General 6% of exam

Which of the following is a mandatory part of an insurance policy that varies with each individual policy? A. Insuring agreement B. Declarations C. Conditions D. Exclusions

Declarations

Using an air-cooled engine, a proposed insured has developed a new, experimental aircraft. If the inventor applies for liability insurance, what rating type will the insurer most likely use? A. Class B. Schedule C. Merit D. Judgment

Judgment

A tornado that destroys property would be an example of which of the following? A. Pure risk B. Loss C. Physical Hazard D. Peril

Peril

In terms of parties to a contract, which of the following does NOT describe an competent party? A. The person must not be under the influence of drugs or alcohol D. The person must be of legal age C. The person must be mentally competent to understand the contract D. The person must have at least completed secondary education

The person must have completed secondary education

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

Implied

If an insurance premium is paid by the policyowner to the agent, and the agent fails to remit that premium to the insurer, which of the following statements is true? A. The policy will not lapse since payment to the agent is the same as payment to the insurer B. The premium will be taken out of the Guaranty Association funds C. The agent's license will be automatically revoked D. The policy will lapse since the premium was not received by the insurer

A. The policy will not lapse since payment to the agent is the same as payment to the insurer

Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company? A. Subrogation B. Warranty C. Aleatory D. Adhesion

Aleatory

Because an agent is using stationery with the logo of an insurance company, applicants for insurance assume that the agent is authorized to transact on behalf of that insurer. What type of agent authority does this describe? A. Assumed B. Apparent C. Express D. Implied

Apparent

A state-issued document empowering an insurance company to become an admitted insurer is called what? A. Certificate of deposit B. Certificate of admission C. Certificate of authority D. Certificate of title

Certificate of authority

In property and causality insurance, what is the term for the amount of a loss that the insured must cover out of pocket, and the insurer will only pay for the addition amount of the loss above this limit? A. Coinsurance B. Premium C. Deductible D. Self insured retention

Deductible

The loss ratio compares: A. Losses to interest rates B. Premiums to interest rates. C. Earned premium to company expenses D. Earned premium to losses

Earned premium to losses

What type of compensatory damages will pay for pain and suffering and disfigurement? A. General B. Special C. Tort D. Normal

General

Otto fails to pay the premium on a Personal Lines Property Policy. Otto's policy can be canceled if: A. He doesn't pay a 25% late fee B. The insurer deems him to be an "insufficient contributor." C. His policy has a late payment penalty phase D. His policy has been in effect for at least 60 days.

His policy has been in effect for at least 60 days

A deliberate act that causes harm to another person, regardless of whether they harm is intended is called a: A. Absolute liability B. Tortfeasor C. Vicarious tort D. Intentional tort

Intentional tort

The causes of loss insured against in an insurance policy are known as A. Risks B. Hazards C. Perils D. Losses

Perils

All of the following are considered parts of the policy structure EXCEPT: A. Insuring clause B. Conditions C. Provisions D. Exclusions

Provisions

A situation in which a person can only lose or have no change represents? A. Adverse selection B. Hazard C. Pure risk D. Speculative risk

Pure risk

Which type of insurance is based on mutual agreements among subscribers? A. Limited liability B. Reinsurance C. Reciprocal Insurance D. Mutual insurance

Reciprocal insurance

Payment for medical expenses, loss of wages, funeral expenses, or the cost to repair or replace damaged property are known as what type of compensatory damages? A. Special B. Tort C. Normal D. General

Special

A property insurance policy that is not subject to any coinsurance requirements but has a set amount of insurance scheduled for the property would use what loss valuation method? A. Replacement cost B. Reproduction cost C. Stated amount D. Actual cash value

Stated amount

When an individual purchases insurance, what risk management technique is he or she practicing? A. Avoidance B. Sharing C. Retention D. Transfer

Transfer

What is a material misrepresentation? A. Any misstatement made by an applicant for insurance B. Any misstatement made by the producer C. Concealment D. A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company

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

According to the Law of Agency, a principal is represented by a/an A. Broker B. Insured C. Agent D. Insurer

Agent

What documentation grants express authority to an agent? A. Fiduciary contract B. State provisions C. Agents contract with the principal D. Agents insurance license

Agents contract with the principal

An individual was involved in a head on collision. He later decided that in order to never be involved in another accident he would never drive again. Which method of risk management does this describe? A. Avoidance B. Reduction C. Sharing D. Retention

Avoidance

The document that indicates that an insurer has been approved and is authorized to transact insurance in a particular state is known as? A. Discretionary Authority B. Certificate of Insurance C. Binder D. Certificate of Authority

Certificate of Authority

Events or conditions that increase the chances of an insured loss occurring are referred to as: A. Hazards B. Exposures C. Risks D. Perils

