FIN 320

Davis dies leaving his wife a $500,000 life insurance policy death benefit. The wife elects to take the $500,000 as a ten-year period certain annuity and receives $52,430 per year. Which part of the payment is taxable income to Davis' wife? none of it only the $500,000 death benefit $ 52,430 per year $ 2,430 per year none of the above

$ 2,430 per year

You let your neighbor borrow your car. He has his own insurance with The Hartford with the same limits and coverages you have. He hits a pedestrian who sues and is awarded $100,000 in bodily injury. How much and who pays the pedestrian? $ 100,000 paid by State Farm (yours) $ 50,000 paid by State Farm $ 100,000 paid by The Hartford (neighbor's) $ 50,000 paid by The Hartford $ 50,000 by each company Neither company pays the pedestrian None of the above

$ 50,000 paid by State Farm

For a first-time 16-year-old driver there is a 30% chance that he will get in a major accident resulting in a loss of $5,000 and a 20% chance that he will get in a small fender bender resulting in a loss of $500. The other expected outcome is no accident whatsoever. What is his total expected loss?

$1,600

You are walking through a parking lot when you are hit by a car and seriously injured. The driver only carries 20/40/15 liability coverage. You incur $20,000 in medical bills that are paid by State Farm under Coverage C. After arbitration with State Farm, it is decided you should be entitled to a bodily injury award of $45,000. How much will your policy pay?

$25,000

Your next door neighbor's 12-year-old son is getting out of your minivan when he slips, falls to the curb and breaks his leg. He incurs $3,500 in medical bills. How much will your policy pay?

$3,500

Mr. Jones purchased a $50,000 whole life policy with double indemnity on June 1, 2012. On June 25, 2014, Jones committed suicide. The insurer will be required to pay $50,000. $100,000. only the premiums which Jones has paid to the company. the premiums paid plus interest on those premiums. the company will not be required to pay anything.

$50,000.

A 30 year old female purchases a $250,000 whole life policy for an annual premium of $2,000. After 20 years the policyholder dies and the insurer pays $250,000 to the primary beneficiary. If the primary beneficiary is in the 28% tax bracket, how much will the beneficiary pay in taxes? (Round to nearest dollar with no commas or dollar sign.)

0

You borrow your neighbor's car. Your neighbor has insurance coverage with GEICO with liability coverage of 25/50/25, equal limits for uninsured/underinsured motorist coverage, and a $500 collision deductible. You lose control of the car and run into a tree. You are okay, but it costs $14,000 to repair your neighbor's car. The ACV of the car is $12,000. How much will your policy pay?

0

our son, who lives with you, borrows a friend's car that is not insured. Your son is in an accident, injuring a passenger who incurs $1,500 in medical bills. How much will your insurance company pay?

1,500

You drive to the U.S.-Mexican border town of Tijuana, Baja California and park your car. As you are getting out of the car, you are hit by another car that drives away and is unidentified. You are hurt pretty badly from the cut glass and being sideswiped by another car. Your car had its door hit while open and will not shut. Your car costs $5,500 to repair. You go to the hospital and leave with a cast, lots of bandages, and a $15,000 bill. You deserve a liability judgement from the other driver of $25,000 including general and special damages. How much does your policy pay?

10,000

Alvin purchased a universal life insurance policy at the age of 35. He is now 43 years old and at the end of the eighth year of the policy. The policy was sold with a face amount is $100,000 and death benefit option 1 and a planned premium of $1,500 per year which Alvin has paid. At the beginning of year 8, the cash value of the policy was $7,800 and it grew by $1,000 during the year. The policy was credited with a $1,100 dividend. If Alvin purchased an annual renewable term policy now, it would cost him $400 for $100,000 of coverage. Based on Yearly Rate of Return, what is the return on Alvin's policy during the eighth year? Omit percent sign.

10.4

You are a member of the U of I frisbee golf club and are driving to Columbus for a game against their club team when your car engine catches fire. You suffer serious burns and are hospitalized for 30 days. You are billed $500 per day hospital room and board, $15,000 for laboratory tests, $10,000 for surgery, and $8,000 for surgical dressings. Your car would cost $10,000 to repair; its ACV was $8,000 at the time of the loss. To make it worse, in your absence, your team loses every game it plays. How much will your policy pay?

12,500

While you are driving your car in Urbana, you lose control and run into a house, injuring four people inside the house. They all sue you and win the following bodily injury awards: first person $60,000, second person $20,000, and the third person $10,000. It costs $65,000 to repair the house and $5,500 to repair your car. How much will your policy pay?

135000

Your roommate Harold, who has no car and therefore no insurance, borrows your car for a week. As he was driving your car across a bridge in Wisconsin, the bridge collapses and your car falls into the river below. Harold is pulled from your car just before it sinks to the bottom of the river, never to be recovered. The insurance company estimates an ACV of your car when it fell off the bridge was $10,500. Harold incurred $30,000 in medical bills (ambulance, emergency room, doctor, etc.) from this incident. He received Med Pay from your policy, but the rest of the medical bills were covered by his insurance and the U of I. How much will your policy pay?

15000

A business firm with an inventory of obsolete stock that it cannot sell and high debt payments might represent A. a moral hazard. B. an actuarial hazard. C. a physical hazard. D. a peril hazard. E. None of the above.

A. a moral hazard.

You are driving your car between Champaign and Chicago when you run into the back of a bus, causing it to leave the road and land in a ditch. Ten people on the bus are injured, and each wins a bodily injury award against you for $20,000. It costs $ 60,000 to repair the bus and $6,500 to repair your car. Your auto policy will pay:

156000

You are driving your car in Illinois when you run into the back of a bus, causing it to leave the road and land in a ditch. Ten people on the bus are injured, and each wins a bodily injury award against you for $50,000. It costs $140,000 to repair the bus and $10,500 to repair your car. How much will your policy pay?

160,000

Your 200-year-old home is insured under an HO-8 policy with a value of $780,000 with $100,000 liability and a $1000 deductible. There is a small kitchen fire, but when the contractor looks at the damage, he says this house was built with wood beams across the ceiling that are no longer made and that it would cost $62,000 to fix with the old wooden beams or $21,000 with modern lumber from Menard's. The insurance company pays how much? (Omit dollar sign and round to nearest dollar with no commas or decimals)

20,000

You want a Progressive Car policy and you contact a Progressive agent. The agent gives you a binding receipt at the day and time you contact him. However, next day you hit another car and it is your fault; hurting a person and causing bodily injuring of $21,000 and $3,500 to repair your car. Five days later, the agent tells you that Progressive rejects your 20/40/15 liability and $500 collision deductible policy application due to your prior driving record. What amount will Progressive pay for this claim?

23,000

You have a life insurance policy with a cash value of $20,000 at the end of 2011. At the beginning of 2012, you pay a premium of $5,000. The annual interest rate is 5%. At the end of the year, you withdrew $1,000. Mortality charges were $500 for the year. The expense charges are $5 per month. Mortality and expense charges are assessed at the end of the year. What is the cash value of this life insurance at the end of 2012? Round to nearest dollar with no commas or dollar sign.

24,690

While on a four week vacation, you rent a car. You decline the insurance coverage offered by the rental agency. On the last day of your vacation, while you are checking out of the hotel, the car with all your luggage in it is stolen and never recovered. The rental agency holds you responsible for the loss. The car had an Actual Cash Value of $28,000. Your luggage was worth $800. How much will your policy pay?

27,500

While your car is being repaired from a previous accident, you borrow a car that has only liability insurance. You get into another accident. You incur $3,000 in medical bills and cause $1,000 in damage to the car. How much will your insurance company pay?

3,500

Your 17-year old son, Mike, who lives with you, borrows your car to take his date, Nicole, to a movie. Mike does not own a car, or have his own insurance policy. After the movie, being the gentleman that he is, Mike opens the car door for Nicole. However, he accidentally closes it on her leg. Mike drives Nicole straight to the hospital, where she must stay for a couple days. Her medical bills of $12,000 are turned over to State Farm. Nicole sues Mike for the injury to her leg and wins a bodily injury award of $35,000. How much will your policy pay?

35000

Alex is sailing his 16-foot sailboat on Clinton Lake. There is a fairly strong wind and when Alex is not paying attention, he runs into a dock on the lake and does $4,000 damage to his boat and $3,000 damage to the dock. How much will his Allstate Deluxe Plus Homeowners policy pay? (Omit dollar sign and round to nearest dollar with no commas or decimals)

4,000

Based on the 2001 CSO Mortality Table in the "Course Content" folder on Compass, how many 20-year-old females per 100,000 will die during the year? (Round to nearest whole number with no commas.)

47

You are driving a friend, along with some of his belongings, back to campus from Chicago on Labor Day weekend, when you hit a bridge abutment on I-57. Your friend is injured and his belongings are damaged. He incurs $500 in medical bills. He sues you (so much for the friendship) and wins a bodily injury award of $3,000 and a property damage award for $1,000. It costs $1,500 to repair your car. How much will your policy pay?

