Primerica - General Insurance Chapter Quiz (AZ)
An individual was just caught violating the state's laws regarding insurance information's privacy protection. What is the largest fine he could be issued? A - $210,000 B -$10,000 C - $500 D - $120,000
B -$10,000 In addition to a cease and desist order, the Director may issue a civil penalty of between $500 and $10,000 for each violation.
An insurer may charge a service fee beyond the premium for motor vehicle insurance policies that insure A - 3 cars. B - 2 cars. C - 7 cars. D - 6 cars.
C - 7 cars. If a motor vehicle policy covers 6 or fewer cars, the insurer or insurance producer cannot charge an extra service fee beyond the premium.
A producer who omits a statement which may mislead or deceive the persons addressed has committed A - Defamation. B - Twisting. C - Coercion. D - Misrepresentation.
D - Misrepresentation. Making false or misleading statements with the intent to defraud another is misrepresentation.
What piece of legislation requires that any commercial e-mail must contain an opt-out mechanism? A - Opt-out B - CAN-SPAM C - AZ-SPAM D - Anti-SPAM Amendment
B - CAN-SPAM CAN-SPAM legislation requires that any commercial e-mail must contain an opt-out mechanism; all opt-out requests must be honored within 10 business days.
Any person who knowingly attempts to obtain money, goods, or any other thing of value with the intent to cheat and defraud is guilty of A - A misdemeanor. B - Nothing. C - A felony. D - Twisting.
C - A felony. This act is a felony, punishable by both fines and imprisonment.
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 - Contingent B - Aleatory C - Unilateral D - Conditional
D - 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.
A producer's insurance license was due for renewal but she failed to pay the required license renewal fee. Seven months later, the producer decided to pay her renewal fee. How much can she expect to pay in addition to the renewal fee? A - $0 B - $100 C - $200 D - $350
B - $100 Within a year after expiration, qualified producers may still renew the license if they pay a renewal fee and a late fee of $100.
Which of the following is an example of a "gene product"? A - Stem cell treatments B - Bovine growth hormones C - Gene fragments D - Tests of an individual's DNA
C - Gene fragments- Gene products refer to gene fragments or DNA sequence information.
How many hours of training is a producer required to take before soliciting annuity products? A - 4 hours B - 8 hours C - 15 hours D - There are no special requirements.
A - 4 hours Prior to selling annuity products, producers must take a one-time 4-hour annuity training course. Insurers are responsible for verifying a producer's completion of the required training.
In Arizona, the Director of Insurance serves A - At the pleasure of the Governor. B - As long as elected by the general public. C - A term of 4 years. D - A term of 8 years.
A - At the pleasure of the Governor. The Director of Insurance is appointed by and serves at the pleasure of the Governor.
Who decides if a licensed property or casualty insurance producer can be licensed as a resident surplus lines broker? A - The Director B - Any executive officer of the insurance company C - The producer him- or herself D - The Governor
A - The Director The Director will decide if a licensed property or casualty insurance producer is able to be licensed as a resident surplus lines broker.
Who requires that a prospective producer take and pass a written examination on the kinds of insurance business specified in the application? A - No exam is needed B - Director C - Insurance company D - State legislature
B - Director The Director requires that the applicant take and pass a written examination on the kinds of insurance business specified in the application. The Director may designate an independent testing service to prepare and administer the examination.
Which of the following best describes a misrepresentation? A - Making a maliciously critical statement that is intended to injure another person B - Discriminating among individuals of the same insuring class C - Misrepresenting the true nature of a policy in order to induce the policyholder to replace it D - Making a deceptive or untrue statement about a person engaged in the insurance business
C - Misrepresenting the true nature of a policy in order to induce the policyholder to replace it Misrepresentation is issuing, publishing or circulating any illustration or sales material that is false, misleading or deceptive as to policy benefits or terms, the payment of dividends, etc. This includes oral statements.
What was created to keep telemarketers from calling consumers who do not wish contacted? A - Freedom of Information Act B - Call Control Registry C - National Do Not Call Registry D - Confidential No Call Act
C - National Do Not Call Registry The National Do Not Call Registry was created to allow consumers the choice to not be contacted by telemarketers.
An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe? A - Good health B - Adhesion C - Conditional D - Aleatory
D - Aleatory In an aleatory contract, unequal amounts are exchanged between payments and benefits. In this instance, the insured receives a large benefit for a small price.
A newly licensed producer decided to hold a cookout for friends and family. At the event, the producer gave a short presentation about his company and specific insurance products that they offer. Some interest was generated. In this scenario, the producer was A - Marketing. B - Soliciting. C - Negotiating. D - Selling.
