1) In insurance terminology, a "cession" is the :

a. Amount of insurance a reinsurer cedes to another reinsurer

b. Amount of insurance an insurer keeps for its own account
c. Amount of insurance an insurer transfers to a reinsurer
d. Maximum amount of insurance an insurer can write
2) The commission given by insurance company to others for receiving Business under re
insurance is called:
a. Commission on re-insurance accepted c. Agents commission
b. Commission on re insurance ceded d. None of these
3) The main purpose of life insurance is to:
a. make up for loss of earnings if an insured person is unable to ever work again.
b. pay for urgent medical expenses to save the life of an insured person if that is needed.
c. meet an insured person’s debts and other financial commitments in the event of death.
d. provide a lump sum if an insured person is diagnosed with a life-threatening illness.
4) Who oversees the insurance sector's central regulation in Egypt?
a. State Department of Insurance c. Financial Regulatory Authority
b. The Insurance company d. Insurance Regulatory Authority
5) Which of the following is the advantage of reinsurance for insurers?
I. It reduces the situation of certainty by the distribution of risks among other insurers
II. Insurers can share their risk with other insurance companies.
a. only I b. only II c. both I & II d. None
6) Selecting an appropriate investment vehicle in insurance companies would not depend on
a. Insurability b. Profitability c. Safety d. Liquidity
7) How life insurance is possible?
a. Timing of death is certain c. Death is certain but its timing is
uncertain
b. Timing of death is uncertain d. None of these
8) Which of the following is not a risk fit for insurance?
a. Early death c. Disability
b. Early death in an accident d. Natural wear and tear to an asset
9) Which of the following is correct?
a. Lfe insurance is a long-term contract, while general insurance is a short-term contract.
b. Lfe insurance is a short-term contract, while general insurance is a long-term contract
c. Both life insurance, while general insurance are short-term contracts
d. Both life insurance, while general insurance are long-term contracts
10) Which of the following statements is correct?
a. Reinsurers are paid a commission to provide reinsurance
b. When the reinsurer makes a loss, it is compensated by an overriding commission
c. The reinsurer receives a premium from the ceding company.
d. The reinsurer must pay the ceding company an additional premium when it makes a profit.
11) A factory is seeking insurance for $100 million on its buildings. Insurance company A accepts
the risk and reinsures with B, C, D and E who each take 20% of the risk. A claim is submitted
and agreed at $10million. How much will company D pay and whom will they pay?
a. $2 million to the factory c. 2.5 million to the factory
b. 2 million to company A d. 2.5 million to company A
12) A type of reinsurance contract whereby one insurer transfers a portion of its insurance
coverage on issued policies to another insurer based on a previously negotiated arrangement
based on mutually agreed upon underwriting standards is called:
a. a stop-loss reinsurance contract c. a facultative reinsurance
b. a pro-rata reinsurance arrangement d. a treaty reinsurance
13) Under a Quota Share treaty with a capacity of $5M, an insurer's retention at 70% and
reinsurance at 30%, how much is ceded?
a. $3.5M b. $5M c. $1.5M d. $2M
14) The difference between proportional and non-proportional reinsurance.
a. Proportional is agreeing on a certain amount while non proportional is agreeing on a
certain percentage
b. Proportional is usually treaty while non proportional is facultative
c. Proportional is agreeing on a certain percentage while non proportional is agreeing on a
certain amount
d. Non Proportional is usually treaty while proportional is facultative
15) Rasburry Co. Had a fire. Ending inventory last year was $100,000. To the day of the fire, the
company had purchased $2,000,000 in goods. The sales to the date of the fire were
$2,000,000. The company marks all merchandise 100% when determining the sales price.
How much did Rasburry lose in the fire?
a. $1,000,000 b. $2,000,000 c. $1,100,000 d. $2,100,000
16) Which of the following is referred to as risk free instruments?
a Loan b. Real estate c. Marketable securities d. Governmental securities
.
Use the following information to answer the next FOUR questions.
On Oct. 1, 2024, an insurance co. acquired government securities having a maturity value of
$100,000 for $90,000. These bills mature on Sep. 30, 2025.
17) What is the journal entry to recognize the acquisition of treasury bills?
a. Debit to Investment in TB, $90,000 and Credit to Cash, $90,000.
b. Debit to Investment in TB, $100,000 and Credit to Cash, $100,000.
c. Debit to Investment in TB, $90,000, Debit to Discount on TB, $10,000 and Credit to
Cash, $90,000.
d. Debit to Investment in TB, $100,000, Credit to Cash, $90,000 and Credit to Discount on
TB, $10,000.
18) What is the journal entry to accrue interest on Dec. 31, 2024?
a. Debit to Interest Income, $2,500, and Credit to Discount in TB, $2,500
b. Debit to Discount on TB, $2,500 and Credit to Interest Income, $2,500
c. Debit to Cash $2,500 and Credit to Interest Income, $2,500.
d. Debit to Investment in TB, $2,500 and Credit to Interest Income, $2,500
19) Assume the fair market value of Treasury bills on December 31, 2024, was $92,000, what is
the journal entry required?
a. Debit to the unrealized holding gain or loss, $500, and Credit to Investment in TB, $500
b. Debit to Investment in TB, $500, and Credit to unrealized holding gain or loss, $500
c. Debit to Investment in TB, $8,000, and Credit to unrealized holding gain or loss, $8,000
d. Debit to Investment in TB, $2,000, and Credit to unrealized holding gain or loss, $2,000
20) What is the journal entry at the extinguishment date on September 30, 2025?
a. Debit to Cash $90,000, and Credit to Investment in TB, $90,000
b. Debit to Cash $100,000, Credit to Investment in TB, $99,500, and Credit to Unrealized
Gain $500.
c. Debit to Cash $100,000, Credit to Investment in TB, $99,500, and Credit to Realized Gain
$500.
d. Debit to Cash $100,000, Credit to Investment in TB, $98,000, and Credit to Realized Gain
$2,000.

