General Insurance - Practice Scenarios

c. the applicant submits the application for insurance Offer happens at time of application.

In insurance an offer is usually made when a. the agent delivers the policy b. the agent explains policy provisions to a potential applicant c. the applicant submits an application for insirance d. the insurer approves the application and receives the initial premium

d. reciprocal

Which of the following insurance providers would be considered a risk sharing arrangement? a. stock b. mutual c. surplus lines d. reciprocal

a. the application given to a prospective insured Considerations has to do with the exchange of money or services

Which of the following is NOT the consideration in a policy? a. The application given to a prospective insured b. something of value exchanged between the parties c. the premium amount paid at the time of application d. the promise to pay covered loses

a. pure risk Pure risk is the only type of risk that is insurable. Speculative risk can result in a gain (for example gambling).

A situation in which a person can only lose or have no change represents a. pure risk b. speculative risk c. Adverse selection d. Hazard

d. comingling Avoidance is avoiding risk. Sharing is dealing with risk with a group - a reciprocal insurance is an example Reduction is lessing the severity of risk (aka installing deadbolts, smoke detectors, ect)

All of these are methods of handling risk except: a. Avoidance b. Sharing c. Reduction d. Comingling

c. foreign A foreign insurance is one that is operated in a different state from the insured. Same state is domestic. Another country is alien 👽

An insurance company is domiclied 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

a. concealment Key words are intentionally did not disclose. Think about concealer - things are hidden.

An insured intentionally did not disclose a material fact on an application for insurance. This would be considered a. concealment b. coercion b. avoidance d. misrepresentation

c. Principal (insurance company)

What is the term for the entity that an agent represents regarding contractual agreements with third parties? a. designer b. insured c. principal d. client

Law of Large numbers

What law states that the larger the number of people with a similar exposure to loss, the more predictable actual losses will be?

d. Due to a catastrophic loss In order to be insurable risk must be due to chance, definite and measureable, statistically predictable, not catastrophic, with large loss exposure, and insurance cannot be mandatory.

Which is NOT an element of insurable risk? a. Statistically predictable b. Definite and measureable c. due to chance d. Due to a catastrophic loss

c. Agent's contract with the principal (the principal refers to the insurance company)

Which of the following grants express authority to the agent? a. fiduciary contract b. state provisions c. agent's contract with the principal d. agent's insurance license

d. the uncertainty of chance of loss hazard - increases chance of loss peril - the cause of loss

For the purpose of insurance, risk is defined as a. the guarantee of loss b. the cause of loss c. an event that increases the chance of loss d. the uncertainty of chance of loss

D. Admitted When you are admitted to the club you are authorized entry.

Which of the following terms for an insurer means the same as "authorized"? a. certified b. licensed c. legal d. admitted