General Insurance

What is a statement regarding insurable risks that is NOT correct?

Insureds cannot be randomly selected- Random insureds randomly will help the insurer to have a fair proportion of good risk to poor risk.

A participating insurance policy may do which of the following?

Pay dividends to the policyowner

What is one non example of risk retention?

Premiums

What is a example of a producers fiduciary duty?

The trust that a client places in the producer in regard to handling premiums

What term best describes the act of withholding material information that would be crucial to an underwriting decision

concealment

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?

consideration

The authority granted to an agent through the agents contract is referred to as?

express authority

The requirement that agents not commingle insurance monies with their own funds is known as?

fiduciary responsibility

Which of the following would qualify as a competent party in an insurance contract?

The applicant has a prior felony conviction- a person with a felony can still buy health insurance, someone under the influence or under age is not

Which of the following is not a characteristic of an insurable risk?

The loss must be catastrophic

In insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract elements is this?

Unilateral

What documentation grants express authority to an agent?

Agent's contract with the principal

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. This is an example of what?

Concealment

Contracts that are prepared by one party and submitted to the other party on a take it or leave it basis are classified as?

Contracts of Adhesion

An insurance company sells an insurance policy over the phone in response to a TV ad. Which describes the act?

Direct Response Marketing- business is conducted over the phone, through the mail or online. It is not mandatory in all situations for the insured to physically sign any document in order for coverage to be in effect.

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?

Mutual

Following a career change, an insured is no longer required to perform many physical activities, so he has implemented a program where he walks and jogs for 45 minutes each morning. The insured has also eliminated most fatty foods from his diet. Which method of dealing with risk does this scenario describe?

Reduction- his actions will reduce the chances of health problems

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 a policy and learns of his history one year later. What will happen?

The policy will not be affected

Which authority is NOT stated in an agent's contract but is required for the agent to conduct business?

implied

What is the major difference between a stock company and a mutual company?

ownership

What is a definition of a unilateral contract?

One-sided: only one party makes an enforceable promise

An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible?

The insured will need a written consent of the insurer.

On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are?

Not taxable since the IRS treats them as a return of a portion of the premium paid

An insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable. What contract characteristics does this describe?

Conditional

Pertaining to insurance, what is the definition of a fiduciary responsibility?

Promptly forwarding premiums to the insurance company

Which of the following insurers are owned by stockholders?

Stock

For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become

larger

An insurance producer who by contract is bound to write insurance for only one company is classified as an?

Captive Agent

Which of the following is NOT a goal of risk retention?

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