General Insurance & Basics
What method do insurers use to protect themselves against catastrophic losses? A Reinsurance B Indemnity C Pro rata liability D Risk management
A
Which of the following is owned by a corporation to serve that organization's needs at lower rates than would otherwise be available with commercial insurance? ACaptive insurer BInternal insurer CCustom insurer DReinsurer
A
Adverse selection is a concept best described as A Only offering coverage to good risks. B Risks with higher probability of loss seeking insurance more often than other risks. C Underwriters slanting the odds in favor of the company. D Poor choices of applicants to be covered.
B
Which of the following is a unit of measurement an underwriter uses when determining the premium rates for insurance? A Hazard B Risk C Exposure D Loss
C
A participating insurance policy may do which of the following? A Provide group coverage B Pay dividends to the stockholder C Require 80% participation D Pay dividends to the policyowner
D
Insurance is a contract by which one seeks to protect another from A Exposure. B Uncertainty. C Hazards. D Loss.
D
Which of the following must an insurer obtain in order to transact insurance within a given state? AProducer's certificate BBusiness entity license CInsurer's license DCertificate of authority
D
Events in which a person has both the chance of winning or losing are classified as ARetained risk. BSpeculative risk. CInsurable. DPure risk.
B
What is a 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
In terms of parties to a contract, which of the following does NOT describe a competent party? A The person must not be under the influence of drugs or alcohol. B The person must be of legal age. C The person must be mentally competent to understand the contract. D The person must have at least completed secondary education.
D
Which of the following is NOT the consideration in a policy? A The premium amount paid at the time of application B The promise to pay covered losses C The application given to a prospective insured D Something of value exchanged between parties
C
A state-issued document empowering an insurance company to become an admitted insurer is called ACertificate of authority. BCertificate of title. CCertificate of deposit. DCertificate of admission.
A
On a participating insurance policy issued by a mutual insurance company, dividends 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 a fixed rate every year. C Taxable as ordinary income. D Guaranteed.
A
If an insurance premium is paid by the policyowner to the agent, and the agent fails to remit that premium to the insurer, which of the following statements is true? A The policy will lapse since the premium was not received by the insurer. B The policy will not lapse since payment to the agent is the same as a payment to the insurer. C The premium will be taken out of the Guaranty Association funds. D The agent's license will be automatically revoked.
B
The reduction, decrease, or disappearance of value of the person or property insured in a policy by a peril insured against is known as A Hazard. B Risk. C Loss. D Exposure.
C