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RIBO Insurance Exam Questions with Correct Answers
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RIBO Insurance Exam Questions with Correct Answers
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RIBO Insurance Exam Questions with CorrectAnswers
What makes pure risk insurable while speculative not? Correct Answer-
Pure risk insurance is a situation involving a chance of a loss without a
chance of gain. Insurance will accept situations where there is no
potential for gain.
Pure Risk Correct Answer-A situation involving a chance of loss
without a chance of gain. Example: property damage
Speculative Risk Correct Answer-A situation where the possibility of
either financial loss or gain exists. This is not accepted by insurances.
Example: gambling
Insurance Correct Answer-A contract in which one party, the insurer, for
monetary consideration agrees to reimburse another, the insured, for loss
or liability for a loss by specified hazards or perils
Risk Correct Answer-the chance of loss (the possible loss or destruction
of property or incurring of a liability).
Direct Loss Correct Answer-losses that are involving damage to or
destruction of the property insured. Example: replacing a stolen stereo
Indirect Loss Correct Answer-losses that occur because of direct losses.
Example: loss of income from a tenant due to a building burning down.
,Peril Correct Answer-the event that caused a loss covered by the policy.
Example: fire. (WHISLER acronym)
What is WHISLER stand for? Correct Answer-Wind, Hail, Impact,
Smoke, Lightning, Explosion and Riot
Hazard Correct Answer-condition that may cause a peril to occur or
make the loss more severe - divided into physical and moral hazards.
Physical hazards' example is slippery floors. Moral hazard example
would be mental attitudes about risk.
What are the three classes of insurance? Correct Answer-The classes of
insurance include personal and commercial lines as well as specialty
risks. Example: personal (jewelry), commercial (owned businesses) and
specialty (airports or high risk industry)
What is a liability insurance peril? Correct Answer-It includes
negligence - when you are doing or not doing something that is expected
by a reasonable person.
Proximate Cause Correct Answer-is the immediate and effective cause
of the loss in a chain of events leading to the loss, but is not necessarily
the last event before the occurrence
Immediate Cause Correct Answer-last link in the chain of events
,Remote Cause Correct Answer-is separate from the proximate cause in
the chain of events leading to a loss (what could've been)
Indemnify Correct Answer-compensate for loss, damage, or injury;
reimburse; repay. It is to bring the insured person back to the point they
previously were (no gain, no loss).
Pooling Funds for Loss Correct Answer-A group of people will pay out
for insurance to insure the few that are injured. Losses of a few are
shared by the many.
What is the role of an insurance broker? Correct Answer-Bring in two
parties together in a contractual relationship
What is spread of risk and how can it be done? Correct Answer-
Spreading of risk is a way to achieve balance between premiums
collected versus losses paid. It is done through volume (large number of
risks), diversity of risk (different risk classifications) and diversity of
location (not all risks in one location).
What does the insurance money get used for? Correct Answer-Insurance
money is a source of capital. it is invested in large amounts of capital to
low risk investments.
What is insurable interest? Correct Answer-You must own the item that
you are insuring. You must benefit from its existence and suffer from its
loss. You cannot insure your neighbour's house.
, What is actual cost value (ACV)? Correct Answer-determined in one of
three ways: cost to repair, fair market value or consideration of evidence
of value
What are the two most popular forms of valuation in indemnification?
Correct Answer-Actual cash value (ACV) and replacement value (cost)
What is replacement value? What is guaranteed replacement cost?
Correct Answer-Replacement value is the current market value to
replace. Guaranteed replacement pays for replacement cost without
depreciation and can exceed the amount of insurance on the dwelling.
What is value contracts? Correct Answer-It is an alternative calculation
method where a predetermined amount is agreed upon by the insure and
insured at the time the contract is made. It is usually done on items
where it is difficult to determine a true value after loss.
What is General Insurance? Correct Answer-General insurance includes
property and casualty insurance. It is also referred to as P&C insurance.
Property is the loss or loss of income caused by a covered peril.
Causality refers to areas not covered by fire, life or auto which would be
burglary or liability.
What are the four groups of insurers? Correct Answer-1) For profit -
stock companies
2) Co-operative - mutuals & reciprocals
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