Exam

The _________ represents the insurer. The __________ represents the insured. Select one: a. Broker, producer b. Agent, broker c. Producer, insurer d. Broker, broker

b. Agent, broker

This employee cannot bind life and health insurance and works for the insurer: Select one: a. Agent b. Consultant c. Broker d. Solicitor

a. Agent

Insurance policies are based on: Select one: a. Tort law b. Contract law c. Negligence law d. Legal liability law

b. Contract law

Janice applies for a life insurance policy. She submits the application with the initial premium for $100,000 whole life. The agent returns the policy with a higher premium and hazardous occupation exclusion. What has the insurer made? Select one: a. Agreement b. Offer c. Invitation to offer d. Counter-offer

d. Counter-offer

Why are life and health insurance contracts said to be contracts of adhesion? Select one: a. Because the insurer writes the contract, to which the insured must adhere b. Because only the insurer is bound to the promises made in the policy c. Because one party has the potential to receive more than the other d. Because certain conditions must be met by all parties of the contract in order for it to be a legally binding contract

a. Because the insurer writes the contract, to which the insured must adhere

Which of the following terms means the ways insurance products are marketed and sold to the public? Select one: a. Distribution system b. Premium c. Contract d. Insurable interest

a. Distribution system

There are three types of private insurers. Which of the following is a true statement about the different insurers? Select one: a. An insurer that conducts business in states other than the state in which it was incorporated is an alien insurer. b. An insurer that conducts business in countries that it was not incorporated in is an alien insurer. c. An insurer that conducts business in countries that it was not incorporated in is a foreign insurer. d. An insurer that conducts business in a foreign country is a domestic insurer.

b. An insurer that conducts business in countries that it was not incorporated in is an alien insurer.

Which of the following is another term for reciprocal exchange? Select one: a. Reinsurer b. Insurance exchange c. Risk purchasing group d. Risk retention group

b. Insurance exchange

LMO Insurer is incorporated in New Hampshire, conducts business in all of the eastern seaboard states and in Germany. How is LMO Insurer classified in Germany? Select one: a. Excess and surplus lines b. Alien c. Foreign d. Domestic

b. Alien

All of the following are required components of a legal contract, EXCEPT: Select one: a. Invitation to offer b. Acceptance c. Offer d. Consideration

a. Invitation to offer

Which of the following is best described as an insurance marketplace where people gather to exchange insurance? Select one: a. Lloyd's association b. Risk retention group c. Noncommercial insurer d. None of the Above

a. Lloyd's association

Which of the following best describes an insurer that is a charitable organization providing insurance only to its members? Select one: a. Stock and mutual companies b. Mutual company c. Fraternal benefit society d. Stock company

c. Fraternal benefit society

The act of an agent collecting a premium from an insured would be an example of: Select one: a. Apparent authority b. Lingering implied authority c. Implied authority d. Expressed authority

c. Implied authority

Agents who own the policies they sell and can work for multiple insurers are known as: Select one: a. Captive agents b. Exclusive agents c. Independent agents d. Managing general agents

c. Independent agents

The _________ is the principal in the agent-insurer relationship. Select one: a. Insured b. Agent c. Insurer d. Policyowner

c. Insurer

Which of the following is a group of companies that collectively assumes and spreads its own risk? Select one: a. Stock insurer b. Reciprocal exchange c. Risk retention group d. Fraternal benefit society

c. Risk retention group

Which of the following is not a primary component of an insurance contract? Select one: a. Policy exclusions b. Policy face c. Policy conditions d. Aleatory contract

d. Aleatory contract

Fraternal benefit societies are described by all of the following, EXCEPT: Select one: a. They provide insurance to their members. b. They can be religion-based. c. They include ethnic or charitable organizations. d. They include stock and mutual companies.

They include stock and mutual companies.

A foreign insurer is: Select one: a. An insurance company conducting business in a foreign country b. An insurance company conducting business in the state in which it is incorporated c. An insurance company conducting business in a state in which it wasn't incorporated d. Always unauthorized

a. An insurance company conducting business in a foreign country

Insurer XYZ has written an agency contract for Yuri to act as an agent. What type of authority is described here? Select one: a. Express b. Implied c. Lingering implied d. Apparent

a. Express

Benefits under a medical expense policy are provided through which of the following methods? Select one: a. Indemnity b. Cash payment c. Valued d. None of the above

a. Indemnity

Agents are appointed to work on behalf of: Select one: a. Insurance companies b. Insureds c. Beneficiaries d. None of the above

a. Insurance companies

What are the basic elements of a legal contract? Select one: a. Offer, acceptance, consideration, competent parties and legal purpose b. Acceptance and consideration c. Policy face, insuring clause and adhesion d. Competent parties, acceptance and reasonable expectations

