General Insurance Quiz I

What is a material misrepresentation?

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

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

A peril

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.

The risk management technique that is used to prevent a specific loss by not exposing oneself to that activity is called

Avoidance

What is reinsurance?

An agreement between a ceding insurer and assuming insurer

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?

Apparent

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

Certificate of Authority

Which statement regarding insurable risks are NOT correct?

Insureds cannot be randomly selected.

Which of the following is true regarding a risk retention group?

It is a liability insurance company owned by its members.

The risk of loss may be classified as

Pure risk and speculative risk

What method do insurers use to protect themselves against catastrophic losses?

Reinsurance

Adverse selection is a concept best described as

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

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

The applicant has prior felony conviction

In insurance policies, contract ambiguities are automatically ruled in the favor of the insured. What privilege does the insurer have in order to balance this?

The right to determine the wording of a policy

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