the application are all acceptable, the policy is automatically issued. Rejected
applications are automatically forwarded to a human underwriter who reviews them. The
use of this technology has reduced the company's expense ratio by two and a half
percent, and reduced the time it takes to issue a policy. ABC Insurance Company's use
of computers to evaluate applications electronically is an application of
, A. Radiant sensors.
B. Artificial intelligence.
C. -CORRECTANSWER Artificial intelligence.
Jimmy decided to buy a house in his neighborhood that had been foreclosed on by the
bank that held the mortgage. He is hoping to do some renovation and repair work on the
house, and then sell it for a quick profit. What type of risk is this? -CORRECTANSWER
Speculative Risk
Which one of the following best describes the concept of pooling?
A. The financial consequences of unanticipated losses are transferred to an insurer.
B. Risk management is concerned with positive and negative risks.
C. Insureds share the cost of each other's losses.
D. Insurance benefits society as a whole. -CORRECTANSWER Insureds share the cost
of each other's losses.
Which one of the following represents uncertainty about outcomes that can be negative
or positive?
A. Loss exposure
B. Transfer
C. Risk
