Hossam Gomaa Ali ‫الخالصةننفننالتأمين‬

‫ سؤال مهم جدا حدا‬50 ‫ركزو عىل اول‬

1) An earthquake is an example of A) a moral hazard. B) a peril. C) a physical hazard. D) an objective risk.
2) The premature death of an individual is an example of:
A) pure risk. B) A speculative risk. C) A no diversifiable risk. D) A physical hazard.
3) The extra expense incurred by a business to stay in operation following a fire is an example of a(n):
A) Fundamental risk B) Direct loss. C)Indirect loss. D) Speculative risk.
4) From the insured's perspective, the use of deductibles in insurance contracts is an example of:
A) Risk retention. B) Risk transfer C) Risk control. D) Risk avoidance.
5) From the standpoint of the insurer, which of the following is a characteristic of an ideally insurable risk?
A) The chance of loss must be calculable B) There must be a small number of unique loss exposures.
C) The loss must be indeterminable. D) The loss must be intentional
6) The requirement that losses should be accidental and unintentional in order to be insurable results in which
of the following? I. Decrease in moral hazard II. More accurate prediction of future losses
A) I only B) II only c) both I and II D) neither I nor II
7) All of the following are benefits to society that result from insurance EXCEPT
A) Indemnification for loss. B) Elimination of moral hazard. C) Less worry and fear. D) Loss prevention.
8) The tendency for unhealthy people to seek life or health insurance at standard rates is an example of
A) Attitudinal hazard. B) Adverse selection. C) Moral hazard D) Fundamental risk.
9) Purchasing health insurance illustrates the use of which personal risk management technique?
A) Avoidance B) Risk retention c) Risk transfer D) Risk control
10) Fundamental purposes of the principle of indemnity include which of the following?
I. To reduce hazards II. To prevent the insured from profiting from insurance
A) I only B) II only C) both I and II D) neither I nor II
11) Which of the following statements about the principle of insurable interest is (are) true?
1. It makes it difficult to measure the amount of an insured's loss. II. It reduces moral hazard.
A) I only (B) II only C) both I and I D) neither I nor II
12) When must an insurable interest legally exist in life insurance?
A)Only at the inception of the policy B) Only at the time the beneficiary is paid C) Only at the time of the
insured's death D) Both at the time of the insured's death and at the inception of the policy
13) A reinsurance contract that is entered into on a case-by-case basis after an application for insurance is
received by a primary insurer is called
A) a reinsurance pool. B) automatic treaty reinsurance. C) retrocession. D) facultative reinsurance.
14) Which of the following statements about subrogation is true?
A)Subrogation helps to hold down the cost of insurance. B) Subrogation results in violation of the principle of indemnity.
C) Subrogation eliminates adverse selection. D) Subrogation permits a party who caused a loss to avoid
responsibility for the loss.
15) A contract in which the values exchanged are not equal because chance is involved is called a(n)
A) Contract of adhesion. B) Aleatory contract. C) Unilateral contract. D) Conditional contract.
16) The human life value is defined as the
A) Future value of a deceased breadwinner's past earnings.
B) Present value of a deceased breadwinner's future gross income.
C)Present value of the family's share of a deceased breadwinner's future earnings.
D) Future value of the family's share of a deceased breadwinner's future earnings.
17) Why are insurance contracts said to be contracts of adhesion?
A) Conditions are placed on the insurer's promise to perform.
B) The values exchanged by the parties to the contract are not equal.
C) Only one party makes a legally enforceable promise.
D)One party writes the contract, and the other party must accept the entire contract as written.
18) All of the following are defects which limit the usefulness of the human life value approach in determining
the correct amount of life insurance to purchase EXCEPT
A) Earnings are assumed to remain constant. B) The effects of inflation are ignored.
C) Other sources of income for survivors are ignored.
D)Earnings during the individual's productive lifetime are ignored.

