#1
What is the primary function of insurance?
To transfer risk from the insured to the insurer
ExplanationRisk transfer from insured to insurer.
#2
Which of the following is a common type of life insurance?
Term life insurance
ExplanationCommon life insurance type with a fixed coverage period.
#3
In property insurance, what does ACV stand for?
Actual Cash Value
ExplanationACV stands for Actual Cash Value in property insurance.
#4
What is the purpose of an insurance premium?
To cover the insurer's operating expenses
ExplanationPremium covers insurer's operational costs.
#5
Which type of insurance provides coverage for damage to someone else's property?
Liability insurance
ExplanationLiability insurance covers damage to others' property.
#6
What is the purpose of reinsurance treaties?
To transfer risk from the insured to the reinsurer
ExplanationTransfer of risk from insured to reinsurer.
#7
What is moral hazard in the context of insurance?
The increased likelihood of loss due to risky behavior
ExplanationHigher risk due to risky behavior.
#8
Which of the following is a component of the underwriting process in insurance?
Assessing risk and determining premiums
ExplanationUnderwriting involves risk assessment and premium determination.
#9
What is the purpose of a deductible in insurance?
To reduce the premium cost
ExplanationDeductible lowers premium cost by sharing the risk.
#10
In insurance, what does the term 'endorsement' refer to?
An amendment or addition to an insurance policy
ExplanationModification or addition to an insurance policy.
#11
What is the difference between hazard and peril in insurance?
Hazard refers to a condition that increases the likelihood of a peril
ExplanationHazard increases the likelihood of a peril.
#12
What is the purpose of an insurance policy deductible?
To limit the insurer's liability
ExplanationDeductible limits the insurer's liability.
#13
What is reinsurance in the insurance industry?
Insurance purchased by insurance companies to manage risk
ExplanationInsurers buying coverage to manage their own risk.
#14
What is a peril in the context of insurance?
The cause of a potential loss
ExplanationThe cause of a potential loss in insurance.
#15
What role does an actuary play in the insurance industry?
Risk assessment and statistical analysis
ExplanationActuaries assess risk and perform statistical analysis.
#16
What is a captive insurance company?
An insurer owned by an individual or entity for its own insurance needs
ExplanationInsurer owned for its own insurance needs.
#17
What is adverse selection in insurance?
The tendency for high-risk individuals to seek insurance more often
ExplanationHigh-risk individuals seeking insurance more frequently.
#18
What is the difference between occurrence-based and claims-made liability insurance?
The coverage period
ExplanationDifference lies in the coverage period.