Chapter 1 - General Insurance

Which of the following is another term for an authorized insurer? A. Admitted B. Licensed C. Certified D. Legal

A. Admitted Remeber Authorized = Admitted (A's)

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

A. An applicant submits an application to the insurer

Contracts that are prepared by one party and submitted to the other party on a take it or leave it bases are classified as: A. Contracts of adhesion B. Aleatory contracts C. Unilateral contracts D. Binding contracts

A. Contracts of adhesion Insurance policies are written by the insurer and submitted to the insured on a take it or leave it bases. The insured doesn't have any in put into the contract, but simply adheres to it

A Participating insurance policy may do which of the following? A. Pay dividends to the Policyowner B. Require 80% participation C. Pay dividends to the stockholder D. Provide group coverage

A. Pay dividends to the policyowner A Participating insurance policy will pay dividends to the owner based upon actual mortality cost, interest earned and costs

Which services are associated with Standard & Poor's and AM Best? A. Rating the financial strength of insurance companies B. Investigating violations of The Fair Credit Reporting Act C. Storing medical information collected by insurance companies D. Providing employement histories for investigative consumer reports

A. Rating the financial strength of insurance companies

In insurance policies, contract ambiguities are automatically ruled in the favor of the insured. What privilege does the insurer have in order to balance this? A. The right to determine the wording of a policy B. The right to raise premiums as a result of court rulings C. The right to revoke the policy D. The right to refute the rulings

A. The right to determine the wording of a policy In contracts in which only the insurer has the right to determine the wording of a policy, the policyholder will receive benefits denied due to a contract ambiguity

Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe? A. Unilateral B. Adhesion C. Personal D. Conditional

B. Adhesion A contract of adhesion is prepared by only the insurer; the insured's only option is to accept or reject the policy as it's written

Which of the following best describes an insurance company that hs been formed under the laws of this state? A. Admitted B. Domestic C. Local D. Sovereign

B. Domestic

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 The powers and authorities that an agent holds are express and implied. Apparent authority is the appearance of, authority based on the actions, words, or deeds of the principal or because of the circumstances the principal created

What is the major difference between a stock company and a mutual company? A. # of producers B. Ownership C. Amount of benefits D. Types of policies issued

B. Ownership Mutual companies are owned by policyholders, while stock companies are owned by stockholders

The causes of loss insured against in an insurance policy are known as A. Risks B. Perils C. Losses D. Hazards

B. Perils

Pertaining to insurance, which of the following is an example of producer's fiduciary responsibility/ A. Performing reviews of insured's coverage B. Promptly forwarding premiujms to the insurance company C. Offering additional coverage to insureds D. Helping insureds to file claims

B. Promptly forwarding premiums to the insurance company Fiduciary refers to position of trust. When an agent is handling the premiums that belong to an insurance company they are acting in a fiduciary capacity

All of the following are marketing arrangements used by insureres EXCEPT A. Direct Response Marketing System B. Reinsurance System C. Independent Agency System D. General Agency System

B. Reinsurance System Reinsurance is a method used by insurers to protect against catastrophic losses. The test are marketing arrangements

In forming an insurance contract, when does acceptance usually occur? A. When an insurer delivers the policy B. When an insurer's underwriter approves coverage C. When an insurer receives an application D. When an insured submits an application

B. When an insurer's underwriter approves coverage In insurance, the offer is usually made by the applicant in the form of an application. Acceptance takes place when a insurer's underwriter approves the application and issues a policy

Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPT A. Legal purpose B. Consideration C. Offer and acceptance D. Conditions

D. Conditions Conditions are part of the policy structure. Consideration is an essential part of a contract

When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following? A. Acceptance B. Contract of adhesion C. Legal purpose D. Consideration

D. Consideration Consideration is something of value that each party gives to the other. The consideration on the part of the insured is the payment of premium and the representations made in the application

Courts will interpret any ambiguity in an insurance contract A. Through arbitration B. Based on the prudent person rule C. In fabor of the insurer D. In favor of the insured

D. In favor of the insured