2 - 15 License Course (Chapters 1-4)

An insurance company has how many years to challenge the validity of a life insurance contract? a. one b. two c. three d. four

b

An insurer is considered competent if it a. is registered with NAIC b. is licensed or authorized by the state with a certificate of authority c. follows the Code of Ethics of the state Office of Insurance Regulation d. is registered with the Securities and Exchange Commission

b

Buying insurance is one of the most effective ways of a. avoiding risk b. transferring risk c. reducing risk d. retaining risk

b

In Florida, properly licensed and appointed agents may act as brokers in insurance transactions, in which case they may legally represent a. the insurer b. the applicant and insured c. the state office of insurance regulation d. themselves

b

In what phase of the selling process are serious problems of misrepresentation likely to occur? a. Approach b. Presentation and recommendations c. Fact finding and needs analysis d. Policy delivery and ongoing service

b

Selling variable universal life insurance policies as mutual funds is an example of a prohibited practice called a. twisting b. misrepresentation c. replacement d. rebating

b

The State Guaranty Association guarantees a. that a policy will be issued b. that the claim will be paid if the insurer becomes insolvent c. that dividends will be paid d. the rate of return on a policy

b

The authority that an insurer gives to its agent by means of the agent's contract is known as a. implied authority b. express authority c. fiduciary responsibility d. general authority

b

The purpose behind full disclosure requirements is to a. makes sure a client is told everything there is to know about a product b. help a client make an informed decision c. makes sure agents comply with the letter of the law d. help a client distinguish one insurer's product from a similar offering from another insurer

b

Tom buys his wife Mary a $50,000 diamond ring. When she is not wearing the ring, she keeps it in a safe deposit box at a local bank. This is an example of risk a. avoidance b. reduction c. retention d. transference

b

When an agent spreads a false story that damages a competing agent's reputation, the offense is called a. twisting b. defamation c. disclosure d. rebating

b

Which of the following best describes the function of insurance? a. It is a form of legalized gambling. b. It spreads financial risk over a large group to minimize the loss to any one individual. c. It protects against living too long. d. It creates and protects risks.

b

All of the following are reasons why it is seldom in the best interest of a policyholder to replace a life insurance policy with a new one EXCEPT a. most of the first year premium is swallowed up in commission b. replacement policies are never in the best interest of the policy owner c. the premium is higher because the insured is older d. waiting periods begin anew

b

All statements on an application are considered to be a. warranties b. representations c. parole evidence d. binding

b

A reinsurer is a company that a. accepts all the risk from another insurer b. assumes a portion of the risk from another insurer c. cedes the risk d. does not take any risk

b

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? a. Aleatory b. Unequal c. Disproportionate d. Adhesion

a

All of the following are involved in a product presentation EXCEPT a. pressure b. education c. discussion d. disclosure

a

How many hours of continuing education in law and ethics does an agent need every two years? a. five hours b. seven hours c. 20 hours d. 24 hours

a

In an insurance transaction, licensed agents legally represent which of the following? a. insurer b. applicant and insured c. state office of insurance regulation d. themselves

a

Jim gives Bill a couple of tickets to a Florida Marlins game to thank him for purchasing a policy. This is an example of a. rebating b. twisting c. replacement d. churning

a

Which of the following is not true concerning a Risk Retention Group? a. it insures a group of separate businesses b. is insures members of the same occupation c. is a mutual company d. all insureds own the company

a

Which of the following is the goal of a sales presentation? a. To educate the client so the client can make his or her own decision about what's right for him or her b. To sell the client as many products as possible c. To convince the client that the producer's recommendations are best d. To explain the rules and regulations governing particular insurance products

a

Which of the following statements does NOT describe an element of an insurable risk? a. The loss must not be due to chance. b. The loss must be definite and measurable. c. The loss cannot be catastrophic. d. The loss exposures to be insured must be large.

a

Which of the following statements regarding the National Association of Insurance Commissioners (NAIC) is NOT correct? a. the NAIC is empowered to prosecute and punish criminal violators in the insurance industry. b. the NAIC seeks to preserve state rather than federal regulation of the insurance industry. c. the NAIC promotes uniformity in state insurance laws and regulations. d. the NAIC seeks to promote efficient administration of insurance laws and regulations.

a

Which of the following statements regarding types of insurers is NOT correct? a. Reinsurers usually deal with group policy owners. b. Mutual insurance companies are "owned" by their policy owners. c. Stock insurance companies seek a profit for their shareholders. d. Fraternal benefit societies must be nonprofit organizations.

