Basics of Common Insurance Law

The minimum age requirement to qualify for a license is: A. There is no minimum age B. 18 C. 21 D. 19

18

No insurer shall transact insurance in this state without a: A. Certificate of Authority B. Agency license C. Producer's license D. Surplus lines license

Certificate of Authority

The producer can't ask about which of these on the application? A. Gender B. Sexual orientation C. Age D. Address

Sexual orientation

Which of the following factors would be allowed in setting premiums for insurance? A. Tobacco usage B. Sexual orientation C. Race D. Gender

Tobacco usage

All of the following are possible requirements for obtaining a producer's license EXCEPT: A. Completion of pre-license training B. Being competent and trustworthy C. Attaining age 21 D. Applying for a license w/in the time period required by state law, often w/in 3-12 months of passing the state exam

Attaining age 21

Which of the following statements is correct concerning the Commissioner's authority to revoke a license? A. The Commissioner doesn't' have the power to revoke a license B. Doesn't have to deem it to be in the public's best interest C. Can't do so w/out a hearing and order D. May do so at any time

Can't do so w/o a hearing and order

A license for an insurance company is called which of the following? A. Certificate of authority B. Limited lines license C. Letter of clearance D. Resident producer license

Certificate of authority

Rebating is considered to be a: A. Class 3 Felony B. Class A Misdemeanor C. Class B Misdemeanor D. Class 4 Felony

Class B Misdemeanor

Refusing to make a loan unless the customer also buys insurance from the lender is an unfair trade practice known as: A. Controlled business B. Defamation C. Coercion D. Rebating

Coercion

Which of the following is not considered an unfair method of competition? A. Commingling B. Coercion C. Defamation D. Rebating

Commingling

A producer who procures a license for the principal purpose of obtaining insurance for herself, her family members or employees is violating the regulations concerning: A. Coerced business B. Exclusive business C. Discriminatory business D. Controlled business

Controlled business

Most commonly, the continuing edu requirement entails? A. 24 hours every 2 years, of which 3 hours must be in ethics B. 24 hours every 2 years, plus 3 additional hours of live ethics C. 24 hours every 2 years, per license held D. 48 hours every 2 years, per person

24 hours every 2 years, of which 3 hours must be in ethics

A foreign insurer doing business in this state must have which of the following? A. A reciprocal agreement B. A license in their home state C. A letter of clearance D. A license in this state

A license in this state

Which of the following could a producer pay part of her commission w/out violating any insurance regulations? A. Any client who buys insurance from her B. An employee who bought insurance from her C. A relative who bought insurance from her D. A partnership of which the producer is a member

A partnership of which the producer is a member

All are true regarding renewing a producer's license EXCEPT: A. A producer may continue to sell for up to 12 months on an expired license B. Commonly, licenses are due to be renewed at the end of the month of the producer's birthday every 2 years C. Commonly, licensees must inform the Commissioner of a name or address change w/in 30 days D. In some states, an expired license may be renewed for up to 12 months w/o reexamination

A producer may continue to sell for up to 12 months on a expired license

Making false or malicious statements about an insurer or producer is what type of unfair trade practice: A. Intimidation B. Deceptive advertising C. Defamation D. Coercion

Defamation

Making false or malicious statements about persons engaged in the business of insurance that are designed to injure their reputation is an unlawful practice known as: A. Coercion B. Defamation C. Boycotting D. Misrepresentation

Defamation

All could be considered rebates EXCEPT: A. Dividends B. Commissions C. Securities D. Employment

Dividends

The main duty of the Insurance Director/Commissioner is to: A. Enforce insurance laws B. Protect producers and insurers C. Pass statutes D. Set rates

Enforce insurance laws

All of the following are true about the insurance continuing education (CE) requirements in this state EXCEPT: A. Producers must complete at least 24 hours prior to license renewal B. Producers must keep their records of course completion for 3 years C. Excess hours may never be carried over D. CE providers must report hours to the Director

Excess hours may never be carried over

Circulating deceptive sales material to the public is what type of Unfair Trade Practice: A. Defamation B. Misleading advertising C. Misrepresentation D. Coercion

Misleading advertising

Which type of insurer may pay dividends to policyholders? A. Fraternal B. Reciprocal C. Mutual D. Stock

