General Insurance Concepts

When doing business in this state, an insurance company that is formed under the laws of another state is classified as what type of insurer? A. Foreign B. Alien C. Domestic D. Nonadmitted

A. Foreign A foreign insurer is formed under the laws of another state. A nonadmitted or unauthorized insurer is an insurer that does not hold a Certificate of Authority and may not transact insurance.

In insurance, an offer is usually made when A. The application is submitted B. The agent delivers the policy C. An agent explains the policy to an applicant D. The insurer receives the premium

A. The application is submitted In insurance, the offer is usually made by the applicant in the form of application. Acceptance takes place when the insurer approves the application and issues a policy.

When would a misrepresentation on the insurance application be considered fraud? A. When the application is incomplete B. If it is intentional and material C. Never; statements by the applicant are only representations D. Any misrepresentation is considered fraud

B. If it is intentional and material A misrepresentation would be considered fraud if it is intentional and material, and may be grounds for voiding the contract.

To be considered an insurable risk, a loss may NOT be A. Due to chance B. Measurable C. Catastrophic D. Predictable

C. Catastrophic To be characterized as pure, or insurable risk, the loss must be due to chance, definite and measurable, and statistically predictable, but not catastrophic.

Which of the following is NOT consideration in an insurance policy? A. The premium paid by the insured B. Something of value exchanged between parties C. The application given to a prospective insured D. The promise to pay covered losses

C. The application given to a prospective insured Consideration is something of value transferred between the two parties to form a legal contract.

Events or conditions that increase the chances of an insured loss occurring are called A. Exposures B. Perils C. Risks D. Hazards

D. Hazards Conditions such as lifestyle and health status, or activities such as scuba diving are hazards and may increase the chance of a loss occurring.

For the purposes of insurance, risk is defined as A. The cause of loss B. The certainty of loss C. An event that increases the amount of loss D. The chance of loss

D. The chance of loss Risk is a chance of a loss occurring. Only pure risks are insurable.