100 IMPORTANT MULTIPLE CHOICE QUESTIONS WITH ANSWERS RELATED TO PRINCIPLES OF INSURANCE AND LOSS ASSESSMENT
Which of the following is NOT a principle of insurance?
a) Indemnity
b) Insurable interest
c) Utmost good faith
d) Non-disclosure
Answer: d) Non-disclosure
Insurable interest means:
a) The insured person must have a financial stake in the subject matter of insurance.
b) The insurance policy must be affordable for the insured.
c) The insurer must have a good reputation in the market.
d) The insured person must have knowledge of insurance principles.
Answer: a) The insured person must have a financial stake in the subject matter of insurance.
The principle of indemnity means:
a) The insurer must indemnify the insured for any loss or damage suffered.
b) The insured must indemnify the insurer for any loss or damage suffered.
c) The insured must indemnify a third party for any loss or damage suffered.
d) The insurer must indemnify the insured only if the loss or damage is intentional.
Answer: a) The insurer must indemnify the insured for any loss or damage suffered.
Which of the following is an example of a peril in insurance?
a) Fire
b) Policyholder
c) Premium
d) Insurer
Answer: a) Fire
Proximate cause refers to:
a) The immediate cause of loss or damage.
b) The remote cause of loss or damage.
c) The cause of loss or damage that occurred in the past.
d) The cause of loss or damage that is difficult to determine.
Answer: a) The immediate cause of loss or damage.
An insurance policy is a:
a) Contract between the insurer and the insured.
b) Agreement between the insured and a third party.
c) Document issued by the government.
d) Statement of financial position of the insured.
Answer: a) Contract between the insurer and the insured.
A person who assesses the loss or damage suffered by the insured is called a:
a) Actuary
b) Adjuster
c) Agent
d) Underwriter
Answer: b) Adjuster
The process of determining the value of the loss or damage is called:
a) Underwriting
b) Risk assessment
c) Claim settlement
d) Loss assessment
Answer: d) Loss assessment
The principle of subrogation allows the insurer to:
a) Transfer the risk to a reinsurance company.
b) Recover the amount paid to the insured from a third party.
c) Reject the insured’s claim for indemnity.
d) Increase the premium amount for the insured.
Answer: b) Recover the amount paid to the insured from a third party.
Which of the following is NOT a type of insurance policy?
a) Life insurance
b) Fire insurance
c) Health insurance
d) Liability insurance
Answer: d) Liability insurance
A policyholder’s failure to disclose material information is known as:
a) Fraud
b) Misrepresentation
c) Negligence
d) Subrogation
Answer: b) Misrepresentation
An insurance policy is a contract of:
a) Indemnity
b) Guarantee
c) Trust
d) Surety
Answer: a) Indemnity
Which type of insurance provides coverage for damage or loss caused by theft, accidents, or vandalism?
a) Property insurance
b) Liability insurance
c) Health insurance
d) Life insurance
Answer: a) Property insurance
The process of estimating the potential financial loss associated with a particular risk is known as:
a) Risk management
b) Underwriting
c) Risk assessment
d) Claim settlement
Answer: c) Risk assessment
In insurance, a deductible refers to:
a) The premium amount paid by the insured.
b) The maximum amount the insurer will pay for a claim.
c) The amount the insured must pay out of pocket before the insurer covers the rest.
d) The financial liability of the insurer in case of a loss.
Answer: c) The amount the insured must pay out of pocket before the insurer covers the rest.
An insurance policy is considered a contract of adhesion, which means that:
a) The insured can negotiate the terms and conditions of the policy.
b) The insurer can change the policy terms without notice.
c) The insured must accept the terms and conditions of the policy as presented.
d) The insurer is solely responsible for any loss or damage suffered by the insured.
Answer: c) The insured must accept the terms and conditions of the policy as presented.
Which of the following is an example of a peril in health insurance?
a) Disability
b) Insured person
c) Premium
d) Insurer
Answer: a) Disability
The principle of utmost good faith requires:
a) The insured to disclose all material information to the insurer.
b) The insurer to disclose all material information to the insured.
c) The insured to provide false information to the insurer.
d) The insurer to deny coverage to the insured.
