Section 1 Practice

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Daniel owns an insurance agency in a small town and represents just 1 insurer. He wears apparel with the company logo and has the name of his vehicle. What type of authority does this represent?

Apparent

All of the following are elements of a contract and except

Are: legal purpose agreement competent parties are not: acknowledgment

What is Lloyd's of London?

Association of individuals and companies that individually underwrite insurance. It helps its associates settle the claim and disputes. It gathers and disseminated underwriting information.

What are the types of agents?

Captive General Independent

Which of the following is an incorporated insurer that is owned by its policy holders and does not have capital stock or shares?

Mutual company

An insurer that issues participating policies

Mutual insurer

An insurer that issues participating policies is

Mutual insurer

What are fraternal benifits societies?

Policies are called contracts

With a life insurance contract, which of the contracting parties makes an enforceable promise?

The insurer

The agent

Who represents an insurance company in an insurance transaction?

An insurance company that transacts insurance directly with consumers without the assistance of producers is called

a direct response company

AN insurance company that is owned by its policyowners, who share the insurer's divisible surplus in the form in the form of participating policy dividends, is known as

a mutual insurance company

A fiduciary responsibility is defined as what

a relationship of special trust and confidence when a person is entrusted with anothers funds

Miguel works for a mutual insurance company that was formed to handle the insurance needs of lawyers. The type of company that Miguel works for is called

a risk retention group

Name the three types of authority under the law of agency:

apparent expressed implied

The insurance concept of returning customers to the financial status they enjoyed prior to a loss is known as

indemnification

In an insurance transaction, who does a licensed agent legally represent?

insurer

Insurance agents represent the

insurer

False information that will void insurance contract is known as

material misrepresentations

Filing a fraudulent health insurance claim is an example of

moral hazard

Which of the following is an incorporated insurers that does not have capital stock and has a governing body that is elected by its policyholders?

mutual insurer

A captive agent who has an exclusive contract with an insurer may

not represent another insurer selling an identical policy

A mutual insurance company is an incorporated entity owned by its

policyholders

Unincorporated groups of people that agree to insure each other's losses under a contract are known as

reciprocal insurers

A contract in which one insurer cedes all or part of a risk to another insurer is known as

reinsurance

Statements made by an applicant in completing a life insurance application are considered to be

representations

If Jill signs a contract 2 week later while intoxicated after wanting to purchase a $500,000 life insurance policy_____

she will not be presumed to be competent

According to insurance law, an insurance agent is a person who

solicits, negotiates, procures or effects insurance or annuity contracts on behalf of an insurer

Making appropriate product recommendations based on the needs, objectives, and circumstances of a client is referred to as

suitability considerations

A producer owes a fiduciary responsibility to all of the following EXCEPT:

the commissioner for license fees

An individual who recruits agents to sell insurance within a certain geographical area is

the general agent

In an insurance transaction, licensed agents legally represent which of the following?

the insurer

Licensed and appointed agents represent

the insurer

Whom do independent insurance agents represent?

the insurer

Statements that are guaranteed to be true are called

warranties

Which of the following types of agents authority is specifically set forth in writing in the agents contracts?

express

The authority that an insurer gives to its agents by means of the agents contracts is known as

express authority

What are the types of agent authority?

express, implied, apparent

Mutual Insurance Company

An insurance company that is owned by its policyholders, who share the insurer's divisible surplus in the form of participating policy dividends.

Examples of Misrepresentation

-Exaggerated description of treatment programs -Exaggerated description of personal levels of training, experience and expertise

A licensed independent life or health insurance producer may represent

1 or more authorized insurers

What is the definition of fiduciary?

A person in a position of trust and confidence who handles the affairs and funds of others

Which of the following is a promise in exchange for an action?

A unilateral contract

Which characteristic of insurance contracts provides legal protection for insureds when coverages are not clearly stated in the policy?

Adhesion

When agents act on behalf of insurers, they are acting under which legal principle?

Agency

A commercial insurer can take all of the following forms except

An individual benefit society

What type of agent authority is specifically set forth in writing gin the agents contract?

Express

Disposition of fiduciary funds?

Funds collected as premiums are to be kept separate from those used for personal expenses or investments.

catastrophic loss

In order to be insured, a group must be randomly selected to avoid

A mutual insurer is owned by its

Policyholders

Transferring Risk

Purchasing Insurance is an example of this

What kind of insurance company is owned by individuals who buy shares but are not entitled to receive policy dividends?

Stock insurance company

Adverse Selection

The inclination of higher-risk individuals to be "first in line" to get and keep insurance is called

Which of the following describes facultative reinsurance?

The reinsurer considers each risk before allowing the transfer to be made from the ceding company.

Life insurance contract

The term aleatory indicates that the values received by each part may be unequal.

If an agent or producer diverts funds belonging to an insurer to her own use, she has committed the illegal act of

Theft

With regard to insurance, risk can be defined as

Uncertainty regarding loss

A peril is a

cause of loss

Reinsurance

A contract in which one insurer cedes all or part of a risk to another insurer.

Which of the following insurance companies are organized are incorporated under state laws but have no stockholders?

Mutual insurers

What are some statements regarding mutual insurers?

Mutual insurers issue participating policies.

Specialized risks that admitted insurers are not able to cover may often be obtained through

a surplus line insurer

In an insurance contract, only one part is legally bound to perform under the contract. This describes

a unilateral contract

An insurance company that holds a certificate of authority in a state may be known as any of the following EXCEPT

accepted right answers - authorized - approved - admitted

What are some examples of insurable risk?

accidental affordable assessable

The inclination of higher-risk individuals to be "first in line" to get and keep insurance is called

adverse selection

The premium for transferring a risk should be

affordable

In an insurance transaction, the insurer is represented by the

agent

What regarding the fiduciary duty of a producer is correct?

all premiums received by an insurance producer must be held in trust and cannot be used for personal matters.

An insurance company formed under the laws of any other country other than the US would be considered

an alien insurance company

What are the 6 characteristics of insurable risk

calculable affordable noncatastrophic homogeneous accidental measurable

The license an insurer usually needs to sell insurance in a state is called

certificate of authority

Since the obligations of the insurance company hinge on certain acts of the policyowner, the beneficiary, or both, the insurance contract is termed

conditional

With regard to insurance, consideration means what

directly giving something of value

When there is no coverage available through an authorized carrier in the state, this insurance is referred to as:

excess and surplus line

Agents that work on behalf of 1 specific insurance carrier are known as

exclusive or captive agents

Insurance company that is owned by its policyholders?

mutual life insurance company

Self-insurance is an example of what kind of risk treatment?

retention

A stock insurer is owned by

shareholders

Murt Enterprises wants to build 3 new casinos in Illinois. It is possible the necessary insurance coverages will be placed through

surplus lines company

Who are the parties to a life insurance contract?

the applicant and the insuring comapny

Morris is a licensed insurance agent. His principal is

the insurer

The law of large numbers states that:

the larger the number of risks combined into one group, the less uncertainty there will be as to the amount of loss that will be incurred.

Which of the following statements regarding a stock insurer is not true?

the policies are participating policies

What are the common characteristics of an insurance contract?

utmost good faith adhesion indemnity not - legal purpose


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