Chapter 1 part 2 AD Banker

Insurable interest for life insurance is necessary only at the time of: A Application B Death C Policy renewal D Policy delivery

A Application

Insurable interest for life insurance is necessary only at the time of: A Application B Policy renewal C Death D Policy delivery

A Application In Life and Health Insurance, insurable interest must exist at the time of application or policy issuance. It is not required at any later point in time.

The State's __________ branch enforces the existing statutes that have been put in place. A Executive B Legislative C Electoral D Judicial

A Executive The State's executive branch enforces the existing statutes that have been put in place.

What is the correct insurance term for a statement that is guaranteed to be true? A Warranty B Utmost good faith C Fact D Representation

A Warranty Warranties are statements guaranteed to be true. Representations are statements made to the best of one's knowledge.

Which of the following would be considered legally competent to enter into a contract? A A person under the influence of drugs or alcohol B A 25-year-old self-employed person C A 13-year-old honor student D A person deemed mentally incapacitated

B A 25-year-old self-employed person A person who has reached the age of majority, is not under the influence of drugs or alcohol, and is mentally competent can enter into a legally binding contract.

Insurance contracts are aleatory contracts. What does "aleatory" refer to? A Ambiguity in policy language B An unequal exchange of value C A contract written by one party D Duties and conduct expected of the parties

B An unequal exchange of value Aleatory refers to the fact that, because of the uncertainty of risk, there will always be an unequal exchange of value between the parties. The insured's premium payments are less than the potential benefit in the event of a loss. But, if a loss never occurs, the total cost of premium payments is greater.

Which of the following best describes a conditional contract? A Written by only one party B Both parties must perform specified duties in order for the contract to be enforceable C Only one party is legally bound to contractual obligations D The exchange of values may be unequal

B Both parties must perform specified duties in order for the contract to be enforceable

_________ refers to the jurisdiction where an insurer was formed or incorporated. A Admitted B Domicile C Approved D Authorized

B Domicile

The National Association of Insurance Commissioners (NAIC): A Requires only 30 Commissioners to be members at any time B Has no legal authority over insurance regulation C Requires each legislature to accept recommendations D Enacts legislation and policy

B Has no legal authority over insurance regulation The NAIC does not have legal authority over insurance regulation, but promotes uniformity in the interpretation of insurance legislation and regulation.

Which of the following manufactures and sells insurance coverage in the form of insurance policies or contracts of insurance? A Insurance agents B Insurance companies C Applicants/insureds D Insurance agencies

B Insurance companies Only insurers can manufacture and issue insurance policies or contracts.

Which term refers to a contract in which only one party is legally bound to contractual obligations after the premium is paid? A Contract of Adhesion B Unilateral Contract C Conditional Contract D Aleatory Contract

B Unilateral Contract A unilateral contract is a one-sided contract. Only the insurer makes a promise of future performance, and only the insurer can be charged with breach of contract. The policyowner can cancel the policy at any time without legal obligation.

An insurer issues a policy as "other than applied for," requiring an additional premium of $100. When would an agreement come into being? A When the applicant agrees to the terms B When the applicant accepts delivery of the policy and pays the additional premium C When the producer receives the policy from the home office D When the insurer puts the policy into the mail

B When the applicant accepts delivery of the policy and pays the additional premium This is how a counteroffer is accepted.

Which of the following would be considered legally competent to enter into a contract? A A person deemed mentally incapacitated B A 13-year-old honor student C A 25-year-old self-employed person D A person under the influence of drugs or alcohol

C A 25-year-old self-employed person A person who has reached the age of majority, is not under the influence of drugs or alcohol, and is mentally competent can enter into a legally binding contract.

What gives an insurer the authority to operate within this state? A Articles of Incorporation filed with the Secretary of State B The Governor's approval C A Certificate of Authority D Approval of the National Association of Insurance Commissioners (NAIC)

C A Certificate of Authority

Insurance contracts are aleatory contracts. What does "aleatory" refer to? A Duties and conduct expected of the parties B A contract written by one party C An unequal exchange of value D Ambiguity in policy language

C An unequal exchange of value Aleatory refers to the fact that, because of the uncertainty of risk, there will always be an unequal exchange of value between the parties. The insured's premium payments are less than the potential benefit in the event of a loss. But, if a loss never occurs, the total cost of premium payments is greater.

