Review Questions: General Insurance

Which of the following statements is TRUE? Select one: a. Agents can bind coverage. b. Agents and brokers represent insurance companies c. Brokers cannot bind coverage. d. Agents in the field of Property and Causalty issue conditional receipts.

Agents can bind coverage.

Insurance companies incorporated under the laws of foreign countries are: Select one: a. Domestic companies. b. Foreign companies. c. Alien companies. d. None of the above.

Alien companies.

An insurance company that is licensed to do business in Louisiana is called: Select one: a. An authorized company. b. A fraternal company. c. Permitted company. d. Domestic company.

An authorized company.

ALL of the following are essential elements in an insurance contract EXCEPT: Select one: a. Counter-offer. b. Agreement. c. Consideration. d. Competent parties.

Counter-offer.

Oily rags stored in the insured's garage is an example of: Select one: a. Risk. b. Peril. c. Hazard. d. Loss.

Hazard.

What increases the chance of a peril occurring? Select one: a. Hazards b. Warranty c. Deductible d. Peril

Hazards

The tansfer of risk from one party to another for a price BEST defines: Select one: a. Pure risk. b. Speculative risk. c. Insurable interest. d. Insurance.

Insurance.

What part of an insurance contract would identify the nature of the coverage provided by the insurer? Select one: a. Endorsements. b. Insuring clause c. Conditions. d. Exclusions.

Insuring clause

ALL of the following is TRUE regarding a reciprocal insurance company EXCEPT: Select one: a. If funds are insufficient to pay claims, the subscribers can be assessed for additional revenue. b. It is managed by an attorney-in-fact. c. Each subscriber assumes part of the risk of all other subscribers. d. Members are grouped into syndicates.

Members are grouped into syndicates.

An insurance contract is a unilateral contract which means that: Select one: a. Both parties must give up something of value. b. Contract provisions are not required. c. Both parties must perform with utmost good faith. d. Only the insurer makes an enforceable promise.

Only the insurer makes an enforceable promise.

A deductible in an insurance contract is an example of which means of handling risk? Select one: a. Retention. b. Control. c. Avoidance. d. Transfer.

Retention.

ALL of the following are methods of handling risk EXCEPT: Select one: a. Risk transfer. b. Risk retention. c. Risk elimination. d. Risk reduction.

Risk elimination.

Company X has 5,000 policyholders. Company Y has 25,000 policyholders. Company Y is able to make more acurate predictions concerning the number of claims it will have to pay than Company X because of: Select one: a. The ability to make accurate predicitons and law of large numbers. b. As the number of risks increases, the ability to make accurate predictions increases also. c. Law of large numbers. d. Quantity accumulatio

The ability to make accurate predicitons and law of large numbers.

Which of the following BEST describes risk? Select one: a. Chance for gain or loss. b. Decrease of economic value. c. Original cause of loss. d. Uncertainty of loss.

Uncertainty of loss.

What is the voluntary abandonment or extinguishment by a party of a legal right or advantage? Select one: a. Waiver b. Estoppel c. Representation d. Warranty

Waiver

An agent's authority to represent the principal may be: I. Implied. II. Specific or expressed. III. Apparent. Select one: a. I only. b. I and II. c. I, II and III. d. III only.

I, II and III.

A mutual insurance company is: I. A full-fledged insurance organization operated on a non-profit basis. II. Owned by policyholders. III. Controlled by trustees and officers. Select one: a. I only. b. II only. c. I, II, and III. d. III only.

I, II, and III.

Which of the following are defined as part of the consideration of an insurance contract? I. Statements made in the application by the insured. II. Payment of the premium. III. Assumption of responsibility by the insurer. Select one: a. I and II. b. I, II and III. c. II and III. d. III only.

II and III.

Each of the following possesses a valid insurable interest EXCEPT: Select one: a. A father concerned about insuring the residence of his son. b. A person who owns a home. c. Bank holding a mortgage on someone else's home. d. A condominium unit owner.

A father concerned about insuring the residence of his son.

A stock insurance company is: Select one: a. Any insurance company incorporated in and having its home office in Louisiana. b. An insurance company incorporated in some other state, but having its executive or home office in Louisiana. c. An insurance company owned and controlled by the policyholder and directly managed by a board of trustees or directors who are chosen by the policyholder. d. An insurance company with a stated amount of capital stock owned by stockholders who compose the company.

An insurance company with a stated amount of capital stock owned by stockholders who compose the company.

ALL of the following would guard against adverse selection EXCEPT: Select one: a. Rating-up substandard risks. b. Common policy exclusions. c. Endorsement waiving a specific condition from the coverage. d. Inclusion of a deductible.

Inclusion of a deductible.

Restoring an insured to the economic position enjoyed prior to a loss is: Select one: a. Insurance b. Indemnificationc. Insured. d. Uncertainty.

Indemnification

Which of the following terms means that the purchaser of insurance MUST be in a position to lose money or something of value if the contingency insured against should happen? Select one: a. Insurable interest b. Adhesion c. Indemnification d. Executory

Insurable interest

ALL of the following are TRUE about insurable risk EXCEPT: Select one: a. The law of large numbers should apply. b. The loss must not be catastrophic in nature. c. The loss must not be definite and definable. d. The loss must be large enough to create hardship.

The loss must not be definite and definable.

Which of the following conditions is NOT required to be met before coverage is procured through the surplus lines market? Select one: a. The coverage must be procured through a licensed surplus lines broker. b. The coverage must be unavailable from any admitted insurer. c. An effort must be made to first place the coverage through an admitted insurer. d. The price for the coverage must be higher in the surplus market than what is charged by admitted insurers.

The price for the coverage must be higher in the surplus market than what is charged by admitted insurers.

Which of the following is the CORRECT term when a contract is prepared by one party and submitted to the other party on a take-it or leave-it basis and where there is no bargaining power on the wording of the contract? Select one: a. Adhesion. b. Aleatory. c. Conditional. d. Valued contract.

Adhesion.

A peril can be defined as: Select one: a. Condition increasing the chance of loss. b. One time event definite in time and place. c. Transfer of pure risk. d. Cause of a loss.

Cause of a loss.

What permits an insurer to transact insurance in Louisiana? Select one: a. Certificate of authority b. Agents agreements. c. An official appointment. d. Show cause hearing.

Certificate of authority

Which of the following would constitute ACCEPTANCE of an offer for insurance? Select one: a. Silence on the part of either party. b. Issuance of a counter-offer by the insurer. c. Completion of an application by a prospective insured. d. Issuance of a binder by the agent.

Issuance of a binder by the agent.

A non-admitted insurer is: Select one: a. Required to participate in the Property and Casualty Guaranty Association. b. Not licensed to transact business in Louisiana. c. Not licensed to transact business outside Louisiana. d. A member of the Louisiana Automobile Insurance Plan.

Not licensed to transact business in Louisiana.

ALL of the following are TRUE of appointed Property and Casualty Agents EXCEPT: Select one: a. They act on behalf of the insurer. b. They act on behalf of the insured. c. They are authorized to solicit contracts of insurance. d. Their actions and knowledge are binding on the insurance company.

They act on behalf of the insured.