Insurance General Information
A tornado that destroys property would be an example of...
A peril
Insurable risk
A pure risk that results in a loss or no change
Contracts that are prepared by one party and submitted to the other party on a take it or leave it basis are classified as:
Contracts of adhesion
Who might receive dividends from a mutual insurer?
Policyholders
What is a unilateral contract?
One sided: only one party makes an enforceable promise
Jennie is a branch manager at XYZ insurance company. She is a salaried employee and supervises the sales force in her branch. What type of agency does Jennie work?
A managerial agency system
In case of a loss, the indemnity provision in insurance policies:
restores an insured person to the same financial state as before the loss
Define concealment
Withholding material information that would have been crucial for an underwriting decision
What is the most common way to transfer risk?
purchase insurance
Insurance policies are not drawn up through negotiations and an insured has little to say about its provisions. What contract characteristic does this best describe?
Adhesion
In insurance, an offer is usually made when...
An applicant submits an application to the insurer
Define Hazard
Something that increases in risk
An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible?
The insured needs written consent of the insurer
Fiduciary Responsibility
The requirement that agents not commingle insurance monies with their own funds
When an individual purchases insurance, what risk management technique is he/she practicing?
Transfer
An insurance agents responsibilities include the following EXCEPT:
represent the client
What is a material misrepresentation?
A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company
According to the Law of Agency, who represents the principal?
Agent
What documentation grants express authority to an agent?
Agents contract with the principal
What are the 4 required elements of an insurance contract?
Agreement, consideration, competent parties, legal purpose
An agent is acting ethically in all the of 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
Always representing the insured
What type of agent authority is also called "perceived authority"?
Apparent
If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered what type of insurer?
Authorized
To legally transact insurance in this state, an insurer must obtain:
Certificate of authority
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
Conditions
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?
Consideration
Representations are written or oral statements made by the applicant that are
Considered true to the best of the applicants knowledge
What best describes the aletory nature of an insurance contract?
Exchange of unequal values
What authorities can an agent hold?
Express and Implied
The authority granted to an agent through the agent's contract is referred to as
Express authority
What are 3 types of producer authority?
Express, implied, apparent
When agents are acting within the scope of their contract, their actions will be assumed to be the acts of the
Insurer
What is NOT true regarding a certificate of authoority?
It is issued to group insurance participants
The reduction, decrease, or disappearance of value of the person or property insured in a policy by a peril insured against is known as:
Loss
An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that 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
What is the major difference between a stock company and a mutual company?
Ownership
The causes of loss insured against in an insurance policy are known as
Perils
An insurance producer licensed to represent one or more insurers, must as a condition of licensure, :
Provide each eligible person seeking insurance the lowest available premium quotation for the form or type of insurance coverage offered by the insurers represented
In what way can an agent demonstrate a high standard of ethics?
Putting a clients best interests before their own.
Which services are associated with Standard and Poor's and AM BEST?
Rating the financial strength of insurance companies
What method do insurers use to protect themselves against catastrophic losses?
Reinsurance
Events in which a person has both the chance of winning or losing are classified as
Speculative risk
What insurers are owned by stockholders
Stock
What is NOT a consideration in a policy?
The application given to a prospective insured
Not all loses are insurable, and there are certain requirements that must be met before a risk is a proper subject for insurance. These requirements are the following EXCEPT:
The loss may be intentional
If an insurance premium is paid by the policy owner to the agent, and the agent fails to remit that premium to the insurer, what is true?
The policy will not lapse since payment go the agent is the same as the payment to the insurer
An insurance company receives an application with some information missing and issues a policy anyway. What is this called?
Waiver
Define peril
cause of loss
Examples of risk retention
deductibles, copayments, and self-insurance
Parts of the policy structure
insuring clause conditions exclusions
What principal states that if a policy allows for greater compensation than the financial loss incurred, the insured may only benefit for the amount lost?
Imdemnity