General Insurance Practice Exam

Text Explanation:Concealment is the failure to disclose a material fact and can be grounds for voiding the contract.

Text Explanation:Once a risk is identified, it can be dealt with in several ways. Self insurance is risk retention. Insurance is defined as the transfer of risk. Avoiding risk is difficult.

Text Explanation:Only pure risk is insurable, which is defined as the chance of loss without any possibility of gain. Speculative risk, like investing in the stock market which has the chance of gain or loss, is not insurable.

Text Explanation:Insurable interest is based on economics and must exist at the time of loss in P&C insurance.

Text Explanation:A moral hazard is created by a dishonest person, such as someone who may use arson to collect on their fire insurance. Moral hazards are best spotted by the agent, who is considered to be the “front line” underwriter.