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  4. General Insurance Concepts

Free General Insurance Concepts Practice Questions

Michigan Personal Lines exam — 56 practice questions.

Subtopics: Law of large numbers, Pure risk, Contract of adhesion, Proximate cause, Pure vs speculative risk, Hazard, Peril, Moral hazard, Morale hazard, Physical hazard, Risk avoidance, Risk retention, Risk transfer, Insurable interest, Indemnity, Elements of a contract, Aleatory contract, Utmost good faith, Representation, Concealment, Warranty, Express authority, Apparent authority, Implied authority, Stock vs mutual insurer, Domestic foreign alien, Admitted insurer, Estoppel, Adverse selection, Reinsurance, Underwriting, Loss ratio, Rate regulation goals, Reciprocal insurer, Lloyds of London, Risk retention group, Self-insurance, Surplus lines, Fundamental vs particular risk, Loss exposure, Frequency vs severity, Unilateral contract, Conditional contract, Personal contract, Waiver, Material misrepresentation, Fiduciary duty, Commingling, Agent vs broker, Rebating, Twisting, Coercion, Defamation, Unfair claims settlement

Read the General Insurance Concepts study guide

Sample questions & answers

1. Insurers predict losses more accurately using the:

Law of large numbers

The law of large numbers improves loss prediction as the number of similar exposures grows.

2. Insurance is designed to cover:

Pure risk

Insurance covers pure risk, which involves only the chance of loss, not gain.

3. A personal lines policy is a contract of adhesion because it is:

Drafted by the insurer and accepted as written

A contract of adhesion is drafted by the insurer and accepted by the insured on a take-it-or-leave-it basis.

4. The continuous chain of events leading to a covered loss reflects:

Proximate cause

Proximate cause is the primary cause that sets in motion the chain of events causing the loss.

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Practice: General Insurance Concepts

Take a randomized, timed-style practice test. Answer choices are shuffled and your results are scored instantly with an explanation for every question.

Practice questions are study aids generated for exam preparation and are not actual exam questions. Content is provided for educational purposes and is not legal advice. Verify current statutes, rules, and exam specifications with the Insurance Department and the exam administrator before relying on it.