21) Which of the following is true regarding a facultative reinsurance contract?

a. The reinsurer is obligated to accept all loss exposures underwritten by the primary insurer.
b. The reinsurer agrees in advance to accept a set proportion of all loss exposures underwritten
by the primary insurer.
c. Both the primary insurer and the reinsurer may cancel the contract at any time with sufficient
notice.
d. The primary insurer must negotiate a separate agreement for each loss exposure it wants to
reinsure.
22) Secure Your Life Insurance Company sold a building for $340,000. The book values of the
building and related accumulated depreciation were $290,000 and $150,000, respectively.
What is journal entry for disposing the building?
a. Debit Cash of $340,000, and Accumulated Depreciation of $150,000; and Credit building of
$440,000 and Gain on Disposal of $50,000.
b. Debit Cash of $340,000, and Accumulated Depreciation of $150,000; and Credit building of
$290,000 and Gain on Disposal of $200,000.
c. Debit Cash of $340,000; and Credit building of $290,000 and Gain on Disposal of $50,000.
d. Debit Cash of $340,000 and Loss on Disposal of $100,000; and Credit building of $440,000
23) Mr. Omar buys insurance from Star Insurance Company for $250. Star buys facultative
reinsurance in respect of 20% of the risk at a cost of $45.00. If Mr. Omar makes a valid claim
for $160, how much does the reinsurer pay Star?
a. $9 b. $10 c. $32 d. $45
24) On January 1, 2019, Red Sea Insurance Company, purchased $200,000 face value, 9% bonds
at a discount of 3%. The bonds mature January 1, 2024, and pay interest at December 31, each
year. The company uses the straight-line method of amortization and intends to hold the
bonds to maturity. In its December 31, 2020 balance sheet, the carrying amount of this
investment should be
a. $195,200 b. $196,000 c. $194,000 d. $196,400
The following information pertains to next Two questions
On December 31, Future Insurance Co. had investments g securities as follows:
Amortized Cost Fair Value
Orange Co $10,000 $ 8,000
 Peach, In 9,000 11,000
Strawberry, Corp 11,000 9,000
25) If these securities were classified as trading, Future's December 31 balance sheet should report
the trading securities as
a. $28,000 b. $26,000 c. $29,000 d. $30,000
26) If these securities were classified as held-to maturity, Future's December 31 balance sheet
should report the trading securities as
a. $26,000 b. $28,000 c. $30,000 d. $29,000
27) Cherries Insurance Co. has a portfolio of marketable equity securities that it does not intend to
sell in the near term. How should Cherries classify these securities, and how should it report
unrealized gains and losses from these securities?
Classified as.. Reported in
a. Trading securities A component of income from continuing
operations
b Available-for-sale securities Other comprehensive income (OCI)
.
c. Trading securities Other comprehensive income (OCI)
d Available-for-sale securities A component of income from continuing
. operations
Use the following information to answer the next 2 questions
