General Insurance

Insurance companies may be classified according to the legal form of their ownership. The type of company organized to return any surplus money to their policyholders is

A mutual insurer.

Which of the following produces evaluations of insurers' financial status often used by state departments of insurance?

AM Best

Which of the following is the closest term to an authorized insurer?

Admitted

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

If it is intentional and material

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

A person who does not lock the doors or does not repair leaks shows an indifferent attitude. This person presents what type of hazard?

Morale

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

Principal

Which of the following is the most common way to transfer risk?

Purchase insurance

Hazard is best defined as

Something that increases the risk of loss.

A situation in which a person can only lose or have no change represents

Pure risk.

Which of the following must an insurer obtain in order to transact insurance within a given state?

Certificate of authority

An individual was involved in a head-on collision while driving home one day. His injuries were not serious, and he recovered. However, he decided that in order to never be involved in another accident, he would not drive or ride in a car ever again. Which method of risk management does this describe?

Avoidance

Which services are associated with Standard & Poor's and AM Best?

Rating the financial strength of insurance companies

When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?

Consideration

An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?

Consideration

When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is

Conditional

An insured intentionally did not disclose a material fact on an application for insurance. This would be considered

Concealment.

What insurance concept is associated with the names Weiss and Fitch?

Guides describing company financial integrity

The insurer must be able to rely on the statements in the application, and the insured must be able to rely on the insurer to pay valid claims. In the forming of an insurance contract, this is referred to as

Utmost good faith.

Which of the following factors is NOT considered by an underwriter when determining the premium rates for an individual seeking insurance?

AMedical history BSex CRace DAge

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

Waiver

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

Direct response marketing

The requirement that agents not commingle insurance monies with their own funds is known as

Fiduciary responsibility.

When doing business in this state, an insurance company that is formed under the laws of another state is known as which type of insurer?

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

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

Implied

Adverse selection is a concept best described as

Risks with higher probability of loss seeking insurance more often than other risks.

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.

The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract?

Conditional

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

A producer who fails to segregate premium monies from his own personal funds is guilty of

Commingling.

Which of the following is NOT true regarding a Certificate of Authority?

DIt is issued to group insurance participants.

Installing deadbolt locks on the doors of a home is an example of which method of handling risk?

Reduction

Which of the following is NOT a characteristic of an insurable risk?

The loss must be catastrophic.

Which of the following insurance providers must be nonprofit and sell insurance only to its members?

Fraternal

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.

Which law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated?

Law of large numbers

A life insurance policy has a legal purpose if both of which of the following elements exist?

Insurable interest and consent