Examfx

An agent who has had formal disciplinary action taken against them by a state regulatory agency must notify the Commissioner of this within A. 10 days B. 30 days C. 45 days D. 60 days

B. 30 days

Representations are written or oral statements made by the applicant that are A. Immaterial to the actual acceptability of the insurance contract B. Considered true to the best of the applicant's knowledge C. Guaranteed to be true D. Found to be false after further investigation

B. Considered true to the best of the applicant's knowledge

Contracts that are prepared by one party and submitted to the party on a take-it-or-leave-it basis are classified as A. Binding contracts B. Contracts of Adhesion C. Unilateral contracts D. Aleatory Contracts

B. Contracts of Adhesion

An insurance organization that does not issue insurance policies but provides a meeting place for underwriters to conduct business is known as a A. Capital stock company B. Lloyd's association C. Fraternal society D. Mutual Company

B. Lloyd's association

Which of the following is the basis for a claim against an insurance policy? A. Misrepresentation B. Loss C. Material Change D. Hazard

B. Loss

An insured stated on her application for life insurance that she had never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. Which of the following will explain the reason a death benefit claim is denied? A. Estoppel B. Material misrepresentation C. Waiver D. Utmost Good Faith

B. Material misrepresentation

Which of the following is the most common way to transfer risk? A. Name a beneficiary B. Purchase insurance C. Increase control of claims D. Lessen the possibility of loss

B. Purchase insurance

When an individual purchases insurance, what risk management technique is he or she practicing? A. Retention B. Transfer C. Avoidance D. Sharing

B. Transfer

Any licensed person whose activities affect interstate commerce and who knowingly makes false material statements related to the business of insurance may be imprisoned for up to A. 3 years B. 5 years C. 10 years D. 12 years

C. 10 years

To legally transact insurance in this state, an insurer must obtain which of the following? A. Business entity license B. Certificate of Insurance C. Certificate of Authority D. Power of Attorney

C. Certificate of Authority

What term best describes the act of withholding material information that would be crucial to an underwriting decision? A. Leading B. Breach of warranty C. Concealment D. Withholding

C. Concealment

An insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable. What contract characteristic does this describe? A. Aleatory B. Unilateral C. Conditional D. Contingent

C. Conditional

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. Representation B. Adhesion C. Consideration D. Good faith

C. Consideration

An agent who includes a statement or omits a statement which, when taken in context of the whole presentation, may tend to mislead or deceive the persons addressed has committed A. Twisting B. Coercion C. Misrepresentation D. Defamation

C. Misrepresentation

Which of the following factors is NOT considered by an underwriter when determining the premium rates for an individual seeking insurance? A. Medical history B. Sex C. Race D. Age

C. Race

If a court ordered payment for a loss that was not covered in the policy even if it was clearly worded, it would be an example of which legal concept? A. Nonforfeiture B. Indemnity C. Reasonable expectations D. Cease and desist

C. Reasonable expectations

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

D the uncertainty or chance of loss

What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act? A. $1,000 B. $100 per violation C. Revocation of license D. $2,500

D. $2,500

Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe? A. Unilateral B. Conditional C. Personal D. Adhesion

D. Adhesion

What documentation grants express authority to an agent? A. Agent's 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 are the authorities that an agent can hold? A. Apparent and allowed B. Authorized and admitted C. Primary and secondary D. Express and implied

D. Express and implied

The authority granted to an agent through the agent's contract is referred to as A. Apparent authority B. Implied authority C. Absolute authority D. Express authority

D. Express authority

An insurance company assures its new policy holders that their premium costs will not increase for a period of at least five years. However, due to increasing financial strain, they plan to raise premium costs for all insureds by 10% over the next two years. What team best describes this act? A. Defamation B. Unfair discrimination C. Errors and omissions D. Fraud

D. Fraud

In insurance transactions, fiduciary responsibility means A. Maintaining a good credit record B. Being liable with respect to payment of claims C. Commingling premiums with agent's personal funds D. Handling insurer funds in a trust capacity

D. Handling insurer funds in a trust capacity

Which statement regarding insurable risks is NOT correct? A. Insurance cannot be mandatory B. The insurable risk needs to be statistically predictable C. An insurable risk must involve a loss that is definite as to cause, time, place and amount D. Insureds cannot be randomly selected