B - Soliciting is attempting to sell insurance or asking a person to apply for a particular kind of insurance from a particular company.
Which of the following is a qualification for an adjuster's license? A - Must have not committed any act that is grounds for denial B - Must be at least 18 years old C - Must have a college degree D - Must be a resident of the county in which the adjuster is conducting business
B - Must be at least 18 years old. A person must be at least 18 years old, file an application with the Director and pay the required license fee, pass the licensing examination, and not have committed any act that can be grounds for license denial. The Director may also require an applicant to submit fingerprints.
When a new insurance company wishes to transact business in the state, it must do all of the following EXCEPT A - Set certain capital and surplus requirements. B - Obtain approval of each of its corporate officers and executives. C - Apply for a license or certificate of authority. D - Obtain approval from the state insurance department or division.
B - Obtain approval of each of its corporate officers and executives. Each insurer wanting to transact insurance business in the state must meet the requirements established by the Insurance Code. Upon meeting these requirements, that company will be issued a Certificate of Authority to transact insurance.
An insurance policy or countersignature endorsement must be signed by any of the following EXCEPT A - Managing general agent. B - Licensed insurance producer. C - Director of Insurance. D - Bail bond agent.
C - Director of Insurance. An insurance policy or countersignature endorsement must be signed by a licensed insurance producer, a managing general agent, or a bail bond agent, whichever is applicable.
In which of the following situations is it legal to limit coverage based on marital status? A - Legal separation during the application process B - Divorce within the last six months of applying for insurance C - It is never legal to limit coverage based on marital status. D - Excessive number of divorces, as defined by the Insurance Code
C - It is never legal to limit coverage based on marital status. Availability of insurance benefits or coverage may not be denied based on sex or marital status. Marital status may be considered for the purpose of defining persons eligible for dependent benefits.
Which of the following would NOT be considered an exception to the National Do Not Call List? A - Calls based from outside of the United States B - Calls for which the consumer has given prior written permission C - Calls which are not commercial or do not include unsolicited advertisements D - Calls by or on behalf of tax-exempt nonprofit organizations
A - Calls based from outside of the United States. Calls from outside the United States are not an exception to the National Do Not Call List.
Which of the following qualifications for selling insurance in the state of Arizona is NOT correct? A - The applicant must be a resident of the state of Arizona at the date of application for licensing and not hold a resident license in another state. B - The applicant must have two letters of recommendation attesting to trustworthiness, reliability, and good reputation. C - The applicant must have filed the application and passed the required examination. D - The applicant must be age 18 or older.
B - The applicant must have two letters of recommendation attesting to trustworthiness, reliability, and good reputation. Eligibility for insurance licenses is established by the Insurance Code. Insurers are expected to check the trustworthiness, reliability and reputation of producers before appointing them to represent their company.
Which of the following lines of authority describes property and casualty insurance sold for noncommercial purposes? A - Casualty B - Credit C - Personal Lines D - Variable Annuity Products
C - Personal Lines Personal lines is property and casualty insurance coverage sold to individuals and families for noncommercial purposes.
When twin brothers applied for life insurance from Company A, the company found that while neither of them smoked and both had a very similar lifestyle, one of the twins was in a much stronger financial position than the other. Because of this, the company charged him a higher rate for his insurance. This practice is considered A - Twisting. B - Controlled business. C - Adverse selection. D - Discrimination.
D - Discrimination. Permitting individuals of the same class to be charged a different rate for the same insurance is the unfair trade practice of discrimination.
Which of the following would be considered an insurance transaction? A - Receiving an application for insurance B - Passing an insurance agent's card to a friend C - Visiting the office of an insurance agent D - Writing a report comparing the policies of different companies
A - Receiving an application for insurance Other actions considered insurance transactions are making any insurance contract; receiving any premiums, commissions or other consideration; delivering any contract of insurance to residents of the state; or acting as an insurance producer.
The producer or broker must keep at the place of business the usual and customary records pertaining to insurance transactions for at least A - Three years. B - Five years. C - One year. D - Two years.
A - Three years. State insurance laws require producers and brokers to maintain such records for a minimum of 3 years.
An agent's license expired on December 1, 2015. His renewal application was not received until July 31, 2016. Which of the following is true regarding the license's renewal? A - The Director will not accept the agent's renewal application because it was submitted after 6 months of expiration. B - Expired licensed cannot be renewed. C - The Director will renew the license, provided that the agent passes the licensing exam again. D - The Director may accept the application, provided that the agent pays the appropriate renewal fees plus a $100 late fee.