Hazards

Which rating method provides an insurer with that portion of a rate that does not include provisions of expenses (other than adjusting expense) or profit and is based on historical aggregate loss and loss adjustment expenses projected through development to their ultimate value and through trending to a future point in time? A. Loss cost rating B. Provision rating C. Profit rating D. Components rating

Loss cost rating

Following a career change, an insured is no longer required to perform many physical activities, so he has implemented a program where he walks and jogs for 45 minutes each morning. The insured has also eliminated most fatty foods from his diet. Which method of dealing with risk does this scenario describe? A. Retention B. Reduction C. Transfer D. Avoidance

Reduction

An insurance agent's responsibilities include all of the following EXCEPT A. Represent the insurer B. Perform professionally C. Represent the client D Perform faithfully

Represent the client

What will happen if a house covered by a standard mortgage clause is a total loss? A. The insurer pays the mortgagee according to the mortgagee's interest in the property B. The mortgagee retains no rights to any contracts involving the policy C. The insured receives the full benefit and passes the mortgagee's share to the mortgagee D. The mortgagee receives the full benefit and passes the insured's share to the insured

The insurer pays the mortgagee according to the mortgagee's interest in the property

In forming an insurance contract, when does acceptance usually occur? A. When an insurer delivers the policy B. When an insurer receives an application C. When an insured submits an application D. When an insurer's underwriter approves coverage

When an insurer's underwriter approves coverage

In any case where there is a controversy or dispute between the insurance company and the insured, the soliciting agent is the agent of the? A. Applicant B. Insured C. Company Dl. Beneficiary

Company

An applicant knowingly fails to communicate information that would help an underwriter make a sound decision regarding coverage. This is an example of: A. Concealment B. Waiver C. Fraud D. Breach of warranty

Concealment

An agent is action ethically in all of the following situations EXCEPT? A. Always representing the insured B. Working within the conditions of his/hers contract C. Representing the insurer, not the insured D. Keeping customers' best interests in mind

Always representing the insured

Which of the following entities is not an insurer but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization? A. Fraternal Benefit Society B. Mutual Company C. Stock Company D. Reciprocal Association

Fraternal Benefit Society

What do individuals use to transfer their risk of loss to a larger group? A. Indemnity B. Insurance C. Insurable interest D. Exposure

Insurance

An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy? A. Nonprofit service organization B. Stock C. Mutual D. Reciprocal

Mutual

Which of the following statements is an accurate comparison between private and government insurers? A. Private insurers provide insurance in areas where the government will not B. Private insurers may be authorized to transact insurance by state insurance departments C. Insurance provided by the government is called federal insurance D. Private insurers offer fewer lines of insurance than government insurers

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

When the insured's car was totaled in a recent accident, the ownership of the car was transferred to the insurer. The insurer then sold off the wrecked car to recover some of the loss it paid to the insured. What is the term for this action? A. Salvage D. Liberalization C. Duty to Defend D. Subrogation

Salvage

Which of the following insurers are owned by stockholders? A. Reciprocal D. Fraternal C. Stock D. Mutual

Stock

A mortgage company is named as a loss payee on the insured's homeowners policy, under the standard mortgage clause. If the insured suffers a loss due to a fire, which of the following is true? A. The loss is payable to the insured and the mortgagee B. The mortgagee should submit a claim to its insurer, and the insured should submit a claim to the HO policy C. The entire loss is payable to the mortgagee D. The entire loss is payable to the insured

The loss is payable to the insured and the mortgagee

Which part of an insurance policy covers claims-related expenses, reasonable expenses incurred by an insured to protect damaged property from further loss, or defense expenses? A. Additional coverage B. Exclusions C. Declarations D Insuring agreement

Additional coverage

In which of the following types of property valuation will the policy pay the full value as specified on the policy schedule, regardless of the insured property's appreciation or depreciation? A. Replacement cost B. Stated amount C. Market value D. Agreed value

Agreed value

In insurance, an offer is usually made when A. An application submits an application to the insurer B. The insurer approves the application and receives the initial premium C. The agent hands the policy to the policyholder D. An agent explains a policy to a potential applicant

An applicant submits an application to the insurer

Which of the following does the term proximate cause refer to? A. Duty to the defendant to act B. Reason for filling a lawsuit C. Negligence that leads to an injury D. Injury that leads to monetary compensation

Negligence that leads to an injury

What type of information would be found in a policy's insuring agreement? A. Policy limits B. Insurer's address C. Renewal dates D. Location of premises

Renewal dates

An insurance company receives an application with some information missing and issues the policy anyway. What is this called? A. Aleatory B. Waiver C. Estoppel D. Subrogation

Waiver

Which of the following is owned by a corporation to serve that organization's needs at lower rates than would otherwise be available with commercial insurance? A. Custom insurer B. Reinsurer C. Captive insurer D. Internal insurer

Captive insurer