D. Insureds cannot be randomly selected

Which of the following is a person other than an officer or employee of the ceding insurer, who solicits, negotiates, or places reinsurance cessions on behalf of a ceding insurer A. Reinsurance broker B. Managing general agent C. Ceding agent D. Reinsurance agent

A. Reinsurance broker

Adverse selection is a concept best described as A. Risks with higher probability of loss seeking insurance more often than other risks B. Underwriters slanting the odds in favor of the company C. Poor choices of applicants to be covered D. Only offering coverage to good risks

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

What is the major difference between a stock company and a mutual company? A. Ownership B. Amount of death benefit C. Number of producers D. Types of whole life policies

A. Ownership

A participating insurance policy may do which of the following? A. Pay dividends to the policy owner B. Provide group coverage C. Pay dividends to the stockholder D. Require 80% participation

A. Pay dividends to the policy owner

Installing deadbolt locks on the doors of a home is an example of which method of handling risk? A. Reduction B. Avoidance C. Transfer D. Self-insurance

A. Reduction

What method do insurers use to protect themselves against catastrophic losses? A. Reinsurance B. Indemnity C. Pro rata liability D. Risk management

A. Reinsurance

Events in which a person has both the chance of winning and losing are classified as A. Speculative risk B. Insurable C. Pure risk D. Retained risk

A. Speculative risk

All of the following are marketing arrangements used by insurers EXCEPT A. Reinsurance System B. General Agency System C. Direct Response Marketing System D. Independent Agency System

A. Reinsurance System

A tornado that destroys property would be an example of which of the following? A. A peril B. A pure risk C. A loss D. A physical hazard

A. A peril

What documentation grants express authority to an agent? A. Agent's contract with the principal B. Agent's insurance license C. Fiduciary contract D. State provisions

A. Agent's contract with the principal

Units with the same or similar exposure to loss are referred to as A. Law of large numbers B. Homogeneous C. Catastrophic loss exposure D. Insurable risks

B. Homogeneous

All of the following are marketing arrangements used by insurers EXCEPT A. Independent Agency System B. Reinsurance System C. General Agency System D. Direct Response Marketing System

B. Reinsurance System

A producer who fails to separate premium monies from his own personal funds is guilty of A. Commingling B. Larceny C. Embezzlement D. Theft

A. Commingling

Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPT A. Conditions B. Considerations C. Legal purpose D. Offer and acceptance

A. Conditions

The causes of loss insured against an insurance policy are known as A. Risks B. Hazards C. Perils D. Losses

C. Perils

Which of the following is NOT the consideration in a policy? A. The application given to a prospective insured B. Something of value exchanged between parties C. The premium amount paid at the time of the application D. The promise to pay covered losses

A. The application given to a prospective insured

Peril is most easily defined as A. The cause of loss insured against B. An unhealthy attitude about safety C. The chance of a loss occurring D. Something that increases the chances of loss

A. The cause of loss insured against

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 A. The loss may be intentional B. The loss must not be catastrophic C. There must be a sufficient number of homogeneous exposure units to make losses reasonably predictable D. The loss produced by the risk must be definite

A. the loss may be intentional

All of the following are examples of risk retention EXCEPT A. Self-insurance B. Premiums C. Deductibles D. Copayments

B. Premiums

When forming an insurance contract, when does acceptance usually cover? A. When an insured submits an application B. When an insurer's underwriter approves coverage C. When an insurer delivers the policy D. When an insurer receives an application

B. When an insurer's underwriter approves coverage

In forming an insurance contract, when does acceptance usually occur? A. When an insured submits an application B. When an insurer's underwriter approves coverage C. When an insurer delivers the policy D. When an insurer receives an application

B. When an insurer's underwriter approves the coverage

What insurance concept is associated with the names Weiss and Fitch? A. Types of mutual companies B. Index used by stock companies C. Guides describing company financial integrity D. Policy dividends

C. Guides describing company financial integrity

In insurance transactions, fiduciary responsibility means A. Being liable with respect to payment of claims B. Commingling premiums with agent's personal funds C. Handling insurer funds in a trust capacity D. Maintaining a good credit record

C. Handling insurer funds in a trust capacity

When would a misrepresentation on an insurance application be considered fraud? A. When the application is incomplete B. Any misrepresentation is considered fraud C. If it is intentional and material D. Never: statements by the applicant are only representations

