Life/Health - A.D. Banker - Chapter 1

A false statement in the application that can render the contract void, if material to the acceptance of the risk, is known as a: A Condition B Misrepresentation C Concealment D Fraud

B A misrepresentation can render the contract void, if material to the acceptance of the risk.

_____________ consists of groups of underwriters called syndicates, each of which specializes in insuring a particular type of risk. A Reciprocal insurers B Risk retention insurers C Lloyds of London D Self insurers

C Lloyds of London is not an insurance company where members are individually liable for each risk they assume.

The State's __________ branch enforces the existing statutes that have been put in place. A Judicial B Electoral C Executive D Legislative

C The State's executive branch enforces the existing statutes that have been put in place.

Dividends issued by Stock insurers are paid to: A Service providers B Agencies C Policyholders D Stockholders

D Stockholders may receive taxable corporate dividends as a share of the stock insurer's profit.

Insurance ____________ are captive or independent organizations that recruit, contract with, train, and support insurance producers. A Producers B Personal producing general agents C Companies D Agencies

D Agencies are responsible for recruiting, contracting, training, and supporting insurance producers.

An insurer authorized to do business within this state is considered what type of insurer? A Foreign B Domestic C Alien D Admitted

D An insurer authorized to do business in this state is referred to as admitted, and could be either domestic, foreign, or alien domiciled.

Which of the following is NOT considered one of the essential elements of a contract? A Competent Parties B Offer and Acceptance C Legal Purpose D Conditions

D The essential elements of a contract are offer and acceptance, consideration, competent parties, and legal purpose. Remember the acronym: CLOC.

An insurer which is formed under the laws of another country is a(n): A Foreign insurer B Domestic insurer C Alien insurer D Non-authorized insurer

C An insurer that is incorporated or organized in another country is called a alien insurer.

An unincorporated organization that is formed by individuals, firms, and business corporations that exchange insurance on one another and whose members are known as subscribers is called a: A Reciprocal Insurance Company B Fraternal Benefit Society C Mutual Insurance Company D Risk Retention Group

A A Reciprocal Insurance Company is a group-owned insurer whose main activity is sharing risk. Each subscriber assumes part of the risk and may be called upon to pay additional premiums if losses are greater than expected.

Which of the following manufactures and sells insurance coverage in the form of insurance policies or contracts of insurance? A Insurance agents B Insurance companies C Applicants/insureds D Insurance agencies

B Only insurers can manufacture and issue insurance policies or contracts.

Statements made on the application by the applicant that are believed to be true to the best of his/her knowledge are: A Warranties B Representations C Waivers D Conditions

B Statements made on the application by the applicant that are believed to be true to the best of his/her knowledge, but are not guaranteed to be true, are known as representations.

The State's __________ branch enforces the existing statutes that have been put in place. A Legislative B Executive C Judicial D Electoral

B The State's executive branch enforces the existing statutes that have been put in place.

Travis owns his own insurance agency and sells and places business with 12 different insurers, each of which he represents by contract. Travis is a(n): A Captive Agent B Independent Agent C Direct Writer D Direct Marketer

B The question establishes that Travis is the owner of his own agency and is not limited as to the number of insurers he represents.

A contract that is drafted by an insurer and receives no input or alteration from the insured, is considered a(n): A Aleatory Contract B Unilateral Contract C Contract of Adhesion D Conditional Contract

C A Contract of Adhesion is submitted on a take it or leave it basis.

_________ refers to the jurisdiction where an insurer was formed or incorporated. A Authorized B Admitted C Domicile D Approved

C Domicile refers to the jurisdiction either state or country where an insurer was formed or incorporated.

___________ manufacture and sell insurance coverage in the form of policies or contracts of insurance. A Producers B Agencies C Insureds D Insurers

D Insurers manufacture and sell insurance policies through agencies and producers to applicant/insureds.

Statements made on the application by the applicant that are believed to be true to the best of his/her knowledge are: A Waivers B Warranties C Conditions D Representations

D Statements made on the application by the applicant that are believed to be true to the best of his/her knowledge, but are not guaranteed to be true, are known as representations.

Under the Fair Credit Reporting Act, which of the following statements is correct? A The Act is designed to protect reporting agencies from the public B The reporting company can provide confidential information to anyone requesting it C The reporting agency has no responsibility to investigate inaccurate information D If an individual is denied coverage, they can request a copy of the report

D The FCRA is designed to protect the public and requires the reporting agency to investigate disputed information. The applicant has the right to request a copy of the report from the reporting agency. This act protects confidential information.