The following data are extracted from Silver Life Insurance Company in June 30, 2025
Total insurance policies issued during the $12,000,000
year
Direct Premiums 7,000,000
Reinsurance Premiums Accepted 1,300,000
Reinsurance Premiums Ceded 1,500,000
Claims on Premiums Accepted 1,350,000
Claims on Premiums Ceded 1,100,000
Claims paid for direct transactions 5,600,000
Balances of provisions are as follows
June 30, 2024 June 30, 2025
Provision for claims under payment $1,150,000 $1,450,000
Mathematical Reserve 980,000 750,000
28) Premiums Earned for the for year ended June 30, 2025 are
a. $6,470,000 b. $7,350,000 c. $7,030,000 d. $7,530,000
29) How much the Loaded Claims for year ended June 30, 2025?
a. $5,050,000 b. $5,750,000 c. $5,850,000 d. $6,150,000
30) On January 28, 2024, a fire destroyed a partial insured inventory of a retail store leaving saved
inventory of $600,000. The company's December 31, 2024 inventory had a cost of $480,000.
During January the company purchased merchandise costing $5,520,000 and sales of
$5,600,000.
How much the estimated destroyed inventory destroyed by fire to be claimed by the insurance
company if the gross profit has consistently been 25% of sales?
a. $800,000 b. $820,000 c. $1,200,000 d. $700,000
Question 1 (MCQs)
31) Insurance helps to
a. Prevent adverse situations from occurring
b. Reduce the financial consequences of adverse situations
c. Negate all consequences of adverse situations
d. Make assets continuously productive

32) ______________principle means that the insured is not entitled to make a profit on his loss.
a. subrogation
b. causa proxima
c. indemnity
d. uberrima fides

33) First-to-die and last-to-die life insurance policies have in common all of the following,
EXCEPT:
a. They both continue in force after one of the named insureds dies
b. They both require premiums to be paid on time
c. They are both issued by an insurance company
d. Generally, they cover the lives of two people, typically husband and wife

34) Anas was late for work. As he drove around a curve, he hit a patch of oil that had been spilled
on the road. He slid across the road and hit a guard rail. Anas was not hurt; however, his car was
severely damaged. The presence of oil on the road is best described as a
a. morale hazard
b. legal hazard
c. moral hazard
d. physical hazard

35) If there were a $22,000 loss and a $700 straight deductible, the insurer would pay:
a. $700
b. $21,300
c. $22,000
d. $0

36) If an owner of a building worth 100,000 buys 60,000 of insurance on a policy with an 80%
coinsurance clause, then suffers a loss of 100,000, his recovery under this policy would be:
a.75,000
b.60,000
c.100,000
d.45,000

37) If an owner of a building worth 600,000 buys 400,000 on a policy with an 80% coinsurance
clause, then suffers a loss of 60,000, how much would the insurer pay?
a. 24,000
b. 45,000
 c. 50,000
d. 60,000

38) Consider a consumer with a medical bill of 1,000. He has a 250 deductible and a 10 percent
coinsurance rate on all expenses over 250. His “out-of-pocket” liability for this bill is:
a. 100
b. 250
c. 325
d. 500