D - The Director may accept the application, provided that the agent pays the appropriate renewal fees plus a $100 late fee. A renewal application received after the expiration date, but not more than 1 year later, may be accepted if accompanied by the required biennial renewal fee and an additional late renewal fee of $100. Any renewal application received more than 1 year after expiration will be treated as a new application for license.
In which of the following examples would a contract between an insurer and prospective insured be legal? A - The applicant is intoxicated at the time of application. B - The applicant is a 12-year-old student. C - The applicant is under the influence of a mind-impairing medication at the time of application. D - The applicant has a prior felony conviction.
D - The applicant has a prior felony conviction. When an insurer and insured enter into a contract, both parties must be of legal age and mentally competent. It is legal for a person convicted of a felony to buy an insurance contract. An intoxicated person, however, may not be mentally competent, a 12-year-old student is considered to be underage in most states and a person under mind-impairing medication most likely would not be mentally competent.
In life insurance, producers are permitted to share or split commissions, providing that A - Both are properly licensed for the line of insurance. B - The insured knows and agrees to the arrangement. C - The insurance department knows of the arrangement. D - There is a written agreement between the producers.
A - Both are properly licensed for the line of insurance For producers to receive commissions from the sale of insurance, they must be properly licensed for that line of insurance.
An individual was involved in a head-on collision while driving home one day. His injuries were not serious, and he recovered. However, he decided that in order to never be involved in another accident, he would not drive or ride in a car ever again. Which method of risk management does this describe? A - Retention B - Avoidance C - Reduction D - Sharing
B - Avoidance Avoidance is a method of risk management by which a person tries to eliminate risk of loss by avoiding any exposure to an event that could give rise to such loss. Risk avoidance is effective but seldom practical.
When an insurance agency published an advertising brochure, it emphasized the company's financial stability and sound business practices. In reality, its financial health is terrible, and the company will soon have to file for bankruptcy. Which of the following terms best describes the advertisement? A - Twisting B - Rebating C - False financial statement D - Defamation
C - False financial statement False financial statements are made when insurance companies attempt to hide their financial troubles from the public and government officials.
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? A - Nonprofit service organization B - Stock C - Mutual D - Reciprocal
C - Mutual Funds not paid out after paying claims and other operating costs are returned to the policyowners in the form of a dividend. If all funds are paid out, no dividends are paid.
Every producer licensed in Arizona must notify the Director of a change of address within A - 2 weeks. B - 45 days. C - 30 days. D - 10 business days.
C - 30 days. Every producer licensed in Arizona must notify the Director in writing within 30 days of any change of residence address, and any agency licensed in Arizona must notify the Director within 30 days of any change in business address.
Adverse selection is a concept best described as A - Risks with higher probability of loss seeking insurance more often than other risks. B - Underwriters slanting the odds in favor of the company. C - Poor choices of applicants to be covered. D - Only offering coverage to good risks.
A - Risks with higher probability of loss seeking insurance more often than other risks. Adverse selection means that there are more risks with higher probability of loss seeking to purchase and maintain insurance than the risks who present lower probability. Underwriters must guard against this.
Which of the following statements does NOT accurately describe an insurance broker? A - Brokers must have a written agreement with an insured when they receive any fees or compensation for services. B - A broker does not represent individual clients. C - A broker is not a direct representative of an insurer. D - A broker cannot bind coverage.
B - A broker does not represent individual clients. Unlike a producer, a broker represents his/her clients (policyholders) and is not a direct representative of any insurance company. Instead, a broker works for his/her clients and will place risks with companies. Brokers must have a written agreement with an insured when they receive any fees or compensation for services. Brokers cannot bind coverage.
Which of the following is an example of a producer's fiduciary duty? A - A duty to base all transactions upon the principle of Ut most Good Faith. B - The obligation to tell the truth to the best of one's knowledge C - The trust that a client places in the producer in regard to handling premiums. D - An obligation to state every known fact about the policy the producer is selling.
C - 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.
If a married woman wishes to transact insurance under the name her maiden name, what must she do in order to be legal? A - Legally change her name back to her maiden name. B - She is not allowed to conduct insurance business under a name other than her own. C - Sign all papers with her real name and her assumed business name. D - File papers with the Director stating she will be operating under an assumed business name.
D - File papers with the Director stating she will be operating under an assumed business name. The producer must file papers with the Director that state the assumed business name she wishes to use, as well as her legal name and address.