a

Which of the following is NOT a provision of NAIC's Model Regulation on Illustrations? a. Each policy illustration must be accompanied by a written explanation or policy summary. b. Each policy illustration should use the words "vanish" and "vanishing premium" sparingly. c. Each policy illustration must show that cash values and coverage vary depending on changes in the insurer's costs and dividends. d. Each policy illustration must be complete.

b

Which of the following is NOT part of a product presentation? a. Explaining policies b. Asking for referrals c. Motivating the client d. Discussing a policy's limitations

b

Which of the following is a distinguishing element of an insurance contract? a. Offer and acceptance b. Conditional c. Consideration d. Competent parties

b

Which of the following is an objective of the NAIC? a. To promote federal legislation of the insurance industry b. To encourage uniformity in state insurance laws and regulations c. To develop continuing education courses for insurance providers d. To develop model insurance policies for adoption by insurers

b

Which of the following phrases could agents avoid using when explaining policies to prospective applicants or clients? a. Cash value b. Vanishing premium c. Flexible premium d. Death benefit

b

Which of the following should a producer NOT do during a presentation? a. Explain and educate b. Sell a policy c. Motivate the client d. Openly discuss a policy`s limitations

b

Which of the following statements about authority is NOT correct? a. Express authority is granted by means of the agent's contract. b. Express authority is determined by a principal's conduct. c. Implied authority is not overtly extended to the agent's contract, but does permit many of the agent's operations. d. Apparent authority can be assumed from the actions of the principal.

b

Which of the following statements describes an insurable interest? a. The policy owner must expect to benefit from the insured's death. b. The policy owner must expect to suffer a loss when the insured dies or becomes disabled. c. The beneficiary, by definition, has an insurable interest in the insured. d. he insured must have a personal or business relationship with the beneficiary.

b

Which of the following statements is CORRECT? a. Only speculative risks are insurable. b. Only pure risks are insurable. c. Both pure risks and speculative risks are insurable. d. Neither pure risks nor speculative risks are insurable.

b

Which of the following statements regarding insurable interest is NOT correct? a. Insurable interest exists when the applicant is the insured. b. A policy obtained by a person without an insurable interest in the insured can be enforced. c. The applicant must be subject to loss upon the death, illness or disability of the insured. d. Generally, the person to be insured must give his or her consent before a policy is issued, even if the applicant has an insurable interest.

b

"An insurance contract is prepared by one party, the insurer, rather than by negotiation between the contracting parties." Which of the following statements explains this characteristic of insurance contracts? a. The insurance contract is an aleatory contract. b. The insurance contract is a contract of acceptance. c. The insurance contract is a contract of adhesion. d. The insurance contract names only the insurer as the competent party.

c

12. Regarding landmark cases and laws involving the regulation of insurance, which of the following statements is NOT correct? a. Insurers are required to disclose when an applicant's consumer/credit history is being investigated. b. the Securities and Exchange Commission (SEC) may regulate insurers that sell variable annuities and variable life insurance. c. the Federal Trade Commission (FTC) directly supervises all insurance marketing activities. d. the McCarran-Ferguson Act (1945) led directly to our current understanding that the insurance industry is predominantly regulated by the states

c

A life insurance company, organized in Illinois, with its home office in Philadelphia, is licensed to conduct business in Florida. In Florida, this company is classified as a(n) a. domestic company b. alien company c. foreign company d. regional company

c

A tornado is an example of a a. physical hazard b. speculative risk c. peril d. moral hazard

c

All of the following actions are examples of risk avoidance EXCEPT: a. Bill won't fly in an airplane b. Wendy keeps her money out of the stock market c. Pat pays his insurance premium d. John never drives a car

c

Diverting insurance funds for personal use is an example of a. replacement b. rebating c. misuse of premiums d. misrepresentation

c

Ethics is best described as a. laws and statutes enacted by duly elected representatives b. religious rituals and ceremonies c. instructions on how to interact with fellow members of a group or community d. a society's laws and regulations

c

In addition to the state, the organization that regulates variable life and variable annuities is the a. Federal Trade Commission (FTC) b. National Association of Insurance Commissioners (NAIC) c. Securities and Exchange Commission (SEC) d. Federal Communications Commission (FCC)

c

In the insurance business, risk can best be defined as: a. sharing the possibility of loss b. uncertainty regarding the future c. uncertainty regarding financial loss d. uncertainty regarding when death will occur

c

Producers are expected to adhere to all of the following standards to protect consumers and promote suitable sales EXCEPT a. selling to customers' needs b. determining the suitability of recommended products c. assessing prospects financial ability to pay commissions d. full and accurate disclosure

c

The use of preprinted material in a sales presentation is recommended for which of the following reasons? a. The agent doesn't have to know exactly how a product works. b. It saves a lot of time and explanations. c. Such material generally has been reviewed for compliance. d. The agent can give it to the client instead of answering the client's questions.

