Section 1 Practice
Daniel owns an insurance agency in a small town and represents just 1 insurer. He wears apparel with the company logo and has the name of his vehicle. What type of authority does this represent?
Apparent
All of the following are elements of a contract and except
Are: legal purpose agreement competent parties are not: acknowledgment
What is Lloyd's of London?
Association of individuals and companies that individually underwrite insurance. It helps its associates settle the claim and disputes. It gathers and disseminated underwriting information.
What are the types of agents?
Captive General Independent
Which of the following is an incorporated insurer that is owned by its policy holders and does not have capital stock or shares?
Mutual company
An insurer that issues participating policies
Mutual insurer
An insurer that issues participating policies is
Mutual insurer
What are fraternal benifits societies?
Policies are called contracts
With a life insurance contract, which of the contracting parties makes an enforceable promise?
The insurer
The agent
Who represents an insurance company in an insurance transaction?
An insurance company that transacts insurance directly with consumers without the assistance of producers is called
a direct response company
AN insurance company that is owned by its policyowners, who share the insurer's divisible surplus in the form in the form of participating policy dividends, is known as
a mutual insurance company
A fiduciary responsibility is defined as what
a relationship of special trust and confidence when a person is entrusted with anothers funds
Miguel works for a mutual insurance company that was formed to handle the insurance needs of lawyers. The type of company that Miguel works for is called
a risk retention group
Name the three types of authority under the law of agency:
apparent expressed implied
The insurance concept of returning customers to the financial status they enjoyed prior to a loss is known as
indemnification
In an insurance transaction, who does a licensed agent legally represent?
insurer
Insurance agents represent the
insurer
False information that will void insurance contract is known as
material misrepresentations
Filing a fraudulent health insurance claim is an example of
moral hazard
Which of the following is an incorporated insurers that does not have capital stock and has a governing body that is elected by its policyholders?
mutual insurer
A captive agent who has an exclusive contract with an insurer may
not represent another insurer selling an identical policy
A mutual insurance company is an incorporated entity owned by its
policyholders
Unincorporated groups of people that agree to insure each other's losses under a contract are known as
reciprocal insurers
A contract in which one insurer cedes all or part of a risk to another insurer is known as
reinsurance
Statements made by an applicant in completing a life insurance application are considered to be
representations
If Jill signs a contract 2 week later while intoxicated after wanting to purchase a $500,000 life insurance policy_____
she will not be presumed to be competent
According to insurance law, an insurance agent is a person who
solicits, negotiates, procures or effects insurance or annuity contracts on behalf of an insurer
Making appropriate product recommendations based on the needs, objectives, and circumstances of a client is referred to as
suitability considerations
A producer owes a fiduciary responsibility to all of the following EXCEPT:
the commissioner for license fees
An individual who recruits agents to sell insurance within a certain geographical area is
the general agent
In an insurance transaction, licensed agents legally represent which of the following?
the insurer
Licensed and appointed agents represent
the insurer
Whom do independent insurance agents represent?
the insurer
Statements that are guaranteed to be true are called
warranties
Which of the following types of agents authority is specifically set forth in writing in the agents contracts?
express
The authority that an insurer gives to its agents by means of the agents contracts is known as
express authority
What are the types of agent authority?
express, implied, apparent
Mutual Insurance Company
An insurance company that is owned by its policyholders, who share the insurer's divisible surplus in the form of participating policy dividends.
Examples of Misrepresentation
-Exaggerated description of treatment programs -Exaggerated description of personal levels of training, experience and expertise
A licensed independent life or health insurance producer may represent
1 or more authorized insurers
What is the definition of fiduciary?
A person in a position of trust and confidence who handles the affairs and funds of others
Which of the following is a promise in exchange for an action?
A unilateral contract
Which characteristic of insurance contracts provides legal protection for insureds when coverages are not clearly stated in the policy?
Adhesion
When agents act on behalf of insurers, they are acting under which legal principle?
Agency
A commercial insurer can take all of the following forms except
An individual benefit society
What type of agent authority is specifically set forth in writing gin the agents contract?
Express
Disposition of fiduciary funds?
Funds collected as premiums are to be kept separate from those used for personal expenses or investments.
catastrophic loss
In order to be insured, a group must be randomly selected to avoid
A mutual insurer is owned by its
Policyholders
Transferring Risk
Purchasing Insurance is an example of this
What kind of insurance company is owned by individuals who buy shares but are not entitled to receive policy dividends?
Stock insurance company
Adverse Selection
The inclination of higher-risk individuals to be "first in line" to get and keep insurance is called
Which of the following describes facultative reinsurance?
The reinsurer considers each risk before allowing the transfer to be made from the ceding company.
Life insurance contract
The term aleatory indicates that the values received by each part may be unequal.
If an agent or producer diverts funds belonging to an insurer to her own use, she has committed the illegal act of
Theft
With regard to insurance, risk can be defined as
Uncertainty regarding loss
A peril is a
cause of loss
Reinsurance
A contract in which one insurer cedes all or part of a risk to another insurer.
Which of the following insurance companies are organized are incorporated under state laws but have no stockholders?
Mutual insurers
What are some statements regarding mutual insurers?
Mutual insurers issue participating policies.
Specialized risks that admitted insurers are not able to cover may often be obtained through
a surplus line insurer
In an insurance contract, only one part is legally bound to perform under the contract. This describes
a unilateral contract
An insurance company that holds a certificate of authority in a state may be known as any of the following EXCEPT
accepted right answers - authorized - approved - admitted
What are some examples of insurable risk?
accidental affordable assessable
The inclination of higher-risk individuals to be "first in line" to get and keep insurance is called
adverse selection
The premium for transferring a risk should be
affordable
In an insurance transaction, the insurer is represented by the
agent
What regarding the fiduciary duty of a producer is correct?
all premiums received by an insurance producer must be held in trust and cannot be used for personal matters.
An insurance company formed under the laws of any other country other than the US would be considered
an alien insurance company
What are the 6 characteristics of insurable risk
calculable affordable noncatastrophic homogeneous accidental measurable
The license an insurer usually needs to sell insurance in a state is called
certificate of authority
Since the obligations of the insurance company hinge on certain acts of the policyowner, the beneficiary, or both, the insurance contract is termed
conditional
With regard to insurance, consideration means what
directly giving something of value
When there is no coverage available through an authorized carrier in the state, this insurance is referred to as:
excess and surplus line
Agents that work on behalf of 1 specific insurance carrier are known as
exclusive or captive agents
Insurance company that is owned by its policyholders?
mutual life insurance company
Self-insurance is an example of what kind of risk treatment?
retention
A stock insurer is owned by
shareholders
Murt Enterprises wants to build 3 new casinos in Illinois. It is possible the necessary insurance coverages will be placed through
surplus lines company
Who are the parties to a life insurance contract?
the applicant and the insuring comapny
Morris is a licensed insurance agent. His principal is
the insurer
The law of large numbers states that:
the larger the number of risks combined into one group, the less uncertainty there will be as to the amount of loss that will be incurred.
Which of the following statements regarding a stock insurer is not true?
the policies are participating policies
What are the common characteristics of an insurance contract?
utmost good faith adhesion indemnity not - legal purpose
