General Insurance Chapter Test - Life and Health Insurance; Oregon; ExamFX.

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?

a) Adhesion b) Consideration c) Good faith d) Representation Answer: b) Consideration ~ The binding force in any contract is consideration. Consideration on the part of the insured is the payment of premiums and the health representations made in the application. Consideration on the part of the insurer is the promise to pay in the event of. loss

What documentation grants express authority to an agent?

a) Agent's insurance license b) Fiduciary contract c) State provisions d) Agent's contract with the principal Answer: d) Agent's contract with the principal ~ The principal grants authority to an agent through the agent's contract.

The requirement that agents not commingle insurance monies with their own funds is known as

a) express authority. b) accepted account principal. c) fiduciary responsibility. d) premium accountability. Answer: c) fiduciary responsibility. ~ Money collected with respect to an insurance transaction must be held in a position of trust by the agent or broker.

If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it?

a) A legal (but unethical) contract b) Unilateral c) Adhesion d) Conditional Answer: b) Unilateral ~ In a unilateral contract, only one of the parties to the contract is legally bound to do anything.

An insurance company is domiciled in Montana and transacts insurance in Wyoming. Which term best describes the insurer's classification in Wyoming?

a) Domestic b) Unauthorized c) Foreign d) Alien Answer: c) Foreign ~ A foreign insurer is domiciled in one state and transacts insurance in another. A domestic insurer transacts insurance in the domicile state (in this case, Montana). An alien insurer is domiciled in one country and transacts insurance in another.

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. Answer: b) Private insurers may be authorized to transact insurance by state insurance departments. ~ Private insurers offer many lines of insurance. Government insurance programs, also known as social insurance, cover areas that private companies cannot or will not, providing programs like Medicare, Social Security, and National Flood Insurance. Government programs are funded with tax dollars and serve national causes, in contrast with private insurers.

Which of the following is NOT a characteristic of an insurable risk?

a) The loss must be measurable. b) The loss exposure must be large. c) The loss must be catastrophic. d) The loss must be due to chance. Answer: c) The loss must be catastrophic. ~ In order to be characterized as pure risk, the loss must be due to chance, definite, measurable, and predictable, but not catastrophic.

What insurance concept is associated with the names Weiss and Fitch?

a) Index used by stock companies. b) Guides describing company financial integrity. c) Policy dividends. d) Types of mutual companies. Answer: b) Guides describing company financial integrity. ~ Because an insurance company's strength and stability are two very crucial factors in its sustainability, independent rating services have formed to publish regular updates on the financial integrity of different insurance companies. Weiss and Fitch are two of these services, although there are more.

Hazard is best defined as

a) neglect to communicate a material fact. b) a deliberate attempt to deceive. c) something that increases the risk. d) the uncertainty of loss. Answer: c) something that increases the risk. ~ Hazards are conditions or situations that increase the probability of an insured loss occurring.