5,000

You are driving a friend, along with some of his belongings, back to campus from Chicago on Labor Day weekend, when you hit a bridge abutment on I-57. Your friend is injured and his belongings are damaged. He incurs $500 in medical bills. He sues you (so much for the friendship) and wins a bodily injury award of $3,000 and a property damage award for $1,000. It costs $1500 to repair your car. How much will your auto insurance pay? (Round to nearest dollar. Omit dollar sign, commas, and decimals)

5,000

Someone steals your car and runs it into a tree. The driver incurs $30,000 in medical bills and it costs $6,000 to repair your car. How much will your insurance company pay?

5,500

After pumping gas, you forget to remove the hose from your gas tank. As you drive off, the hose breaks spilling some gasoline and starting a fire. The fire causes $325,000 in damage to the gas station. You are held responsible for the entire loss. How much will your auto insurance pay? (Round to nearest dollar. Omit dollar sign, commas, and decimals)

50,000

Based on the CSO Mortality Table in the "Course Content" folder of Compass, what is the COI for a 32-year-old female with a $10,000 life insurance policy? (Round to nearest cent with no commas or dollar sign.)

7.7

A 30-year-old female purchased a $250,000 whole life policy for $4,000 a year. She receives dividends of $25,000 over time. At age 60, she surrenders the policy for $125,000. If this individual is in the 28% tax bracket at that point, how much does she have to pay in taxes when she surrenders this policy? Round to nearest dollar with no commas or dollar sign.

8,400

Based on the 2001 CSO Mortality Table in the "Course Content" folder on Compass, what is the expected average age of death for a 20-year-old female? Round to the nearest year (whole number).

81

Your wife buys you a Rolex for your anniversary. You kept meaning to call your agent and tell him that you have this watch because you know there is a limit in your policy. One day while you are out working, you leave your watch at home, and there is a fire that destroys your new Rolex. Your wife tells you she paid $9,500 for the watch. How much will the homeowners policy pay for the loss? (Round to the nearest dollar and omit dollar sign and comma & decimal)

9,000

Which of the following is an example of a morale hazard? A. Sawing a limb off a tree in your yard that accidentally falls on your house going through the roof. B. Being admitted to the hospital for appendicitis. C. Sawing a limb off a tree in your yard in a way to make sure it damages your backyard shed. D. Driving your personal car on a for-hire basis. E. An insurance company selling a business liability policy to a bar.

A. Sawing a limb off a tree in your yard that accidentally falls on your house going through the roof.

The following are examples of insurance distribution systems except for: A. Self-insurance. B. Agencies. C. Telemarketing. D. Independent brokers. E. Internet based sales.

A. Self-insurance.

You purchase an auto insurance policy with the Odious Auto Insurance Company through an insurance agent. At renewal, the agent gives you a receipt to indicate that you have coverage for six-months with Odious Auto when actually he stole the money. The policy terminated for non-payment. Three months later you have a claim. Which of the following will occur? A. The company will pay your claim due to the Law of Agency. B. The company will pay the claim based on Utmost Good Faith. C. The company will not pay your claim due to Policy Conditions. D. The company will not pay your claim due to examination. E. The company will not pay your claim due to never receiving premium consideration.

A. The company will pay your claim due to the Law of Agency.

Coverage G insures damage to A. an insured's automobile regardless of liability. B. the insured's auto and another auto with which the insured collides. C. another auto the insured collides with if the insured is not liable. D. another auto the insured collides with if the insured is liable. E. none of the above

A. an insured's automobile regardless of liability.

Which of the following would result in the largest increase in automobile premium? A. conviction for drunken driving or driving under the influence of drugs. B. being licensed for less than two years. C. several minor traffic violations within a five year period. D. an accident at which the insured was at fault. E. making a claim for vandalism of your car while parked overnight at your apartment

A. conviction for drunken driving or driving under the influence of drugs.

In purchasing automobile insurance, which of the following coverages should be considered essential? A. liability coverage. B. medical payments coverage. C. uninsured motorist coverage. D. underinsured motorist coverage. E. they are all essential.

A. liability coverage.

Automobile collision insurance covers damage to: A. the insured's auto regardless of liability. B. the insured's auto and another auto with which it collides. C. another auto the insured runs into if the insured is not liable. D. another auto the insured runs into if the insured is liable. E. more than one of the above.

A. the insured's auto regardless of liability.

Which of the following is not required for an ideal insurable risk? Large Number of Similar Exposure Units. Calculable expected average loss. Ability of the insured to accept a high deductible. Definite time and place of insurable event. Measurable economic losses. Stochastic and serendipitous losses.

Ability of the insured to accept a high deductible.

Minnie buys a whole life insurance on August 1, 1995. Minnie names her best friend, Pluto, as her primary beneficiary. She has paid the yearly premium of $1,533 every year. But Minnie, who likes to think she is still young, stated on the application that she was 35 instead of 45. If Minnie passes away on September 7, 2011, what will the insurance company do when they find out that Minnie is 57 instead of 47? Pay Pluto the full death benefit because the two year contestability period is past. Refuse to pay the death benefit because Minnie blatantly lied on her application. Pay Pluto the accrued premium plus interest due to misrepresentation. Adjust the death benefit to account for the actual age of Minnie, accounting for the premiums she paid. Transfer the policy to Pluto, as he is the primary beneficiary and becomes the insured if the policy is contested. None of the above.

Adjust the death benefit to account for the actual age of Minnie, accounting for the premiums she paid.

Which of the following functional divisions in an insurance company submits an application for insurance? Ratemaking Agency Claims Legal Underwriting

Agency

Corporations have been implementing Enterprise Risk Management at a more rapid pace in the last decade because of which of the following trends and changes? Increased Federal regulation regarding public statements by corporate executives. Increased volatility in the markets. Internatonal competition. Increased speed of financial transactions. Larger variability in value of assets. All of the above. None of the above.

All of the above

Insurance policies contain exclusions because: some perils are uninsurable. some types of property must be covered under special policies. some coverages are subject to separate rating. some perils are covered under other policies. All of the above.

All of the above

The combination of a large number of exposure units by an insurer is important for the operation of insurance because: it reduces uncertainty in the aggregate. it allows the insurer to make accurate predictions. it spreads losses among the members of the group. it makes the insurer's aggregate risk less than a summation of the risks of the individuals. All of the above.

All of the above

Involuntary retention occurs when: Selected Answer: the risk is not recognized. insurance coverage is not available. insurance does not cover the intended exposure. loss control measures are improperly implemented. All of the above.

All of the above.

The benefit package provided by a Health Maintenance Organization differs from a Fee-for-service insurance policy in that it encourages preventive care. usually provides prescription benefits. imposes restrictions on care outside of the network. is not generally subject maximums. All of the above.

All of the above.

Which of the following is/are true with respect to State Children's Health Insurance Programs (SCHIPS)? They were created to insure children from low-income families that do not qualify for Medicaid. Eligibility requirements vary by state. In some states, parents from low-income families are covered in addition to children. States receive federal funding to support the programs. All of the above.

All of the above.

Which of the following policies would have the lowest first year premium for a 25-year-old male? 10-year level term Straight Whole Life Whole life paid up at 65 Universal life Annual renewable term

Annual renewable term

Health Maintenance Organizations were originally started To increase a patient's options for health services. As a cost reduction measure against rising health costs. Due to an increased need for specialized medical care. Because federal regulation required hospitals to create HMOs. As Fee For Service utilization reviews were proving ineffective.

As a cost reduction measure against rising health costs.

From the insured's perspective, not owning or riding in an automobile is an example of which type of risk mitigation? Avoidance. Hazard risk. Retention. Loss prevention. Transfer. Combination. Pure risk.

Avoidance

Which of the following functional divisions in an insurance company submits the new business application to the insurance company? A. Ratemaking. B. Agency. C. Claims. D. Legal. E. Underwriting.

B. Agency.

Which of the following is correct for the relationship between deductible and premium? A. There is a positive correlation between deductible and premium. B. There is an inverse correlation between deductible and premium. C. There is no correlation between deductible and premium. D. The correlation between deductible and premium cannot be determined.

B. There is an inverse correlation between deductible and premium.

Pure risk is characterized by A. a chance of loss and a chance of gain. B. a chance of loss or no loss only. C. certainty that a loss will occur. D. the chance of gain or no loss only. E. None of the above.

B. a chance of loss or no loss only.

A. are sometimes referred to as "no-fault" insurance plans. B. are designed to provide auto insurance to persons who cannot obtain it through private automobile insurers. C. reduce the cost of automobile insurance for drivers not in the "association." D. provide government subsidized auto insurance to some drivers. E. will provide auto insurance to anyone who wants to pay the premium

B. are designed to provide auto insurance to persons who cannot obtain it through private automobile insurers.

Employment opportunities in the insurance field are A. more susceptible to recession than employment in other fields. B. less susceptible to recession than employment in other fields. C. regulated by the state governments. D. limited to a number of very narrow specialties. E. none of the above.

