General insurance

reinsurance (assuming insurer)

A form of insurance whereby one insurance company (the reinsurer) in consideration of a premium pay to it agrees to an indemnify another insurance company (the ceding) company for a part or all of its liabilities from an insurance policy it has issued

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

What is reinsurance?

An agreement between a ceding insurer an assuming insurer

what is a foreign insurer?

An insurer with a home office in another state

Because an agent is using stationery with the logo of an insurance company, applicants for insurance assume that the agent is authorized to transact on behalf of that insurer. What type of agent authority does this deścribe?

Apparent

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

Apparent

An individual was involved in 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 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

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

Commingling.

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.

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

Fiduciary responsibility

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

Foreign

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

Units with the same or similar exposure to loss are referred to as

Homogeneous the basis of insurance is sharing risk between a large homogeneous group with similar exposure to loss

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

Implied

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

Insurable interest and consent

All of the following actions by a person could be described as risk avoidance EXCEPT

Investing in the stock market.

For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become

Larger

untrue statements on the application intentionally made by insureds that, if discovered, would alter the underwriting decision of the insurance company, are called

Material misrepresentations

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

Moral hazard

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

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

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

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

Reduction

Insurance is the transfer of

Risk

In terms of parties to a contract, which of the following does NOT describe a competent party?

The person must have at least completed secondary education Mentally competent, not under the influence, legal age

Which of the following is not the consideration in a policy?

The promise to pay covered losses B- The application given to a prospective insured Something of value exchange between parties The premium amount paid at the time of application

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.

Which of the following is NOT a goal of risk retention?

To fund losses that cannot be insured B - To minimize the insured's level of liability in the event of loss To reduce expenses and improve cash flow To increase control of claim reserving and claims settlements

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 elements does this describe?

Unilateral

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

Utmost good faith

Waiver

Voluntary giving up one's knows right or privilege

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

Waiver

Apparent authority

also known as perceived authority is the appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created.

The document that indicated that an insurer has been approved and is authorized to transact insurance in a particular state is known as

certificate of authority

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

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

fraternal benefit society

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 causes of loss insured against in an insurance policy are known as

perils

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

purchase insurance

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

the applicant has a prior felony conviction

Which of the following is characteristic of a Reciprocal Insurance Exchange?

the chief administrator of the insurer is called an "attorney-in-fact"

For the purpose of insurance, risk is defined as

the uncertainty or chance of loss

If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it?

unilateral