Chapter 1: General Insurance

An agent is acting ethically in all the of following situations EXCEPT: a. working within the conditions of his/her contract b. representing the insurer, not the insured c. keeping customers' best interests in mind d. always representing the insured

Always representing the insured

In insurance, an offer is usually made when: a. an applicant submits an application to the insurer b. the insurer approves the application and receives the initial premium c. the agent hands the policy to the policyholder d. an agent explains a policy to a potential applicant

An applicant submits an application to the insurer

Which of the following is owned by a corporation to serve that organization's needs at lower rates than would otherwise be available with commercial insurance? a. Internal insurer b. Custom insurer c. Reinsurer d. Captive insurer

Captive insurer

An insurance company sells an insurance policy over the phone in a response to a TV ad. Which of the following best describes this act? a. Direct response marketing b. Independent agency marketing c. Illegal d. insurance telemarketing

Direct response marketing

A person who does not lock the doors or does not repair leaks shows an indifferent attitude. This person presents what type of hazard? a. Moral b. Legal c. Physical d. Morale

Morale

An insurance agent's responsibilities include all of the following EXCEPT: a. Perform professionally b. Represent the client c. Perform faithfully d. Represent the insurer

Represent the client

Which of the following insurers are owned by stockholders: a. Fraternal b. Stock c. Mutual d. Reciprocal

Stock

what term best describes the act of withholding material that would be crucial to an underwriting decision? a. concealment b. withholding c. leading d. breach of warranty

a. concealment

According to the Law of Agency, a principal is represented by whom? a. Insurer b. broker c. insured d. agent

agent (the agent represents the principal/insurer)

When transacting business in this state an insurer formed under the laws of another country is known as a/an

alien insurer

Because an agent is using stationery with the logo of an insurance company, applicants for insurance assume that the agent is authorized to transact on behalf of that insurer. What type of agent authority does this describe? a. implied b. assumed c. apparent d. express

b. apparent

contracts that are prepared by one party and submitted to the other party on a take-it or leave-it basis are classified as: a. binding contracts b. contracts of adhesion c. unilateral contracts d. aleatory contracts

b. contracts of adhesion

What documentation grants express authority to an agent? a. fiduciary contract b. state provisions c. agent's contract with the principal d. agent's insurance license

c. agent's contract with the principal

all of the following are marketing arrangements used by insurers except: a. direct response marketing system b. independent agency system c. reinsurance system d. general agency system

c. reinsurance system

If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it? a. conditional b. a legal (but unethical) contract c. unilateral d. adhesion

c. unilateral

In any case where there is a controversy or dispute between the insurance company and the insured, the soliciting agent is the agent of the

company

An applicant knowingly fails to communicate information that would help an underwriter make a sound decision regarding coverage. This is an example of: a. waiver b. concealment c. fraud d. breach of warranty

concealment

which of the following statements is an accurate comparison between private and government insurers? a. insurance provided by the government is called federal insurance b. private insurer offer fewer lines of insurance than government insurance c. private insurers provide insurance in areas where the government will not d. private insurers may be authorized to transact insurance by state insurance departments

d. private insurers may be authorized to transact insurance by state insurance departments

which of the following is NOT a responsibility of an insurance agent? a. delivering the contract b. explaining the policy provisions c. submitting the application to the insurer d. underwriting the contract

d. underwriting the contract

Which of the following insurance options would be considered a risk-sharing arrangement? a. reciprocal b. stock c. mutual d. surplus lines

reciprocal

Which of the following is NOT a goal of risk retention? a. to fund losses that cannot be insured b. to minimize the insured's level of liability in the event of a loss c. to reduce expenses and improve cash flow d. to increase control of claim reserving and claims settlements

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

which of the following are the authorities that an agent can hold? a. primary and secondary b. express and implied c. apparent and allowed d. authorized and admitted

b. express and implied

On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are: a. guaranteed b. not taxable, since the IRS treats them as a return of a portion of premium paid c. paid at a fixed rate every year d. taxable as ordinary income

b. not taxable (etc.)

what is a definition of a unilateral contract? a. if one party makes a condition, the other party can counteroffer b. one-sided: only one party makes an enforceable promise c. two or more parties go into a contract understanding there may be an unequal exchange of value d. one author: the company wrote the contract; the insured must accept it as written

b. one-sided: only one party makes an enforceable promise

when an individual purchases insurance, what risk management technique is he or she practicing? a. retention b. transfer c. avoidance d. sharing

b. transfer

A tornado that destroys property would be an example of which of the following? a. a pure risk b. a loss c. a physical hazard d. a peril

d. a peril

an insurance producer who by contract is bound to write insurance for only one company is classified as a/an: a. solicitor b. broker c. independent producer d. captive agent

d. captive agent

which of the following is NOT an essential element of an insurance contract? a. consideration b. agreement c. legal purpose d. counteroffer

d. counteroffer

An insurance organization that does not issue insurance policies but provides a meeting place for underwriters to conduct business is known as a: a. fraternal society b. mutual company c. capital stock company d. lloyd's association

d. lloyd's association

Which of the following is a characteristic of a reciprocal insurance exchange? a. normally write all lines of insurance b. stockholders share in any profits c. issues nonassessable policies d. the chief administrator of the insurer is called an "attorney-in-fact"

d. the chief admin of the insurer is called an "attorney in fact"

Which of the following best describes an insurance company that has been formed under the laws of this state? a. sovereign b. alien c. foreign d. domestic

domestic

The reduction, decrease, or disappearance of value of the person or property insured in a policy by a peril insured against is known as: a. exposure b. hazard c. risk d. loss

loss

Which of the following is the basis for a claim against an insurance policy? a. loss b. material change c. hazard d. misrepresentation

loss

Untrue statements on the application unintentionally made by insureds that, if discovered, would alter the underwriting decision of the insurance company, are called: a. material misrepresentations b. fraudulent statements c. warranties d. common errors

material misrepresentations

An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy? a. reciprocal b. nonprofit service organization c. stock d. mutual

mutual