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  4. General Insurance Concepts

Free General Insurance Concepts Practice Questions

Washington Personal Lines exam — 58 practice questions.

Subtopics: Insurable interest, Principle of indemnity, Utmost good faith, Law of large numbers, Adverse selection, Subrogation, Pure vs speculative risk, Hazard, Peril, Moral hazard, Morale hazard, Physical hazard, Risk avoidance, Risk retention, Risk transfer, Indemnity, Elements of a contract, Contract of adhesion, Aleatory contract, Representation, Concealment, Warranty, Express authority, Apparent authority, Implied authority, Stock vs mutual insurer, Domestic foreign alien, Admitted insurer, Estoppel, 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

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Sample questions & answers

1. For a Washington homeowners policy to pay a property claim, the insured must have an insurable interest in the property:

At the time of the loss

Property insurance requires that the insured have an insurable interest in the covered property at the time of loss.

2. The principle of indemnity in property insurance is intended to:

Restore the insured to the financial position held before the loss, without profit

Indemnity restores the insured to the same financial position held before the loss and is not intended to create a gain.

3. Insurance contracts are described as being based on utmost good faith, which means:

Both parties rely on each other's honesty and full disclosure

Utmost good faith means both the insurer and insured rely on each other's honesty and complete, accurate disclosure.

4. Insurers rely on the law of large numbers in order to:

More accurately predict losses as the number of similar exposures increases

The law of large numbers lets insurers predict losses more accurately as the pool of similar exposures grows.

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Practice: General Insurance Concepts

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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.