B. less susceptible to recession than employment in other fields.

When one person borrows another's automobile A. the insurance of the operator is primary. B. the insurance on the car being driven is primary. C. the insurance on both cars applies on a pro-rata basis. D. coverage applies on a "contribution by equal shares" basis. E. none of the above.

B. the insurance on the car being driven is primary.

The principle of indemnity requires that A. insurance rates must be neither too high nor too low. B. the insured should be paid for the loss he suffers and not gain. C. people who have accidents must pay for the losses that result. D. the insured must be paid the benefits that his or her premium has purchased. E. none of the above.

B. the insured should be paid for the loss he suffers and not gain.

In an insurance contract, subrogation provides that A. three parties may collect from the insurer as a result of one negligent act. B. the insured's right to collect from a negligent third party is transferred to the insurer to the extent he or she receives payment from the insurer. C. The insured must give up the right to receive damages from the insurance company if the insured is negligent. D. The insured may collect from his insurer and the negligent party's insurer. E. none of the above.

B. the insured's right to collect from a negligent third party is transferred to the insurer to the extent he or she receives payment from the insurer.

State legislatures enacted compulsory automobile insurance liability laws primarily A. to make sure that drivers are protected against liability they may incur. B. to provide claimants with a defendant worth suing. C. in an effort to help consumers make good risk management decisions. D. to generate premium tax dollars. E. more than one of the above.

B. to provide claimants with a defendant worth suing.

Traditional fee-for-service health insurance coverage is offered by Blue Cross and Blue Shield organizations. Preferred provider organizations. Point of service plans. Provider-sponsored organizations. Health maintenance organizations. All of the above. None of the above.

Blue Cross and Blue Shield organizations.

If my income is commission based and therefore erratic, but my savings are good since I save for times of erratic income and I go to the doctor once a year for preventative care (so I want a low premium, but willing to pay more when I need healthcare insurance) - I would want which of the following Healthcare Marketplace policies? Platinum. Gold. Silver. Bronze. Catastrophe. None of the above. All of the plans are equally desirable.

Bronze.

The definition of personal property in homeowner form Section I includes all but which of the following? furniture. bicycles. rowboats and canoes. pets and animals. it includes all of the above.

pets and animals.

Your neighbor has his own insurance policy with Allstate with the same coverages that you have with your State Farm Car Policy. So when he tells you that his insurance will cover an accident in your car, you lend him your car. He promptly runs into a tree, causing $2,500 in damage to your car. How much will your insurance policy pay? A. $ 0 - Allstate will pay for the damage B. $ 0 -Neither company is responsible for the damage C. $ 2,000 D. $ 2,500 E. Cannot be determined

C. $ 2,000

Which of the following functional divisions in an insurance company determines loss liability and loss payments for the insurance company? A. Ratemaking. B. Agency. C. Claims. D. Legal. E. Underwriting

C. Claims.

Kelsey is a huge football fan and never misses an Illini football game. On her way to the Illini game at Soldier Field in Chicago, she has an accident and her car is undrivable; the driver's side door will not shut. Thankfully, nobody is hurt. She exchanges information with the other driver, but when she calls for the tow truck, they tell her it will be three to four hours before they can get there due to the football traffic. Upset at the tow company, she leaves her car by the side of the road and walks to Memorial Stadium. When she gets back to her car after the game, it has been vandalized almost beyond recognition including near total destruction to the interior of her car. The door costs $2,200 to repair and the interior $12,100. The insurance company will pay for the door, but refuses to pay for the damage to the interior of her car based on which part of the auto policy? A. Insuring Agreement B. Endorsement C. Conditions and Duties D. Declarations E. Exclusions

C. Conditions and Duties

Your building keeps getting damaged from the bad parking done at the tavern next door. Constructing a guard rail between the parking lot of the tavern next door and your building represents which of the following methods of handling the risk of damage to your building?  A. Avoidance. B. Loss adjustment. C. Loss prevention. D. Retention. E. Transfer.

C. Loss prevention.

Assuming the same coverage, type of automobile, territory, and driving record, which of the following persons would you expect to pay the highest premium for automobile insurance? A. a 35-year old single female. B. a 20-year old married male. C. a 20-year old single male. D. a 20-year old single female. E. a 35-yer old single male

C. a 20-year old single male.

In most states, Uninsured Motorists Coverage provides coverage A. for all damages caused by an Uninsured Motorist. B. only property damage caused by an Uninsured Motorist. C. for bodily injury caused by an Uninsured Motorist. D. which is automatically included under Medical Payments coverage. E. none of the above.

C. for bodily injury caused by an Uninsured Motorist.

From the viewpoint of society and the entire economy, the most desirable means of dealing with risk is A. transfer. B. retention. C. loss prevention. D. sharing. E. hedging.

C. loss prevention.

The following are life insurance loads, except for Surrender charge Mortality expense Cash value Administration fee Expense charges

Cash value

One evening after a football win, you drink way too much beer. In your drunken stupor you make an after-midnight deal and you sign a contract. The next day you realize what an idiot you were and you need to get out of the contract. Which requirement of a valid contract would allow this? Offer and acceptance. Consideration. Competent parties. Legal purpose. None of the above.

Competent parties.

The underwriting process is designed to A. Collect relevant applicant information. B. protect company profits. C. adhere to legal requirements. D. determine policy form and riders for individual applicants. E. All of the above.

E. All of the above.

Which part of the insurance contract is the statement, "Resident Relative means a person, other than you, who resides primarily with the first person shown as a named insured on the Declarations Page and who is:..."? A. Application B. Declarations C. Insuring Agreement D. Definitions E. Conditions F. Exclusions and exceptions

D. Definitions

Terrorism is a risk associated with ________ frequency and __________ severity. A. High, high B. Low, low C. High, low D. Low, high E. None of the above.

D. Low, high

The hazard that reflects the tendency in some jurisdictions for judges and juries to favor a plaintiff in litigation is properly classified as  A. a moral hazard. B. a morale hazard. C. a physical hazard. D. a legal hazard. E. None of the above.

D. a legal hazard.

The definition of "uninsured motor vehicle" under the Uninsured Motor Vehicle coverage of the Personal Auto Policy includes A. an automobile being operated without liability insurance. B. a hit-and-run driver. C. an automobile insured by a company that becomes insolvent. D. all of the above. E. none of the above.

D. all of the above.

Social insurance is distinguished from private or voluntary insurance primarily in that social insurance A. is provided by the state governments. B. is voluntary. C. is designed to provide benefits to government employees. D. attempts to redistribute income in favor of certain classes and is usually compulsory. E. is financed primarily by private companies.

D. attempts to redistribute income in favor of certain classes and is usually compulsory.

Most states currently have A. compulsory auto insurance laws, but not financial responsibility laws. B. financial responsibility laws, but not compulsory auto insurance laws. C. no-fault laws. D. compulsory auto insurance laws and financial responsibility laws. E. no-fault laws and compulsory auto insurance laws.

D. compulsory auto insurance laws and financial responsibility laws.

In most states, Underinsured Motorists coverage A. essentially duplicates Uninsured Motorists coverage. B. is a statutory coverage required of all drivers. C. is usually written with limits equal to the state's minimum financial responsibility D. is mutually exclusive with Uninsured Motorists coverage. E. none of the above.

D. is mutually exclusive with Uninsured Motorists coverage.

Which of the following losses would be paid under the collision coverage of the Personal Auto Policy? A. the car is stolen and the thief collides with a bridge. B. the car collides with a deer. C. bricks fall from a truck the insured is following and hit the car. D. the insured misjudges a curve and "rolls" the car. E. none of the above.

D. the insured misjudges a curve and "rolls" the car.

Which section of an insurance policy is unique to each individual insured? Declarations. Definitions. Insuring clause. Coverages. Conditions.

Declarations

Which part of the insurance contract is the statement on page 4 that states, "Resident Relative means a person, other than you, who resides primarily with the first person shown as a named insured on the Declaration Page..." Application Declarations Definitions Insuring clause Conditions Exclusions and exceptions

Definitions

To which of the following persons does the medical payments coverage of the Personal Auto Policy not apply? A. the' named insured' while occupying a non-owned automobile. B. 'nonresidents' while occupying the owned automobile. C. 'non-insured persons' struck by the owned automobile. D. 'resident relatives' struck by an automobile while pedestrians. E. 'persons' occupying (riding) an AMTRAK train

E. 'persons' occupying (riding) an AMTRAK train

Risk management contributes to organization profit A. by reducing expenditures for insurance. B. by reducing the cost of losses. C. by giving the organization the ability to engage in certain profit-making activities and take speculative risks. D. by preserving the organization's operating effectiveness. E. All of the above.

