Property & Casualty Insurance Chapter 2: General

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

A peril; the cause of loss insured against in an insurance policy

What company produces evaluations of insurer financial status often used by the insurance department?

AM Best

What documentation grants express authority to an agent?

Agent's contract with the principal

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 contact, this is referred to as what?

Utmost Good Faith

An agency 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 insurer that holds a certificate of Authority in the state in which it transacts business is considered a/an

Authorized Insurer

The risk management technique that is used to prevent a specific loss by not exposing yourself to that activity is called what?

Avoidance

Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPT:

Conditions

Which of the following is the basis for a claim against an insurance policy?

D) Loss A) Material Change B) Hazard C) Misrepresentation D) Loss

An insurance company sells an insurance policy over the phone in response to a T.V. ad. Which of the following best describes this act?

Direct Response Marketing

What is the meaning of the term 'offer' when being described as an element of insurance?

Done typically when the applicant submits an application

Which of the following is a unit of measurement an underwriter uses when determining the premium rates for insurance?

Exposure

Which of the following is NOT a government health insurance program?

Federal Deposit Insurance Corporation (FDIC)

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

Fiduciary Responsibility

An insurance company is domiciled in Montana and transacts insurance in Wyoming. Which term best describes the insurer's classification in Wyoming?

Foreign

Insurance transactions, fiduciary responsibility means what?

Handling insurer funds in a trusted capacity

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

Implied Authority

Which statement regarding insurable risks is NOT correct?

Insurance cannot be mandatory

All of the following actions by a person could be described as risk avoidance EXCEPT:

Investing in the stock market

Which of the following is true regarding a risk retention group (RRG)?

It is a liability insurance company owned by its members

Which of the following entities is not an insurer, but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization?

Fraternal Benefit Society

An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for each covered loss. What characteristic of an insurance contract does this describe?

Aleatory

Which of the following are the authorities that an agent can hold?

Express and Implied Authorities

Which insurance concept is associated with the words "Weiss" and "Fitch"?

Guides describing company financial integrity

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

If it is intentional and material

Which of the following is NOT true regarding a Certificate of Authority?

It is issued to group insurance participants

An insurance organization that does not issue insurance policies, but provides a meeting place for individuals, known as underwriters, to conduct business is known as a what?

Lloyd's Association

A participating insurance policy may do which of the following?

Pay dividends to the policyowner

What is the term for the entity that an agent represents regarding contractual agreements with third parties?

Principal

Which of the following is an example of an agent's fiduciary responsibilities?

Promptly forwarding premiums to the insurance company

The risk of loss may be classified as what?

Pure Risk and Speculative Risk

What method do insurers use to protect themselves against catastrophic losses?

Reinsurance

For the purpose of insurance, risk is defined as what?

The uncertainty or chance of loss

What is speculative risk mean?

This involves the opportunity for either a loss or gain

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

Transfer

An insured received a dividend, nontaxable check one year, but not the next. What type of insurer did the insured purchase the policy from?

Mutual

Taking a defensive driving course or installing deadbolt locks on the doors of a home are examples of what?

Risk Reduction

What is the major difference between Government insurers and private insurers?

Government programs are funded with taxes and serve national and state purposes

An insurer incorporated in which of the following locations would be considered a foreign insurer in Washington D.C.?

Maryland

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

The application is given to a prospective insured

The authority granted to an agent through the agent's contact is referred to as what?

Express Authority