#1
What is the primary function of insurance?
To generate profit for the insurance company
To transfer risk from the insured to the insurer
To provide investment opportunities
To regulate financial markets
#2
Which of the following is a common type of life insurance?
Collision insurance
Renter's insurance
Term life insurance
Pet insurance
#3
In property insurance, what does ACV stand for?
Actual Cash Value
Annual Coverage Variation
Asset Coverage Verification
Accidental Claims Validation
#4
What is the purpose of an insurance premium?
To cover the insurer's operating expenses
To fund the insured's investments
To transfer risk to the insured
To compensate the insured for a loss
#5
Which type of insurance provides coverage for damage to someone else's property?
Liability insurance
Health insurance
Property insurance
Life insurance
#6
What is the purpose of reinsurance treaties?
To regulate insurance premiums
To transfer risk from the insured to the reinsurer
To establish coverage limits for policyholders
To exclude certain perils from coverage
#7
What is moral hazard in the context of insurance?
The intentional exaggeration of a claim
The increased likelihood of loss due to risky behavior
The misuse of insurance premiums by the insured
The reluctance to purchase insurance
#8
Which of the following is a component of the underwriting process in insurance?
Issuing policies
Investing premiums
Assessing risk and determining premiums
Processing claims
#9
What is the purpose of a deductible in insurance?
To limit the coverage amount
To encourage policyholders to file more claims
To reduce the premium cost
To transfer risk to the insured
#10
In insurance, what does the term 'endorsement' refer to?
A document providing evidence of coverage
An amendment or addition to an insurance policy
The termination of an insurance policy
A legal claim against an insurer
#11
What is the difference between hazard and peril in insurance?
They are synonymous and can be used interchangeably
Hazard refers to a condition that increases the likelihood of a peril
Peril refers to a condition that increases the likelihood of a hazard
They both refer to the potential for financial loss
#12
What is the purpose of an insurance policy deductible?
To limit the insurer's liability
To discourage the insured from filing claims
To determine the coverage amount
To increase the premium cost
#13
What is reinsurance in the insurance industry?
Insurance purchased by an individual or entity
Insurance for high-risk individuals
Insurance purchased by insurance companies to manage risk
Insurance for government agencies
#14
What is a peril in the context of insurance?
The uncertainty of loss
The cause of a potential loss
The total amount payable by the insured
The probability of a claim being denied
#15
What role does an actuary play in the insurance industry?
Claims processing
Premium collection
Risk assessment and statistical analysis
Policy issuance
#16
What is a captive insurance company?
An insurer owned by its policyholders
An insurer owned by an individual or entity for its own insurance needs
An insurer specializing in life insurance only
An insurer offering coverage to anyone in the market
#17
What is adverse selection in insurance?
The intentional exaggeration of a claim
The tendency for high-risk individuals to seek insurance more often
The process of evaluating risk in underwriting
The practice of denying claims without proper investigation
#18
What is the difference between occurrence-based and claims-made liability insurance?
The coverage territory
The coverage period
The premium cost
The types of perils covered