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Unit 1 - Personal Lines Insurance Exam Prep – Arizona Questions And Answers With Verified Solutions Already!!! $11.49   Add to cart
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Unit 1 - Personal Lines Insurance Exam Prep – Arizona Questions And Answers With Verified Solutions Already!!!
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Unit 1 - Personal Lines Insurance Exam Prep – Arizona Questions And Answers With Verified Solutions Already!!!

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  • October 1, 2024
  • 5
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • Personal lines
  • Personal lines

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Unit 1 - Personal Lines Insurance Exam
Prep – Arizona Questions And Answers
With Verified Solutions Already!!!
Insurance - ANSWER✔✔transfer of risk from a person or business to an insurer


Risk - ANSWER✔✔is the uncertainty or possibility of a loss


Describe Both Type of Risk - ANSWER✔✔Speculative risk has a chance for gain
or loss and pure risk is 100% risk (making it insurable).


Exposure - ANSWER✔✔Is the possibility that risk will occur.


List Examples of Exposure - ANSWER✔✔Auto Accident, Lost Luggage (on a
trip), Pet Bites Mailman, House Fire, etc.


Peril - ANSWER✔✔The cause of loss, for example when a house burns down the
peril is fire.


Direct Loss vs. Indirect Loss - ANSWER✔✔Direct loss is a physical loss (a rental
home that burns down) and the indirect loss is a consequence of the direct loss
(loss of rent during the repairs, if loss made the rental uninhabitable).


Hazard - ANSWER✔✔something that increases the chances of a loss.


List and Describe the 3 Hazard Types - ANSWER✔✔Physical hazards, are visible
hazard like wet floors. A moral hazard is an intentional act of dishonesty that

, causes a loss, for example the employee lied to their boss and said they put up the
wet floor sign but did not. While a morale hazard is an act of carelessness that
could cause loss, for example someone who decides to forgo wearing their seatbelt.


STARR Method for Handling Risk - ANSWER✔✔Sharing, Transfer, Avoidance,
Retention, Reduction


Law of Large Numbers - ANSWER✔✔The larger the number of people in a group
then the more accurately the company can predict future loss.


Contract (Policy) - ANSWER✔✔An agreement between the insured and the
insurer. Property insurance the contact is a 1st party contract where the 1st party is
the insured and the 2nd party is the insurer. For Casualty insurance the contract is a
3rd party contract where the previous two parties are the same and the 3rd party is
the "other guy" suing you for their loss.


Elements of Insurable Risk (CANHAM) - ANSWER✔✔Calculable, Affordable,
Non-Catastrophic, Homogeneous, Accidental, and Measurable


Adverse Selection - ANSWER✔✔Risks that are not wanted by insurers because
they have a greater-than-average chance of loss. This is the why insurers go
through the underwriting process to determine the level of risk and base the
decision to accept/refuse risk as well the amount of money for the premiums.


Reinsurance - ANSWER✔✔When an insurance company (the ceding company)
pays another insurance company (reinsurer) to take some of the company's risk to
help spread out the risk.

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