Risk management final review

Which of the following statements about an earthquake endorsement for a homeowners policy is (are) true? I. The endorsement also covers landslides and volcanic eruptions. II. The coverage for earthquakes is written without a deductible.

I only

All of the following statements about the Medicare prescription drug benefit are true EXCEPT

coverage is limited to when a beneficiary is hospitalized or a resident of rest home.

As an alternative to demutualizing, Big Mutual Insurance Company reorganized itself into a corporate form that can directly or indirectly own a stock insurance company. This form of organization is called a(n)

holding company.

One benefit payable under a typical no-fault plan is "essential services expenses." Which of the following would be covered under this benefit?

housekeeping expenses

Liability may arise because of a method of collecting oil or natural gas. Under this collection method, a high-pressure flow of fluid is injected underground. This collection method is called

hydraulic fracturing.

Cal was just hired as XYZ Company's first risk manager. Cal would like to employ the risk management process. The first step in the process Cal should follow is to

identify potential losses faced by XYZ Company.

Bruce lied about his health history when he purchased a life insurance policy. He died 3 years after the policy was issued. Which life insurance policy provision will require the life insurer to pay the beneficiary even though Bruce lied on the application?

incontestable clause

A score derived from an individual's credit history and other factors that is used by many auto and homeowners insurers for underwriting and rating purposes is called a(n)

insurance score.

The purpose of the Miscellaneous-Type Vehicle Endorsement to the PAP is to

insure motorcycles, mopeds, motor scooters, and similar vehicles.

All of the following statements about current assumption whole life insurance are true EXCEPT

it is a form of participating whole life insurance that pays annual dividends.

Arguments often used against no-fault automobile insurance laws include all of the following EXCEPT

it is often difficult to determine which driver was negligent when a multiple-vehicle accident occurs.

Which of the following is a noneconomic cost associated with premature death?

loss of a parental role model

The basic purpose of FAIR plans is to provide

property insurance to persons who cannot obtain it in normal markets.

Jim and Paula Franklin started a dry cleaning business. The business may be successful or it may fail. The type of risk that is present when either a profit or loss could occur is called

speculative risk.

Which of the following is a provision of the Affordable Care Act?

prohibition of harmful practices by insurers.

Millie is risk manager of JKL Company. She is considering an investment in a loss control project. The project will cost $40,000. Assuming a 10 percent discount rate, the present value of the future net cash flows that this project will generate is $60,000. What is the net present value (NPV) of this project?

$20,000

Sarah is using the needs approach to determine how much life insurance to buy. Her cash needs are $30,000; her income needs are $140,000; and special needs are $100,000. Sarah has the following assets: $20,000 in bank accounts, $30,000 in retirement plans, and $40,000 in investment accounts. Sarah owns no individual life insurance. She is covered by a $50,000 group life insurance policy through her employer. Based on this information, how much additional life insurance should Sarah purchase?

$130,000

XYZ Insurance Company uses class rating to determine the rate to charge for insurance. For one type of insurance, the pure premium XYZ actuaries calculated is $75 per unit. If XYZ's expense ratio is 25 percent, what is the gross rate for this coverage?

$100.00

David has a Homeowners 3 policy that provides $280,000 of insurance on his dwelling, which has a current replacement value of $400,000. Ignoring any deductible, how much will David collect if a roof with a replacement value of $16,000 but an actual cash value of $10,000 is destroyed in a fire?

$14,000

Some states have enacted laws which prohibit uninsured drivers from suing a negligent driver for noneconomic damages, such as pain and suffering. These laws are called

"no pay, no play" laws.

Brad owns a cash value life insurance policy. Last year, the cash value increased by $300. Brad received $100 in policyowner dividends on the policy last year. Brad was the beneficiary named in his grandmother's $50,000 life insurance policy. When she died this past year, Brad received $50,000. How much taxable income relating to life insurance must Brad report for federal income tax purposes?

$0

Steve was involved in an auto accident. Both drivers were partially at fault for the accident. Steve's actual damages were $50,000. He was judged to be 60 percent at fault. If Steve's state has a 51 percent rule for comparative negligence, how much will Steve collect?

$0

According the 2001 CSO mortality table, the yearly probability of dying for a 40 year-old man is .00165. The present value of $1 one year from today, assuming a 5.5 percent interest rate, is .9479. What is the net single premium per $1,000 for a one-year term insurance policy sold to a man at age 40 assuming a 5.5 percent interest rate? Assume the premium is paid at the start of the year and the death benefit is paid at the end of the year.

$1.56

ABC Company in considering a loss control investment. The project will cost $100,000. It will generate an after-tax net cash flow of $60,000 one year after investment and an after-tax net cash flow of $60,000 two years after investment. The present value of $1 received one year from today assuming a 6 percent rate is .9434. The present value of $1 received two years from today assuming a 6 percent interest rate is .8900. Assuming a discount rate of 6 percent, what is the net present value (NPV) of this project?

$10,004

An Inter-Ocean Transfer cargo ship was forced to jettison some cargo in heavy seas. The various interests in the voyage at the time the property was jettisoned were

$160,000

Beth purchased a $50,000 nonparticipating whole life insurance policy. The annual premium was $1,278. The cash value of the policy after 10 years will be $13,740. The future value of $1 deposited at the start of the year for 10 years, assuming 5 percent interest, is $13.207. If the premiums were invested at 5 percent interest for 10 years, the premiums would grow to $16,878.55. Assuming 5 percent interest, what is the net payment cost of this policy, per thousand per year, over the first 10 years the policy is in force?

$25.56

Frank's property insurance requires periodic reporting of inventory values. Frank believes he can save money by under-reporting the inventory. Last period, Frank reported $200,000 when the value was really $400,000. Shortly after filing the report, when the value was $500,000, the inventory was destroyed. Ignoring any deductible, how much will Frank's insurer pay?

$250,000

Beth purchased a $50,000 nonparticipating whole life insurance policy. The annual premium was $1,278. The cash value of the policy after 10 years will be $13,740. The future value of $1 deposited at the start of the year for 10 years, assuming 5 percent interest, is $13.207. What is the traditional net cost of this policy, per thousand per year, over the first 10 years the policy is in force?

-$1.92

Which of the following $100,000 whole life insurance policies, issued by the same company to a man age 32, would require the highest first-year premium?

10-payment whole life

A company has a fleet of 200 vehicles. On average, 50 vehicles per year experience property damage. What is the probability that any vehicle will be damaged in any given year?

25 percent

Which of the following statements about group insurance underwriting principles is true?

A flow of people through the group is desirable.

Which of the following statements about types of property covered under the Personal Articles Floater is true?

A higher premium must be paid to insure musical instruments if they are played for pay.

Which of the following statements about Social Security disability benefits is true?

A strict definition of disability is used in the Social Security program.

Which of the following statements about retirement benefits under pension plans is true?

A unit-benefit formula considers both earnings and years of service.

Which of the following statements is true regarding unsatisfied judgment funds?

An accident victim must have exhausted other means of recovery before collecting from the fund.

Which of the following statements about the eligibility requirements for group insurance is true?

An employee must be actively at work on the day the employee's group insurance becomes effective.

Ann Parks and Robert Evans jointly own a grocery store. Ann and Robert are both named insureds on the property insurance covering the store, but Ann is the first named insured. Which of the following statements is true with regard to Ann's status as the first named insured?

Ann is responsible for making sure that the premium has been paid.

State X hired Build-Right Construction to build a bridge. State X required that construction be completed within 2 years after the contract was signed. Les Johnson is the president of Build-Right. State X required that Build-Right's promise to perform be guaranteed by a third party. Build-Right purchased a performance bond from Rock Solid Indemnity. The bond requires Rock Solid to be responsible if Build-Right does not have the project completed on time. In this scenario, which party is the principal?

Build-Right Construction

Which of the following forms is used to insure buildings that are under construction?

builders risk coverage form

Which of the following statements about Lloyd's of London is true?

Coverage is actually written by syndicates who belong to Lloyd's of London.

Which of the following statements about the personal liability coverage (Coverage E) of an unendorsed homeowners policy is true?

Coverage is provided for bodily injury liability.

Which of the following statements about group long-term disability income plans is true?

Coverage is provided for both occupational and nonoccupational disabilities.

Which of the following statements about the medical payments coverage of the PAP is true?

Covered expenses must be incurred within 30 days of the accident.

Which of the following statements about Section 401(k) plans is true?

Elective salary deferrals to these plans are free of federal income taxation until the funds are actually withdrawn.

Jenny purchased a Personal Auto Policy (PAP) that included property damage liability, collision coverage, medical payments coverage, and other-than-collision coverage. Jenny had too much alcohol to drink at a graduation party. While driving home from the party, Jenny ran off the road and hit a tree. Police responded to the accident, and Jenny was arrested for driving under the influence of alcohol. Which of the following statements is true regarding the damage to Jenny's car?

Damage to the car is covered under Jenny's collision coverage.

Which of the following statements about a warranty in an insurance contract is (are) true? I. It is part of the insurance contract. II. Statements made by an insurance applicant are considered warranties rather than representations.

I only

Valerie's home does not qualify for coverage under a standard homeowners policy. Valerie would like to have "open-perils" (all-risks) coverage on her dwelling and named-perils coverage on her personal property. Which of the following policies should Valerie purchase?

Dwelling Property 3-Special Form

Which of the following statements regarding the Emergency Unemployment Compensation (EUC) program is true?

EUC benefits are funded entirely by the federal government.

Under financial responsibility laws, proof of financial responsibility is generally required under which of the following circumstances?

Failure to pay a final judgment resulting from an auto accident

Helen and John both own automobiles on which they carry liability insurance. If Helen is negligent and has an accident while driving John's car with his permission, how will each insurer respond to any liability judgment against Helen?

Helen's insurance will pay on an excess basis if John's insurance is insufficient to cover the judgment.

Donna, age 50, is single and earns $40,000 annually. She is covered under her employer's retirement plan. Donna would like to start a traditional IRA and contribute $4,000 this year. Which of the following describes her ability to establish a traditional IRA and the tax treatment of her contribution?

Her contribution is fully tax deductible.

Which homeowners policy is designed for the tenants of a rented premises?

Homeowners 4

Arguments in favor of reforming the civil justice system include which of the following? I. There is often a long delay in settling lawsuits. II. Compensation awards have decreased significantly over the past two decades.

I only

Which of the following statements concerning social insurance benefits is (are) correct? I. Social insurance benefits are heavily weighted in favor of upper-income groups because of their higher earnings. II. Social insurance benefits are financed entirely or in part by mandatory contributions by covered employers and employees, and not by general revenues of the government.

II only

Which of the following statements is (are) true about the loss ratio method of class rating? I. The pure premium is calculated, and it is loaded to cover expenses, profit, and contingencies. II. The actual loss ratio is compared to the expected loss ratio, and the rate is adjusted accordingly.

II only

Which of the following statements about the impact of the implementation of the Affordable Care Act (ACA) on workers compensation is true?

Implementation of the ACA will create higher healthcare provider prices.

Which statement is true with regard to problems and issues with tax-deferred retirement plans in the United States?

Inadequate participation in employer-sponsored retirement plans can create economic insecurity for retired employees.

Which of the following statements is true regarding insurance market conditions and underwriting results?

Insurance rates are high and underwriting standards are tight when the insurance market is "hard."

Which of the following statements regarding insurance and hedging is true?

Insurance reduces objective risk while hedging involves only risk transfer and not risk reduction.

James purchased liability insurance with a $100,000 limit from Insurer A. When Insurer A denied a claim that James thought should be covered, he bought a second liability insurance policy with a $150,000 limit from Insurer B. Before he cancelled the policy with Insurer A, a $60,000 loss occurred. If this loss is settled on a pro rata basis, how much must each insurer pay?

Insurer A will pay $24,000 and Insurer B will pay $36,000.

Jane purchased a $50,000 liability insurance policy from Insurer A. Fearing that she did not have enough liability insurance, she purchased an additional $100,000 of liability coverage from Insurer B. As a result of a negligent act, Jane was ordered to pay $75,000 in damages. Assuming the coverage from Insurer A is primary and the coverage from Insurer B is excess, how will this claim be settled?

Insurer A will pay $50,000 and Insurer B will pay $25,000.

An armed robber pulled a gun on a teller at the Fourth National Bank. He made off with over $10,000 in cash. Which insuring agreement in a financial institution bond is designed to cover such losses?

Insuring Agreement B-On Premises

A Pony Express Armored Car was transporting bank receipts from six branch banks to the main bank. A group of robbers staged a daring robbery. They forced the armored car off the road, shot two guards, and took over $120,000 in cash. Which insuring agreement in a financial institution bond would cover the stolen money in this case?

