Life Insurance CH 1

Which of the following types of agent authority is also called "perceived authority"? A. Implied B.Fiduciary C.Apparent D.Express

C.Apparent

Which statement regarding insurable risks is NOT correct? A. An insurable risk must involve a loss that is definite as to cause, time, place and amount. B. Insureds cannot be randomly selected. C. Insurance cannot be mandatory. D. The insurable risk needs to be statistically predictable.

B. Insureds cannot be randomly selected.

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 A. Older. B. More active. C. Larger. D. Smaller.

C. Larger.

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 A. The loss must not be catastrophic. B. There must be a sufficient number of homogeneous exposure units to make losses reasonably predictable. C. The loss produced by the risk must be definite. D. The loss may be intentional.

D. The loss may be intentional.

What is surplus lines insurance? A. Any insurance on items worth more than $25,000 B. Insurance in excess of a standard policy's coverage C. Insurance placed with an unauthorized insurer D. Additional insurance placed on itemized risks

C. Insurance placed with an unauthorized insurer

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 been hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of his history one year later. What will probably happen? A. The insurer will sue the insured for committing fraud. B. Because the insured is currently not a drug user, his policy will not be affected. C. The policy will not be affected. D. The policy will be voided.

C. The policy will not be affected.

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 A. Utmost good faith. B. Reasonable expectations. C. A warranty. D. Implied warranty.

A. Utmost good faith.

Which of the following is an example of a producer's fiduciary duty? A. A duty to base all transactions upon the principle of Utmost Good Faith. B. The obligation to tell the truth to the best of one's knowledge C. The trust that a client places in the producer in regard to handling premiums. D. An obligation to state every known fact about the policy the producer is selling.

C. The trust that a client places in the producer in regard to handling premiums.

All of the following are examples of risk retention EXCEPT A. Self-insurance. B. Premiums. C. Deductibles. D. Copayments.

B. Premiums

Pertaining to insurance, what is the definition of a fiduciary responsibility? A. Helping insureds to file claims B. Performing reviews of insured's coverage C. Offering additional coverage to clients D. Promptly forwarding premiums to the insurance company

D. Promptly forwarding premiums to the insurance company

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. Warranty B. Aleatory C. Adhesion D. Subrogation

B. Aleatory

An insurance producer who by contract is bound to write insurance for only one company is classified as a/an A. Captive agent. B. Solicitor. C. Broker. D. Independent producer.

A. Captive agent.

Which services are associated with Standard & Poor's and AM Best? A. Storing medical information collected by insurance companies B. Rating the financial strength of insurance companies C. Investigating violations of The Fair Credit Reporting Act D. Providing employment histories for investigative consumer reports

B. Rating the financial strength of insurance companies

What term best describes the act of withholding material information that would be crucial to an underwriting decision? A. Concealment B. Withholding C. Leading D. Breach of warranty

A. Concealment

Which of the following is NOT a goal of risk retention? A. To minimize the insured's level of liability in the event of loss B. To reduce expenses and improve cash flow C. To increase control of claim reserving and claims settlements D. To fund losses that cannot be insured

A. To minimize the insured's level of liability in the event of loss