Chapter 1 Test
Gary wants to make sure that, if he dies before his wife, she will have enough money to live on. His death is considered a risk. If he convinces another party to assume this risk (for example by purchasing insurance), what is this process called?
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The "take it or leave it" nature of an insurance contract is most expressed by which of the following terms?
Adhesion
An incomplete application would result in which of the following?
Affect the Insurer's right to contest a subsequent claim for benefits
Which of the following is true regarding AIDS Testing during the Underwriting Process?
All choices are correct
Who is the only individual that can make changes on the Application?
Applicant/Insured
An applicant submits an application for insurance along with the first month's premium based on a preferred rate class. Since the insurer issued the policy with a standard rate class, this would be referred to as which of the following?
Counter-offer
Where an Interim Insuring Agreement is not present, coverage begins on which of the following dates?
Date of policy delivery and collection of premium due
Which of the following statements is an accurate comparison between private and government insurers?
Government insurers offer insurance that private insurers can not.
In the formation of a Life Insurance contract, the special significance of a Conditional Receipt is that it accomplishes which of the following?
Is intended to provide coverage on a date earlier than the date of the issuance of the policy
When a stock company issues both participating and nonparticipating policies, it is doing business on what kind of plan? Mixed plan
Mixed plan Mixed plan
An insurance company owned by its policyholders is known as which of the following?
Mutual company
On an application for insurance, all statements are?
No statements are Warrantees
What does the Law of Large Numbers tell us about the predictability of loss?
Predictability is more accurate as the population sample increases.
Statements made by an applicant in the application for a Life Insurance policy, which are supposed to be true, are referred to as which of the following?
Representations
Assuming and later confronting risk is a form of which of the following?
Risk retention
When insurance cannot be procured from an Authorized Insurer, which of the following would serve as an alternative?
Surplus lines
The insured's financial obligations are outlined in which section of a policy?
The Consideration Clause
Risk is which of the following?
Uncertainty of loss
In the formation of a legal contract, each party must give something of value. Under contract law this is referred to as:
consideration
An insurer incorporated under the laws of the state in which it is operating is considered to be a(n):
domestic insurer
The authority of an agent which is spelled out in the written words of the agency contract between the agent and insurer is ______:
express authority
Which of the following is the basis for a claim against an insurance policy?
loss
An insurance company owned by its policyholders who receive a return of unused premiums in the form of policy dividends, is a(n):
mutual company
A statement made by an insurance applicant on an application is referred to as a:
representation
Underwriters are concerned with something known as adverse selection, which means:
the greater tendency of poorer risks to apply for and obtain insurance