Chpater 1 General Insurance

Admitted

An insurer authorized to do business within this state is considered what type of insurer? Alien Domestic Admitted

Aleatory

When the exchange of value is unequal, the contract is considered:

Facultative

A ____________ agreement is a reinsurance agreement that allows the reinsurance company an opportunity to reject coverage for individual risks, or price them higher due to their substandard (higher risk) nature.

Misrepresentation

A false statement in the application that can render the contract void, if material to the acceptance of the risk, is known as a:

Broker

A person who negotiates insurance contracts with insurers on behalf of an applicant is known as a(n):

Warranty

A statement that a person makes and guarantees to be true is a:

Mutual Insurance

A type of company that is owned by its policyholders, that traditionally issues participating policies in which policyholders may be eligible to receive dividends is a _______ company.

A waiver

A voluntary surrender of a known right, claim, or privilege is known as:

An offer

A voluntary surrender of a known right, claim, or privilege is known as:

Applicant

A(n) ___________ has the right to review the consumer report used in the underwriting process.

Owner

A(n) ____________ is responsible for paying the policy's premium and has various rights as specified in the contract.

Insured

A(n)____________ is the person or entity that is covered by an insurance policy.

Paying annual policy premiums

All of the following are Anti-Money Laundering 'red flags', except: Early cancellation of the policy, regardless of cancellation fees (surrender charges) Paying for an entire policy up front with cash Strong reliance on wire or electronic fund transfers to foreign accounts Paying annual policy premiums

They issue policies

All of the following are TRUE regarding agent/producer activities and responsibilities, except: A: They issue policies B: They provide quotes and collect premiums C: They represent the insurer D: They solicit, receive, and forward applications for insurance

Representations

All of the following are essential elements of a legal contract, except: A: Competent Parties B: Legal Purpose C: Representations D: Consideration

College Degree

All of the following are sources that insurers may look at for information regarding the insurability of a prospective insured, except: College Degree Inspection Report APS (Attending Physician Statement) MIB (Medical Information Bureau)

It eliminates risk

All of the following are true of insurance in general, except: It eliminates risk It reduces uncertainty It transfers risk It can reduce risk

When the insurer issues a policy

An applicant completes the application and submits it to the insurer along with a premium check. When is the applicant's offer considered accepted?

Admitted

An insurer authorized to do business within this state is considered what type of insurer?

Reciprocal Insurance Company

An unincorporated organization that is formed by individuals, firms, and business corporations that exchange insurance on one another and whose members are known as subscribers is called a:

Certificate of Authority issued by the state Insurance Department

Before an insurer can operate in this state, it must have which of the following?

Indemnification

Being restored to the same financial situation or economic condition that existed prior to a loss and not profiting from an insurance transaction is considered:

Formation of

Contract law pertains to the __________ and enforcement of contracts.

The individual states

For the most part, the highest authority for insurance regulation is:

A representation

If a life insurance applicant's answers on the application indicate that he/she is in good health, when in fact the applicant has a disease that he/she is not aware of, the statement on the application is considered:

What the public assumes the agent has

Implied authority is:

Adhesion

Larry owns an insurance contract issued by the ABC company that contains words and phrases that are ambiguous to Larry. If ABC challenges a claim based on these phrases they will lose because an insurance contract is deemed to be a contract of:

Syndicates

Lloyd's of London is not an insurance company, but consists of groups of underwriters called _________, each of which specializes in insuring a particular type of risk.

$100

Mateo applies for an insurance policy that will have an annual premium payment of $1,000 ($510 semi-annually, $260 quarterly, and $100 monthly) if issued. Which of the following premium checks would be adequate consideration if he chose to pay monthly?

National Association of Insurance Commissioners (NAIC)

Members of the ___________ include state and territorial insurance commissioners or regulators.

