Quiz 1 questions

an insurance producer who by contract is bound to write insurance for only one company is classified as a/an

Captive agent

Which of the following best describes the aleatory nature of an insurance contract?

Exchange of unequal values

An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy?

Mutual

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

Reciprocal

adverse selection is a concept best described as

Risks with higher probability of loss seeking insurance more often than other risks.

Which of the following is an example of a producer's fiduciary duty?

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

If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it?

Unilateral

In insurance, an offer is usually made when

An applicant submits an application to the insurer

When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?

Consideration

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

Implied

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

Marketing

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.

What is the definition of a unilateral contract

One-sided: only one party makes an enforceable promise

All of the following are examples of risk retention Except

Premiums

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. a. The loss must be catastrophic b. The loss must be measurable c. The loss must be due to chance d. The loss exposure must be large

The loss must be catastrophic

In terms of parties to a contract, which of the following does NOT describe a competent party?

The person must have at least completed secondary education.

For the purpose of insurance, risk is defined as

the uncertainty or chance of loss

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

Apparent