General Life

What is a material misrepresentation? a. any misstatement by the producer b. concealment c. a statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company d. any misstatement by an applicant for insurance

c. a statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company

The risk management technique that is used to prevent a specific loss by not exposing oneself to that activity is called... a. avoidance b. transfer c. reduction d. sharing

a. avoidance

In forming an insurance contract, when does acceptance usually occur? a. when an insurer's underwriter approves coverage b. when an insurer delivers the policy c. when an insurer receives an application d. when an insured submits an application

a. when an insurer's underwriter approves coverage

When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following? a. contract of adhesion b. acceptance c. consideration d. legal purpose

c. consideration

Representations are written or oral statements made by the applicant that are.. a. found to be false after further investigation b. immaterial to the actual acceptability of the insurance contract c. considered true to the best of the applicant's knowledge d. guaranteed to be true

c. considered true to the best of the applicant's knowledge

In insurance transactions, fiduciary responsibility means... a. being liable with respect to payment of claims b. commingling premiums with agents personal funds c. handling insurer funds in a trust capacity d. maintaining a good credit record

c. handling insurer funds in a trust capacity

What do individuals use to transfer their risk of loss to a larger group? a. exposure b. indemnity c. insurance d. insurable interest

c. insurance

The causes of loss insured against in an insurance policy are known as a. risk b. hazards c. perils d. losses

c. perils

The risk of loss may be classified as... a. named risk and un-named risk b. high risk and low risk c. pure risk and speculative risk d. certain risk and uncertain risk

c. pure risk and speculative risk

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

d. the person must have at least completed secondary education

Events or conditions that increase the chances of an insured loss occurring are referred to as... a. hazards b. exposures c. risks d. perils

a. hazards

All of the following actions by a person could be described as risk avoidance EXCEPT... a. investing in the stock market b. refusing to scuba dive c. never flying in an airplane d. not driving after being in an accident

a. investing in the stock market

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? a. mutual b. reciprocal c. nonprofit service organization d. stock

a. metal

The requirement that agents not commingle insurance monies with there own funds is known as... a. express authority b. accepted accounting principal c. fiduciary responsibility d. premium accountability

c. fiduciary responsibility

An insurance company is domiciled in Montana and transacts insurance in Wyoming. Which term best describes the insurer's classification in Wyoming? a. domestic b. unauthorized c. foreign d. alien

c. foreign

To legally transact insurance in this state, an insurer must obtain which of the following? a. certificate of authority b. power of attorney c. business entity license c. certificate of insurance

a. certificate of authority

Insurance is a contract by which one seeks to protect from... a. loss b. exposure c. uncertainty d. hazards

a. loss

A situation in which a person can only lose or have no change represents... a. pure risk b. speculative risk c. adverse selection d. hazard

a. pure risk

When transacting business in this state an insurer formed under the laws of another country is known as a/an a. admitted insurer b. alien insurer c. domestic insurer d. foreign insurer

b. alien insurer

What term best describes the act of withholding material information that would be crucial to an underwriting decision? a. breach of warranty b. concealment c. withholding d. leading

b. concealment

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? a. adhesion b. consideration c. good faith d. representation

b. consideration

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? a. stop-loss b. consideration c. reasonable expectations d. indemnity

d. indemnity

Who might receive dividends from a mutual insurer? a. stockholders b. agents c. policyholders d. subscribers

c. policyholders

All of the following are examples of risk retention EXCEPT... a. copayments b. self-insurance c. premiums d. deductibles

c. premiums

In case of a loss, the indemnity provision in insurance policies... a. pays the insured a percentage of the loss above and beyond the loss b. pays the insured as much as 95% of the loss c. restores an insured person to the same financial state as before the loss d. allows the insured to collect 20% more than the actual loss

c. restores an insured person to the same financial state as before the loss

Which of the following is NOT the consideration in a policy? a. the premium amount paid at the time of application b. the promise to pay covered losses c. the application given to a prospective insured d. something of value exchanged between parties

c. the application given to a prospective insured

Which of the following is the closest term to an authorized insurer? a. certified b. licensed c. legal d. admitted

d. admitted

What documentation grants express authority to an agent? a. agents insurance license b. fiduciary contract c. state provisions d. agent's contract with the principal

d. agent's contract with the principal

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

d. it is issued to group insurance participants

Which of the following insurance options would be considered a risk-sharing arrangement? a. stock b. mutual c. surplus lines d. reciprocal

d. recirpocal

Which of the following is an example of a producer's fiduciary duty? a. the trust that a client places in the producer in regard to handling premiums b. an obligation to state every known fact about the policy the producer is selling c. a duty to base all transactions upon the principle of utmost good faith d. the obligation to tell the truth to the best of one's knowledge

a. the trust that a client places in the producer in regard to handling premiums

Insurance is the transfer of... a. peril b. risk c. loss d. hazard

b. risk

The authority granted to an agent though the agent's contract is referred to as... a. absolute authority b. express authority c. apparent authority d. implied authority

b. express authority

All of the following would be considered an insurance transaction EXCEPT... a. advising a policyholder regarding a claim b. negotiating coverage c. obtaining an insurance license d. soliciting a policy

c. obtaining an insurance license

Which of the following best describes an insurance company that has been formed under the laws of this state? a. alien b. foreign c. domestic d. sovereign

c. domestic

Which of the following is NOT a characteristic of an insurable risk? a. the loss must be catastrophic b. the loss must be due to chance c. the loss must be measurable d. the loss exposure must be large

a. the loss must be catastrophic

For the purpose of insurance, risk is defined as... a. the uncertainty or chance of loss b. the certainty of loss c. the cause of loss d. an event that increases the amount of loss

a. the uncertainty or chance of loss

Which statement regarding insurable risks is NOT correct? a. an insurable risk must involve a loss that is definite as to cause, time, place and amount b. insureds cannot be randomly selected c. insurance cannot be mandatory d. the insurable risk needs to be statistically predictable

b. insureds cannot be randomly selected

When an individual purchases insurance, what risk management technique is he or she practicing? a. retention b. transfer c. avoidance d. sharing

b. transfer

Which of the following insurers are owned by stockholders? a. reciprocal b. fraternal c. stock d. mutual

c. stock

Pertaining to insurance, what is the definition of a fiduciary responsibility? a. helping insureds to file claims b. performing reviews of insured's coverage c. offering additional coverage to clients d. promptly forwarding premiums to the insurance company

d. promptly forwarding premiums to the insurance company

When doing business in this state, an insurance company that is formed under the laws of another state is known as which type of insurer? a. nonadmitted b. foreign c. domestic d. alien

b. foreign

A tornado that destroys property would be an example of which of the following? a. a pure risk b. a loss c. a physical hazard d. a peril

d. a peril

Which of the following would qualify as a competent party in an insurance contract? a. the applicant is intoxicated at the time of application b. the applicant is a 12 yr old student c. the applicant is under the influence of a mind-impairing medication at the time of application d. the applicant has a prior felony conviction

d. the applicant has a prior felony conviction

In insurance, an offer is usually made when... a. an applicant submits an application to the insurer b. the insured approves the application and receives the initial premium c. the agent hands the policy to the policyholder d. an agent explains a policy to a potential applicant

a. an applicant submits an application to the insurer

Which authority is NOT stated in an agent's contract but is required for the agent to do business? a. implied b. apparent c. assumed d. express

a. implied

Which of the following types of agent authority is also called "perceived authority"? a. implied b. fiduciary c. apparent d. express

c. apparent