California Life-Only Agent Exam, Basic Insurance Concepts and Principles: all 31 questions

All questions from the Basic Insurance Concepts and Principles section for California Life-Only Agent Exam, each with the correct answer.

• 1001Under California Insurance Code section 22, insurance is best described as which of the following?
• 1002Which term describes the uncertainty of financial loss?
• 1003A homeowner faces the possibility of a fire loss but has no chance of gaining from a fire. This is which kind of risk?
• 1004Which of the following is an example of a speculative risk?
• 1005In insurance terminology, a peril is best defined as
• 1006Storing oily rags near a furnace is an example of which kind of hazard?
• 1007An applicant intentionally overstates the value of belongings in order to collect more on a claim. This is an example of which hazard?
• 1008A policyowner stops locking the doors because the property is insured. This attitude illustrates
• 1009What does the law of large numbers allow an insurer to do?
• 1010Which of the following is a requirement of an ideally insurable risk?
• 1011Which risk management technique is used when a person decides not to take up skydiving to avoid injury?
• 1012A business pays a $1,000 deductible itself and insures losses above that. Which risk management method does the deductible represent?
• 1013Installing smoke detectors and sprinklers in a building is an example of
• 1014Buying an insurance policy is primarily which risk management technique?
• 1015Under California Insurance Code section 250, which kind of event may be insured against?
• 1016What is the purpose of the principle of indemnity?
• 1017Utmost good faith in an insurance contract means that
• 1018The main purpose of insurance underwriting is to
• 1019Adverse selection occurs when
• 1020Which term describes a possible exposure to loss that a person or business faces?
• 1021The term insurable interest means that the policyowner
• 1022Which of the following best describes the relationship between a hazard and a loss?
• 1023An insurer that sells a large number of similar policies is relying on which concept to make costs predictable?
• 1024Profitable distribution of exposures means that an insurer
• 1025Which statement about a risk that is ideally insurable is correct?
• 1026A person who buys a lottery ticket is taking
• 1027What is the difference between a peril and a hazard?
• 1028Which of the following is an example of the sharing method of managing risk?
• 1029When an insurer decides to charge higher premiums to applicants with known health problems, it is performing which function?
• 1030A pure risk differs from a speculative risk because a pure risk
• 1031Which concept holds that the insured should not be allowed to profit from a loss?

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