Insurance Awareness Questions – Set 13

Dear Aspirants,
Welcome to Insurance Awareness Questions in AffairsCloud.com. Here we are covering some important Insurance Awareness Questions & Answers with Explanations. Do study this questions thoroughly as it may prove to be helpful in upcoming exams and also in interviews.

1. The person other than the insured or insurer who has incurred losses or is entitled to receive payment due to acts or omissions of the insured is called _______
   A. First Person
   B. Second Person
   C. Third Person
   D. Last Person
   

   Answer & Explanation

   C. Third Person
   Explanation:
   “Third-party” in the case of automotive insurance would be the driver of the other vehicle, since that person is not the first party (Insured) in the insurance policy. Second Party refers the Insurer(Insurance Company).
   
   
2. The process of determining the cost of an insurance policy based on the actual loss experience determined as an adjustment to the initial premium payment is termed as _______
   A. Universal Life Insurance
   B. Unauthorized Reinsurance
   C. Unearned Premium
   D. Retrospective Rating
   

   Answer & Explanation

   D. Retrospective Rating
   Explanation:
   An insurance policy with a premium that adjusts according to the losses experienced by the insured company, rather than according to an industry-wide loss experience is called Retrospective Rating.
   
   
3. The portion of risk that a reinsurance company cedes or amount of insurance the company chooses not to retain is called ______
   A. Universal Life Insurance
   B. Unauthorized Reinsurance
   C. Retro cession
   D. Retrospective Rating
   

   Answer & Explanation

   C. Retro cession
   Explanation:
   A transaction wherein a re-insurer cedes the reinsurance they have assumed to another re-insurer.
   
   
4. _______ is an insurance coverage protecting the manufacturer, distributor, seller of a product against legal liability resulting from a defective condition causing personal injury, or damage, to any individual or entity, associated with the use of the product.
   A. Product Liability
   B. Unauthorized Reinsurance
   C. Retro cession
   D. Retrospective Rating
   

   Answer & Explanation

   A. Product Liability
   Explanation:
   Product liability insurance protects against claims of personal injury or property damage caused by products sold or supplied through your business.
   
   
5. Circumstance including possibility of loss or no loss but no possibility of gain is termed as ______
   A. Product Liability
   B. Pure Risk
   C. Pure Premium
   D. Retrospective Rating
   

   Answer & Explanation

   B. Pure Risk
   Explanation:
   Pure risk, also called absolute risk, is a category of threat that is beyond human control and has only one possible outcome: loss. Pure risk includes such things as natural disasters, fire or untimely death.
   
   
6. Event covered under insured’s policy agreement is called _____
   A. Product Liability
   B. Pure Risk
   C. Provisions
   D. Proximate Clause
   

   Answer & Explanation

   D. Proximate Clause
   Explanation:
   Proximate cause identifies for insurance purposes, which event is the probable cause of a particular event, leading to a loss.
   
   
7. Contingencies outlined in an insurance policy is called ________
   A. Product Liability
   B. Pure Risk
   C. Provisions
   D. Proximate Clause
   

   Answer & Explanation

   C. Provisions
   Explanation:
   A provision is a legal clause or condition contained within a contract that requires or prevents either one or both parties to perform a particular requirement by some specified time.
   
   
8. An insurance company not licensed to do business within a given state is called _____
   A. Product Liability
   B. Pure Risk
   C. Non-admitted Insurer
   D. Proximate Clause
   

   Answer & Explanation

   C. Non-admitted Insurer
   Explanation:
   An insurance company that is “non-admitted” has not been approved by the state’s insurance department.
   
   
9. Selling insurance through groups is called ________
   A. Affinity sales
   B. Pure Risk
   C. Non-admitted Insurer
   D. Proximate Clause
   

   Answer & Explanation

   A. Affinity sales
   Explanation:
   The sale of insurance through groups such as business or professional associations is known as Affinity sales
   
   
10. The conversion of the account balance of a deferred annuity contract to income payments is termed as ________
    A. Affinity sales
    B. Pure Risk
    C. Annuitization
    D. Proximate Clause
    

    Answer & Explanation

    C. Annuitization
    Explanation:
    Annuitization is a single, one-time event that occurs between the accumulation and payout phases in an annuity.
    
    

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