Mutual

Which of the following would be prohibited? A. Using sky-diving as a rating factor B. Selling insurance for an unauthorized company C. Charging married people less than single people for auto insurance D. Selling insurance under an assumed name

Selling insurance for an unauthorized company

All are true about "foreign" insurance companies doing business in State A EXCEPT: A. Their home office is in another state B. They don't need a Certificate of Authority in State A C. They are not domiciled in State A D. They need a Certificate of Authority in their home state

They don't need a Certificate of Authority in State A

Which is not prohibited under unfair trade practice regulations? A. Readjusting group premiums based on loss or expense experience B. Misleading or false statements about dividends previously paid out C. Discriminating between individuals of the same class D. False statements about the financial condition of an insurer

Readjusting group premiums based on loss or expense experience

Which of the following is a producer's fiduciary duty? A. Making a commission B. Signing an application C. Selling insurance D. Handling premiums

Handling premiums

Rates may be based upon all of the following factors EXCEPT: A. Hobbies B. Past lawful travel experiences C. Health D. Gender

Past lawful travel experiences

The Commissioner may examine (audit) an authorized insurer: A. Every 3 years B. Every 7 years C. Every 5 years D. Whenever necessary

Whenever necessary

Insurance Continuing Education law most commonly requires: A. New licensees to obtain 24 hours prior to their first renewal date B. 24 credit hours every 2 years for each license held C. 24 credit hours every 2 years regardless of the # of licenses held D. Exemptions for those holding professional designations (CLU or CPCU)

24 credit hours every 2 years regardless of the # of licenses held

In authorizing an insurer to transact business in a state, the Commissioner/Director is: A. Designing products for that company to sell this state B. Approving that company C. Allowing that company to legally do business in this state D. Setting rates of that company's products

Allowing that company to legally do business in this state

The Commissioner does all of the following EXCEPT: A. Issue cease and desist orders B. Grant prior approval of auto insurance rates C. Audit insurers D. Protect the public

Grant prior approval of auto insurance rates

Which of the following is NOT considered an unfair practice? A. Paying dividends to policyholders out of a surplus accumulated from participating policies B. Using misleading advertising C. Charging a higher premium than the one filed D. Requiring any person to buy insurance through a specific insurer as a condition to lending money for the purchase of property

Paying dividends to policyholders out of a surplus accumulated from participating policies

Which properly describes an authorized insurer? A. One that promises to provide coverage that is better than law requires B. One that is exempt from insurance laws C. One that can legally conduct business in the state D. One that has been approved

One that can legally conduct business in the state

You need an insurance license to sell all EXCEPT: A. Prepaid legal B. Credit life C. Universal Life D. AD&D

Prepaid legal

As an insurance producer, you represent: A. Insureds B. Insurers C. The public D. The State

Insurers

Of $10,000 in premiums producer Smith wrote over the past year, $3,000 came from sales to a business which employs Smith's spouse. This is: A. Coercion B. Perfectly legal C. Violation of the "controlled business" regulations D. Rebating

Perfectly legal

All are true regarding company producer appointments EXCEPT: A. A producer must hold at least one appointment B. Companies may appoint either individual producers or agencies C. The producer must be appointed at the time business is placed with an insurer D. A producer may only hold an appointment with one insurer

A producer may only hold an appointment with one insurer

A person appointed by an insurer to solicit or sell insurance on their behalf in this state is known as a(n): A. Adjuster B. Solicitor C. Agent D. Broker

Agent

Which of the following would most likely be the first penalty for acting as an "unauthorized entity"? A. License suspension B. Fines C. License revocation D. Jail time

Fines

All of the following are correct regarding misrepresentation EXCEPT: A. Fines for misrepresentation are the same across all states B. Misleading advertising is considered misrepresentation C. Misrepresentation includes the guarantee of future dividends D. Misstating the terms of a policy or benefits to be paid is misrepresentation

Fines for misrepresentation are the same across all states

You need a license to sell all of the following types of policies EXCEPT: A. Prepaid legal B. Endowment C. Group life D. Prepaid funeral

Prepaid legal

The definition of "controlled" business doesn't include insurance written on: A. Producer B. Producer's spouse C. Producer's parents or children D. Producer's employer

Producer's parents or children

Discrimination based upon physical handicap is: A. Prohibited B. Lawful, if based upon individuals of the same class C. Permitted in rating, but not eligibility D. Permitted, if based upon verifiable actuarial data