Insurers that are incorporated in another state, but doing business in this state, are considered: A Stock B Alien C Foreign D Domestic

C Foreign An insurer operating in this state but incorporated in another state is referred to as foreign.

A nonprofit corporation without capital stock formed solely for the benefit of its members is a: A Stock insurer B Mutual company C Fraternal benefit society D Unauthorized insurance association

C Fraternal benefit society

The ___________ branch is responsible for interpreting and determining the constitutionality of the statutes. A Legislative B Executive C Judicial D Electoral

C Judicial The judicial branch is responsible for interpreting and determining the constitutionality of the statutes.

An insurer NOT authorized to do business within this state is considered what type of insurer? A Alien B Domestic C Non-Admitted D Foreign

C Non-Admitted An insurer NOT authorized to do business in this state is referred to as "non-admitted." Foreign, domestic, and alien refer to where an insurer is domiciled. Domicile is not the same as admittance.

Which term refers to a contract in which only one party is legally bound to contractual obligations after the premium is paid? A Conditional Contract B Contract of Adhesion C Unilateral Contract D Aleatory Contract

C Unilateral Contract A unilateral contract is a one-sided contract. Only the insurer makes a promise of future performance, and only the insurer can be charged with breach of contract. The policyowner can cancel the policy at any time without legal obligation.

An insurer issues a policy as "other than applied for," requiring an additional premium of $100. When would an agreement come into being? A When the producer receives the policy from the home office B When the insurer puts the policy into the mail C When the applicant accepts delivery of the policy and pays the additional premium D When the applicant agrees to the terms

C When the applicant accepts delivery of the policy and pays the additional premium

A life insurance applicant's answers on the application indicate that they in good health. In fact, the applicant actually has a disease that they are not aware of. The statement on the application is considered: A A concealment B Fraudulent C A warranty D A representation

D A representation Representations are statements which are 'true and complete to the best of one's knowledge.' Warranties are statements that are guaranteed to be true. Concealment occurs when known information is not communicated.

An insurer authorized to do business in State A, which was incorporated in State B, is considered what type of insurer in State A? A Domestic B Alien C Stock D Foreign

D Foreign

What happens if an applicant discovers that there has been inaccurate or incomplete information in any report used during the underwriting process for life insurance? A They can bring legal action against the producer or insurer B They have the right to apply for the same coverage through another carrier without any additional expense C They can file an Errors and Omissions claim against the producer or insurer D The applicant has the right to challenge the inaccurate or incomplete information

D The applicant has the right to challenge the inaccurate or incomplete information Any inaccurate or incomplete information found in any report may be challenged by the applicant under the Fair Credit Reporting Act.

Which term refers to a contract in which only one party is legally bound to contractual obligations after the premium is paid? A Contract of Adhesion B Aleatory Contract C Conditional Contract D Unilateral Contract

D Unilateral Contract A unilateral contract is a one-sided contract. Only the insurer makes a promise of future performance, and only the insurer can be charged with breach of contract. The policyowner can cancel the policy at any time without legal obligation.

Dividends issued by mutual insurance companies: A Are non-taxable refunds (returns) of unused or surplus premiums B Represent a share of company profits for stockholders C Are considered guaranteed member benefits D Are taxable distributions to policyholders

A Are non-taxable refunds (returns) of unused or surplus premiums Since the policyowners also own the company, any policy dividends are being paid back to those who paid them in the first place; therefore, they are non-taxable refunds rather than taxable income.

An insurer authorized to do business in State A, which was incorporated in State B, is considered what type of insurer in State A? A Foreign B Stock C Alien D Domestic

A Foreign The insurer would be domestic in State B and foreign in State A.

The ___________ branch writes and passes state insurance laws, or statutes, to protect the insuring public. A Legislative B Judicial C Executive D Electoral

A Legislative

Members of the ___________ include state and territorial insurance commissioners or regulators. A National Association of Insurance Commissioners (NAIC) B Financial Industry Regulatory Authority (FINRA) C Federal Insurance Office (FIO) D Securities and Exchange Commission (SEC)

A National Association of Insurance Commissioners (NAIC) The NAIC is made up of all the state and territorial commissioners or regulators.

An insurer NOT authorized to do business within this state is considered what type of insurer? A Non-Admitted B Domestic C Alien D Foreign

A Non-Admitted An insurer NOT authorized to do business in this state is referred to as "non-admitted." Foreign, domestic, and alien refer to where an insurer is domiciled. Domicile is not the same as admittance.

