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This chapter will make up roughly 20%, 10 questions, of the required examination.

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Chapter 2 Quiz

Question 1 of 35

1

_________ is the uncertainty or possibility for loss in a given policy.

Select one of the following:

  • Exposure

  • Hazard

  • Risk

  • Peril

  • Loss

Explanation

Question 2 of 35

1

_________ is the total outstanding risk for loss.

Select one of the following:

  • Exposure

  • Hazard

  • Risk

  • Peril

  • Loss

Explanation

Question 3 of 35

1

__________ is a situation that increases the likelihood for loss; or the severity of loss:

Select one of the following:

  • Exposure

  • Hazard

  • Risk

  • Peril

  • Loss

Explanation

Question 4 of 35

1

___________ is the cause of damage or loss

Select one of the following:

  • Exposure

  • Hazard

  • Risk

  • Peril

  • Loss

Explanation

Question 5 of 35

1

________ is the physical damage or loss of income

Select one of the following:

  • Loss

  • Peril

  • Risk

  • Hazard

  • Exposure

Explanation

Question 6 of 35

1

_______ is avoiding as much risk as possible; avoiding high-risk policies

Select one of the following:

  • Reduction

  • Retention

  • Transfer

  • Sharing

  • Avoidance

Explanation

Question 7 of 35

1

________ is dealing with risk as it occurs; often consumers will pay a higher deductible.

Select one of the following:

  • Reduction

  • Retention

  • Transfer

  • Sharing

  • Avoidance

Explanation

Question 8 of 35

1

________ is dealing with risk for a group of people with the same risk to reduce the loss for the individual:

Select one of the following:

  • Avoidance

  • Sharing

  • Transfer

  • Retention

  • Reduction

Explanation

Question 9 of 35

1

_______ is limiting the probability for risk by taking preventative steps:

Select one of the following:

  • Reduction

  • Retention

  • Transfer

  • Sharing

  • Avoidance

Explanation

Question 10 of 35

1

_________ is placing risk to another party whom assumes liability if and when loss should occur.

Select one of the following:

  • Reduction

  • Retention

  • Transfer

  • Sharing

  • Avoidance

Explanation

Question 11 of 35

1

________ is the social phenomenon whereby persons with a higher than average probability of loss seek greater insurance coverage than those with less risk..

Select one of the following:

  • Law of large numbers

  • Reinsurance

  • Adverse selection

Explanation

Question 12 of 35

1

________ indicates the larger the pool of insurance policies written the greater probability to estimate the loss expected. This allows companies to estimate how many policies should be written in order to cover the expected loss.

Select one of the following:

  • Law of large numbers

  • Reinsurance

  • Adverse selection

Explanation

Question 13 of 35

1

_______ is a transaction between a primary insurer and another licensed (re) insurer where the reinsurer agrees to cover all or part of the losses and/or loss adjustment expenses of the primary insurer. The assumption is in exchange for a premium.

Select one of the following:

  • Law of large number

  • Reinsurance

  • Adverse selection

Explanation

Question 14 of 35

1

______ is a type of insurance company whom gains its capital from its shareholders, or those who purchase stock in the company.

Select one of the following:

  • Stock Companies

  • Lloyd's Associations

  • Fraternal Benefit Societies

  • Mutual Companies

Explanation

Question 15 of 35

1

_______ is a type of insurance company owned entirely by the policyholders (consumer).

Select one of the following:

  • Stock companies

  • Lloyd’s associations

  • Fraternal benefit societies

  • Mutual companies

Explanation

Question 16 of 35

1

______ is an organization of people who usually share a common ethnic, religious, or vocational affiliation. This type of society may provide insurance to its members.

Select one of the following:

  • Stock companies

  • Lloyd’s associations

  • Fraternal benefit societies

  • Mutual companies

Explanation

Question 17 of 35

1

In a _______ individuals who are not in business together come together and each is only responsible for the portion of the risk they choose to insure.

