General Insurance Practice Questions

When an insures makes truthful statements on the application for insurance and pays the required premium, it is known as

Consideration

An insurer formed under the laws of another country is known as an

Alien insurer

Which of the following is NOT an example of the company's location of incorporation? Foreign Alien Authorized Domestic

Authorized

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

Exchange of unequal values

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

Express authority

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

Perils

When a person buys insurance, what method of handling risk is exercised?

Transfer

With respect to the business of insurance,a hazard is

Any condition or exposure that increases the possibility of loss

The type of risk that insurance companies will insure is called

Pure risk

Which of the following is the basis for a claim against an insurance policy? -A loss -A hazard -An event that increases the chances of possibility of loss -A misrepresentation to an applicant made by an insurance agent

A loss

Because an insurance policy is a legal contract, it must conform to the laws governing contracts which require all of the following elements EXCEPT Offer and acceptance Conditions Legal purpose Consideration

Conditions

In insurance transactions, fiduciary responsibility means

Handling insurer's funds in a trust capacity

Which insurance principle states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost?

Indemnity

Which services are associated with Standard & Poor's and AM Best?

Rating the financial strength of insurance companies.

All of the following are example of risk retention EXCEPT: Deductibles Copayments Premiums Self-Insurance

Premiums