Chapter 1 Quiz
If an insurance premium is paid by the policyowner to the agent, and the agent fails to remit that premium to the insurer, which of the following statements is true?
The policy will not lapse since payment to the agent is the same as a payment to the insurer.
Which of the following is not a responsibility of an insurance agent: Delivering the contract, submitting the application to the insurer, explaining policy provisions, underwriting the contract
underwriting the contract; the insurer does that
When would a misrepresentation on the insurance application be considered fraud?
If it is intentional and material
Untrue statements on the application unintentionally made by insureds that, if discovered, would alter the underwriting decision of the insurance company, are called
Material misrepresentations
Which of the following is NOT correct regarding false statements by a person engaged in the business of insurance?
Oral statements cannot be considered fraud.
In case of a loss, the indemnity provision in insurance policies
Restores an insured person to the same financial state as before the loss
Adverse selection is a concept best described as
Risks with higher probability of loss seeking insurance more often than other risks.
The risk management technique that is used to prevent a specific loss by not exposing oneself to that activity is called
avoidance
An applicant knowingly fails to communicate information that would help an underwriter make a sound decision regarding coverage. This is an example of
concealment
What term best describes the act of withholding material information that would be crucial to an underwriting decision?
concealment
What entity is not an insurer but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization?
fraternal benefit society
What do individuals use to transfer their risk of loss to a larger group?
insurance
The reduction, decrease, or disappearance of value of the person or property insured in a policy by a peril insured against is known as
loss
Insurance is the transfer of
risk
Which of the following is NOT a characteristic of an insurable risk: the loss must be due to chance, the loss must be measurable, the loss exposure must be large, the loss must be catastrophic
the loss must be catastrophic. in order to be characterized by pure risk, the loss must be due to chance, definite, measurable, and predictable, but not catastrophic