ExamFx - Ohio - Life insurance - General Insurance Quiz questions.

A nonadmitted insurer who provides unique insurance coverage that is not available from an admitted insurer is called a/an ASurplus lines insurer. BAssessment mutual insurer. CCapital stock insurer. DReciprocal insurer.

A

A producer who fails to separate premium monies from his own personal funds is guilty of ACommingling. BLarceny. CEmbezzlement. DTheft

A

Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as AContracts of adhesion. BUnilateral contracts. CAleatory contracts. DBinding contracts.

A

Installing deadbolt locks on the doors of a home is an example of which method of handling risk? ATransfer BSelf-insurance CReduction DAvoidance

C

Which services are associated with Standard & Poor's and AM Best? AStoring medical information collected by insurance companies BRating the financial strength of insurance companies CInvestigating violations of The Fair Credit Reporting Act DProviding employment histories for investigative consumer reports

B

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? AUnidirectional BAleatory CConditional DUnilateral

D

Which of the following best describes an insurance company that has been formed under the laws of this state? ASovereign BAlien CForeign DDomestic

D

Which of the following is another term for an authorized insurer? ACertified BLicensed CLegal DAdmitted

B

A participating insurance policy may do which of the following? ARequire 80% participation BPay dividends to the policyowner CProvide group coverage DPay dividends to the stockholder

B

What method do insurers use to protect themselves against catastrophic losses? APro rata liability BRisk management CReinsurance DIndemnity

C

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? AAdhesion BSubrogation CWarranty DAleatory

D

If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it? AUnilateral BAdhesion CConditional DA legal (but unethical) contract

A

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 AThe loss must not be catastrophic. BThere must be a sufficient number of homogeneous exposure units to make losses reasonably predictable. CThe loss produced by the risk must be definite. DThe loss may be intentional.

D

What is a material misrepresentation? AAny misstatement made by an applicant for insurance BAny misstatement by the producer CConcealment DA statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company

D

When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following? ALegal purpose BContract of adhesion CAcceptance DConsideration

D

An individual was involved in a head-on collision while driving home one day. His injuries were not serious, and he recovered. However, he decided that in order to never be involved in another accident, he would not drive or ride in a car ever again. Which method of risk management does this describe? AAvoidance BReduction CSharing DRetention

A

Events or conditions that increase the chances of an insured loss occurring are referred to as AHazards. BExposures. CRisks. DPerils.

A

For the purpose of insurance, risk is defined as AAn event that increases the amount of loss. BThe uncertainty or chance of loss. CThe certainty of loss. DThe cause of loss.

B

For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become AMore active. BLarger. CSmaller. DOlder.

B

In case of a loss, the indemnity provision in insurance policies APays the insured as much as 95% of the loss. BRestores an insured person to the same financial state as before the loss. CAllows the insured to collect 20% more than the actual loss. DPays the insured a percentage of the loss above and beyond the loss.

B

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? AConditional BUnilateral CUnidirectional DAleatory

B

In terms of parties to a contract, which of the following does NOT describe a competent party? AThe person must be mentally competent to understand the contract. BThe person must have at least completed secondary education. CThe person must not be under the influence of drugs or alcohol. DThe person must be of legal age.

B

In what way can an agent demonstrate a high standard of ethics? ARecommending qualified retirement plans to each client BPutting the client's best interests before their own CMaking enough commissions to cover personal expenses DSetting and meeting monthly production goals

B

The authority granted to an agent through the agent's contract is referred to as AAbsolute authority. BExpress authority. CApparent authority. DImplied authority.

B

The insurer may suspect that a moral hazard exists if the policyholder AAlways drives over the speed limit. BIs not honest about his health on an application for insurance. CIs prone to depression. DIs indifferent to activities that may be dangerous.

B

The risk management technique that is used to prevent a specific loss by not exposing oneself to that activity is called ASharing. BAvoidance. CTransfer. DReduction.

B

Which of the following would qualify as a competent party in an insurance contract? AThe applicant is under the influence of a mind-impairing medication at the time of application. BThe applicant has a prior felony conviction. CThe applicant is intoxicated at the time of application. DThe applicant is a 12-year-old student.

B

A person who does not lock the doors or does not repair leaks shows an indifferent attitude. This person presents what type of hazard? ALegal BPhysical CMorale DMoral

C

Which of the following is true regarding a risk retention group? AIt is a benefit society formed to provide insurance for members of an affiliated lodge. BIt is a company owned by the stockholders that provides nonparticipating policies. CIt is a liability insurance company owned by its members. DIt provides support for underwriters and is not an insurance company.

