Life insurance Take 2

Emily postpones buying a life insurance policy, believing that her family will use its savings to pay her final expenses if she dies prematurely. Which method is she using to deal with risk?

retention

Robin falls while snow skiing and breaks a leg. She decides to never again attempt this activity. What method is she using to manage this risk of falling?

risk avoidance

The federal Risk Retention Act of 1986 applies to which businesses?

self-insuring businesses

Agent Smith knows that his best friend, Agent Thomas, is embezzling money from clients. However, Agent Smith does not notify the Commissioner in order to protect his friend. What is the result?

Agent Smith's license will be revoked.

Which of the following presents a situation of pure risk?

Knowing that his family depends on his income, Franklin wants to insure his life.

Which entity does not rate the solvency of insurance companies?

Lloyd's of London

Emil, an agent licensed in North Carolina, moves to a new home on April 30. He is required to notify the North Carolina Department of Insurance by what date?

May 10

Which does not rate the financial strength of insurance companies?

Securities and Exchange Commission

Which statement is correct about insurance regulation?

State governments primarily regulate the insurance industry, and the federal government regulates some aspects of it.

Which condition must exist for a risk to be considered insurable?

The loss must be ascertainable.

Tim applies for a life insurance policy. His agent gives him a receipt conditioned on Tim's passing a physical exam to meet underwriting standards. Tim passes the physical exam but dies before the policy is issued. Which of the following is correct?

The policy will pay the death benefit.

Beatrice is a member of the Supreme Lodge fraternal benefit society. What must Beatrice do before she can sell insurance on its behalf?

comply with the same general licensing requirements that apply to resident agents

When classifying insurance risks, insurance underwriters most often use the:

numerical rating system

Why would a business self-insure instead of buying an insurance policy?

to insure against frequent low-severity losses

An insurer must notify its current customers of its privacy policies or practices at least once every how often?

12 months

ABC Insurance Company is domiciled in Delaware and does business in Ohio. Which of the following is correct about ABC?

ABC is a domestic insurer in Delaware and a foreign insurer in Ohio.

Which of the following best illustrates risk transfer?

Anita buys health insurance to protect herself in case of serious illness.

Which is not an example of a hazard?

John takes medication to control high blood pressure.

Which is a non-admitted insurance company?

a domestic insurer without a certificate of authority

When an insurer employs field agents, who is responsible for delivering a new policy to a policyholder?

agent

An insurance company with a home office in Wisconsin that does business in Illinois is a domestic company in Wisconsin. What kind of company is it in Illinois?

foreign

Which term applies to an insurance company domiciled in one state but operating in another, from the perspective of the state in which it operates?

foreign company

While meeting with her insurance customer, Ben, Ann sees that he is chain smoking. Yet he notes on his application that he is a nonsmoker. What should Ann do at this point in the application process?

insist that Ben be truthful and avoid misrepresentation

Which is not a means of regulating the insurance business?

producer peer review

Johnson Industries funds its workers' compensation program. It will use these funds to pay employee's claims. What type of insurer is Johnson Industries?

self-insurer

Which statement is correct about the types of insurance sales systems?

Direct response companies sell insurance to consumers without the use of a licensed producer.

Which type of insurance company pays dividends to its stockholders?

stock company

Acme Insurance and Apogee Insurance agree to offer different premium rates for persons of equal risk within a particular class. They also agree to limit benefits paid to insureds within this class if the insureds live in certain counties of North Carolina. What are Acme and Apogee engaging in?

unfair and prohibited business practices

Larry, Brian, Susan, and Jennifer just started working for AllPro Insurance Company in North Carolina. Based on their job descriptions below, which of them is NOT acting as a producer?

Brian, who is a vice president in AllPro's human resources department and does not receive commissions

Emily solicits policies and accepts premiums from the public but is not licensed as an agent. She then turns over the applications and premiums to her husband, who is licensed. Which statement is correct?

Emily has committed a Class 1 misdemeanor.

Life and health insurance companies regulate themselves through each of the following entities or organizations EXCEPT:

Financial Industry Regulatory Authority

He should see that the funds are remitted to the customer as soon as possible.

