General Insurance Concepts

Which of the following insurance options would be considered a risk-sharing arrangement?

Reciprocal

Events in which a person has both the chance of winning or losing are classified as

Speculative Risk

Which of the following is NOT the consideration in a policy?

The application given to a prospective insured

A tornado that destroys property would be an example of which of the following?

A peril

What is material misrepresentation?

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

Because an agent is using stationery with the logo of an insurance company, applicants for insurance assume that the agent is authorized to transact on behalf of that insurer. What type of agent authority does this describe?

Apparent

Which of the following types of agent authority is also called "perceived authority"?

Apparent

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

The applicant has a prior felony conviction

Which is NOT the consideration in a policy?

The application given to a prospective insured

An insured is driving her car through a residential area when she loses control and crashes into a neighbor's front porch. The neighbor, who was sitting on the porch, is injured. The insured's liability policy has a limit of $500,000. This amount applies to the total of damages for any bodily injury and property damage resulting from one accident. Which type of limit of liability does the insured have?

Combined single

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

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

Considered true to the best of the applicant's knowledge

The part of a property policy that shows the amount of insurance, premium, and policy term is the

Declarations

The authority granted to an agent through the agent's contract is referred to as

Express Authority

In insurance transactions, fiduciary responsibility means

Handling insurer funds in a trust capacity

When would a misrepresentation on an insurance application be considered fraud?

If it is intentional and material

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

Implied

Which statement regarding insurable risks is NOT correct?

Insureds cannot be randomly selected

The part of the insurance contract that describes the covered perils and the nature of the coverage of the contractual agreement between the insurer and the insured is called the

Insuring agreement

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

Loss

Untrue statements on the application unintentionally made by insureds that, if discovered, would alter the underwriting decision of the insurance company, are called

Material misrepresentations

An individual's tendency to be dishonest would be indicative of a

Moral Hazard

The causes of loss insured against in an insurance policy are known as

Perils

All of the following are examples of risk retention EXCEPT

Premiums

Pertaining to insurance, which of the following is an example of a producer's fiduciary responsibility?

Promptly forwarding premiums to the insurance company

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

The loss may be intentional

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

The loss must be catastrophic

Aggregate Limit

The maximum amount an insurer will pay for all covered losses during the covered policy period.

An individual applies for a life policy; two years ago he suffered a head injury from an accident, so he can not remember parts of his past, but is otherwise competent. He has also been hospitalized for drug abuse, but does not remember that when applying for insurance; the insurer issues the policy and learns for his history one year later, what will probably happen?

The policy will not be affected

Which of the following is NOT a goal of risk retention

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

The insurer must be able to rely on the statements in the application, and the insured must be able to rely on the insurer to pay valid claims. In the forming of an insurance contract, this is referred to as

Utmost good faith

Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract?

Warranty

In forming an insurance contract, when does acceptance usually occur?

When an insurer's underwriter approves coverage

For the purpose of insurance, risk is defined as

the uncertainty or chance of loss