general insurance quiz

In insurance, an offer is usually made when

An applicant submits an application to the insurer

what is a foreign insurer?

An insurer with a home office in another state

an individual was involved in a head on collision while driving home one day. his injuries are not serious and he recovered. however he decided that in order to never be involved in another accident that he would not drive or ride in a car again. what type of risk management is this?

Avoidance

Who might recieve dividends from a mutual insurer?

Policyholders

the risk of loss may be classified as?

Pure risk and speculative risk

adverse selection is a concept best described as

Risks with higher probability of loss seeking insurance more often than other risks.

A hazard is best described as:

Something that increases the chance of loss

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

An agent is acting ethically in all the of following situations EXCEPT a. working within the conditions of his/her contract b. representing the insurer, not the insured c. keeping customers' best interests in mind d. always representing the insured

always representing the insured

the risk management technique that is used to prevent a specific loss by not exposing oneself to that activity is called

avoidance

which of the following is owned by a corporation to serve that organizations needs at lower rates than would otherwise be available with commercial insurance

captive insurer

in any case where there is a controversy or dispute between the insurance company and the insured the soliciting agent is the agent of the

company

what term best describes the act of withholding material information that would be crucial to an underwriting decision.

concealment

which term best describes the act of withholding material information that would be crucial to an underwriting decision

concealment.

When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is

conditional

an insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable. what contract characteristic does this describe

conditional

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

a 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

consideration

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 is not an essential element of an insurance contract

counteroffer

which of the following best describes the aleatory nature of an insurance contract

exchange of unequal values

which of the following is a unit of measurement an underwriter uses when determining the premium rates for insurance

exposure

which of the following are the authorities that an agent can hold

express and implied

which of the following authorities that an agent can hold

express and implied.

the authority granted to an agent through an agents contract is referred to as

express authority

Events or conditions that increase the chances of an insured loss occurring are referred to as

hazards

what authority is not stated in an agents contract but is required for the agent to conduct business

implied

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

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? 2

indemnity 2

which statement regarding insurable risk is NOT correct

insureds cannot be randomly selected

which statement regarding insurable risks is not correct?

insureds cannot be randomly selected

When agents are acting within the scope of their contract, their actions will be assumed to be the acts of the

insurer

The insurer may suspect that a moral hazard exists if the policyholder

is not honest about his health on an application for insurance

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

larger

which law is the foundation of the statistical prediction of loss upon which rates for insurance is calculated

law of large numbers

An insurance organization that does not issue insurance policies but provides a meeting place for underwriters to conduct business is known as a

lloyds association

Insurance is a contract by which one seeks to protect another from

loss

which of the following is the basis for a claim against an insurance policy?

loss

Untrue statements on the application unintentionally made by insureds that, if discovered, would alter the underwriting decision of the insurance company, are called

material misrepresentation

on a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are 2

not taxable since the IRS treats them as a return of a portion of the premium paid

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

what is the major difference between a stock company and mutual company

ownership

a participating insurance policy may do which of the following

pay dividends to the policy owner

the causes of loss insured against in an insurance policy are known as

perils

all of the following are examples of risk retention except

premiums

which of the following statements is an accurate comparison between private and government insurers?

private insurers may be authorized to transact by state insurance departments

If a court ordered payment for a loss that was not covered in the policy even if it was clearly worded, it would be an example of which legal concept?

reasonable expectations

which type of insurance is based on mutual agreements among subscribers

reciprocal insurance

an insurance agents responsibilities include all of the following except?

represent the client

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

which of the following is a characteristic of a Reciprocal insurance exchange? 2

the chief administrator of the insurer is called an "attorney in fact" 2

which of the following is a characteristic of a reciprocal insurance exchange

the chief administrator of the insurer is called an "attorney-in-fact"

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

In terms of parties to a contract, which of the following does NOT describe a competent party?

the person must have at least completed secondary education

if an insurance premium is paid by the policyowner to the agent, and the agent fails to remit that premium to the insurer which of the following statements is true?

the policy will not lapse since payment to the agent is same as payment to the insurer.

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

the right to determine the wording of a policy

for the purpose of insurance, risk is defined as

the uncertainty or chance of loss

which of the following is not a goal of risk retention 1

to minimize the insured's level of liability in the event of loss 1

which of the following is not a goal of risk retention

to minimize the insureds level of liability in the event of a loss

which of the following in not a responsibility of an insurance agent

underwriting the contract

which of the following is not a responsibility of an insurance agent

underwriting the contract

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 elements does this describe

unilateral

The insurer must be able to rely on the statements in the application, and the insured must be able to rely on the insurer to pay valid claims. In the forming of an insurance contract, this is referred to as

utmost good faith

the insurer must be able to rely on the statements in the application and the insured must be able to rely on the insurer to pay valid claims. in the forming of an insurance contract, this is referred to as

utmost good faith

which of the following is a statement that is guaranteed to be true and if untrue may breach an insurance contract

warranty

in forming an insurance contract when does acceptance usually occur

when the insurers underwriter approves coverage