CH 1: General Insurance

Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPT A Conditions. B Consideration. C Legal purpose. D Offer and acceptance.

A Conditions

An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy? A Mutual B Reciprocal C Nonprofit service organization D Stock

A Mutual

Which of the following is the closest term to an authorized insurer? A Legal B Admitted C Certified D Licensed

B Admitted

When applying for an individual life insurance policy, an applicant states that he went to the doctor for nausea, but fails to mention that he was also having severe chest pains. This is an example of A Warranty. B Concealment. C Misrepresentation. D Fraud.

B Concealment

The requirement that agents not commingle insurance monies with their own funds is known as A Accepted accounting principal. B Fiduciary responsibility. C Premium accountability. D Express authority.

B Fiduciary Responsibility

When doing business in this state, an insurance company that is formed under the laws of another state is known as which type of insurer? A Nonadmitted B Foreign C Domestic D Alien

B Foreign

When would a misrepresentation on the insurance application be considered fraud? A Any misrepresentation is considered fraud. B If it is intentional and material C Never: statements by the applicant are only representations. D When the application is incomplete

B If it is intentional and material

Which of the following is the basis for a claim against an insurance policy? A Misrepresentation B Loss C Material change D Hazard

B Loss

Which of the following types of agent authority is also called "perceived authority"? A Express B Implied C Fiduciary D Apparent

D Apparent authority

When an individual purchases insurance, what risk management technique is he or she practicing? A Avoidance B Sharing C Retention D Transfer

D Transfer

A life insurance policy has a legal purpose if both of which of the following elements exist? A Underwriting and reciprocity B Offer and counteroffer C Policyowners and named beneficiaries D Insurable interest and consent

D insurable interest and consent

In what way can an agent demonstrate a high standard of ethics? A Setting and meeting monthly production goals B Recommending qualified retirement plans to each client C Putting the client's best interests before their own D Making enough commissions to cover personal expenses

C Putting the client's best interests before their own

What is the term for the entity that an agent represents regarding contractual agreements with third parties? A Principal B Client C Designee D Insured

A Principal

An insurance company is domiciled in Montana and transacts insurance in Wyoming. Which term best describes the insurer's classification in Wyoming? A Unauthorized B Foreign C Alien D Domestic

B Foreign

The insurer may suspect that a moral hazard exists if the policyholder A Is prone to depression. B Is indifferent to activities that may be dangerous. C Always drives over the speed limit. D Is not honest about his health on an application for insurance.

D is not honest about his health on an application for insurance