Chapter 1 Basic Principles

Karen is a producer who has obtained personal information about a client without having a legitimate reason to do so. Under the McCarran-Ferguson Act, what is the minimum penalty for this? $0 $5,000 $10,000 $15,000

$10,000

Which of the following is NOT considered advertising? A rating from a rating service company, such as A.M. Best An illustration A sales presentation Direct mailing from an agency

A rating from a rating service company, such as A.M. Best

Why are dividends from a mutual insurer not subject to taxation? Because insurance premiums are tax-deductible Because dividends are already subject to capital gains Because dividends are payable directly to the policyholder Because dividends are considered to be a return of premium

Because dividends are considered to be a return of premium

What is the primary purpose of a rating service company such as A.M Best? Determine which insurer offers the best rates Determine which insurer offers the best policies Determine financial strength of an insurance company Determine which agent to use locally

Determine financial strength of an insurance company

Fraternal Benefit Society has each of the following characteristics EXCEPT Incorporated Without capital stock Exist For profit Exist for the benefit of its members

Exist For profit

An insurer's claim settlement practices are regulated by the Securities and Exchange Commission (SEC) National Association of Claims Adjusters (NACA) National Association of Insurance Commissioners (NAIC) State insurance departments

State insurance departments

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

reinsurer

Ken is a producer who has obtained Consumer Information Reports under false pretenses. Under the Fair Credit Reporting Act, what is the maximum penalty that may be imposed on Ken? $1,000 $3,000 $5,000 $7,000

$5,000

A plan in which an employer pays insurance benefits from a fund derived from the employer's current revenues is called A self-derived plan A multiple-employer plan A blanket plan A self-funded plan

A self-funded plan

What is considered to be the primary reason for buying life insurance? Provide death benefits Provide money for retirement Provide living benefits Provide money for colleg

Provide death benefits

The Do Not Call Registry offers exemptions for calls placed from all of the following EXCEPT charities political organizations insurance sales calls surveys

insurance sales calls

An insurer's ability to make unpredictable payouts to policyowners is called investment values liquidity assets capital

liquidity

A type of insurer that is owned by its policyowners is called domestic mutual stock in-house

mutual

A nonparticipating policy will provide a return of premium provide tax advantages not pay dividends give policyowners special privileges

not pay dividends

What kind of life insurance policy issued by a mutual insurer provides a return of divisible surplus? nonparticipating life insurance policy participating life insurance policy divisible surplus life insurance policy straight life insurance policy

participating life insurance policy

The Fair Credit and Reporting Act's main purpose is to 1) assist in the underwriting of insurance policies 2) protect insurers from an applicant's misrepresentation 3) protect consumers with guidelines regarding credit reporting and distribution 4) assist an insurer in determining an applicant's creditworthiness

protect consumers with guidelines regarding credit reporting and distribution

A nonparticipating company is sometimes called a(n) alien insurer mutual insurer reinsurer stock insurer

stock insurer