Answer: a) The insured to disclose all material information to the insurer.
A contract of insurance is valid only if it is based on:
a) Speculation
b) Adverse selection
c) Aleatory principle
d) Unilateral promise
Answer: c) Aleatory principle
Which of the following is NOT a characteristic of insurance?
a) Risk transfer
b) Payment of premium
c) Uncertainty
d) Certainty of loss
Answer: d) Certainty of loss
Which of the following is a method of calculating the value of a loss in property insurance?
a) Actual cash value
b) Agreed value
c) Replacement cost
d) All of the above
Answer: d) All of the above
In health insurance, pre-existing conditions are typically:
a) Covered without any waiting period.
b) Excluded from coverage.
c) Covered with higher premiums.
d) Covered with additional deductibles.
Answer: b) Excluded from coverage.
Which type of insurance provides coverage for legal liability arising from injuries to other people or damage to their property?
a) Property insurance
b) Liability insurance
c) Health insurance
d) Life insurance
Answer: b) Liability insurance
A person who sells insurance policies on behalf of the insurer is called a(n):
a) Actuary
b) Adjuster
c) Agent
d) Underwriter
Answer: c) Agent
The principle of contribution states that:
a) Each insurer must contribute equally to the claim settlement.
b) The insured must contribute financially to the claim settlement.
c) The insured can choose which insurer will settle the claim.
d) Each insurer is responsible for the entire claim settlement.
Answer: a) Each insurer must contribute equally to the claim settlement.
Which type of insurance provides coverage for medical expenses and loss of income due to illness or injury?
a) Property insurance
b) Liability insurance
c) Health insurance
d) Life insurance
Answer: c) Health insurance
The process of evaluating and classifying the risks presented by potential policyholders is called:
a) Underwriting
b) Risk assessment
c) Risk management
d) Claim settlement
Answer: a) Underwriting
An insurable risk must have all of the following characteristics, EXCEPT:
a) Measurable
b) Predictable
c) Identifiable
d) Uncontrollable
Answer: d) Uncontrollable
A policy provision that excludes coverage for certain events or conditions is called a(n):
a) Exclusion clause
b) Endorsement
c) Rider
d) Deductible
Answer: a) Exclusion clause
Which of the following is NOT a common type of life insurance policy?
a) Term life insurance
b) Whole life insurance
c) Variable life insurance
d) Collision insurance
Answer: d) Collision insurance
The process of transferring the risk of potential losses from an individual or entity to an insurance company is known as:
a) Underwriting
b) Risk management
c) Risk transfer
d) Loss prevention
Answer: c) Risk transfer
In insurance, an actuary is responsible for:
a) Assessing the value of a loss or damage.
b) Investigating fraudulent claims.
c) Calculating insurance premiums and reserves.
d) Negotiating claim settlements with the insured.
Answer: c) Calculating insurance premiums and reserves.
The principle of average states that:
a) The insurer must pay the average amount for a claim settlement.
b) The insured must pay the average premium amount.
c) The insured is responsible for a proportionate share of a loss if underinsured.
d) The insurer must equally share the loss with the insured.
Answer: c) The insured is responsible for a proportionate share of a loss if underinsured.
Which of the following is NOT a factor affecting insurance premium rates?
a) Age and gender
b) Geographic location
c) Marital status
d) Race and ethnicity
Answer: d) Race and ethnicity
In insurance, a waiting period refers to:
a) The time during which the insured is not covered by the policy.
b) The time between submitting a claim and receiving the claim settlement.
c) The time it takes for the insurer to process a new policy application.
d) The time it takes for the insured to recover from an illness or injury.
Answer: a) The time during which the insured is not covered by the policy.
Which type of insurance provides coverage for financial losses resulting from legal claims against the insured?
a) Property insurance
b) Liability insurance
c) Health insurance
d) Life insurance
Answer: b) Liability insurance
An insurable interest in property insurance typically exists when:
a) The insured owns the property.
b) The insured has a financial stake in the property.
c) The insured has a personal connection to the property.
d) The insured has obtained permission to insure the property.
