General Insurance

What are four methods of risk management?

-avoidance -reduction -sharing -retention

According to the Law of Agency, a principal is represented by whom?

Agent or producer

What type of insurer is formed under the laws of another country?

Alien

What type of risk is insurable?

pure risk

What document is required for an insurance company to transact insurance?

Certificate of Authority

An insurance company is domiciled in California and transacts insurance in Nevada. What is this insurer's classification in Nevada?

Foreign

Conditions that increase chance of loss

Hazards

What two elements are necessary for a life insurance contract to have a legal purpose?

Insurable interest and consent

Who's does an insurance agent represent?

Insurance company (principal)

What entities make up the Medical Information Bureau?

Insurers

The reduction, decrease, or disappearance of value of a person or property insured by a policy is known as what?

Loss

What are the five important characteristics of an ideally insurable risk?

Loss is (1) due to chance, (2) definite/measurable, (3) statistically predicable, (4) not catastrophic, and (5) coverage cannot be mandatory

A person who doesn't lock their doors presents what type of hazard?

Moral

If an applicant conceals relevant health information on an application, they present what type of hazard?

Moral

The type of insurance company that's organized to return any surplus money to its policyholders is known as what?

Mutual company

What is the term for causes of loss insured against in a policy?

Peril

What are the three types of hazards?

Physical, Moral, Morale

What are the strategies used by underwriters to prevent adverse selection?

Restriction of coverage, refusal to accept a risk, and accepting a risk at a higher rate

What is the best way to handle incomplete insurance applications?

Return the application to the applicant for completion

For the purpose of insurance, what is risk?

Uncertainty of loss

In forming an insurance contract, when does acceptance usually occur?

When an insurer approves a prepaid application

When would a misrepresentation on an insurance application be considered fraud?

When it is intentional and material

In insurance, when is an offer usually made on a contract?

When the insurance application is submitted

When does an insurance policy go into effect?

When the policy is delivered and the premium is paid

Wagering on a sporting event is known as what type of risk?

speculative

The insurer organized to return a profit to stockholders, is what type of insurer?

stock company

When a change needs to be made on the application for insurance, which is the best method for correcting the information?

Complete a new application or ask the applicant to initial the correction on the original application.

Which of the following statements is an accurate comparison between private and government insurers?

private insurers may be authorized to transact insurance by state insurance departments

If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered what type of insurer?

Authorized or admitted

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

a peril

what is material misrepresentation

a statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company

What is a warranty for insurance contact?

absolutely true statement upon which the validity of the insurance policy depends.

What documentation grants express authority to an agent?

agent's contract with principal

Which of the following types of agent authority is also called "percieved authority"?

apparent

An insurance contract must contain all of the following to be considered legally binding EXCEPT: a. Competent parties b. Beneficiary's consent c. Offer and acceptance d. Consideration

beneficiary consent (cotract requires: offer/acceptance, consideration, competent parties, and legal purpose)

An insurance producer who is bound to write insurance for only one company is classified as a

captive (exclusive) agent

When applying for an individual life insurance policy, an applicant states he went to the doctor for nausea, but fails to mention that he was having severe chest pains. This is an example of

concealment

An insurance contract requires that both the insured and insurer meet certain conditions in order for the contract to be enforcable. What contract characteristic does this describe?

conditional

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

An insurance company sells an insurance policyover the phone in response to a TV ad. Which best describes this act?

direct response marketing

Insurers are classified according to their domicile. What are the three types of insurers?

domestic, foreign, alien

Which of the following are types of authorities an agent can hold?

express and implied (and apparent)

In insurance transactions, fiduciary means

handling insurer funds in a trust capacity

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

implied

What type of report provides information about the applicant's hobbies, habits and financial status?

inspection report

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

insurance

In the agent/insurer relationship who is considered the principal?

insurer

An insured purchased an insurance policy 5 years ago. Last year, she recieved a dividend check from the insurance company that was not taxable. This year, she didn't recieve anything. What type of insurer did she purchase the policy from?

mutual

What's the main difference between stock and mutual companies?

ownership

Who might recieve dividends from a mutual insurer?

policyholders

When risks with higher probability of loss are seeking insurance more often than other risks, this is known as what?

adverse selection

What are the four elements of a contract?

agreement (offer&acceptance), consideration, capacity (competent parties), legality (legal purpose

An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe?

aleatory

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

promptly forwarding premiums to the insurance company

A situation in which a person can only experience loss and no gain presents what type of risk?

pure risk

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 a. the loss must not be catostrophic b. there must be a sufficient number of homogeneous exposure units to make losses reasonable preictable c. the loss produced by the risk must be definite d. the loss may be intentional

the loss may be intentional Requirements for a loss to be insured: -caused by an accident -definite/measurable -statistically predictible -not catostrophic -sufficient number of homogeneous exposure units to make losses reasonable preictable