Casualty Part 1
Myron, who is 16, signs a contract to lease a car. This would probably not be considered a valid contract under the law because
Myron is not a competent party
The insured's policy is nearing the expiration date. The insurer doesn't want to continue the insured's coverage, so it sends the insured a notice that the policy will not continue beyond the expiration date. This is an example of
Nonrenewal
The initial premium paid at the time of application constitutes which part of the insurance contract?
Offer
One of the most important risks covered by insurance policies in the casualty line is the risk that
You will become liable for damage to others
A document that summarizes a policy's coverage and is used to provide proof that insurance coverage has been written is called
a certificate of insurance
Under a unilateral contract, which parties are legally bound to perform under the contract?
Insurer only
A nonexclusive agent
Is an independent businessperson
A person may NOT act as a Minnesota insurance producer unless he
Is appointed by at least one insurer
Which on of these statements concerning an insurance application is NOT correct?
It may be used to provide temporary insurance protection
Which of the following is NOT an essential element of a contract?
It must be oral
One of your clients owned a small restaurant. He leaves the door unlocked because he knows if anything is stolen it will be covered by his insurance policy. Which type of hazard is exhibited by this action?
Morale
What type of insurance company pays dividends to its policyholders?
Mutual
Judgement rating is based on
An evaluation of the characteristics of the individual risk
Business reputation, habits, lifestyle, and personal character are all part of what report?
Fair Credit Reporting Act
The Minnesota Insurance Guaranty Association
protects insured's against insurer insolvencies
What rating method makes modifications to manual rates to reflect the unique characteristics of each risk?
Merit
Which insurance company department is responsible for accepting and rejecting applications based on company standards?
Underwriting
Ben bought an automobile four years ago for $15,000. Today it is worth $6,000. According to the principle of indemnity, how much should Ben receive if the car is totally demolished?
$6,000
Harry Arne and his cousin each own 50% of a $160,000 duplex. Suppose Harry purchases $160,000 of insurance on the home. if it burns to the ground, how much would Harry collect?
$80,000
A temporary license issued by the Commissioner is effective for
180 days
The required number of continuing education credit hours that an agent needs per 2 year reporting period is
24 credit hours
Which of the following statements best defines an exposure?
A condition that presents the possibility of a loss
An insurance policy is prepared by the insurance company and is not negotiable by the insured. This means that an insurance policy is
A contract of adhesion
On May 16, Providence, Inc. files a new policy with the state insurance department. Providence begins issuing this policy to insureds on the same day. Two months later, the Commissioner rejects the policy because it is not in compliance with state insurance law, and orders Providence to stop using the policy. This is an example of
A file and use state
Each of the following is an element of fraud EXCEPT
A person thinks that she will be hurt by a lie
A risk that involves both the possibility of loss and the possibility of gain is
A speculative risk
The Commissioner of Commerce is
Appointed by the Governor
Benson Pharmaceutical Company decides not to manufacture a new drug after determining that it has serious potential side effects. This is an example of which risk management method?
Avoidance
LaTonya purchases a house from John. She borrows $75,000 from First City Bank which, along with her $25,000 down payment, equals the $100,000 purchase price of the home. Who has an insurable interest in this home?
Both LaTonya and First City Bank
Endorsements are used to do all of the following EXCEPT
Cancel the entire policy
The Actuarial department
Collects and analyzes data to determine the rates to be charged for insurance
All of the following are contained in an insurance policy EXCEPT
Competent parties
Which part of an insurance policy describes the responsibilities and obligations of both the insurance company and the insured under the policy?
Conditions
Which of the following parts of a legal contract is defined as a value exchange for a promise?
Consideration
At DEF Insurance Company, agents are employees of the company who are paid a salary plus commissions. This is an example of what type of insurance marketing system?
Direct writer
State Insurance Departments audit admitted companies to
Ensure admitted companies are in compliance with state regulations and will be able to meet their financial obligations to insureds
f an agent states or indicates by his actions that a particular loss is covered, this is an example of
Estoppel
Barbara received a written binder from her agent on January 15 providing coverage for 90 days. On February 1, Barbara's policy is issued. On what date will coverage under the binder terminate?
February 1
Which of the following increases the chances of a loss?
Hazard
All are sources of underwriting and application EXCEPT
Medical history
A mutual insurance company
Pays dividends to its policyholders
All of the following are ways to manage risk EXCEPT
Preclude
Which of the following types of risk is insurable?
Pure risk
Agent Blondell is offering a free television to every applicant who agrees to buy insurance through his agency. In most states, this is considered to be illegal practice known as
Rebating
A factual statement on an application is made to the best of one's knowledge is
Representation
Benson Pharmaceutical Company decides NOT to purchase insurance to protect itself from potential lawsuits. This is an example of which risk management method?
Retention
Since she has always been in good health, Donna decides to cancel her health insurance policy. This is an example of which risk management method?
Retention
J&M Industries does not have a group health insurance plan for its employees. Instead, it pays employees' medical expenses out of a fund specifically created for this purpose. This is an example of
Self-insurance
Who is responsible for licensing insurance agents?
State insurance department
The law of large numbers
States that the more examples used to develop a statistic, the more reliable the statistic will be.
All of the following statements regarding the law of large numbers is correct EXCEPT
The fewer examples used to develop any statistic, the more reliable the statistic will be
Which of the following is an element of insurability?
The risk of loss is a pure risk
Which of these statements concerning regulations of the insurance industry is correct?
The state insurance department is responsible for controlling insurance matters within the state
Which of the following is NOT an element of an insurable risk?
There must not be an insurable interest.
All of the following are legal characteristics of insurance contracts EXCEPT
They are bilateral contracts
A vehicle owner buys an insurance policy on it. This represents which method of handling risk?
Transfer
Agent George persuades a prospect to let her current policy lapse and buy insurance through him. He tells the prospect that his company's policy provides more coverage at a lower premium, even though this is not true. This is an example of an illegal practice known as
Twisting
An agreement between the insured and the insurer that certain conditions will be met is
a warranty
The tendency for people with a greater-than-average exposure to loss to purchase insurance is known as
adverse selection
A contract in which there is an unequal exchange of values is known as
an aleatory contract
To void a policy, a misrepresentation by the insured must
concern material facts
An agent whose license is revoked but who wishes to become licensed again must do all of the following EXCEPT
perform 30 hours of community service
When an insured decides to cancel an insurance policy prior to the expiration date, the unearned premium is returned on a
short rate basis