C. If it is intentional and material

Which authority is NOT stated in an agent's contract but is required for the agent to conduct business? A. Assumed B. Express C. Implied D. Apparent

C. Implied

A life insurance policy has a legal purpose if both of which of the following elements exist? A. Offer and counteroffer B. Policy owners and named beneficiaries C. Insurable interest and consent D. Underwriting and reciprocity

C. Insurable interest and consent

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. Allows the insured to collect 20% more than the actual loss B. Pays the insured a percentage of the loss above and beyond the loss C. Pays the insured as much as 95% of the loss D. Restores an insured person to the same financial state as before the loss

D. Restores an insured person to the same financial state as before the loss

Hazard is best defined as a. The uncertainty of loss b. Neglect to communicate a material fact c. A deliberate attempt to deceive d. Something that increases the risk of loss

D. Something that increases the risk of loss

Which of the following would qualify as a competent party in an insurance contract? A. The applicant is intoxicated at the time of the application B. The applicant is a 12-year-old student C. The applicant is under the influence of mind-impairing medication at the time of the application D. The applicant has a prior felony conviction

D. The applicant has a prior felony conviction

An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible? A. It is impossible to transfer a policy B. The insured would have to surrender his policy to the insurer, and his friend could then ask to buy it. C. The insured an transfer the policy to his friend and then notify the insurer of the change. D. The insured will need a written consent of the insurer

D. The insured will need a written consent of the insurer

In insurance policies, the insured is not legally bound to any particular action in the insurance contract, by the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe? A. Conditional B. Unilateral C. Unidirectional D. Aleatory

B. Unilateral

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 claims. In the forming of an insurance contract, this is referred to as A. Implied warranty B. Utmost good faith C. Reasonable Expectations D. A warranty

B. Utmost good faith

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

C. To minimize the insured's level of liability in the event of loss

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

C. To minimize the insured's level of liability in the event of loss

Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract? A. Indemnity B. Representation C. Warranty D. Concealment

C. Warranty

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. Legal purpose B. Contract of adhesion C. Acceptance D. Consideration

D. Consideration

Which of the following is another term for an authorized insurer? A. Licensed B. Legal C. Admitted D. Certified

C. Admitted

According to the Law of Agency, a principal is represented by a/an A. Broker B. Insured C. Agent D. Insurer

C. Agent

In insurance, an offer is usually made when a. an applicant submits an application to the insurer b. the insurer 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

In Wisconsin, producers are permitted to share or split commissions, providing that A. Both are properly licensed for the line of insurance B. The insured knows and agrees to the arrangement C. The insurance department knows of the arrangement D. There is a written agreement between the producers

A. Both of properly licensed for the line of insurance

Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPT A. Conditions B. Consideration C. Legal purpose D. Offer and acceptance

A. Conditions

Which of the following best describes an insurance company that has been formed under the laws of this state? A. Domestic B. Sovereign C. Alien D. Foreign

A. Domestic

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. Indemnity B. Stop-loss C. Consideration D. Reasonable expectations

A. Indemnity

Which of the following is true regarding a risk retention group? A. It is a liability insurance company owned by its members B. It provides support for underwriters and is not an insurance company. C. It is a benefit society formed to provide insurance for members of an affiliated lodge. D. It is a company owned by the stockholders that provides nonparticipating policies

A. It is a liability insurance company owned by its members

An individual's tendency to be dishonest would be indicative of a A. Moral hazard B. Morale hazard C. Pure hazard D. Physical hazard

A. Moral hazard

On a participating insurance policy issued by a mutual insurance company, dividend paid to policyholders are A. Not taxable since the IRS treats them as a return of a portion of the premium paid B. Paid at the fixed rate every year C. Taxable as ordinary income D. Guaranteed

A. Not taxable since the IRS treats them as a return of a portion of the premium paid

Every producer must maintain a place of business in this state A. That is approved by the Department B. Accessible to the public C. With the exception of resident licenses D. And maintain an approval rating of 60%

B. Accessible to the public

Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company? A. Warranty B. Aleatory C. Adhesion D. Subrogation

B. Aleatory

What is reinsurance? A. An agreement between an insurer and an insured B. An agreement between a ceding insurer and an assuming insurer C. An agreement between an originating insurer and a ceding insurer D. An agreement between a domestic insurer and a foreign insurer

B. An agreement between a ceding insurer and an assuming insurer

If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered to be A. Approved B. Authorized C. Certified D. Qualified

