Chapter 1

Describes the concept that insured pays a small amount of premium for a large amount of risk on the part of the insurance company

an Aleatory contract

Accepting a premium after the end of a grace period

Apparent authority

Which insurance principle states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost?

Indemnity

Which of the following is NOT the consideration in a policy?

The application given to a prospective insured

In insurance the offer is usually made when

the application is submitted

Which authority is NOT stated in an agents contract but is required for the age to conduct business.

Implied

In an insurance policy, the insured is not legally bound to any action, but the insurer is legally obligated to pay loss coverage. What element does this describe?

Unilateral

What company produces evaluations of insurer financial status often used by the insurance department

AM Best and Company

The requirement that agents not commingle insurance monies with their own funds is known as

Fiduciary responsibility

In insurance transactions, fiduciary responsibility means

Handling insurer funds in a trust capacity

A situation in which a person can only lose or have no chance represents

Pure risk

Objectionable provision on policy but not allowed to negotiate. Either reject policy or accept as is. Which contract feature does this describe?

Adhesion

An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. What has the insurer violated?

Consideration

Which of the following is NOT consideration on the part of an insured?

Promise to submit timely claims

Which of the following insurers are owned by stockholders who have the usual rights of ownership, including the right of voting?

Stock

Lifestyle changes that reduce the chance of health problems is known as

Reduction

The authority granted to an agent through the agent's contract is referred to as

Express Authority

Events or conditions that increase the chances of an insured loss occurring are referred to as

Hazards

All the following are examples of risk retention Except

premiums