Life Insurance - Section 1 - General Insurance

Which of the following is an example of a surplus lines insurer? Select one: a. A company organized in a different state, but which sells a life insurance policy sold by other companies as well. b. A non-admitted insurer who offers insurance at half the price that admitted insurers offer it. c. An insurer organized under the laws of a state other than the one in which it is doing business. d. A company that offers insurance not offered through admitted insurers.

A company that offers insurance not offered through admitted insurers

The term insurance means: Select one: a. The concept of restoring a person to the financial position they were in before a loss occurred. b. A contractual coverage binding the insurer to indemnify the insured against a specified loss in return for paid premiums. c. A contractual coverage binding the insured to indemnify the insurer against a specified loss in return for paid premiums. d. An agreement to pay for losses

A contractual coverage binding the insurer to indemnify the insured against a specified loss in return for paid premiums.

Membership in a fraternal benefit society could include which of the following? Select one: a. A credit union b. A college fraternity that is heavily involved in community service c. Puerto Rican Day Parade organizers d. A group that operates on a lodge system

A group that operates on a lodge system

BJI is a surplus lines insurer offering coverage to bungee jumpers. When MITU Insurance decides it wants to offer a similar coverage policy, charging a premium that is three times that of BJI's, and BJI must subsequently stop offering coverage, what type of insurer is MITU? Select one: a. Acknowledged b. Excess Lines c. Private d. Admitted

Admitted

An insurer authorized by a state's insurance department to transact business in that state is called a what? Select one: a. Admitted Insurer b. Domestic Insurer c. Excess Lines Insurer d. Surplus Insurer

Admitted Insurer

The tendency of poorer risks to continue and for better risks to drop or seek coverage elsewhere is called: Select one: a. Guaranteed Insurability. b. Pre-existing Condition Clause. c. Adverse Selection. d. Substandard Rating.

Adverse Selection.

An insurer organized under the laws of a jurisdiction outside of the United States or its territories is called a what? Select one: a. Foreign Insurer b. Domestic Insurer c. Non-admitted Insurer d. Alien Insurer

Alien Insurer

Which of the following is an example of someone acting in a fiduciary capacity? Select one: a. An insurance agent collecting renewal premiums b. A store owner handling money c. A potential insured filling out an application for insurance d. A student collecting entrance fees at a high school basketball game

An insurance agent collecting renewal premiums

An insurer transacting business in the state in which it is chartered is called a: Select one: a. Domestic Insurer b. Self Insurer c. Mutual Insurer d. Private Insurer

Domestic Insurer

The principal role of the National Association of Insurance Commissioners is to: Select one: a. Regulate insurance commerce between different states. b. Create generic insurance policy forms. c. Determine the fiduciary capacity of insurance agents. d. Encourage the standardization of insurance laws around the country.

Encourage the standardization of insurance laws around the country.

An agent that is appointed by an insurer to represent the company by selling and servicing policies on its behalf is called a what? Select one: a. Insurance Agent b. Exclusive Agent c. Nonresident Agent d. Independent Agent

Exclusive Agent

The process of using a group's own premium and claims experience to calculate premium rates is called what rating method? Select one: a. Experience Rating b. Community Rating c. Schedule Rating d. Audit Rating

Experience Rating

An agent's ability to solicit insurance applications and accept premiums is an example of: Select one: a. Express Directive. b. Sales Directive. c. Implied Directive. d. Apparent Directive.

Express Directive.

Which is NOT a type of insurance agent? Select one: a. Non-resident agent b. Exclusive agent c. Independent agent d. Express agent

Express agent

Which of the following insurers often offer insurance coverage for situations where standard insurers will not offer coverage because of particularly high risk or loss potential? Select one: a. Mutual insurers b. Reciprocal companies c. Syndicate insurers d. Federal or state government

Federal or state government

An insurer chartered under the laws of one of the states other than the one in which it is transacting business is called: Select one: a. Foreign Insurer. b. Non-Resident Insurer. c. Alien Insurer. d. Domestic Insurer.

Foreign Insurer.

Insurers in which membership is based on religious, ethnic, or national lines is a: Select one: a. Mutual Insurance Company. b. Syndicate Insurer. c. Stock Insurance Company. d. Fraternal Benefit Society.

Fraternal Benefit Society.

Flood insurance and federal crime and crop insurance are examples of: Select one: a. No Limit Liability Riders. b. Multiline Insurance. c. Governmental Insurance. d. Catastrophic Loss Riders.

Governmental Insurance.

