Testing questions
An agent who is action exceeds the authority granted by contract is
Not back by the insurer
Which of the following is not an example of risk retention
Not doing a business deal after deciding it would be too risky
What element of a Contract constitutes a definite and unqualified proposal by one party to another?
Offer
Insurable interest involves what assumption?
One person benefits from another person's continued life
All of these statements correctly describes an aleatory contract except?
Only one party makes any kind of legal enforceable offer
What situation will not require the insured's consent when a life insurance policy is issued?
When a parent is making a policy for a minor
A contract is considered void and all of the following situations except
When consideration is unequal
The Powers directly given to a producer in an agency contract are called
to express
A business becoming incorporated is an example of risk
to transfer
A hold-harmless clause is an example of risk
to transfer
Which of the following involves sharing an uncertain risk with another similar group?
to transfer
Purchasing Insurance is an example of risk
transference
Giving up a known right on a voluntary basis is called
waiver
During the application process, a statement made by an applicant that becomes part of the contract is considered to be a
warranty
An insurance company can be liable for a producers unauthorized acts
when the agency contract is unclear concerning the authority given
In what way are insurance policies said to be aleatory?
Involves the potential for the unequal exchange of value
And appointed producers implied authority is derived from
Express authority
Which of the following types of risk is insurable?
pure
What type of risk involves the potential for a loss with no possibility for gain?
pure risk
Which of the following is an unincorporated association whose members provide coverage for one another?
reciprocal
ABC Company is attempting to minimize the severity of potential losses within its company. The company is engaged in risk
reduction
When must insurable interest exist for a life insurance contract to be valid?
Inception of the contract
What happens when an initial offer is answered with a counter offer?
Initial offer is void
And insurance companies failure to enforce a contract provision is called
Waiver
And agents authority to bind an insurer to an insurance contract may be granted in the
Agents contract and the insurance companies appointment
What qualifies as acceptance of an insurance contract offer?
An issued policy
Which of these statements regarding insurance is false?
As the number of insured units increases, the number of losses decreases
Insurance is not characterized as which of the following?
As the number of insureds increase the number of losses decrease
A producers working for an insurance company may be personally liable for
Ask performed which are prohibited in the agency contract
A reciprocal Insurer typically has an administrator who manages the premiums collected from the groups members. This administration is called a
Attorney in fact
Which of these is true regarding the exchange of consideration among parties involved in an insurance contract?
Can be unequal
Voluntarily terminating an insurance policy is known as
Cancellation
Which of the following types of insurers limits the exposure it writes to those of its owners?
Captive insurer
The courts will normally interpret a policy in favor of the insured when the meaning of the policy is not clear. This is because an insurance policy is an
Contract of Adhesion
An insurance application requires an applicant to make a full, accurate disclosure of the risk factor involved. Using this criteria, and insurance policy is considered what type of contract?
Contract of utmost good faith
Christopher is issued an insurance policy that contains an attached agreement which alters the terms of the policy. This attachment is called an
Endorsement
For insurance purposes, similar objects which are exposed to the same group of perils are referred to as
Homogeneous exposure units
Which of these do not indicate the presence of insurable interest in a life insurance contract?
Lifelong friendship
Which of the following is a syndicate established by a group of insurers to share underwriting duties?
Lloyd's organization
Which of the following situations would an insurance agent need to guard against liability for professional errors and omissions?
Making a recommendation to a potential insured to replace existing coverage
Which of the following relationships demonstrates insurable interest in the absence of economic interest?
Marriage partners
Greg applies for insurance and makes a false statement on the application that will influence whether or not the insurer will accept the risk. Greg's false statement is called a(n)
Material misrepresentation
Dividends from a mutual insurance company are paid to whom?
Policyholders
Which of the following accurately describes a participating insurance policy?
Policyowners may be entitled to receive dividends
The law of large numbers enables an insurer to
Predict losses
According to the law of large numbers, how would losses be affected if the number of similar insured units increases?
Predictability of losses will be improved
Which of the following outlines the authority given to the producer on behalf of the insurer?
Producer contract
Which of these statements is not a characteristic of the law of large numbers?
Rates can be calculated to compensate for losses
Ambiguities in insurance contracts are typically interpreted in favor of the insured. This rule is referred to as
Reasonable expectations
An insured is entitled to coverage under a policy that a prudent person would expect it to provide. This principle is called
Reasonable expectations
Which of the following is not an objective to the national Association of insurance commissioner's?
Regulate state insurance commissioners
A ___________ insurer assumes risk from another insurance company
Reinsurance
And insure has an contractual agreement which transfers a portion of its risk exposure to another insurer. What type of contractual agreement is this?
Reinsurance contract
How can an insurance company minimize exposure to loss?
Reinsuring risks
Statements made by an insured on an accident and health insurance application or considered to be?
Representations
What is the accounting measurement of an insurance companies future obligations to its policy owners?
Reserves
What is the insurers responsible for when a producer is acting within the scope of authority granted in the agency contract?
Responsible for acts by the producer that are authority only
Which of the following describes the act of ensuring a risk against possible loss
Risk transfer
Which of the following would not have a restricted ability to enter into a contract
Small employer
Which one of these is not considered to be an Element of an insurable risk?
Speculative risk
Who regulates an insurer's claim settlement practices?
State insurance departments
Which group is the do not call registry designed to protect against?
Telemarketers
When a producer acts within the scope of his or her contractual authority, which of the following is legally responsible for these actions?
The insurer
An agreement where an individual is authorized to act on behalf of another person or company is established through
The law of agency
Which reinsurance contract between two insurers involves an automatic sharing of the risks assumed?
Treaty reinsurance
Use of XYZ Insurance Company brochures, business cards, and rating guides is an example of
apparent authority
A(n) ___ agent is an insurance agent who represents only one insurance company
captive
The insurers obligation to pay a claim depends on whether the insured or beneficiary has complied with all policy conditions. This makes the policy a
conditional contract
The payment of the first premium, the promise to pay a covered loss, and the agreement to abide by policy conditions are all examples of
consideration
An agreement is reached when an insurance contract is formed. Which of the following is NOT considered to be an element of an agreement?
equity
When a ceding insurer transfers a portion of its risk to an assuming insurer on a case by case basis, this process is referred to as
facultative reinsurance
A condition that increases the possibility of financial loss is called a(n)
hazard
The unwritten authority given to a producer to carry out necessary incidental acts of the agency agreement is called
implied authority
XYZ Insurance Company gives direct authority to its producers to sell insurance through an agency contract, but nothing is stated regarding the collection of premiums. Which authority grants the producer the right to collect premiums?
implied authority
A(n) ____ agent may represent several insurers.
independent
Under the law of agency, the principal is considered to be
insurer
Which of the following financial products creates an instant estate, no matter when the date of death?
life insurance
Risk ____ is the process of analyzing exposures that create risk and designing programs to handle them.
management
An insurance contract may be voided if a misrepresentation found on the application is determined to be
material
Which of the following can be defined as a Cause of loss?
peril
Which of the following can be defined as the potential for loss?
risk
Which term describes the elimination of a hazard?
risk avoidance
A group-owned insurance company that is formed to assume and spread the liability risks of its members is known as a
risk retention group
Dividends from a stock insurance company are normally sent to
shareholders
What type of risk involves the potential for loss and the possibility for gain?
speculative
An insurable risk requires
that the chance of loss be calculable
The following are all elements of a valid contract except
written evidence