General Health Insurance

An insurer must notify its current customers of its privacy policies or practices at least once every how often?

12 months

Anthony becomes an agent for Acme Insurance Company. Acme has not filed the notice of appointment with the Commissioner. It must do so within how many days?

15

Terry is licensed in North Carolina as a life and health insurance agent. To maintain his license, how many hours of continuing education must he complete every two years?

24

ABC Insurance Company is domiciled in Delaware and does business in Ohio. Which of the following is correct about ABC?

ABC is a domestic insurer in Delaware and a foreign insurer in Ohio.

Agent Smith knows that his best friend, Agent Thomas, is embezzling money from clients. However, Agent Smith does not notify the Commissioner in order to protect his friend. What is the result?

Agent Smith's license will be revoked.

Which of the following best illustrates risk transfer?

Anita buys health insurance to protect herself in case of serious illness.

Larry, Brian, Susan, and Jennifer just started working for AllPro Insurance Company in North Carolina. Based on their job descriptions below, which of them is NOT acting as a producer?

Brian, who is a vice president in AllPro's human resources department and does not receive commissions

Emily solicits policies and accepts premiums from the public but is not licensed as an agent. She then turns over the applications and premiums to her husband, who is licensed. Which statement is correct?

Emily has committed a Class 1 misdemeanor.

Life and health insurance companies regulate themselves through each of the following entities or organizations EXCEPT:

Financial Industry Regulatory Authority

Zelda, a producer selling health insurance, assures a prospective applicant that the insurance company she represents is backed by the protections of the North Carolina Life and Health Insurance Guaranty Association. Which of the following statements is correct regarding this kind of assurance?

It is prohibited at all times.

Which is not an example of a hazard?

John takes medication to control high blood pressure.

Which of the following presents a situation of pure risk?

Knowing that his family depends on his income, Franklin wants to insure his life.

Which entity does not rate the solvency of insurance companies?

Lloyd's of London

Emil, an agent licensed in North Carolina, moves to a new home on April 30. He is required to notify the North Carolina Department of Insurance by what date?

May 10

Sarah applies for a $1 million life insurance policy from ABC Insurance Company. ABC counters by offering to insure her for $200,000 and asks her for a written response. Sarah tells her agent that she accepts the counteroffer. Which statement is correct?

No binding contract is formed until ABC gets Sarah's written acceptance.

Which does not rate the financial strength of insurance companies?

Securities and Exchange Commission

Becky works as an agent for Delta Insurance Company, which is located in North Carolina. What must Becky do in order to sell life insurance on behalf of Delta to U.S. military personnel who are stationed in Germany?

She must obtain a restricted license.

Abby lives in Maryland, where she is licensed as an insurance agent. She wants to apply for a nonresident license in North Carolina. Which of the following conditions must she satisfy?

She must show her license to be in good standing in Maryland.

Which statement is correct about insurance regulation?

State governments primarily regulate the insurance industry, and the federal government regulates some aspects of it.

An insurance applicant submits a completed application with a check for the first premium to her agent. The insurance company accepts the application and issues the policy. Which describes this process?

The applicant offered to buy the policy, and the insurance company accepted.

When may an Insurance company call a consumer on the Do Not Call list?

The insurer has an existing relationship with the consumer.

Which condition must exist for a risk to be considered insurable?

The loss must be ascertainable.

Which is not correct about the agency contract between the insurance company and the agent it appoints to represent it?

The principal has express authority; the agent does not.

How do independent agents differ from captive agents?

They can sell policies for several insurers.

While taking an insurance application, Betty recommends backdating it so that the proposed insured will appear to be a year younger on the form. Can Betty do this?

Yes. Backdating is permitted if it is for six months or less and authorized by the insurer.