E. All of the above.

On page 35 of the State Farm Car Policy, the policy states, "The insured must give us or one of our agents written notice of the accident or loss as soon as reasonably possible." Which part of the contract is this statement? A. Application B. Declarations C. Insuring Agreement D. Definitions E. Conditions F. Exclusions and exceptions

E. Conditions

Which of the following situations would the Automobile Policy not provide coverage under the liability section? A. The named insured rents a motorhome for a vacation. B. A resident relative borrows a pick-up truck for pleasure use. C. A non-resident borrows the insured's covered auto for business use. D. The spouse of the named insured rents an auto while at a business conference. E. The named insured borrows a truck for moving furniture for their small business. F. anyone operating the owned automobile listed on the declarations page with the owner's permission. G. the employer of the named insured is sued because of the operation of the covered auto during the course of employment.

E. The named insured borrows a truck for moving furniture for their small business.

Which of the following functional divisions in an insurance company makes the determination to accept a new insured from the application? A. Ratemaking. B. Agency. C. Claims. D. Legal. E. Underwriting.

E. Underwriting.

Advocates of the "no-fault" approach to compensating auto accident victims argue that such a plan would A. speed the compensation of injured persons. B. reduce litigation and help to clear the congested courts. C. result in more equitable compensation to injured persons. D. reduce the cost of compensating those who are injured. E. all of the above.

E. all of the above.

Which of the following losses would be payable under the comprehensive coverage of the Personal Auto Policy? A. flood damage. B. damage to the car from hitting a bull on the highway. C. glass broken in a collision. D. damage caused by hail. E. all of the above.

E. all of the above.

EZ Insurance has an automobile combined ratio of 103.2. This means EZ is unprofitable. EZ is showing an underwriting loss on automobile insurance. EZ is making 3.2% profit on automobile insurance. EZ is showing an underwriting profit on automobile insurance. None of the above.

EZ is showing an underwriting loss on automobile insurance.

EZ Insurance has a loss ratio of 60% and an expense ratio of 35% in automobile insurance. This means: EZ is unprofitable EZ is showing an underwriting loss on automobile insurance EZ is making 3.2% profit on automobile insurance EZ is showing an underwriting profit on automobile insurance None of the above

EZ is showing an underwriting profit on automobile

John & Jane Doe (husband & wife) each have a life insurance policy that names the other as a direct beneficiary and there are no contingent beneficiaries or further payees listed in either policy. John and Jane are involved in car accident and both are dead when the paramedics arrive. The death benefit from both policies are paid to John's estate Jane's estate Each estate in equal parts The insurance company cannot pay the death benefit None of the above

Each estate in equal parts

John Jones is insured with State Farm. His son Junior, who lives with him, has his own policy with Geico. John is using his son's auto while his own car is in the garage for repairs. In case of accident, A. There will be no coverage under either auto policy. B. Only the Geico policy would apply. C. Both policies will apply on a pro-rata basis. D. Only the State Farm policy would apply. E. The State Farm policy will be primary, with the Geico policy applying on an excess basis. F. The Geico policy will be primary, with the State Farm policy applying on an excess basis. G. It cannot be determined from the information given.

F. The Geico policy will be primary, with the State Farm policy applying on an excess basis.

Under most financial responsibility laws, an individual prove financial responsibility A. in order to obtain a driver's license. B. at the time of an accident in which he or she was at fault. C. in order to register an automobile. D. when he or she is held legally liable for an auto accident. E. regardless of liability when involved in an accident in which there is bodily injury or property damage in excess of some specified amount. F. all of the above.

F. all of the above

All of the following plans were originally designed primarily with methods to control health care cost except for which healthcare plan type? HMO HSA PPO FFS POS

FFS

Which of the following is not a form of managed care in its pure form? Fee-for-service indemnity plans (FFS). Health maintenance organizations (HMO). Preferred provider organizations (PPO). Point-of-service plans (POS). Health Savings Accounts (HSA). None of the above use managed care.

Fee-for-service indemnity plans (FFS).

The 2016-2017 Student Injury and Sickness Insurance Plan is which of the following plans? Platinum. Gold. Silver. Bronze. Catastrophe. None of the above.

Gold.

When purchasing insurance on a dwelling

HO-3 is preferable to HO-2.

When purchasing insurance on a dwelling HO-5 is preferable to HO-3. HO-6 is preferable to HO-4. HO-4 is preferable to HO-3. HO-8 is preferable to HO-6. all of the above.

HO-5 is preferable to HO-3.

What is the fastest rising cost for employers? Social Security taxes Business owners insurance Health care benefit costs Federal and state taxes Employee social insurance

Health care benefit costs

The capitation approach to charging for health care benefits is characteristic of Blue Cross and Blue Shield organizations. Preferred provider organizations. Point of service plans. Provider-sponsored organizations. Health maintenance organizations. All of the above. None of the above.

Health maintenance organizations.

The purposes of the coinsurance provision in major medical insurance policies include which of the following? I.To reduce premiums. II.To prevent overutilization of policy benefits. III.To prevent pre-existing conditions. I only II only III only I & II only II & III only I & III only I, II, & III

I & II only

If an individual wanted to purchase a life insurance policy that provided both death protection and a tax-sheltered investment, which type(s) of life insurance would best suit his or her needs? I. Variable universal life II. Universal life III. Re-entry term IV. Annual Renewable Term V. Straight whole life I and II II and V III and IV I, II, and V III, IV, and V

I, II, and V

Which of the following do ALL permanent life insurance policies offer that term life insurance policies do not? I. Level premiums II. Cash values III. Tax-sheltered investment vehicles IV. Permanent death protection V. Tax-free death benefits to beneficiaries II, III, and IV only. IV only. I, II, III, IV, and V. II, III, IV, and V only. I, II, and IV only.

II, III, and IV only.

If an individual wanted to purchase a life insurance policy that provided death protection with the lowest premium, which type(s) of life insurance would suit his or her needs the best? I. Variable life II. Universal life III. Endowment life IV. Yearly renewable term V. Straight Whole life I IV III and IV I, III, and IV III, IV, and V

IV

All of the following are correct statements about aleatory contracts, except which one? If you paid the premium to your agent, but your agent does not turn it over to the insurance company, then the contract between you and the insurer is still valid. If there is a loss, the insured may collect more than the amount of the premium. This is a contract in which the consideration between the parties is not equal. Aleatory insurance contracts do not create hazard risk. Aleatory contracts tend to not be commutative between the contract's parties.

If you paid the premium to your agent, but your agent does not turn it over to the insurance company, then the contract between you and the insurer is still valid.

Which of the following would be an example of "loss prevention"? Purchasing a less expensive car. Switching insurance from one company to another. Installing a home security system with a sign in the front yard. Chasing the robber down the street after being robbed. Purchasing Burglary & Robbery Insurance after being robbed.

Installing a home security system with a sign in the front yard.

What is the best reason that 2016-2017 Student Injury and Sickness Health Insurance Plan excludes coverage during the commission of a felony ("Exclusions and Limitations" #1)? It violates the "catastrophic unlikely" ideal requisite for insurability. It violates the "fortuitous losses" ideal requisite for insurability because a person has control over whether he/she commits a felony. It "standardizes the risk" since those involved in felonies have a higher probability of bodily injury. Not enough people commit felonies to have a large enough number of similar exposures. It violates the "definite losses" ideal requisite for insurability because it is impossible to determine the cost relative to the crime cost. The government has required that insurance companies deny this coverage to discourage crime activity.

It "standardizes the risk" since those involved in felonies have a higher probability of bodily injury.

All insurance policies are sold with a term of one year except for auto policies that are effective for six-months. What is the best reason that insurance companies would do this? It is easier for the insured to pay the premium for six months rather than a year. This allows the insurance company to cancel policies faster. Cars depreciate faster and therefore policies don't need to last as long. It allows for premium rate auditing of the insured more often. None of the above

It allows for premium rate auditing of the insured more often.

The Homeowners Comprehensive Form (HO-5) excludes loss to personal property caused by all but which of the following? wear and tear. gradual deterioration. earthquake. nuclear damage. It excludes loss to personal property by all of the above.

It excludes loss to personal property by all of the above.

What is the best reason that 2016-2017 Student Injury and Sickness Health Insurance Plan excludes coverage for elective cosmetic procedures ("Exclusions and Limitations" #6)? It violates the "catastrophic unlikely" ideal requisite for insurability. Not enough people intentionally hurt themselves to have a large number of similar exposures. It violates the "fortuitous losses" ideal requisite for insurability because a person has control over whether he/she gets the procedure. It violates the "definite losses" ideal requisite for insurability because it is impossible to determine the cost. The government has required that insurance companies deny this coverage to discourage unneeded surgery.

It violates the "fortuitous losses" ideal requisite for insurability because a person has control over whether he/she gets the procedure.

John Doe buys a life insurance policy and names his wife, Jane Doe, as the primary beneficiary. He names son, Jack, as the contingent beneficiary. One night, they forget to turn off the gas on the stove, and while sleeping, something sparks and blows the house up. Both tragically die in the fire/explosion. Jack was away at college on the night of their death. It its unknown who died first. The death benefit of John's policy is paid to John's estate. Jane's estate. Jack. The benefit is not paid out. The insurer holds the benefit until the courts decide. None of the above.