Prohibited

You represent a large insurer who does business in all 50 states. All of the following are true EXCEPT: A. You must obtain a producer's license in all 50 states B. If the insurer's home office is in Illinois, the insurer would be considered a "foreign" insurer in Colorado C. The insurer must obtain a Certificate of Authority in all 50 states D. You must obtain a producer's license only in the states you sell in

You must obtain a producer's license in all 50 states

Which of the following statements concerning clerical and administration personnel who do not solicit or get commission is true? A. Need not be licensed B. Must be licensed C. Only need to be licensed after they have been employed as a CSR for over 6 months D. Must be licensed w/in 1 year of hire date

Need not be licensed

All of the following would be prohibited EXCEPT: A. Making a distinction in premium for life insurance solely based upon blindness B. Offering a client a multi-policy discount C. Making a distinction in premium for auto insurance solely based upon a physical disability D. Quoting future dividends

Offering a client a multi-policy discount

When can a producer keep property or funds of a customer? A. Only if state law allows it B. If necessary C. Always D. When the client owes them for another account

Only if state law allows it

Which of the following accurately describes the ability of a licensed State C resident producer to become licensed in other states? A. The producer can only get a nonresident license in other states where the producer maintains a part-time residence B. The producer can get a nonresident license in all reciprocal states C. The producer can get a license in all other states D. The producer can only get a license in another state by passing an examination

The producer can get a nonresident license in all reciprocal states

Unfair claims practices will be assumed to be intentional if: A. They are reported to an insurer by the policyholder B. The licensee fails to promptly submit a required report C. The licensee has been reported for a similar practice during the preceding 3 years D. They occur w/ such frequency as to indicate a general business practice

They occur w/ such frequency as to indicate a general business practice

All of the following are considered misrepresentation EXCEPT: A. Projecting a dividend on a participating policy B. Misstating policy provisions C. False advertisements D. Projecting a dividend on a nonparticipating policy

Projecting a dividend on a participating policy

Insurers must complete claims investigations: A. W/in 30 days B. W/in 45 days C. W/in 15 days D. Promptly

Promptly

The purpose of insurance regulations is to: A. Achieve uniformity w/ the regulations of other states B. Protect insurance producers C. Protect the insurance companies D. Protect the insurance buying public

Protect the insurance buying public

Which of the following inducements to the sale of insurance is permitted: A. The payment of a bonus out of surplus to the policyholders of a nonparticipating policy B. A return of premium or commission C. Any advantage in age or effective date of coverage D. An offer of employment

The payment of a bonus out of surplus to the policyholders of a nonparticipating policy

An insurer w/ their home office in another state may do business in this state if: A. They are granted an exemption by the Insurance Commissioner B. They obtain a Certificate of Authority in this state C. Only domestic companies may do business in this state D. They register as a domestic company in this state as well

They obtain a Certificate of Authority in this state

Producers must notify the Director of a change of address within: A. 20 days B. 30 days C. 60 days D. 10 days

30 days

Clark's credit union refused his application for an auto loan unless he agreed to purchase credit life insurance from them. This is an example of: A. Coercion B. Unfair discrimination C. Misrepresentation D. Defamation

Coercion

When a lender requires an applicant for a loan to buy insurance from them as a condition to loan approval, it is an unfair trade practice known as: A. Intimidation B. Rebating C. Coercion D. Defamation

Coercion

If a producer or insurer is found to have violated an insurance law, the Commissioner may do all of the following EXCEPT: A. Impose time in jail B. Impose a monetary fine C. Revoke the violator's license D .Notify the district attorney

Impose time in jail

All of the following are true regarding the guarantee of future dividends EXCEPT: A. The min monetary fine is $200 B. The max monetary fine is $10,000 C. It's considered to be a form of misrepresentation D. It's considered rebating

It's considered rebating

Which of the following is correct regarding a producer's license? A. A producer's license is good for 1 year and then must be renewed B. A producer's license is good for 3 years and then must be renewed C. A producer's license is perpetual, subject to payment of renewal fees and continuing edu D. A producer's license is good for 4 years and then must be renewed

A producer's license is perpetual, subject to payment of renewal fees and continuing edu

An insurance producer using an assumed name is required to file the name w/ the Insurance Commissioner when? A. W/in 30 days of use B. W/in 15 days of use C. W/in 5 days of use D. Prior to use