a. Offer, acceptance, consideration, competent parties and legal purpose

A group of companies that collectively assume and spread their own risk are termed: Select one: a. Risk retention group b. Reciprocal exchange c. Fraternal benefit society d. Stock insurer

a. Risk retention group

An excess and surplus lines insurer is categorized as a(n): Select one: a. Unauthorized insurance company b. Authorized insurance company c. Domestic insurer d. Admitted insurer

a. Unauthorized insurance company

All of the following are false statements regarding authority of insurers, EXCEPT: Select one: a. Unauthorized insurers are admitted and hold a certificate of authority. b. A license, called a certificate of authority, must be held by all insurers intending to transact insurance in a jurisdiction unless they are exempt as excess and surplus lines insurers. c. All life and health insurance companies are admitted insurers. d. Property and casualty insurers are also called excess and surplus lines insurers, and hold a certificate of authority to act as nonadmitted insurers in a jurisdiction.

b. A license, called a certificate of authority, must be held by all insurers intending to transact insurance in a jurisdiction unless they are exempt as excess and surplus lines insurers.

A domestic insurer is: Select one: a. An insurance company conducting business in a foreign country. b. An insurance company conducting business in the state in which it is incorporated. c. An insurance company conducting business in a state in which it wasn't incorporated. d. Always unauthorized

b. An insurance company conducting business in the state in which it is incorporated.

When insurance agent Jake uses the insurance company's logo and letterhead for sales presentations and letters to his clients, this is which type of authority? Select one: a. Underlying b. Apparent c. Implied d. Express

b. Apparent

Daniel was purchasing a life policy from his friend Marcus, an agent for MMC Agency. Even though Daniel had not yet paid a premium, Marcus told him that the policy was in force as of the date that they wrote the contract. Marcus did not have the authority to bind coverage immediately, but the MMC Agency could still be liable. This is an example of: Select one: a. Waiver and estoppel b. Apparent authority c. Implied authority d. Expressed authority

b. Apparent authority

DEF insurer is nonadmitted. All of the following are possible explanations for why DEF insurer cannot sell insurance in a state EXCEPT: Select one: a. DEF has been denied licensure. b. DEF sells excess and surplus lines insurance. c. DEF has not applied for a license. d. DEF is not licensed.

b. DEF sells excess and surplus lines insurance.

Janice has received a contract from the agency she plans to work for. The contract defines the agreement in very explicit terms. Signing the contract will allow her to represent the agency. This is an example of: Select one: a. Implied authority b. Express authority c. Apparent authority d. Presumptive authority

b. Express authority

A reciprocal exchange is characterized by which of the following? Select one: a. It cannot be administered by an attorney-in-fact. b. It consists of an unincorporated group of individuals. c. It is the same as a mutual insurer. d. The insured acts only as an insured.

b. It consists of an unincorporated group of individuals.

All of the following are OASDI benefits EXCEPT: Select one: a. Disability b. Medicaid c. Retirement d. Survivor's

b. Medicaid

Maria buys a life insurance policy for her husband, Fred. Of the following, which correctly describes the party legally bound to fulfill the policy's promise of paying benefits? Select one: a. The insured b. The insurer c. The insurer and Maria d. The insurer and Fred

b. The insurer

ABC insurer is incorporated in Texas. Which of the following is true? Select one: a. ABC insurer is foreign in Texas. b. ABC insurer is domestic in Louisiana. c. ABC insurer is alien in Great Britain. d. ABC insurer is domestic and foreign in Texas.

c. ABC insurer is alien in Great Britain.

All of the following statements regarding unauthorized insurers are true, EXCEPT: Select one: a. Excess and surplus lines insurers must apply for a certificate of authority to become admitted. b. Unauthorized insurers are insurers that are unlicensed because they have not yet applied for a certificate of authority, have applied and been denied licensure, or are excess and surplus lines insurers. c. All excess and surplus lines insurers are unauthorized. d. Unauthorized insurers are also referred to as nonadmitted insurers, and do not hold a certificate of authority.

c. All excess and surplus lines insurers are unauthorized.

Which of the following statements is true pertaining situations involving errors and/or omissions? Select one: a. Producer should document all conversations. b. Producer can purchase Errors and Omissions coverage. c. The insurer will defend the producer against lawsuits the policy covers. d. All of the above

d. All of the above

The __________ section of the contract states what the insurer will not do. This includes the risks that the insurer will not cover. Select one: a. Conditions b. Policy face c. Insuring clause d. Exclusions

d. Exclusions

A market where individuals and groups of people gather to exchange insurance is a: Select one: a. Risk retention group b. Noncommerical insurer c. Lloyd's of London d. Lloyd's association

d. Lloyd's association

John purchases a life insurance policy for his wife Jean. Which of the following best describes who is legally bound to the policy's promise of benefits? Select one: a. The insurer, John and Jean b. The insurer and John c. The insurer and Jean d. The insurer

d. The insurer