39) __________ guarantee insurance guarantees the employer for any damages or losses resulting
from dishonesty of employee.
a. Fidelity guarantee insurance
b. cash in transit insurance
c. social insurance
d. Property insurance

40) If an insured has actual cash value coverage, how much would he collect given the following
facts?
 The replacement cost of the building is 200,000
 The replacement cost of the loss is 30,000
 Estimated total useful life is 30 years
 The building has been in use 15 years.
a. 70,000
b. 45,000
c. 30,000
d. 15,000

41) Which of the following marketable securities is issued by the Egyptian government?
a. Negotiable certificates of deposit
b. Commercial paper
c. Bonds payable
d. T-bills

42) Which of the following statements most accurately describes the modern approach to cash
management?
a. Cash management involves the efficient disbursement of cash.
b. Cash management involves the efficient funds working, speed up the payment, receipt process,
and improve profitability.
c. Cash management involves the efficient collection and disbursement of cash.
d. Cash management involves the efficient processing, collection, and depositing of cash.

43) This principle of insurance means that the parties to an insurance contract must be truthful in
the declaration they make:
a. Insurable Interest
b. Indemnity
c. Utmost Good Faith
d. Proximate Cause

44) Which of the following is true of indemnity?

a. life insurance policies are contracts of indemnity.
b. Indemnity is determined by the insurer.
c. To indemnify means to put someone back in the same financial position as he was when the
policy was purchased.
d. The principle of indemnity demands that an insured should neither lose nor gain as a result of a
loss.

45) according to___________ principle , life insurance can be affected on the lives of third parties
provided the proposer has insurable interest in the third party.
a. insurable interest in own life
b. insurable interest in other’s life
c. insurable interest in property insurance
d. none of above

46) The insurer according to which of the following principle, becomes entitled to all the rights of
insured subject matter after payment because he has to pay the actual loss of the property.
a. Subrogation
b. Insurable Interest
c. Indemnity
d. Contribution
e. Proximate Cause

47) The tread on Alan's automobile tires is very thin. This is an example of what type of hazard?
a. Physical
b. Moral
c. Morale
d. Obvious

48) Angel purchases a house from Abdul Rahman. She borrows $75,000 from Red Sea Bank that,
along with her $25,000 down payment, equals the $100,000 purchase price of the home. Who
has an insurable interest in this home? Choose all that apply.
a. Angel
b. Abdul Rahman
c. Red Sea Bank
d. Angel's son, who would like to inherit the home some day

49) A fire destroyed an insured store. Investigators determined the fire originated in the garbage
dumpster behind the store, and his insurance company indemnified him for his loss. What
insurance term describes the fire that caused the destruction of the insured's store?
a. Hazard
b. Peril
c. Severity of loss
d. Captive

Use the following information to answer the next Two questions

 Omar owns a storage building valued at $400,000. He purchased $280,000 in property insurance on
the store, and the property insurance contract includes an 80 percent coinsurance clause.
50) If an $80,000 covered loss occurs, how much will Omar collect from the insurer?
a. $44,800
b. $70,000
c. $56,000
d. $80,000

51) If an $340,000 covered loss occurs, how much will Omar collect from the insurer?
a. $280,000
b. $320,000
c. $297,500
d. $400,000

52) Life insurance and general insurance are divided on the basis of:
a. nature of insurance
b. risk point of view
c. business point of view
d. none of above

53) ___________ helps lower the cost of insurance as well as increase its availability.
a. selective decisions
b. deductible decisions
c. objective decision
d. all the above

54) Risk is best defined as

a. chance of loss
b. certainty of loss
c. financial loss
d. sentimental loss

55) Which one the following statement is correct

a. The principle of indemnity applies in life insurance only.
b. The principle of indemnity applies in general insurance but does not apply in life insurance.
c. The principle of indemnity does not apply in general insurance.
d. The principle of indemnity does not apply neither in life insurance nor general insurance.
e. The principle of indemnity applies either in life insurance or general insurance.