Which is a non-admitted insurance company?

a domestic insurer without a certificate of authority

An agent who sells insurance for an insurance company that does not have a certificate of authority to operate in the state represents:

a non-admitted insurer

Which person would not be considered competent to enter into an insurance contract?

a person under the influence of alcohol

In an agency relationship between the agent and the insurance company, which of the following is not a type of authority granted to the agent?

absolute authority

Blackstone Insurers is incorporated in New York, where it also has a certificate of authority to transact insurance. What type of insurer is Blackstone in New York?

admitted insurer

Jeremy has had an individual health insurance policy for many years because of his family's history of cancer. The tendency of someone like Jeremy to buy and maintain insurance is known as:

adverse selection

When an insurer employs field agents, who is responsible for delivering a new policy to a policyholder?

agent

An errors and omissions insurance policy protects the:

agent or producer

Best Insurance Company is incorporated in Canada and just applied for a license to transact insurance in North Carolina. Which type of insurer is Best Insurance Company considered in North Carolina?

alien

For a life insurance contract to be enforceable, which of the following must be legally competent to enter into the agreement?

applicant and insurer

In forming the insurance contract, who gives something of value as consideration?

applicant and insurer

Which action by an agent would legally bind the insurance company that the agent represents?

authorized acts

During the application process, ABC Insurers receives personal and confidential information about Tom, who is applying for a life insurance policy. In which of the following circumstances must ABC Insurers obtain Tom's written authorization before disclosing this information?

before disclosing information to third parties for telemarketing and sales purposes

Which is not a necessary element of a legally enforceable contract?

beneficiary

Tom is a career agent of ABC Insurance Company. He sells insurance products only for ABC. Tom is a:

captive agent

An insurable risk is not:

catastrophic

What is not required to obtain an insurance producer's license?

character assessment

As a field underwriter, what does an agent do for the insurance company?

collect information from an applicant

To qualify for an insurance agent's license, a person must have all of the following EXCEPT:

college degree

Beatrice is a member of the Supreme Lodge fraternal benefit society. What must Beatrice do before she can sell insurance on its behalf?

comply with the same general licensing requirements that apply to resident agents

Carol applies for a $250,000 life insurance policy. Her agent gives her a document that provides limited coverage during the underwriting period. What is this document?

conditional receipt

An agent who recommends the replacement of an insurance policy with another is not required to discuss which of these with the prospect?

cost of similar policies from competing insurers

Which is not an element of all legal contracts?

counteroffer

When meeting with a prospect to discuss life insurance, Agent Tyler makes disparaging comments about the financial stability and reputation of a competitor to dissuade the prospect from purchasing its policies. Which unfair trade practice has Agent Tyler committed?

defamation

A valid insurance contract does not require:

disinterested witnesses

Which of the following terms categorize insurers by their location or domicile?

domestic, foreign, and alien

Protection from damages resulting from a lawsuit brought by an insurance customer against an insurance producer for breach of fiduciary duties would be covered under what kind of policy?

errors and omissions insurance

An insurer sends a premium statement to a former policyowner. However, the policy has lapsed for non-payment of premiums. Believing that the policy is still in effect, the policyowner pays the premium, which the insurer accepts. The insured then suffers a loss and makes a claim on the policy. What legal doctrine prevents the insurer from denying the claim?

estoppel

Jerry's life insurance policy instructs him to pay the premium to the insurer's home office. However, he has sent his payments to his agent for many years, and the agent has forwarded them to the insurer. What legal principal will prevent the insurer from now requiring that Jerry send the premiums to the home office?

estoppel

Jim's policy expired due to nonpayment of premium. His agent sends him a statement the following month without noting the lapse. If Jim pays the premium and later suffers a loss for which he files a claim, what will prevent the insurer from denying the claim?

estoppel

Stacey is a captive agent for Best Rates Insurance Company. Her agency contract gives her permission to print and use business cards with the company's logo and submit applications for its policies. Which type of authority does Stacey have to take these actions?

express

The Commissioner of Insurance cannot suspend or revoke an agent's license for which of the following reasons?

failing to meet projected sales goals

Which of the following is NOT an unfair claims settlement practice if committed by an insurance company in North Carolina?

failing to promptly settle a claim for which liability is uncertain

Which describes the type of relationship based on trust that exists between the insurer and its appointed agent?

fiduciary

An insurance company with a home office in Wisconsin that does business in Illinois is a domestic company in Wisconsin. What kind of company is it in Illinois?

foreign

Which term applies to an insurance company domiciled in one state but operating in another, from the perspective of the state in which it operates?

foreign company

An agent meets with a prospect and learns that he already owns a life insurance policy. He is interested in replacing it with a new policy. Which must the agent do?