What is a condition that creates or increases the chance of loss? Select one: a. Risk b. Peril c. Hazard d. Exposure

Hazard

Under which type of directive may an agent have business cards with the company logo made? Select one: a. Implied b. Apparent c. Express d. Approved

Implied

The right of an agent representative of an insurance company to have business cards with the company logo made is what? Select one: a. Implied directive b. Optional directive c. Apparent directive d. Express directive

Implied directive

The idea of restoring a person to the same financial position they were in before a loss occurred is known as: Select one: a. The Law of Large Numbers. b. Self-actualization. c. Indemnification. d. Security.

Indemnification.

An individual who solicits, negotiates, or binds policies of insurance is called a(n) Select one: a. Exclusive Agent. b. Independent Agent. c. Insurance Agent. d. Nonresident Agent.

Insurance Agent.

Multi-line Insurance Companies: Select one: a. Insure other insurance companies against catastrophic losses such as earthquakes. b. Insure more than one line of insurance. c. Cover certain types of insurance with high risks that private insurers cannot or will not insure. d. Only insure people in the same profession/business.

Insure more than one line of insurance.

A Reinsurer: Select one: a. Covers certain types of insurance with high risks that private insurers cannot or will not insure. b. Insures more than one line of insurance. c. Insures other insurance companies against catastrophic losses such as earthquakes. d. Only insures people in the same profession/business.

Insures other insurance companies against catastrophic losses such as earthquakes.

What term is used to describe the implementation of state laws to determine the disposition of property when someone dies without a will? Select one: a. Churning b. Probate c. Intestacy d. Reinstatement

Intestacy

As a fiduciary, an insurance agent: Select one: a. Must put the company's economic interest as their number one priority. b. Is expected to make their client's interests their top priority. c. Is expected to be professional and ethical in regards to the company they represent as well as their clients. d. Must put aside all personal desires and be willing to testify in a court of law on behalf of the company.

Is expected to be professional and ethical in regards to the company they represent as well as their clients.

Which of the following terms best defines the frequency of premium payments? Select one: a. Premium determination b. Premium rate c. Graded premium plan d. Mode of premium payments

Mode of premium payments

An insurance company which is owned by policy holders is a: Select one: a. Fraternal Benefit Society. b. Mutual Insurance Company. c. Syndicate Insurer. d. Stock Insurance Company.

Mutual Insurance Company.

An insurance company owned by policyholders who can attend and vote at company meetings is known as a: Select one: a. Stock company b. Reciprocal company c. Mutual company d. Syndicate insurer

Mutual company

An insurer not authorized to transact business in the state because it either did not seek admission to the state or failed to comply with state requirements is called a what? Select one: a. Surplus Insurer b. Foreign Insurer c. Alien Insurer d. Non-admitted Insurer

Non-admitted Insurer

Many states require a producer to maintain a ________ in which to deposit any cash they receive for an insurance policy premium before transmitting the money to the insurer. Select one: a. PFTA b. VGLI c. FIFO d. LIFO

PFTA

Many states require a producer to maintain a ________ in which to deposit any cash they receive for an insurance policy premium before transmitting the money to the insurer. Select one: a. VGLI b. PFTA c. LIFO d. FIFO

PFTA

Which is a financial responsibility of an insurance agent? Select one: a. COLA b. MPCMSA c. MEWA d. PFTA

PFTA

The role of the state insurance commissioners consists of all of the following EXCEPT: Select one: a. Pass legislation regarding insurance business in the state. b. Determining the amount of surplus insurers must maintain. c. Investigating complaints against agents and insurance companies. d. Determining the types of insurance policies that can be sold in their state.

Pass legislation regarding insurance business in the state.

No coverage is available under any circumstances without: Select one: a. Underwriting. b. Payment of the initial premium. c. Representations. d. Insurance riders.

Payment of the initial premium.

What is a cause of a possible loss, such as fire, windstorm, theft, explosion, or riot, covered in an insurance policy called? Select one: a. Hazard b. Peril c. Exposure d. Risk

Peril

Which of the following is not one of the four parts of the entire contract? Select one: a. Pre-Existing Conditions b. The Policy c. Any Riders or Endorsements d. The Application

Pre-Existing Conditions

Which of the following is NOT a contractual requirement? Select one: a. Premium Consideration b. Offer and Acceptance c. Legal Subject or Purpose d. Mutual Agreement

Premium Consideration

To be insurable, a risk must have the chance of a loss but not the certainty of loss. This characteristic is described by the term: Select one: a. Pure risk b. Binding risk c. Speculative risk d. Indemnification

Pure risk

Susan is an agent in a rural area who believes in doing business with those who do business with her. She makes a practice of buying a side of beef from farmers who buy an insurance policy from her. This is an example of: Select one: a. Discrimination. b. Rebating. c. Redlining. d. Misrepresentation

Rebating.