56) Faking an accident to collect insurance proceeds is an example of a

a. physical hazard
b. objective risk
c. moral hazard
d. attitudinal hazard

57) If an insured person dies, the person entitled to receive the life insurance benefit is:
a. The next of kin of the insured person.
b. The executor of the insured person’s will, regardless of who the policy owner is.
c. The policy owner, but only if the policy owner is related to the life insured.
d. The policy owner, regardless of who that person is.

58) A physical hazard is a condition stemming from the material characteristics of an object
a. True
b. False

59) A peril is defined as

a. the chance a loss will occur
b. the proximate cause of the loss
c. a morale hazard
d. contingency that increases the chance of a loss

60) Which of the following is a hazard as opposed to a peril?

a. Fire
b. Lightning
c. Flood
d. Wet pavement

61) The law of large numbers allows an insurer to determine who will actually have a loss.
a. True
b. False

62) Insurance is the pooling of many premiums to pay a few losses

a. True
b. False

63) Which of the following is an example of a hazard?

a. Slippery floor
b. Fire
c. Vandalism
d. Flood

64) Life insurance companies provide protection against death

a. True
b. False

65) To indemnify means to

a. put aside funds to pay for losses reported but not yet paid.
b. transfer risk to someone who has better financial resources and can withstand loss.
c. put back in the same financial position just prior to the loss.
d. make financial provisions for dealing with potential losses.

66) Golden Bill Company has insurance policies with Sinai Insurance, Inc., and Red Sea covering
the risk of loss of Golden Bill's building in a fire. Each policy has a multiple insurance clause.
If the building is partially destroyed in a fire, Golden Bill can collect from each insurer
a. each insurer's proportionate share of the loss to the total amount of insurance.
b. half of the amount of the loss.
c. the full amount of the loss.
d. nothing.

67) Three years ago, an insured moved to an unfurnished apartment. She bought new furniture that
cost $9,000. Last week, there was a fire in the apartment that destroyed the furniture.
Replacement cost is $10,500. The adjuster told the insured her furniture depreciated $2,500. If
insurance is written on an actual cash value basis, how much will it pay for the loss?
a. $6,500
b.$8,000
c. $9,000
d.$10,500

68) A building policy is subject to 90% coinsurance. The building is valued at $200,000 and
insured for $170,000. The loss is $130,000. What will the insurer pay?
a. $180,000
b. $130,000
c. $99,450
d. $122,778

69) Why is a large number of exposure units generally required before a pure risk is insurable?
a. It prevents the insurer from losing money.
b. It eliminates intentional losses.
c. It minimizes moral hazard.
d. It enables the insurer to predict losses based on the law of large numbers.

70) Insurance is better used to insure

a. minimum possible loss.
b. minimum probable loss.
c. maximum possible loss.
d. maximum probable loss.

71) All of the following are disadvantages of using insurance EXCEPT

a. There is an opportunity cost because premiums must be paid in advance.
b. Considerable time and effort must be spent selecting and negotiating coverages.
c. It results in considerable fluctuations in earnings after a loss occurs.
d. Attitudes toward loss control may become lax.

72) 'It means that the responsibility for meeting the cost of any losses is pass on to someone else'
What kind of financial risk control method is being described here?
a. Risk reduction.
b. Risk transfer.
c. Risk retention.
d. Risk avoidance.

73) There is no refund to the insured due to cancellation of policy before expiry.
a. True
b. False
74) Which of the following is not a category of property risk?
a. Loss of property due to fire, wind, water of other hazards.
b. Loss of value through economic obsolescence.
c. Liability loss resulting from negligent use of property.
d. Financial loss resulting from death or disability of the owner of the organization.

75) From the standpoint of the individual, insurance is a device in which a small certain cost is
substituted for a large certain loss.
a. True
b. False

76) Insurance cannot exist without a sufficiently large number of exposures to make losses
predictable.
a. True
b. False

77) Property insurance protects the policyholder against

a. all direct and indirect losses.
b. all direct losses.
c. losses from insured risks only.
d. Living expenses or loss of business income.

