Chapter: General Insurance

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An individual's tendency to be dishonest would be indicative of a

Moral Hazard

On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are

Not taxable since the IRS treats them as a return of a portion of the premium paid

An insurance company receives an application with some information missing and issues the policy anyways. What is this called

Waiver

A tornado that destroys property would be an example of which of the following

A pure risk

Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company

Aleatory

When transacting business in this state an insurer formed under the laws of another country is known as a/an

Alien insurer

What is reinsurance

An agreement between a ceding insurer an assuming insurer

Which of the following types of agent authority is also called "perceived authority"

Apparent

An insurance producer who by contract is bound to write insurance for only one company is classified as a/an

Captive agent

Which of the following is issued by the State Department of Insurance to show that the insurer has power to write insurance contracts in that state

Certificate of Authority

Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPT

Conditions

Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements except

Conditions

Representations are written or oral statements made by the applicant that are

Considered true to the best of the applicant's knowledge

Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as

Contracts of adhesion

Which of the following best describes the aleatory nature of an insurance contract

Exchange of unequal values

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

Express authority

An insurance company is domiciled in Montana and transacts insurance in Wyoming. Which term best described the insurer's classification in Wyoming

Foreign

Which of the following entities is not an insurer but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization

Fraternal benefit society

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

Hazards

When would a misrepresentation on the insurance application be considered fraud

If it is intentional and material

Which authority is NOT stated in agent's contract but is required for the agent to conduct business

Implied

Which authority is NOT stated in an agent's contract but is required for the agent to conduct business

Implied

What do individuals use to transfer their risk of loss to a larger group

Insurance

The insurer may suspect that a moral hazard exists if the policyholder

Is not honest about his health on an application for insurance

Which of the following is true regarding a risk retention group

It is a liability insurance company owned by its members

Which of the following is the basis for a claim against an insurance policy

Loss

An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy

Mutual

What is the major difference between a stock company and a mutual company

Ownership

A participating insurance policy may do which of the following?

Pay dividends to the policyowner

The risk of loss may be classified as

Pure risk and speculative risk

What method do insurers use to protect themselves against a catastrophic losses

Reinsurance

Insurance is the transfer of

Risk

Which of the following would qualify as a competent party in an insurance contract

The applicant has a prior felony conviction

Which of the following is NOT the consideration in a policy

The application given to a prospective insured

An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible

The insured will need a written consent of the insurer

Not all losses are insurable, and there are certain requirements that must be met before a risk is a proper subject for insurance. These requirements include all of the following EXCEPT

The loss may be intentional

Which of the following is an example of a producer's fiduciary duty

The trust that a client places in the producer in regard to handling premiums

In insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe

Unilateral

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

All of the following are examples of risk retention EXCEPT

Premiums

What is the term for the entity that an agent represents regarding contractual agreements with third parties

Principal

Pertaining to insurance, what is the definition of a fiduciary responsibility

Promptly forwarding premiums to the insurance company

Following a career change, an insured is no longer required to perform many physical activities, so he has implemented a program where he walks and jogs for 45 minutes each morning. The insured has also eliminated most fatty foods from his diet. Which method of dealing with risk does this scenario describe

Reduction

What method do insurers use to protect themselves against catastrophic losses

Reinsurance


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