XCEL Chapter 1 Exam Review

Reinsurer

A life insurance company has transferred some of its risk to another insurer. The insurer assuming the risk is called the

Stock insurer

A non-participating company is also called

Self-funded plan

A plan in which an employer pays insurance benefits from a fund derived from the employer's current revenues

Mutual

A type of insurer that is owned by its policy owners is called

Mutual Insurer

AKA Re-insurer

Reinsurance

An insurer enters into a contract with a third party to insure itself against losses from insurance policies it issues. What is this agreement called?

Participating life insurance policy

Contract that allows the policy owner to receive a share of surplus in the form of policy dividends

Insurance policy

Contract that involves one party which indemnifies another when a loss arises from an unknown event

Non-participating policy

Does not participate in paying dividends

Exist for profit

Fraternal Benefit Society does NOT

Captive Insurer

Insurer established by a parent company for the purpose of insuring the parent company's loss exposures

Mutual Insurer

Insurer owned by its policyholders

Participating policy

John owns an insurance policy that gives him the right to share in the insurer's surplus. What kind of policy is this?

Participating life insurance policy

Life insurance policy issued by a mutual insurer provides a return of divisible surplus

$5,000 and 1 year imprisonment

Maximum penalty under the Fair Credit and Reporting Act

$10,000 or up to 1 year in jail

Minimum penalty under the McCarran-Ferguson Act

Marketing

One important function of an insurance company is to identify and sell to potential customers. Which of these BEST describes this function?

Reinsurance

Type of insurance where an insurer transfers loss exposures from policies written for its insurers

It is the distribution of excess of funds accumulated by the insurer on participating policies

What is a true statement regarding a life insurance policy dividend?

Demutualization

When a mutual insurer becomes a stock company

Because dividends are considered to be a return of premium

Why are dividends from a mutual insurer not subject to taxation?

State insurance departments

Regulates insurer's claim settlement practices

Death benefits

Primary reason for purchasing life insurance

The Fair Credit and Reporting Act

Protects consumers with guidelines regarding credit reporting and distribution