78) The combination of a large number of exposure units by an insurer is important for the
operation of insurance because:
a. it reduces uncertainty in the aggregate.
b. it allows the insurer to make accurate predictions.
c. it spreads losses among the members of the group.
d. it makes the insurer's aggregate risk less than a summation of the risks of the individuals.
e. all of the above.

79) Insurance business in Egypt is controlled by

a. Central Bank.
b. Reinsurance Companies
c. Public Authority for Financial Supervisory.
d. Public Authority for Insurance Supervisory.
e. Central Auditing Organization.

80) If an insurance company carries business of more than one type of insurance (i.e., life and
property insurance) is required to prepare
a. a separate revenue and expense statement for each type of insurance.
b. a separate income statement for each type of insurance.
c. a separate balance sheet for each type of insurance.
d. a separate cash flow statement for each type of insurance.

81) From the insured's perspective, the purchase of insurance is an example of risk ________
a. avoidance.
b. retention.
 c. transfer.
d. loss prevention.
e. combination.

82) Insurance against risk is possible because of the

a. Law of cooperation.
b. law of contribution.
c. law of large numbers.
d. law of small numbers.

83) _____________ refers to the right of insurer to step into the shoes of the insured as to any
cause of action relating to a third party whose conduct caused to the loss.
a. Indemnity.
b. Contribution.
c. Subrogation.
d. Physical risk.

84) Cause of loss is known as

a. Risk.
b. Peril.
c. Hazard
d. Loss exposure.

85) The insurance principle which imposes a duty on the parties to contract "not to misrepresent
any matter relating to the insurance" is known as
a. Indemnity.
b. subrogation.
c. Contribution.
d. Utmost good faith.
e. Co-operation

86) A life insurance contract is designed to provide coverage for

a. premature death.
b. temporary disability.
c. permanent disability.
d. all of the above.

87) The life insurance branch in Company A received direct premiums during the first quarter of
2022, $360,000. It transferred one third of the premium to another insurance company and
received premiums from other companies of $78,000. The net life premiums in Company A
would be
a. $240,000
b. $318,000
c. $360,000
d. $402,000
e. $438,000

88) A primary purpose of insurance as a risk transfer mechanism is to

a. compensate for financial losses however sustained.
b. provide risk control advice.
c. spread the cost of an insured loss amongst many policyholders.
d. provide a source of funds for capital investment.

89) Under the contract of indemnity, the claim is

a. limited to the extent of insurable interest existing at inception.
b. unlimited.
c. limited to the loss incurred by the insured.
d. paid directly to the bank.

90) A life insurance company provides life covers for 10,000 males at a premium of $35 each for a
death benefit of $30,000. In 2022, 10 males died leaving a profit of $35,000 after deducting
operating expenses of $15,000. What would be the profit have been reduced if one additional
death?
a. $5,000
b. $15,000
c. $20,000
d. $35,000

91) An example of a physical hazard for property risk would be

a. an insured with a criminal record.
b. an insured with a high staff turnover.
c. a regularly serviced burglar alarm.
d. harming employees in a chemical factory.

92) The balance sheet reports changes in fair value for which type of securities?
a. Securities reported under the equity method.
b. Trading securities
c. Held-to-maturity securities.
d. Securities available for sale.

93) The following items are extracted from a life branch in Northern Insurance Company
$98,000 salaries and commissions paid to producers and agents.
$12,000 commission on premium accepted.
$18,000 commission on premium ceded.
$23,000 salaries and benefits paid to medical and administrative staff in the life branch
Based on the above facts, the production costs should equal
a. $115,000
b. $133,000
c. $141,000
d. $139,000
e. $127,000

94) The life branch in Company Y paid you claims of $180,000. The branch deducted a loan of
$15,000. The entry made by the company should include
a. Credit total claims paid by $180,000
b. Credit total claims paid by $165,000
c. Credit cash by $180,000
d. Debit total claims paid by $180,000
e. Debit total claims paid by $165,000

95) The following facts occurred in an insurance company.

