#1
Which of the following best describes insurance?
A contract between an individual and an insurer to mitigate risk
ExplanationInsurance is a risk mitigation contract between an individual and an insurer.
#2
What is the primary purpose of life insurance?
To protect against the financial loss resulting from premature death
ExplanationLife insurance primarily safeguards against financial loss due to premature death.
#3
What is a peril in insurance terminology?
An event that causes financial loss and is covered by an insurance policy
ExplanationA peril is an event leading to financial loss covered by an insurance policy.
#4
In liability insurance, what does 'bodily injury' typically refer to?
Physical harm or injury to a person
ExplanationBodily injury in liability insurance refers to physical harm to a person.
#5
Which type of insurance is designed to cover medical expenses resulting from accidents or illnesses?
Health insurance
ExplanationHealth insurance covers medical expenses from accidents or illnesses.
#6
What does 'premium' refer to in insurance?
The cost of purchasing an insurance policy
ExplanationA premium in insurance refers to the cost of buying a policy.
#7
Which type of insurance typically covers damage to one's own vehicle in an accident?
Auto insurance
ExplanationAuto insurance generally covers damage to one's own vehicle in accidents.
#8
What is a deductible in insurance?
The maximum amount the insured must pay out-of-pocket before the insurer covers the rest
ExplanationA deductible is the maximum out-of-pocket amount an insured must pay before the insurer covers further costs.
#9
What is underwriting in the insurance industry?
The process of evaluating and assessing risks before issuing insurance policies
ExplanationUnderwriting involves assessing risks prior to issuing insurance policies.
#10
Which of the following is NOT a type of life insurance?
Property insurance
ExplanationProperty insurance is not a type of life insurance.
#11
What does 'COBRA' stand for in the context of health insurance in the United States?
Consolidated Omnibus Budget Reconciliation Act
ExplanationCOBRA stands for Consolidated Omnibus Budget Reconciliation Act.
#12
In property insurance, what is 'actual cash value' (ACV)?
The cost to replace an item with a new one of similar quality, minus depreciation
ExplanationACV in property insurance is the replacement cost minus depreciation.
#13
What is reinsurance in the context of insurance?
The process of transferring some of the risk assumed by an insurance company to another insurer
ExplanationReinsurance involves transferring some assumed risk from one insurer to another.
#14
What does the term 'exclusion' mean in insurance policies?
A provision that limits coverage under certain circumstances
ExplanationAn exclusion is a provision restricting coverage in specific circumstances.
#15
In insurance, what does the term 'actuary' refer to?
A professional who assesses and manages risks using mathematical and statistical methods
ExplanationAn actuary is a professional who assesses risks using mathematical methods.
#16
Which of the following is NOT a factor typically considered by insurers when calculating premiums?
Eye color
ExplanationEye color is not typically considered when insurers calculate premiums.
#17
What does 'subrogation' mean in insurance?
The process of reclaiming money from a third party to cover a claim already paid
ExplanationSubrogation is reclaiming money from a third party to cover a claim.
#18
Which type of insurance covers damage to property caused by fire, theft, or other perils?
Property insurance
ExplanationProperty insurance covers damage from fire, theft, and other perils.