Answer: b) The insured has a financial stake in the property.
The process of settling an insurance claim involves:
a) Determining the value of the loss or damage.
b) Reviewing the terms and conditions of the insurance policy.
c) Verifying the validity of the claim.
d) All of the above
Answer: d) All of the above
In insurance, the term “moral hazard” refers to:
a) The risk of loss resulting from an insured event.
b) The intentional causing of a loss to collect insurance benefits.
c) The uncertainty surrounding the occurrence of a loss.
d) The increased risk of loss due to the insured’s behavior or characteristics.
Answer: d) The increased risk of loss due to the insured’s behavior or characteristics.
Which of the following is an example of a named peril in property insurance?
a) Flood
b) Accidental injury
c) Medical emergency
d) General wear and tear
Answer: a) Flood
The principle of utmost good faith applies to:
a) Both the insured and the insurer.
b) Only the insured.
c) Only the insurer.
d) Neither the insured nor the insurer.
Answer: a) Both the insured and the insurer.
In insurance, a policy limit refers to:
a) The maximum number of claims a policyholder can file.
b) The maximum amount the insurer will pay for a covered loss.
c) The minimum amount the insured must pay as a deductible.
d) The maximum premium rate the insured must pay.
Answer: b) The maximum amount the insurer will pay for a covered loss.
Which type of insurance provides coverage for financial losses resulting from the death of the insured?
a) Property insurance
b) Liability insurance
c) Health insurance
d) Life insurance
Answer: d) Life insurance
The principle of utmost good faith requires the insured to:
a) Pay the premium on time.
b) Report any changes in risk during the policy period.
c) Disclose all material facts to the insurer.
d) All of the above
Answer: d) All of the above
A policy provision that extends the coverage of an insurance policy is called a(n):
a) Exclusion clause
b) Endorsement
c) Rider
d) Deductible
Answer: b) Endorsement
Which of the following is an example of a peril in auto insurance?
a) Theft
b) Policyholder
c) Premium
d) Insurer
Answer: a) Theft
The principle of loss minimization states that the insured must:
a) Take all reasonable steps to prevent or minimize a loss.
b) File a claim immediately after a loss occurs.
c) Pay the deductible before the insurer settles the claim.
d) Provide false information to the insurer to increase the claim amount.
Answer: a) Take all reasonable steps to prevent or minimize a loss.
In insurance, a policyholder is also known as the:
a) Insured
b) Adjuster
c) Agent
d) Underwriter
Answer: a) Insured
An insurance policy that covers a specific period of time is known as a(n):
a) Term policy
b) Whole life policy
c) Variable policy
d) Indemnity policy
Answer: a) Term policy
Which of the following is an example of a first-party claim?
a) A claim filed by the insured against another person’s insurance policy.
b) A claim filed by a third party against the insured’s insurance policy.
c) A claim filed by the insured for damage to their own property.
d) A claim filed by the insured for liability arising from an injury to another person.
Answer: c) A claim filed by the insured for damage to their own property.
The principle of insurable interest does NOT require the insured to:
a) Have a legal or financial relationship with the subject matter of insurance.
b) Benefit from the continued existence of the subject matter of insurance.
c) Demonstrate financial need for insurance coverage.
d) Suffer a financial loss if the subject matter of insurance is damaged or destroyed.
Answer: c) Demonstrate financial need for insurance coverage.
The process of assigning a risk category to an applicant based on their risk profile is called:
a) Underwriting
b) Risk assessment
c) Risk management
d) Loss prevention
Answer: a) Underwriting
In insurance, a policy renewal refers to:
a) The process of updating the policy terms and conditions.
b) The transfer of the policy to a different insurer.
c) The extension of the policy for an additional period.
d) The cancellation of the policy by the insured.
Answer: c) The extension of the policy for an additional period.
An insurable risk must be all of the following, EXCEPT:
a) Financially measurable
b) Accidental in nature
c) Speculative in nature
d) Independent of the insured’s control
Answer: c) Speculative in nature
In insurance, a grace period refers to:
a) The time during which the insured can cancel the policy without penalty.
b) The time during which the insured can file a claim.
c) The time during which the insured can renew the policy without a lapse in coverage.
d) The time during which the insured can delay paying the premium.