For the most part, the highest authority for insurance regulation is: A The Interstate Commerce Commission (ICC) B The individual states C The National Association of Insurance Commissioners (NAIC) D The Federal Trade Commission (FTC)

B States have the authority to regulate insurance without interference from federal regulation, unless federal law specifically provides otherwise.

The Financial Privacy rule requires insurers to provide consumers with a privacy notice: A At time of application and monthly thereafter B At the time the consumer relationship is established and annually thereafter C At the time of policy delivery and quarterly thereafter D With each billing statement

B The Financial Privacy rule requires insurers, to provide each consumer with a privacy notice at the time the consumer relationship is established and annually thereafter.

The ___________ branch is responsible for interpreting and determining the constitutionality of the statutes. A Judicial B Legislative C Electoral D Executive

A The judicial branch is responsible for interpreting and determining the constitutionality of the statutes.

A statement that a person makes and guarantees to be true is a: A Warranty B Representation C Closely held belief D Fact

A Warranties are statements of absolute truth. Representations are statements made to the best of one's knowledge and belief.

When both parties must perform certain duties and follow certain rules of conduct to make a contract enforceable refers to a(n) __________ contract. A Conditional B Personal C Acceptable D Aleatory

A When the insured has complied with all of the policies terms and conditions as well as paying the premium in full and on time, then the insurer must pay the claim in a timely fashion when filed.

An applicant completes the application and submits it to the insurer along with a premium check. When is the applicant's offer considered accepted? A Only after the policyowner completes any required medical exams B When the insurer issues a policy C Upon cashing the premium check D When the application and premium check arrive at the insurer's home office

B The applicant's offer to be insured is accepted when the insurer issues a policy.

The insurance industry is primarily regulated at the _________ level. A Federal B State C County D Insurers

B The states have primary responsibility for regulating the insurance industry.

This organization is licensed in one state and may insure members in other states consisting of a large number of similar units with similar risk exposures such as theme parks, go-cart tracks, or water slides is known as a(n) _________. A Reciprocal Insurance Company B Fraternal Benefit Association C Risk Retention Group D Lloyd's of London Association

C A risk retention group is a group owned insurer that primarily assumes and spreads the liability of related risks of its members with each member assuming a portion of the risks insured.

Larry owns an insurance contract issued by the ABC company that contains words and phrases that are ambiguous to Larry. If ABC challenges a claim based on these phrases they will lose because an insurance contract is deemed to be a contract of: A Indemnity B Reasonable expectations C Adhesion D Utmost good faith

C In a contract of adhesion, ambiguity and questionable wording is construed against the party who drew up the contract (ABC Insurance Company) because the applicant had no say in how it was written.

With health and life insurance a/an _________ is required at the time of the application. A Indemnity interest B Beneficiary status C Insurable interest D Ownership right

C Insurable interest must exist at the time of application, or policy effective date.

The __________ monitors the insurance industry and identifies issues and gaps in the state regulation of insurers. A National Association of Insurance Commissioners (NAIC) B Securities and Exchange Commission (SEC) C Federal Insurance Office (FIO) D Financial Industry Regulatory Authority (FINRA)

C It is the job of the FIO to monitor the insurance industry and identify issues and gaps in the state regulation of insurers.

Which of the following statements is true? A Insurer X rates the insured based on health reasons. X accepted an offer and the policy is in effect B Q completes an application and submits it to the insurer. Q made an offer C Q completes an application and submits it with premium to the insurer. Q made an offer D Insurer X issues a policy with an outstanding premium requirement. X accepted an offer and the policy is in effect

C Offers must be accepted prior to contracts coming into being.

If a life insurance applicant's answers on the application indicate that he/she is in good health, when in fact the applicant has a disease that he/she is not aware of, the statement on the application is considered: A Fraudulent B A warranty C A representation D A concealment

C Representations are statements which are 'true and complete to the best of one's knowledge.' Warranties are statements of absolute truth. Concealments occur when known information is not communicated.

The ____________ has the power to issue rules and regulations to help enforce insurance statutes.

C The Commissioner has the power to issue rules and regulations to help enforce insurance statutes.

A(n)____________ is the person or entity that is covered by an insurance policy. A Producer B Owner C Insured D Agency

C The insured is the person whose life is being used for insurability purposes for a life and/or health insurance policy.

When two parties rely upon the statements and promises of the other and assume no attempt to conceal or deceive means that the contract was entered into upon the basis of: A Equal consideration B Sound business practices C Reasonable expectations D Utmost good faith

D This is one of the characteristics of an insurance contract and is the definition of utmost good faith.