Chapter one quiz questions

Because an agent is using stationery with the logo of an insurance company, applicants for insurance assume that the agent is the authorized to transact on behalf of that insurer. What type of agent authority does this describe?

Apparent

Which of the following types of agent authority is also called "perceived authority"

Apparent

in forming an insurance contract, when does the acceptance usually occur?

When an insurer's underwriter approves coverage

which of the following is another term for an authorized insurer

admitted

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

alien insurer

If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered to be

authorized

An individual was involved in a head-on collision while driving home one day. His injuries were not serious, and he recovered. However, he decided that in order to never be involved in another accident, he would not drive or ride in a car ever again. Which method of risk management does this describe?

avoidance

which of the following must an insurer obtain in order to transact insurance within a given state?

certificate of authority

when an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?

consideration

An insurance company sells an insurance policy over the phone in response to a TV ad. Which of the following best describes this act?

direct response marketing

The authority granted to an agent through the agent's contract is referred to as

express authority

The requirements that agents not commingle insurance monies with their own funds is known as

fiduciary responsibility

an insurance company is domiciled in Montana and transacts insurance in Wyoming. Which term best describes the insurer's classification in Wyoming?

foreign

a life insurance policy has a legal purpose if both of which of the following elements exist?

insurable interest and consent

all of the following are examples of risk retention EXCEPT

premiums

pertaining to insurance, what is the definition of fiduciary responsibility?

promptly forwarding premiums to the insurance company

installing deadbolt locks on the doors of a home is an example of which method of handling risk

reduction

Hazard is best defined as

something that increases the risk of loss

events in which a person has both the chance of winning or losing are classified as

speculative risk

which of the following insurers are owned by stockholders?

stock

If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it?

unilateral

what is a material misrepresentation

A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company

An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe?

Aleatory

What services are associated with Standard & Poor's and AM Best?

Rating the financial strength of insurance companies

Not all losses are insurable, and there are certain requirements that must be met before a risk is a proper subject for insurance. These requirements include all of the following EXCEPT

The loss may be intentional

for the purpose of insurance, risk is defined as

The uncertainty or chance of loss

which of the following is NOT a goal or risk retention

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

a producer who fails to separate premium monies from his own personal funds is guilty of

commingling

representations are written or oral statements made by the applicant that are

considered true to the best of the applicant's knowledge

contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as

contracts of adhesion

which of the following best describes the aleatory nature of an insurance contract?

exchange of unequal values

in insurance transactions, fiduciary responsibility means

handling insurer funds in a trust capacity

the insurer may suspect that a moral hazard exists if the policyholder

is not honest about his health on an application for insurance

the causes of loss insured against in an insurance policy are known as

perils

which of the following is the most common way to transfer risk?

purchase insurance

which of the following factors is NOT considered by an underwriter when determining the premium rates for an individual seeking insurance

race

which of the following insurance options would be considered a risk-sharing arrangement?

reciprocal

Which of the following is NOT a characteristic of an insurable risk?

The loss must be catastrophic

units with the same or similar exposure to loss are referred to as

homogenous

when would a misrepresentation on the insurance application be considered fraud?

if it is intentional and material

Which authority is NOT stated in an agent's contract but is required for the agent to conduct business?

implied

which of the following is true regarding a risk retention group?

it is a liability insurance company owned by its members

Which of the following is NOT true regarding a Certificate of Authority

it is issued to group insurance participants

which of the following would qualify as a competent party in an insurance contract

the applicant has a prior felony conviction

which of the following is an example of a producer's fiduciary duty?

the trust that a client places in the producer in regard to handling premiums

untrue statements on the application unintentionally made by the insureds that, if discovered, would alter the underwriting decision of the insurance company, are called

material misrepresentations

insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe?

adhesion

What is the definition of a unilateral contract

One-sided: only one party makes an enforceable promise

Which of the following statements is an accurate comparison between private and government insurers?

Private insurers may be authorized to transact insurance by state insurance departments

The risk management technique that is used to prevent a specific loss by not exposing oneself to that activity is called

avoidance