Answer: c) The time during which the insured can renew the policy without a lapse in coverage.
Which type of insurance provides coverage for financial losses resulting from damage to one’s vehicle?
a) Property insurance
b) Liability insurance
c) Health insurance
d) Auto insurance
Answer: d) Auto insurance
The principle of insurable interest is based on the concept that insurance should:
a) Provide financial protection to the insured.
b) Promote risk sharing among the insured.
c) Ensure that the insured is compensated for any loss or damage suffered.
d) Encourage the insured to take all necessary precautions to prevent a loss.
Answer: a) Provide financial protection to the insured.
In insurance, a rider is a(n):
a) Person who assesses the value of a loss or damage.
b) Provision added to an insurance policy to modify or expand coverage.
c) Financial penalty imposed on the insured for filing a fraudulent claim.
d) Document that summarizes the terms and conditions of the insurance policy.
Answer: b) Provision added to an insurance policy to modify or expand coverage.
The principle of subrogation allows the insurer to:
a) Deny coverage to the insured.
b) Transfer the risk to a reinsurance company.
c) Recover the amount paid to the insured from a third party.
d) Increase the premium amount for the insured.
Answer: c) Recover the amount paid to the insured from a third party.
Which type of insurance provides coverage for financial losses resulting from damage or loss of property?
a) Property insurance
b) Liability insurance
c) Health insurance
d) Life insurance
Answer: a) Property insurance
The principle of proximate cause states that:
a) The insurer must pay the actual cause of loss.
b) The insured must prove the exact cause of loss.
c) The cause of loss must be directly related to the insured event.
d) The cause of loss must be excluded from coverage.
Answer: c) The cause of loss must be directly related to the insured event.
In insurance, a claim reserve refers to:
a) The amount the insured must pay out of pocket before the insurer covers the rest.
b) The financial liability of the insurer in case of a loss.
c) The estimated amount the insurer will need to pay for future claim settlements.
d) The maximum amount the insurer will pay for a claim.
Answer: c) The estimated amount the insurer will need to pay for future claim settlements.
The principle of indemnity is intended to:
a) Compensate the insured for the full value of their loss.
b) Provide financial benefits to the insured regardless of the loss amount.
c) Prevent the insured from profiting from an insurance claim.
d) Transfer the risk of loss to a third party.
Answer: c) Prevent the insured from profiting from an insurance claim.
Which of the following is an example of a liability claim?
a) A claim for damage to a car in an accident.
b) A claim for stolen jewelry.
c) A claim for medical expenses after a slip and fall accident.
d) A claim for damage to a house due to a fire.
Answer: c) A claim for medical expenses after a slip and fall accident.
In insurance, a material fact is defined as:
a) Any information that may affect the premium amount.
b) Any information that may affect the insurer’s decision to provide coverage.
c) Any information that may affect the insured’s ability to pay the premium.
d) Any information that may affect the insured’s eligibility for coverage.
Answer: b) Any information that may affect the insurer’s decision to provide coverage.
Which type of insurance provides coverage for financial losses resulting from damage or loss of goods during transportation?
a) Property insurance
b) Liability insurance
c) Health insurance
d) Cargo insurance
Answer: d) Cargo insurance
The principle of contribution states that:
a) Each insurer must contribute equally to the claim settlement.
b) The insured must contribute financially to the claim settlement.
c) The insured can choose which insurer will settle the claim.
d) Each insurer is responsible for the entire claim settlement.
Answer: a) Each insurer must contribute equally to the claim settlement.
In insurance, a claimant is:
a) The insured person filing a claim.
b) The person or entity against whom a claim is filed.
c) The person or entity responsible for paying the claim settlement.
d) The person or entity investigating the validity of the claim.
Answer: a) The insured person filing a claim.
