#1
Which of the following best defines insurance?
A contract between two parties where one party agrees to compensate the other for specified losses
ExplanationInsurance is a contractual agreement for compensation of specified losses.
#2
What is a premium in the context of insurance?
The amount of money paid by an insured party to an insurer for coverage
ExplanationPremium is the payment for insurance coverage made by the insured.
#3
Which of the following is an example of a peril in insurance terminology?
Fire
ExplanationFire is an example of a peril, a specific risk covered by insurance.
#4
What does the 'deductible' refer to in an insurance policy?
The amount paid by the insured before the insurance coverage kicks in
ExplanationDeductible is the initial amount the insured must pay before insurance coverage applies.
#5
What is 'renewal' in insurance?
The process of extending an existing insurance policy beyond its expiration date
ExplanationRenewal is the extension of an insurance policy beyond its expiry date.
#6
Which of the following is NOT a type of insurance?
Cryptocurrency insurance
ExplanationCryptocurrency insurance is not a traditional type of insurance.
#7
What is subrogation in the insurance context?
The process of an insurer suing a third party responsible for a loss to recover the amount paid to the insured
ExplanationSubrogation involves insurers recovering payments from third parties responsible for losses.
#8
What does the term 'underwriting' refer to in insurance?
The process of an insurer assessing and accepting risks
ExplanationUnderwriting is the evaluation and acceptance of risks by insurers.
#9
What is reinsurance in the insurance industry?
The process of an insurer transferring part of its risk to another insurance company
ExplanationReinsurance involves insurers transferring some of their risk to other insurers.
#10
What is the purpose of the National Flood Insurance Program (NFIP) in the United States?
To provide insurance coverage for damages caused by floods
ExplanationNFIP provides insurance coverage specifically for flood-related damages.
#11
Which of the following is NOT a type of life insurance?
Collision insurance
ExplanationCollision insurance is not a form of life insurance.
#12
Which principle of insurance states that the insured should not profit from insurance?
Principle of indemnity
ExplanationThe principle of indemnity ensures the insured are restored to the same financial position they were before the loss.
#13
What does the 'exclusion' clause in an insurance policy specify?
The specific risks or circumstances that are not covered by the insurance policy
ExplanationExclusion clauses define risks or circumstances not covered by an insurance policy.
#14
In insurance, what is 'actuarial science' primarily concerned with?
Calculating insurance premiums and reserves
ExplanationActuarial science deals with calculating premiums and reserves based on risk assessments.
#15
What does 'co-insurance' refer to in the context of insurance?
The percentage of covered expenses that the insured must pay after the deductible is met
ExplanationCo-insurance is the portion of expenses the insured pays after the deductible is met.
#16
In insurance, what does 'risk management' involve?
Assessing and reducing the likelihood and impact of potential losses
ExplanationRisk management involves evaluating and mitigating potential losses.
#17
What is 'residual market' in insurance?
The market for high-risk individuals who cannot obtain insurance coverage through normal channels
ExplanationResidual market serves high-risk individuals who can't access insurance through standard means.