The refusal of an insurer to insure individuals in a certain part of town because of a non-actuarial belief that part of town is a bad insurance risk is: Select one: a. Discrimination. b. Misrepresentation. c. Rebating. d. Redlining.

Redlining

A primary purpose of Premium Fund Trust Accounts is to: Select one: a. None of the choices b. Allow the agent to maintain only one account for both business and premium monies. c. Require the agent to maintain separate accounts for business and premium monies. d. Allow quicker claim payment by requiring agents to write claims out of their own account and be reimbursed by the insurer.

Require the agent to maintain separate accounts for business and premium monies.

Indemnification is the concept of: Select one: a. Restoring someone to the same financial position he was in before a loss occurred. b. Identifying a loss as covered in an insurance policy. c. The unpredictability that a loss will occur. d. Restoring someone to the health she enjoyed before an illness.

Restoring someone to the same financial position he was in before a loss occurred.

Self-insuring is also known as what? Select one: a. Risk transfer b. Risk sharing c. Risk retention d. Risk reduction

Risk retention

Debit Insurers do what? Select one: a. Specialize in insuring many debtors of the same creditor, when the debtor group is larger than 20 individuals. b. Specialize in industrial insurance with low face amounts of one or two thousand dollars. c. None of these d. Choose not to transfer their share of a loss to an insurance company, instead establishing their own pool of monetary reserves to cover losses that may arise.

Specialize in industrial insurance with low face amounts of one or two thousand dollars.

All of the following risks are insurable EXCEPT those that are: Select one: a. Predictable. b. Speculative. c. Measurable. d. Selected from a diverse, randomly selected pool of risks.

Speculative

The Consideration Clause does what? Select one: a. States that the insurer will provide coverage if it can verify statements made on the application b. None of these c. States the insurance company's promise to pay d. States that the insured pay a premium, in return for which the insurer will provide coverage as stated in the policy

States that the insured pay a premium, in return for which the insurer will provide coverage as stated in the policy

Which is NOT an insurer operating expense? Select one: a. Technology b. Buildings c. Salaries d. Stocks

Stocks

Lloyd's of London is an example of what type of insurance company? Select one: a. Reciprocal b. Reinsurer c. Syndicate d. Governmental

Syndicate

Which of the following is determined by the value of an insurer's policy reserves? Select one: a. The amount of premium that must be charged for insurance policies b. Insurer investments c. The amount of insurance that can be issued d. Insurer operating expenses

The amount of insurance that can be issued

No policy will ever be issued without: Select one: a. Underwriting. b. Representations. c. The applicant's signature. d. The initial premium.

The applicant's signature.

The Entire Contract provision of an insurance policy refers to which of the following elements? Select one: a. The policy itself, rider and endorsements, and signed understandings of the policy-owner. b. Rights of the policy-owner and beneficiaries. c. The application, the policy itself, and any riders and endorsements. d. The application, the policy, and the producer's signed affidavit to any changes that were made.

The application, the policy itself, and any riders and endorsements.

Why is it important to have a large group of individuals insured? Select one: a. The larger the group, the more accurate statistical assumptions will become. b. Small groups tend to have more claims. c. Policies can only be written on large groups. d. The larger the group, the more profit can be made by the insurer.

The larger the group, the more accurate statistical assumptions will become.

Probate is a term used to describe: Select one: a. The laws regulating insurance companies and agents which vary between states. b. An individual who holds a position of public trust and confidence. c. The process of determining the validity of a will in court and carrying out its provisions. d. The situation in which someone dies without a will and in which the state laws determine the disposition of property.

The process of determining the validity of a will in court and carrying out its provisions.

Which of the following is NOT correct about stock insurance companies? Select one: a. Shareholders share in profits through stock growth. b. They are organized under the laws of the state where they are selling insurance. c. They are owned by policyholders. d. Officers and directors are elected by shareholders.

They are owned by policyholders.

Which of the following is untrue about Fraternal Insurers? Select one: a. They have capital stock. b. They provide benefits in accordance with their charters. c. They have a representative form of government. d. They are not for profit.

They have capital stock.

