Life and Health (Ch 1-4)

Which of the following statements concerning pure and speculative risks is/are true? 1. Pure risks have only the chance of loss. 2. Speculative risks have only the chance for gain. 3. Only pure risks are insurable. 4. Both pure and speculative risks are insurable.

1 & 3

Bill Wilson wants to obtain a life insurance policy on his employee, Kenneth Myers's, and names Kenneth's wife, Susan,as the beneficiary. Signatures of which of the following would be legally required on the application? 1. Bill 2. Kenneth Myers 3. Susan

1 and 2 only

To be characterized as a fraternal benefit society, the organization must: 1. Be non-profit. 2. Have ritualistic work within a lodge system. 3. Elected officers. 4. Operate on a pure assessment system.

1, 2, and 3.

Ima Yankee has been licensed for seven years. How many hours of continuing education does Ima need?

20 hours every two years

The policyowner/insured of a $100,000 life insurance policy died of a heart attack four months after taking out the policy. The company then learned that the insured had been treated for a heart condition nine months prior to being insured, but the fact had been omitted from the application. Which course of action would the company likely follow? 1. The company had to pay the death benefit because the discrepancy was not uncovered prior to the insured's death. 2. The company had to pay the death benefit because the contract is incontestable after the payment of the initial premium. 3. The company will not have to pay the death benefit, but will return the premium

3 only

An agent's license will terminate if he or she allows how many years to pass without an appointment?

4 years without being appointed.

Tom completes the application, pays the initial premium, and the agent submits this to the insurance company. The insurer issues a policy with different terms not requested by Tom. Which of the following answers describes the Insurer's action?

A counter offer by the insurer

Rooster died as the result of an automobile accident. His alcohol level was well above the state's limit for impairment. The accident was considered:

A peril

A group of Pharmacists or dentists might be covered under:

A risk retention group. This is a mutual insurer formed to insure people in the same business or profession

Which of the following is a "take it or leave it" contract?

Adhesion

Rules pertaining to testimonials, statistics and special offers would be found in:

Advertising Code

The use of testimonials, special offers, or statistics would be found under what code or act?

Advertising code

A life insurance policy paid $500,000 to a beneficiary and the total premiums paid were $2500. Which of the following terms defines this type of contract?

Aleatory

Which of the following denotes an "element of chance"?

Aleatory

Which of the following is/are true concerning the NAIC?

All : Instrumental in developing guidelines and model legislation, develop standards for policy provisions, created the unfair trade practices act and advertising code.

When an agent is replacing an existing policy, he is to provide what with the application? 1. Agent 's name and ID number 2. Notice to applicant regarding replacement of life insurance? 3. A copy of all sales proposals used for representation applicant

All the above

Which of the following is not a valued contract?

An 80/20 major medical policy

The following statements about INSURABLE INTEREST are true EXCEPT:

An insurable interest must exist between the policy owner and the insured at the time of the claim.

Insurable interest must exist

At the time of application

Which of the following statements about representations and warranties is/are true? 1. if a warranty is untrue the company may cancel the contract. 2. If a representation is untrue the company can not cancel the contract unless it is a material fact.

Both 1 and 2

The NAIC developed:

Both advertising code and Unfair trade practices act

Which of the following statements are true?

Career agents are contracted to represent the particular company. They do no train anyone. General agents train but typically not sell.

A producer represents the

Company

Because an insurance contract has been prepared by an insurance company without negotiation, it is considered a/an

Contract of adhesion

Which of the following is an example of a risk retention group (RRG)?

Dentists

Selling insurance through a vending machine would be:

Direct Selling

All the following systems support the sale of insurance through agents EXCEPT:

Direct selling

A company that is licensed to sell insurance in a state in which it is domiciled is called:

Domestic company

McCarran-Ferguson Act

Gave regulation back to the states in 1945

Warranty

Guaranteed fact

Regarding warranties and representations, which of the statements below are true?

If a warranty is untrue, the insurer has the right to cancel the contract

Regarding warranties and representations, which of the statements below are true?

If warranty is untrue, the insurer has the right to cancel the contract.

Lloyd's of London:

Is an insurance company specializing in unusual risks

Bilateral Contract

Is one in which both sides make an enforceable promise

Which of the following is not true concerning the National Association of Insurance Commissioners (NAIC)?

It encourages uniformity in state insurance laws by legislative acts. NAIC is not part of the legislative branch, no ability to create laws, no power to prosecute or punish. Do set the standards that each state will follow to one degree or another. The commissioner is a member of the board.

Which statement concerning a life insurance contract is true?

It is not a personal contract and can be given away. Like a fire policy, the risk would change every time the policy was assigned or given away. If new owner smoker then increase chance of loss. But life insurance is on particular person even if ownership

All of the following statements about life insurance and the risk it covers are true EXCEPT:

Life insurance is like a mutual fund in that a certain sum of money must be set aside each year to meet the contractual obligations of the insured.

What is Not used to determine a company's ratings?

Lloyd's of London because that is used to sell insurance to weird risks like legs.

