General Insurance
A tornado that destroys property would be an example of which of the following?
A peril.
What is a material misrepresentation?
A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company
Which of the following produces evaluations of insurers' financial status often used by state departments of insurance?
AM Best
Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristics does this describes?
Adhesion
Which of the following is another term for an authorized insurer?
Admitted.
What documentation grants express authority to an agent?
Agent's contract with the principal.
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 characteristic of an insurance contract does this describe?
Aleatory
What is reinsurance?
An agreement between a ceding insurer an assuming insurer
What is a foreign insurer?
An insurer with a home office in another state
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?
Apparent
which of the following types of agent authority is also called "perceived authority"?
Apparent
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 the car ever again. Which method of risk management does this describe?
Avoidance
The risk management technique that is used to prevent a specific loss by not exposing oneself to that activity is called
Avoidance
An insurance producer who by contract is bound to write insurance for only one company is classified as a/n:
Captive agent
A producer who fails to separate premium monies from his own personal funds is guilty of
Commingling.
An applicant knowingly fails to communicate information that would help an underwriter make a sound decision regarding coverage. This is an example of
Concealment
What term best describes the act of withholding material information that would be crucial to an underwriting decision?
Concealment
When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is:
Conditional
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
When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?
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
An insurance company sells an insurance policy over the phone in response to a TV ad. Which of the following best describes this act
Direct response marketing
Which of the following best describes an insurance company that has been formed under the laws of the state?
Domestic
Which of the following best describes the aleatory nature of an insurance contract?
Exchange of unequal values
The authority granted to an agent through the agent's contracted is referred to as
Express authority.
The requirement that agents not commingle insurance monies with their own funds is known as:
Fiduciary responsibility.
An insurance company is Montana and transacts insurance in Wyoming. Which term best describes the insurer's classification in Wyoming?
Foreign
An insurance company is domiciled in Montana and transacts insurance in Wyoming. Which term best describes the insurer's classification in Wyoming?
Foreign
When doing business in this state, an insurance company that is formed under the laws of another state is known as which type of insurer?
Foreign
What insurance concept is associated with the names Weiss and Fitch?
Guides describing company financial integrity
In insurance transactions, fiduciary responsibility means
Handling insurer fund in a trust capacity
Events or conditions that increase the chances of an insured loss occurring are referred to as
Hazards.
Events or conditions that increase the chances of an insured loss occurring are referred to as.
Hazards.
Units with the same or similar exposure to loss are referred to as
Homogeneous.
Which authority is NOT stated in an agent's contract but is required for the agent to conduct business?
Implied.
Courts will interpret any ambiguity in an insurance contract
In favor of the insured.
Which insurance principle states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost?
Indemnity
A life insurance policy has a legal purpose if both of which of the following elements exist?
Insurable interest and consent
What do individuals use to transfer their risk of loss to a larger group?
Insurance
Which statement regarding insurable risks is NOT correct?
Insureds cannot be randomly selected.
All of the following actions by a person could be described as risk avoidance EXCEPT
Investing in the stock market
An individual's tendency to be dishonest would be indicative of a
Moral hazard
A person who does not lock the doors or does not repair leaks shows an indifferent attitude. This person presents what type of hazard?
Morale.
What is the major difference between a stock company and a mutual company?
Ownership.
A participating insurance policy may do which of the following?
Pay dividends to the policyowner
The causes of loss insured against in an insurance policy are known as
Perils
Who might receive dividends from a mutual insurer?
Policyholders
All of the following are examples of risk retention EXCEPT
Premiums
Pertaining to insurance, which of the following is an example of a producer's fiduciary responsibility?
Promptly forwarding premiums to the insurance company
Promptly forwarding premiums to the insurance company
Promptly forwarding premiums to the insurance company
Which of the following is the most common way to transfer risk?
Purchase insurance
The risk of loss may be classified as
Pure risk and uncertain risk.
In case of a loss, the indemnity provision in insurance policies
Restores and insured person to the same financial state as before the loss.
Insurance is the transfer of:
Risk
Adverse selection is a concept best described as
Risks with higher probability of loss seeking insurance more often than other risks.
Events in which a person has both the chance of winning or losing are classified as
Speculative risk
Which of the following types of insurers is owned by stockholders?
Stock
Which of the follow is NOT a goal of risk retention?
To minimize the insured's level of liability in the event of loss.
When an individual purchases insurance, what risk management technique is he or she practicing?
Transfer
If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it?
Unilateral
In forming an insurance contract, when does acceptance usually occur?
When an insurer's underwriter approves coverage
For the purpose of insurance, risk is defined as
the uncertainty or chance of loss
Which of the following is NOT a characteristic of an insurable risk?
The loss much be catastrophic.
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?
Aleatory
When transacting business in this state an insurer formed under the laws of another country is known as a/an
Alien insurer.
In insurance, an offer is usually made when:
An applicant summits an application to the insurer.
Insurance is a contract by which one seeks to protect another from
Loss
Which of the following would qualify as a competent party in an insurance contract?
The applicant has a prior felony conviction.
Which of the following is NOT the consideration in a policy?
The application given to a prospective insured.
Which of the following best describes the concept that the insurance pays a small amount of premium for a large amount of risk on the part of the insurance company?
Aleatory
The insurer may suspect that a moral hazards exists if the policyholder
Is not honest about his health on an application for insurance
Which of the following is NOT true regarding a Certificate of Authority?
It is issued to group insurance participants.
For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become
Larger.
An insurance organization that does not issue insurance policies but provides a meeting place for underwriters to conduct business in known as a
Lloyd's association
Which of the following is the basis for a claim against an insurance policy?
Loss
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
In what way can an agent demonstrate a high standard of ethics?
Putting the client's best interests before their own
If a court ordered payment for a loss that was not covered in the policy even if it was clearly worded, it would be an example of which legal concept?
Reasonable expectations
Which of the following insurance options would be considered a risk-sharing arrangement?
Reciprocal
Following a career change, and insured is no longer required to preform 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?
Reduction.
Installing deadbolt locks on the doors of a home is an example of which method of handling risk?
Reduction.
All of the following are marketing arrangements used by insurers EXCEPT
Reinsurance System
What method do insurers use to protect themselves against catastrophic losses?
Reinsurance.
In case of a loss, indemnity provision in insurance policies
Restores an insured person to the same financial state as before the loss
Which of the following is a characteristic of a Reciprocal Insurance Exchange?
The chief administrator of the insurer is called an "attorney-in-fact".
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 insurer.
Not all losses are insurable, and there are certain requirements that must be met before a risk is a proper subject for insurance. These requirements include all of the following EXCEPT
The loss may be intentional
In terms of parties to a contract, which of the following does NOT describe a competent party?
The person must have a least completed secondary education.
An individual applies for a life policy. Two years ago he suffered a head injury from an accident, so he cannot remember parts of his past, but is otherwise competent. He has also be hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of this history later. What will probably happen?
The policy will not be affected.
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.
Which of the following is NOT a goal of risk retention?
To minimize the insured's level of liability in the event of loss
In the insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe?
Unilateral
An insurance company receives an application with some information missing and issues the policy anyway. What is that called.
Waiver
Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract?
Warranty