Testing questions

An agent who is action exceeds the authority granted by contract is

Not back by the insurer

Which of the following is not an example of risk retention

Not doing a business deal after deciding it would be too risky

What element of a Contract constitutes a definite and unqualified proposal by one party to another?

Offer

Insurable interest involves what assumption?

One person benefits from another person's continued life

All of these statements correctly describes an aleatory contract except?

Only one party makes any kind of legal enforceable offer

What situation will not require the insured's consent when a life insurance policy is issued?

When a parent is making a policy for a minor

A contract is considered void and all of the following situations except

When consideration is unequal

The Powers directly given to a producer in an agency contract are called

to express

A business becoming incorporated is an example of risk

to transfer

A hold-harmless clause is an example of risk

to transfer

Which of the following involves sharing an uncertain risk with another similar group?

to transfer

Purchasing Insurance is an example of risk

transference

Giving up a known right on a voluntary basis is called

waiver

During the application process, a statement made by an applicant that becomes part of the contract is considered to be a

warranty

An insurance company can be liable for a producers unauthorized acts

when the agency contract is unclear concerning the authority given

In what way are insurance policies said to be aleatory?

Involves the potential for the unequal exchange of value

And appointed producers implied authority is derived from

Express authority

Which of the following types of risk is insurable?

pure

What type of risk involves the potential for a loss with no possibility for gain?

pure risk

Which of the following is an unincorporated association whose members provide coverage for one another?

reciprocal

ABC Company is attempting to minimize the severity of potential losses within its company. The company is engaged in risk

reduction

When must insurable interest exist for a life insurance contract to be valid?

Inception of the contract

What happens when an initial offer is answered with a counter offer?

Initial offer is void

And insurance companies failure to enforce a contract provision is called

Waiver

And agents authority to bind an insurer to an insurance contract may be granted in the

Agents contract and the insurance companies appointment

What qualifies as acceptance of an insurance contract offer?

An issued policy

Which of these statements regarding insurance is false?

As the number of insured units increases, the number of losses decreases

Insurance is not characterized as which of the following?

As the number of insureds increase the number of losses decrease

A producers working for an insurance company may be personally liable for

Ask performed which are prohibited in the agency contract

A reciprocal Insurer typically has an administrator who manages the premiums collected from the groups members. This administration is called a

Attorney in fact

Which of these is true regarding the exchange of consideration among parties involved in an insurance contract?

Can be unequal

Voluntarily terminating an insurance policy is known as

Cancellation

Which of the following types of insurers limits the exposure it writes to those of its owners?

Captive insurer

The courts will normally interpret a policy in favor of the insured when the meaning of the policy is not clear. This is because an insurance policy is an

Contract of Adhesion

An insurance application requires an applicant to make a full, accurate disclosure of the risk factor involved. Using this criteria, and insurance policy is considered what type of contract?

Contract of utmost good faith

Christopher is issued an insurance policy that contains an attached agreement which alters the terms of the policy. This attachment is called an

Endorsement

For insurance purposes, similar objects which are exposed to the same group of perils are referred to as

Homogeneous exposure units

Which of these do not indicate the presence of insurable interest in a life insurance contract?

Lifelong friendship

Which of the following is a syndicate established by a group of insurers to share underwriting duties?

Lloyd's organization

Which of the following situations would an insurance agent need to guard against liability for professional errors and omissions?

Making a recommendation to a potential insured to replace existing coverage

Which of the following relationships demonstrates insurable interest in the absence of economic interest?

Marriage partners

Greg applies for insurance and makes a false statement on the application that will influence whether or not the insurer will accept the risk. Greg's false statement is called a(n)

Material misrepresentation

Dividends from a mutual insurance company are paid to whom?

Policyholders

Which of the following accurately describes a participating insurance policy?

Policyowners may be entitled to receive dividends

The law of large numbers enables an insurer to

Predict losses

According to the law of large numbers, how would losses be affected if the number of similar insured units increases?

Predictability of losses will be improved

Which of the following outlines the authority given to the producer on behalf of the insurer?

Producer contract

Which of these statements is not a characteristic of the law of large numbers?

Rates can be calculated to compensate for losses

Ambiguities in insurance contracts are typically interpreted in favor of the insured. This rule is referred to as

Reasonable expectations

An insured is entitled to coverage under a policy that a prudent person would expect it to provide. This principle is called

Reasonable expectations

Which of the following is not an objective to the national Association of insurance commissioner's?

Regulate state insurance commissioners

A ___________ insurer assumes risk from another insurance company

Reinsurance

And insure has an contractual agreement which transfers a portion of its risk exposure to another insurer. What type of contractual agreement is this?

Reinsurance contract

How can an insurance company minimize exposure to loss?

Reinsuring risks

Statements made by an insured on an accident and health insurance application or considered to be?

Representations

What is the accounting measurement of an insurance companies future obligations to its policy owners?

Reserves

What is the insurers responsible for when a producer is acting within the scope of authority granted in the agency contract?

Responsible for acts by the producer that are authority only

Which of the following describes the act of ensuring a risk against possible loss

Risk transfer

Which of the following would not have a restricted ability to enter into a contract

Small employer

Which one of these is not considered to be an Element of an insurable risk?

Speculative risk

Who regulates an insurer's claim settlement practices?

State insurance departments

Which group is the do not call registry designed to protect against?

Telemarketers

When a producer acts within the scope of his or her contractual authority, which of the following is legally responsible for these actions?

The insurer

An agreement where an individual is authorized to act on behalf of another person or company is established through

The law of agency

Which reinsurance contract between two insurers involves an automatic sharing of the risks assumed?

Treaty reinsurance

Use of XYZ Insurance Company brochures, business cards, and rating guides is an example of

apparent authority

A(n) ___ agent is an insurance agent who represents only one insurance company

captive

The insurers obligation to pay a claim depends on whether the insured or beneficiary has complied with all policy conditions. This makes the policy a

conditional contract

The payment of the first premium, the promise to pay a covered loss, and the agreement to abide by policy conditions are all examples of

consideration

An agreement is reached when an insurance contract is formed. Which of the following is NOT considered to be an element of an agreement?

equity

When a ceding insurer transfers a portion of its risk to an assuming insurer on a case by case basis, this process is referred to as

facultative reinsurance

A condition that increases the possibility of financial loss is called a(n)

hazard

The unwritten authority given to a producer to carry out necessary incidental acts of the agency agreement is called

implied authority

XYZ Insurance Company gives direct authority to its producers to sell insurance through an agency contract, but nothing is stated regarding the collection of premiums. Which authority grants the producer the right to collect premiums?

implied authority

A(n) ____ agent may represent several insurers.

independent

Under the law of agency, the principal is considered to be

insurer

Which of the following financial products creates an instant estate, no matter when the date of death?

life insurance

Risk ____ is the process of analyzing exposures that create risk and designing programs to handle them.

management

An insurance contract may be voided if a misrepresentation found on the application is determined to be

material

Which of the following can be defined as a Cause of loss?

peril

Which of the following can be defined as the potential for loss?

risk

Which term describes the elimination of a hazard?

risk avoidance

A group-owned insurance company that is formed to assume and spread the liability risks of its members is known as a

risk retention group

Dividends from a stock insurance company are normally sent to

shareholders

What type of risk involves the potential for loss and the possibility for gain?

speculative

An insurable risk requires

that the chance of loss be calculable

The following are all elements of a valid contract except

written evidence