Property And Casualty Practice Exam
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Many people don’t think they need insurance. In reality, you can never predict what might happen to you, your belongings, or the place you live, and so it’s essential to take preliminary measures, so you haven't left up a creek without a panel when tragedy strikes! Insurance is the way to do that, and today we’ll be testing your knowledge on property and casualty insurance licenses! Go ahead with the quiz and learn interesting trivia.
- 1.Which of the following represents a pure risk?
- A.
Terry places a bet on the outcome of a basketball game.
- B.
Margaret's dog is temperamental. She's afraid that it will bite a neighbor someday and she will be held responsible.
- C.
Sam transfers all of his retirement funds into a stock that he expects to rise in value.
- D.
Cindy, along with 32 others, puts $100 into an Indy 500 race pool at work. The person holding the name of the winning driver will win the entire $3,300.
- 2.What does the law of large numbers state?
- A.
That there must be a narrow spread of risk for insurance to be effective.
- B.
Requires all members of society with insurance exposures to purchase insurance.
- C.
That the more examples used to develop a statistic, the more reliable the statistic will be.
- 3.LaTonya purchases a house from John. She borrows $75,000 from First City Bank that, along with her $25,000 down payment, equals the $100,000 purchase price of the home. Who has an insurable interest in this home? Choose all that apply.
- A.
LaTonya
- B.
John
- C.
LaTonya's son, who would like to inherit the home some day
- D.
First City Bank
- 4.Highpoint Industries has an automatic sprinkler system installed in its office building. This is an example of which risk management method?
- A.
Avoidance
- B.
Reduction
- C.
Retention
- D.
Transfer
- 5.Benson Pharmaceutical Company decides not to manufacture a new drug after determining that it has serious potential side effects. This is an example of which risk management method?
- A.
Transfer
- B.
Retention
- C.
Avoidance
- D.
Reduction
- 6.Which of the following is a hazard as opposed to a peril?
- A.
Fire
- B.
Lightning
- C.
Wet pavement
- D.
Flood
- 7.What is meant by a contract of adhesion?
- A.
Both parties are required to provide services for the other.
- B.
One party draws up the contract provisions, and the other party adheres to the terms.
- C.
The contract can be revoked by any party at any time for any reason.
- D.
A contract that is formed without any consideration by either party.
- 8.Which of the following describes the principle of indemnity?
- A.
After a loss, an insured should be restored to approximately the same condition that existed before the loss.
- B.
Every insured will receive full compensation for all losses in all cases.
- C.
When property is damaged or destroyed, the insurance company must pay the full replacement cost.
- D.
In the case of bodily injuries, liability coverage must be available without regard to any policy exclusions.
- 9.Which part of an insurance policy describes what property and/or perils will be covered by the contract?
- A.
Definitions
- B.
Exclusions
- C.
Insuring agreement
- D.
Conditions
- 10.What is the consideration that an insurer gives to the insured under an insurance contract?
- A.
Stated benefits and the dates on which they are to be paid
- B.
The premium
- C.
A promise to pay for certain losses if they occur
- D.
A promise to be conscientious about the customer's situation
- 11.Under an insurance contract, the uncertainty of events can lead to unequal financial results for the two parties. This means that insurance is what kind of contract?
- A.
Unilateral
- B.
Aleatory
- C.
Conditional
- D.
Utmost good faith
- 12.The "ground rules" are described in which part of an insurance policy?
- A.
Definitions
- B.
Exclusions
- C.
Insuring agreement
- D.
Conditions
- 13.A mutual insurance company
- A.
Is managed by an attorney-in-fact.
- B.
Pays dividends to its stockholders.
- C.
Is owned by its insureds.
- D.
Is a voluntary association of individuals that shares in writing insurance contracts for a variety of risks.
- 14.A nonexclusive agent
- A.
Represents a single insurance company.
- B.
Works for a direct writer.
- C.
Is an independent businessperson.
- D.
Does not collect commissions.
- 15.Solicitors may not
- A.
Issue or countersign policies.
- B.
Sell insurance.
- C.
Collect premiums.
- D.
Sign an application.
- 16.At DEF Insurance Company, agents are employees of the company who are paid a salary plus commissions. This is an example of what type of insurance marketing system?
- A.
Captive
- B.
Independent
- C.
Direct writer
- D.
Direct response
- 17.Which insurance company department is responsible for accepting and rejecting applications based on company standards?
- A.
Underwriting
- B.
Loss Control
- C.
Claims
- D.
Agency
- 18.Which insurance company department is responsible for paying insureds' covered losses?
- A.
Audit
- B.
Claims
- C.
Underwriting
- D.
Reinsurance
- 19.Who is responsible for licensing insurance agents?
- A.
Lloyd's Associations
- B.
State insurance department
- C.
Interstate Commerce Commission
- D.
Insurance Services Office
- 20.Agent Blondell is offering a free television to every applicant who agrees to buy insurance through his agency. In most states, this is an illegal practice known as
- A.
Rebating.
- B.
Twisting.
- C.
Misrepresentation.
- D.
Failure of fiduciary responsibility.
- 21.J&M Industries does not have a group health insurance plan for its employees. Instead, it pays employees' medical expenses out of a fund specifically created for this purpose. This is an example of
- A.
Fraternal insurance.
- B.
Self-insurance.
- C.
Reinsurance.
- D.
Government insurance.
- 22.Which of the following statements concerning regulation of the insurance industry is correct?
- A.
The insurance industry is regulated exclusively by the federal government.
- B.
The insurance industry is very loosely regulated.
- C.
The state insurance department is responsible for controlling insurance matters within the state.
- D.
The state insurance department serves only the interests of the insurance industry.
- 23.Which of the following is not one of the duties of an agent?
- A.
Making appropriate coverage recommendations to prospective customers
- B.
Writing the provisions of a customer's policy
- C.
Helping prospective customers complete the application
- D.
Assuring that customers understand the coverage they are purchasing
- 24.The written agency contract between an insurer and an agent constitutes the agent's
- A.
Express authority.
- B.
Implied authority.
- C.
Assertive authority.
- D.
Apparent authority.
- 25.The Excel Insurance Company is incorporated in the state of Tennessee. It is also authorized to do business in Georgia. In Georgia, Excel is known as what type of company?
- A.
Alien
- B.
Foreign
- C.
Domestic
- D.
Non-admitted
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