B. Authorized

The risk management technique that is used to prevent a specific loss by not exposing oneself to that activity is called A. Sharing B. Avoidance C. Transfer D. Reduction

B. Avoidance

An insurance producer who by contract is bound to write insurance for only one company is classified as a/an A. Independent producer B. Captive agent C. Solicitor D. Broker

B. Captive agent

Forcing a client to buy insurance from a particular lender as a condition of granting a loan is defined as A. Defamation B. Coercion C. Rebating D. Misleading advertising

B. Coercion

Insurers must report or list all appointments and any terminations of appointments to what authority? A. NAIC B. Commissioner C. Department of Insurance D. Federal Insurance Regulation Board

B. Commissioner

When applying for an individual life insurance policy, an applicant state that he went to the doctor for nausea, but fails to mention that he was also having severe chest pains. This is an example of A. Warranty B. Concealment C. Misrepresentation D. Fraud

B. Concealment

which of the following is NOT an essential element of an insurance contract? A. Legal purpose B. Counteroffer C. Consideration D. Agreement

B. Counteroffer

An insurance company sells an insurance policy over the phone in response to a TV ad. Which of the following best describes this act? A. Insurance telemarketing B. Direct response marketing C. Independent agency marketing D. Illegal

B. Direct response marketing

Which of the following best describes the aleatory nature of an insurance contract? A. Policies are submitted to the insurer on a take-it-or-leave-it-basis B. Exchange of unequal values C. Only one of the parties being legally bound by the contract D. Ambiguities are interpreted in favor of the insured

B. Exchange of unequal values

Which law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated? A. Law of group evaluation B. Law of large numbers C. Law of masses D. Law of averages

B. Law of large numbers

Which of the following is the use of false, misleading, or deceptive statements to describe the terms or benefits of any policy? A. Fraudulent disclosure B. Misrepresentation C. False advertisement D. Defamation

B. Misrepresentation

What is the definition of a unilateral contract? A. If one party makes a condition, the other party can counteroffer B. One-sided; only one party makes an enforceable promise C. Two or more parties go into a contract understanding there may be an unequal exchange of value D. One author; the company wrote the contract; the insured must accept it as written

B. One-sided; only one party makes an enforceable promise

Which of the following statements is an accurate comparison between private and government insurers? A. Private insurers provide insurance in areas where the government will not B. Private insurers may be authorized to transact insurance by state insurance departments C. Insurance provided by the government is called federal insurance D. Private insurers offer fewer lines of insurance than government insurers

B. Private insurers may be authorized to transact insurance by state insurance departments

In what way can an agent demonstrate a high standard of ethics? A. Recommending qualified retirement plans to each client B. Putting the client's best interests before their own C. Making enough commissions to cover personal expenses D. Setting and meeting monthly production goals

B. Putting the client's best interests before their own

Following a career change, an insured is no longer required to perform many physical activities, so he has implemented a program where he walks and jogs for 45 minutes each morning. The insured has also eliminated most fatty foods from his diet. Which method of dealing with risk does this scenario describe? A. Retention B. Reduction C. Transfer D. Avoidance

B. Reduction

Under the Fair Credit Reporting Act, if the consumer challenges the accuracy of the information contained in his or her report, the reporting agency must A. Send an actual certified copy of the entire report to the consumer B. Respond to the consumer's complaint C. Defend the report if the agency feels it is accurate D. Change the report

B. Respond to the consumer's complaint

Which of the following is NOT a characteristic of an insurable risk? A. The loss exposure must be large B. The loss must be catastrophic C. The loss must be due to chance D. The loss must be measurable

B. The loss must be catastrophic

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? A. The right to raise premiums as a result of court rulings B. The right to determine the wording of a policy C. The right to refute the rulings D. The right to revoke the policy

B. The right to determine the wording of a policy

An insurance company receives an application with some information missing and issues the policy anyway. What is it called? A. Aleatory B. Waiver C. Estoppel D. Subrogation

B. Waiver

After the original hearing and a final order is issued, an aggrieved person may request a re-hearing within A. 40 days B. 15 days C. 20 days D. 30 days

C. 20 days

According to the rule of readability of insurance policies in the state, what is a required minimum score on the Flesch reading ease test for Medicare supplement policies? A. 30 B. 40 C. 50 D. 60