Jack.

While you are driving your car in Mexico, 100 miles from the U. S. border, you run into a parked car and are injured. It costs $2,500 to repair your car and $1,500 to repair the car you hit. You incur $500 in medical bills as a result of this accident. Your auto policy will pay:

Nothing

Your neighbor, who has his own insurance policy with Allstate with the same coverages you have with your State Farm Policy, borrows your car and runs into a tree, causing $2500 in damage to your car. Which of the following provisions keeps you from collecting for this loss under both your policy and your neighbor's insurance? Other insurance provisions Lack of insurable interest Subrogation Estoppel Consideration

Other insurance provisions

What is the chronological order of the following significant events in insurance regulation? Paul vs. Virginia, Glass-Steagall Act, US vs. SEUA, Gramm-Leach-Bliley Act, McCarran-Ferguson Act Paul vs. Virginia, Glass-Steagall Act, US vs. SEUA, McCarrran-Ferguson Act, Gramm-Leach-Bliley Act Glass-Steagall Act, Paul vs. Virginia, McCarran-Ferguson Act, US vs. SEUA, Gramm-Leach-Bliley Act Paul vs. Virginia, McCarran Ferguson Act, US vs. SEUA, Glass-Steagall, Gramm-Leach Bliley Act Gramm-Leach-Bliley Act, Glass-Steagall Act, Paul vs. Virginia, US vs. SEUA, McCarran-Ferguson Act

Paul vs. Virginia, Glass-Steagall Act, US vs. SEUA, McCarrran-Ferguson Act, Gramm-Leach-Bliley Act

Which of the following types of insurance is a "Personal-Involuntary-Private-Property & Liability" type of policy? Health Maintenance Organization (an HMO policy) Disability Income Protection (DI) Social Security (OASDI) Business Owners Policy (BOP) Personal Auto Policy (PAP) Homeowners Insurance (HO)

Personal Auto Policy (PAP)

If my income is high, but my savings are low (I don't care what the premium is, but I want to keep my costs low if I need healthcare insurance) - I would want which of the following Healthcare Marketplace policies? Platinum. Gold. Silver. Bronze. Catastrophe. None of the above. All of the plans are equally desirable.

Platinum.

Which of the following represents an exception to the principle of indemnity? Actual cash value payment of insurance losses. The doctrine of insurable interest. Replacement cost coverage. Subrogation. Other insurance provisions.

Replacement cost coverage.

Sulu purchased his first ever car on September 19 right after Finance 230. Before he can leave the lot, the salesperson requires that he show "proof of insurance." Sulu had been listening to Prof. Davis and called "his new insurance agent" that he had chosen before making the deal on the car. The agent gives him a verbal binder to Sulu and the car dealer and Sulu drives away happily to pay the premium to his new insurance agent. Five days later, the insurer issues Sulu's automobile policy. Which date in September will be the effective date of Sulu's new policy?

September 20th

Deepak purchased his first ever car on September 6 during his noon lunch hour. Before he can leave the lot, the salesperson requires that he show "proof of insurance." Deepak talks to an insurance agent he knows and the agent gives him a verbal binder and Deepak drives away happily to pay the premium to his new insurance agent. Ten days later, the insurer issues Deepak's policy. The effective date of his policy is.

September 7

Which would be an example of a transfer of risk by "contractual arrangement"? Paying your electric bill with cash. Selling stock in your new business. Replacing the bald tires on your automobile. The one-year warranty on your i>clicker. Your company decides not to produce a dangerous product.

The one-year warranty on your i>clicker.

Which of the following is the best reason that the State Farm Car Policy excludes physical damage coverage for "war of any kind" (page 31)? To make the policy economically feasible To standardize the risk To reduce the risk of a catastrophe To avoid losses that are not fortuitous To avoid duplication of coverage

To reduce the risk of a catastrophe

Purchasing health insurance is an example of which method of hazard reduction? Avoidance Loss prevention Loss reduction Retention Transfer

Transfer

An individual who had a chance and failed to avoid an accident would likely be liable under the doctrine of respondeat superior. res ipsa loquitur. negligence per se. last clear chance. contributory negligence.

last clear chance.

Risk avoidance would be the best solution in all of the following instances except which one? No other alternative is available. The risk cannot be transferred. When the frequency and severity of loss are high. When the probability or frequency cannot be determined. When premiums are excessively expensive.

When the probability or frequency cannot be determined.

Which of the following policies would have the highest first year premium for a 25-year-old male? 10-year level term Straight Whole Life Whole life paid up at 65 5-year level term Annual renewable term

Whole life paid up at 65

Which of the following is not a requirement of a legally binding contract?

Written

You sell your car to a woman who responds to an ad you placed online, but you mistakenly pay the insurance renewal premium on the car after you sell it. During the policy term you find out that the woman you sold the car to was in an accident that caused extensive damage to the car. Which of the following is true? You can collect for damages done to the car since you had an insurable interest at the inception of the policy. You cannot collect on the losses to the car, because you were not in the accident. You can collect under your policy, but you must turn the payment over to the women who bought the car. You cannot collect for the loss to the car since you did not have an insurable interest in the car at the time of loss. It is your option to decide if you want to collect for the loss to the car and make payment to the woman to whom you sold the car.

You cannot collect for the loss to the car since you did not have an insurable interest in the car at the time of loss.

Because of the fact that the terms of an insurance contract are fixed by the insurer instead of being determined by a bargaining process, the insurance policy is said to be a contract of utmost good faith. an aleatory contract. a contract of adhesion. a contract of indemnity. a voided contract. an insurance policy contract.

a contract of adhesion.

To be technically correct, we should define "weather" as: a peril. a hazard. a risk. a loss. it depends on the insurance division defining "weather." Any of the above is equally correct.

a hazard.

The type of insurance company in which insureds are also insurers, and in which the members of the group assume liability for losses individually rather than collectively is

a reciprocal.

The type of insurance company in which insureds are also insurers, and in which the members of the group assume liability for losses individually rather than collectively is a reciprocal. a pure assessment mutual. any mutual insurer. Lloyd's of London. none of the above.

a reciprocal.

The possibility of loss resulting from a home fire is an example of: a static fundamental risk. a dynamic fundamental risk. a static particular risk. a dynamic particular risk. a static dynamic risk. a fundamental particular risk.

a static particular risk.

Which of the following opposes a shift to a system of federal regulation for insurance include The U.S. Department of Justice. banks and certain large insurance companies. advocates of states' rights. the American Council of Life Insurers. all of the above oppose a shift to a system of federal regulation.

advocates of states' rights.

Legal liability is imposed by the courts when it has been established that: there was actual damage or loss. there was negligence. the negligence was the proximate cause of the damage or loss. there are no defenses that relieve the negligent party. all of the above

all of the above

The Consolidated Omnibus Budget Reconciliation Act (COBRA) contains provisions that allow continuation of group health insurance by employees and certain dependents upon the occurrence of designated events. apply to all employers offering group health insurance to employees. require an employer to continue former employees' health insurance for up to 36 months. allows terminated employees to continue their group health insurance for up to 36 months. all of the above

all of the above

The primary consideration in deciding how to deal with a particular risk is the potential loss severity and one's ability to bear it. the probability that the loss will occur. the expected value of the loss. the cost of insurance. all of the above are of equal importance.

all of the above are of equal importance.

An insurer's combined ratio is derived by adding the loss ratio and expense ratio of the insurer is a measure of underwriting profitability. ignores investment income. can use different premium measures to calculate the loss ratio and expense ratio. all of the above.

all of the above.

Life insurance contracts receive favorable tax treatment in that all proceeds to the beneficiary are not usually taxable as income. tax on investment gains is deferred until the gain is realized. the investment earnings on the cash value are not taxed during the period of accumulation. in computing taxable gain, the insured may deduct all the premiums paid and the cost of insurance. all of the above.

all of the above.

Risk management contributes to organization profit by reducing expenditures for insurance. by reducing the cost of losses. by allowing the organization to engage in certain speculative risks. by preserving the organization's operating effectiveness. all of the above.

all of the above.

The advances in genetic testing will probably result in a debate over the use of such information by insurers. the ability of insurers to price their products with greater precision. insurance availability and affordability problems for some persons if insurers are allowed to use the results of genetic testing in underwriting. adverse selection against insurers if they are not allowed to use the results of genetic testing in underwriting. all of the above.

all of the above.

The liability coverage of the Homeowners policy is not intended to cover a parent's vicarious liability of an adult child. business liability exposures of the insured. liability assumed under contract. punitive damages. all of the above.

all of the above.

The reforms introduced by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) affect the large and small group markets, and the individual health insurance market. affect renewability, limits on preexisting conditions, and portability. require insurers in the individual market to make coverage available to eligible individuals on a guaranteed issue basis. require that products in the small group market be available on a guaranteed issue basis. all of the above.

all of the above.