Minimizing the chance of loss

Risk reduction is:

Representations

Statements made on the application by the applicant that are believed to be true to the best of his/her knowledge are:

Agent

The Law of Agency states that a person or entity who acts on behalf of another person, company, or government, is known as the __________.

Gave states the authority to regulate insurance

The McCarran-Ferguson Act of 1945:

Has no legal authority over insurance regulation

The National Association of Insurance Commissioners (NAIC):

Ceding

The ________ department of an insurance company advertises and sells policies to the public. Marketing or SalesIn a reinsurance transaction, the company that wishes to transfer all or a portion of the financial risk of loss is known as the _______ company.

Federal Insurance Office (FIO)

The __________ monitors the insurance industry and identifies issues and gaps in the state regulation of insurers.

Insurability

The ability of an individual to meet an insurance company's underwriting requirements is known as:

Apparent

The authority created when a producer/agent exceeds the authority stipulated in his/her contract, and when the insurer does nothing to counter the public impression that such authority exists (i.e., the producer/agent accepting premiums on lapsed policies) is known as ______ authority:

Express

The authority of a producer or agent that is written in his/her contract is called:

Unilateral

The contract type in which only one party is legally bound to its contractual obligations after a premium is paid is a(n)_______ contract.

Unlimited

The insurable interest on one's own life is generally regarded as:

Fraud

The intentional distortion of the truth in order to induce another to part with something of value or to surrender a legal right is:

Rewrite policy provisions

The life/health producer or agent is authorized to do all of the following, except: Forward applications to the company Deliver contracts from the company Solicit new business Rewrite policy provisions

Risk Management

The process of analyzing risk exposures and designing programs to handle them is known as:

Physical, moral, and morale

The three types of hazards are:

Reinsurance

The transfer of some or all of the financial risk of loss from one insurer to another insurer or insurers is best described as:

Concealment

The withholding of important known facts, that if disclosed would change the decision of an insurer's underwriting or premium determination, is known as which of the following?

Claims

The_______ department of an insurance company is responsible for providing service to policyholders at the time of a loss.

Foreign

Those insurers that are incorporated in another state, but doing business in this state, are considered:

Appointed

To act as an agent for an insurer, the producer must be ________ by the insurer:

Independent Agent

Travis owns his own insurance agency and sells and places business with 12 different insurers, each of which he represents by contract. Travis is a(n):

Speculative

Wagering on a horse race or at the casino tables is known as what type of risk?

Speculative and pure

What are the two types of risk?

Credit report

When an applicant applies for insurance, which of the following items is obtained by an insurance company to determine the financial and moral status of the applicant?

Surplus lines producers

Which of the following can place business with an unauthorized insurer? Insurance counselors Surplus lines producers All licensed producers Nonresident producers

Broker Agency

Which of the following is not a marketing and distribution system used by insurers?

Incidental

Which of the following is not a type of hazard for insurance underwriting purposes? Incidental Morale Moral Physical

The loss must be intentional

Which of the following is not an essential element of an insurable risk? The loss must be intentional The loss must be measurable A large number of similar or same type units facing the same perils The chance of loss must be calculable

The loss must cause an economic hardship on the insurer

Which of the following statements regarding an insurable risk is FALSE? The insured event must be accidental There must be a large number of homogeneous units The chance of loss must be calculable The loss must cause an economic hardship on the insurer

A 25-year-old self-employed person

Which of the following would be considered legally competent to enter into a contract? A 13-year-old honor student A person who is under the influence of drugs or alcohol A 25-year-old self-employed person A person deemed to be mentally incapacitated

Alien

Which term describes an insurance company that has been organized outside of the United States or its possessions and is admitted to this state?

Fraternal Benefit Societies

______ are primarily social organizations that engage in charitable and benevolent activities consisting of members of a given faith, lodge, or order, and are usually organized as non-profits.

Self-insurance

________ is generally an option only for large corporations who may want to limit their risk up to a certain dollar amount, then buy insurance above and beyond that amount.