Life and Health State Exam

Units with the same or similar exposure to loss are referred to as a. insurable risks b. Law of large numbers c. Homogeneous d. Catastrophic loss exposure

Homogenous

An insurance producer who by contract is bound to write insurance for only one company is classified as a: a. solicitor b. broker c. independent producer d. captive/ exclusive agent

Captive/ exclusive agent

Which of the following best described an insurance company that has been formed under the laws of this state? a. Foreign b. Domestic c. Sovereign d. alien

Domestic

Which of the following produces evaluations of insurer's financial Status often used by state departments of insurance a. NAIC b. Consumer's guide c. SEC d. AM Best

AM best

What documentation grants express authority to an agent? a. Fiduciary Contract b. State provisions c. Agent's contract with the principal d. Agent's insurance license

Agent's contract with the principal

What is reinsurance? a. an agreement between domestic insurer and foreign insurer b. an agreement between an insurer and an insured c. an agreement between a ceding insurer and assuming insurer d. an agreement between an originating insurer and a ceding insurer

An agreement between a ceding insurer and assuming insurer

If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered what type of insurer? a. authorized b. certified c. qualified d. approved

authorized

the risk management technique that is used to prevent a specific loss by not exposing oneself to that activity is called a. reduction b. sharing c. avoidance d. transfer

avoidance

What do individuals use to transfer their risk of loss to a larger group?

Insurance

what is surplus lines insurance? a. Insurance on items worth more than $25,000 b. Insurance in excess of a standard's policy's coverage c. insurance placed with an unauthorized insurer d. additional insurance placed on itemized risks

Insurance placed with an unauthorized insurer

The causes of loss insured against in an insurance policy are known as: a. Risks b. Hazards c. Perils d. Losses

Perils

Which of the following is the most common way to transfer risk? a. increase control of claims b. lessen the possibility of loss c. name a beneficiary d. purchase insurance

Purchase insurance

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

Pure risk

When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is a. Personal b. Unilateral c. Conditional d. Aleatory

Conditional

Which of the following is NOT an essential element of an insurance contract? a. Consideration b. Agreement c. Legal purpose d. Counteroffer

Counteroffer

Events or conditions that increase the chanced of an insured loss occurring are referred to as a. Perils b. Hazards c. exposures d. risks

Hazards

on a participating insurance policy issued by a mutual insurance company, dividends paid to PO are a. Taxable as ordinary income b. Guaranteed c. not taxable since the IRS treats them as a return of a portion of the premium paid d. paid at a fixed rate every year

not taxable since the IRS treats them as a return of a portion of the premium paid

A participating insurance policy may do which of the following a. pay dividends to the stockholder b. requires 80% participation c. pay dividends to the PO d. provide group insurance

pay dividends to the PO

what is the term for the entity than an agent represents regarding contractual agreements with third parties a. designee b. insured c. Principal d. client

principal

Pertaining to insurance, what is the definition of a fiduciary responsibility? a. performing reviews of the insured's coverage b. offering additional coverage to clients c. promptly forwarding premiums to the insurance company d. helping insureds to file claims

promptly forwarding premiums to the insurance company

Which type of insurance is based on mutual agreements among subscribers a. Reciprocal insurance b. Mutual insurance c. limited liability d. reinsurance

reciprocal insurance

Insurance is the transfer of a. risk b. loss c. hazard d. peril

risk

Courts will interpret any ambiguity in an insurance contract a. in favor of the insured b. in favor of the insurer c. through arbitration d. Based on the prudent person rule

in favor of the insured

A life insurance policy has a legal purpose if both of which of the following elements exist a. Insurable interest and consent b. Underwriting and reciprocity c. offer and counteroffer d. Policyowners and named beneficiaries

insurable interest and consent

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. Apparent b. Express c. Implied d. Assumed

Apparent

In insurance, an offer is usually made when a. And agent explains a policy to a potential applicant b. An applicant submits an application to the insurer c. The insurer approves the application and receives the initial premium d. the agent hands the policy to the PO

An applicant submits an application to the insurer

Which of the following must an insurer obtain in order to transact insurance within a given state? a. Certificate of authority b. Producer's certificate c. Business entity license d. Insurer's license

Certificate of authority

Peril is most easily defined as a. Something that increases the chance of loss b. the cause of loss insured against c. an unhealthy attitude about safety d. the chance of a loss occurring

The cause of loss insured against

which of the following is a characteristic of a reciprocal insurance exchange? a. issues nonassessable policies b. the chief administrator of the insurer is called an "attorney-in-fact" c. normally write in all lines of insurance d. stock holders share in any profits