To reinstate a policy that has lapsed, the insured must pay all past due premiums plus interest. provide evidence of insurability. reinstate the policy within the reinstatement period. pay or reinstate any indebtedness under the policy. all of the above.

all of the above.

When insurance is not available at affordable prices for some buyers, the situation may reflect an income distribution problem. an exposure with excessive hazards and costs. the operation of an open market. unwillingness of insurers to write insurance at a loss. all of the above.

all of the above.

When the Other Members of Your Household (HO 04 58) endorsement is used to extend the definition of "insured" to include persons not related to the insured

all of the above.

Which of the following technique(s) is(are) used by insurers to control the cost of delivering health care?

all of the above.

Which of the following technique(s) is(are) used by insurers to control the cost of delivering health care? concurrent review programs. medical service exclusions. alternative sites of care. point-of-service reviews. second surgical opinions. pre-admission certification. case management programs. all of the above.

all of the above.

Health Maintenance Organizations differ from commercial insurers in that they are not subject to regulation. operate in the same manner as Blue Cross Organizations. are owned by the participating subscribers. also provide health care. None of the above.

also provide health care.

In most jurisdictions, a property owner owes the highest degree of care to a trespasser. a social guest. a licensee. an invitee. the degree of care owed is the same to all.

an invitee.

For which of the following vehicles would the liability coverage under Section II of the Homeowners policy provide coverage? an owned go-cart while being used away from the premises. a non-owned snowmobile while used away from the insured's premises. an owned moped while used away from the premises. an owned snowmobile while used away from the insured premises. more than one of the above.

an owned snowmobile while used away from the insured premises.

Special mortality tables are used for annuities because: people who buy annuities are usually from poorer economic classes and have a higher mortality rate. annuitants are a select group of risks that generally live longer than purchasers of life insurance. higher expenses are associated with issuing annuities than with issuing life insurance policies. life insurance mortality tables are inaccurate at the older ages when most annuities are sold. none of the above.

annuitants are a select group of risks that generally live longer than purchasers of life insurance.

Loss of income coverage under the Homeowners Policy

applies to parts of the dwelling occupied by the insured or by a tenant.

Variable life insurance contracts are subject to SEC regulation rather than regulation by the individual states. are considered life insurance and are exempt from securities regulation. are also referred to as "adjustable life and premium" insurance contracts. are considered securities and can only be sold by licensed securities agents. none of the above.

are considered securities and can only be sold by licensed securities agents.

The elements of an ideal insurable risk: require that the probability of a given loss be known. include the requirement of loss payments. must be advantageous to the insured. requires multiple types of units to be pooled. must be present or the exposure cannot be insured. are desirable, but some insurable risks do not possess them. More than one of the above.

are desirable, but some insurable risks do not possess them.

Expenses incurred in defending a liability suit that is covered under Section II of the Homeowners policy are payable, with any judgment, up to the policy limit. are payable in addition to the policy limit of liability. are not payable under the policy. are not covered, but may be added to the policy by endorsement. none of the above.

are payable, with any judgment, up to the policy limit.

Expenses incurred in defending a liability suit under Coverage A of the PAP are payable, with any judgment, up to the policy limit. are payable in addition to the policy limit of liability. are not payable under the policy. are not covered, but may be added to the policy by endorsement. none of the above.

are payable, with any judgment, up to the policy limit.

Dividends paid under participating life insurance policies

are the refund of that part of the premium which remains after the insurer has set aside the necessary reserves for claims and expenses.

Based on the large loss principle, which of the following is the most important coverage in an automobile policy? Liability. Medical Payments. Uninsured motorist Collision. Comprehensive. Towing & Emergency Road Service.

liability

If an agent tells an insured that a breach of a policy condition will not affect the policy's coverages, and a loss occurs, the insurer may: deny coverage if the breach contributed to the loss. be liable for the loss because the agent's acts are considered acts of the insurer. deny liability if the agent was not authorized to make such statements. deny liability because a waiver must be in writing before it is valid. None of the above.

be liable for the loss because the agent's acts are considered acts of the insurer.

The definition of personal property in the Homeowners forms includes motorized vehicles as long as they are not licensed. borrowed property which is being used by an insured. property belonging to roomers and boarders. pets belonging to the insured. all of the above.

borrowed property which is being used by an insured.

Adjustable life policies are called "adjustable" because the face of the policy changes with changes in a price index. the insured may vary the premium over the life of the policy. the amount of insurance may be adjusted over time. both the amount of insurance and premium are adjustable over the life of the policy. none of the above.

both the amount of insurance and premium are adjustable over the life of the policy.

Jones is insured under a Homeowners Broad Form (HO-2). A sudden surge of power from the city's power plant burns out the motor on his freezer and the meat in the freezer spoils before the loss is discovered.

both the meat and the motor are covered.

Under the Named Non-Owner Policy coverage applies for the operation of nonowned autos

by the named insured only.

Under most state laws, when a driver who is required to show proof of financial responsibility is unable to do so, the penalty is

loss of driving privileges.

The advice "buy term and invest the difference" summarizes the philosophy of those who believe that

cash value life insurance is not an attractive investment.

An automobile rating plan in which the individual's premium is based on his or her driving record is an example of

class rating which uses elements of experience rating.

All of the following are typical characteristics of HMO insurance EXCEPT: co-payments. broad hospital and medical services coverage. high maximum limits. coinsurance. that ALL of the above are characteristics of HMOs.

coinsurance.

The most favorable doctrine from the perspective of a least-at-fault injured person is contributory negligence. last clear chance. comparative negligence. the principles of common law. concurrent negligence.

comparative negligence.

Under a health savings account contributions by individuals are tax deductible up to a limit. distributions to pay qualified medical expenses are taxable as income, but deductible as medical expenses to the extent that they exceed 7.5 of adjusted gross income. investment income is taxable on an annual basis. distributions for non-medical expenses are non-taxable if the expenses do not exceed contributions. More than one of the above.

contributions by individuals are tax deductible up to a limit.

All of the following are covered by the water damage peril of the dwelling and contents broad form except: damage to the plumbing system itself. tearing out and replacing portions of a building in order to make repairs. accidental overflow or leakage of water from an appliance. overflow of a bath tub. all of the losses are covered.

damage to the plumbing system itself.

Which of the following perils is specifically excluded from coverage under all of the standard Homeowners forms?

earth movement.

Multiple line operation

extends the concept of diversification to the insurance field, permitting the combination of property and liability insurance by a single company.

Pure risks are generally classified as

fundamental risks, dynamic risks, and particular risks.

In which of the following do life insurance companies invest the greatest percentage of their assets?

government and corporate bonds.

The medical payments coverage of the Homeowners policy agrees to pay medical expenses resulting from bodily injury to residents of the household. anyone except a domestic employee injured on the premises. guests, regardless of the insured's liability or lack thereof. persons other than members of the insured's household who reside on the premises. all of the above.

guests, regardless of the insured's liability or lack thereof.

The doctrine of contributory negligence has been replaced in many jurisdictions by the doctrine of comparative negligence. is a defense that benefits the injured party. is currently applied only in the field of employers liability. applies only in the case of automobile accidents. none of the above.

has been replaced in many jurisdictions by the doctrine of comparative negligence.

The individual responsibility requirement is written into the U.S. Constitution. is for people who need assistance with healthcare premium payments. imposes a fine for not purchasing health insurance. exempts unemancipated adults. creates smaller pools of insureds to share the losses.

imposes a fine for not purchasing health insurance.

The definition of "flood" in the Federal Flood Insurance policy limits the peril to the overflow of bodies of water. specifically excludes mudslides. includes water from sources on the insured's own property. includes overflow of inland or tidal waters and rapid accumulation of surface water from other sources. none of the above.

includes overflow of inland or tidal waters and rapid accumulation of surface water from other sources.

Which of the following is least likely to be held legally liable? infants. minors. charitable institutions. municipalities. corporations.

infants

The South Eastern Underwriters Association case established that insurance was not interstate commerce. insurance rates may not discriminate unfairly. insurance is interstate commerce, and is therefore subject to federal regulation. the federal anti-trust laws do not apply to insurance. none of the above.

insurance is interstate commerce, and is therefore subject to federal regulation.

The principle of indemnity requires that: insurance rates must be neither too high nor too low. the insured should be made whole for all types of losses suffered. insureds who have claims must pay part of the losses that result. insureds are fully compensated for economic losses suffered. the insured must be paid the benefits that his or her premium has purchased. None of the above.

insureds are fully compensated for economic losses suffered.

The three primary elements in life insurance ratemaking are costs, profits and taxes. mortality, loading and expenses. interest, mortality, and loading. mortality, expenses, and profits. interest, mortality, and profits.

interest, mortality, and loading.

Waiver is the same thing as estoppel. involves the relinquishment of a known right. is an obsolete doctrine, seldom used in insurance today. is an exception to the principle of indemnity. none of the above.

involves the relinquishment of a known right.