Insuring Agreement C-In Transit

Fifth National Bank decided to loan $200,000 to Fred Franklin. As collateral for the loan, Fred posted stock certificates. When Fred defaulted on the loan, Fifth National tried to sell the stock. They discovered the stock certificates were stolen from someone else. Which insuring agreement in a financial institution bond is designed to cover such losses?

Insuring Agreement E-Securities

Tenth National Bank extended a $2 million loan to ABC Development Company. Tenth National accepted a mortgage on a building as collateral for the loan. The mortgagee's signature on the loan, however, was a forgery. The resulting loss is covered by which financial institution bond coverage?

Insuring Agreement G-Fraudulent Mortgages

Which of the following statements describes a Difference in Conditions (DIC) Policy?

It is an open perils policy that covers perils not insured by basic property insurance contracts.

Which statement is true about medical expense coverage under the boatowners package policy?

It pays the medical expenses of a covered person who is injured while in the boat.

Which of the following statements about re-entry term insurance is true?

It permits a lower renewal premium if the insured demonstrates insurability.

Which of the following statements describes how losses will be settled if a property insurance policy is written on a replacement cost basis?

Losses are settled without a deduction for depreciation.

Which of the following is a general exclusion under Section I of the Homeowners 3 policy?

Losses due to the failure of the insured to use all reasonable means to save and preserve property after the time of a loss.

Glenda insured her home for its full replacement cost under an unendorsed Homeowners 3 policy. Which of the following statements is true?

Losses to the dwelling and other structures are settled on a replacement cost basis.

New Jersey's dollar-a-day auto insurance coverage is limited to

Medicaid recipients.

The Affordable Care Act has a provision that expands a public assistance program designed to make health coverage available to low-income individuals by increasing the maximum amount of income that can be earned and still qualify for benefits. As a result, millions of individuals are eligible for coverage under this program. This public assistance program is called

Medicaid.

One source of life and health insurance underwriting information is an organization that life and health insurance companies can join. As a member, life and health insurance companies report health impairments of applicants, and this information is shared with member companies. Although the information is shared, the underwriting decision of the member company is not disclosed. What is this organization called?

Medical Information Bureau (MIB)

Which of the following statements about the coverage for medical payments to others (Coverage F) under the homeowners policy is true?

Medical expenses incurred within 3 years of an accident are covered.

Which of the following statements about the characteristics of current no-fault laws is true?

Most laws permit payment of survivor benefits to a surviving spouse and children.

Which of the following statements about group short-term disability income plans is true?

Most plans provide benefits for total disabilities only.

Which of the following statements about the exclusive agency system for marketing property and liability insurance is true?

New exclusive agents may start as employees and after a training period become independent contractors.

Tom is planning to build a home. He is weighing many factors, including construction materials, location, and other considerations. Which of the following statements is true with regard to homeowners insurance and Tom's new home?

Older homes cost more to insure than newer homes.

Jack, owner of Jack's Bar and Grill, was robbed while attempting to deposit receipts at his bank's night depository. Jack had purchased an ISO commercial crime coverage form. This loss would be covered under which insuring agreement?

Outside the Premises

Which of the following statements about the financing of unemployment insurance benefits is true?

Part of an employer's contribution is used for administrative expenses, to fund extended benefits, and to maintain a loan fund that can be drawn upon if the state's account is depleted.

Which of the following statements about the additional coverage for damage to property of others in Section II of the homeowners policy is true?

Payments are made on the basis of the replacement cost of the damaged property.

Which of the following statements about covered perils and loss settlement under an unendorsed Homeowners 3 policy is true?

Personal property losses are settled on an actual cash value basis.

Monopoly Insurance is the only company marketing a certain line of insurance in a state. After complaints from several consumers, the State Insurance Department investigated Monopoly's rates. The regulators determined that Monopoly was taking advantage of being the only insurer offering the line by charging more than double the actuarial cost of the coverage. Which regulatory rating objective was Monopoly violating?

Rates must not be excessive.

Rita is 66 years old. She earned $20,000 this year working part-time at a store and her modified adjusted gross income was $28,000. Rita is considering making a $3,000 contribution to her traditional IRA. Which of the following statements is true regarding this contribution?

Rita can make a $3,000 contribution to her traditional IRA, and it is fully tax deductible.

What information is contained in the insuring agreement of an insurance policy?

a summary of the major promises of the insurer

State X hired Build-Right Construction to build a bridge. State X required that construction be completed within 2 years after the contract was signed. Les Johnson is the president of Build-Right. State X required that Build-Right's promise to perform be guaranteed by a third party. Build-Right purchased a performance bond from Rock Solid Indemnity. The bond requires Rock Solid to be responsible if Build-Right does not have the project completed on time. In this scenario, which party is the obligee?

State X

Which of the following statements about subrogation is true?

Subrogation helps to hold down the cost of insurance.

JKL Insurance Company estimates that 14 out of every 100 homeowners it insures will file a claim each year. Last year, JKL insured 200 homeowners. According to the law of large numbers, what should happen if JKL insures 2,000 homeowners this year?

The actual results will more closely approach the expected results.

Which of the following statements about group short-term disability income plans is true?

The amount of disability income benefits typically is equal to some percentage of a worker's normal earnings.

From the standpoint of the insurer, which of the following is a characteristic of an ideally insurable risk?

The chance of loss must be calculable.

What is the legal significance of a material misrepresentation in an insurance application?

The contract is voidable at the insurer's option.

Brian purchased an unendorsed Homeowners 3 policy. Under the policy, Brian's detached garage is also covered. Which of the following statements regarding coverage on the garage is true?

The cost of removing debris is included in the policy limit on the garage, but if the damage and cost of removing debris exceed the limit, an additional five percent of the policy limit is available.

Which of the following statements about subrogation is true?

The insured's right to collect benefits may be forfeited if the insured interferes with the insurer's subrogation rights after a loss occurs.

A property and liability insurance company's loss ratio and expense ratio, respectively, for 2013 — 2015 were: 2013: 74% 31% 2014: 68% 33% 2015: 66% 30% Which of the following statements is true about the company's underwriting results for this time period?

The insurer's profitability from underwriting has been improving each year.

XYZ Insurance Company writes coverage for most perils which can damage property. XYZ, however, does not write flood insurance on property located in flood plains. Which requirement of an ideally insurable risk might be violated if XYZ wrote flood insurance on property located in flood plains?

The loss should not be catastrophic.

Polly purchased a Homeowners 3 policy. She has a swing set in the backyard of her home. While her son and the neighbor's child were using the swing set, it collapsed. Both of the children required medical care. Which of the following statements is true?

The medical expenses of the neighbor's child are covered under the policy.

Which of the following statements about life insurance policy loans is true?

The policyholder must pay interest on a life insurance policy loan.

Which statement is true regarding the advanced premium tax credits for individuals and families under the Affordable Care Act?

The tax credit is based on income and is designed to limit the amount spent on health insurance premiums to make the insurance affordable.

Which of the following statements is true about fraternal insurers?

They specialize in writing life and health insurance.

Which of the following statements about nonforfeiture options found in life insurance policies is true?

Under the reduced paid-up option, no additional premiums must be paid.

Which of the following statements about mandatory provisions in individual health insurance policies is true?

Under the reinstatement provision, a health insurance policy that has lapsed can be put back in force.

Which of the following statements about the federal flood insurance program is true?

Under the write-your-own program, each insurer services the policies it writes.

Which statement is true regarding IRA distributions?

Unless a life annuity is issued, a retiree may still be alive when the IRA account is exhausted.

Which of the following statements is true with regard to defined benefit and defined contribution pension plans?

With a defined benefit plan, the retirement benefit is known is advance but the contributions vary; with a defined contribution plan, the contribution rate is fixed but the retirement benefit varies.

Which of the following statements about the withdrawal of funds from a traditional IRA is true?

Withdrawals must begin no later than April 1 of the year following the calendar year in which an individual attains age 70.5.

Which of the following is a covered person under the medical payments coverage of the PAP?

a family member of the named insured if struck by an auto while crossing the street

All of the following statements about inland marine forms are true EXCEPT

a jewelers block coverage form is used by individuals to insure jewelry limited in coverage by the homeowners form.

Under common law, which of the following persons is most likely to be classified as an invitee?

a mail carrier

All of the following are considered to be a covered auto under the Personal Auto Policy EXCEPT

a motorcycle owned by the insured.

The tax credit available through the Saver's Credit is equal to

a percentage of the contribution made to a traditional IRA, Roth IRA, 401-k, SIMPLE plan, or 403(B) plan.

Which of the following types of families is likely to have the least need for a large amount of life insurance?

a single person family

While the Homeowners Flood Insurance Affordability Act of 2014 rolled-back some premium increases in the Biggert-Waters Act, it included a provision to help fund the large deficit in the National Flood Insurance Program. The provision to help fund the deficit is

a surcharge on every flood insurance policy that is sold.

All of the following are considered to be uninsured vehicles for purposes of the uninsured motorists coverage of the PAP EXCEPT

a vehicle owned by an individual who purchased just enough liability insurance to satisfy the state's financial responsibility law.

During the funding period, the premiums paid for a variable annuity are used to purchase

accumulation units.

The primary purpose of coinsurance in property insurance is to

achieve equity in rating.

Mark owns a 2006 sedan. The last time Mark renewed his auto insurance, he decided to drop the physical damage insurance on this vehicle. How is Mark dealing with the auto physical damage exposure in his personal risk management program?

active retention

The production facility for ABC Manufacturing is located in a flood plain. Although the risk of flood is low, ABC's risk manager is concerned that a flood could damage the plant and equipment. He received bids on flood insurance from two insurance agents, but decided the cost of coverage was too high relative to the risk. So he did not purchase flood insurance. Which risk management technique is ABC using with respect to the risk of flood?

active retention

Roger owns some farmland that he rents to a tenant. The tenant lives in an old farmhouse on the property and raises crops on the land. Roger is concerned about possible legal liability if the tenant injures someone. Roger requires the tenant to have liability insurance and to add himself to the liability coverage through an endorsement. Under the tenant's liability insurance, Roger is a(n)

additional insured.

The tendency for unhealthy people to seek life or health insurance at standard rates is an example of

adverse selection.

What are the minimum age and service requirements that can be imposed on employees eligible to participate in a retirement plan?

age 21 and 1 year of service

The underwriting process begins with the

agent.

A contract in which the values exchanged are not equal because chance is involved is called a(n)

aleatory contract.

An insurance company chartered in another country has been licensed to operate in your state. In your state, the insurer would be considered a(n)

alien insurer.

Bruce believes a local manufacturer is responsible for contaminating some land he owns. He filed suit against the company. Rather than have the case go to court, the manufacturing company's legal team suggested mediation or arbitration to settle the case. Methods that are employed to resolve legal disputes without litigation, such as mediation, are called

alternative dispute resolution techniques.

A total loss under a valued policy is settled on the basis of the

amount of insurance covering the loss.

If a third party is led to reasonably believe that an agent is acting within the scope of his/her authority, even though the agent is exceeding his/her authority, the principal may still be bound by the agent's actions. In this case, the agent has bound the principal by

apparent authority.

Bev lives in the suburbs and works downtown. She drives to work, and her most direct route to work would require her to pass through an area where carjackings and drive-by-shootings are common. Bev does not drive through this area. Instead, she uses a route which adds 10 minutes to her commute. Which risk management technique is Bev using with respect to the risk of injury while driving through the dangerous area?

avoidance

Why does the insured get the benefit of the doubt if an insurance policy contains any ambiguities or uncertainties?

because insurance contracts are contracts of adhesion

Temporary evidence of insurance until a policy is actually issued is provided by a(n)

binder

A common situation involving strict liability includes which of the following?

blasting operations

All of the following are exclusions in the homeowners policy that apply to medical payments to others (Coverage F) EXCEPT

bodily injury to persons who are social guests at the insured location.

Alternative techniques for resolving legal disputes without litigation include which of the following? I. Arbitration II. Mediation

both I and II

Nancy's employer provides an interesting employee benefit plan. Each employee is given 250 employee benefit credits to spend. A wide array of benefits is available, and the employee uses benefit credits to select the benefits that he or she wants. This type of employee benefit plan is called a(n)

cafeteria plan.

The terrorism risk in the United States

can be addressed through risk control and insurance.

Terrorists attacked the World Trade Center on September 11, 2001. The attack simultaneously created large losses for life insurers, property insurers, workers compensation insurers, health insurers, and liability insurers. What name is given to an event that simultaneously creates large losses in several lines of insurance?

clash loss

An emerging concern for risk managers is the greater volatility that has been observed in weather patterns-higher high temperatures, lower low temperatures, record rainfall, drought, etc. Collectively, this risk is called

climate change risk.

