IC38 Core Elements of Insurance MCQs (30 Questions with Answers)
Practice IC38 Core Elements of Insurance MCQs with answers and explanations. Covers asset, risk, hazard, and risk pooling.
IC38 Core Elements of Insurance MCQs
Q1. What is an asset?
A. Liability
B. Something with economic value
C. Expense
D. Loss
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Answer: B
Explanation: Asset provides economic benefit.
Q2. Which is NOT an asset?
A. House
B. Car
C. Air
D. Machinery
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Answer: C
Explanation: Air is not scarce or owned.
Q3. Risk means:
A. Profit
B. Certainty
C. Possibility of loss
D. Savings
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Answer: C
Explanation: Risk is uncertainty of loss.
Q4. Peril is:
A. Result of loss
B. Cause of loss
C. Premium
D. Policy
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Answer: B
Explanation: Peril causes loss.
Q5. Hazard is:
A. Loss
B. Risk
C. Condition increasing risk
D. Premium
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Answer: C
Explanation: Hazard increases probability of loss.
Q6. Example of physical hazard:
A. Fraud
B. Carelessness
C. Faulty wiring
D. Law change
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Answer: C
Explanation: Physical condition increases risk.
Q7. Moral hazard relates to:
A. Environment
B. Behavior
C. Law
D. Weather
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Answer: B
Explanation: It involves dishonest behavior.
Q8. Legal hazard arises due to:
A. Weather
B. Behavior
C. Laws
D. Machines
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Answer: C
Explanation: Legal system affects risk.
Q9. Insurance compensates:
A. Emotional loss
B. Financial loss
C. Social loss
D. Physical loss
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Answer: B
Explanation: Insurance covers economic loss.
Q10. Risk pooling means:
A. Sharing profit
B. Sharing loss
C. Avoiding risk
D. Increasing risk
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Answer: B
Explanation: Losses are shared among many.
Q11. Risk transfer is done through:
A. Saving
B. Investment
C. Insurance
D. Loan
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Answer: C
Explanation: Insurance transfers risk.
Q12. Example of peril:
A. Smoking
B. Fire
C. Fraud
D. Carelessness
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Answer: B
Explanation: Fire causes loss.
Q13. Exposure to risk means:
A. Loss
B. Being open to loss
C. Profit
D. Safety
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Answer: B
Explanation: Exposure means possibility of loss.
Q14. Insurance does NOT:
A. Prevent loss
B. Compensate loss
C. Reduce impact
D. Provide protection
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Answer: A
Explanation: Insurance cannot prevent events.
Q15. Law of large numbers helps in:
A. Avoiding loss
B. Predicting loss
C. Increasing loss
D. Eliminating risk
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Answer: B
Explanation: It helps estimate losses.
Q16. Critical risk is:
A. Small loss
B. Large manageable loss
C. No loss
D. Profit
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Answer: B
Q17. Catastrophic risk is:
A. Minor loss
B. Huge widespread loss
C. No loss
D. Predictable loss
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Answer: B
Q18. Marginal risk is:
A. Large loss
B. Small loss
C. No risk
D. High risk
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Answer: B
Q19. Example of asset:
A. Debt
B. Car
C. Expense
D. Loss
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Answer: B
Q20. Risk retention means:
A. Transfer risk
B. Avoid risk
C. Bear risk
D. Ignore risk
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Answer: C
Q21. Risk avoidance means:
A. Transfer risk
B. Avoid activity
C. Reduce risk
D. Share risk
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Answer: B
Q22. Risk reduction means:
A. Eliminate risk
B. Lower impact
C. Increase risk
D. Transfer risk
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Answer: B
Q23. Risk financing means:
A. Borrowing
B. Funding losses
C. Saving
D. Investing
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Answer: B
Q24. Premium is:
A. Profit
B. Payment for insurance
C. Claim
D. Loss
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Answer: B
Q25. Insurance works on:
A. Profit sharing
B. Risk pooling
C. Investment
D. Borrowing
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Answer: B
Q26. Loss must be:
A. Emotional
B. Financial
C. Social
D. Personal
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Answer: B
Q27. Insurer is:
A. Policyholder
B. Company
C. Agent
D. Broker
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Answer: B
Q28. Insured is:
A. Company
B. Customer
C. Agent
D. Broker
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Answer: B
Q29. Hazard increases:
A. Profit
B. Risk
C. Savings
D. Income
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Answer: B
Q30. Risk is:
A. Gain
B. Loss
C. Chance of loss
D. Profit
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Answer: C