Chapter 1 Quiz Questions

How are state inurance guaranty associations funded?

by their members-authorized insurers

Which of the following is the closest term to an authorized insurer?

Admitted

What documentation grants express authority to an agent?

Agent's contract with the principal

A producer who fails to segregate premium monies from his own personal funds is guilty of:

Commingling

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

Express Authority

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

Fiduciary Responsibility

What group is not an insurer but an organization formed to provide insurance benefits for members of an affiliated religious organization or lodge?

Fraternal Benefits Society

Units with the same or similar exposure to loss are referred to as:

Homogeneous...NOT insurable risks

A participating insurance policy may:

Pay dividends to the policy owner

Types of Risk Loss

Pure risk and Speculative Risk

If a court ordered payment for a loss that was not covered in the policy even if it was clearly worded, it would be an example of which legal concept?

Reasonable Expectations

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

Reciprocal

Insurance is the transfer of:

Risk; NOT...loss, hazard, or peril...

Which of the following is an example of apparent authority of an agent appointed by an insurer?

The agent accepts a premium payment after (not during) the end of the grace period.

In insurance, an offer is usually made when:

The completed application is submitted

What must happen when an individual policy has been personally delivered to the policy owner?

The policy owner must sign a delivery receipt.

What is the producer's fiduciary duty?

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

Which is the best reason for life insurance over an annuity?

To create an estate

An individual applied for policy and paid initial premium. The insurer issued a conditional receipt. Five days after the guy gets his medical exam. When is the policy's effective date?

date of the medical exam

a life ins. policy has a legal purpose if both which of the following exist?

insurable interest and consent

Which is not the consideration in a policy?

the application.

If you pay a certain amount for a specific loss and you suffer a loss that is less than the policy, the policy will pay:

The amount of the loss "for restoration"...not making profit (indemnity)

An agent 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

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

Consideration

An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. What principle has the insurer violated?

Consideration; which is the binding force between two parties in any contract.

When would a misrepresentation on the 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 Authority; Assumed is in reference to looking at who the person is. Implied is just understanding that all details cannot be on paper.

What do individuals use to transfer their risk of loss to a larger group?

Insurance

one year a woman received a dividend check but the next year she didn't. What type of insurance does she have?

Mutual

Statement guaranteed to be true and if untrue, may breach an insurance contract.

Warranty

All are examples of risk retention:

deductibles, self-insurance, co-payments, and NOT premiums

Facts regarding Certificate of Authority:

it may be necessary for transacting business in a specific state, equivalent to an insurance license, issued by the state dept. of ins., ...its NOT issued to group insurance participants...

What is considered in a policy?

promise to pay covered losses, something of value exchanged between parties, premium amount paid at the time of application...NOT application given to a prospective insured...

Which is not a goal of retention

to minimize the insured's level of liability in the event of a loss.

An insured intentionally did not disclose a material fact on an application for insurance. This would be considered:

Concealment

Moral Hazard vs. Morale Hazard

Moral: tendency to be dishonest; Morale: deals with carelessness

Which best details the underwriting process for life insurance?

Selection, classification, and rating of risks

If an insurer meets state requirements and is approved to transact business in the state, it is considered to be:

Authorized

Insurance companies may be classified according to the legal form of their ownership. The type of company organized to return any surplus money to their policy holders is:

A mutual Insurer. NOT stock companies...