General Insurance

What is a material misrepresentation?

A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company

Which of the following is the most common way to transfer risk? a. Purchase insurance b. Increase control of claims c. Lessen the possibility of loss d. Name a beneficiary

A) Purchase insurance

An agent accepts the premium payment 35 days after it is due, telling the insured that there will not be a problem keeping the policy in force. This is an example of what type of agent authority?

Apparent

An individual was involved in a head-on collision while driving home one day. His injuries were not serious, and he recovered. However, he decided that in order to never be involved in another accident, he would not drive or ride in a car ever again. Which method risk management does this describe?

Avoidance

An insurance producer who by contract is bound to write insurance for only one company or group of companies is classified as a/an

Captive Agent

A producer who fails to segregate premium monies from his own personal funds is guilty of

Commingling

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

Concealment

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

Conditional

When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is

Conditional

Representations are written or oral statements made by the applicant that are

Considered true to the best of the applicant's knowledge

In insurance transactions, fiduciary responsibility means

Handling insurer funds in a trust capacity

Events or conditions that increase the chances of an insured loss occurring are referred to as

Hazards

The reduction, decrease, or disappearance of value of the person or property insured in a policy by a peril insured against is known as

Loss

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

Who might receive dividends from a mutual insurer?

Policyholders

A situation in which a person can only lose or have no change represents

Pure Risk

Installing deadbolt locks on the doors of a home is an example of which method of handling risk?

Reduction

Peril most easily defined as

The cause of loss insured against

When an individual purchases insurance, what risk management technique is he or she practicing?

Transfer

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 element does this describe?

Unilateral

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

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

Which of the following is an example of a producer's fiduciary duty? a. The trust that a client places in the producer in regard to handling premiums b. An obligation to state every known fact about the policy the producer is selling c. A duty to base all transactions upon the principle of Utmost Good Faith d. The obligation to tell the truth to the best of ones knowledge

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

Which of the following is the closest term to an authorized insurer? a. Licensed b. Legal c. Admitted d. Certified

c) Admitted

In order for an insurer to legally transact insurance, it must obtain which of the following? a. Director's Decree b. Authorization of Power c. Certificate of Authority d. Power of Authority

c) Certificate of Authority

A life insurance policy has a legal purpose if both of which of the following elements exist? a. Offer and counteroffer b. Policyowners and named beneficiaries c. Insurable interest and consent d. Underwriting and reciprocity

c) Insurable interest and consent

Which of the following is NOT true regarding a Certificate of Authority? a. It is equivalent to an insurance license b. It is issued by the state department of insurance c. It is issued to group insurance participants d. It may be necessary for transacting business in a specific state

c) It is issued to group insurance participants

A tornado that destroys property would be an example of which of the following? a. A pure risk b. A loss c. A physical hazard d. A peril

d) A peril

Not all losses are insurable, and there are certain requirements that must be met before a risk is a proper subject for insurance. These requirements include all of the following EXCEPT a. The loss must not be catastrophic b. There must be a sufficient number of homogenous exposure units to make losses reasonably predictable c. ? d. The loss may be intentional

d) The loss may be intentional