Ken purchased a PAP with liability limits of 100/300/50, medical payments coverage, and collision coverage. Ken fell asleep while driving late at night. He crossed the center line and hit a car approaching from the other direction. The following losses occurred. —The driver of the other car suffered $30,000 in bodily injuries. —Ken's car sustained $5,000 in damages. —Ken incurred $5,000 in medical expenses. —The car that Ken hit was a total loss. Which of Ken's Personal Auto Policy (PAP) coverages will cover Ken's medical expenses?

collision coverage

Janet hit a wall causing a large dent in the fender of her car. She was busy at work and delayed reporting the damage to her insurer for 9 months. When she finally reported the claim, her insurer denied payment, stating, "Although such a loss is usually covered, you are required under the terms of the contract to provide prompt notification in case of loss." The prompt notification requirement is an example of a(n)

condition

Liability arising out of work performed by independent contractors is referred to as

contingent liability.

A useful measure for an organization to monitor is the total expenditures for treating loss exposures including retained losses, loss control expenses, insurance premiums, and other related expenses. This measure is called the organization's

cost of risk.

Marcus is concerned that inflation will erode the purchasing power of the face value of his life insurance policy. His agent suggested that Marcus add a provision that allows him to purchase one-year term insurance equal to the percentage change in the consumer price index without having to demonstrate insurability. This provision is called a(n)

cost-of-living rider.

All of the following are characteristics of inland marine floater policies EXCEPT

coverage applies only when the property is at a specified location, such as the insured's home.

Dave purchased a life insurance policy. The policy is nonparticipating and the cash values are based on the insurer's present mortality, investment, and expense experience. After 2 years, the insurer will recalculate the premium based on the mortality, investment, and expense experience at that time. Dave purchased

current assumption whole life.

Laura Evans is risk manager of LMN Company. Laura decided to retain certain property loss exposures. Which of the following is a method that Laura can use to fund the retained property loss

current net income

One type of liability insurance covers damages arising from the failure of a data holder to protect private information from being accessed by an unauthorized party. This type of liability coverage is called

cyber liability insurance.

Which of the following types of water damage is covered under an unendorsed Homeowners 3 policy?

damage from water that overflows from a malfunctioning washing machine

Some insurers are experimenting with the use of an electronic device that can be installed in a vehicle to track driving behavior. The insurers then use the information to help determine the appropriate auto insurance premium to charge. Such devices are called

data recorders.

That part of a property and liability insurance contract that contains information about the property or activity to be insured is called the

declarations.

Winslow Corporation has many long-term employees. The company has never had a pension plan. Recently, a new management team was hired. The new president said he would like to start a pension plan through which he could reward the long-term service provided by many employees. Which of the following types of plans should Winslow Corporation adopt?

defined benefit plan

All of the following changes would reduce the long-range deficit for the Social Security program EXCEPT

delay scheduled increases in the full retirement age.

The purpose of a coordination-of-benefits provision in group health insurance plans is to

determine which plan pays first if more than one plan covers a loss.

One type of commercial property insurance excludes perils that are covered by the basic coverages. Some businesses buy this coverage to fill coverage gaps, including flood and earthquake, and to cover property in other countries. This type of insurance is called

difference in conditions insurance.

A car damaged in an auto accident may have reduced market or resale value after it is repaired. Some insureds have sought to recover this reduction in market or resale value. This loss in value is called

diminution

Jennifer was just asked to serve on the Board of an insurance company. Jennifer is concerned that if the company is mismanaged, the policyowners, stockholders, and employees might sue the management team. What type of liability insurance will protect Jennifer from such claims if she accepts a position on the insurance company's Board?

directors and officers liability insurance

A risk that affects only individuals or small groups and not the entire economy is called a

diversifiable risk.

Five years ago, Shannon decided to start investing monthly in the common stock of ABC Telecom Company. Her financial well-being will be harmed if the price of ABC Telecom stock drops significantly. The risk of investment loss can be reduced if she invests in other companies and other types of financial assets. The risk Shannon faces with regard to her investments is a(n)

diversifiable risk.

A risk manager was asked to review all the loss exposures his company faces. The risk manager noted that the company obtained over 90 percent of its raw materials from one supplier. He voiced concern about business interruption if that supplier was closed for some reason. Acting on his recommendation, the company began to purchase raw materials from two other suppliers. Using multiple suppliers illustrates which risk control technique?

diversification

Melanie was just hired as the risk manager of JKL Company. The company president asked her to make a thorough review of all of the company's loss exposures. Melanie noted that many employees were too heavily invested in stock issued by the company in their 401-k plan. Melanie suggested that the employees change some of their investment holdings to mutual funds that invest in stock issued by different companies. The risk control method that Melanie suggested is

diversification.

The residual market for auto insurance is designed to provide insurance to

drivers who are unable to obtain coverage in the standard market.

The number of title insurance companies operating in State Z is relatively low. Recently, the largest of these companies (50 percent market share) acquired the second largest company (30 percent market share). Immediately after the acquisition, the insurer raised premiums by 75 percent. This scenario demonstrates which of the following rationales for the regulation of insurance?

ensure reasonable rates

Katelyn was just named Risk Manager of ABC Company. She has decided to create a risk management program which considers all of the risks faced by ABC-pure, speculative, operational, and strategic-in a single risk management program. Such a program is called a(n)

enterprise risk management program.

A life insurance contractual provision protects the beneficiary by not permitting the insurer to introduce outside information to deny payment of the claim. Such outside information might be notes that the agent took while the insured completed the application. This contractual provision is the

entire contract clause.

A common use of second-to-die life insurance is

estate planning

Some courts have ruled that an alternative to "replacement cost less depreciation" should be used to determine the actual cash value of a property loss. Under this alternative, the value of property lost is determined by the price a willing buyer would pay a willing seller for the property in a free market. This method of determining actual cash value is called the

fair market value method.

Liability arising out of which of the following is covered under the personal injury endorsement to the homeowners policy?

false arrest

A discount store chain is concerned that cashiers might steal money from cash registers. To provide protection against theft by the cashiers, the discount store chain can purchase a

fidelity bond.

Tracy is a trust officer at a bank. One of her responsibilities is to manage funds that have been set aside for the benefit of minor children. What type of bond guarantees that Tracy will faithfully execute her required duties in this capacity?

fiduciary bond

A bond that guarantees that the person responsible for the property of another will faithfully exercise his or her duties is called a

fiduciary bond.

One method of ensuring the solvency of insurers is a periodic review, every three to five years, of insurers that operate on a multistate basis. This review is coordinated by the NAIC. This review is called a(n)

field examination.

For a long-term employee who is covered by a defined benefit plan, the highest retirement income will be obtained if his/her retirement income is based on

final average pay.

Big Life Insurance Company purchased Regional Bank. Regional Bank has 27 branches in four states. Big Life Insurance Company required one employee at each bank branch to become a licensed life insurance agent and to sell Big Life Insurance Company annuities and life insurance products. This distribution channel is an example of the

financial institution distribution system.

Marcy advises her clients on investments, taxes, wealth management, estate issues, budgeting, and insurance. Marcy is also a licensed life insurance agent. When Marcy sells life insurance to a client, the distribution channel used is a(n)

financial planner.

Under what type of rate regulation are insurers required to obtain approval of rates before using them if the rate change exceeds a specified predetermined range?

flex-rating law

The auto dealers coverage form pays for damages that the insured is legally obligated to pay because of damage to a customer's auto left in the insured's car while it is being serviced or repaired. This coverage is called

garagekeepers coverage.

An HMO physician who determines if medical care from a specialist is necessary is called a(n)

gatekeeper

Inland marine insurance provides coverage for

goods being shipped on land.

As an alternative to coinsurance, rate discounts can be given as the amount of insurance to value increases. This alternative is called

graded rates.

An employer-funded plan with favorable tax advantages, which repays employees for medical care not covered by the employer's standard medical plan is a(n)

health reimbursement arrangement (HRA).

Which of the following types of loss exposures are best handled by the use of avoidance?

high-frequency, high-severity loss exposures

The Affordable Care Act has provisions that improve the quality of health care and lower costs. All of the following are examples of these provisions EXCEPT

increasing the number of medical specialists and reducing the number of primary care physicians.

Gwen purchased an interesting life insurance policy. A minimum interest rate is guaranteed on the cash value, but additional interest may be credited based on the investment performance of a group of common stocks. There is also a cap on the additional interest credited to the policy. Based on this information, what type of life insurance did Gwen purchase?

indexed universal life insurance

The extra expense incurred by a business to stay in operation following a fire is an example of a(n)

indirect loss.

All of the following statements about employer-provided group life insurance are true EXCEPT

individual evidence of insurability, through a medical exam, is usually required.

Med Profs is a group of 18 doctors. These doctors work out of their own offices and treat patients on a fee-for-service basis. In addition, Med Profs doctors also agree to treat HMO members at reduced fees. The type of HMO that uses organizations like Med Profs is called a(n)

individual practice association plan.

Mark has been an underwriter for 20 years. An application he recently reviewed looked odd to him. The building value in the application seemed far too high, and Mark suspected the applicant might be planning to destroy the property after it is insured. Mark hired an outside firm to investigate the applicant and to prepare a report about the applicant. This report is called a(n)

inspection report.

Insurers obtain data that can be used to determine rates from

insurance advisory organizations.

Scott works in property and liability insurance marketing. He legally represents insurance purchasers, rather than insurance companies. Scott is paid a commission on the insurance placed with insurers. Scott is a(n)

insurance broker.

Agnes and Mary Clare, two elderly sisters, own an annuity covering both of their lives. The annuity pays benefits to them until the first sister dies, then the annuity terminates. Agnes and Mary Clare own a

joint life annuity.

Taylor Tobacco Company is concerned that the company may be held liable in a court of law and ordered to pay a large damage award to a smoker harmed by the company's cigarettes. The characteristics of the judicial system that increase the frequency and severity of loss are known as

legal hazard.

Which of the following losses would be covered under the personal liability coverage (Coverage E) of an unendorsed Homeowners 3 policy?

liability arising out of damage to a neighbor's property that occurred over time

Parker Department Stores has been hurt in recent months by a large increase in shoplifting losses. Parker's risk manager concluded that while the frequency of shoplifting losses was high, the severity is still relatively low. What is (are) the appropriate risk management technique(s) to apply to this problem?

loss prevention

Which of the following would not appear in the asset section of an insurance company's balance sheet?

loss reserves

Insurer A began to provide crime insurance coverage for JKL Company three months ago. Insurer B provided coverage up until the time Insurer A's coverage became effective. Forty-five days after the effective date of Insurer A's coverage, a loss was discovered that occurred while Insurer B was providing coverage. The loss would have been covered under Insurer A's policy had it been in effect the previous period. Which policy provision in the current Insurer A policy would make Insurer A responsible for this loss?

loss sustained during prior insurance not issued by us

A few states have enacted laws to make minimum amounts of liability insurance available at reduced rates to individuals who cannot afford regular insurance or who have limited financial assets to protect. The coverage made available through such a plan is called

low-cost auto insurance.

Lisa does not want her life insurance policy included in her gross estate when she dies. Lisa can remove the life insurance policy from her estate if she does which of the following more than 3 years before she dies?

make an absolute assignment of the policy to someone else

Carl and Carol Williams, a married couple, are doing some estate planning. Upon his death, Carl plans to leave $1,000,000 in property to his wife. This amount will reduce the value of Carl's gross estate and will be taxed later when Carol dies. This reduction of the gross estate is called the

marital deduction.

The regulation of insurers in areas that affect consumers, which include claims handling, underwriting, complaints, advertising, sales practices, and other trade practices is called

market conduct regulation.The risk-based capital requirements for life insurers are based on a formula that considers four types of risk.

A plan for selling individually underwritten property and liability insurance to members of a group is called

mass merchandising.

All of the following statements about the Medicare Prescription Drug Plan are true EXCEPT

medicare prescription drug coverage is funded exclusively through the Part A payroll tax.

When Ben applied for life insurance, he was asked on the application if he smoked or used tobacco products. Ben answered "No." In reality, Ben smokes two packs of cigarettes a day. The policy was issued at the "preferred, nonsmoker rate." If Ben dies 6 months after the policy is issued, upon what grounds will the insurer be able to legally deny the claim?

misrepresentation

Marco, a risk manager in California, is interviewing for a new position in the state of Washington. When Marco asked about methods of providing workers compensation, the answer surprised him. In Washington, employers can self-insure the risk or obtain coverage through a state fund. Private insurers do not market workers compensation insurance in Washington. Washington uses a

monopoly state fund.