Claims paid by death and maturity, $200,000.
Claims related to premiums accepted, $70,000.
Claims related to premiums ceded, $40,000.
Exemption from payments of two premiums to a VIP insured, $30,000.
The net claims reported by the branch are
a. $260,000
b. $280,000
c. $300,000
d. $320,000
e. $340,000

96) Which of the following is correct related to the criteria of investment?

Security Profitability Liquidity
a. Investment in governmental bonds high moderate low
b. Investment in governmental bonds high moderate high
c. Investment in governmental bonds low high low
d. Investment in governmental bonds low high high

97) A building, insured for $100,000, has a replacement cost of $200,000. The policy is subject to
the condition of average. If a fire causes a damage of $50,000, what total amount, if any, is
payable to the insured?
a. Nil.
b. $12,500
c. $25,000
d. $50,000

98) _____________ refers to the right of insurer to step into the shoes of the insured as to any
cause of action relating to a third party whose conduct caused to the loss.
a. Indemnity.
b. Contribution.
c. Subrogation.
d. Physical risk.

99) Cause of loss is known as

a. Risk.
b. Peril.
c. Hazard
d. Loss exposure.

100) Which statement is true with regard to risk and insurance?

 I. Most speculative risks can be insured.
II. Insurance is a form of risk transfer.
a. I only.
b. II only.
c. both I and II.
d. neither I nor II.

101) The law of large numbers makes it possible for a company to assume risk for an insured
party through a _______ upon payment of a _______.
a. policy, premium.
b. premium, policy.
c. contract, fee.
d. policy, fee.
e. Any of the above.

102) When an insured have a more careless attitude toward preventing losses is termed
a. physical hazards.
b. moral hazard.
c. morale Hazard.
d. adverse hazard.
e. legal hazard.

103) The primary source of funds for an insurance company is

a. insurance premiums
b. insurance policies.
c. insurance claims.
d. governmental securities.
e. investment in bonds and stocks.

104) Sarah was late for work. As she drove around a curve, she hit a patch of oil that had
been spilled on the road. She slid across the road and hit a guard rail. Sarah was not hurt;
however, her car was severely damaged. The presence of oil on the road is best described as
a(n):
a. attitudinal hazard.
b. objective risk.
c. moral hazard.
d. physical hazard.

105) Which of the following is not covered under the contract of indemnity?
a. Fire insurance.
b. Theft insurance.
c. Life insurance.
d. Marine insurance.
e. Commercial insurance.

106) The original purpose of life insurance was

a. to provide funds from construction of homes and buildings.
 b. to pay to estate taxes.
c. to pay death benefits.

107) Which principle suggests that when a loss is caused by more than one cause, the
proximate or the nearest or the closest cause should be taken into consideration to decide the
liability of the insurer?
[Link] of proximate cause.
b. Principle of loss minimization.
c. Principle of mitigation.
d. Principle of indemnity.
e. Principle of contribution.

108) Assume 1000 students all healthy, all age 22, and all male, form a life insurance pool to
pay $500 to the beneficiaries of any member who dies in the next 365 days. The chance of loss
or probability of death for the members of this group is .002. To join the pool a member must
pay: (disregard interest earnings and reserves and assume expenses of operating the insurance
pool are 30% of losses).
a. $1
b. $1.30
c. $3
d. $2.28

109) Which of the following is most likely the largest expense of a bank?
a. income taxes
b. occupancy expense
c. salaries
d. interest on loans
e. interest on deposits

110) The principal revenue source for a bank typically is

a. gain on sale of real estate
b. sales
c. dividend income
d. interest income
e. interest expense

111) Which of the following is not a type of earning asset for a bank?
a. Cash
b. Leases
c. Loans
d. investment securities
e. money market assets

112) For a bank, loans to customers are assets

a. Ture
b. False

113) For a bank, loans are not earning assets

a. Ture
b. False