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Hossam Gomaa Ali ‫الخالصةننفننالتأمين‬
19) Which of the following statements about yearly renewable term insurance is (are) true?
I .It requires evidence of insurability for renewal.
II.It is most appropriate when an insured needs lifetime protection.
A) I only B) II only C) both I and II D) neither I nor II
20) The purchase of term insurance is by of the following circumstances?
I .The insured has a temporary need for life insurance protection.
II. The insured wants to save money through the policy for a specific need.
A) I only B) II only C) both I and II D) neither I nor II
21) Which of the following statements about endowment insurance policies is (are)
1. The face amount is paid if the insured dies during the policy period or at the end of the policy period if the
insured is still alive.
II. The use of endowment insurance has increased in recent years because of its favorable tax treatment.
A) I only B) II only C) both I and II D) neither I nor II
22) Which of the following statements about variable life insurance is true?
A) The cash surrender value of the policy is guaranteed. B) Premium payments are flexible.
C) The death benefit cannot be higher or lower than a guaranteed, specified, value.
D)The policy owner has the option of investing the cash value in several investment accounts.
23) Which of the following statements about treaty reinsurance is true?
A) The reinsurer is required to underwrite each individual applicant that is reinsured.
B) The reinsurer must accept all business that falls within the scope of the treaty.
C) The ceding insurer can choose which business falling within the scope of the treaty it wishes to reinsure.
D) It protects the reinsurer by requiring the ceding insurer to charge adequate premiums.
24) Which of the following statements about underwriting standards is (are) true?
1. One purpose of underwriting standards is to reduce adverse selection against the insurer.
II. Equitable rates should be charged so that each group of policy owners pays its own way in terms of losses
and expenses. A) I only B) II only C) both I and II D) neither I nor II
25) All of the following are characteristics of insurance EXCEPT
A) Payment of fortuitous losses. Risk avoidance. B) Pooling of losses. c) risk avoidance D) Indemnification.
26)Which of the following is implied by the pooling of losses?
A) Sharing of losses by an entire group. B) Inability to predict losses with any degree of accuracy.
C) Substitution of actual loss for average loss. D) Increase of objective risk.
27) According to the law of large numbers, what should happen as an insurer increases the number of units
insured? A) Underwriting expenses should decrease. B) The amount the insurer expects to pay in claims should decrease.
C) Actual results will more closely approach expected results. D) The insurer's profitability should become more variable.
28) Characteristics of a fortuitous loss include which of the following?
1. The loss is certain to occur. 11. The loss occurs as a result of chance. B) II only
A) I only B) II only C) both I and II D) neither I nor II
29) From the viewpoint of the insurer, all of the following are characteristics of an insurable risk EXCEPT
b)The loss must be accidental A) The loss should be catastrophic. C) The premium must be economically
feasible. D) There must be a large number of exposure units.
30) From the standpoint of the insurer, all of the following are characteristics of an insurable risk EXCEPT
A)The loss must be indeterminable. B) The loss must be unintentional.
C) The chance of loss must be calculable. D) The loss must be measurable.
31) Why is a large number of exposure units generally required before a pure risk is insurable?
A) It minimizes moral hazard. B) It eliminates intentional losses. C) It prevents the insurer from losing money.
D) It enables the insurer to predict losses more accurately.
32) The requirement that losses should be accidental and unintentional in order to be insurable results in which
of the following? I. Decrease in moral hazard II. More accurate prediction of future losses
A) I only B) II only C) both I and II D) neither I nor II
33) Which of the following types of risks best meets the requirements for being insurable by private insurers?
A) political risks B) financial risks C) property risks D) Market risks
34) Reasons why market, financial, and production risks are often uninsurable include which of the following?
1. The potential to produce a catastrophic loss is great." II. The chance of loss cannot be accurately estimated.
A) I only B) II only C) both I and II D) neither I nor II
35) Which of the following types of risks is normally uninsurable by private insurers?
A) Market risks B) Liability risks C) Property risks D) Personal risks
36) Which of the following is a result of adverse selection?
A) The insurer's financial results will be substantially improved.