Which of the following is an advantage of federal regulation of insurance over state regulation of insurance?

more effective treatment of systemic risk

Some events cannot occur together because the occurrence of one event makes the occurrence of the second event impossible. Such events are called

mutually exclusive events.

Failure to exercise the degree of care required by law to protect others from harm is called

negligence.

Consumer experts typically recommend which of the following rules when purchasing life insurance? I. Avoid policies which pay dividends. II. Purchase life insurance equal to ten times your annual salary.

neither I nor II

For which of the following situations would there be personal liability coverage under the homeowners policy? I. The named insured accidentally injures her husband with a hammer. II. The named insured breaks his wife's valuable vase while practicing his golf swing.

neither I nor II

Which of the following statements about beneficiary designations is (are) true? I. The primary beneficiary is entitled to the death proceeds of a life insurance policy only if the contingent beneficiary dies before the insured. II. If a revocable beneficiary designation is used, the insured must obtain the beneficiary's permission of exercise most policy rights.

neither I nor II

Which of the following statements about coverage under the federal flood insurance program is (are) true? I. Subsidized coverage is available for contents, but not for dwellings. II. A $10,000 deductible applies to each loss.

neither I nor II

An HMO that contracts with two or more independent group practices to provide medical services to covered members is called a(n)

network model HMO.

A strip-mall includes eight identical-sized retail units. All of the units were built at the same time and each has an identical sprinkler system. Unit number two is a dry cleaning business. Unit number three is a bar and grill. Unit number four is a dress shop. The owners of these three units are all insured by the same insurance company, but the property insurance premiums vary significantly. Which of the following rating factors best explains the difference in premiums?

occupancy

Lisa has three fire insurance policies on her office building. The policy from company A is for $400,000, and the policies from companies B and C are for $100,000 each. If Lisa has a $360,000 loss, how much of the loss will be covered by each policy if the loss is settled on a pro rata basis by the insurers?

policy A: $240,000; policies B and C: $60,000 each

Which of the following is a basic characteristic of insurance?

pooling of losses

The business income and extra expense coverage form covers loss of business income and continuing normal operating expenses. How is business income (revenue) defined?

pre-tax net profit

Which of the following items would appear in the income section of an insurance company's income and expense statement?

premiums

The worst loss that is likely to happen is referred to as the

probable maximum loss.

Traditionally, federal state, and local governments could not be sued. This immunity had eroded over time. Today, government units may be liable for injuries arising out of money-making activities. Such activities are called

proprietary functions.

The difference between the present value of future benefits payable under a life insurance policy and the present value of net premiums for the policy is the policy's

prospective reserve.

In schedule rating, each building is individually rated on several factors. One factor refers to the quality of the city's water supply and fire department, and the risk control devices installed in the building. This factor is called

protection.

An insurance company that sells earthquake insurance in an area where earthquakes are possible has subjected itself to the risk of insolvency if a severe earthquake occurs. An insurer can safely sell earthquake insurance in this area if it shifts the risk of catastrophic loss to another insurer. The shifting of insured risk from one insurer to another insurer is called

reinsurance.

Apex Insurance Company wrote a large number of property insurance policies in an area where earthquake losses could occur. When the president of Apex was asked if she feared that a severe earthquake might put the company out of business, she responded, "Not a chance. We transferred most of that risk to other insurance companies." An arrangement by which an insurer that initially writes insurance transfers to another insurer part or all of the potential losses associated with such insurance is called

reinsurance.

The building and personal property coverage form provides several optional coverages. Under one optional coverage, no deduction is taken for depreciation when settling a covered loss. This optional coverage is called

replacement cost.

Williams Company installed smoke detectors, a sprinkler system, and fire extinguishers in its new manufacturing facility. These devices are all examples of

risk control.

From the insured's perspective, the use of deductibles in insurance contracts is an example of

risk retention.

Which of the following is a method used to help ensure the solvency of insurers?

risk-based capital standards

The process of transferring risk to the capital markets through the use of financial instruments such as bonds, futures contracts, and options is known as

securitization of risk.

To protect policyholders, state laws place limitations on a life insurance company's investments. The assets backing interest-sensitive products, such as variable life insurance and variable annuities, are not subject to these restrictions. Assets backing interest-sensitive products are placed in a special account called the life insurer's

separate account.

Discount Department Stores is a national retail chain. The company had one large, central warehouse. At the suggestion of the risk manager, the company decided to build four smaller regional warehouses so that a loss at the central warehouse would not be a catastrophic blow to the company's distribution system. Splitting the inventory between four regional warehouses illustrates which risk management technique?

separation

In reviewing his company's operations, a risk manager noticed that all of the company's finished goods were stored in a single warehouse. The risk manager recommended that the finished goods be divided among three warehouses to prevent all of the finished goods from being destroyed by the same peril. Dividing the finished goods among three warehouses illustrates

separation.

Rather than storing all of its finished goods in a single location, Davis Company divides the finished goods between two warehouses. This simple risk control technique which is designed to limit losses should a warehouse fire occur is called

separation.

One long-term care insurance benefit trigger considers whether the insured needs supervision to protect against threats to health or safety due to memory loss or disorientation. This benefit trigger is referred to as

severe cognitive impairment trigger.

Which of the following is implied by the pooling of losses?

sharing of losses by an entire group

Which of the following is an intentional tort?

slander

The deductible used for automobile collision losses is an example of a(n)

straight deductible.

What is the intent of the family purpose doctrine?

to impose liability on the owner of an automobile for the negligence of immediate family members operating the automobile

Carl would like to purchase life insurance. He would also like to invest in a mutual fund. An agent told Carl about a form of life insurance in which Carl could select where the saving component is invested. This form of life insurance has fixed premiums and the cash value is not guaranteed. This type of life insurance is called

variable life insurance.

The voluntary relinquishment of a legal right is called

waiver.

Under the needs approach, when is the dependency period of a surviving spouse assumed to end?

when the youngest child reaches age 18

Which of the following is classified as casualty insurance?

workers compensation insurance

Carolyn is considering the purchase of a large (60-foot) boat. She called her insurance agent to see if she needs a separate policy for the boat. The agent said that a special category of insurance policies was designed to insure large watercraft. These policies are called

yacht insurance policies.

The concurrent causation exclusion in the Homeowners 3 policy specifies that:

if two or more perils jointly cause a loss, there is no coverage if one of the perils is excluded.

All of the following are methods that a property and liability insurance company can use to protect against catastrophic losses EXCEPT

purchase of common stock.

Andrea purchased an auto insurance policy with bodily injury liability limits of 250/500 ($250,000/$500,000). She also purchased a personal umbrella policy with a $1 million limit and a $500 self-insured retention. Andrea was talking on her cell phone while driving, and her car struck and killed a pedestrian in a crosswalk. The court ordered her to pay $750,000 to the spouse of the person she killed. How will this claim be settled?

$250,000 will be paid under the auto policy and $500,000 will be paid by the umbrella policy.

Juanita paid a life insurer $45,000 in exchange for an immediate life annuity. Juanita will receive $500 per month from the insurer, and her life expectancy is 15 years (180 months). Assume that Juanita receives 12 monthly payments of $500 the first year. How much taxable income must she report?

$3,000

Darla purchased an unendorsed Homeowners 3 policy. While the policy was in force, a fire occurred that destroyed a living room set. The living room set cost $4,000 new, but was 25 percent depreciated when the loss occurred. Replacement furniture will cost $4,400. Assuming no deductible, how much will Darla receive from her insurer?

$3,300

Malcolm was involved in an auto accident. He was judged to be 20 percent at fault in the accident, and the other party was judged to be 80 percent at fault. Malcolm's actual damages were $40,000. Under a pure comparative negligence rule, how much will Malcolm receive for his injuries?

$32,000

ABC Company insured its building on a replacement cost basis for $700,000 under a property insurance policy that included an 80 percent coinsurance clause. The building had a replacement cost of $1 million when it sustained a $40,000 loss. How much will ABC Company receive from its insurer, assuming no deductible applies?

$35,000

Jenkins Company purchased a commercial umbrella policy with a $10 million limit and a $100,000 self-insured retention. The insurer required Jenkins Company to carry a $1 million per-occurrence limit on its general liability policy and a $1 million per-occurrence limit on its business auto policy. Jenkins purchased these required limits. A Jenkins driver was negligent while operating a company vehicle and killed another motorist. The court ruled that Jenkins must pay $5 million. How much of this amount will be paid by the umbrella policy?

$4.0 million

XYZ Company insured its building on a replacement cost basis for $450,000 under a property insurance policy that included an 80 percent coinsurance clause. The building had a replacement cost of $500,000 when it sustained a $50,000 loss. How much will XYZ Company receive from its insurer, assuming no deductible applies?

$50,000

David owns a commercial building with a replacement cost of $4 million. The building is insured on a replacement cost basis for $2.4 million under a fire insurance policy that has an 80 percent coinsurance clause. How much will David collect if the building sustains a covered fire loss with a replacement cost of $80,000?

$60,000

Acme Company has three identical manufacturing plants, one on the Texas Gulf Coast, one in southern Alabama, and one in Florida. Each plant is valued at $200 million. Acme's risk manager is concerned about the damage which could be caused by a single hurricane. The risk manager believes there is an extremely low probability that a single hurricane could destroy two or all three plants because they are located so far apart. What is the maximum possible loss associated with a single hurricane?

$600 million

Sam's furniture was destroyed by a fire. The furniture cost $1,200 when it was purchased, but similar new furniture now costs $1,800. Assuming the furniture was 50 percent depreciated, what is the actual cash value of Sam's loss?

$900

The risk-based capital requirements for life insurers are based on a formula that considers four types of risk. One risk reflects whether the insurer will have enough surplus if claims are higher than expected.

insurance risk.

Two buildings are located close together at a production facility. The probability that either of these buildings will experience a fire loss is 4 percent. However, if one building has a fire, the probability that the second building will have a fire is 60 percent. What is the probability that both buildings will have a fire?

2.4 percent

JKL Insurance Company reported the following information on its accounting statements last year: Premiums Written $90,000,000 Loss Adjustment Expenses $5,000,000 Underwriting Expenses 30,000,000 Premiums Earned $100,000,000 Incurred Losses $70,000,000 What was JKL's combined ratio last year?

108.3

Juanita paid a life insurer $45,000 in exchange for an immediate life annuity. Juanita will receive $500 per month from the insurer, and her life expectancy is 15 years (180 months). What is the exclusion ratio in this case?

50.00 percent

Beta Corporation has 1,000 employees eligible to participate in the firm's pension plan, and 100 of these employees are considered highly compensated. All of the highly compensated employees are covered by the plan. What is the minimum number of the 900 non-highly compensated employees who must be covered by the plan in order for the plan to satisfy the ratio percentage test?

630

A credit-based score that insurers claim is highly predictive of future claims costs is an individual's

insurance score.

Which of the following statements about the change of plan provision in a life insurance contract is (are) true? I. A change to a lower premium policy results in a refund of the difference in the cash values of the two policies. II. A change to a higher premium policy requires evidence of insurability.

I only

A credit-based score that is highly predictive of future claims cost is an individual's

insurance score.

Which of the following statements about the financial status of Medicare Part A is (are) true? I. Part A has serious financial problems. II. Reforms instituted by Congress have reduced total Part A expenditures in recent years

I only

Which of the following statements about problems and issues in workers compensation insurance is (are) true? I. Uncertainties created by the increasing use of medical marijuana is a growing problem for employers. II. Enactment of the Affordable Care Act led many employers to stop offering medical benefits as part of the workers compensation coverage on their employees.

I only

Which of the following statements about tax-deferred retirement plans in the United States is true? I. Women, on average, receive lower employment-based retirement income than men. II. One way to hedge against inflation is to invest lump-sum pension distributions in fixed-income investments.

I only

Which of the following statements about the financing of OASDI and Medicare is (are) true? I. There is a maximum taxable wage base for OASDI. II. There is a maximum taxable wage base for Part A of Medicare.

I only

Defects of financial responsibility laws include which of the following? I. Accident victims may not be fully compensated for their injuries. II. They apply only to property damage losses, not to bodily injury claims.

I only

Methods by which insurers may minimize or avoid catastrophic losses include which of the following? I. The use of reinsurance II. Concentrating coverage written in one geographic region

I only

Tony has an unendorsed Personal Auto Policy which provides medical payments coverage. Under which of the following circumstances would the injured person be eligible for benefits under Tony's policy? I. A friend in the car is injured while Tony is driving a covered auto. II. A passenger on a motorcycle driven by Tony is injured when Tony hit another vehicle.

