Chapter: General Insurance
An individual's tendency to be dishonest would be indicative of a
Moral Hazard
On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are
Not taxable since the IRS treats them as a return of a portion of the premium paid
An insurance company receives an application with some information missing and issues the policy anyways. What is this called
Waiver
A tornado that destroys property would be an example of which of the following
A pure risk
Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company
Aleatory
When transacting business in this state an insurer formed under the laws of another country is known as a/an
Alien insurer
What is reinsurance
An agreement between a ceding insurer an assuming insurer
Which of the following types of agent authority is also called "perceived authority"
Apparent
An insurance producer who by contract is bound to write insurance for only one company is classified as a/an
Captive agent
Which of the following is issued by the State Department of Insurance to show that the insurer has power to write insurance contracts in that state
Certificate of Authority
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
Conditions
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
Conditions
Representations are written or oral statements made by the applicant that are
Considered true to the best of the applicant's knowledge
Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as
Contracts of adhesion
Which of the following best describes the aleatory nature of an insurance contract
Exchange of unequal values
The authority granted to an agent through the agent's contract is referred to as
Express authority
An insurance company is domiciled in Montana and transacts insurance in Wyoming. Which term best described the insurer's classification in Wyoming
Foreign
Which of the following entities is not an insurer but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization
Fraternal benefit society
Events or conditions that increase the chances of an insured loss occurring are referred to as
Hazards
When would a misrepresentation on the insurance application be considered fraud
If it is intentional and material
Which authority is NOT stated in agent's contract but is required for the agent to conduct business
Implied
Which authority is NOT stated in an agent's contract but is required for the agent to conduct business
Implied
What do individuals use to transfer their risk of loss to a larger group
Insurance
The insurer may suspect that a moral hazard exists if the policyholder
Is not honest about his health on an application for insurance
Which of the following is true regarding a risk retention group
It is a liability insurance company owned by its members
Which of the following is the basis for a claim against an insurance policy
Loss
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
Mutual
What is the major difference between a stock company and a mutual company
Ownership
A participating insurance policy may do which of the following?
Pay dividends to the policyowner
The risk of loss may be classified as
Pure risk and speculative risk
What method do insurers use to protect themselves against a catastrophic losses
Reinsurance
Insurance is the transfer of
Risk
Which of the following would qualify as a competent party in an insurance contract
The applicant has a prior felony conviction
Which of the following is NOT the consideration in a policy
The application given to a prospective insured
An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible
The insured will need a written consent of the insurer
Not all losses are insurable, and there are certain requirements that must be met before a risk is a proper subject for insurance. These requirements include all of the following EXCEPT
The loss may be intentional
Which of the following is an example of a producer's fiduciary duty
The trust that a client places in the producer in regard to handling premiums
In insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe
Unilateral
Which insurance principle states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost
indemnity
All of the following are examples of risk retention EXCEPT
Premiums
What is the term for the entity that an agent represents regarding contractual agreements with third parties
Principal
Pertaining to insurance, what is the definition of a fiduciary responsibility
Promptly forwarding premiums to the insurance company
Following a career change, an insured is no longer required to perform many physical activities, so he has implemented a program where he walks and jogs for 45 minutes each morning. The insured has also eliminated most fatty foods from his diet. Which method of dealing with risk does this scenario describe
Reduction
What method do insurers use to protect themselves against catastrophic losses
Reinsurance