Insurance Test (Unit 1)

In an insurance transaction, who does a licensed agent legally represent?

insurer

Who would NOT have an insurable interest for a life insurance policy?

The closest friend of the insured.

In carrying out their duties, licensed insurance agents are representatives of the:

insurance company

Mutual companies are sometimes referred to as:

participating companies

A mutual insurance company is an incorporated entity owned by its:

policy owners

Who are the owners of a mutual insurance company?

policy owners

Which of the following statements pertaining to life insurance companies is CORRECT?

The primary purpose of a life insurance company that is organized as a stock company is to earn a profit for its stockholders.

An insurance company that is owned by its policy owners is known as a:

mutual life insurance company.

According to insurance law, an insurance agent is defined as a person who:

solicits, negotiates, procures or effects insurance or annuity contracts on behalf of an insurer.

An incorporated insurer whose capital is divided into shares and owned by its stockholders is a:

stock insurer

Which one of the following is owned by shareholders and receives profits in the form of dividends?

stock insurers

A contract based on the principle of indemnity:

attempts to return the insured to his original financial position.

All of the following statements about insurable interest are correct EXCEPT:

A policy obtained by a person without an insurable interest in the insured is enforceable.

An insurable interest may be found in which of the following?

An employer in the life of a key employee.

If Tony is insured under a life insurance policy, all of the following individuals have an insurable interest in Tony EXCEPT:

Marcie, his ex-wife, who has remarried.

Alan, age 39, is married and has a small son. He is employed as a sales manager by R.J. Links, a sole proprietorship that owes much of its success to Alan's efforts. He recently borrowed $50,000 from his brother-in-law, Pete, to finance a vacation home. On the basis of these facts, which of the following individuals does NOT have an insurable interest in Alan's life?

One of his customers.

Insurable interest exists in all of the following relationships EXCEPT:

teacher and student

Upon the issuance of a life insurance policy, an insurable interest must exist between:

the applicant and the insured.

All of the following statements about mutual insurance companies are correct EXCEPT:

they are unincorporated

All of the following statements about stock insurance companies are correct EXCEPT:

they must be nonprofit corporations.

The term mutualization refers to:

transferring control of a company from stockholders to policy owners.

An individual may purchase a life insurance policy on all of the following persons EXCEPT:

a neighbor.

Which of the following situations constitutes an insurable interest?

The policy owner must expect to suffer a loss when the insured dies or becomes disabled.

Suppose a life insurance company is organized in Detroit, where it maintains its home office. In Michigan, the company is classified as:

a domestic company

A life insurance company organized in Pennsylvania, with its home office in Philadelphia, is licensed to conduct business in New York. In New York, this company is classified as:

a foreign company

A stock insurance company that issues both participating and nonparticipating policies is classified as:

a mixed company

Who represents an insurance company in an insurance transaction?

agent

Which of the following terms correctly describes a life insurance company that is organized outside the United States or its possessions?

alien

With regard to life insurance, all of the following statements are correct EXCEPT:

an insurable interest must exist at the time of the claim.

With a life insurance contract, an insurable interest must exist:

at the inception of the contract.

With regard to life insurance, all of the following statements are correct EXCEPT:

insurable interest must be maintained throughout the life of the contract.

The phrase "the applicant for insurance has more to gain if the insured continues to live than if the insured dies" is the rule defining:

insurable interest.