I only

Which of the following is (are) included in the common declarations page of a commercial package policy? I. A description of the insured property II. A listing of the causes-of-loss that are covered by the policy

I only

Which of the following losses would be covered under a Commercial General Liability Policy that has no endorsements? I. The named insured rented a building and an employee of the named insured negligently started a fire at the rented building. II. The cost to recall defective products

I only

Which of the following statements about Medigap policies is (are) true? I. Insurers are required to have an open enrollment period of 6 months from the date an applicant first enrolls in Medicare Part B and is age 65 or older. II. Most policies are of limited value because they largely duplicate benefits already provided by Medicare.

I only

Which of the following statements about joint underwriting associations for insuring high-risk drivers is (are) true? I. Underwriting losses are proportionately shared by all auto insurers based on premiums written in the state. II. Each company participating in a joint underwriting association sets it own rates.

I only

Which of the following statements about the needs approach for estimating the amount of life insurance to purchase is (are) true? I. It involves an analysis of various family needs which must be met if a family breadwinner dies. II. Its use is appropriate only if a person currently has no life insurance protection.

I only

Which of the following statements about the regulation of insurance company investments is (are) true? I. The purpose of regulating insurance company investments is to prevent insurers from making unsound investments which could threaten their solvency. II. Life insurers can invest an unlimited amount of their assets in common stocks.

I only

Which of the following statements about the risk of terrorism in the United States is (are) true? I. Congress created a federal backstop for terrorism claims. II. Coverage for losses attributable to terrorism is not marketed by private insurers in the United States.

I only

Which of the following statements about underwriting policy is (are) true? I. A company must establish an underwriting policy consistent with company objectives. II. Underwriting policy is usually subjective and allows the underwriter considerable flexibility with respect to lines written and forms used.

I only

Which of the following statements concerning defined-benefit pension plans is (are) true? I. The contribution rate by the employer varies from year to year. II. The retirement benefit is not known in advance.

I only

Which of the following statements concerning directors and officers liability insurance (D&O) is (are) true? I. D&O policies usually cover the personal liability of directors and officers. II. D&O policies exclude coverage for claims brought by employees and by stockholders.

I only

Which of the following statements is (are) true concerning the self-insured retention (SIR) under a commercial umbrella liability policy? I. The SIR applies to claims covered by the umbrella policy but not by any underlying insurance. II. The SIR only applies to those claims for which the underlying policy has paid first, and the umbrella policy is paying on an excess basis.

I only

Which of the following statements is (are) true regarding insurance agents and insurance brokers? I. A property and liability insurance agent has the authority to bind the insurer for certain types of coverage. II. A licensed broker who is not a licensed agent has the legal authority to bind an insurer.

I only

Which of the following statements is (are) true with respect to annuities? I. Annuities are the opposite of life insurance. II. The fundamental purpose of annuities is to replace lost income in case of premature death.

I only

Which statement is (are) true regarding property and liability insurance market conditions? I. Premiums are high when the insurance market is "hard." II. Underwriting standards are tight when the insurance market is "soft.

I only

Characteristics of a fortuitous loss include which of the following? I. The loss is certain to occur. II. The loss occurs as a result of chance.

II only

Perils insured under Dwelling Property 1 (basic form) include which of the following? I. Earthquake II. Smoke

II only

Reasons why an insured might add a scheduled personal property endorsement to a homeowners policy include which of the following? I. To lower the premium by limiting the perils covered II. To obtain higher limits for certain personal property

II only

The Commercial General Liability (CGL) Policy covers liability for which of the following loss exposures? I. Bodily injury of an employee of the insured arising out of and in the course of employment II. Bodily injury of a customer injured by a defective product manufactured by the insured

II only

Which of the following is (are) covered under a claims-made policy? I. Claims arising out of occurrences which take place during the policy period, regardless of when the claim is made II. Claims first reported during the policy period, provided the event occurred after a retroactive date stated in the policy

II only

Which of the following items is (are) contained in the common policy conditions page of the commercial package policy? I. A description of the property that is insured. II. A provision describing the insurer's right to audit the insured's books and records.

II only

Which of the following persons is (are) insured under the uninsured motorists coverage of the PAP? I. A pedestrian struck by a covered auto if he or she has no insurance to pay medical expenses II. The spouse of a named insured who is killed by an uninsured motorist

II only

Which of the following situations would be covered under the liability section of the PAP? I. A mechanic is sued by a pedestrian who is injured when the mechanic has an accident while road testing the insured's auto. II. The daughter of the named insured is sued after she has an accident when a new friend she just met at a campus hangout lets her drive his car.

II only

Which of the following statements about Roth 401(k) plans is true? I. Contributions to a Roth 401(k) plan are made with before-tax dollars. II. Qualified distributions from a Roth 401(k) are received income-tax free

II only

Which of the following statements about automobile insurers that specialize in insuring high-risk motorists with poor driving records is (are) true? I. The actual premium paid by an applicant is set by the federal government and is independent of an applicant's driving record. II. The coverages available may be more limited than those written by insurers in the standard market.

II only

Which of the following statements about captive insurance companies is (are) true? I. A captive insurance company established by a U.S. company must be domiciled in the United States. II. A captive insurance company may be owned by several parents.

II only

Which of the following statements about chance of loss and risk is (are) true? I. If the chance of loss is identical for two groups, the objective risk must be the same. II. Two individuals may perceive differently the risk inherent in a given activity.

II only

Which of the following statements about comparative negligence laws is (are) true? I. Under the pure rule, any negligence by the plaintiff automatically bars recovery for damages. II. Under the 50 percent rule, parties who are equally at fault are each allowed to recover damages.

II only

Which of the following statements about dividend options is (are) true? I. The interest on dividends left to accumulate with the insurer is not considered to be taxable income. II. Paid-up additions are additional units of whole life insurance.

II only

Which of the following statements about eligibility requirements for homeowners insurance is (are) true? I. A contract can be written on a twenty-unit apartment complex as long as the tenants are families. II. Separate forms are available for renters and condominium owners.

II only

Which of the following statements about eligibility requirements for qualified Health Savings Accounts (HSAs) is (are) true? I. Only individuals who are eligible for Medicare benefits can establish a qualified HSA. II. Applicants must be covered by a high deductible health plan and not be covered by any other comprehensive health plan to establish a qualified HSA.

II only

Which of the following statements about hospice benefits under the hospital insurance (Part A) portion of Medicare is (are) true? I. To become eligible for hospice care, a patient must first receive inpatient care for at least 10 consecutive days. II. Hospice benefits are provided to persons who are terminally ill.

II only

Which of the following statements about individual disability income policies that use a two-part definition of total disability is (are) true? I. During the initial period of disability, the insured must be unable to perform the duties of any gainful occupation. II. After the initial period of disability, the insured must be unable to perform the duties of any occupation for which he or she is reasonably fitted by education, training, and experience.

II only

Which of the following statements about long-term care insurance is (are) true? I. Long-term care insurance is inexpensive, especially if purchased at older ages. II. Purchasers have a choice of daily benefits and benefit periods.

II only

Which of the following statements about methods for estimating loss reserves for property and casualty insurers is (are) true? I. The judgment method involves the use of a statutory formula to estimate the loss reserve. II. The average value method is used when the number of claims is large and the claims are settled quickly.

II only

Which of the following statements about premature death is (are) true? I. From an economic standpoint, premature means death before a specified age, such as 65. II. The economic problem of problem of premature death in the United States has declined substantially over time.

II only

Which of the following statements about taxation of Social Security retirement benefits under federal law is (are) true? I. Social Security retirement benefits are never considered taxable income. II. Up to 85 percent of Social Security retirement benefits may be considered taxable income, depending on the amount of other income received by the beneficiary.

II only

Which of the following statements about the Miscellaneous-Type Vehicle Endorsement to the PAP is (are) true? I. It provides bodily injury liability coverage for any vehicle rented by the insured. II. It can be added to PAP to insurance motorcycles and motor scooters

II only

Which of the following statements about the appraisal clause in the Homeowners 3 policy is (are) true? I. It is used to determine a value for personal property when the policy is issued. II. It is used to help settle disputes over the amount of a loss after a loss has occurred.

II only

Which of the following statements about the condominium commercial-unit owners coverage form is (are) true? I. It provides coverage for the unit owner's proportionate financial interest in the condominium building. II. It provides coverage for the business personal property of the unit owner.

II only

Which of the following statements about the minimum vesting standards for a qualified defined benefit plan is (are) true? I. Under cliff vesting, an employee must be at least 50 percent vested after 5 years of service. II. Under graded vesting, an employee must be at least 20 percent vested after 3 years of service and 100 percent vested after 7 years.

II only

Which of the following statements about the provisions of the building and personal property coverage form is (are) true? I. A separate deductible must be satisfied for each building damaged in the same occurrence. II. Under the replacement cost option, there is no deduction for depreciation.

II only

Which of the following statements is (are) true concerning the automatic premium loan provision? I. Unlike other policy loans, interest is not charged on automatic premium loans. II. The basic purpose of an automatic premium loan is to prevent a life insurance policy from lapsing.

II only

Which of the following statements is (are) true concerning the joint and survivor annuity settlement option? I. Under this option, payments begin after the first annuitant dies. II. This settlement option is often selected by married couples.

II only

Which of the following statements is (are) true regarding the net present value of a capital investment? I. Net present value does not consider time value of money. II. A positive net present value represents an increase in value to the firm.

II only

Which of the following statements is (are) true regarding the results of the 2014 study by the Life Insurance Market Research Association (LIMRA) on the adequacy of life insurance owned by households in the United States? I. The average household is adequately insured against the risk of premature death. II. The average household is significantly underinsured against the risk of premature death.

II only

Which of the following statements is (are) true regarding the taxation of distributions from individual annuities? I. Individual annuity distributions are never taxable. II. Once the annuitant has recovered the premiums he or she paid for the annuity, the entire annuity distribution is taxable.

II only

Which of the following statements is (are) true with respect to SIMPLE retirement plans? I. Only large employers can start a SIMPLE plan, provided the employer does not maintain another qualified plan. II. SIMPLE plans are exempt from most nondiscrimination and administrative rules that apply to qualified plans.

II only

Which of the following statements is (are) true with respect to the treatment of legal defense costs under the ISO Commercial General Liability policy? I. Legal defense costs usually are counted against the policy limit. II. Once the insurer has paid out the applicable limit of liability, the insurer's duty to defend ends.

II only

Which of the following statements regarding group long-term disability income insurance plans is (are) true? I. These plans are usually limited to occupational disabilities. II. These plans typically use a more restrictive definition of disability after an initial period of disability, such as two years.

II only

Which of the following statements regarding minimum vesting standards for qualified defined benefit plans is (are) true? I. The vesting standards apply to both employer and employee retirement contributions. II. Employers may vest benefits more quickly than the minimum standards.

II only

Which of the following statements is true regarding the Homeowners 3 policy and identity theft?

Identity theft is covered by adding an endorsement.

Which of the following statements concerning coverage under the Homeowners 3 policy is true?

If a Coverage C peril causes a collapse, the resulting damage is covered.

Which of the following statements about coverage for loss of use (Coverage D) under the Homeowners 3 policy is true?

If a covered loss makes the home unfit for living, the insurer pays additional living expenses the insured may incur as a result of the loss.

Which of the following statements about the additional coverages included in Section II of the homeowners policy is true?

Interest that accrues on a judgment after the judgment is awarded but before the judgment is paid is covered under claims expenses.

Which of the following statements about the surrender cost index for measuring the cost of life insurance is true?

It takes the amount and timing of each dividend into consideration.

John has an auto which is covered for collision losses subject to a $250 deductible. Kate's auto also has collision coverage but her deductible is $500. Which of the following statements describes how a $2,000 collision loss will be paid if it occurs when John borrows Kate's car because his car is in the shop for repairs?

Kate's policy will pay $1,500, and John's policy will pay $250.

Larry has $25,000 of bodily injury liability coverage under his PAP. This limit is the minimum amount required by his state to be considered financially responsible. While on a vacation, Larry visited a neighboring state which has a minimum financial responsibility limit of $50,000 for bodily injury. Which of the following statements describes the situation for Larry while he was in the neighboring state?

Larry's policy automatically provided $50,000 of liability coverage.

Which of the following statements is true regarding covered losses under the commercial crime coverage form?

Liability associated with data security breaches is excluded.

Maria is covered under a group medical expense plan as an employee. She is also covered under her husband's plan as a dependent. If Maria is hospitalized, how will each plan respond to her medical bills if both plans have the typical coordination-of-benefits provision?

Maria's plan is primary, and her husband's plan is excess.