c

Which of the following four steps is NOT part of a sales presentation? a. Review and reestablish the client-producer relationship b. Introduce the recommended policy c. Review the product application d. Review the client's needs and priorities

c

Which of the following is NOT part of the home office underwriting process? a. Credit report b. Medical Information Bureau report c. Applicant's analysis report d. Inspection report

c

Which of the following is an example of churning a. Illegally inducing a person to drop existing insurance to purchase similar coverage with another agent or company b. Rephrasing a policy provision in such a way that it says just the opposite of the original c. Replacing a policy for another with the same insurer with the intent of earning additional premiums or commissions d. Representing an insurance policy as a retirement plan

c

Which of the following is not a service provider? a. HMO b. Benefit plans offering medical services to subscribers c. Lloyd's of London d. PPO

c

Which of the following statements describe the parol evidence rule? a. A written contract cannot be changed once it is signed. b. An oral contract cannot be modified by written evidence. c. A written contract cannot be changed by oral evidence. d. An oral contract takes preference over any earlier written contracts.

c

Which of the following terms is used for the voluntary relinquishment of a known right? a. Estoppel b. Adhesion c. Waiver d. Unilateral

c

All of the following methods support the sale of insurance through agents and brokers EXCEPT a. independent agency system b. personal producing general agency system c. career agency system d. direct selling system

d

An insurance company organized and headquartered in Florida can be described as what type of company in Florida? a. Alien b. Home-based c. Foreign d. Domestic

d

An insurance salesperson who offers a $100 gourmet dinner in exchange for the purchase of a life insurance policy would be considered to have violated ethical sales practices by a. twisting b. replacement c. churning d. rebating

d

Competent parties who can enter into insurance contracts are a. applicants b. trusts and estates c. business entities d. all of the above

d

Melanie is a newly licensed producer. A customer calls and asks for some product recommendations, but Melanie thinks that she is not yet qualified to help the customer. Therefore, Melanie has an ethical responsibility to a. answers the customer's questions on the basis of her current knowledge and then send a letter confirming their conversation b. assures the customer that because she is licensed, there is a presumption that the advice Melanie gives is reliable c. refuses to speak to the customer d. seeks help from a more experienced colleague or other professional before responding to the customer's questions

d

Solicitation of insurance includes a. inviting prospective purchasers to enter a contract for an insurance product b. making general or specific recommendations concerning insurance products c. comparing insurance products, advising on insurance matters, or interpreting policies or coverages d. all of the above

d

The Buyer's Guide is intended to accomplish all of the following EXCEPT a. helps buyers choose the most suitable plan b. explain basic product features c. provide information about the recommended policy d. ensures that buyers obtain the lowest price for insurance

d

The basis for many state statutes regulating insurance advertising is the NAIC's a. McCarran-Ferguson Act b. Fair Credit Reporting Act c. Ethics in Advertising Act d. Unfair Trade Practices Act

d

The head of a state office of insurance regulation is generally responsible for all the following EXCEPT a. licensing and supervising agents and brokers b. overseeing insurance companies' marketing practices c. issuing rules and regulations d. making insurance laws

d

The owner of a camera store is worried that her new employees may help themselves to items from inventory without paying for them. What kind of hazard is described? a. Physical hazard b. Ethical hazard c. Morale hazard d. Moral hazard

d

When values of an insurance policy are used to purchase another policy with the same insurer for the sole purpose of earning additional premiums or commissions, this practice is called a. replacement b. misalliance c. rebating d. churning

d

Which of the following insurance concepts is founded on the ability to predict the approximate number of deaths or frequency of disabilities within a certain group during a specific time? a. Principle of large loss b. Quantum insurance principle c. Indemnity law d. Law of large numbers

d

Which of the following statements regarding the utmost good faith in insurance contracts is CORRECT? a. The concept of utmost good faith - that there is no attempt to conceal, disguise, or deceive - applies only to the insurer. b. Although a warranty is a statement, it is not technically part of the contract. c. A representation is a statement that the applicant guarantees to be true. d. Most state insurance laws consider statements made in an application for an insurance policy to be representations, not warranties.

d

Who is responsible for reporting suspicious activity concerning money laundering? a. the insurance company b. the producer c. no one d. the producer and the company

d

With life and health contracts, when must an insurable interest exist? a. After the policy is issued b. Before the beneficiary is named c. While the policy is in force d. At the inception of the policy

d