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  4. General Insurance Concepts

Free General Insurance Concepts Practice Questions

South Carolina Personal Lines exam — 58 practice questions.

Subtopics: Contract elements, Competent parties, Legal purpose, Risk pooling, Speculative risk, Proximate cause, Pure vs speculative risk, Hazard, Peril, Moral hazard, Morale hazard, Physical hazard, Law of large numbers, Risk avoidance, Risk retention, Risk transfer, Insurable interest, Indemnity, Elements of a contract, Contract of adhesion, 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. Which of the following is a required element of a valid insurance contract?

Offer and acceptance (agreement)

A valid contract requires offer and acceptance, along with consideration, legal purpose, and competent parties.

2. For an insurance contract to be valid, the parties must be:

Legally competent

Competent parties is an element of a valid contract; parties must have the legal capacity to contract.

3. An insurance contract must have a legal purpose, which means it cannot:

Insure an illegal activity

A contract must have a legal purpose; insuring an illegal activity would make the contract unenforceable.

4. Insurance fundamentally works by:

Spreading the cost of losses among many insureds

Insurance pools premiums from many insureds so the relatively few who suffer losses can be indemnified.

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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 Pennsylvania Insurance Department and the exam administrator before relying on it.