1.6 Types of Insurers QUIZ

Which of the following statements regarding a stock insurer is NOT true? A) It is owned by shareholders. B) Profits may be distributed as dividends. C) The policies are participating policies. D) The operations are overseen by a board of directors.

B) Profits may be distributed as dividends.

Which of the following is an incorporated insurer that does not have capital stock and has a governing body that is elected by its policyholders? A) Stock insurer B) Guaranty association C) Mutual insurer D) Reciprocal insurer

C) Mutual insurer

A mutual insurance company is an incorporated entity owned by its A) agents B) board of directors C) policyowners D) corporate officers

C) policyowners

Unincorporated groups of people that agree to insure each other's losses under a contract are known as A) mutual insurers B) fraternal insurers C) reciprocal insurers D) stock insurers

C) reciprocal insurers

A stock insurer is owned by its A) policyholders B) subscribers C) shareholders D) certificate holders

C) shareholders

Which of the following statements about fraternal benefit societies is NOT correct? A) Insurance may be sold to members as well as nonmembers. B) Life insurance is one of the benefits of membership. C) Policies are called certificates. D) The society must operate under a lodge system of government.

A) Insurance may be sold to members as well as nonmembers.

Which of the following statements regarding mutual insurers is TRUE? A) Mutual insurers are also known as reciprocal insurers. B) Mutual insurers issue participating policies. C) The board of directors oversees the operations of the company. D) If a mutual insurer is profitable, it may issue taxable dividends to its policyholders.

A) Mutual insurers are also known as reciprocal insurers.

An insurer that issues participating policies is A) a mutual insurer B) a stock insurer C) a policy insurer D) a fraternal insurer

A) a mutual insurer

A group of individuals who agree to share each other's losses is known as A) a reciprocal group B) a mixed group C) a service organization D) a reinsurer

A) a reciprocal group

Concerning mutual insurers, which of the following statements is CORRECT? A) In a mutual company, there are stockholders. B) Mutual companies are sometimes referred to as nonparticipating companies. C) Policyholders may participate in dividends. D) In a mutual company, there are shareholders.

B) Mutual companies are sometimes referred to as nonparticipating companies.

Which of the following is NOT a characteristic of fraternal benefit societies? A) Lodge system B) Insurance benefits to members C) Profit-making organization with capital stock D) Representative form of government

C) Profit-making organization with capital stock

A nonprofit organization with a representative form of government and an elected officer that sells life insurance only to its members would be considered A) a risk retention group B) a service insurer C) a fraternal benefit society D) a home service insurer

C) a fraternal benefit society

An insurance company that is owned by its policyowners is known as A) a stock insurance company B) a domestic company C) a mutual life insurance company D) a parent company

C) a mutual life insurance company

Which of the following insurance companies is owned by its policyholders? A) Reinsurer B) Home service insurer C) Stock life insurance company D) Mutual life insurance company

D) Mutual life insurance company

An incorporated insurer whose governing body is elected by the policyowners is A) a stock company B) a combination insurer C) a reciprocal insurer D) a mutual company

D) a mutual company

A corporation or other limited liability association that assumes and spreads the liability exposure for any of its group members is called A) a reciprocal insurer B) a mutual insurer C) a stock insurer D) a risk retention group

D) a risk retention group

Which of the following insurance companies are organized and incorporated under state laws but have no stockholders? A) Stock insurers B) Reciprocal insurers C) Lloyd's of London D) Mutual insurers

Mutual insurers

An incorporated insurer whose capital is divided into shares and owned by its stockholders is A) a stock insurer B) a foreign insurer C) a reciprocal insurer D) a mutual insurer

a stock insurer

An unincorporated group of subscribers who operate through an attorney-in-fact to provide indemnity insurance for each other is called A) a reciprocal exchange B) an unauthorized insurer C) a fraternal benefit society D) a surplus lines insurer

A) a reciprocal exchange

Which of the following statements about participating policies is NOT correct? A) They enable the policyowner to share in the earnings of the company. B) They are issued only by stock companies. C) The annual premium rate is generally higher than that for nonparticipating policies. D) They are eligible for dividends.

C) The annual premium rate is generally higher than that for nonparticipating policies.

A mutual insurer is owned by its A) stakeholders B) directors C) policyholders D) stockholders

C) policyholders

Which of the following statements regarding fraternal benefit societies is NOT true? A) Policies are called contracts. B) Life insurance is a benefit of membership. C) The society exists for the benefit of its members. D) They are organized under a lodge system.

A) Policies are called contracts.

An insurance company that is owned by its policyholders, who share in the company's profits in the form of dividends, is known as A) a mutual insurance company B) a reciprocal insurance company C) a reinsurance company D) a stock insurance company

A) a mutual insurance company

Which of the following statements regarding a risk retention group is TRUE? A) Its sole purpose is to provide liability insurance to its policyholders. B) A risk retention group may provide any type of insurance. C) Policyholders may be from any type of industry. D) Risk retention groups are federally regulated.