C

Which of the following types of agent authority is also called "perceived authority"? AImplied BFiduciary CApparent DExpress

C

Which services are associated with Standard & Poor's and AM Best? AProviding employment histories for investigative consumer reports BStoring medical information collected by insurance companies CRating the financial strength of insurance companies DInvestigating violations of The Fair Credit Reporting Act

C

A life insurance policy has a legal purpose if both of which of the following elements exist? AUnderwriting and reciprocity BOffer and counteroffer CPolicyowners and named beneficiaries DInsurable interest and consent

D

Units with the same or similar exposure to loss are referred to as ACatastrophic loss exposure. BInsurable risks. CLaw of large numbers. DHomogeneous.

D

What do individuals use to transfer their risk of loss to a larger group? AInsurable interest BExposure CIndemnity DInsurance

D

What documentation grants express authority to an agent? AAgent's insurance license BFiduciary contract CState provisions DAgent's contract with the principal

D

Which of the following is the basis for a claim against an insurance policy? AMaterial change BHazard CMisrepresentation DLoss

D

Which statement regarding insurable risks is NOT correct? AInsurance cannot be mandatory. BThe insurable risk needs to be statistically predictable. CAn insurable risk must involve a loss that is definite as to cause, time, place and amount. DInsureds cannot be randomly selected.

D

Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe? AConditional BPersonal CAdhesion DUnilateral

C

To legally transact insurance in this state, an insurer must obtain which of the following? ABusiness entity license BCertificate of Insurance CCertificate of Authority DPower of Attorney

C

What documentation grants express authority to an agent? AFiduciary contract BState provisions CAgent's contract with the principal DAgent's insurance license

C

Which authority is NOT stated in an agent's contract but is required for the agent to conduct business? AAssumed BExpress CImplied DApparent

C

On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are ANot taxable since the IRS treats them as a return of a portion of the premium paid. BPaid at a fixed rate every year. CTaxable as ordinary income. DGuaranteed.

A

Which of the following best describes the aleatory nature of an insurance contract? AAmbiguities are interpreted in favor of the insured BPolicies are submitted to the insurer on a take-it-or-leave-it basis CExchange of unequal values DOnly one of the parties being legally bound by the contract

C

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? AStock company BReciprocal association CFraternal benefit society DMutual company

C

Which of the following factors is NOT considered by an underwriter when determining the premium rates for an individual seeking insurance? AMedical history BSex CRace DAge

C

Which of the following is the most common way to transfer risk? APurchase insurance BIncrease control of claims CLessen the possibility of loss DName a beneficiary

A

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? AReduction BTransfer CAvoidance DRetention

A

An individual's tendency to be dishonest would be indicative of a AMorale hazard. BPure hazard. CPhysical hazard. DMoral hazard.

D

An insurance company is domiciled in Montana and transacts insurance in Wyoming. Which term best describes the insurer's classification in Wyoming? AUnauthorized BForeign CAlien DDomestic

B

An insurance company receives an application with some information missing and issues the policy anyway. What is this called? AAleatory BWaiver CEstoppel DSubrogation

B

An insurance company is domiciled in Montana and transacts insurance in Wyoming. Which term best describes the insurer's classification in Wyoming? AAlien BDomestic CUnauthorized DForeign

D

What is the major difference between a stock company and a mutual company? AAmount of benefits BNumber of producers CTypes of policies issued DOwnership

D

To legally transact insurance in this state, an insurer must obtain which of the following? ACertificate of Authority BPower of Attorney CBusiness entity license DCertificate of Insurance

A

What insurance concept is associated with the names Weiss and Fitch? AGuides describing company financial integrity BPolicy dividends CTypes of mutual companies DIndex used by stock companies

A

Which of the following is an example of a producer's fiduciary duty? AA duty to base all transactions upon the principle of Utmost Good Faith. BThe obligation to tell the truth to the best of one's knowledge CThe trust that a client places in the producer in regard to handling premiums. DAn obligation to state every known fact about the policy the producer is selling.

