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Xcel chapter exams UPDATED Exam Questions and CORRECT Answers
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Xcel chapter exams UPDATED Exam Questions and CORRECT Answers Which of the following is a contract that involves one party which indemnifies another when a loss arises from an unknown event? - CORRECT ANSWER - Insurance policy Which of the following is NOT a characteristic of reinsurance? - ...

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  • January 2, 2025
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  • 2024/2025
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Xcel chapter exams UPDATED Exam
Questions and CORRECT Answers
Which of the following is a contract that involves one party which indemnifies another when a
loss arises from an unknown event? - CORRECT ANSWER - Insurance policy



Which of the following is NOT a characteristic of reinsurance? - CORRECT ANSWER -
Increases the unearned premium reserve


Which of the following is an insurer established by a parent company for the purpose of insuring
the parent company's loss exposures? - CORRECT ANSWER - Captive insurer


A participating company is also referred to as which type of insurer? - CORRECT
ANSWER - Mutual insurer



What is a participating life insurance policy? - CORRECT ANSWER - Contract that
allows the policyowner to receive a share of surplus in the form of policy dividends


Which of the following statements regarding a life insurance policy dividend is TRUE? -
CORRECT ANSWER - It is a distribution of excess funds accumulated by the insurer on
participating policies


Which of the following is NOT a benefit of insurance? - CORRECT ANSWER - Losses
due to fraud are eliminated


An insurer enters into a contract with a third-party to insure itself against losses from insurance
policies it issues. What is the agreement called? - CORRECT ANSWER - Reinsurance


Which of the following is a type of insurance where an insurer transfers loss exposures from
policies written for its insurerds? - CORRECT ANSWER - Reinsurance

,When a mutual insurer becomes a stock company, the process is called - CORRECT
ANSWER - Demutualization


Which of the following describes the increase in the probability of a loss due to an insureds
dishonest tendencies? - CORRECT ANSWER - moral hazard


An insurer having a large number of similar exposure unit it's considered important because -
CORRECT ANSWER - The greater the number insured, the more accurately the insurer
can predict losses and set appropriate premiums


Which of the following is considered to be any situation that has the potential for loss? -
CORRECT ANSWER - Loss exposure


Which of the following is a situation where there is a possibility of either a loss or a gain? -
CORRECT ANSWER - Speculative risk


Restoring an insured to the same condition as before a loss is known as - CORRECT
ANSWER - principle of indemnity



Which of these statements correctly describes risk? - CORRECT ANSWER - Pure risk is
the only insurable risk


Moral hazard is described as the - CORRECT ANSWER - increased chance of a loss
because of an insured's dishonest tendencies


Which of the following best describes the statement "The more times and event is repeated, the
more predictable the outcome becomes"? - CORRECT ANSWER - Law of large numbers


Which of the following refers to a condition that may increase the chance of a loss? - CORRECT
ANSWER - hazard

, Which of the following would NOT be accomplished with the purchase of an insurance policy? -
CORRECT ANSWER - Risk is eliminated


All of the following circumstances must be met for a loss retention to be an effective risk
management technique, EXCEPT - CORRECT ANSWER - Probability of loss is unknown



Which of the following is NOT an element of an insurable risk? - CORRECT ANSWER -
The loss must be catastrophic


Which type of risk is gambling? - CORRECT ANSWER - Speculative risk



Which of the following is NOT considered a definition of a risk? - CORRECT ANSWER -
The cause of loss


Which of the following is NOT a requirement of a contract? - CORRECT ANSWER -
Equal consideration is required between the involved parties


If a material warranty violation on the part of the insured is found, what recourse does an insurer
have? - CORRECT ANSWER - Rescind the policy


Restoring an insured to the same condition as before a loss is an example of the principle of -
CORRECT ANSWER - Indemnity



A unilateral contract is one in which - CORRECT ANSWER - only one party (the insurer)
makes any kind of legally enforceable promise


What does the insurance term "indemnity" refer to? - CORRECT ANSWER - Make whole



Express power given to an agent in an agency agreement is - CORRECT ANSWER - the
authority to represent the insurer

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