Which of the following are legal obligations of a property owner with respect to an invitee? I. The property owner must warn an invitee of any unsafe conditions. II. The property owner must inspect the premises and eliminate any dangerous conditions revealed by the inspection.

both I and II

Some managed care plans use physicians, hospitals, and health care organizations that agree to make medical services available to insureds at discounted fees. Insureds are not required to use these entities, but if they do, health care costs are less than if these entities are not used. Such health care entities are called

Preferred Provider Organizations (PPOs).

State X hired Build-Right Construction to build a bridge. State X required that construction be completed within 2 years after the contract was signed. Les Johnson is the president of Build-Right. State X required that Build-Right's promise to perform be guaranteed by a third party. Build-Right purchased a performance bond from Rock Solid Indemnity. The bond requires Rock Solid to be responsible if Build-Right does not have the project completed on time. In this scenario, which party is the surety?

Rock Solid Indemnity

The Affordable Care Act created program that enables small firms to offer health insurance to their employees. The program provides flexibility, choice, and the convenience of on-line account management. This program is called the

SHOP Marketplace program.

Small business owners have a number of retirement plans available to them. One type of plan is limited to employers with 100 or fewer eligible employees. Under this type of plan, small employers are exempt from most of the nondiscrimination and administrative rules that apply to qualified plans. Such plans are called

SIMPLE retirement plans.

Which of the following statements about life insurance marketing systems is true?

Some exclusive agents who market property and liability insurance also sell life insurance.

John occasionally borrows the car of his friend, Sophie. Sophie has a PAP with liability limits of 100/300/50. John also has a PAP, and his liability limits 250/500/50. John had an accident while using Sophie's car and was found to be legally liable for $300,000 in bodily injury liability for injuries suffered by one person. How much will be paid by each policy?

Sophie's policy will pay $100,000, John's policy will pay $200,000.

One type of Medicare Advantage Plans provides focused care for a specific group of people, such as diabetics and nursing home residents. This type of Medicare Advantage Plan is a

Special Needs plan.

Which of the following statements regarding terrorism insurance is (are) true?

both I and II

Which of the following statements is true regarding return of premium term insurance?

The coverage is expensive and is not free when time value of money is considered.

Which of the following statements regarding the accidental death benefit rider (also known as double indemnity) is true?

The death benefit is doubled only if an accidental injury is the direct cause of death and death occurs prior to a specified age.

According to the law of large numbers, what should happen as an insurance company increases the number of loss exposures that it insures?

The difference between actual and expected results should decrease.

Which of the following statements about the waiver-of-premium provision in life insurance is true?

The disability must occur before a stated age, such as 65, for premiums to be waived.

Which of the following statements about the business income coverage form is true?

The form covers loss of business income and extra expenses incurred during restoration.

Which of the following losses would be covered under Section II of an unendorsed Homeowners 3 policy?

The homeowner accidentally dropped a bowling ball, injuring another bowler's foot.

Which of the following is a demographic factor that has increased losses from climate change in the United States?

The increasing population in Southern states such as Florida, Texas, and South Carolina.

Which of the following situations would be covered by the liability section of an unendorsed PAP if the insured is legally liable?

The insured backs into and damages the garage door of his rented house.

Which of the following statements about Coverage E: Personal Liability under the homeowners 3 policy is true?

The insured must be legally liable for insurer to pay damages.

All of the following are typical characteristics of individual medical expense coverage EXCEPT

annual benefit limits.

The auto dealers coverage form includes coverage for violating odometer (mileage) disclosure laws and selling a vehicle where there was a title defect. Which coverage under the auto dealers coverage form would respond to such claims?

acts, errors or omissions liability coverage

The loss settlement under which of the following supports the principle of indemnity?

actual cash value property insurance

Sue double-majored in mathematics and statistics in college. She also enrolled in a number of finance courses. After graduation, she was hired by Econodeath Insurance Company. Her job is to calculate premium rates for life insurance coverages. Sue is a(n)

actuary.

A no-fault law under which benefits are paid to an accident victim without regard to fault and the accident victim can still sue the negligent driver who caused the accident is referred to as a(n)

add-on no-fault law.

Jane would like to save money on her homeowners premium. All of the following steps will help her to reduce her homeowners premium EXCEPT

adding a personal property replacement cost endorsement.

The Homeowners 3 policy limits the amount of coverage provided on certain personal property (e.g. coin collections and silverware). This personal property can be adequately insured by

adding a schedule to the policy listing the property with specific amounts of insurance.

Under the ISO program, a mobile home can be insured by

adding the appropriate endorsement to an ISO Homeowner 2 or Homeowners 3 form.

One of the additional coverages under the building and personal property coverage form is "increased cost of construction." The coverage is payable if

an ordinance or building code increases the cost of construction.

Ellen believes the value of the loss to her home is $30,000. The insurer has offered $18,000 to settle the loss. If Ellen and the insurer cannot agree on the value of the loss, which homeowners policy provision specifies how this dispute will be settled?

appraisal clause

Dennis was involved in an accident. He believes the damage to his auto is $7,000. His insurer believes the damage is only $3,500. Which PAP provision is designed to handle disputes between the insurer and the insured over the amount of the loss?

appraisal provision

Life insurance policy reserves

are a major liability of life insurance companies

Life insurance policyholders may borrow the cash value from their life insurance policies. Where are life insurance policy loans shown on a life insurance company's financial statements?

as an asset

One life insurance company reserve is designed to smooth the company's reported surplus over time by absorbing fluctuations in security prices that are not attributable to changing interest rates. This reserve is called the

asset valuation reserve.

All of the following statements about the cancellation of a Homeowners 3 policy are true EXCEPT

at least 100 days' notice of cancellation must be given if an insurer cancels a policy for nonpayment of premium.

A reciprocal exchange is managed by a corporation that is authorized to collect premiums, pay losses, invest funds, seek new members, and perform other functions. This corporate manager is called a(n)

attorney-in-fact.

All of the following are programs to insure fundamental risks EXCEPT

auto physical damage insurance.

Janet was unable to obtain auto insurance in the voluntary insurance market. She was contacted by the state insurance department and notified that XYZ Insurance would be her insurer. The mechanism used in Janet's state to provide auto insurance to high-risk drivers is a(n)

automobile insurance plan.

Criticisms of compulsory insurance laws include which of the following? I. They provide less than complete protection since they require only a minimum amount of liability insurance. II. Even with compulsory insurance laws, a substantial number of motorists continue to operate vehicles without insurance.

both I and II

Disadvantages of life insurance settlement options include which of the following? I. Higher yields can often be obtained elsewhere. II. Life income options have limited usefulness at younger ages

both I and II

Factors that affect the cost of homeowners insurance include which of the following?

both I and II

Factors that may result in more restrictive underwriting decisions include which of the following? l. Inadequate rates. II. The unavailability of reinsurance at favorable terms

both I and II

Functions of an insurance company's legal department include which of the following? I. Lobbying for legislation favorable to the insurance industry. II. Drafting policy provisions.

both I and II

In addition to marketing life insurance, life insurers typically sell which of the following products? I. Retirement annuities II. Disability income insurance

both I and II

Loss control includes which of the following?

both I and II

Purposes of the coinsurance provision in medical expense insurance policies include which of the following? I. to reduce premiums II. to prevent overutilization of policy benefits

both I and II

Reasons for having a minimum participation requirement before a group is eligible for insurance include which of the following? I. To lower the expense rate per unit of insurance II. To minimize the possibility of insuring a group which consists largely of unhealthy individuals

both I and II

Reasons for the unearned premium reserve include which of the following? I. To pay losses that occur during the policy period. II. To pay premium refunds to policyholders in the event of cancellation.

both I and II

Reasons why market, financial, and production risks are often uninsurable include which of the following? I. The potential to produce a catastrophic loss is great. II. The chance of loss cannot be accurately estimated.Apex Insurance

both I and II

Under the Affordable Care Act, which of the following statements are true? I. Health insurers cannot use pre-existing conditions exclusions. II. Health insurers cannot impose annual benefit limits and lifetime benefit limits.

both I and II

Which of the following is (are) covered under an unendorsed Commercial General Liability Policy? I. False arrest of a customer wrongly accused of shoplifting II. Publication of material that violates an individual's right to privacy

both I and II

Which of the following is (are) included among the duties of an insured following a loss covered under the Homeowners 3 policy? I. To file a proof of loss within a specified time period after the insurer's request II. To prepare an inventory of damaged personal property

both I and II

Which of the following persons is (are) covered for liability insurance under the PAP? I. a family member who drives a covered auto II. a family member who occasionally drives a friend's auto

both I and II

Which of the following statements about a typical accidental death benefit rider is (are) true? I. Accidental injury must be the cause of death for the increased benefit to be paid. II. The accidental death must occur prior to some specified age for the increased benefit to be paid.

both I and II

Which of the following statements about accelerated death benefits riders is (are) true? I. The benefit paid is usually less than the full face amount. II. Several different medical conditions may trigger the payment of benefits.

both I and II

Which of the following statements about mobile home insurance is (are) true? I. Coverage for the mobile home may be written on either a replacement cost basis or an actual cash value basis, depending on how much the mobile home has depreciated. II. An additional coverage pays, up to a specified dollar limit, for the cost of transporting the mobile home to a safe place when it is endangered by a covered peril.

both I and II

Which of the following statements about personal producing general agents is (are) true? I. They often have the option of recruiting and training sub-agents. II. They are independent agents who produce substantial amounts of life insurance with one insurer.

both I and II

Which of the following statements about purchasing cyber liability insurance is true? I. The coverage can be obtained by adding the appropriate endorsement to the general liability coverage. II. The coverage can be obtained by purchasing stand-alone cyber liability coverage.

both I and II

Which of the following statements about the causes-of-loss special form of the ISO commercial package policy is (are) true? I. The causes-of-loss special form provides open perils coverage and insures against direct physical loss. II. The causes-of-loss special form excludes loss caused by earthquake.

both I and II

Which of the following statements about the problems and issues of unemployment insurance programs is (are) true? I. Many state programs are inadequately financed. II. Only a small portion of the total unemployed receive benefits at any time.

both I and II

Which of the following statements about the regulation of life insurance companies is (are) true? I. The percentage of assets a life insurance company may invest in a specific type of asset (e.g., stocks or bonds) is generally limited by law. II. The purpose of limiting the accumulation of surplus is to prevent an insurer from increasing its surplus at the expense of policyowner dividends.

both I and II

Which of the following statements about underwriting standards is (are) true? I. One purpose of underwriting standards is to reduce adverse selection against the insurer. II. Equitable rates should be charged so that each group of policyowners pays its own way in terms of losses and expenses.

both I and II

Which of the following statements concerning individual medical expense insurance is (are) correct? I. Once the deductible is satisfied, no additional deductible is payable during the calendar year. II. Family deductibles are substantially higher than individual deductibles.

both I and II

Which of the following statements concerning regulatory objectives of rate making is (are) true? I. Rates must not be unfairly discriminatory. II. Rates must be adequate.

both I and II

Which of the following statements is (are) true about the federal estate tax? I. The gross estate can be reduced by a number of deductions. II. If the person who died had any ownership interest in a life insurance policy at the time of death, the proceeds are included in the gross estate for federal estate tax purposes.

both I and II

Which of the following statements is (are) true concerning investments of property and casualty insurers and life insurers? I. Property and casualty insurance companies place greater emphasis on liquidity than do life insurers. II. Life insurance company investments are, on average, of longer duration than property and casualty insurance company investments.

both I and II

Which of the following statements is (are) true with respect to financial institution bonds? I. Fidelity coverage covers losses resulting from the dishonest acts of employees. II. Financial institutions usually insure their crime exposures through financial institutions bonds.

both I and II

Which of the following statements is (are) true with respect to the differences between insurance and surety bonds? I. Insurance is a two-party contract; surety involves three parties. II. Insurers usually do not have the right to recover a loss payment from an insured, while a surety does have the legal right to recoup a loss payment.

both I and II

Which of the following statements is (are) true with respect to the kidnap/ransom and extortion coverage available through ISO's Commercial Crime Coverage program? I. It covers the loss of money that is paid for ransom if someone is kidnaps. II. It covers some indirect costs association with a kidnapping, such as hiring a hostage negotiator.

both I and II

Which of the following statements is (are) true with respect to variable annuities? I. The price at which accumulation units can be purchased fluctuates during the funding period. II. The value of annuity units fluctuates over time.

both I and II

Which of the following statements regarding insurance and hedging is (are) true? I. Insurance involves the transfer of an insurable risk while hedging handles risk that is typically uninsurable. II. Insurance transactions can reduce objective risk, while hedging typically involves only risk transfer and not risk reduction.

both I and II

R.I.P. Company manufactures herbicide and pesticide. The company had difficulty finding affordable liability insurance. R.I.P. established its own insurance company based in Bermuda for the purpose of insuring R.I.P.'s loss exposures. The company that R.I.P. formed is called a

captive insurer.