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Hossam Gomaa Ali ‫الخالصةننفننالتأمين‬
B) Persons most likely to have losses are also most likely to seek insurance at standard rates.
C) It is unnecessary for the insurance company to use underwriting.
D) Insurance can be written only by the federal government.
37) The tendency for unhealthy people to seek life or health insurance at standard rates is an example of
A) Fundamental risk. B) Moral hazard. C) Adverse selection. D) Morale hazard.
38) Which of the following statements regarding insurance and gambling is (are) true?
1. Insurance is used to handle existing pure risks, while gambling creates a new speculative risk.
II. Insurance usually involves risk avoidance, while gambling typically involves only risk reduction.
A) I only B) II only C) both I and II D) neither I nor II
39) All of the following are benefits to society that result from insurance EXCEPT
A) Indemnification for loss. B) Less worry and fear. C) Elimination of moral hazard. D) Loss prevention.
40) Which of the following conditions is (are) appropriate for using retention?
1. Losses are difficult to predict. II. The worst possible loss is not serious
A) I only B) II only C) both I and II D) neither I nor II
41) Which of the following statements regarding insurance and hedging is (are) true?
I. Insurance involves the transfer of insurable risk while hedging handles risk that is typically uninsurable.
II. Both insurance and hedging rely on the law of large numbers to reduce risk.
A) I only B) II only C) both I and II D) neither I nor II
42) A risk manager is concerned with
1. Identifying potential losses. II. Selecting the appropriate techniques for treating losses.
A) I only B) II only C) both I and II D) neither I nor II
43) Loss frequency is defined as the:
A) probable size of the losses that may occur during some period.
B) probable number of losses that may occur during some period.
C) probability that any particular piece of property may be totally destroyed.
D) probability that a liability judgment may exceed a firm's net worth
44) The worst loss that could ever happen to a firm is referred to as the
A) Maximum probable loss. B) Maximum possible loss. C) Severity of loss. D) Frequency of loss.
45) Loss control includes which of the following? 1. Loss prevention II. Loss reduction
A) I only B) II only C) both I and II D) neither I nor II
46) Which of the following statements about a variable universal life insurance policy is (are) true? I. There is
a minimum guaranteed interest rate for the cash value. II. The policyowner has a variety of investment options
for the investment of premiums. A) I only B) II only C) both I and II D) neither I nor II
47) All of the following statements describe the flexibility available to the owner of a universal life insurance
policy EXCEPT A) Policy loans are permitted on an interest-free basis. B) The frequency of premium
payments can be varied. C) The death benefit can be increased with evidence of insurability. D) Premium
payments can be any amount provided there is sufficient cash value to keep the policy in force.
48) Which of the following statements about universal life insurance is (are) true? I. The current interest rate
credited to the cash value at the time the policy is issued remains fixed for the life of the policy. II. A monthly
deduction is made from the policy's cash value for the cost of insurance protection.
A) I only B) II only C) both I and II D) neither I nor II
49) All of the following statements about universal life insurance are true EXCEPT A) Interest is credited to
the policy's cash value each month. B) Any withdrawal of a policy's cash value reduces the amount of the
death benefit. C) Interest credited to a policy's cash value is taxable for the policyowner in the year credited.
D) The policyowner can add to a policy's cash value at any time subject to policy guidelines. Answer: C
50) Which of the following statements about variable life insurance is true?
A) Premium payments are flexible. B) The death benefit cannot be higher or lower than a guaranteed,
specified, value. C) The policyowner has the option of investing the cash value in several investment accounts.

1) Which of the following statements about underwriting policy is (are) true?

I. A company must establish an underwriting policy consistent with company objectives.
II. Underwriting policy is usually subjective and allows the underwriter considerable flexibility with respect to
lines written and forms used. A) I only B) II only C) both I and II D) neither I nor II
2) Factors that may result in more restrictive underwriting decisions include which of the following? I.
Inadequate rates. II. The unavailability of reinsurance at favorable terms. A) I only B) II only C) both I and II
3) All of the following statements about reinsurance are true EXCEPT

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Hossam Gomaa Ali ‫الخالصةننفننالتأمين‬
A) A reinsurer may also purchase reinsurance. B) Reinsurance is an arrangement by which the primary insurer
that initially writes the insurance transfers to another insurer part or all of the potential losses associated with
such insurance. c) The amount of insurance transferred to a reinsurer is called the net retention.
4) All of the following are reasons for a primary insurer to use reinsurance EXCEPT A) to increase the
unearned premium reserve. B) to increase underwriting capacity. C) to protect against catastrophic losses.
5) The unearned premium reserve of an insurer is A) an asset representing the investments made with premium
income. B) a liability representing the unearned portion of gross premiums on outstanding policies. C) a
liability representing claims that have been filed, but not yet paid.
6) A reinsurance contract that is entered into on a case-by-case basis after an application for insurance is
received by a primary insurer is called A) a reinsurance pool.. C) retrocession. c) facultative reinsurance.
7) Which of the following statements about treaty reinsurance is true? A) The reinsurer is required to
underwrite each individual applicant that is reinsured. B) The reinsurer must accept all business that falls
within the scope of the treaty. C) The ceding insurer can choose which business falling within the scope of the
treaty it wishes to reinsure.
8) Which of the following statements about treaty reinsurance is true?
A) Under a surplus-share treaty, 100 percent of the ceding insurer’s liability must be transferred to the
reinsurer.
B) Using a quota-share treaty increases the ceding insurer’s unearned premium reserve.
c) Using a reinsurance pool provides financial capacity to write large amounts of insurance.
9) All of the following statements about life insurance company investments are true EXCEPT
A) Funds for these investments are derived primarily from premium income, investment earnings, and
maturing investments that must be reinvested.
B) Income from these investments reduces the cost of insurance.
C) A primary objective in making these investments is safety of principal.
D) The majority of these investments are short-term investments.
10) One method through which reinsurance is provided is through an organization of insurers that underwrites
insurance on a joint basis. Through the organization, financial capacity is available for large commercial risks.
This reinsurance arrangement is a(n) A) quota-share treaty. B) surplus-share treaty.
C) excess-of-loss treaty. D) reinsurance pool.
11) Which of the following statements about underwriting standards is (are) true? I. One purpose of
underwriting standards is to reduce adverse selection against the insurer. II. Equitable rates should be charged
so that each group of policyowners pays its own way in terms of losses and expenses.
A) I only B) II only C) bothI and II D) neither I nor II
12) Which of the following statements about the needs approach for estimating the amount of life insurance to
purchase is (are) true?
I. It involves an analysis of various family needs which must be met if a family breadwinner dies.
II. Its use is appropriate only if a person currently has no life insurance protection. A) I only B) II only C) both
I and II D) neither I nor II
13) Which of the following statements about yearly renewable term insurance is (are) true? I. It requires
evidence of insurability for renewal. II. It is most appropriate when an insured needs lifetime protection. A) I
only B) II only C) both I and II D) neither I nor II
14) What happens to the premiums for yearly renewable term insurance as an insured gets older?
A) They increase at an increasing rate. B) They increase at a decreasing rate. C) They decrease at a constant
rate. D) They remain level.
15) Which of the following statements about term insurance is true? A) The coverage is appropriate if the goal
is permanent lifetime protection. B) Most policies can be renewed for additional periods without evidence of
insurability. C) Premiums increase at a constant rate each time the policy is renewed. D) Most policies have a
cash value that is refunded when coverage ceases.
16) All of the following statements about the conversion of a term policy are true EXCEPT A) Under an
attained age conversion, the premium is based on the insured's attained age at the time of conversion. B) Under
an original age conversion, the policyowner must pay a financial adjustment in addition to the premium for the
new policy. C) Most insurers require original age conversion to take place within a specified period (5 years,
for example) of the issue of the term policy. D) Evidence of insurability is required before a conversion is
permitted.
17) Which of the following statements about a decreasing term insurance policy is true? A) The face amount of
the policy decreases during the policy period, and the premium increases. B) The face amount of the policy
decreases during the policy period, but the premium remains level. C) The premium decreases during the