It is the _________ who issues a Certificate of Authority enabling an insurer to conduct insurance business within a particular state. A State insurance Commissioner or Director B State legislature C State Senate D Secretary of State

A State insurance Commissioner or Director In order for an insurer to operate as an admitted or authorized insurer, the insurer must hold a Certificate of Authority issued by the State Insurance Commissioner, Superintendent, or Director.

What happens if an applicant discovers that there has been inaccurate or incomplete information in any report used during the underwriting process for life insurance? A The applicant has the right to challenge the inaccurate or incomplete information B They can bring legal action against the producer or insurer C They can file an Errors and Omissions claim against the producer or insurer D They have the right to apply for the same coverage through another carrier without any additional expense

A The applicant has the right to challenge the inaccurate or incomplete information Any inaccurate or incomplete information found in any report may be challenged by the applicant under the Fair Credit Reporting Act.

For the most part, the highest authority for insurance regulation is: A The individual states B The National Association of Insurance Commissioners (NAIC) C The Interstate Commerce Commission (ICC) D The Federal Trade Commission (FTC)

A The individual states States have the authority to regulate insurance without interference from federal regulation, unless federal law specifically provides otherwise.

When it comes to life insurance, insurable interest on one's own life is: A Unlimited B Based on the number of dependents C Calculated by the insured's assets D Based upon salary

A Unlimited

An applicant completes the application and submits it to the insurer along with a premium check. When is the applicant's offer considered accepted? A When the insurer issues a policy B When the application and premium check arrive at the insurer's home office C Upon cashing the premium check D Only after the policyowner completes any required medical exams

A When the insurer issues a policy An application accompanied by a premium check is a legal offer. Policy issuance is a legal acceptance. In other words, the offer is not accepted until the insurer issues a policy.

Under the Fair Credit Reporting Act, which of the following statements is correct? A The reporting agency has no responsibility to investigate inaccurate information B The reporting company can provide confidential information to anyone requesting it C If an individual is denied coverage, they can request a copy of the report D The Act is designed to protect reporting agencies from the public

C If an individual is denied coverage, they can request a copy of the report The FCRA is designed to protect the public and requires the reporting agency to investigate disputed information. The applicant has the right to request a copy of the report from the reporting agency. This act protects confidential information.

Which principle states that an insured may be reimbursed up to the amount of the actual loss? A Insurable Risk B Adhesion C Indemnity D Fair Claims Settlement

C Indemnity The Principle of Indemnity states that the insured should not profit from an insurance transaction, but should be restored in whole or in part to their prior condition.

Mutual insurance companies are owned by: A Stockholders B Directors C Policyowners D Beneficiaries

C Policyowners The ownership of mutual insurance companies rests with the policy owners

Stock insurance companies are owned by: A Directors B Members C Stockholders D Policyowners

C Stockholders The ownership of stock insurance companies rests with the stockholders.

Which of the following best describes a conditional contract? A Only one party is legally bound to contractual obligations B The exchange of values may be unequal C Written by only one party D Both parties must perform specified duties in order for the contract to be enforceable

D Both parties must perform specified duties in order for the contract to be enforceable A conditional contract is one in which both parties must perform certain duties in order for the contract to be enforceable.

___________ manufacture and sell insurance coverage in the form of policies or contracts of insurance. A Agencies B Insureds C Producers D Insurers

D Insurers Insurers manufacture and sell insurance policies through agencies and producers to applicant/insureds.

All of the following are essential elements of a legal contract, EXCEPT: A Legal Purpose B Competent Parties C Consideration D Representation

D Representation Representation is not one of the four essential elements of a legal contract. (Offer and Acceptance is the fourth essential element.)

Statements made on the application by the applicant that are believed to be true to the best of the applicant's knowledge are called: A Warranties B Waivers C Conditions D Representations

D Representations

It is the _________ who issues a Certificate of Authority enabling an insurer to conduct insurance business within a particular state. A Secretary of State B State Senate C State legislature D State insurance Commissioner or Director

D State insurance Commissioner or Director

Dividends issued by stock insurers are paid to: A Members B Directors C Policyholders D Stockholders

D Stockholders Stock insurers issue taxable corporate dividends to stockholders, but not policyholders. Mutual insurers may issue dividends to policyholders. (Mutual insurers may issue dividends to policyholders.)