State Exam

Which service are associated with standard and poors and AM best

rating the financial strength of insurance company

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

reasonable expectation

which of the following is considered to be a morale hazard A. working as a firefighter B. engaging in illegal activities C. driving recklessly D. smoking

C morale= carelessness

Not stated in an agent;s contract but is required for the agent ti conduct business

implied

courts will interpret any ambiguity in an insurance contract

in favor of the insured

a life insurance policy has legal purpose if both of which elements exists

insurable interest and consent

Which is Not a goal of risk retention? A. to minimize the insured's level of liability in the event of loss B, to reduce expenses and improve cash flow C. to increase control of claim reserving and claims settlements D. to fund losses that cannot be insured

A

agent using logo of an insurance company, showing they have the authority to work on transaction is known as

Apparent

If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered what type of insurer?

Authorized

which of the following is not considered by an underwriter when determine the premium rates for an individual seeking insurance A. Sex B Race C. Age D. Medical History

B

insuere may suspect that a moral hazard exists if the policyholder A. always drives over the speed limts B. is not honest about his health on the application C. is prone to depression D, is indifferent to activities that may be dangerous

B moral=lie

which of the following best describes the aleatory nature if an insurance contract A. ambiguities are interpreted in favor of the insured B. polices are submitted to the insure on a take it or leave it basis C. exchange unequal values. the amount insured pay is less than the potential loss assumed by insurer D. only one of the parties being legally bound by contract

C

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

insurance company that has been formed under the laws of this state

Domestic

Who might receive dividends from a mutual insurer?

Policyholders

Adverse selection is a concept best described as

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

hazard is best defined as

Something that increases the risk of loss

what is producer

a person who sells many types of polices for one insurance company

Another term for authorized insurer

admitted

documentation grants express authority to agent

agents contract with principal

insured pays 100/month and insurer promises to pay 10,000 for loss. this is an example of

aleatory

examples of risk retention except A. self insurance B. premium C. deductibles D. Co payments

b

insurance producer who is bounded to write insurance for only one company

captive agent

insurer must obtain this in order to transact within a given state

certificate of authority

producer who fails to separate premium monies from his own personal funds is guilty of

commingling

The ABC Insurance company receives an incomplete application and issues the policy anyway. 6 months later ABC realizes the missing information. what is the term used to prevent ABC from forcing the policyholder to answer further question

estoppel

requirement that agent not commingle insurance monies with their own funds is known as

fiduciary responsibility

Not an insurer nut an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization

fraternal benefit society

insurance concept associated with weiss and fitch

guides describing company financial integrity

in insurance transactions, fiduciary responsibility means

handiling insurer funds in a trust capacity

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

law of large numbers

basis for a claim against an insurance policy

loss

the reduction, decrease, or disappearance of value of the person or property insured in a policy by a peril insured against

loss

advertisement of life insurance does not include

material prepared by the insurer for training new agents

a person who does not lock doors nor repair leaks and shows an indifferent attitude, is showing what type of hazard

morale (carelessness, indifferent)

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?

mutual

which of the following best describes gross annual premium

net premium plus expenses

major different between stock and a mutual company

ownership mutual comp. are policyholders and stock is stockholders

a participating insurance policy may do

pay dividends to the policy owner

A tornado that destroys property would be an example of ----(cause of loss)

peril

insurance option considered risk sharing

reciprocal

which of the following insurance options would be considered a risk sharing arrangement

reciprocal

methods insurer use to protect themselves against catastrophic losses

reinsurance

events in which a person has both chance of winning or losing

speculative risk

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

the loss may be intentional

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 when applying for insurance. the insurer issues the policy and learns of his history one year later. what will happen

the policy will not be affected

in insurance polices, the insures id not legally bound to any particular action in the insurance contract, the insurer is legally obligated to pay losses covered by the policy. what contract does this describe

unilateral

guaranteed to be true, and if untrue, may breach an insurance contract

warranty

in forming an insurance contract, when does acceptance usually occur

when an insurer's underwrites approves coverage

which of the following is an example of a producers 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 utmost good faith D. The obligation to tell the truth to the best of ones knowledge

A

which of the following is not the consideration in a polcy A. the application given to prospective insured B. something of value exchanges between parties C. the premium amount paid at the time of application D. the promise to pay covered losses

A

insurance policies are not drawn up through negotiation and an insured has little to say about provision. what contract is describe

Adhesion

which of the following is another term for an authorized insurer

Admitted

when transacting business in this state an insurer formed under of another country is known as

Alien insurer

What is reinsurance?

An agreement between a ceding insurer and assuming insurer

In insurance, an offer is usually made when

An applicant submits an application to the insurer

An insures wants to transfer his personal insurance policy to a friend. under what conditions would this be possible

An insured can transfer an insurance contract to another person but he or she must first obtain the written consent of the insurer

type of agent is also called perceived authority

apparent

An applicant knowingly fails to communicate information that would help am underwriter make a sound decision regarding coverage. this is an example of

concealment

act of withholding material information that would be crucial to an underwriting decision

concealment

insured makes premium payment on a new policy, if they dies, the insurer will pay the death benefits to the beneficiary. this an example of

conditional

An insurer neglect to pay a legitimate claim that is covered under the term of the policy. which of the following insurance principles has insurer violates

consideration (binding force in a contract; insures promises to pay)

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

express

Units with the same or similar exposure to loss are referred to as

homogeneous

Which of the following methods of calculating the amount of life needed takes into account the insured wages, years until retirement, and inflation

human life value approach

when would a misrepresentation on the insurance application be considered fraud

if it is intentional and material

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

private insurers may be authorized to transact insurance by state insurance department

most common way to transfer risk

purchase insurance

In case of loss, the indemnity provision in the insurance policies

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

when a person develops a formal program identifying, evaluating, and funding its losses

self-insuring

applicant that can be charge a higher rate of premium and not violate regulation regarding discrimination

smoker

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 policy

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 claim. in the forming of an insurance contract, this referred to as

utmost good faith

An insurance company receives an application with some information missing and issues the policy anyways. this is called

waiver

Which of the following statements concering buy-sell agreement is true

normally funded with life insurance