General Insurance

Which of the following is the basis for a claim against an insurance policy? A. Loss B. Material change C. Hazard D. Misrepresentation

A. Loss

A person who does not lock the doors or does not repair leaks shows an indifferent attitude. This person presents what type of hazard? A. Moral B. Legal C. Physical D. Morale

D. Morale

In case of a loss, the indemnity provision in insurance policies A. Pays the insured as much as 95% of the loss. B. Restores an insured person to the same financial state as before the loss. C. Allows the insured to collect 20% more than the actual loss. D. Pays the insured a percentage of the loss above and beyond the loss.

B. Restores an insured person to the same financial state as before the loss

When an insurer receives a Certificate of Authority from the Department of Insurance, it is then classified as A. Domestic. B. Foreign. C. Admitted. D. Nonadmitted.

C. Admitted

In any case where there is a controversy or dispute between the insurance company and the insured, the soliciting agent is the agent of the A. Applicant. B. Insured. C. Company. D. Beneficiary.

C. Company

Which of the following are the authorities that an agent can hold? A. Authorized and admitted B. Primary and secondary C. Express and implied D. Apparent and allowed

C. Express and Implied

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? A. Adhesion B. Conditional C. Aleatory D. Good health

C. Aleatory

The risk of loss may be classified as A. Named risk and un-named risk. B. High risk and low risk. C. Pure risk and speculative risk. D. Certain risk and uncertain risk.

C. Pure risk and speculative risk

Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract? A. Indemnity B. Representation C. Warranty D. Concealment

C. Warranty

What is the term for the entity that an agent represents regarding contractual agreements with third parties? A. Principal B. Client C. Designee D. Insured

A. Principal

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 A. Utmost good faith. B. Reasonable expectations. C. A warranty. D. Implied warranty.

A. Utmost good faith

Which of the following types of agent authority is also called "perceived authority"? A. Implied B. Fiduciary C. Apparent D. Express

C. Apparent

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? A. Stock company B. Reciprocal association C. Fraternal benefit society D. Mutual company

C. Fraternal benefit society

Which of the following is NOT a government health insurance program? A. Medicaid B. Federal Deposit Insurance Corporation (FDIC) C. Old-age, Survivors and Disability Insurance (Social Security) D. Medicare

B. FDIC

Which of the following is the most common way to transfer risk? A. Name a beneficiary B. Purchase insurance C. Increase control of claims D. Lessen the possibility of loss

B. Purchase insurance

Which of the following is NOT the consideration in a policy? A. The promise to pay covered losses B. The application given to a prospective insured C. Something of value exchanged between parties D. The premium amount paid at the time of application

B. The application given to a prospective insured

An insurance producer who by contract is bound to write insurance for only one company is classified as a/an A. Solicitor. B. Broker. C. Independent producer. D. Captive agent.

D. Captive agent

An insurance company is domiciled in Montana and transacts insurance in Wyoming. Which term best describes the insurer's classification in Wyoming? A. Alien B. Domestic C. Unauthorized D. Foreign

D. Foreign

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? A. Reciprocal B. Nonprofit service organization C. Stock D. Mutual

D. Mutual

On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are A. Paid at a fixed rate every year. B. Taxable as ordinary income. C. Guaranteed. D. Not taxable since the IRS treats them as a return of a portion of the premium paid.

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

Which services are associated with Standard & Poor's and AM Best? A. Investigating violations of The Fair Credit Reporting Act B. Providing employment histories for investigative consumer reports C. Storing medical information collected by insurance companies D. Rating the financial strength of insurance companies

D. Rating the financial strength of insurance companies

The reduction, decrease, or disappearance of value of the person or property insured in a policy by a peril insured against is known as A. Hazard. B. Risk. C. Loss. D. Exposure.

C. Loss

An individual's tendency to be dishonest would be indicative of a A. Pure hazard. B. Physical hazard. C. Moral hazard. D. Morale hazard.

C. Moral Hazard

An insurance company that has not applied, or has applied and been denied a Certificate of Authority A. Is authorized and may transact insurance within the state. B. Is unauthorized but may transact insurance within the state. C. Is authorized but may not transact insurance within the state. D. Is unauthorized and may not transact insurance within the state.

D. Is unauthorized and may not transact insurance within the state

Which of the following produces evaluations of insurers' financial status often used by state departments of insurance? A. SEC B. AM Best C. NAIC D. Consumer's guide

B. AM Best

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 describe? A. Assumed B. Apparent C. Express D. Implied

B. Apparent

If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it? A. Conditional B. A legal (but unethical) contract C. Unilateral D. Adhesion

C. Unilateral

In what way can an agent demonstrate a high standard of ethics? A. Making enough commissions to cover personal expenses B. Setting and meeting monthly production goals C. Recommending qualified retirement plans to each client D. Putting the client's best interests before their own

D. Putting the clients best interests before their own

Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as A. Contracts of adhesion. B. Unilateral contracts. C. Aleatory contracts. D. Binding contracts.

A. Contracts of adhesion.

Events or conditions that increase the chances of an insured loss occurring are referred to as A. Risks. B. Perils. C. Hazards. D. Exposures.

C. Hazards

When agents are acting within the scope of their contract, their actions will be assumed to be the acts of the A. Department of Insurance. B. Insured. C. Insurer. D. Policyowner.

C. Insurer

In insurance, an offer is usually made when A. The insurer approves the application and receives the initial premium. B. The agent hands the policy to the policyholder. C. An agent explains a policy to a potential applicant. D. An applicant submits an application to the insurer.

D. An applicant submits an application to the insurer

An insurance company sells an insurance policy over the phone in response to a TV ad. Which of the following best describes this act? A. Independent agency marketing B. Illegal C. Insurance telemarketing D. Direct response marketing

D. Direct response marketing

An insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable. What contract characteristic does this describe? A. Conditional B. Contingent C. Aleatory D. Unilateral

A. Conditional

What is a material misrepresentation? A. Concealment B. A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company C. Any misstatement made by an applicant for insurance D. Any misstatement by the producer

B. A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company

An agent is acting ethically in all of the following situations EXCEPT A. Working within the conditions of his/her contract. B. Representing the insurer, not the insured. C. Keeping customers' best interests in mind. D. Always representing the insured.

D. Always representing the insured

According to the Law of Agency, a principal is represented by a/an A. Broker. B. Insured. C. Agent. D. Insurer.

C. Agent

Which of the following is true regarding a risk retention group? A. It is a benefit society formed to provide insurance for members of an affiliated lodge. B. It is a company owned by the stockholders that provides nonparticipating policies. C. It is a liability insurance company owned by its members. D. It provides support for underwriters and is not an insurance company.

C. It is a liability insurance company owned by its members

Which of the following is NOT a characteristic of an insurable risk? A. The loss must be measurable. B. The loss exposure must be large. C. The loss must be catastrophic. D. The loss must be due to chance.

C. The loss must be catastrophic

An insurance company receives an application with some information missing and issues the policy anyway. What is this called? A. Subrogation B. Aleatory C. Waiver D. Estoppel

C. Waiver