Prior to use

It's not unfair to deny a claim in which of the following situations? A. An excluded claim B. W/out a valid reason C. For misstatement of age or gender D. Always

An excluded claim

Which of the following persons would be required to hold a producer's license: A. A company employee who sells on commission B. An underwriter responsible for risk classification C. A clerical staff person who does not solicit insurance or receive commissions D. The manager of the insurer's training department

A company employee who sells on commission

Which of the following is true regarding an unauthorized insurer? A. Unauthorized insurance is perfectly legal B. Persons selling insurance for an unauthorized insurer have no legal liability C. An unauthorized insurer will not be held liable for any policies sold in this state D. An unauthorized insurer will be held liable for all policies sold in this state

An unauthorized insurer will be held liable for all policies sold in this state

All of the following entities fall under the Insurance Commissioner's jurisdiction EXCEPT: A. Auto loan companies B. Domestic insurers C. Premium finance companies D. Alien insurers

Auto loan companies

Forcing a client to buy insurance from a particular producer as a condition to a loan is defined as: A. Misrepresentation B. Coercion C. False advertising D. Controlled business

Coercion

All of the following are considered to be misuses of fiduciary funds EXCEPT: A. Collecting interest on customer balances held in a producer's trust account B. Reflecting a premium received as a business asset on the producer's financial statement C. Remitting a return premium to an insured 7 months after the producer received it from the insurer D. Using balances in customer accounts as collateral for a loan to a producer

Collecting interest on customer balance held in a producer's trust account

Which of the following is unlawful? A. Giving the insured a rebate B. Paying a dividend C. Projecting dividends D. Charging young men more than young women for auto insurance

Giving the insured a rebate

A producer who procures a license for principal purpose of obtaining insurance for herself, relatives or employees is violating the regulation prohibiting: A. Controlled Business B. Exclusive Business C. Coercion D. Rebating

Controlled business

An agent who procures a license for the principal purpose of obtaining insurance for themselves, for family members or employees, violates the regulations prohibiting: A. Captive business B. Controlled business C. Exclusive business D. Fraud

Controlled business

To obtain a producer's license as a nonresident, you must: A. Have a similar license in your home state B. Have a part-time residence in the state you want to be a nonresident licensee in C. Have attained the professional designation of either CLU or CPCU D. Take the insurance licensing examination of the nonresident state

Have a similar license in your home state

All of the following are true regarding warranties and representations EXCEPT: A. Insurers require insured(s) to make representations on a life and health application B. Insurers require insured(s) to make warranties on a life and health application C. Warranties are guaranteed to be true D. Representations are the truth to the best of your knowledge

Insurers require insured(s) to make warranties on a life and health application

All of the following may examine (audit) an insurer in this state EXCEPT: A. A Deputy Director of Insurance B. The Director of Insurance C. A designated representative of the Director D. Legal representative of the insurer's holding company

Legal representative of the insurer's holding company

Which of the following need to be licensed? A. Life and health producer B. TPA C. Salaried employees of producers D. Insurance company officer

Life and health producer

All of the following are true regarding the principle of indemnity EXCEPT: A. Property policies follow this principle B. Dread disease policies don't follow this principle C. Health insurance policies follow this principle D. Life insurance policies follow this principle

Life insurance policies follow this principal

Which of the following is not one of the duties of the Commissioner? A. Making rates B. Holding hearings and issuing administrative "orders" C. Enforcing provisions of the insurance code D. Examining and licensing indiv producers and agencies

Making rates

A producer's false statement on an application regarding insurance is: A. Misrepresentation B. Coercion C. Twisting D. Defamation

Misrepresentation

Falsifying an application for insurance is: A. Defamation B. Coercion C. Misrepresentation D. Rebating

Misrepresentation

An example of defamation, which is an unfair trade practice, is: A. Sharing commissions with someone who is not licensed B. A producer using a trade name that implies he is an insurer C. Paying part of your commission back to the client as an inducement D. Misstating the financial condition of an insurer or producer

Misstating the financial condition of an insurer or producer

Which of the following would be considered rebating? A. Offering a valuable consideration, other than that which is offered in the contract, as an inducement to purchase a policy B. Across the board reductions in premiums by class of individuals C. Offering a child restraint system to policyholders D. Readjustment in group rates based upon loss or expense experience

