Chapter 1-4 Practice Test

All of the following statements about life insurance and the risk it covers are true EXCEPT:

Life insurance is like a mutual fund in that a certain sum of money must be set aside each year to meet the contractual obligations of the insured.

The Florida Guarantee Association:

Protects the insured if the insurer becomes insolvent

Which of the following statements concerning rebating is not correct?

Rebates should be given to insureds who purchase a policy from an insurer that prohibits rebating

The following statements about INSURABLE INTEREST are true EXCEPT:

An insurable interest must exist between the policy owner and the insured at the time of the claim.

Which type of authority is given to the agent specifically through a contract with an insurance company?

expressed

The USA PATRIOT Act was created:

to protect against terrorism & money laundering

Fraternal Benefit Societies are required to do all of the following except:

to provide the insured with a policy

Which of the following gives the state their ability to fine, issue cease and desist orders and impose penalties?

unfair trade practices act

A _______ contract may be set aside.

voidable

Which of the following is a distinguishing element of an insurance contract?

incontestability

Rooster died as the result of an automobile accident. His alcohol level was well above the state's limit for impairment. The accident was considered:

peril

A producer owes a fiduciary responsibility to:

the company and the client

Who is responsible for reporting suspicious activity concerning money laundering?

the producer and the company

A company transfers a risk. The company assuming the risk is:

the re-insurer

Which of the following is not a valued contract

an 80/20 major medical policy

Which statement concerning a life insurance contract is true?

It is not a personal contract and can be given away.

Which of the following statements about representations and warranties is/are true? 1. If a warranty is untrue the company may cancel the contract 2. If a representation is untrue the company can not cancel the contract unless it is a material fact.

1 and 2

If 100 men, age 25, desired to provide their beneficiary with $10,000, how much would each have to pay if we knew three were going to die?

300

The USA PATRIOT Act was created in response to which of the following?

9/11

The use of testimonials, special offers, or statistics would be found under what code or act?

Advertising Code

When an applicant applies for insurance by completing an application and paying one month's premium, this constitutes:

Consideration and an offer to buy.

Regarding warranties and representations, which of the statements below are true?

If a warranty is untrue, the insurer has the right to cancel the contract

Which of the following is not true concerning the National Association of Insurance Commissioners?

It encourages uniformity in state insurance laws by legislative acts.

Which of the following is not a federal run government insurance program?

Medicaid

Which statement most accurately describes a unilateral contract?

Only one party is legally bound to the contract.

Agents hired by a PPGA are considered to be employees of the :

PPGA

The USA PATRIOT Act requires financial institutions to do all of the following, except:

Share information with credit reporting agencies

An applicant has been denied insurance coverage because of information contained in a consumer report. According to the Fair Credit Reporting Act, all of the following statements are true about this situation EXCEPT:

The applicant has the right to obtain a copy of the consumer report directly from the insurance company that used the report.

Which of the following is true regarding a STOLI or IOLI?

These are usually sold by persuading seniors to purchase life insurance for the benefit of an investor.

Career agents are contracted to represent the particular company.

True

The authority of an agent to undertake certain functions for an insurance company would be found under which of the following?

a contract for agency

Which of the following could be considered a commercial company?

a stock or mutual company

The statement "there is no attempt to value financial loss" would be applied to which of the following?

a valued contract

Which of the following describes the idea that the insurance contract is created by the insurer and the client can "take it or leave it"?

adhesion

Which of the following statements best describes an element of an insurable risk? 1. The loss must be due to chance. 2. The loss must be definite and measurable. 3. The loss must not be catastrophic. 4. The loss exposures to be insured must be large

all

Andy the agent was fired by the general agent three months ago for conduct "unbecoming". Andy's general agent later was known to accept business that Andy had written after having been fired. One of these policy holders died before the policy was issued but had paid the required premium. Assuming the applicant had been insurable at standard rates, the company would pay because of:

apparent authority

The company transferring the risk to another company is called the:

ceding company

Because an insurance contract has been prepared by an insurance company without negotiation, it is considered a/an

contract of adhesion

Another name for a home service company is:

debit

Which of the following is an example of a Risk Retention Group (RRG)?

dentists

Selling insurance through a vending machine would be:

direct selling

Lloyd's of London

does not insure anything

Which of the following is not true concerning a Risk Retention Group?

it insures a group of separate businesses

There are risks that include the possibility of loss or gain. What is the definition of accepting risk and confronting it if and when it occurs?

retention

Rules pertaining to testimonials, statistics and special offers would be found in:

the advertising code