According to Jake Beach from CNA, the Enterprise Risk Management team drives underwriting profit for CNA. combines all the company's investment risks. increases corporate risk capital volume. is accountable for managing risk and volatility throughout CNA. standardizes customer risk for CNA.

is accountable for managing risk and volatility throughout CNA.

Our guest speaker, David Podwojski from State Farm said in class on Oct. 7 that Opportunity Pricing (OP): is used by all insurance companies in ratemaking. has the potential of bankrupting insurers because of loss expense allocation. is already banned in 18 states and the District of Columbia. is a new concept to marketing and sales.

is already banned in 18 states and the District of Columbia

Under Section II of the Homeowners forms, liability arising out of owned golfcarts

is broader in scope than coverage on other recreational motor vehicles.

Under the State Farm PAP, if the insured has an auto without collision, an additionally acquired auto is not covered for collision until it is reported to the insurer is covered for collision for 5 days after delivery with a $500 deductible is covered for collision for 30 days is automatically covered is not covered for collision until the end of the policy period

is covered for collision for 5 days after delivery with a $500 deductible

Automobile Joint Underwriting Associations

is designed to provide auto insurance to persons who cannot obtain it through private automobile insurers.

The cyclical nature of the U.S. property and liability insurance industry, in which insurance prices and the availability of insurance fluctuate over time is evidence of a conspiracy on the part of insurers. reflects mismanagement on the part of insurance company executives. is gradually changing to a more stable market. is evidence that the industry is highly competitive. none of the above.

is evidence that the industry is highly competitive.

Consumer-driven health care is aimed at increasing incentives for insurers to control utilization and costs limits out-of-pocket costs to relatively low levels. encourages preventive care. is evident in the design of health savings account plans. More than one of the above.

is evident in the design of health savings account plans.

Under State Farm's PAP, coverage for liability arising out of the use of a non-owned auto: is primary with respect to coverage on the non-owned auto prorates with the coverage on the non-owned auto under the COB provision is excess with respect to coverage on the non-owned auto is not provided because of the care, custody, and control exclusion none of the above

is excess with respect to coverage on the non-owned auto

Coverage under the theft peril of the Homeowners forms HO-2, HO-3, and HO-4 is identical in all forms. excludes theft of money. excludes theft of jewelry, furs, silverware, and guns. includes theft by tenants to whom the insured has rented an apartment. all of the above.

is identical in all forms.

Fire legal liability coverage under the Homeowners policy: is optional and an additional premium charge is made. has the same limit as coverage on the insured's property in Section I. is important for persons who are tenants in an apartment or dwelling. is of little value to a renter because of the policy exclusion of damage to property rented to, or in the care, custody, or control of the insured. none of the above.

is important for persons who are tenants in an apartment or dwelling.

The initial cash outlay on participating life insurance policies

is normally higher than on nonparticipating policies.

Common law is sometimes termed unwritten law. is also referred to as statutory law. consists of statutes and codes enacted by legislatures. is "common" in the sense that it has not yet been addressed by the courts. none of the above.

is sometimes termed unwritten law

Coverage A of the Homeowners Policy would apply to: lumber to be used to in remodeling the insured's basement. an unattached garage rented for private garage purposes. a shed used to store tools and equipment. the insured's summer home not listed in the declarations. none of the above.

lumber to be used to in remodeling the insured's basement.

The oldest of the modern fields of insurance is probably fire insurance. life insurance. casualty insurance. marine insurance. health insurance

marine insurance.

The "earth movement" exclusion of the Homeowners policies excludes earthquake and volcanic eruption. applies only to the dwelling, but not to moveable property. may be modified by endorsement for an additional premium. does not appear in Homeowners form HO-3. all of the above.

may be modified by endorsement for an additional premium.

Insurance which is required by law: is classified as a social insurance coverage. is classified as a compulsory-private insurance coverage. may be social or private, depending on other characteristics. is usually classified as a public guarantee program. None of the above.

may be social or private, depending on other characteristics.

An Insurance agent's authority to act on behalf of an insurer: is limited to the express authority expressly granted in an agency contract. may include authority that is not expressly granted by contract. is limited by the doctrine of implied agency restrictions. includes stipulated authority and implied authority, but not ostensible authority. None of the above.

may include authority that is not expressly granted by contract.

Property of a student living at a sorority house while attending school.

may not be covered for loss by theft if left at the house over the summer.

The ultimate goal of risk management is to minimize insurance expenditures. make certain that uninsured losses do not occur. minimize the adverse effects of losses and uncertainty connected with risks. get the best buys in the field of insurance. eliminate financial loss.

minimize the adverse effects of losses and uncertainty connected with risks.

Which of the following would permit the insurance company to void your automobile policy? concealing the fact that your brother was convicted of drunken driving. misstating your age. driving without a license. lending your car to someone without a license. all of the above.

misstating your age.

Purposely leaving your old bicycle unlocked for thieves in order to collect insurance money for a new bicycle is a ________, while accidentally running into a bus while you were setting up a playlist on your mobile phone is a ___________. moral hazard, morale hazard. morale hazard, moral hazard. moral hazard, societal hazard. societal hazard, moral hazard. societal hazard, physical hazard. societal hazard, morale hazard.

moral hazard, morale hazard.

Insurance companies are members of the NAIC. must belong to an underwriting association. cannot make risky investments with their premium revenue. must use actuarial data. prefer to use agents.

must use actuarial data.

The goal that insurance be available and affordable to all who need or want it

none of the above.

The Comprehensive Homeowners Form (HO-5) provides open-peril coverage on both the dwelling and contents. open-peril coverage on personal property. a broader definition of personal property than other forms. a higher limit on money and securities than other forms. none of the above.

open-peril coverage on both the dwelling and contents.

The Homeowners Special Form (HO-3) provides open-peril coverage on both the dwelling and personal property. named peril coverage on both the dwelling and personal property. open-peril coverage on the dwelling and named peril coverage on personal property. open-peril coverage on personal property, and named peril coverage on the dwelling. none of the above.

open-peril coverage on the dwelling and named peril coverage on personal property.

Which of the following policies purchased at age 35 would provide the highest cash value at age 65? whole life policy. paid up at 65 life policy. term insurance to age 65. twenty payment life policy. they would all have the same cash value at age 65.

paid up at 65 life policy.

Which one of the following statements best describes a "twenty-payment" life policy (20 annual payments)? payment of the face amount at the end of 20 years. payment of the death benefit only if death occurs during the 20 year period. payment of premiums only during the 20 year period. payment of the cash value and the face amount if death occurs during the 20 year period. none of the above.

payment of premiums only during the 20 year period.

Persons eligible for benefits under the Medicaid program include persons receiving Supplemental Security Income (SSI) payments. persons whose income is below 400% of the federal poverty level. all persons under age 65 who are not currently employed. all persons whose medical expenses exceed 20% of their income. all of the above.

persons receiving Supplemental Security Income (SSI) payments.

To which of the following persons does the medical payments coverage of the Personal Auto Policy not apply?

persons struck by the owned automobile.

Coverage C of the homeowners policy is extended to all of the following except: property borrowed for use by the insured. machinery used in maintenance of the premises. pets owned by the insured. clothing of a daughter living at college. property away from the insured's premises.

pets owned by the insured.

The coordination of benefits provision relates the coverage of a major medical policy to base coverage. relates the coverage of hospitalization policies to surgical expense policies. is commonly used in individual contracts, but not in group contracts. provides that payments conform to the "UCR" provision of the policy. prioritizes the payment order when two spouses are covered under each other's employer provided health coverage. None of the above.

prioritizes the payment order when two spouses are covered under each other's employer provided health coverage.

The type of insurance that is characterized by individual equity and contractual arrangements is generally referred to as: social insurance. private insurance. property-liability insurance. public guarantee insurance programs. government insurance programs. individual life insurance. public welfare insurance. None of the above.

private insurance.

Which of the following is not true with respect to the property and liability insurance industry? there are few barriers to entry by new competitors. competition has produced changes in market share of competitors over time. the field is highly decentralized, with no firm controlling as much as 10% of the market. the business is highly cyclical. profits have consistently been above those in other industries.

profits have consistently been above those in other industries.

A homeowners policy provides coverage for all of the following items except: sporting equipment when used off premises. equipment used for maintenance of the premises. a shed used to store tools on the premises. property of boarders not related to the insured. jewelry, furs, and guns.

property of boarders not related to the insured.

The definition of insured personal property under Homeowners Coverage C excludes jewelry. furs. money and securities. property that is specifically insured. all motorized vehicles.

property that is specifically insured.

A collateral assignment of a life insurance policy is often used to transfer all ownership rights to an assignee. provide security for a loan. change irrevocable beneficiary designations. avoid reducing the benefits payable to the beneficiary. none of the above.

provide security for a loan.

A drunken driver killed a man and severely injured his wife. The court awarded the wife $10 million in damages. A substantial part of the damages were undoubtedly loss of consortium damages. special damages. general damages. punitive damages. intangible damages.

punitive damages.

