Chapter 1

Which of the following manufactures and sells insurance coverage in the form of insurance policies or contracts of insurance? a) Insurance agents b) Applicants/Insureds c) Insurance agencies d) Insurance companies

d) Insurance companies

A(n) ______is the person or entity that is covered by an insurance policy. a) Owner b) Agency c) Producer d) Insured

d) Insured

Stock insurance companies are owned by: a) Directors b) Policyowners c) Members d) Stockholders

d) Stockholders

When it comes to life insurance, insurable interest on one's own life is: a) Based on the number of dependents b) Based upon salary c) Calculated by the insured's assets d) Unlimited

d) Unlimited

______refers to the jurisdiction where an insurer was formed or incorporated. a) Approved b) Authorized c) Admitted d) Domicile

d) Domicile

Which of the following would be considered legally competent to enter into a contract? a) A 25 year old self employed person b) A person who is under the influence of drugs or alcohol c) A 13 year old honor student d) A person deemed to be mentally incapacitated

a) A 25 year old self employed person

If a life insurance applicant's answers on the application indicate that he/she is in good health, when in fact the applicant has a disease that he/she is not aware of, the statement on the application is considered: a) A representation b) Fraudulent c) A warranty d) A concealment

a) A representation

Dividends issued by Stock insurers are paid to: a) Stockholders b) Directors c) Members d) Policyholders

a) Stockholders

Dividends issued by mutual insurance companies: a) Represent a share of company profits for stockholders b) Are non-taxable refunds (returns) of unused or surplus premiums c) Are considered guaranteed member benefits d) Are taxable distributions to policyholders

b) Are non-taxable refunds (returns) of unused or surplus premiums

_____are primarily social organizations that engage in charitable and benevolent activities consisting of members of a given faith, lodge, or order, and are usually organized as non-profits. a) Stock Insurance Companies b) Fraternal Benefit Societies c) Mutual Insurance Companies d) Domestic Insurance Companies

b) Fraternal Benefit Societies

The ______branch is responsible for interpreting and determining the constitutionality of the statues. a) Executive b) Judicial c) Electoral d) Legislative

b) Judicial

Members of the ______include state and territorial insurance commissioners or regulators. a) Federal Insurance Office (FIO) b) National Association of Insurance Commissioners (NAIC) c) Financial Industry Regulatory Authority (FINRA) d) Securities and Exchange Commission (SEC)

b) National Association of Insurance Commissioners (NAIC)

Mutual Insurance companies are owned by: a) Directors b) Policyowners c) Beneficiaries d) Stockholders

b) Policyowners

A false statement in the application that can render the contract void, if material to the acceptance of the risk, is known as a: a) concealment b) fraud c) misrepresentation d) condition

c) misrepresentation

A contract that is drafted by an insurer and receives no input or alteration from the insured, is considered a(n): a) Conditional Contract b) Unilateral Contract c) Aleatory Contract d) Contract of Adhesion

d) Contract of Adhesion