General Insurance 1 part 2
A tornado that destroys property would be an example of which of the following?
A peril
The causes of loss insured against in an insurance policy are known as
Perils
An individual was involved in a head-on collision while driving home one day. His injuries were not serious, and he recovered, However, he decided that in order to never be involved in another accident, he would not drive or ride in a car ever again. Which method of risk management does this describe?
Avoidance
hich of the following best describes rescission?
An insurer cancels a policy after it has been issued and refunds all paid premiums
The risk management technique that is used to prevent a specific loss by not exposing oneself to that activity is called
Avoidance.
The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract?
Conditional
When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is
Conditional
Which of the following best describes the aleatory nature of an insurance contract?
Exchange of unequal values
Which of the following are the authorities that an agent can hold?
Express and implied
The requirement that agents not commingle insurance monies with their own funds is known as
Fiduciary responsibility
n insurance organization that does not issue insurance policies but provides a meeting place for underwriters to conduct business is known as a
Lloyd's association.
The reduction, decrease, or disappearance of value of the person or property insured in a policy by a peril insured against is known as
Loss
The risk of loss may be classified as
Pure risk and speculative risk
Which of the following is NOT a characteristic of an insurable risk?
The loss must be catastrophic
Which of the following is NOT a goal of risk retention?
To minimize the insured's level of liability in the event of loss
If only one party to an insurance contract has made a legally enforceable promise, what kind of contact is it?
Unilateral
The insurer must be able to rely on the statements in the application, and the insured must be able to rely on the insurer to pay valid claims. In the forming of an insurance contract, this is referred to as
Utmost good faith
What term best describes the act of withholding material information that would be crucial to an underwriting decision?
Concealment
An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristics of an insurance contract does this describe?
Aleatory
Which of the following is NOT true regarding a Certificate of Authority?
It is issue to group insurance participants
Who might receive dividends from a mutual insurer?
Policyholders
All of the following are examples of risk retention EXCEPT
Premiums
Which of the following produces evaluations of insurers' financial status often used by state department of insurance?
AM Best
When transacting business in this state an insurer formed under the laws of another country is known as a/an
Alien insurer
What is reinsurance?
An agreement between a ceding insurer an assuming insurer
In insurance, an offer is usually made when
An applicant submits an application to the insurer
Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPT
Conditions
Which services are associated with Standard & poor's and AM Best?
Rating the financial strength of insurance companies
What method do insurers use to protect themselves against catastrophic losses?
Reinsurance
All of the following are marketing arrangements used by insurers EXCEPT
Reinsurance System
Events in which a person has both the chance of winning or losing are classified as
Speculative risk
In forming an insurance contract, when does acceptance usually occur?
When an insurer's underwriter approves coverage
Which of the following is NOT an essential element of an insurance contract?
Counteroffer
Which law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated?
Law of large numbers
Untrue statements on the application unintentionally made by insureds that, if discovered, would alter the underwriting decision of the insurance company, are called?
Material misrepresentations
Which of the following statements is an accurate comparison between private and government insurers?
Private insurers may be authorized to transact insurance by state insurance departments.
An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible?
The insured will need a written consent of the insurer.
Which of the following is an example of a producer's fiduciary duty?
The trust that a client places in the producer in regard to handling premiums
A producer who fails to separate premium monies from his own personal funds is guilty of
Commingling
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?
Mutual
What is a definition of a unilateral contract?
One-sided: only one party makes an enforceable promise
A participating insurance policy may do which of the following?
Pay dividends to the policyowner
What is a material misrepresentation?
A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?
Consideration
Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave it basis are classified as
Contracts of adhesion