Which of the following is untrue about Fraternal Insurers? Select one: a. They provide benefits in accordance with their charters. b. They are not for profit. c. They have a representative form of government. d. They have capital stock.

They have capital stock.

Which of the following is NOT correct about Fraternal Benefit Societies? Select one: a. They sell insurance to anyone who wants to buy, as long as they are healthy. b. They have a representative form of government. c. They are not-for-profit organizations d. They have ritualistic forms of work.

They sell insurance to anyone who wants to buy, as long as they are healthy.

Which is NOT a financial responsibility of insurance agents? Select one: a. To hold monies received in return for an insurance policy or binding of insurance coverage in a fiduciary capacity. b. To establish a PFTA if premium funds are held for any length of time before giving them to the insurer. c. All of these are financial responsibilities of insurance agents. d. To pay claims the insurer has approved.

To pay claims the insurer has approved.

A foreign insurer: Select one: a. Is organized under the laws of a jurisdiction outside the U.S. or its territories. b. Is not authorized to transact business in the U.S. c. Insures people who work outside the U.S. or its territories. d. Transacts business in one state but is chartered under the laws of a different state or one of the U.S. territories.

Transacts business in one state but is chartered under the laws of a different state or one of the U.S. territories.

In what type of contract is only one party to the contract legally bound to perform once the contract is in force? Select one: a. Adhesion b. Unilateral c. Estoppel d. Utmost Good Faith

Unilateral

When only one party, the insurer, is required to perform when the insured meets the policy conditions it is called a: Select one: a. Unilateral contract. b. Conditional Contract. c. Contract of Adhesion. d. Business Contract.

Unilateral contract.

Applicants who are rejected or denied coverage due to excessive risks which the insurance company does not want to accept are: Select one: a. A Standard Risk. b. Uninsurable. c. A Preferred Risk. d. A Substandard Risk.

Uninsurable.

The contractual requirement called the "Valuable Consideration" is best defined as: Select one: a. a valuable interest must exist at the time of policy application. b. both parties to the contract must exchange something of value. c. the contract requirement that the policy cannot be transferred to another individual. d. the requirement that the applicant pay the initial premium at the time of application for the policy to be in force.

both parties to the contract must exchange something of value.

The premium that is submitted with an application to an insurance company is generally known as the: Select one: a. consideration. b. conditional payment. c. master receipt. d. deposit.

consideration.

A Reciprocal Company: Select one: a. has no premium paid in advance. b. has an attorney bind the members together to insure each other. c. specializes in one type of insurance. d. insures other insurance companies against catastrophic losses.

has an attorney bind the members together to insure each other.

The concept of restoring individuals to the same financial position in which they were before a loss occurred is called: Select one: a. restoration. b. reimbursement. c. insurance. d. indemnification.

indemnification

Representations are BEST defined as: Select one: a. guarantees that an insurance company offers to an applicant. b. information that an applicant provides to an insurance company. c. legal terms that describe the contractual relationship between an insurance company and an insured. d. clauses that an insurance company must include in a policy as standard provisions.

information that an applicant provides to an insurance company.

A Risk Retention Group: Select one: a. provides a place for members to meet and individually or as groups transact insurance business; members are individually and wholly liable for all risks. b. shares losses among group members, losses are assessed to each member as they occur. c. is a mutual company that insures people in the same profession or business. d. shares losses among group members, premiums are paid at the beginning of each assessment period, and claims are paid from these premiums.

is a mutual company that insures people in the same profession or business.

To be considered insurable, a risk must be: Select one: a. indemnified. b. speculative. c. unpredictable d. measurable.

measurable.

An Aleatory Contract is one in which: Select one: a. one party may receive benefits greatly in excess of the benefits received by the other party. b. one party to the contract draws up the contract, the other party can only accept or reject the terms. c. the parties exchange something of equal value. d. there is both an offer and acceptance.

one party may receive benefits greatly in excess of the benefits received by the other party.

Groups that exchange insurance on each other are called: Select one: a. reinsurers. b. syndicate insurers. c. reciprocal insurers. d. mutual insurers.

reciprocal insurers.

surance companies that insure other insurers against catastrophic losses are called: Select one: a. reinsurers. b. mutual insurers c. syndicate insurers. d. reciprocal insurers.

reinsurers

A Contract of Adhesion is: Select one: a. a contract which must be adhered to by both parties. b. made between competent parties. c. written and the terms are decided by only one party. d. made when the insurer issues a policy.

written and the terms are decided by only one party.