Select one of the following:

  • Stock companies

  • Lloyd’s associations

  • Fraternal benefit societies

  • Mutual companies

Explanation

Question 18 of 35

1

Self-insured funds is a method of managing risk by setting aside a pool of money to be used if an unexpected loss occurs..

Select one of the following:

  • True
  • False

Explanation

Question 19 of 35

1

_______ is any insurance company operating in a country for which the company did not originate..

Select one of the following:

  • Domestic

  • Foreign

  • Alien

Explanation

Question 20 of 35

1

______ is any insurance company operating within the same state for which the company originated.

Select one of the following:

  • Domestic

  • Foreign

  • Alien

Explanation

Question 21 of 35

1

_______ is any insurance company operating in a state for which the company did not originate.

Select one of the following:

  • Domestic

  • Foreign

  • Alien

Explanation

Question 22 of 35

1

______ authority is granted to an individual based upon a mutual agreement, and is explicitly stated and understood. .

Select one of the following:

  • Apparent

  • Implied

  • Express

Explanation

Question 23 of 35

1

_______ authority is not explicitly stated, but is reasonably assumed.

Select one of the following:

  • Apparent

  • Implied

  • Express

Explanation

Question 24 of 35

1

______ is an agent's power to act on behalf of a principal, even though not expressly or impliedly granted.

Select one of the following:

  • Apparent

  • Implied

  • Express

Explanation

Question 25 of 35

1

Which of the following are elements of a legal contract?

Select one of the following:

  • Offer and acceptance

  • Consideration

  • Competent parties

  • Legal purpose

  • All of the above

Explanation

Question 26 of 35

1

______ is a contract in which one party has substantially more power than the other in creating the contract.

Select one of the following:

  • Unilateral contract

  • Personal contract

  • Conditional contract

  • Aleatory contract

  • Contract of adhesion

Explanation

Question 27 of 35

1

______ is an agreement concerned with an uncertain event that provides for unequal transfer of value between the parties.

Select one of the following:

  • Unilateral contract

  • Personal contract

  • Conditional contract

  • Aleatory contract

  • Contract of adhesion

Explanation

Question 28 of 35

1

______ is a contract written to a named individual that may not be transferred.

Select one of the following:

  • Unilateral contract

  • Personal contract

  • Conditional contract

  • Aleatory contract

  • Contract of adhesion

Explanation

Question 29 of 35

1

______ is a contract in which only one party makes an enforceable promise..

Select one of the following:

  • Unilateral contract

  • Personal contract

  • Conditional contract

  • Aleatory contract

  • Contract of adhesion

Explanation

Question 30 of 35

1

_____ is a legal agreement that requires the prior performance of another agreement or clause in order to be enforceable.

Select one of the following:

  • Unilateral contract

  • Personal contract

  • Conditional contract

  • Aleatory contract

  • Contract of adhesion

Explanation

Question 31 of 35

1

Indemnity is the form of a contract that ensures a party be brought back to whole in the event of a peril.

Select one of the following:

  • True
  • False

Explanation

Question 32 of 35

1

______ are any statements made by the applicant in the process of filling out an application that are believed to be correct in nature to the best of their knowledge

Select one of the following:

  • Estoppel

  • Representations

  • Warranties

  • Waiver

Explanation

Question 33 of 35

1

______ is any statement made in the application process for insurance that is guaranteed to be true in nature. .

Select one of the following:

  • Estoppel

  • Representations

  • Warranties

  • Waiver

Explanation

Question 34 of 35

1

_________ is the voluntary withholding of a given legal right, or advantage known by the insurer

Select one of the following:

  • Estoppel

  • Representations

  • Warranties

  • Waiver

Explanation

Question 35 of 35

1

________ is utilized to prevent the denial of a fact if the fact was admitted to be true by a previous action

Select one of the following:

  • Estoppel

  • Representations

  • Warranties

  • Waiver

Explanation

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