Principles and Concepts in Insurance Quiz
Test your knowledge on insurance fundamentals, from premiums and underwriting to reinsurance and deductibles.
#1
What is the primary purpose of insurance?
To make a profit for insurance companies
To transfer risk from individuals to the insurance company
To guarantee a return on investment
To control government regulations
#2
What does 'premium' refer to in insurance?
The total number of policies sold by the company
The amount of money paid for an insurance policy
The profit margin of the insurance company
The number of claims filed by policyholders
#3
What is the purpose of a deductible in an insurance policy?
To limit the total amount of coverage provided by the policy
To determine the premium amount
To transfer risk to the insured
To share the cost of covered expenses between the insured and the insurer
#4
What does the term 'policyholder' refer to in insurance?
The insurance agent who sells policies
The insurance company's CEO
The person or entity that owns the insurance policy
The government regulator overseeing insurance practices
#5
What is the principle of indemnity in insurance?
Insured parties must be indemnified for any and all losses they experience
Insurers must indemnify policyholders up to the policy limits
Insurers must compensate for the actual value of the loss suffered
Insured parties are not entitled to any indemnification
#6
Which of the following best describes 'underwriting' in insurance?
The process of calculating insurance premiums
The process of evaluating risks and deciding whether to accept or reject applications for insurance
The process of investigating insurance fraud
The process of settling insurance claims
#7
What is 'moral hazard' in insurance?
The risk of loss due to natural disasters
The risk of loss due to intentional actions
The risk of loss due to negligence
The risk of loss due to unforeseen circumstances
#8
In insurance, what is the purpose of an actuary?
To investigate insurance fraud
To assess and calculate risks associated with insurance policies
To process insurance claims
To market insurance products
#9
What is the difference between 'whole life' and 'term life' insurance policies?
Whole life policies have a fixed premium, while term life policies have a flexible premium
Whole life policies provide coverage for a specific term, while term life policies provide coverage for the entire life of the insured
Whole life policies have a cash value component, while term life policies do not
Whole life policies have a higher death benefit than term life policies
#10
What is the purpose of a 'rider' in an insurance policy?
To exclude certain coverage from the policy
To modify or add coverage to the policy
To cancel the policy before its expiration date
To determine the premium amount
#11
What is 'reinsurance' in the insurance industry?
Insurance purchased by individuals and businesses
Insurance purchased by insurance companies to protect themselves against large losses
Insurance that covers losses from natural disasters
Insurance that covers losses from intentional acts
#12
What is the 'exclusion' clause in an insurance policy?
A clause that limits the geographic coverage of the policy
A clause that specifies the types of losses or risks that are not covered by the policy
A clause that allows the insured to cancel the policy at any time
A clause that provides additional coverage beyond the basic policy limits
#13
What is 'coinsurance' in insurance?
A type of insurance for rare coins and collectibles
A provision where the insured agrees to share a percentage of the covered losses
The process of insuring multiple properties under a single policy
The process of insuring against losses due to counterfeit currency
#14
What is 'aggregate limit' in insurance?
The maximum amount the insurer will pay for a single claim
The total amount the insurer will pay for all claims during a policy period
The minimum amount the insurer will pay for a covered loss
The limit on the number of claims a policyholder can file
#15
What is 'waiting period' in insurance?
The period of time an insured must wait before coverage begins for certain conditions
The period of time during which claims must be filed
The period of time after a claim is filed until it is processed
The period of time after a policy is purchased until it becomes effective
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