He should see that the funds are remitted to the customer as soon as possible.

Zelda, a producer selling health insurance, assures a prospective applicant that the insurance company she represents is backed by the protections of the North Carolina Life and Health Insurance Guaranty Association. Which of the following statements is correct regarding this kind of assurance?

It is prohibited at all times.

To boost her sales at the end of the year, Agent Trudy started offering potential clients a $250 cash gift card in exchange for purchasing a life insurance policy. Which ethical sales practice has Agent Trudy violated?

rebating

Why do courts interpret ambiguities in an insurance contract in favor of the policyowner?

The contract's terms are drafted by the insurer and not negotiated with the policyowner.

Tori has a health insurance policy from ABC Insurers. ABC denies a claim because Tori failed to notify it in a timely manner of the loss. Tori argues that the policy's instructions on filing claims are confusing. A court that reviews the policy's instructions will probably resolve any ambiguities in favor of:

Tori

Which entity spreads the cost of losses among its members by having each member pay a pro-rata share of these losses?

reciprocal insurer

A life insurance application asks Steven whether he has had heart problems. He does not answer the question even though he had heart surgery three years ago because he is afraid his application will be denied. Steven's failure to give his entire medical history is:

a concealment

An agent who sells insurance for an insurance company that does not have a certificate of authority to operate in the state represents:

a non-admitted insurer

Blackstone Insurers is incorporated in New York, where it also has a certificate of authority to transact insurance. What type of insurer is Blackstone in New York?

admitted insurer

Jeremy has had an individual health insurance policy for many years because of his family's history of cancer. The tendency of someone like Jeremy to buy and maintain insurance is known as:

adverse selection

Best Insurance Company is incorporated in Canada and just applied for a license to transact insurance in North Carolina. Which type of insurer is Best Insurance Company considered in North Carolina?

alien

During the application process, ABC Insurers receives personal and confidential information about Tom, who is applying for a life insurance policy. In which of the following circumstances must ABC Insurers obtain Tom's written authorization before disclosing this information?

before disclosing information to third parties for telemarketing and sales purposes

Salvador takes an application for life insurance with the first premium. When the policy is ready for delivery, he personally delivers it to his insured. The next day, the insured decides she cannot afford it and rejects the policy. What should Salvador do?

cancel the policy and refund the premium because the policy is still in the free-look period

An insurable risk is not:

catastrophic

What is not required to obtain an insurance producer's license?

character assessment

When meeting with a prospect to discuss life insurance, Agent Tyler makes disparaging comments about the financial stability and reputation of a competitor to dissuade the prospect from purchasing its policies. Which unfair trade practice has Agent Tyler committed?

defamation

Which of the following terms categorize insurers by their location or domicile?

domestic, foreign, and alien

The Commissioner of Insurance cannot suspend or revoke an agent's license for which of the following reasons?

failing to meet projected sales goals

Which of the following is NOT an unfair claims settlement practice if committed by an insurance company in North Carolina?

failing to promptly settle a claim for which liability is uncertain

If the parties disagree over the meaning of an insurance contract's terms, courts will usually interpret these terms in favor of the:

insured

An insurance policy provides financial protection against:

losses caused by perils

The amount of the benefit paid under an indemnity policy can never be:

more than the loss or the policy's face amount, whichever is less

Statewide Insurers wants to obtain an investigative consumer report about an applicant because of questions it has regarding the individual's credit history. What must Statewide do before it can obtain a report?

notify the applicant that he has the right to be interviewed in connection with the report

A person who smokes heavily and drinks alcohol to excess exhibits what kind of an insurance risk?

physical hazard

While completing an application for a health insurance policy, Dan discloses his partial blindness. The insurer will treat this blindness as a:

physical hazard

Which of the following is not a power granted to the North Carolina Commissioner of Insurance?

prosecuting individuals for violating insurance laws

When collecting personal financial or health information, an insurance company is required to do all of the following EXCEPT

provide individuals with copies of documents disclosed to other parties.