C

An insurance company sells an insurance policy over the phone in response to a TV ad. Which of the following best describes this act? AIndependent agency marketing BIllegal CInsurance telemarketing DDirect response marketing

D

In forming an insurance contract, when does acceptance usually occur? AWhen an insurer's underwriter approves coverage BWhen an insurer delivers the policy CWhen an insurer receives an application DWhen an insured submits an application

A

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? AUnilateral BUnidirectional CAleatory DConditional

A

An individual applies for a life policy. Two years ago he suffered a head injury from an accident, so he cannot remember parts of his past, but is otherwise competent. He has also been hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of his history one year later. What will probably happen? ABecause the insured is currently not a drug user, his policy will not be affected. BThe policy will not be affected. CThe policy will be voided. DThe insurer will sue the insured for committing fraud.

B

Which law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated? ALaw of masses BLaw of averages CLaw of group evaluation DLaw of large numbers

D

What is a foreign insurer? AAn insurer with licensed agents doing business in other countries BAn insurer with licensed agents who are citizens in more than one country CAn insurer with a home office in another state DAn insurer with a home office in another country

C

What is a material misrepresentation? AAny misstatement by the producer BConcealment CA statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company DAny misstatement made by an applicant for insurance

C

Which of the following is NOT true regarding a Certificate of Authority? AIt is equivalent to an insurance license. BIt is issued by the state department of insurance. CIt is issued to group insurance participants. DIt may be necessary for transacting business in a specific state.

C

An insurance organization that does not issue insurance policies but provides a meeting place for underwriters to conduct business is known as a AFraternal society. BMutual company. CCapital stock company. DLloyd's association.

D

For the purpose of insurance, risk is defined as AThe certainty of loss. BThe cause of loss. CAn event that increases the amount of loss. DThe uncertainty or chance of loss.

D

In insurance policies, contract ambiguities are automatically ruled in the favor of the insured. What privilege does the insurer have in order to balance this? AThe right to revoke the policy BThe right to raise premiums as a result of court rulings CThe right to determine the wording of a policy DThe right to refute the rulings

D

Peril is most easily defined as AAn unhealthy attitude about safety. BThe chance of a loss occurring. CSomething that increases the chance of loss. DThe cause of loss insured against.

D

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? ARetention BReduction CTransfer DAvoidance

B

All of the following actions by a person could be described as risk avoidance EXCEPT ANever flying in an airplane. BNot driving after being in an accident. CInvesting in the stock market. DRefusing to scuba dive.

C

An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated? ARepresentation BAdhesion CConsideration DGood faith

C

An insurer that holds a Certificate of Authority in the state in which it transacts business is considered a/an ACertified insurer. BSelf-insurer. CAuthorized insurer. DLocal insurer.

C

Adverse selection is a concept best described as AUnderwriters slanting the odds in favor of the company. BPoor choices of applicants to be covered. COnly offering coverage to good risks. DRisks with higher probability of loss seeking insurance more often than other risks.

D

Insurance is a contract by which one seeks to protect another from AExposure. BUncertainty. CHazards. DLoss.

D

When transacting business in this state an insurer formed under the laws of another country is known as a/an ADomestic insurer. BForeign insurer. CAdmitted insurer. DAlien insurer.

D

Which type of insurance is based on mutual agreements among subscribers? AMutual insurance BLimited liability CReinsurance DReciprocal insurance

D

Because an agent is using stationery with the logo of an insurance company, applicants for insurance assume that the agent is authorized to transact on behalf of that insurer. What type of agent authority does this describe? AImplied BAssumed CApparent DExpress

C

In insurance transactions, fiduciary responsibility means ABeing liable with respect to payment of claims. BCommingling premiums with agent's personal funds. CHandling insurer funds in a trust capacity. DMaintaining a good credit record

C

In insurance, an offer is usually made when AThe agent hands the policy to the policyholder. BAn agent explains a policy to a potential applicant. CAn applicant submits an application to the insurer. DThe insurer approves the application and receives the initial premium.

C

All of the following actions by a person could be described as risk avoidance EXCEPT ANot driving after being in an accident. BInvesting in the stock market. CRefusing to scuba dive. DNever flying in an airplane.

B

The risk of loss may be classified as AHigh risk and low risk. BPure risk and speculative risk. CCertain risk and uncertain risk. DNamed risk and un-named risk.

B

Which of the following insurers are owned by stockholders? AFraternal BStock CMutual DReciprocal

B

A tornado that destroys property would be an example of which of the following? AA pure risk BA loss CA physical hazard DA peril

D

Who might receive dividends from a mutual insurer? APolicyholders BSubscribers CStockholders DAgents

A