ExamFX: Chapter 1 Quiz 1- General Insurance
The reduction, decrease, or disappearance of value of the person or property insured in a policy is known as what?
Loss
An insured purchased an insurance policy 5 years ago. Last year she received a dividend check from the insurance company which 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 (funds not paid out after paying claims and other ape-rating costs are returned to the policypowners in the form of a dividend. if all funds are paid out, no dividends are paid.
All of the following actions by a person could be described as risk avoidance EXCEPT
investing in the stock market (investing in the stock market is not an example of risk avoidance; it creates a possibility of a loss)
In insurance, an offer is usually made when:
An applicant submits an application to the insurer. (acceptance takes place when an insurer's underwriter approves the application and issues a policy)
An insurer that holds a Certificate of Authority in the state in which it transacts business is considered a/an
Authorized insurer (insurers who meet the state's financial requirements and hold a Certificate of Authority to transact business in the state are considered authorized or admitted)
In insurance transactions, fiduciary responsibility means
Handling insurer funds in a trust capacity.
Who might recieve dividends from a mutual insurer?
Policyholders (a mutual insurer has no stock, and is owned by the policyholders. since they may receive a dividend, such policies are known as participating policies. Dividends received by policyholders of a mutual insurer are not taxable)
Which of the following is the most common way to transfer risk?
Purchase insurance. (the most effective way to handle risk is to transfer it so that the loss is borne by another party. Insurance is the most common method of transferring risk from an individual or group to an insurance company)
Which of the following are the authorities that an agent can hold?
Express and Implied ( the powers and authorities that an agent holds are express and implied. Apparent authority is the appearance of, or the assumption of, authority based on the actions, words, or deeds of the principal or because of circumstances of the principal created.
When transacting business in this state an insurer formed under the laws of another country is known as a/an
Alien insurer (alien insurer is defined as an insurer formed under the laws of another country)
A participating insurance policy may do which of the following?
Pay dividends to the policyowner ( a participating insurance policy will pay dividends to the owner based upon actual mortality cost, interest earned and costs
Which of the following is an example of a producer's fiduciary duty?
The trust that a client places in the producer in regard to handling premiums. (an agent acts in a fiduciary capacity, based upon trust and confidence, when handling the financial affairs of their customers, including the handling of premiums)
Representations are written or oral statements made by the applicant that are:
Considered true to the best of the applicant's knowledge. (representations are statements made by an applicant that they believe to be true)
Which of the following is not an essential element of an insurance contract?
Counteroffer. (in order for insurance contracts to be legally binding, they must have four essential elements: agreement, consideration, competent parties, and legal purpose)
When an individual purchases insurance, what risk management technique is he or she practicing?
Transfer. (insurance is a transfer of the risk of financial loss from a covered peril from the insured to the insurance company.)