General Insurance PnC

Randy goes to Main Street Insurance Company to buy a homeowner's policy. He observes that he cannot negotiate the terms with the insurer, which presented the policy to him on a take-it-or-leave-it basis. This type of contract is considered a(n)

Contract of adhesion

When Yvette meets with you to buy a homeowners policy, she attempts to negotiate the terms of the contract. You tell her the terms are not negotiable and she must either purchase the policy and comply with its terms or decline to purchase the policy. You are explaining what type of contract to Yvette?

Contract of adhesion

A party to a contract may not enforce a right it has voluntarily waived by its past conduct. This is known as

Estoppel

How often must insurance producers licensed in Washington fulfill continuing education requirements to maintain their licenses?

Every 24 months

Underwriters know that as the number of units of exposure increases, prediction becomes more accurate. This basic insurance principle is known as

Law of large Numbers

To boost her sales at the end of the year, Trudy started offering potential clients a $250 cash gift card in exchange for buying an insurance policy from her. What unfair trade practice has Trudy committed?

Rebating

Which of the following persons would be considered legally competent to apply for an insurance policy?

ndividual who is physically disabled

What is the maximum amount that the Washington Insurance Guaranty Association will pay on a covered claim?

$300,000

onas received a cease and desist order from the Commissioner for an unfair practice he committed while transacting insurance business. He is subject to a fine if he does not discontinue the practice within how many days after receiving the order?

10 days

Joanne's producer license lapsed six months ago when she failed to satisfy the continuing education requirements. A policy she sold a year ago was renewed last month. What compensation, if any, may Joanne receive from the renewal?

100% of the renewal commission

Jake's insurance producer license expired 7 months ago. His license is eligible for reinstatement as long as he submits his reinstatement application within how many months after the license's expiration date?

12 months

The maximum period for which a Washington insurance license may be suspended is

12 months

What is the maximum time for which the Commissioner can order the suspension of a producer's license?

12 months

A temporary producer's license issued in Washington is valid for up to

180 days

How long is a Washington insurance producer's license valid?

2 years

How do a hazard and a peril differ

A hazard is a condition that increases the frequency and severity of loss while a peril is a cause of loss.

Which of the following would be considered an indirect loss?

A person whose house was damaged lives in a hotel while the house is repaired, incurring additional expenses.

Ajax Manufacturing Company bought a $1 million building property policy for a premium of $2,500/ Two months after he policy went into effect, the building was destroyed by a tornado. For the consideration of a $2,500 premium, the insured will receive $1 million. Clearly, the insured is receiving a benefit that is out of proportion to the consideration it gave in its premium payment. This type of contract is considered a (n)

Aleatory Contract

What kind of contract involves the exchange of unequal amounts?

Aleatory contract

Susan is studying insurance and comes across the term aleatory contract. She asks her professor what the term means and he tells her that.

Aleatory contracts involve an exchange of unequal amounts.

Davis Insurance Company was formed under the laws of Canada. In Washington, it would be considered a(n)

Alien insurer

All of the following statements are true about applying for a nonresident producer's license in Washington EXCEPT:

An applicant must establish residency in Washington.

When she applied for auto insurance, Delphia's agent asked if she'd ever had any at-fault accidents or traffic violation convictions. Delphia answered 'no' because she hadn't yet been convicted. When the insurer learns about the DUI citation, how will it view Delphia's withholding of information?

As a concealment

Surplus lines coverage refers to certain insurance coverages that cannot be obtained from

Authorized insurers

What typically provides temporary insurance coverage for a specified time period until an insurance policy is either accepted or denied?q

Binder

What penalty may not be imposed upon an insurance producer who represents an unauthorized insurer?

Cancellation of unauthorized policies and refund of all premiums

Sam purchased a fire insurance policy on an old building with the intention of setting fire to the building and collecting the insurance. For what reason did the insurance company decline to pay Sam's claim, citing the policy was not a legal contract?

Cause of Loss

Clark sued his insurance company because it didn't pay his claim. He finds the wording in his policy vague and ambiguous. He claims that had he understood the policy, he would have purchased additional coverage and his claim would have been covered. In whose favor did the Court render judgment?