JKL Company just converted its traditional defined-benefit plan to another type of plan. Under the plan, benefits are defined in terms of a hypothetical account balance, with retirement benefits dependent upon the value of the participant's account at retirement. Each year, employees receive an interest rate credit and a pay credit which is a specified percentage of compensation. This type of plan is called a

cash-balance plan.

West Coast Insurance writes property and liability insurance in California, Oregon, and Washington. These states are all susceptible to earthquakes. To help determine how much reinsurance to purchase, West Coast Insurance hired an organization to use a computer algorithm to estimate what its insured losses would be if a severe earthquake occurred. West Coast Insurance based its purchase of reinsurance on the loss estimates. This scenario illustrates using

catastrophe modeling.

A serious current concern with the Social Security program is the depletion of the Disability Income Trust Fund. Each of the following contributed to the depletion of the fund EXCEPT

changing to a less stringent definition of disability.

All of the following are extensions of coverage under the building and personal property coverage form EXCEPT

currency and securities.

Congressional action in 2012 extended the National Flood Insurance Program (NFIP) until 2017. Which of the following is a key provision of the Biggert-Waters Flood Insurance Reform and Modernization Act of 2012?

elimination and phase-outs of several rate subsidies

Actuaries at Term Life Insurance Company calculated the net single premium per thousand for a five-year term policy for a man age 32 to be $5.04. To calculate the net level premium for this policy, the net single premium should be

divided by the present value life annuity due factor for $1 for five years.

Frazier Electric keeps a paper copy of business records at the company's headquarters. The company also has two back-up copies of business records stored in electronic files. The electronic files are kept in the event the paper records are damaged or destroyed. The back-up files illustrate which of the following risk control techniques?

duplication

Under a unit-benefit formula, benefits are a function of both

earnings and years of service.

Which of the following is a characteristic of a health maintenance organization (HMO)?

emphasis on cost containment

The phrase "general liability" is used to refer to the legal liability of a business arising from all of the following EXCEPT

employees injured on the job.

The doctrine of respondeat superior applies to a(n)

employer's liability for a negligent employee.

Al was named the beneficiary in his mother's life insurance policy. His mother died during the contestable period. The insurer denied payment, citing a material misrepresentation on the application. Al believes the insurer should pay the claim because the misrepresentation occurred on the application, and the application is not part of the formal agreement between the insurer and the policyholder. Which provision protects the insurer by making the application part of the formal agreement between the parties to the contract?

entire contract clause

Reimbursement for spoilage of frozen food caused by failure of a refrigeration unit at a frozen foods processor can be covered under

equipment breakdown insurance.

David started a public accounting firm. David is concerned that accountants on his staff may give incorrect accounting advice, and the accounting firm may be sued. What type of liability insurance should David purchase to protect against such claims?

errors and omissions insurance

The Affordable Care Act requires employers with 100 or more employees to provide health insurance on the employees or pay a penalty if at least one employee receives a tax credit and coverage through the Health Insurance Marketplace. This requirement-providing insurance or paying a fine-is known as the

essential benefit requirement

The Affordable Care Act requires all new medical expense plans to provide a comprehensive set of coverages and services. This comprehensive set of coverages and services that must be provided are called

essential health benefits.

When announcing that an enterprise risk management program would be implemented at XYZ Company, the president of the company observed, "We must overcome the silo mentality for the program to be successful." The "silo mentality" refers to

focusing narrowly on one area and not viewing risk holistically.

Morris Company self-insures its workers compensation loss exposure. The risk manager of Morris Company is concerned about the possible impact of a single catastrophic claim. She decided to set a retention limit of $500,000 per-claim, and to purchase insurance that will be begin to pay once Morris Company has paid $500,000 on a single claim. The insurance the risk manager purchased is called

excess insurance.

A legal reserve in life insurance is a result of

excess premiums in the early policy years being invested at compound interest.

Under one type of merit rating, the class or manual rate is adjusted upward or downward based on past loss history. This type of merit rating is called

experience rating.

In schedule rating, each building is individually evaluated based on several rating factors. One factor refers to the possibility that the building will be damaged or destroyed by a fire that starts at an adjacent property and spreads to the building. This rating factor is known as

exposure.

Mike and Susan built their "dream home." They insured their home for its full replacement cost. They also added an endorsement that will pay up to an additional 20 percent of the policy limit in case the cost of rebuilding the home after a loss is greater than the policy limit. The basis under which Mike and Susan insured their home is called

extended replacement cost.

Rick is risk manager of Herald News, a daily newspaper in a competitive market. Rick wants to make sure that if Herald's printing facility is damaged or destroyed, the paper will continue to be published. What type of insurance can Rick purchase to cover the added cost of continuing to print the paper after a physical damage loss has occurred?

extra expense coverage

The net amount at risk for an ordinary life insurance policy is the difference between the

face amount of the policy and the legal reserve

A reinsurance contract that is entered into on a case-by-case basis after an application for insurance is received by a primary insurer is called

facultative reinsurance.

Which of the following perils is not included in the causes-of-loss basic form of the ISO commercial package policy?

flood

An insurance company incorporated in another state has been licensed to operate in your state. In your state, the insurer would be considered a(n)

foreign insurer.

Which of the following is a characteristic of a longevity annuity (longevity insurance)?

forfeiture of the purchase price if the annuitant dies during the deferral period

Which of the following is a financial derivative that derives value from specific insurable losses or from an index of values?

insurance option

Insurers offering variable annuities charge a number of expenses. One category of expenses is to pay the fund manager and to pay brokerage fees. This expense is the

investment management charge.

All of the following are ISO personal umbrella liability policy exclusions EXCEPT

liability arising out of uncompensated board service for a nonprofit organization.

Which of the following losses is generally covered under a commercial umbrella policy?

liability arising out of use of a business auto

All of the following statements about aviation insurance are true EXCEPT

liability coverage applies to liability arising out of a workers compensation law.

All of the following statements about the boatowners package policy are true EXCEPT

liability coverage is provided for bodily injury only.

All of the following are commonly excluded by personal umbrella policies EXCEPT

libel, slander, and other types of personal injury.

Janet is the beneficiary of her uncle's $200,000 life insurance policy. When her uncle died, Janet selected a settlement option that pays monthly benefits for as long as she lives. If Janet dies before receiving $200,000, payments will continue to a contingent beneficiary until a total of $200,000 has been paid. What settlement option did Janet select?

life income with guaranteed total amount

Deductibles are not used in which of the following type of insurance?

life insurance

Which of the following statements about a typical personal umbrella policy is (are) true? I. Losses covered under an underlying policy and the umbrella policy are settled on a pro rata basis. II. Losses not covered by the basic underlying contracts are subject to a self-insured retention which typically is at least $25,000.

neither I nor II

Which of the following statements about group insurance underwriting principles is (are) true? I. If a plan is contributory, 100 percent of the eligible employees must be covered. II. Ideally, there should be a flow of older people into the group and younger people out of the group.

neither I nor II

Which of the following statements about the personal property replacement cost endorsement used with the homeowners policy is (are) true? I. The damaged or destroyed property must be repaired or replaced, no matter the size of the loss. II. It is designed primarily for antiques and fine art.

neither I nor II

Which of the following statements about the sale of property and liability insurance through the direct response system is (are) true? I. Selling expenses are higher because market segmentation tends to be less precise than with other marketing methods. II. It is the most appropriate system for selling complex products.

neither I nor II

Which of the following statements is (are) true concerning settlement options? I. A straight life annuity provides the lowest amount of periodic income of all the life income options. II. Fixed-period and fixed-amount are life income options.

neither I nor II

Which of the following statements is (are) true regarding renters insurance? I. Renters insurance is needed if you rent a house, but is not needed if you rent an apartment. II. The ISO renter's policy provides open perils ("all-risks") coverage on the insured's personal property.

neither I nor II

Which of the following statements is (are) true regarding the quality of insurance regulation? I. The quality of insurance regulation is uniform from state to state. II. All evidence suggests federal regulation of insurance would improve the quality of regulation.

neither I nor II

Which of the following statements is (are) true with respect to the collision damage waiver on rented cars? I. It is inexpensive and is provided at no charge by most rental car companies. II. It waives the renter's liability for bodily injury liability arising out of use of the rented auto.

neither I nor II

Which statement concerning towing and labor coverage under the PAP is (are) true? I. There's no coverage for towing if the auto breaks down-towing is only covered if the auto needs to be towed after a collision has occurred. II. Towing and labor coverage pays for repairs at a service station or garage.

neither I nor II

Under one type of rate regulation, insurers do not have to register their rates with state regulatory authorities. However, insurers may be required to furnish rate schedules and supporting data to state officials. A fundamental assumption underlying this type of rating law is that market forces will determine the price and availability of insurance, rather than discretionary acts of regulators. This type of rate regulation is called

no filing required.

Brad started a pest control business. To protect his personal assets against liability arising out of the business, Brad incorporated the business. Brad's use of the corporate form of organization to shield against personal liability claims illustrates

noninsurance transfer.

Heather sued Robert for injuries suffered in an automobile accident. Based on the facts presented, the jury concluded that Heather was 40 percent at fault in the accident and Robert was 60 percent at fault. Under the common law doctrine of contributory negligence, the jury should award Heather

nothing.

The long-run relative frequency of an event based on the assumption of an infinite number of observations with no change in the underlying conditions is called

objective probability.

In a surety arrangement, the party who benefits from the bond if the bonded party fails to perform is the

obligee.

When must an insurable interest legally exist in life insurance?

only at the time of the insured's death

An important current issue in state workers compensation programs is the overuse of a certain category of pain-killing drugs. These drugs have been associated with drug overdoses and drug addiction. This category of drugs is called

opiates.

Homeowners insurance policies usually cover resident relatives of the named insured who are under age 24 and who are full-time students away from home. Under the homeowners policy, these full-time students are considered

other insureds.

Alex, age 26, purchased a 20-payment whole life insurance policy. After Alex has made 20 premium payments, his life insurance policy is considered

paid-up.

Insurance companies collect premiums in advance. Since the premiums collected are not needed to pay losses and expenses immediately, the funds can be loaned to business firms. Because of this fact, insurance benefits society by

providing a source of investment funds.

James is concerned that if he purchases a fixed immediate annuity his funds will be tied-up and not accessible if an emergency arises. His insurance agent said that a rider could be attached to his annuity to address this concern. The rider is a

partial cash withdrawal rider.

The inability of the insured to perform some but not all of the important duties of his or her occupation is called

partial disability.

One tort reform proposal is capping noneconomic damages. Noneconomic damages include

payment for pain and suffering.

Metro City would like a pedestrian bridge constructed across Big Creek. The city will accept bids on the project until a specified date. Bidders must submit a bid bond that guarantees if the bid is accepted, the bidder will sign the construction contract and furnish a bond that guarantees the construction work will be completed according to contract specifications. This second bond the bidder must post is a

performance bond.

Peggy is an independent insurance agent who places substantial amounts of business with XYZ Insurance Company. XYZ pays Peggy a bonus when she meets a sales goal. XYZ also allows Peggy to recruit and train sub-agents. She receives additional commissions based on the sales generated by the sub-agents. Based on this description, we can conclude that Peggy is a

personal producing general agent.

Len is considering the purchase of a home. As a home is a large investment, Len wants to make sure that there are no liens, easements, or other encumbrances preventing him from an unchallenged right to possess and enjoy his property. Len can protect this right through the purchase of

personal umbrella insurance.

Dense fog that increases the chance of an automobile accident is an example of a

physical hazard.

All of the following statements about long-term care insurance are true EXCEPT

premiums can be reduced by electing shorter elimination periods.

All of the following statements about the income tax treatment of individually-purchased life insurance are true EXCEPT

premiums paid for individual life insurance are a tax deductible expense.

In the context of a surety agreement, the party who agrees to perform certain acts or fulfill certain obligations is called the

principal

The purpose of the Financial Analysis Solvency Tracking (FAST) system employed by the NAIC is to

prioritize insurance companies for additional regulatory action.

Loss severity is defined as the

probable size of the losses which may occur during some period

Easy Pay Insurance Company may require insureds who suffer a loss to submit a sworn statement to substantiate that a loss occurred and to describe the conditions under which the loss occurred. This sworn statement is called a(n)

proof of loss.

An integrated risk management program is a risk management program which combines

pure and speculative risks.

The premature death of an individual is an example of aThe premature death of an individual is an example of a

pure risk

The price per unit of insurance is called the

rate

A contingent beneficiary in a life insurance policy has the right to

receive the policy proceeds if the primary beneficiary dies before the insured.