Which of the following is designed to protect security and confidentiality of nonpublic information and the security of the information system? A - Investigative consumer report B - Fair Credit Reporting Act C - Cybersecurity event D - Information security program
D - Information security program Information security program means the administrative, technical, and physical safeguards that a licensee uses to access, collect, distribute, process, protect, store, use, transmit, dispose of, or otherwise handle nonpublic information.
Which of the following statements is an accurate comparison between private and government insurers? A - Private insurers provide insurance in areas where the government will not. B - Private insurers may be authorized to transact insurance by state insurance departments. C - Insurance provided by the government is called federal insurance. D - Private insurers offer fewer lines of insurance than government insurers.
B - Private insurers may be authorized to transact insurance by state insurance departments. Private insurers offer many lines of insurance. Government insurance programs, also known as social insurance, cover areas that private companies cannot or will not, providing programs like Medicare, Social Security, and National Flood Insurance. Government programs are funded with tax dollars and serve national causes, in contrast with private insurers.
When must an applicant be notified that an insurer is gathering information about him or her? A - The insured is considered to be informed upon receipt of a Notice of Investigation, which is delivered at the time of application. B - When consulting a source other than the applicant or public records C - When consulting any source except for the applicant D - The insurer has the right to contact any source deemed necessary without having to inform the insured.
B - When consulting a source other than the applicant or public records Insurers must provide notice of their practices to applicants and policyholders no later than the time the policy is delivered. If information is collected from a source other than the applicant or public records, notice must be given at that time.
What is the purpose of a certificate of authority? A - To show that an insurer is a member of the Guaranty Association B - To allow the insurer specific liberties with regard to insurance code C - To show the lines of insurance an insurer is authorized to transact D - To give the Director ultimate control over an insurer's actions
C - To show the lines of insurance an insurer is authorized to transact A certificate of authority shows the lines of insurance an insurer is authorized to transact.
When must an applicant be notified that an insurer is gathering information about him or her? A - When consulting any source except for the applicant B - The insurer has the right to contact any source deemed necessary without having to inform the insured. C - The insured is considered to be informed upon receipt of a Notice of Investigation, which is delivered at the time of application. D - When consulting a source other than the applicant or public records
D - When consulting a source other than the applicant or public records Insurers must provide notice of their practices to applicants and policyholders no later than the time the policy is delivered. If information is collected from a source other than the applicant or public records, notice must be given at that time.
Representations are written or oral statements made by the applicant that are A - Found to be false after further investigation. B - Immaterial to the actual acceptability of the insurance contract. C - Considered true to the best of the applicant's knowledge. D - Guaranteed to be true.
C - Considered true to the best of the applicant's knowledge. Representations are statements made by an applicant that they believe to be true.
Which type of insurance is based on mutual agreements among subscribers? A - Limited liability B - Reinsurance C - Reciprocal insurance D - Mutual insurance
C - Reciprocal insurance Reciprocals are insurance companies made up of subscribers, who are collectively known as a Reciprocal Insurance Company or Exchange. These types of companies are administered by an appointed Attorney in Fact.
On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. The company is guilty of A - Concealment. B - Unfair claim practice. C - Rebating. D - Misrepresentation.
D - Misrepresentation. Issuing or circulating any sales material that is false or misleading would be considered misrepresentation and is illegal.
A producer could be licensed as a surplus lines producer in which of the following situations? A - The producer holds a life and health license. B - The producer meets a designated sales goal. C - All producers may be licensed in surplus lines. D - The producer holds a property and casualty license.
D - The producer holds a property and casualty license. Anyone licensed as a resident property and casualty producer in Arizona may also be licensed as a resident surplus lines broker if determined to be competent and trustworthy by the Director.
A licensed producer is granted an inactive license during military service. He is in active duty for 365 days. For how long will the time period for submission of the license renewal fee be extended? A - 365 days B - 180 days C - 90 days D - 30 days
A - 365 days The time periods for submission of the license renewal fee and for completion of the applicable renewal requirements and CE for a licensee who is deemed inactive may be extended by the number of days the licensee is in active military service.
Which of the following is an example of a producer's fiduciary duty? A - An obligation to state every known fact about the policy the producer is selling. B - A duty to base all transactions upon the principle of Utmost Good Faith. C - The obligation to tell the truth to the best of one's knowledge D - The trust that a client places in the producer in regard to handling premiums.
D - 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.
Although most domestic insurers must be examined at least once every 5 years, how often may the Director examine an insurer? A - Once a year B - Once every 2 years C - Only every 3 years D - Whenever necessary
D - Whenever necessary The Director may examine any insurer doing business in Arizona as frequently as is necessary.