RIBO Insurance Exam UPDATED Exam Questions and CORRECT Answers
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Course
RIBO Insurance
Institution
RIBO Insurance
RIBO Insurance Exam UPDATED Exam
Questions and CORRECT Answers
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 ga...
RIBO Insurance Exam UPDATED Exam
Questions and CORRECT Answers
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
3) Government - worker's compensation
4) Captive - policy holders limited to parent company and subsidiaries
Stock Companies (For Profit) - Correct Answer- a group of shareholders put interest in the
asset and expect a profit on the investment (Lloyds is an example).
Outstanding Loss Reservers - Correct Answer- funds set aside to pay for losses that have
been incurred but not yet paid for
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