The principle of indemnity does NOT apply to which type of insurance?
a) Property insurance
b) Liability insurance
c) Health insurance
d) Life insurance
Answer: d) Life insurance
In health insurance, a copayment is:
a) The maximum amount the insurer will pay for a claim.
b) The percentage of medical expenses the insured must pay out of pocket.
c) The fixed amount the insured must pay for certain healthcare services.
d) The amount the insured receives from the insurer for a covered medical expense.
Answer: c) The fixed amount the insured must pay for certain healthcare services.
The principle of utmost good faith requires the insurer to:
a) Pay claims promptly and fairly.
b) Provide accurate and complete policy information to the insured.
c) Offer competitive premium rates.
d) Protect the insured against all possible risks.
Answer: b) Provide accurate and complete policy information to the insured.
In insurance, a deductible is:
a) The maximum amount the insurer will pay for a claim.
b) The percentage of a claim that the insured must pay out of pocket.
c) The amount the insured must pay before the insurer covers the rest of the claim.
d) The additional coverage added to an insurance policy.
Answer: c) The amount the insured must pay before the insurer covers the rest of the claim.
Which type of insurance provides coverage for financial losses resulting from legal claims related to professional services?
a) Property insurance
b) Liability insurance
c) Health insurance
d) Professional liability insurance
Answer: d) Professional liability insurance
The principle of subrogation is intended to:
a) Compensate the insured for their loss.
b) Prevent the insured from filing fraudulent claims.
c) Transfer the insured’s rights to the insurer after a claim settlement.
d) Shift the risk of loss to a third party.
Answer: c) Transfer the insured’s rights to the insurer after a claim settlement.
In insurance, an exclusion clause is:
a) The part of the policy that specifies the insured events covered.
b) The provision that extends the coverage of an insurance policy.
c) The document that summarizes the policy terms and conditions.
d) The part of the policy that excludes coverage for certain events or conditions.
Answer: d) The part of the policy that excludes coverage for certain events or conditions.
Which of the following is an example of a third-party claim?
a) A claim filed by the insured for damage to their own property.
b) A claim filed by the insured against another person’s insurance policy.
c) A claim filed by a third party against the insured’s insurance policy.
d) A claim filed by the insured for liability arising from an injury to another person.
Answer: c) A claim filed by a third party against the insured’s insurance policy.
The principle of utmost good faith requires the insured to:
a) Pay the premium on time.
b) Report any changes in risk during the policy period.
c) Disclose all material facts to the insurer.
d) All of the above.
Answer: d) All of the above.
In insurance, an actuary is responsible for:
a) Assessing the value of a loss or damage.
b) Investigating fraudulent claims.
c) Calculating insurance premiums and reserves.
d) Negotiating claim settlements with the insured.
Answer: c) Calculating insurance premiums and reserves.
The principle of insurable interest applies to:
a) Both the insured and the insurer.
b) Only the insured.
c) Only the insurer.
d) Neither the insured nor the insurer.
Answer: b) Only the insured.
Which of the following is an example of a peril in property insurance?
a) Fire
b) Policyholder
c) Premium
d) Insurer
Answer: a) Fire
In insurance, a waiting period refers to:
a) The time during which the insured is not covered by the policy.
b) The time during which the insured can cancel the policy without penalty.
c) The time during which the insured can delay paying the premium.
d) The time during which the insured must wait before certain coverage benefits apply.
Answer: d) The time during which the insured must wait before certain coverage benefits apply.
The principle of loss minimization requires the insured to:
a) Take all reasonable steps to prevent or minimize a loss.
b) File a claim immediately after a loss occurs.
c) Pay the deductible before the insurer settles the claim.
d) Provide false information to the insurer to increase the claim amount.
Answer: a) Take all reasonable steps to prevent or minimize a loss.
Which type of insurance provides coverage for financial losses resulting from medical expenses?
a) Property insurance
b) Liability insurance
c) Health insurance
d) Auto insurance
Answer: c) Health insurance
The principle of contribution applies when:
a) The insured files a claim with multiple insurers.
b) The insured fails to disclose material facts to the insurer.
c) The insured intentionally causes a loss to collect insurance benefits.
d) The insured does not take reasonable steps to prevent a loss.
Answer: a) The insured files a claim with multiple insurers.
