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NJ PROPERTY INSURANCE STATE EXAM QUESTIONS AND CORRECT DETAILED ANSWERS,A COMPLETE SOLUTION THAT COVERS 2024/2025 BEST GRADED TO SCORE A+ FOR SUCCESS$11.49
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NJ PROPERTY INSURANCE STATE EXAM QUESTIONS AND CORRECT DETAILED
ANSWERS,A COMPLETE SOLUTION THAT COVERS 2024/2025 BEST GRADED TO
SCORE A+ FOR SUCCESS
Pure Risks - CORRECT ANSWERS Only pure risks (not speculative risks, like gambling)
are insurable
Peril - CORRECT ANSWERS Cause of loss. Examples: Fire; Explosion; Windstorm;
Flood; Theft; Collision
Hazard - CORRECT ANSWERS A condition that increases the chance of a peril
occurring. Three types of hazards: Moral, Morale, and Physical
To be insurable - CORRECT ANSWERS Risk must be definable, measurable, beyond the
insured's control, common to a large group of people, and not catastrophic
Basic Risk and Loss Factors - CORRECT ANSWERS Risk; Loss; Exposure; Peril; Hazard
Loss - CORRECT ANSWERS An unwelcomed and unplanned reduction in economic
value
Risk - CORRECT ANSWERS The chance of loss
Direct Loss - CORRECT ANSWERS The immediate result of an event caused by a
covered peril. Example: A home is severely damaged by fire, the damage to the building
is considered a direct loss.
Indirect Damage Loss - CORRECT ANSWERS A more remote ramification than a direct
loss, but is still a result of loss from a covered peril. Example: Because a home suffering
fire damage is temporarily uninhabitable the home owner will incur additional living
expenses, over and above the home owner's normal expenses, until the house has been
repaired. These additional living expenses are an indirect loss that follows the direct
loss of the home.
Exposure - CORRECT ANSWERS The state of being subject to a possible loss.
Moral Hazard - CORRECT ANSWERS The tendencies or traits of an individual that
increase the chance of a loss. Alcoholism, smoking, and bad credit are examples of moral
hazards.
,NJ PROPERTY INSURANCE STATE EXAM QUESTIONS AND CORRECT DETAILED
ANSWERS,A COMPLETE SOLUTION THAT COVERS 2024/2025 BEST GRADED TO
SCORE A+ FOR SUCCESS
Morale Hazard - CORRECT ANSWERS Individual tendencies, but they arise from a state
of mind, attitude, indifference to loss. Not locking one's car or driving recklessly are
examples of morale hazards.
Physical Hazard - CORRECT ANSWERS Physical conditions that increase the chance of
loss. For instance, dangerous conditions or activities are physical hazards that increase
the chance of injury or death. Diseases are physical hazards because they increase
chance of death.
Legal Hazards - CORRECT ANSWERS Legal or regulatory environment characteristics
that affect an insurer's ability to provide insurance at a premium that fairly reflects its
loss exposures.
Risk Management Techniques - CORRECT ANSWERS Avoiding the risk; Controlling
(reducing) the risk; Sharing the risk; Retaining the risk; Transferring the risk
Risk Avoidance - CORRECT ANSWERS One way to manage a risk to simply to avoid it.
For example, those who do not own a car avoid the risk of having a car being stole or
damaged.
Risk Prevention (Control) - CORRECT ANSWERS Reduce the likelihood that a loss will
occur. For example, shoveling snow off a sidewalk makes it less likely a visitor will slip
and fall.
Risk Reduction (Control) - CORRECT ANSWERS Reduce the severity of any loss that
does occur. Having fire extinguishers does not keep fires from starting, but when
available and used, they often limit fire damage.
Risk Sharing (Pooling) - CORRECT ANSWERS Under a risk-sharing arrangement,
groups share the financial burden of a loss suffered by any member of the group.