One method through which reinsurance is provided is through an organization of insurers that underwrites insurance on a joint basis. Through the organization, financial capacity is available for large commercial risks. This reinsurance arrangement is a(n)

reinsurance pool.

Which of the following is a principal method of ensuring the solvency of insurers?

requiring submission of annual financial statements to state regulators

Michelle had major abdominal surgery. Months after the surgery, she still did not feel well. When she was operated on again, the surgeon discovered two sponges that were not removed at the conclusion of the first operation. Michelle should be able to collect damages without having to prove negligence under the doctrine of

res ipsa loquitor.

Liability items on an insurer's balance sheet that reflect obligations that must be met in the future are called

reserves

The term used to describe plans in which automobile insurers participate to make insurance available to drivers unable to obtain coverage in the standard market is the

residual (shared) market.

Small Town used to be just that-a small town 6 miles from Large City. Over the years, the area between Small Town and Large City has developed, and now Small Town is part of the suburbs surrounding Large City. An auto insurer that operated in the area had a large increase in auto claims from Small Town insureds. The insurer did not adjust its rates, and this year will lose money because of claims attributable to higher population density. Which business rating objective did this insurer fail to meet?

responsiveness

Low-frequency, low-severity loss exposures are best handled by

retention

The net premiums collected by a life insurer for a particular block of policies, plus interest income at an assumed rate, less assumed death benefits paid is called the

retrospective reserve.

Tom and Nancy Boyle provide financial support for their two children. In addition, they provide financial support for Tom's aged father and Nancy's aged mother. The Boyle family can be described as a

sandwiched family.

A special form of planned retention by which part or all of a give loss exposure is retained by the firm is called

self-insurance.

The corporate structure of mutual insurers has changed in recent years. All of the following are examples of significant changes EXCEPT

sharp increase in the number of mutual insurance companies.

Each accounting period, Harris Company Department Store charges a bookkeeping account for its estimated shoplifting losses. The method that Harris Company Department Store uses to fund its retained shoplifting losses is a(n)

unfunded reserve.

Under one type of retirement plan for small businesses, the employer contributes to an IRA established for each eligible employee. Under this type of plan, the contribution limits are significantly higher than they are for traditional IRAs and Roth IRAs. This type of plan, which requires little paperwork, is called a

simplified employee pension (SEP) plan.

Liability arising out of which of the following is covered under the personal injury endorsement to the homeowners policy?

slander

John is risk manager of Alpha-2-Omega Company. John wants coverage for "direct physical loss" ("open perils" coverage) under the business and personal property (BPP) coverage form. Which causes-of-loss form should he select?

special form

Scott had trouble obtaining auto insurance. After three companies refused to insure him, he called the state insurance department. A representative suggested he obtain coverage through Last Chance Insurance Company because "that's all they insure-high-risk drivers." Scott contacted Last Chance. He was not refused coverage; however, the premium Scott was required to pay was three times greater than the average premium in the market. Last Chance Insurance Company is a(n)

specialty auto insurer.

Morgan was hired by an insurance company after she graduated from college. Upon completion of a training program, Morgan was assigned to a territory where she adjusts claims of the insurer's policyowners. Morgan is a(n)

staff claims representative.

Some investors decided to start an insurance company. Each investor contributed $50,000 to raise the capital required to charter a new company. Each investor received an ownership interest in the company. The company will raise additional capital by selling ownership rights to other investors. Under this type of organization, the customer and owner functions are separate. This type of insurer is called a

stock company.

Uncertainty pertaining to the organization's goals and objectives and the organization's strengths, weaknesses, opportunities, and threats is called

strategic risk.

In addition to the named insured, all of the following are insureds under the Commercial General Liability Policy EXCEPT

suppliers of products to the named insured's business.

All the following are common exclusions in a medical expense insurance policy EXCEPT

surgeons' fees.

Jim would like to start a business raising thoroughbred racehorses. Obtaining insurance on the horses is a key concern, and he was dismayed to learn that none of the insurers authorized to operate in his state offer this specialty insurance. What is the name of the intermediary that Jim can use to place this coverage with an insurer not admitted to his state?

surplus lines broker

Granite Insurance Company entered into a treaty reinsurance agreement with Rock Solid Reinsurance (RSR). Granite's retention limit is $400,000 and RSR agreed to provide reinsurance for up to $2.0 million. If Granite writes an $800,000 policy, RSR is responsible for 50 percent of the losses. If Granite insures a $1.6 million risk, RSR is responsible for 25 percent of any losses. What type of reinsurance arrangement did Granite enter into with RSR?

surplus share reinsurance

John purchased an unendorsed Homeowners 3 policy. The coverage will expire next month. Which of the following changes will lower the premium that John will pay?

switching to an HO-2 policy

Under one method of estimating a loss reserve, the reserve is based on life expectancy, duration of disability, and similar factors. This method of estimating loss reserves is called the

tabular value method.

The Affordable Care Act includes a provision designed to help small employers make health insurance coverage available to their employees. This provision allows small employers to reduce their federal income tax by a percentage of the employer's contribution to health insurance for employees. This subsidy, in the form of reduction of income taxes, is called a

tax credit.

Smith is Manager of ABC Department Store. Jones, ABC's Security Director, visited Smith to ask some questions. During questioning, Smith admitted that he stole $10,000 in merchandise. He was disciplined, but not fired. The loss was not reported to the insurer that wrote ABC's crime insurance. Six weeks later, Smith was observed on a surveillance camera stealing over $50,000 in jewelry from ABC. ABC immediately reported the loss to its crime insurer. Which ISO crime coverage condition may prevent ABC from collecting for this loss?

termination as to any employee

The National Association of Insurance Commissioners (NAIC) administers an "early warning system" to help ensure insurance company solvency. This system uses data provided in the annual statement to identify companies that may pose a solvency risk. This early warning system is called

the Insurance Regulatory Information System (IRIS).

All of the following statements about insurance regulation are true EXCEPT

the National Association of Insurance Commissioners (NAIC) can force states to adopt the model laws that it drafts.

All of the following statements about the tax treatment of life insurance purchased by an individual are true EXCEPT

the annual increase in the cash value is currently taxable.

Under a 401(k) plan, what is compared to determine if the plan unfairly discriminates in favor of highly compensated employees?

the average percentage of salary deferred by the highly compensated is compared to the average percentage of salary deferred by other eligible employees

Under which of the following rules is actual cash value determined by taking into consideration all relevant factors an expert would use to determine the value of the property?

the broad evidence rule

Maria's home was damaged by an earthquake. As Maria has open-perils coverage on her home, she was surprised to learn that her loss was not covered. Which section of a property insurance policy specifies which perils, property, and types of losses are not covered?

the exclusions

Carl is concerned that if he purchases an equity indexed annuity, he will lose money long-term if the stock index declines. Which equity indexed annuity provision assures Carl that he will not lose money if he holds the equity indexed annuity to term?

the guaranteed minimum value

Risk management is concerned with

the identification and treatment of loss exposures

With an equity-indexed annuity, what name is given to the method of crediting excess interest to the annuity?

the indexing method

All of the following requirements must be met to satisfy the doctrine of res ipsa loquitur EXCEPT

the injured party must prove negligence on the part of the defendant.

All of the following statements about the independent agency system are true EXCEPT

the insurer rather than the agent owns the renewal rights to the business.

All of the following are covered under the dwelling coverage (Coverage A) of the Homeowners 3 policy EXCEPT

the land on which the insured dwelling is located.

Nancy was injured when she drove her car through a stop sign and was struck by Philip's car. Philip saw Nancy and could have stopped. However, he failed to do so since he had the right-of-way. Nancy can recover damages from Philip under which of the following legal doctrines?

the last clear chance rule

The gross premium is defined as

the net premium plus the loading allowance.

Under an equity-indexed annuity, what name is given to the percentage increase in the stock index that is credited to the contract?

the participation rate

What major feature distinguishes a participating policy from a nonparticipating policy?

the payment of dividends

Most group health insurance plans have adopted the coordination-of-benefits rules developed by the National Association of Insurance Commissioners. Under these rules, if a dependent child is covered by both of the health insurance plans of the child's married parents, which health plan is primary for the child's medical expenses?

the plan of the parent whose birthday occurs first in the calendar year

Amy purchased a life insurance policy with the intent of committing suicide to pay all the debts that were burdening her family. If she commits suicide 9 months after the policy is purchased, and the insurer is able to prove that her death was a suicide, how much will be paid by the insurance company?

the premiums paid for the policy

The net single premium for a life insurance policy is

the present value of the future death benefit.

The gross premium for life insurance is equal to

the present value of the future death claim plus an expense loading.

All of the following statements about the rules governing agency relationships are true EXCEPT

the principal is responsible for the acts of agents only if the acts are criminal.

In a reinsurance transaction, the ceding commission is paid by

the reinsurer to the ceding company.

Marshall is interested in determining the cost per thousand of his life insurance policy. Which of the following will provide Marshall the most meaningful measure of the cost per thousand dollars per year of his life insurance?

the surrender cost index

Under the Medicare Prescription Drug Program, a coverage gap (also called a "donut hole") exists after the beneficiary and drug plan pay a certain amount for covered drugs. The coverage gap refers to

the temporary gap in coverage that begins when the beneficiary and drug plan pay a certain amount for covered drugs during the year and ends when the catastrophic limit is reached and coverage resumes.

Under the traditional net cost method, the net cost of life insurance for a given period (e.g., 20 years) is determined by which of the following formulas?

the total premiums for the period less the policy reserve at the end of the period

The property and liability insurance industry fluctuates between periods of increasing insurance rates and tight underwriting standards, and decreasing insurance rates and loose underwriting standards. Profitability in the industry follows these cyclical movements. What is this pattern of fluctuations called?

the underwriting cycle

All of the following are circumstances under which withdrawals from a traditional IRA may be made prior to age 59.5 without incurring a substantial penalty EXCEPT

the withdrawal is used to pay living expenses after unemployment insurance benefits cease.

Charles Blake told Wendy that he was an agent for Easy Pay Life Insurance Company. He presented no credentials. He asked Wendy some questions about her health and activities, and recorded the answers on scrap paper. He collected a $250 cash premium from Wendy. When Wendy did not receive a policy from Easy Pay, she contacted the company. Easy Pay said they do not have an agent named Charles Blake. Easy Pay is not responsible for Wendy's loss of $250 because

there is no presumption of an agency relationship.

All of the following statements about endorsements and riders are true EXCEPT

they are primarily used to circumvent legislation requiring specific policy provisions.

An employee of Nelson Manufacturing was injured by a defective machine Nelson purchased from Clark Corporation. The employee's tort action against Clark was successful. Clark, in turn, sued Nelson, alleging that Nelson failed to provide proper operating instructions to the employee. This claim (Clark vs. Nelson) is covered under Part Two of Nelson's workers compensation and employer liability policy. Such claims are called

third-party over cases.

Reasons to adopt an enterprise risk management plan include all of the following EXCEPT

to increase earnings volatility.

All of the following are reasons for a primary insurer to use reinsurance EXCEPT

to increase the unearned premium reserve.

Which of the following is a reason that social insurance programs exist?

to provide a base of economic security

All of the following are reasons why employers self-insure medical expense plans EXCEPT

to provide mandated state benefits.

Which of the following is a fundamental purpose of the principle of indemnity?

to reduce moral hazard

Which of the following is authority given to the Federal Insurance Office created by the Dodd-Frank Act?

to represent the federal government in international discussions of insurance regulation

All of the following are methods used to fund the Affordable Care Act EXCEPT

tort reform measures that reduce medical malpractice claims.

The multi-car discount is based on the assumption that

two cars owned by the same person will not be driven as frequently as one car.

Traditionally, risk has been defined as

uncertainty concerning the occurrence of a loss

Jan is employed by an insurance company. She reviews applications to determine whether her company should insure the applicant. If insurable, Jan assigns the applicant to a rating category based on the applicant's degree of risk. Jan is a(n)

underwriter.

Kim purchased a one-year property insurance policy. She agreed to pay half the premium when she bought the coverage, and the other half six months later. If Kim fails to pay the second premium, the insurer cannot sue her for the premium because insurance contracts are

unilateral contracts.

All of the following are historical reasons for the increase in health care expenditures in the United States EXCEPT

universal health insurance coverage

In the ISO Commercial Crime Coverage form, robbery is defined as the

unlawful taking of property from the care and custody of a person by someone who has caused or threatens to cause bodily harm or who has committed an unlawful act witnessed by that person.

Daryl, age 42, quit his job. His employer offered a defined contribution pension plan, and the balance in the account was $30,000 when Daryl quit. He can avoid immediate taxation of these funds by

using an IRA rollover account.