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policy period, but the face amount remains constant. D) Both the premium and the face amount of the policy
decrease gradually over the policy period.
18) The purchase of term insurance is justified by which of the following circumstances? I. The insured wants
to save money through the policy for a specific need. II. The insured has a temporary need for life insurance
protection. A) I only B) II only C) both I and II D) neither I nor II
19) A legal reserve in life insurance is a result of A) premium taxes payable by life insurance companies being
postponed during the early policy years. B) dividends being paid to policyholders. C) inadequate premiums in
the early policy years being subsidized by investment earnings. D) excess premiums in the early policy years
being invested at compound interest.
20) Which of the following statements about life insurance cash values is (are) true? I. Cash values are a result
of the level premium method of purchasing life insurance. II. The cash value of a policy must always exceed
the policy's legal reserve. A) I only B) II only C) both I and II D) neither I nor II
21) Which of the following statements about limited-payment life insurance is true? A) It is a form of term
insurance. B) It matures at the end of the premium-payment period. C) The premium decreases each year
during the premium-payment period. D) Its use may be appropriate if a person wants paid-up life insurance
during retirement.
22) Which of the following statements about endowment insurance policies is (are) true?
I. The face amount is paid if the insured dies during the policy period or at the end of the policy period if the
insured is still alive.
II. The use of endowment insurance has increased in recent years because of its favorable tax treatment.
A) I only B) II only C) both I and II D) neither I nor II
23) Which of the following statements about variable life insurance is true? A) Premium payments are flexible.
B) The death benefit cannot be higher or lower than a guaranteed, specified, value. C) The policyowner has the
option of investing the cash value in several investment accounts. D) The cash surrender value of the policy is
guaranteed.
24) Which of the following statement is true regarding return of premium term insurance? A) The insurance is
free because premiums are refunded at the end of the coverage period. B) Life insurers charge less for this
coverage than for regular term insurance that does not include a refund provision. C) The return of premium is
only offered on one-year term insurance policies. D) The coverage is expensive and is not free when time
value of money is considered.
25) Which of the following statements about variable universal life insurance is (are) true? I Variable universal
life insurance has fixed premium payments. II. Variable universal life insurance allows the policyowner to
decide where the premiums are invested. A) I only B) II only C) both I and II D) neither I nor II
26) Which of the following statements about industrial life insurance (also called home service life insurance)
policies is true? A) Most policies have a face value exceeding $100,000. B) Most industrial life insurance
policies are cash value coverage. C) Industrial life insurance is group term insurance coverage marketed to
employers. D) This popular product accounts for over 40 percent of the life insurance sold today.
27) Which of the following statements about second-to-die life insurance is (are) true? I. The insurance is a
form of endowment coverage. II. The premium is lower than the combined cost of purchasing a life insurance
policy on each insured. A) I only B) II only C) both I and II D) neither I nor II

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