give the applicant the 'Notice Regarding Replacement'

An insurance company sends a proposed insurance policy to an applicant with instructions to accept the policy in writing by December 15 or it will be withdrawn. What must the applicant do to accept the policy?

give written notice on or before December 15

In an insurance transaction, what does the applicant give to the insurer as consideration in exchange for the insurer's promise to cover the risk?

initial premium

Which two parties form a contract for life insurance?

insurer and policyowner

An applicant for an insurance policy submits an application without the first premium. By doing so, what has the applicant done?

invited the insurer to make an offer

An insurance policy provides financial protection against:

losses caused by perils

Jana applies for a life insurance policy and submits the initial premium with her application to Acme Insurers. Acme offers her a modified policy at a higher premium. By doing so, Acme Insurers has:

made a counteroffer to Jana

An applicant for a $500,000 whole life insurance policy pays the initial premium when submitting the application. By doing this, the applicant has:

made an offer to the insurer

Which information is not to be included in the first part of an insurance application?

medical information

Statewide Insurers wants to obtain an investigative consumer report about an applicant because of questions it has regarding the individual's credit history. What must Statewide do before it can obtain a report?

notify the applicant that he has the right to be interviewed in connection with the report

When classifying insurance risks, insurance underwriters most often use the:

numerical rating system

With respect to the insurance contract, the insurance company and the applicant are, respectively, the:

offeree and offeror

Because they are aleatory contracts, insurance policies:

often award disproportionately large benefits due to chance events

Which of the following persons would not qualify for a temporary producer's license in North Carolina?

part-time producer of a licensed agency

Which is not a common source of underwriting information that an insurer uses?

peer references

A person who smokes heavily and drinks alcohol to excess exhibits what kind of an insurance risk?

physical hazard

While completing an application for a health insurance policy, Dan discloses his partial blindness. The insurer will treat this blindness as a:

physical hazard

A prospective insured gives an agent a completed life insurance application with the first premium payment. What must the agent now give the applicant?

premium receipt

Which is not a means of regulating the insurance business?

producer peer review

Insurance agents are often called:

producers

Which of the following is not a power granted to the North Carolina Commissioner of Insurance?

prosecuting individuals for violating insurance laws

When collecting personal financial or health information, an insurance company is required to do all of the following EXCEPT

provide individuals with copies of documents disclosed to other parties.

To boost her sales at the end of the year, Agent Trudy started offering potential clients a $250 cash gift card in exchange for purchasing a life insurance policy. Which ethical sales practice has Agent Trudy violated?

rebating

Which entity spreads the cost of losses among its members by having each member pay a pro-rata share of these losses?

reciprocal insurer

Emily postpones buying a life insurance policy, believing that her family will use its savings to pay her final expenses if she dies prematurely. Which method is she using to deal with risk?

retention

Robin falls while snow skiing and breaks a leg. She decides to never again attempt this activity. What method is she using to manage this risk of falling?

risk avoidance

Johnson Industries funds its workers' compensation program. It will use these funds to pay employee's claims. What type of insurer is Johnson Industries?

self-insurer

The federal Risk Retention Act of 1986 applies to which businesses?

self-insuring businesses

Which of the following transactions requires an insurance producer to have more than one insurance license?

selling variable life insurance

Which type of insurance company pays dividends to its stockholders?

stock company

According to the laws of agency, an insurance agent appointed by an insurance company acts on behalf of:

the appointing insurer

Why does an insurance company issue a conditional receipt to a new policyowner?

to cover the proposed insured before the policy is issued

Which of the following best describes the purpose for the laws of agency?

to govern the authority granted agents to represent insurers

Why would a business self-insure instead of buying an insurance policy?

to insure against frequent low-severity losses

Which of the following is not a requirement for an insurance agent?

to request referrals from a client

Acme Insurance and Apogee Insurance agree to offer different premium rates for persons of equal risk within a particular class. They also agree to limit benefits paid to insureds within this class if the insureds live in certain counties of North Carolina. What are Acme and Apogee engaging in?

unfair and prohibited business practices

Which is not necessary to create a legal contract?

warranty

When does an insurance policy take effect?

when the first premium is paid