Which of the following is not considered an insurance company?

Lloyd's of London is rather considered the arena for obtaining protection

Void

Means without legal effect

Which of the following is not a federal run government insurance program?

Medicaid

Not considered competent parties to the contract

Minors, mentally infirm, and those under the influence of alcohol or narcotics.

Alcoholism or drug addiction would be considered which of the following hazards?

Moral

Agents hired by a PPGA are considered to be employees of the :

PPGA

All the following statements describe risk avoidance, EXCEPT:

Pat pays his insurance premium

All of the following are not conspired competent parties to the contract except:

Physically disabled

The Financial Service Modernization Act:

Repealed the Glass-Steegal Act

An applicant for a health policy has a heart condition of which he is unaware and therefore he answers "no" to the question pertaining to heart problems. His answer is considered to be a:

Representation because is a statement that is believed to be true.

All statements on an application are considered to be:

Representations

Statements made by an applicant for a life insurance policy which are supposed to be true are referred to as:

Representations

The USA PATRIOT Act was created in response to which of the following?

September 11th Attacks

The USA PATRIOT Act requires financial institutions to do all of the following, except:

Share information with credit reporting agencies

Which of the following statements are true?

Stock companies sell both participating and non-participating policies.

Principle of agency law refers to the relationship between which two parties?

The agent and the company

An applicant has been denied insurance coverage because of information contained in a consumer report. According to the Fair Credit Reporting Act, all of the following statements are true about this situation, EXCEPT:

The applicant has the right to obtain a copy of the consumer report directly from an insurance company that used the report

For a risk to be insurable it must contain all of the following characteristics EXCEPT:

The loss must not be due to chance

A stock insurance company has stockholders and policyholders. The directors and officers are responsible to which of the following?

The stockholders. Stock company is organized for the purpose of making a profit. Stockholders own the company. Insurance is simply the product they are selling. Mutual company has no stockholders, the policyholders own the company.

Which of the following is true regarding a STOLI or IOLI?

These are usually sold by persuading seniors to purchase life insurance for the benefit of an investor.

Which Act gives the Chief Financial Officer the right to suspend licenses, assign fines, and prosecute insurance companies?

Unfair Trade Practices Act

Which of the following gives the state their ability to fine, issue cease and desist orders and impose penalties?

Unfair Trade Practices Act

A ___ contract may be set aside.

Voidable

Which of the following statements concerning rebating is not correct?

Which of the following statements concerning rebating is not correct?

The statement "there is no attempt to value financial loss" would be applied to which of the following?

a valued contract

Which of the following statements best describes an element of an insurable risk? 1. The loss must be due to chance 2. The loss must be definite and measurable 3. The loss must not be catastrophic 4. The loss exposures to be insured must be large

all of the above

Andy the agent was fired by the general agent three months ago for conduct "unbecoming". Andy's general agent later was known to accept business that Andy had written after having been fired. One of these policy holders died before the policy was issued but had paid the required premium. Assuming the applicant had been insurable at standard rates, the company would pay because of:

apparent authority

The opposite of a unilateral contract is a:

bilateral contract

Most new life insurance is purchased:

by individuals through insurance agents

System that support sale of insurance through agents

career agency system, PPGA's, independent agency system

All of the following are unique elements of an insurance contract except?

consideration

The authority of an agent to undertake certain functions for an insurance company would be found under which of the following?

contract of agency

Which type of authority is given to the agent specifically through a contract with an insurance company?

expressed

Which of the following cause the potential for increasing risk?

hazard

What type of authority is not overtly extended but must be used to enable the agent to transact business of the principle?

implied

The "right of subrogation" means the insurance company may acquire the right of the insured against liable third parties, those that may have contributed to the loss, in the event a claim is paid. This could be found in which type of contract?

indemnity contracts

What type of agent represents a number of insurance companies under separate contractual agreements?

independent agents

USA PATRIOT ACT

is intended to counter attempts at money laundering and finance terrorism, and requires financial institutions to take several precautions when opening new accounts as well as increased reporting requirements. Develop new compliance system and training, share info with other financial institutions and enforcement entities to investigate the money laundering.

Which of the following is not true concerning a risk Retention group?

it insures a group of separate businesses

Tendencies for attitude and state of mind which cause indifference to loss are a:

morale hazard (state of mind)

Long Life, a stock insurance company, transfers ownership of the company to the policy holders. This process is called:

mutualization

There are risks that include the possibility of loss or gain. What is the definition of accepting risk and confronting it if and when it occurs?

retention

A person covered under a service provider is called:

subscriber

A producer owes a fiduciary responsibility to:

the company and the client

The USA PATRIOT Act was created:

to protect against terrorism & money laundering

Fraternal Benefit Societies are required to do all the following except:

to provide the insured with a policy

An applicant for insurance denied having ever been diagnosed with heart problems when in fact he had recently had triple bypass surgery. How long does the company have to uncover this fact?

two years

A/an ___ is the voluntary giving up of a legal right

waiver