Life Insurance Quiz Questions Chapter 1
To engage or participate in the insurance business, a prohibited person must first apply for a(n):
1033 waiver for consent to work A prohibited person that has been convicted of a felony must first apply for a 1033 Waiver for Consent to work from the appropriate insurance commissioner.
Which of the following would be considered legally competent to enter into a contract? A person deemed to be mentally incapacitated B A 25-year-old self-employed person C A person who is under the influence of drugs or alcohol D A 13-year-old honor student
A 25-year-old self-employed person A person who has reached the age of majority, is not under the influence of drugs or alcohol, and is mentally competent can enter into a legally binding contract.
Which of the following best describes a Conditional Contract? A A contract in which only one party is legally bound to contractual obligations B A contract in which both parties must perform specified duties in order for the contract to remain enforceable C A contract in which the exchange of values may be unequal D A contract submitted on a take it or leave it basis
A contract in which both parties must perform specified duties in order for the contract to remain enforceable A Conditional Contract is one in which both parties to a contract must perform certain duties to make the contract enforceable.
If a life insurance applicant's answers on the application indicate that he/she is in good health, when in fact the applicant has a disease that he/she is not aware of, the statement on the application is considered:
A representation Representations are statements which are 'true and complete to the best of one's knowledge.' Warranties are statements of absolute truth. Concealments occur when known information is not communicated.
A voluntary surrender of a known right, claim, or privilege is known as:
A waiver This is the definition of a waiver and may come into play when an insurance company issues a policy when there are unanswered questions on the application or it accepts an overdue premium in lieu of a reinstatement application.
A voluntary surrender of a known right, claim, or privilege is known as: A An illegal inducement B A waiver C An offer D Consideration
A waiver This is the definition of a waiver and may come into play when an insurance company issues a policy when there are unanswered questions on the application or it accepts an overdue premium in lieu of a reinstatement application.
An insurer authorized to do business within this state is considered what type of insurer?
Admitted An insurer authorized to do business in this state is referred to as admitted, and could be either domestic, foreign, or alien domiciled.
The Financial Privacy rule requires insurers to provide consumers with a privacy notice:
At the time the consumer relationship is established and annually thereafter The Financial Privacy rule requires insurers, to provide each consumer with a privacy notice at the time the consumer relationship is established and annually thereafter.
The Financial Privacy rule requires insurers to provide consumers with a privacy notice: A At time of application and monthly thereafter B With each billing statement C At the time of policy delivery and quarterly thereafter D At the time the consumer relationship is established and annually thereafter
At the time the consumer relationship is established and annually thereafter The Financial Privacy rule requires insurers, to provide each consumer with a privacy notice at the time the consumer relationship is established and annually thereafter.
When both parties must perform certain duties and follow certain rules of conduct to make a contract enforceable refers to a(n) __________ contract.
Conditional When the insured has complied with all of the policies terms and conditions as well as paying the premium in full and on time, then the insurer must pay the claim in a timely fashion when filed.
When the owner of the policy and insurer must meet certain conditions in order for the health insurance policy to be enforceable, it is referred to as a(n): A Aleatory contract B Contract of adhesion C Unilateral contract D Conditional contract
Conditional contract A Conditional Contract is one in which both parties to a contract must perform certain duties to make the contract enforceable.
Which of the following is an insurance company that is organized under the laws of a different state within the United States?
Foreign A foreign insurer is not organized under the laws of the state in which it is writing insurance, whereas a domestic insurer is organized under the laws of the state in which it is writing insurance.
The intentional distortion of the truth in order to induce another to part with something of value or to surrender a legal right is:
Fraud
The National Association of Insurance Commissioners (NAIC): Requires only 30 Commissioners to be members at any time B Sets legislation and policy C Requires each legislature to accept recommendations D Has no legal authority over insurance regulation
Has no legal authority over insurance regulation The NAIC does not have legal authority over insurance regulation, but promotes uniformity in the interpretation of insurance legislation and regulation.
Being restored to the same financial situation or economic condition that existed prior to a loss and not profiting from an insurance transaction is considered:
Indemnification The statement defines the Principle of Indemnification.
Which principle of insurance restores the insured to the same economic condition that existed before the loss?
Indemnity An insured should not profit from an insurance loss.
Each of the following is an element of a legal contract, except:
Indemnity The fourth element of a legal contract is a competent party or someone that has the legal capacity to enter into a legal contract.
Travis owns his own insurance agency and sells and places business with 12 different insurers, each of which he represents by contract. Travis is a(n): A Direct Writer B Direct Marketer C Independent Agent D Captive Agent
Independent Agent The question establishes that Travis is the owner of his own agency and is not limited as to the number of insurers he represents.
