West Virginia Property and Casualty Licensing Practice Exam

Which type of insurance is typically provided by the government due to limited availability from private insurers?

1. Residual market insurance

2. Excess insurance

3. Universal insurance

4. Term insurance

The correct answer is: Residual market insurance

Residual market insurance is a type of coverage that is established to provide insurance to individuals or entities that are unable to obtain it from standard private insurance companies. This situation often arises for high-risk groups or individuals who may be deemed uninsurable under standard market conditions. Governments or designated organizations step in to create these programs to ensure that such risks are covered, thereby promoting fairness and access to coverage for all, regardless of their risk status. Residual market insurance is particularly essential in regions or scenarios where there is a significant gap in coverage options, such as in certain property sectors or auto insurance for high-risk drivers. By providing this type of insurance, the government helps to protect public interests and mitigate the potential financial burdens that could occur due to uninsured risks. In contrast, the other options do not typically involve government provision due to their nature. For instance, excess insurance provides additional coverage beyond the limits of primary insurance policies, while universal and term insurance are standard forms of life insurance available in the private market, reflecting common consumer needs without necessitating government intervention.