In insurance, an underwriter is responsible for:
a) Assessing the value of a loss or damage.
b) Investigating fraudulent claims.
c) Calculating insurance premiums and reserves.
d) Negotiating claim settlements with the insured.
Answer: c) Calculating insurance premiums and reserves.
The principle of indemnity is closely related to which of the following insurance concepts?
a) Deductible
b) Policy limit
c) Exclusion clause
d) Subrogation
Answer: b) Policy limit
Which type of insurance provides coverage for financial losses resulting from legal claims related to personal injury or property damage caused by the insured?
a) Property insurance
b) Liability insurance
c) Health insurance
d) Auto insurance
Answer: b) Liability insurance
The principle of utmost good faith requires the insured to disclose:
a) All material facts related to the insurance application.
b) The amount of premium they are willing to pay.
c) The expected value of the insured property.
d) The reason for applying for insurance coverage.
Answer: a) All material facts related to the insurance application.
In insurance, an endorsement is a(n):
a) Person who assesses the value of a loss or damage.
b) Provision added to an insurance policy to modify or expand coverage.
c) Financial penalty imposed on the insured for filing a fraudulent claim.
d) Document that summarizes the terms and conditions of the insurance policy.
Answer: b) Provision added to an insurance policy to modify or expand coverage.
The principle of subrogation does NOT apply to which type of insurance?
a) Property insurance
b) Liability insurance
c) Health insurance
d) Life insurance
Answer: d) Life insurance
In insurance, a policy term refers to:
a) The time during which the insured is covered by the policy.
b) The maximum amount the insurer will pay for a covered loss.
c) The minimum amount the insured must pay as a deductible.
d) The maximum premium rate the insured must pay.
Answer: a) The time during which the insured is covered by the policy.
Which of the following is an example of a first-party claim?
a) A claim filed by the insured against another person’s insurance policy.
b) A claim filed by a third party against the insured’s insurance policy.
c) A claim filed by the insured for liability arising from an injury to another person.
d) A claim filed by the insured for damage to their own property.
Answer: d) A claim filed by the insured for damage to their own property.
The principle of utmost good faith is based on the concept that insurance contracts are:
a) Legally binding agreements.
b) Subject to interpretation by the insured.
c) Negotiable based on the insured’s preferences.
d) Voidable at the insurer’s discretion.
Answer: a) Legally binding agreements.
In insurance, a premium is:
a) The maximum amount the insurer will pay for a claim.
b) The percentage of a claim that the insured must pay out of pocket.
c) The fixed amount the insured must pay for the insurance coverage.
d) The additional coverage added to an insurance policy.
Answer: c) The fixed amount the insured must pay for the insurance coverage.
The principle of loss minimization is closely related to which of the following insurance concepts?
a) Underwriting
b) Risk assessment
c) Deductible
d) Policy limit
Answer: b) Risk assessment
Which type of insurance provides coverage for financial losses resulting from bodily injury or death?
a) Property insurance
b) Liability insurance
c) Health insurance
d) Life insurance
Answer: d) Life insurance
The principle of indemnity is based on the concept that insurance should:
a) Provide financial protection to the insured.
b) Promote risk sharing among the insured.
c) Ensure that the insured is compensated for any loss or damage suffered.
d) Encourage the insured to take all necessary precautions to prevent a loss.
Answer: c) Ensure that the insured is compensated for any loss or damage suffered.
In insurance, a claims adjuster is responsible for:
a) Assessing the value of a loss or damage.
b) Investigating fraudulent claims.
c) Calculating insurance premiums and reserves.
d) Negotiating claim settlements with the insured.
Answer: a) Assessing the value of a loss or damage.
The principle of subrogation allows the insurer to recover the amount paid to the insured from:
a) The insured’s family members.
b) The insured’s employer.
c) The insured’s financial institution.
d) A third party responsible for the loss.
Answer: d) A third party responsible for the loss.
Which type of insurance provides coverage for financial losses resulting from damage or loss of crops or livestock?
a) Property insurance
b) Liability insurance
c) Health insurance
d) Agricultural insurance
Answer: d) Agricultural insurance