Chapter 1: General Insurance Quiz

If an insurance company underwriter discovers that an applicant for a policy has been convicted of submitting a fraudulent claim to an insurer in the past, the application may be rejected as a A. Risk of loss B. Physical hazard C. Morale hazard D. Moral hazard

D. Moral hazard

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? A. Consideration B. Good faith C. Representation D. Adhesion

A. Consideration

Illegal use of narcotics would be an example of a A. Moral hazard B. Physical hazard C. Pure hazard D. Morale hazard

A. Moral hazard

Faulty wiring in a home is an example of a A. Risk B. Hazard C. Loss D. Peril

B. Hazard

Which of the following is a unit of measurement an underwriter uses when determining the premium rates for insurance? A. Hazard B. Risk C. Exposure D. Loss

C. Exposure

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. Reciprocal B. Nonprofit service organization C. Stock D. Mutual

D. Mutual

Because an agent is using stationery with the logo of an insurance company, applicants for insurance assume that the agents 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

When applying for an individual life insurance policy, an applicant states that he went to the doctor for nausea, but fails to mention that he was also having severe chest pains. Thei is an example of A. Warranty B. Concealment C. Misrepresentation D. Fraud

B. Concealment

When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is A. Aleatory B. Personal C. Unilateral D. Conditional

D. Conditional

Which of the following best describes an insurance company that has been formed under the laws of this state? A. Sovereign B. Alien C. Foreign D. Domestic

D. Domestic

Which of the following types of agent authority is also called "perceived authority"? A. Express B. Impied C. Fiduciary D. Apparent

D. Apparent

Peril is most easily defined as A. Something that increases the chance of loss B. The cause of lose insured against C. An unhealthy attitude about safety D. The chance of a loss occurring

B. The cause of loss insured against

A state-issued document empowering an insurance company to become an admitted insurer is called A. Certificate of title B. Certificate of deposit C. Certificate of admission D. Certificate of authority

D. Certificate of authority

What hazard would you be concerned about if you lived next to an explosives contractor? A. Moral B. Morale C. Dangerous D. Physical

D. Physical

In forming an insurance contract, when does acceptance usually occur? A. When an insured submits an application B. When an insurer's underwriter approves coverage C. When an insurer delivers the policy D. When an insurer receives an application

B. When an insurer's underwriter approves coverage

In terms of parties to a contract, which of the following does NOT describe a competent party? A. The personal must have at least completed secondary education. B. The person must not be under the influence of drugs or alcohol. C. The person must be of legal age. D. The person must be mentally competent to understand the contract.

A. The person must have at least completed secondary education.

When an individual purchases insurance, what risk management technique is he or she practicing? A. Sharing B. Retention C. Transfer D. Avoidance

C. Transfer

Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract? A. Indemnity B. Representation C. Warranty D. Concealment

C. Warranty

What is surplus lines insurance? A. Insurance placed with an unauthorized insurer B. Additional insurance placed on itemized risks C. Any insurance on items worth more than $25,000 D. Insurance in excess of a standard policy's coverage

A. Insurance placed with an unathorized insurer

An insured stated on her application for life insurance that she had never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. Which of the following will explain the reason a death benefit claim is denied? A. Waiver B. Utmost Good Faith C. Estoppel D. Material misrepresentation

D. Material misrepresentation

What is the major difference between a stock company and a mutual company? A. Amount of death benefit B. Number of producers C. Types of whole life policies D. Ownership

D. Ownership

The risk of loss may be classified as A. Named risk or un-named risk B. High risk and low risk C. Pure risk and speculative risk D. Certain risk and uncertain risk

C. Pure risk and speculative risk

An individual applies for a life policy. Two years ago he suffered a head injury from an accident, so he cannot remember parts of his past, but is otherwise competent. He has also been hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of his history one year later. What will probably happen? A. The insurer will sue the insured for committing fraud B. Because the insured is currently not a drug C. The policy was not affected D. The policy was void

C. The policy was not affected

When doing business in this state, an insurance company that is formed under the laws of another state is known as which type of insurer? A. Domestic B. Alien C. Nonadmitted D. Foreign

D. Foreign

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

D. Implied

Pertaining to insurance, what is the definition of a fiduciary responsiblity? A. Helping insureds to file claims B. Performing reviews of insured's coverage C. Offering additional coverage to clients D. Promptly forwarding premiums to the insurance company

D. Promptly forwarding premiums to the insurance company

What is a material misrepresentation? A. Any misstatement by the producer B. Concealment C. A statement by the applicant that upon discover, would affect the underwriting decision of the insurance company D. Any misstatement made by an applicant for insurance

C. A statement by the applicant that upon discover, would affect the underwriting decision of the insurance company

All of the following actions by a person could be described as risk avoidance EXCEPT A. Never flying in an airplane B. Taking a flu shot each year C. Investing in the stock market D. Refusing to scuba dive

C. Investing in the stock market

What term best describes the act of withholding material information that would be crucial to an underwriting decision? A. Leading B. Breach of warranty C. Concealment D. Withholding

C. Concealment

Which of the following best describes the aleatory nature of an insurance contract? A. Ambiguities are interpreted in favor of the insured B. Policies are submitted to the insurer on a take-it-or-leave-it basis C. Exchange of unequal values D. Only one of the parties being legally bound by the contract

C. Exchange of unequal values

Events in which a person has both the chance of winning and losing are classified as A. Speculative risk B. Insurable C. Pure risk D. Retained risk

A. Speculative risk

What is the term for the entity that an agent represents regarding contractual agreements with third parties? A. Principal B. Client C. Designee D. Insured

A. Principal

Which of the following is the basis for a claim against an insurance policy? A. Misrepresentation B. Loss C. Material change D. Hazard

B. Loss

A participating insurance policy may do which of the following? A. Require 80% participation B. Pay dividends to the policyowner C. Provide group coverage D. Pay dividends to the stockholder

B. Pay dividends to the policyowner

Which of the following is NOT the consideration in a policy? A. The promise to pay covered losses B. The application given to a prospective insured C. Something of value exchanged between parties D. The premium amount paid at the time of application

B. The application given to a prospective insured

If a court ordered payment for a loss that was not covered in the policy even if it was clearly worded, it would be an example of which legal concept? A. Nonforfeiture B. Indemnity C. Reasonable expectations D. Cease and desist

C. Reasonable expectations

Which of the following is NOT a goal of risk retention? A. To increase control of claim reserving and claims settlements B. To fund losses that cannot be insured C. To minimize the insured's level of liability in the event of loss D. To reduce expenses and improve cash flow

C. To minimize the insured's level of liability in the event of loss

All of the following are examples of risk retention EXCEPT A. Copayments B. Self-insurance C. Premiums D. Deductibles

C. Premiums

Which of the following are the authorities that an agent can hold? A. Apparent and allowed B. Authorized and admitted C. Primary and secondary D. Express and implied

D. Express and implied

The causes of loss insured against in an insurance policy are known as A. Losses B. Risks C. Hazards D. Perils

D. Perils

All of the following are examples of hazards EXCEPT A. Faulty wiring in a home B. Broken step or hand railing on the porch C. A fire in the kitchen of a home D. Trash or debris in the basement of a home

C. A fire in the kitchen of a home