A) Its sole purpose is to provide liability insurance to its policyholders.

Which of the following statements about fraternal benefit societies is NOT correct? A) They operate on a lodge system. B) They are nonprofit societies that have a representative form of government. C) They are exempt from the licensing requirements if they provide insurance benefits to their members only. D) They do not have capital stock.

C) They are exempt from the licensing requirements if they provide insurance benefits to their members only.

Miguel works for a mutual insurance company that was formed to handle the insurance needs of lawyers. The type of company that Miguel works for is called A) a reinsurer B) a reciprocal insurer C) a risk retention group D) a fraternal benefit society

C) a risk retention group

A commercial insurer can take all of the following forms EXCEPT A) a fraternal benefit society B) a stock insurance company C) a mutual insurance company D) an individual benefit society

A) a fraternal benefit society

All of the following are types of insurers EXCEPT A) communal B) stock C) mutual D) fraternal

A) communal

Self-insurance is A) practiced by organizations that establish reserves to protect themselves against loss B) insurance written by an insurer on itself C) illegal in many states D) available through the federal government

A) practiced by organizations that establish reserves to protect themselves against loss

Which of the following is an incorporated insurer that is owned by its policyholders and does not have capital stock or shares?

B) Mutual company

Which of the following statements about Lloyd's of London is NOT correct? A) It is an insurance carrier that underwrites insurance. B) It gathers and disseminates underwriting information. C) It is an association of individuals and companies that individually underwrite insurance. D) It helps its associates settle claims and disputes.

D) It helps its associates settle claims and disputes.

An insurance company that is owned by its policyowners, who share the insurer's divisible surplus in the form of participating policy dividends, is known as A) a reciprocal insurance company B) a reinsurance company C) a stock insurance company D) a mutual insurance company

D) a mutual insurance company

What is the difference between a stock insurer and a mutual insurer? A) Stock insurers have certificate holders and mutual insurers have policyholders. B) Stock insurers have shareholders and mutual insurers have policyholders. C) Stock insurers have policyholders and mutual insurers have certificate holders. D) Stock insurers have policyholders and mutual insurers have shareholders.

B) Stock insurers have shareholders and mutual insurers have policyholders.

Individuals who own life insurance and are called certificate holders are members of a A) a home service insurer B) a fraternal benefit society C) a certificate holders society D) a risk retention group

B) a fraternal benefit society

All of the following are considered to be insurers EXCEPT A) an association B) a group of employees enrolled in an insurance plan C) an insurance company D) a fraternal organization

B) a group of employees enrolled in an insurance plan

An insurance company that is owned by its policyholders, who share the insurer's divisible surplus in the form of participating policy dividends, is known as A) a reciprocal insurance company B) a mutual insurance company C) a stock insurance company D) a reinsurance company

B) a mutual insurance company

Which of the following statements regarding Lloyd's associations is CORRECT? A) Lloyd's associations are insurance companies. B) Insurance can only be offered in London. C) Insurance is provided by individual underwriters. D) Lloyd's of London is an insurance company.

C) Insurance is provided by individual underwriters.

Which of the following statements regarding insurance company organization is CORRECT? A) Stock companies are owned by the policyholders. B) A stock company pays dividends to its policyholders. C) Mutual companies do not declare dividends. D) A policyholder in a mutual company may receive a dividend.

D) A policyholder in a mutual company may receive a dividend.

Which of the following is a distinctive feature of fraternal life insurance? A) Members must be related. B) Some policies are referred to as open contracts. C) Policies are only available to men who have lived in a fraternity. D) Fraternal societies are exempt from income taxes.

D) Fraternal societies are exempt from income taxes.

Which of the following statements regarding insurers is CORRECT? A) Mutual insurance companies sell insurance to insurers. B) A stock company that issues both participating and nonparticipating life insurance policies is classified as a full lines company. C) The primary purpose of an insurance company that is organized as a stock insurer is to earn a profit for its stockholders. D) If a life insurance company is owned by its policyowners, it is a stock company.

D) If a life insurance company is owned by its policyowners, it is a stock company.

An insurance company that is owned by its policyowners, who share the insurer's divisible surplus in the form of participating policy dividends, is known as A) a mutual insurance company B) a reinsurance company C) a stock insurance company D) a reciprocal insurance company

D) a reciprocal insurance company

Which kind of insurance company is owned by individuals who buy shares but are not entitled to receive policy dividends? A) Stock insurance company B) Fraternal insurance company C) Reciprocal insurance company D) Mutual insurance company

B) Fraternal insurance company