Clark's, because the policy is a contract of adhesion

Which of the following is not a penalty for a licensee or insurer who commits an unfair business practice?

Community Service

Ned just bought a homeowner's policy from Main Street Insurance Company. However, he did not disclose that he operated a lawn mower repair business in his garage and that he employed two mechanics. He also did not disclose that one employee was injured three weeks ago. On what grounds might the insurer deny coverage in the event of a claim?

Concealment

Mr. Smith is furious that his insurance company won't pay his claim. You explain that he must comply with certain provisions of the policy before the insureeremust make payment. You tell Mr. Smith that his policy iw what type of contract?

Conditional

Denzel's insurance policy requires him to notify his insurer of a loss within 20 days of the date of loss and to cooperate with the insurer in settling a loss. His policy is a(n)

Conditional contract

Allied Insurance Company agrees to pay Leslie up to $75,000 to repair or replace her new sports car if it is involved in an accident. The insurance company's promise to pay is known as

Consideration

Rebecca tells a potential customer that an insurer she is considering disputes all claims from its policyholders, though she knows this is not true. What do her actions constitute?

Defamation

When meeting with a prospect to discuss insurance, Tyler makes disparaging comments about the financial stability and reputation of a competitor to dissuade the prospect from purchasing its policies. Which unfair trade practice has Tyler committed?

Defamation

Which of the following is not a prohibited marketing practice?

Discrimination among risk

Which of the following is not an unfair claims settlement practice if committed by an insurance company in Washington?

Failing to promptly settle a claim for which liability is uncertain

Sam lost his job and cannot make his mortgage payments. He has a comprehensive homeowner's policy with high dwelling limits. His neighbor suggests that he burn the house down to collect the insurance proceeds. On what grounds might the insurance company deny coverage if it can show that Sam intentionally burned the house down?

Fraud

The Commissioner may immediately revoke or refuse to refuse to renew a producer's license without a hearing if the producer

Has been convicted of a felony

Which of the following is an example of risk reduction?

Having fire extinguishers in place to limit the extent of a potential fire loss

An insurance producer who engages in deceptive business practices is subject to all fo the following disciplinary measures EXCEPT:

Imprisonment

Where must a nonresident insurance producer maintain his or her place of business?

In either Washington or in the nonresident insurance producer's state of domicile

What term is used when a loss victim is financially restored up to the amount of his or her loss?

Indemnity

A licensed insurance producer who represents an insurer on a contractual basis and is not an employee of the insurer is called a(n)

Independent insurance producer

According to the Washington insurance code, a contract in which one party agrees to indemnify another or pay a specific amount if certain events take place is called a(n)

Insurance

Which of the following has primary responsibility for enforcing the Washington insurance laws and regulations?

Insurance Commissioner

Spike received a cancellation notice from his insurer stating that his homeowners insurance policy would be cancelled in 45 days, but no reason was given for this action. Spike's insurance producer told him that the insurer is required by law to provide the reason. This notice is

Invalid

Flo is an insurance agent who suspects her client isn't eligible for insurance with her standard insurers because the client has an unusual exposure. Flo knows that insurers like to have a sizeable pool of exposure units before issuing insurance because it enables them to more accurately predict losses. What mathematical principle is Flo thinking about?

Law of Large Numbers

Stephanie is hired by ABC Insurance Company's home office. She does not have an insurance producer's license. Which of the following duties may she perform for ABC?

Mail company correspondence for the president

The insurance code identifies certain conditions that would allow an insurer to cancel a fire insurance policy with only 5 days' notice if at least two of those conditions exist. Which of the following is not one of these conditions?

Major renovation is underway without the appropriate permit.

Each of the following producers is unable to fulfill the continuing education requirements within the time allowed. Who will probably not be granted a waiver by the Commissioner?

Melanie, who is travelling abroad

It is an unfair method of competition for a producer to portray the terms and benefits of an insurance policy inaccurately to a prospective purchaser. This deceptive practice is called

Misrepresentation

Making a false statement in an insurance policy application to obtain a benefit from the insurer is known as

Misrepresentation

What is false statement of material fact?