The chief administrator of the insurer is called an "attorney-in-fact"

Which of the following is the closest term to an authorized insurer? a. admitted b. certified c. licensed d. legal

admitted

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

which of the following types of agents authority is also called "perceived authority" a. Apparent b. Express c. Implied d. Fiduciary

apparent

To legally transact insurance in this state, an insurer must obtain which of the following? a. certificate of authority b. Power of attorney c. Business entity license d. certificate of insurance

certificate of authority

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 a. offer and acceptance b. conditions c. consideration d. legal purpose

conditions

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. good faith b. representation c. adhesion d. consideration

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? a. Legal purpose b. Contract of adhesion c. Acceptance d. consideration

consideration

An insurance company sells an insurance policy over the phone in response to a TV ad. Which of the following best described this act? a. Illegal b. Insurance telemarketing c. Direct response marketing d. Independent agency marketing

direct response marketing

Which of the following is considered to be a morale hazard a. Driving recklessly b. Smoking c. Working as a firefighter d. Engaging in illegal activities

driving recklessly

The authority granted to an agent through the agent's contract is referred to as: a. apparent authority b. implied authority c. absolute authority d. express authority

express authority

The requirement that agents not commingle insurance monies with their own funds is known as a. fiduciary responsibility b. premium accountability c. express authority d. accepted accounting principal

fiduciary responsibility

An insurance company is domiciled in Montana and transacts insurance in wyoming. which term described the insurer's classification in wyoming? a. foreign b. alien c. domestic d. unauthorized

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? a. Foreign b. Domestic c. Alien d. nonadmitted

foreign

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. mutual company b. stock company c. reciprocal association d. fraternal benefit society

fraternal benefit society

What insurance concept is associated with the names Weiss and Fitch a. policy dividends b. types of mutual companies c. index used by stock companies d. guides describing company financial integrity

guides describing company financial integrity

what is the purpose of a conditional receipt? a. it is given only to applicants who fully prepay the premium b. it is intended to provide coverage on a date prior to the policy issue c. it guarantees that a policy will be issued in the amount applied for d. it serves as proof that an applicant has been determined insurable

it is intended to provide coverage on a date prior to policy issue

Which law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated? a. law of averages b. law of group evaluation c. law of large numbers d. law of masses

law of large numbers

The insurer may suspect that a moral hazard exists if the PO a. is indifferent to activities that may be dangerous b. drives over the speed limit c. lies about their health on an application d. is prone to depression

lies about their health on an application

Insurance is a contract by which one seeks to protect another from a. loss b. exposure c. uncertainty d. hazards

loss

A person who does not lock the doors or does not repair leaks shows an indifferent attitude. This person presents what type of hazard? a. Moral b. Legal c. Physical d. Morale

morale

which services are associated with standard & poor's and AM Best? a. rating the financial strength of insurance companies b. investigating violations of the fair credit reporting act c. providing employment histories for investigative consumer reports d. storing medical information collected by insurance companies

rating the financial strength of insurance companies

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. Avoidance b. Retention c. Reduction d. Transfer

reduction

Installing deadbolt locks on the doors of a home is an example of which method of handling risk? a. self-insurance b. avoidance c. reduction d. transfer

reduction

What method do insurers use to protect themselves against catastrophic losses? a. risk management b. reinsurance c. indemnity d. pro rata liability

reinsurance

All of the following are marketing arrangements used by insurers EXCEPT a. General Agency System b. Direct Response Marketing System c. Independent Agency System d. Reinsurance system

reinsurance system

Hazard is best defined as a. A deliberate attempt to deceive b. Something that increases the risk of loss c. the uncertainty of loss d. Neglect to communicate a material fact

something that increases the risk of loss

Which of the following insurers are owned by stockholders? a. mutual b. reciprocal c. fraternal d. stock

stock

Which of the following is not a characteristic of an insurable risk? a. the loss must be due to chance b. the loss must be measurable c. the exposure must be large d. the loss must be catastrophic

the loss must be catastrophic

In terms of parties to a contract, which of the following does NOT describe a competent party? a. the person must not be under the influence of drugs or alcohol. b. 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 at least completed secondary education

Which of the following is not a goal of risk retention? a. to reduce expenses and improve cash flow b. to increase control of claim reserving and claims settlements c. to fund losses that cannot be insured d. to minimize the insured's level of liability in the event of loss

to minimize the insured's level of liability in the event of loss

When an individual purchases insurance, what risk management technique is he practicing? a. Transfer b. Avoidance c. Sharing d. Retention

transfer

the insurer must be abe 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 a. reasonable expectations b. warranty c. implied warranty d. utmost good faith

utmost good faith