Offering a valuable consideration, other than that which is offered in the contract, as an inducement to purchase a policy

Which of the following would be considered to be a rebate? A. Paying dividends out of surplus as stated in the policy B. Paying another licensed producer for a referral C. Offering to give part of the commission to a customer as an inducement to buy D. Basing group insurance rates on claims experience

Offering to give part of the commission to a customer as an inducement to buy

Which of the following correctly defines an "alien" insurer doing business in State B? A. One formed under the laws of another country B. One formed under the laws of another state C. One formed under the laws of the State B D. One formed under the laws of another country, but holding a Certificate of Authority in State B

One formed under the laws of another country, but holding a Certificate of Authority in State B

Under Unfair Claims Practices regulations, when denying a claim an insurer must do all of the following EXCEPT: A. Conduct a reasonable investigation B. Pay a claim that occurs after the grace period has ended C. Indicate to the claimant which section of the policy they are relying upon D. Respond promptly to claims communications

Pay a claim that occurs after the grace period has ended

Which of the following is not a violation? A. Commingling funds B. Depositing client premiums in your personal account C. Paying premiums to insurer from trust account w/in the time period required by law D. Paying premiums to insurer from trust account w/in 60 days of receipt

Paying premiums to insurer from trust account w/in the time period required by law

The Director may deny, suspend or revoke a producer's license for all of the following reasons EXCEPT: A. Failing to comply w/ an order imposing a child support obligation B. Committing an unfair trade practice C. Placing customer or insurer funds in a premium fund trust account D. Having been convicted of a felony

Placing customer or insurer funds in a premium fund trust account

Giving a customer a stock option on the insurer's stock as inducement to buy is considered which one of the following unfair trade practices? A. Controlled business B. Misrepresentation C. Coercion D. Rebating

Rebating

Giving a customer an inducement to the sale that is not stated in the policy is an unlawful practice known as: A. Bribery B. Twisting C. Rebating D. Inducing

Rebating

Which of the following would constitute unfair discrimination? A. Charging men and women an equal rate for health insurance B. Refusing to make available coverage for persons of the same class C. Charging young men more than young ladies for auto insurance D. Charging women less than men for life insurance

Refusing to make available coverage for persons of the same class

Under Unfair Claims Practices regulations, all would be considered violations EXCEPT: A. Failing to settle when liability is clear B. Requiring claimants to submit proof of loss C. Offering claimants lower settlements than they could win in court D. Attempting to base settlements on altered applications

Requiring claimants to submit proof of loss

Which of the following in not one of the duties of the Insurance Commissioner? A. Issuing Certificates of Authority B. Enforcing insurance laws to protect the public C. Determining solvency of insurers D. Requiring insurers to maintain adequate staffing levels

Requiring insurers to maintain adequate staffing levels

Which of the following would not be considered an unfair claims settlement practice? A. Refusing to pay a claim after conducting a proper investigation B. Offering a claimant a much lower settlement than they are later able to win in court C. Failure to respond promptly to claims communications D. Requiring a claimant to submit to arbitration

Reusing to pay a claim after conducting a proper investigation

Which of the following is not considered controlled business? A. Selling insurance to your friends and neighbors B. Selling insurance to your own family C. Selling insurance to your own company D. Selling insurance to your employees

Selling insurance to your friends and neighbors

Which type of government is primarily concerned with regulating insurance? A. County B. State C. City D. Federal

State

The type of government primarily concerned with the regulation of insurance and insurance companies is: A. Federal government B. County government C. State government D. City government

State government

All of the following are true regarding claims EXCEPT: A. The insurer may require the insured to submit proof of loss B. The insurer may require the insured to submit to a polygraph test C. The insurer may not require duplicate information to delay processing D. The insurer may deny a claim after conducting a reasonable investigation

The insurer may require the insured to submit to a polygraph test

Unfair claims practices will be assumed to be intentional if: A. They are reported to the Commissioner B. The insured has to file a lawsuit in order to collect C. They occur w/ such frequency as to indicate a general business practice D. The insurer has been reported for a similar practice in other states

They occur w/ such frequency as to indicate a general business practice

You must be licensed to sell all of the following EXCEPT: A. An annuity B. Variable life C. Whole life D. Travel accident

Travel accident