Misrepresentation

Bernie's driving history contains several convictions for driving under the influence. When he applies for auto insurance, the insurance company declines to write Bernie's insurance. What type of hazard does Bernie's drunken driving present to the insurer?

Moral

Jack recently lost his job. He is having difficulty making his mortgage payments and risks foreclosure. What type of insurance hazard might he present under these circumstances?

Moral Hazard

Hilda lives in a high crime area but does not always lock the door to her apartment when she goes out. What type of hazard does this represent?

Morale Hazard

An agent sold a homeowners policy to Mrs. Tannenbaum, who suffers from Alzheimer's disease. When Mrs. Tannenbaum's son learned of the insurance sale, he claimed the policy was not a legal contract, requested cancellation of the policy, and obtained a full refund for which of the following reasons?

Mrs. Tannenbaum was not a competent party

Agent Todd sells Bobby, age 15, a life insurance policy, and Bobby pays the first installment of the premium. The legal age in the state is 21. Is this a legal contract?

No, Bobby is not of legal age in this state and, therefore, is not considered to be legally competent.

Which of the following statements BEST describes the transfer of risk via an insurance contract?

Not all risks are transferrable via insurance contracts

What is the element of legal contract

Offier, Acceptance, Consideration

Which of the following persons would not qualify for a temporary producer's license in Washington?

Part-time producer of a licensed agency

Which of the following acts would not be considered rebating?

Paying a personal visit to induce a person to buy insurance

A cause of loss is called a(n)

Peril

Ed cannot transfer his property and casualty policy to Jim without his insurer's consent because a property and casualty policy is a(n)

Personal contract

Jason repairs a broken stair on his front porch so that it is less likely people will trip and fall down the stairs and injure themselves. What measure has he taken to manage this risk?

Prevention

Zelda, a producer selling property and casualty insurance, assures a prospective applicant that the insurance company she represents is backed by the protections of the Washington Insurance Guaranty Association. This kind of assurance is

Prohibited at all times

Consideration is one of the required elements of a valid contract. What is the consideration in a typical insurance contract?

Promise to cover valid losses in exchange fir premium payment

Joan, an underwriter with Happy Valley Mutual, makes great efforts to avoid adverse selection in deciding which risks to insure. Which of the following is an example of adverse selection?

Refusing to insure a commercial applicant that had five burglary losses in the past year.

Julia and her family own a large manufacturing business. She convinced her family to set aside funds for a self-insurance program instead of buying a commercial insurance policy. This would be considered what form of risk management?

Retention

Mr. Davidson has chosen to assume personally the risks associated with automobile ownership. If his car sustains a loss, Mr. Davidson will pay for the damages and injuries himself. What method of handling risk has he chosen?

Retention

Alice is an insurance agent who telephones her underwriter and asks to discuss a particular piece of prop

Risk

Brad purchased an auto insurance policy to insure his new car. An insurer might consider Brad, his car, or both to be a(n)

Risk

Main Street Corp. owns a shopping center. It buys liability and property insurance to cover losses stemming from its business. It also requires tenants of the shopping center to hold Main Street harmless from injuries sustained on tenant property. This is an example of which method of handling risk?

Risk Transfer

Many large organizations self insure up to a specific limit but buy insurance to cover losses beyond that limit. Setting up a self insurance program is an example of which method of handling risk

Risk retention

Sam purchased a fire insurance policy on an old building with the intention of setting fire to the building and collecting the insurance. For what reason did the insurance company decline to pay Sam's claim, citing the policy was not a legal contract?

Sam entered into the contract for an illegal purpose

In Washington, which of the following persons is not considered an insurance producer?

Sven, who brokers suprlus lines contracts

A producer who deals directly with the insured and receives compensation from the insured is required to disclose all of the following information

The amount of the fee paid by the insured The amount of any commission paid by the insurer The amount of any additional compensation in awards and bonuses

Harold's property insurance policy is a contract of indemnity because

The benefit payable is related to the amount of loss.

