Quiz: 1

Bob is thinking about obtaining insurance because he just found out he needs extensive surgery that will require several days in the hospital. This situation of waiting until the last minute to obtain insurance is known as: Cost Effective Insurance Adverse Selection Spread of Risk Ideally Insurable Risk

Adverse Selection

Which of the following is an example of an adverse underwriting decision? Rejecting the risk Charging a higher rate Issuing with limitations All of these are examples

All of these are examples

Which of the following is NOT a known private insurer? Stock Insurance Companies Bond Insurance Companies Mutual Insurance Companies Reciprocal Insurance Exchanges

Bond Insurance Companies

Examples of tort law include all of the following EXCEPT: Breach of contract Libel and slander Personal injury Bodily injury

Breach of contract

Which of the following is not a class of insurance? Auto Marine Fire Casualty

Casualty

Which of the following elements of a contract is/are the binding force? Legal Purpose Offer & Acceptance Consideration Competent Parties

Consideration

Which of the following is defined as `an agreement between two or more parties enforceable by law?` Agreement Clause Insurance Policy Contract Tort

Contract

Insurance is a contract whereby one undertakes to indemnify another against: Physical hazard Uncertainty Damage Exposure

Damage

Which of the following is the amount of money the insured pays before the insurer pays for the rest of the claim? Coinsurance Subrogation Deductible Premium

Deductible

When a right or privilege has been given up, a party cannot reassert that right or privilege. The process of preventing the party from reasserting that right or privilege is known as: indemnity Estoppel Pro-rata Waiver

Estoppel

Which of the following describes when one party intentionally gives the other party false information in order to benefit from the unlawful gain. Fraud Misrepresentation Theft Concealment

Fraud

Restoring the insured back to the condition he or she was in before the loss occurred is known as: Insurable Interest Indemnification Loss Retention Restoration

Indemnification

What are the two types of torts? Broad & Basic Pure & Speculative Intentional & Unintentional Legal & Non-Legal

Intentional & Unintentional

The degree of loss a person/organization faces from suits brought by a third party refers to: Loss Exposure Liability Loss Exposure Human Personnel Loss Exposure Property Exposure

Liability Loss Exposure

A hazard that deals with a persons mental attitude, behavior and habits is an example of: Legal hazard Physical hazard Morale hazard Moral hazard

Moral hazard

According to the California insurance law, either party may rescind a contract for any of the following reasons EXCEPT: One party intentionally or unintentionally hides material information. If a representation is false in a material point, whether affirmative or promissory, the injured party is entitled to rescind the contract. One party intentionally omits information from the other party. Once a contract is signed, it can never be rescinded.

Once a contract is signed, it can never be rescinded.

Which of the following statements is true about reinsurance? Property and casualty insurers use reinsurance, life insurers do not. Reinsurance is the process whereby the insurer transfers all or part of the risk to another company. When an insurer obtains reinsurance, it has sold the contract to another insurer, and no longer has direct responsibility for the policy. Reinsurance is when the insured allows a policy to lapse for nonpayment. Later, if the insured makes the payment, the policy is reinsured.

Reinsurance is the process whereby the insurer transfers all or part of the risk to another company.

Which of the following are the main types of risks? Speculative and pure Avoidance and Retention Pure and Transfer Sharing and Transfer

Speculative and pure

Which of the following is NOT required for a risk to be ideally insurable? The loss must create economic hardship. The loss must be an accident. The loss must be definite and measurable. The loss must occur on the insured`s property.

The loss must occur on the insured`s property.

The process of reviewing applications for insurance and the information on the application is: Underwriting Field Underwriting the job of the agent before accepting or rejecting an application Application Evaluation

Underwriting

When an insured rejects uninsured motorist in writing this is considered: a modification ran example of estoppel a waiver a rescission

a waiver

Performance depends upon an uncertain future event is the feature: adhesion aleatory conditional unilateral

aleatory

A hazard is best defined as: any action from a court that increases the likelihood or size of a loss. anything that increases the chance of loss or severity of loss due to a peril. a possibility of a loss. risk shifted from one to another.

anything that increases the chance of loss or severity of loss due to a peril.

Materiality is determined by the disadvantage placed on the other party and: neither are correct both are correct not by the event the influence of the facts

both are correct

Punishment for twisting or misrepresentation would be: up to 1 year in jail rup to $25,000 both are correct neither are correct

both are correct

The state of being subject to a loss is considered: risk hazard exposure insurance

exposure

A beautician stating that this conditioner fixes badly damaged hair is a: representation expressed warranty stated fact implied warranty

implied warranty

Substitution of a small certain loss for a large uncertain loss is: a pure risk an insurable event law of large numbers insurance

insurance

Type of loss exposure pertaining to land and structures attached to it is: liability loss exposure personal loss exposure financial loss exposure property loss exposure

property loss exposure

The uncertainty or chance of a loss occurring is pure risk. speculative risk. risk. risk management.

risk.

Loss control refers to: taking measures to prevent further damage during a loss. taking the necessary precautions that will reduce the risk of a loss. preventing a loss from becoming catastrophic. a combination of risk control techniques with risk financing techniques.

taking the necessary precautions that will reduce the risk of a loss.

A peril is: pure and speculative. anything that increases the chance of loss or severity of loss. a possibility of a loss. the actual cause of the loss.

the actual cause of the loss.

The law of large numbers is a principal that basically says: the larger the number of people in an insurance company, the more stable it is. the more insurance you have, the more protected you are. the larger the possibility of a loss, the greater the exposure. the larger the amount of information gathered, the more reliable that information will be.

the larger the amount of information gathered, the more reliable that information will be.

Any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest or create a liability against him/her, may be insured against. The more unpredictable a loss becomes: the less it becomes insurable interest. the more insurable it becomes. the less insurable it becomes. the more it becomes insurable interest.

the more insurable it becomes.

The term loss exposure refers to: the actual cause of the loss. the increase in the possibility of a loss. the uncertainty of a loss occurring. the possibility of a loss.

the possibility of a loss.