MI Life Insurance Certificate Chapter 1
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. Conditional B. Contingent C. Aleatory D. Unilateral
A. Conditional A conditional contract requires both the insurer and policyowner to meet certain conditions before the contract can be executed, unlike other types of policies which put the burden of condition on either the insurer or the policyowner.
Which of the following is another term for an authorized INSURER? A. Licensed B. Legal C. Admitted D. Certified
C. Admitted This term refers to the insurance company not the representative. Insurers who meet the state's financial requirements are are approved to transact business in the state are considered authorized or admitted into the state as a legal insurer.
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. Express B. Implied C. Assumed D. Apparent
D. Apparent It is something that and be seen and connects the agent to the insurance company Apparent authority (also know as perceived authority) is the appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created.
Which authority is NOT stated in an agent's contract but is required for the agent to conduct business? A. Apparent B. Assumed C. Express D. Implied
Implied There is something in the contract that can not be accomplished unless this authority exists. Implied authority is not written in the agent's contract but is require in order for the agent to conduct business. Implied authority exists because not every single detail of an agent's authority can be written in a contract.
Untrue statements on the application UNINTENTIONALLY made by insureds that, if discovered, would alter the underwriting decision of the insurance company, are called A. Material misrepresentations B. Fraudulent statements C. Warranties D. Common errors1
A. Material misrepresentations A material misrepresentation is a statement that, if discovered would alter the underwriting decision of the insurance company.
Which of the following insurance options would be considered a risk-sharing arrangement? A. Reciprocal B. Stock C. Mutual C. Surplus lines
A. Reciprocal When insurance is obtained through a reciprocal insurer, the insureds are sharing the risk of loss with other subscribers of that reciprocal.
In insurance, an OFFER is usually made when A. the agent hands the policy to the policyholder B. An agent explains a policy to a potential applicant. C. An applicant submits an application to the insurer. D. The insurer approves the application and receives the initial premium
C. An applicant submits an application to the insurer. In insurance, the OFFER is usually made by the applicant in the form of the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy.
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 The binding force in any contract is consideration. Consideration on the part of the insured is the payment of premiums and the health representations made in the application. Consideration on the part of the insurer is the promise to pay in the event of loss.
A participating insurance policy may do which of the following? A. Require 80% participation B. Pay dividends to the policy owner C. Provide group coverage D. Pay dividends to the stockholder
Pay dividends to the policy owner A participating insurance policy will pay dividends to the owner based upon actual mortality cost, interest earned and costs.
Which of the following is NOT true regarding a Certificate of Authority? A. It is equivalent to an insurance license B. It is issued by the state department of insurance C. It is issued to group insurance participants D. It may be necessary for transacting business in a specific state.
C. It is issued to group insurance participants Before insurers may transact business in a specific state, they must apply for a license or Certificate of Authority from the state department of insurance and meet any financial (capital and surplus) requirements set down by the state.
All of the following are examples of risk retention EXCEPT... Copayments, Self-insurance, Premiums, Deductibles
Premiums Retention is a planned assumption of risk, or acceptance of responsibility for the loss by an insured through the use of deductibles, copayments, or self-insurance.