Risk Retention (Self-Insurance) - CORRECT ANSWERS "Do nothing" option, risk
retention is simply accepting a risk and dealing with a loss using personal funds. If the
potential financial loss is small, risk retention makes sense. However, if the potential loss
is great, risk retention may lead to financial disaster.
,NJ PROPERTY INSURANCE STATE EXAM QUESTIONS AND CORRECT DETAILED
ANSWERS,A COMPLETE SOLUTION THAT COVERS 2024/2025 BEST GRADED TO
SCORE A+ FOR SUCCESS
Risk Transfer - CORRECT ANSWERS Modern insurance is based on the risk
management technique called risk transfer. In exchange for paying a premium, an
individual or business can transfer the risk of loss to an insurance company through an
insurance policy.
Adverse Selection - CORRECT ANSWERS Means to "select against." It is the tendency of
those at greater-than-average risk of loss to seek insurance.
Law of Large Numbers - CORRECT ANSWERS This mathematical concept says that
what is not predictable in a single instance becomes predictable the greater the number
of similar instances are being observed.
Stock Insurance Companies - CORRECT ANSWERS Stock insurance companies are
owned by stockholders who purchase shares of stock as an investment.
Mutual Insurance Companies - CORRECT ANSWERS Mutual insurance companies are
owned by their policyholder. Rather than issuing shares of stock, mutual companies
issue participating policies which distribute the company's surplus "profit" to
policyowners in the form of policy dividends.
Stock Insurance Companies - CORRECT ANSWERS stock insurance companies are
owned by stockholders who purchase shares of stock as an investment.
Mutual Insurance Companies - CORRECT ANSWERS Mutual insurance companies are
owned by their policyholder. Rather than issuing shares of stock, mutual companies
issue participating policies which distribute the company's surplus "profit" to
policyowners in the form of policy dividends.
County Mutuals - CORRECT ANSWERS While they traditionally sold farm insurance in a
small geographical area, many county mutuals today sell a wide array of insurance
products in broader geographical regions.
Reciprocal Insurers - CORRECT ANSWERS Unincorporated group of members that
insure each other by exchanging contracts of indemnity that obligate them to
collectively pay any member's covered loss.
Fraternal Benefit Societies - CORRECT ANSWERS Organizations of people who share a
common ethnic, religious, or vocational affiliation.
, NJ PROPERTY INSURANCE STATE EXAM QUESTIONS AND CORRECT DETAILED
ANSWERS,A COMPLETE SOLUTION THAT COVERS 2024/2025 BEST GRADED TO
SCORE A+ FOR SUCCESS
Lloyd's Associations - CORRECT ANSWERS Groups of insurers that mainly write fire
insurance and auto physical damage insurance.
Self-Insurers - CORRECT ANSWERS Businesses that are financially able to self-fund
certain risks. They set aside funds to pay claims as well as the administrative costs of
running an internal insurance programs.
Captive Insurance Companies - CORRECT ANSWERS An insurance company designed
to cover the risks of the "parent" organizations that own it:
- Single-owner captives (or single-parents captives) are owned by a single company for
which they provide insurance.
- Association captives (also known as group-owned capitives) are owned by and cover
the risks of a group of organizations.
Risk Retention Groups - CORRECT ANSWERS A form of captive insurance company that
provide their members - who are both the insureds and owners of the RRG - with
coverage for all types of liability risks except works compensation.
Purchasing Groups - CORRECT ANSWERS Must have similar businesses or activities,
and one purpose of the group must be the purchase of liability insurance on a group
basis. Purchases insurance from an insurer that issues the policies and serves as the risk
bearer.
Reinsurance Companies - CORRECT ANSWERS Spread the risk with other insureres to
minimize the risk they face should a loss occur.
Ceding Company - CORRECT ANSWERS Insurer seeking to transfer some of its risk is
known as the ceding company (cedent).
Reinsuring Company - CORRECT ANSWERS Insurer accepting some of the risk being
transferred from ceding company in reinsurance.
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