Jesse buys a large number of expensive watches from a street vendor. He suspects the watches have been stolen and therefore plans to sell them out-of-state. Jesse buys insurance for the shipment of watches and asks you if the insurance policy will pay for a loss to the watches during shipment. You tell him

The contract is not enforceable because its purpose is not legal.

Mrs. Anderson's insurance policy is a unilateral contract. Only one party to the contract makes enforceable promises. Once the policy premium is paid and the policy is issued, which party must keep its promises?

The insurance company

All of the following are tru statements about an insurer's cancellation of a medical malpractice insurance policy EXCEPT:

The insurer must provide the named insured with at least 30 day's notice of cancellation if the reason for cancellation is non payment of premium

It is an unfair business practice for an insurance producer to fail to issue a proper receipt for a premium payment. The receipt must be delivered as soon as possible, but no later than

The next business day

The Commissioner can suspend a producer's insurance license without a hearing in all of the following cases EXCEPT:

The producer has violated a department regulation

A producer who deals directly with the insured and receives compensation from the insured is required to disclose all of the following information EXCEPT:

The producer's annual income from fees paid by clients

When an insurance contract is formed, only the insurer makes a legally enforceable promise to pay covered claims. After the premium is paid and the policy is in force, the policyholder has no further promises to keep. What characteristic of insurance contracts is described?

They are unilateral

Milton argued with his insurer over a third party claim. They disagreed as to whether Milton was engaged in a business pursuit and therefore not covered under his homeowner's policy. The terms of the exclusion were ambiguous, and could be interpreted in Milton's favor. Who will likely prevail, Milton or his insurer?

To boost her sales at the end of the year, Trudy started offering potential clients a $250 cash gift card in exchange for buying an insurance policy from her. What unfair trade practice has Trudy committed?

Insurrss may consider which of the following when determining whether to deny peronal insurance coverage?

Total amount of outstanding debt in relations to the total available line of credit.

Edwin has decided not to retain the risk of home ownership himself. What method of risk does he choose when he purchases homeowners insurance?

Transfer

When comparing her insurance company's policies to those of Zenith Insurance, Melanie makes a misleading statement to convince an insurance prospect to terminate a policy with Zenith and buy one from Melanie's company. Melanie has engaged in

Twisting

Bonnie works for Lincoln Insurance Company where she assesses insurance policy applications to determine whether particular risks should be accepted or rejected. The process Bonnie undertakes is known as

Underwriting

Acme Insurance and Apogee Insurance agree to offer different premium rates for persons of equal risk within a particular class. They also agree to limit benefits paid to insureds within this class if the insureds live in certain counties of Washington. Acme and Apogee are engaging in

Unfair and prohibited business practices

A binder or other contract for temporary insurance issued in Washington can be valid for

Up to 90 days

Because insurance companies and policyholders rely on the honesty and disclosures of the other party when negotiating the sale of insurance policies, what doctrine is said to apply to the insurance contract?

Utmost Good Faith

Esther has just bought an expensive painting as an addition to her art collection. Considering the high price she paid for it, she wants to be sure there will be no dispute with the insurer in the event it is damaged or stolen. What type of policy would you recommend Esther purchase?

Valued Policy

Genevra's furniture was lost in a fire at her business office. The fire spread rapidly because the fire alarm system was turned off. The insurance company denies her claim because Genevra, as owner of her business, had assured the insurance company the alarm system would always be in operation and she failed to honor her

Warranty

Once a producer is appointed to represent an insurance company, the appointment will remain valid for how long?

While the producer's license remains in good standing

Ed, a prospect for property insurance, completes the insurance application with the help of Michael, an agent. Ed gives Michael a check for the six month premium. The application and premium payment are sent to the insurance company, which deposits the premium. Has a legal contract formed?

Yes, Ed made an offier that the insurer accepted

Jack is selling his home to Sue and wants to transfer his omeowners policy to her. Can Jack tranfer his policy?

Yes, but only with written consemt of the Insurer

Calvert Enterprises submits an application for insurance to Indemnity Mutual Insurance Company, with property insurance limits of $10 million. Indemnity Mutual tells Calvert that it can insure it only for $5 million. How would you describe Indemnity Mutual's actions?

t rejected the offer and made a counteroffer.