C. 50

Which of the following produces evaluations of insurers' financial status often used by the state departments of insurance? A. Consumer's guide B. SEC C. AM Best D. NAIC

C. AM Best

Because an agent is using stationery with the logo of an insurance company, applicants for insurance assume that the agent is authorized to transact on behalf of that insurer. What type of agent authority does this describe? A. Implied B. Assumed C. Apparent D. Express

C. Apparent

An insurance contract must contain all of the following to be considered legally binding EXCEPT A. Consideration B. Competent parties C. Beneficiary's consent D. Offer and acceptance

C. Beneficiary's consent

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. Driving recklessly

all of the following are CORRECT regarding temporary licenses EXCEPT A. The Commissioner may limit the authority of a temporary licenses B. The Commissioner may revoke temporary licenses if it is in the public's interest C. Examinations are never required for the issuance of a temporary license D. They are granted to representatives of licensed intermediaries who cannot currently transact business

C. Examinations are never required for the issuance of a temporary license

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

A life insurance policy has a legal purpose if both of which of the following elements exist? A. Offer and counteroffer B. Policyowners and named beneficiaries C. Insurable interest and consent D. Underwriting and reciprocity

C. Insurable interest and consent

When agents are acting within the scope of their contract, their actions will be assumed to be the acts of the A. Department of Insurance B. Insured C. Insurer D. Policyowners

C. Insurer

All of the following actions by a person could be described as risk avoidance EXCEPT A. Never flying in an airplane B. Not driving after being in an accident C. Investing in the stock market D. Refusing to scuba dive

C. Investing in the stock market

Which of the following insurers are owned by stockholders? A. Reciprocal B. Fraternal C. Stock D. Mutual

C. Stock

Knowledge and actions of an agent are deemed to be out of A. The insured B. The agent only C. The insurer D. The Department of Insurance

C. The insurer

Principles of Insurance and General Insurance A. The right to revoke the policy B. The right to raise premiums as a result of court rulings C. The right to determine the wording of a policy D. The right refute the rulings

C. The right to determine the wording of a policy

Which of the following would NOT be a violation of state insurance regulations? A. Agent D collects premiums due on policies and deposits the funds in his own personal account B. Agent A uses her license to write only insurance for herself and her immediate family C. Agent B charges his clients a consulting fee, in addition to the premium for placing a policy D. Agent C uses her license to write only business other than controlled

D. Agent C uses her license to write only business other than controlled

When transacting business in this state an insurer formed under the laws of another country is known as a/an A. Domestic insurer B. Foreign insurer C. Admitted insurer D. Alien insurer

D. Alien insurer

An agent is acting ethically in all of the following situations EXCEPT A. Working within the conditions of his/her contract B. Representing the insurer, not the insured C. Keeping customers' best interests in mind D. Always representing the insured

D. Always representing the insured

What is a foreign insurer? A. An insurer with a home office in another country B. An insurer with licensed agents doing business in other countries C. An insurer with licensed agents who are citizens in more than one country D. An insurer with a home office in another state

D. An insurer with a home office in another state

The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract? A. Adhesion B. Personal C. Unilateral D. Conditional

D. Conditional

For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become A. Smaller B. Older C. More active D. Larger

D. Larger

A person who does not lock the doors or does not repair leaks shows an indifferent attitude. This person presents what type of hazard? A. Moral B. Legal C. Physical D. Morale

D. Morale

Who might receive dividends from a mutual insurer? A. Subscribers B. Stockholders C. Agents D. Policyholders

D. Policyholders

Which type of insurance is based on mutual agreements among subscribers? A. Mutual insurance B. Limited Liability C. Reinsurance D. Reciprocal Insurance

D. Reciprocal Insurance

An individual applies for a life policy. Two years ago he suffered from a head injury from an accident, so he cannot remember parts of his past, but is competent. He has also been hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of his history one year later. What will probably happen? A. The policy will be voided B. The insurer will sue the insured for committing a fraud C. Because the insured is currently not a drug user, his policy will not be affected D. The policy will not be affected

D. The policy will not be affected

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 claims. In the forming of an insurance contract, this is referred to as A. Reasonable expectations B. A warranty C. Implied warranty D. Utmost good faith

D. Utmost good faith

An insurance company receives an application with some information missing and issues the policy anyway. What is this called? A. Estoppel B. Subrogation C. Aleatory D. Waiver

D. Waiver