When an applicant for life insurance faces potential financial loss in the event of injury or sickness of an insured, it is said the applicant has: A Insurable interest B Beneficiary status C Indemnity rights D Incidents of ownership
Insurable interest Insurable interest in life insurance is based upon a reasonable expectation of pecuniary advantage through the continued life of another person and consequent loss by reason of that person's death or a substantial interest engendered by love and affection in the case of individuals closely related by blood or law.
Which of the following manufactures and sells insurance coverage in the form of insurance policies or contracts of insurance? A Insurance agents B Applicants/insureds C Insurance agencies D Insurance companies
Insurance companies Only insurers can manufacture and issue insurance policies or contracts.
The ___________ branch is responsible for interpreting and determining the constitutionality of the statutes.
Judicial The judicial branch is responsible for interpreting and determining the constitutionality of the statutes.
The ___________ branch writes and passes state insurance laws, or statutes, to protect the insuring public. A Legislative B Judicial C Electoral D Executive
Legislative The legislative branch writes and passes state insurance laws, or statutes, to protect the insuring public.
_____________ consists of groups of underwriters called syndicates, each of which specializes in insuring a particular type of risk. A Self insurers B Risk retention insurers C Reciprocal insurers D Lloyds of London
Lloyds of London Lloyds of London is not an insurance company where members are individually liable for each risk they assume.
A ______________ insurance company is owned by its policyholders.
Mutual Its members, also called policyholders, own a mutual insurance company.
Members of the ___________ include state and territorial insurance commissioners or regulators. A Securities and Exchange Commission (SEC) B National Association of Insurance Commissioners (NAIC) C Federal Insurance Office (FIO) D Financial Industry Regulatory Authority (FINRA)
National Association of Insurance Commissioners (NAIC) The NAIC is made up of all the state and territorial commissioners or regulators.
If an applicant or insured discovers errors in their Credit Report, the Fair Credit Reporting Act requires the reporting agency to: A Make certain that the insurer corrects any inaccuracies found in the report B Send out a letter of apology C Provide inaccurate information given out within the previous 2 years D Automatically reinvestigate
Provide inaccurate information given out within the previous 2 years According the Fair Credit Reporting Act, the applicant may inspect the reporting agency's file and be given an opportunity to dispute any misinformation. The consumer must be provided with any and all inaccurate information given out within the previous 2 years.
Which of the following statements is true? A Insurer X rates the insured based on health reasons. X accepted an offer and the policy is in effect B Q completes an application and submits it with premium to the insurer. Q made an offer C Insurer X issues a policy with an outstanding premium requirement. X accepted an offer and the policy is in effect D Q completes an application and submits it to the insurer. Q made an offer
Q completes an application and submits it with premium to the insurer. Q made an offer Offers must be accepted prior to contracts coming into being.
An unincorporated organization that is formed by individuals, firms, and business corporations that exchange insurance on one another and whose members are known as subscribers is called a:
Reciprocal Insurance Company A Reciprocal Insurance Company is a group-owned insurer whose main activity is sharing risk. Each subscriber assumes part of the risk and may be called upon to pay additional premiums if losses are greater than expected.
The Underwriting Department of an insurer is charged with the responsibility of: A Regulating B Rate setting C Risk selection D Advertising
Risk selection Underwriting is responsible for risk selection, classification, and rating.
A warranty is defined as which of the following?
Statement in the application that is guaranteed to be true A warranty is a statement guaranteed true in all respects and if later discovered to be false, the contract may be voided.
A warranty is defined as which of the following? A A false statement in the application B What a reasonable and prudent buyer can expect C Statement in the application that is guaranteed to be true D Intentional misrepresentation on the application
Statement in the application that is guaranteed to be true A warranty is a statement guaranteed true in all respects and if later discovered to be false, the contract may be voided.
Dividends issued by Stock insurers are paid to:
Stockholders Stockholders may receive taxable corporate dividends as a share of the stock insurer's profit.
Dividends issued by Stock insurers are paid to: A Policyholders B Stockholders C Members D Directors
Stockholders Stockholders may receive taxable corporate dividends as a share of the stock insurer's profit.
For the most part, the highest authority for insurance regulation is: A The Federal Trade Commission (FTC) B The individual states C The National Association of Insurance Commissioners (NAIC) D The Interstate Commerce Commission (ICC)
The individual states States have the authority to regulate insurance without interference from federal regulation, unless federal law specifically provides otherwise.
When two parties rely upon the statements and promises of the other and assume no attempt to conceal or deceive means that the contract was entered into upon the basis of: A Equal consideration B Sound business practices C Reasonable expectations D Utmost good faith
Utmost good faith This is one of the characteristics of an insurance contract and is the definition of utmost good faith.
A statement that a person makes and guarantees to be true is a:
Warranty Warranties are statements of absolute truth. Representations are statements made to the best of one's knowledge and belief.