Insurance chapter 1

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

A tornado that the stories property would be an example of?

A peril

And insured who has recovered for all of his personal property has his TV stolen from the shop of a repair man. The owner of the repair shop filed a claim under the insured policy but it paid nothing to the owner of the store. What provision does the policy have?

No benefit to bailee clause

On 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

in insurance, and offer is usually made when

When the application is submitted correctly

What is issued by the state department of insurance to show that the insurer has power through right insurance contracts in that state?

Certificate of authority

In the event of a loss covered by the policy, if the insurer request a sign sworn proof of loss, the name insured is required to submit within

A specified time

A person who is not named as an insured 08 declaration page of a policy but is protected by the policy is known as the

Additional insured

What is not an example of an agent acting ethically ?

Always representing the insured

An Insurance producer who buy contract is bound to write insurance for only one company or group of companies is classified as

Captive agent

An Insured business is damage because of a fire, and he is forced to close the business temporarily for repairs. As a result, the insured lost income. What type of loss is this?

Consequential

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

Consideration

Representation are written or oral statementsmade by the applicant that are

Considered true to the best of the applicants knowledge

What are the examples of risk retention?

Deductibles, copayments, and self insurance

When insurance coverage is written on an actual cash value bases, losses paid or for the replacement cost minus what?

Depreciation

What is the purpose of the coinsurance clause found in property insurance policies

Encourage the insured to insure the property closer to its full value

John fails to pay the premium on a personal line property policy. John policy can be canceled if

His policy has been in effect for at least 60 days

What is the major difference between a stock company and a mutual company?

Ownership

An insured is no longer required to perform many physical activities so he has implemented a program where he walked and jogged for 45 minutes each morning. The insured has also eliminated most fatty foods from his diet which method of dealing with the rest does this scenario described?

Reduction

And insurance company is domiciled in Montana transact Insurance in Wyoming. What term best describes the insurer classification in Wyoming?

foreign

Hazard is best defined as

Something that increases the risk of loss

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

Insurance

Using an air cooled engine a proposed insured has developed a new experimental aircraft. If the inventor applies for liability insurance, what rating type will the insurer most likely use?

Judgment

Adverse selection is best described as

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

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

Company

And Apple can't knowingly fails to communicate information that would help an underwriter makes a sound decision regarding coverage. This is an example of

Concealment

Not all losses are insurable and there are certain requirements that must be met before a risk is a proper subject for insurance, what is not an example of a requirement?

The loss may be intentional

What is the authority that an agent can hold?

Express and implied

The policy conditions define

How parties to the contract must act following a loss

A person who does not lock the doors or does not repair leaks show and in different attitude. This person presents what type of Hazard?

Morale

What statement is an accurate comparison between private and government Insurer

Private insurers may be authorized to transact Insurance by state insurance department

What is the most common way to transfer risk?

Purchase insurance

The risk of loss may be classified as

Pure risk and speculative risk

What is not a characteristic of an insurable risk?

The loss must be catastrophic

When an individual purchase Insurance what risk management technique is practicing?

Transfer

When an individual purchases Insurance, what risk management technique is he or she practicing?

Transfer

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 Element does this describe?

Unilateral

According to the law of agency, a principal is represented by an

Agent

What is reinsurance?

An agreement between a ceding insurer and assuming insurer

What is a foreign insurer?

And insurer with a home office in another state

What is owned by a corporation to serve that organization's needs at lower rates than would otherwise be available with commercial insurance?

Captive insurer

The section of an insurance policy that details what perils are not insured against and what person are not insured is known as the

Exclusion

Which of the following is a unit of measurement and underwriting uses when determining the premium rates for insurance

Exposure

The authority granted to an agent through the agent contract is referred to as

Express authority

What type of reinsurance arrangement is negotiated on a case-by-case basis?

Facultative

What entity is not an insurer but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization?

Fraternal benefit society

What is defined as the cost to replace damage property with less expensive and more modern construction or equipment?

Functional replacement cost

When would A misrepresentation on the insurance application to be considered fraud?

If it is intentional and material

What authority is not stated in an agent contract but is required for the agent to conduct business?

Implied

Chords will interpret any ambiguity in an insurance contract in favor of who

In favor of The insured

What statement regarding insurable risk is not correct?

Insureds cannot be randomly selected

When agents are acting within the scope of their contract, their actions will be assumed to be the acts of the

Insurer

What is not conditions commonly found in the insurance policy

Insuring agreement

The insurer may suspect that a moral hazard exists if the policyholder

Is not honest about his health on an application for insurance

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

What is a written or printed untrue statement that damages a person reputation?

Libel

And insurance organization does not issue insurance policies that provides a meeting place for underwriters to conduct business is known as a

Lloyds association

Insurance is a contract by which one seeks to protect another from

Loss

The reduction decrease or disappearance of value of the person or property insured in a policy by a peril insured against is known as

Loss

Rates that are established based on the similarities of the risk with all the risks are known as

Manual rates

An insured stated on her application for life insurance that she never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. What will explain the reason a death benefit claim is denied?

Material misrepresentation

And insured purchased an insurance policy five 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 purchased the policy?

Mutual

A participating insurance policy may do what?

Pay dividends to the policyowner

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

Perils

What is not an example of rest retention?

Premiums

If a court ordered payment for a loss that was not covered in the policy even if it was clearly worded, it would be an example of which legal concept?

Reasonable expectation

What is an Insurance option that would be considered a risk sharing arrangement?

Reciprocal

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

Reduction

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

Reinsurance

What is not a marketing arrangement use my insurer?

Reinsurance system

What is not an Insurance agent responsibility?

Represent the client

Adverse selection is a concept best described as

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

What clause in insurance policies allows the insured to sell the damage property to recover part of the paid loss

Salvage

When The amount of insurance written in a property policy is not Subject to any coinsurance provision and that amount is paid in the event of a covered loss, the coverage is said to be written as

Stated amount

What insurers are owned by stockholders who have the usual rights of ownership, including the right of voting?

Stock

What is not a consideration in a policy

The Application given to A prospective insured

Peril is most easily defined as

The cause of loss insured against

What is a characteristic of a reciprocal insurance exchange

The chief administrator of the insurer is called an attorney in fact

An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible?

The insured will need a written consent of the insurer

If an insurance premium is paid by the policy owner to the agent and the agent fails to remit the premium to the insurer, what will happen?

The policy will not lapse since the payment to the agent is the same as the payment to the insurer

What is not a goal of risk retention?

To minimize the insured's level of liability in the event of a loss