Chapter 1- General Insurance

What is the term for a cause of loss, such as the theft of a car?

A. A peril B. Hazard C. Risk D. Accident Correct: A.A peril

In an insurance contract, the value that each party gives the other is called the:

A. Acceptance B. Subject matter C. Consideration D. Offer Correct: C. Consideration

An agent has authority to do all of the following, except:

A. Countersign insurance contracts B. Appoint a solicitor as his or her representative C. Solicit applications on the insurer's behalf D. Represent the insured's interest Correct: D. Represent the insured's interest

Which kind of agent enters into agreements with more than one insurer?

A. Direct B. Independent C. Exclusive D. Captive Correct: B. Independent

Concealment

Failure to disclose material facts

Misrepresentations are

False statement contained in the application

Surplus lines broker

States regulate the procurement of business from nonadmitted carriers by regulating the brokers who place business with these carriers.

Waiver and Estoppel are

Terms that apply to the insurer not the applicant

Which of the following best describes a surplus lines broker?

A. A surplus lines broker places risk with nonadmitted insurers when coverage cannot be placed with admitted insurer carriers B. A surplus lines broker deals with direct writing companies only C. A surplus lines broker accepts business only from non- resident agents D. A surplus lines broker deals with admitted carriers only Correct: A. a surplus lines broker places risks with nonadmitted insurers when coverage cannot be placed with admitted insurer carriers

An Insurer organized in another state than the state in which it is authorized to do business is known as which type of insurer?

A. Admitted B. foreign C. Alien D. Domestic Correct: B. Foreign

All of the following statements regarding financial rating services are correct, except

A. Agents and producers must place business through an insurer with the lowest rated B. Rating codes are assigned to show financial strength or weakness of each company rated C. Independent rating services evaluate and rate the financial ability of insurance companies D. The ratings are available to the public Correct:

When an insured fails to disclose known facts in an application for insurance, he/she may be guilty of:

A. Breach of warranty B. Twisting C. Waiver D. Concealment Correct: D. Concealment

When Applicant P fails to disclose all of his motor vehicle violations in an application for automobile insurance, he may be guilty of:

A. Estopple B. Avoidance C. Concealment D. Breach of warranty Correct: C. Concealment

The Terrorism Risk Insurance Program is administered by which of the following Federal entities?

A. Executive office B. Department of Defense C. Department of State D. Department of Treasury Correct: D. Department of Treasury

If an insurer is incorporated in Rhode Island, but primarily does business in New York, what type of insurer would it be considered in New York?

A. Foregin B. Nonadmitted C. Domestic D. Alien Correct: A. Foreign

An Applicant inaccurately representing information on the application is guilty of:

A. Fraud B. Misrepresentation C. Waiver of Estoppel D. Concealment Correct: Misrepresentation

The following are all true regarding risk management, except:

A. Insurance is designed to cover both intentional and unintentional losses B. Insurance is considered a transfer of risk C. The insured may retain part of a risk through deductibles D. Reduction is a method of managing risk Correct: A Insurance is designed to c over both intentional and unintentional losses

Insurance is designed to provide protection against which of the following?

A. Involuntary Risk B. Pure risk C. Certain Risk D. Speculative Risk Correct: B. Pure Risk

Which statement defines a Peril?

A. It is an indirect loss B. It is a condition that may increase a loss C. It is the specific cause of loss D. it is defined as a risk of financial loss Correct: C. It is the specific cause of loss

The insurer's promise to pay a covered loss and the insured's payment of the first premium, are examples of:

A. Legal Purpose B. Acceptance C. Consideration D. Offer Correct: C. Consideration

An underwriter will consider each of the following factors when evaluating a risk, except:

A. Rates B. Nature of risk C. Hazards D. Claim History Correct: A. Rates

A peril

Cause of potential loss to property such as fire, windstorm, hail, flood, etc.

Subrogating the risk

means of collecting a loss payment from a liable party

An agent has authority to do all of the following, except:

A. Appoint a solicitor as his or her representative B. Represent the insured's interest C. Countersign insurance contracts D. Solicit applications on insurer's behalf Correct: B. Represent the insured's interest

A Contract that binds only one party to future performance, is a (n):

A. Contract of adhesion B. Conditional Contract C. Unilateral contract D. Aleatory contract Correct: C. Unilateral contract

Which of the following statements is not correct regarding rates and premiums?

A. Rates are considered inadequate when they do not cover projected losses and expenses B. A premium is a toal cost for the amount for the insurance purchased C. The rate is the amount charged for a particular unit of insurance D. Rates may only be exclusive if the insurer is making up for lost reserves Correct: D. Rates may only be exclusive if the insurer is making up for lost reserves

Which of the following best describes a surplus lines broker?

A. Surplus lines broker deals with admitted carriers only B. A surplus lines broker accepts business only from non- resident agents C. A surplus lines broker deals with direct writing companies only D. A surplus lines broker places risks with nonadmitted insurers when coverage cannot be placed with admitted insurer carriers Correct: D. A surplus lines broker places risks with nonadmitted insurers when coverage cannot be placed with admitted insurer carriers

When an insurance policy is not clear, the court will usually interpret in favor of the insured because of which characteristic?

A. The policy is a conditional contract B. The policy is a contract of adhesion C. The policy is an aleatory contract D. The policy is a bilateral contract Correct: B. The policy is a contract of adhesion

Which of the following is a physical hazard?

A. The storage of flammables in a fireproof container B. Dishonesty on the part of an insured C.Uneven pavement in a sidewalk D. An insured's attitude that good housekeeping is not important Correct: C. Uneven pavement in a sidewalk

All of the following are options for managing risk, except:

A. Transferring the risk B. Retaining the risk C. Avoiding the risk D. Subrogating the risk Correct: D. Subrogating the risk

Because the insurance company must pay claims and the insured must comply with the policy terms, the insurance contract is considered which of the following types of contracts?

A. contract of adhesion B. Aleatory contract C. Conditional contract D. Unilateral Contract Correct: C. Condition contract

When an individual faces the risk of economic loss in the event of property damage, this indicates which of the following?

A. merit Rating B. Subrogation C. Insurable Interest D. Limit of recovery Correct: C. Insurable interest

Fraud is

An intentional deception of the truth in order to induce another to part with something of value or to surrender a legal right

Department of Treasury

The Terrorism Act, which protects consumers by addressing market disruptions and ensuring the continued widespread availability and affordability of property and casualty insurance for a terrorism risk, is a administered by the Department of Treasury

A Condition contract is

enforceable only under certain conditions. For example, a claim will be paid only is there has been a covered loss

Concealment is

the willful holding back or secretion of material facts pertinent of the issuance of insurance or a claim.