The cash surrender values listed in a whole life contract

represent an overpayment made for the protection received.

A pedestrian injured by an object falling from a building would probably attempt to establish liability on the basis of the doctrine comparative negligence. respondeat superior. caveat lector. res ipsa loquitur. none of the above.

res ipsa loquitur.

Vicarious liability involves a situation where one person becomes legally liable because of the negligence of another. One of the doctrines upon which vicarious liability may be based is negligence per se. respondeat superior. sovereign immunity. the fellow servant doctrine. none of the above.

respondeat superior.

Mr. Miller wants to be able to change the beneficiary of his life insurance policy at any time. Which type of beneficiary designations should he use?

revocable.

The willingness to pay a premium for car insurance that is higher than your expected losses represents: speculative risk. expected loss. risk neutrality. risk seeking. risk aversion.

risk aversion.

A major difference between stock and mutual insurers is: stock insurers are incorporated and mutual insurers are not. mutual insurers are not taxed, while stock insurers pay tax. stock insurers are owned by their stockholders, while mutual insurers are owned by their policyholders. stock insurers pay dividends to policyholders and mutual insurers do not. none of the above.

stock insurers are owned by their stockholders, while mutual insurers are owned by their policyholders.

One of the most attractive features of the loan values under permanent forms of life insurance is the fact that the loans are interest free. such loans do not have a fixed repayment requirement. the loans do not have a fixed repayment requirement and are interest free. funds are available without delay upon request by the insured. loans do not have to be repaid if the insured dies while the loan is outstanding.

such loans do not have a fixed repayment requirement.

Policy dividends are paid from:

surplus apportioned for distribution by the insurer.

A nonowned auto used while the insured's auto is being repaired or serviced is a:

temporary substitute automobile.

Under the doctrine of stare decisis, the courts will generally follow precedents from other courts when they are available. the court must decide each individual case on its merits. the decisions of other courts have less influence. a court must follow precedent if one is available. None of the above.

the courts will generally follow precedents from other courts when they are available.

An individual might purchase a monoline fire dwelling policy rather than a Homeowners form on a dwelling because he or she does not need the liability coverage of the Homeowners. the monoline dwelling form will be substantially cheaper. the Homeowners form is not available in the state in question. the dwelling is not owner occupied. none of the above.

the dwelling is not owner occupied.

The application of the rule of strict liability or absolute liability is the employer's liability under workers compensation laws. prima facie evidence of negligence. res ipsa loquitur. respondeat superior. the doctrine of last clear chance.

the employer's liability under workers compensation laws.

The most distressing aspect of the current health care situation for most Americans is the lack of health care for the poor. the high infant mortality rate. the lack of adequate medical facilities. the escalation of health care costs from year to year. the lack of insurance coverages to fit the need.

the escalation of health care costs from year to year.

Risk avoidance should be used in those instances in which

the exposure has catastrophic potential and the risk cannot be reduced or transferred.

In the event of a total loss to property insured under a valued policy, payment will generally be made for the face amount of the policy. replacement cost. actual cash value. the cost to repair or replace the property. none of the above.

the face amount of the policy.

From the perspective of the insured, a major disadvantage of health maintenance organizations is the absence of coverage for outpatient services. the inability to use providers outside the system except in emergencies. the absence of a gatekeeper medical provider. coinsurance. All of the above are disadvantages.

the inability to use providers outside the system except in emergencies.

All of the following statements are true with respect to liability insurance except it is commonly referred to as third party coverage. the insurer is obligated to pay damages only when the insured is legally liable. the injured party has a direct claim against the insurance company. the insurer promises to defend any suits involving the type of liability insured. none of the above.

the injured party has a direct claim against the insurance company.

When one person borrows another's automobile

the insurance on the car being driven is primary.

The principle of indemnity requires that insurance rates must be neither too high nor too low. the insured should be paid for the loss he suffers and no more. people who have accidents must pay for the losses that result. the insured must be paid the benefits that his or her premium has purchased. none of the above.

the insured should be paid for the loss he suffers and no more.

Under the doctrine of concurrent causation, the courts have ruled that when a loss results from two causes, one of which is covered and one excluded: coverage depends on which cause occurs first. the loss is usually not covered. part of the loss is covered and part is not covered. the insurer is liable for the damage. none of the above.

the insurer is liable for the damage.

When a mortgagee is named in the Homeowners Policy:

the mortgagee is granted certain rights distinct from those of the insured owner.

The definition of "persons insured" Homeowners Section II includes only the named insured. the entire family except children away from home at school. all persons living on the premises. the named insured and spouse and other resident relatives in the household. employees of the insured except while operating vehicles.

the named insured and spouse and other resident relatives in the household.

An insured who purchases an open-peril contract would be well advised to pay particular attention to the policy declarations. the insuring agreement. the policy conditions. the policy exclusions. endorsements to the policy.

the policy exclusions.

Under the Uniform Simultaneous Death Law, how is a life insurance policy paid if the insured and the primary beneficiary die in the same accident and there is no evidence as to who died first? the court must determine who is entitled to the proceeds. the policy is settled as though the insured survived the beneficiary. the policy is settled as though the beneficiary survived the insured. the proceeds are divided between the insureds estate and the beneficiary's estate. there is no payment because there is no beneficiary.

the policy is settled as though the insured survived the beneficiary.

Jones has a Homeowners policy. Her dog bites the mailman while he is still about three blocks away from the premises.

the policy will pay medical costs under the medical payments coverage and will also pay under liability coverage if Jones is held legally liable.

For the insurance company, a meaningful measure of risk is: the probability that an individual loss will or will not occur. the possible deviation of actual from predicted results. the size of the population insured. the relationship of premium to average loss. None of the above.

the possible deviation of actual from predicted results.

The primary consideration in deciding how to deal with a particular risk is

the potential loss severity and one's ability to bear it.

In most states, the Commissioner of Insurance directly regulates all of the following except the amount of capital or surplus an insurer must have to operate in the state. the insurance policy forms used in the state. the trade practices of any life insurer transacting business in the state. the premium profitability rates for life insurance companies. none of the above.

the premium profitability rates for life insurance companies.

The principal difference among the various Homeowners forms is with respect to the liability coverage under Section II. the property covered and perils insured against in Section I. the definition of the dwelling in each form. the definition of personal property in each form. the extensions of coverage in each form.

the property covered and perils insured against in Section I.

"Viatical settlement" refers to the sale of a terminally ill person's life insurance policy. artificial impoverishment to become eligible for Medicaid. payments to the IRS by a life insurance company. the taxation of surrendered life insurance policies. none of the above.

the sale of a terminally ill person's life insurance policy.

Adverse selection is a term used to describe: the choice of the wrong insurance to fit a specific need. an underwriting error on the part of an insurance company. the tendency of the poorer than average risks to seek insurance to a greater extent than do the better than average risks. a loss situation in which the chance of loss cannot be determined. None of the above.

the tendency of the poorer than average risks to seek insurance to a greater extent than do the better than average risks.

The most logical classification of the types of life insurance contracts is between

those that offer pure protection and those that combine protection and savings.

The period for which an insurer must insure an assigned risk without a new application is usually

three months.

One way the principle of indemnity is enforced is: through valued policy laws. to a greater extent in life insurance than in the field of property insurance. to the same extent in all fields of insurance. through the principle of subrogation. None of the above.

through the principle of subrogation.

The term "risk" is best defined as: the same thing as the term "peril." a condition that increases the chance of loss. as a hazard. uncertainty regarding future losses. the same thing as probability of loss.

uncertainty regarding future losses.

Liability insurance is concerned primarily with the financial consequences of crimes. intentional torts. unintentional torts. unintentional torts which are also crimes. all of the above.

unintentional torts.

David Podwojski said that State Farm Insurance

use agents as their primary distribution channel.

The 2001 Commissioners Standard Ordinary Mortality Tables

use different tables for men and women.

A preferred provider organization is a health insurer selected exclusively by a group of physicians. uses health care providers designated by an employer or insurer. is an insurer approved by the state commissioner of insurance. usually charges higher fees than other providers in the area. None of the above.

uses health care providers designated by an employer or insurer.

Price Optimization is

uses non-actuarial data for maximizing customer profitability.

During the decade of the 1990s, virtually every state in the U.S. enacted some type of tort reform. These statutes

usually involved limits on general damages and joint and several liability.

Assuming the insured does not die, the guaranteed cash surrender value of a 30 payment whole life policy will equal the face of the policy

when the insured reaches age 121

Cash value life insurance may be an attractive investment for those individuals

who will benefit from the favorable tax treatment and who need life insurance.

Which of the following does not constitute an insurable interest? a savings and loan company holding a mortgage on your home. you make an offer to buy your neighbor's house. you inherit a ski lodge in Aspen, Colorado. your lease makes you liable for fire damage to your rented premises. you have custody of a valuable painting when the owner is away.

you make an offer to buy your neighbor's house.