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22 Cards in this Set

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"One of the basic premises of insurance is the transference of risks, rather than the retention of them, associated with large groups of people to an insurance company, without the uncertainty associated with gambling." This statement is True or False?
False
With regards to insurance applicability, the word "risk" can be best defined as which of the following?

a.) The uncertainty associated with a loss occurring
b.) The uncertainty of a financial loss
c.) The cause of the loss
d.) The increase in the probability of a loss occurring.
a.) The uncertainty associated with a loss occurring
What does a "pure risk" consist of ?

a.) The chance of gain only
b.) The chance of loss only
c.) The chance of neither of these
d.) The chance of both of these
b.) The chance of loss only
How would a "peril" best be defined?

a.) Reason for the loss
b.) Result of the loss
c.) Required to increase the likelihood of a loss occurring
d.) Remaining hazards after a loss occurs
a.) Reason for the loss
Which of the following combinations of characteristics should be considered when making an insurance recommendation to a prospective insured who has just purchased a new office building?

a.) Cost of the building hazards causing potential losses, the possible dollar value of an individual loss
b.) The structure exposed to the loss, loss preventive methods installed, the possible dollar value of a single loss.
c.) The insured's exposure, the highest amount of fire coverage that an insurer will offer (since this is the most common type of loss), the possible financial impact of a loss.
d.) The structure that is exposed to a loss, the perils that may occur, consequently causing a loss, the possible financial impact of a loss.
d.) The structure that is exposed to a loss, the perils that may occur, consequently causing a loss, the possible financial impact of a loss.
Which of the following is the reason that an insured should not be making any kind of profit as the result of an insurance claim/loss being paid, but rather, the payment should restore the insured to same financial status that existed prior to the loss with no chance for any type of profit?

a.) Law of supply & demand
b.) Law of large numbers
c.) Basic principle of insurance
d.) Basic premise of the CA Department of Insurance Code
c.) Basic principle of insurance
The insurable interest that one has in a property will be the amount that the same individual will be able to recover as a payment for a loss resulting in the occurrence of an insured peril according to the limitations on loss payments that insurers impose.

a.) True
b.) False
a.) True
What would be the reason(s) for a $100 deductible versus a $1,000 deductible?

a.) Reduced premium
b.) Reduced number of small claims submitted to the insurance company by insureds
c.) Neither of these apply
d.) Both of these apply
c.) Neither of these apply
Reinsurance is used by insurance companies to protect themselves from catastrophic losses, minimize capacity problems by lessening unearned premium amounts, and accept the risks associated with large exposures.

a.) False
b.) True
b.) True
All of the following explain the characteristics that are unique to insurance contracts, except:

a.) Only the insurer must perform under certain conditions
b.) There is an equal exchange of amounts or value within the contract
c.) All relevant facts must be disclosed honestly and completely by both parties
d.) Because the insured must accept the contract on a "take it or leave it" basis as written by the insurance company, if the contract can be interpreted in more than one way by the courts, the interpretation that favors the insured will be enforced by the courts
b.) There is an equal exchange of amounts or value within the contract
An insurance company pays a loss and continues coverage under an auto policy under the following circumstances: An insured honestly thinking that he received his last traffic ticket more than 36 months ago, applies for an auto policy stating that he has had no tickets or accidents in the past 36 months. Several days after the policy is issued the insured's car is stolen. While the claim is being processed, the insurance company discovers that the insured had received his most recent traffic ticket for speeding 32 months ago. Why is the claim paid and the policy continued?

a.) The insurer, by law, must pay the claim because the policy was in force at the time of the claim

b.) The concealed facts were not material

c.) The Insurance Code states that the insurer must take action prior to a loss occurring, and frowns on concealment

d.) The concealment in this situation was unintentional
b.) The concealed facts were not material
Which of the following statements is true regarding the materiality of representations and concealment?

a.) Materiality has no affect on either of these
b.) The degree of materiality is determined after a loss is calculated and paid
c.) It does not apply to health insurance, only property and casualty insurances
d.) It is determined by the affect of the facts on each party to the contract in determining his or her estimate of the disadvantages of the contract.
d.) It is determined by the affect of the facts on each party to the contract in determining his or her estimate of the disadvantages of the contract.
Which of these is true concerning exclusive agents?

a.) They sell for only one insurance company
b.) They sell only one line or class of insurance
c.) They sell exclusively by phone
d.) They retain all rights to their renewals
a.) They sell for only on insurance company
A licensed fire and casualty broker/agent, when properly appointed, may transact liability insurance, property insurance, ocean/marine insurance, health insurance and auto insurance.

a.) True
b.) False
a.) True
How is an "insurance broker" defined according to the CA Insurance Code?

a.) An individual who is appointed to transact insurance business with admitted insurance companies, receives commissions from these companies, but acts on behalf of the clients

b.) An individual who is appointed by specialty insurance companies to transact higher risk cases

c.) An individual who receives compensation for transacting insurance on behalf of another person, but not on behalf of an insurance company

d.) An individual who is appointed and employed by a licensed fire and casualty broker/agent, transacts insurance with the insurance companies that the employing fire and casualty broker/agent represents, is paid commission from the employing broker/agent, but acts on behalf of clients.
c.) An individual who receives compensation for transacting insurance on behalf of another person, but not on behalf of an insurance company
A fire and casualty managing general agent can do all of the following, except:

a.) Accept or decline risks, and accept premiums from producing broker agents

b.) Be licensed as a fire and casualty agent

c.) Appoint, supervise, and terminate the contracts of agents

d.) None of these are excluded from the powers and authority given to fire and casualty managing general agents
d.) None of these are excluded from the powers and authority given to fire and casualty managing general agents
If an individual has a solicitor's license, they may assist a life licensed fire and casualty broker/agent in the transactions of homeowners, automobile and health insurances.

a.) False

b.) True
b.) True
Which of the following statements best defines a binder?

a.) A contract of insurance that is temporary, either oral or in writing, between the insured and the insurer

b.) A contract of insurance that is temporary, either oral or in writing, between the insured and the soliciting agent

c.) A contract of insurance that is temporary, only in writing, between the insured and the insurer

d.) A contract that is temporary, only oral, between the insured and the insurer
c.) A contract of insurance that is temporary, only in writing, between the insured and the insurer
It is considered an illegal activity if a CA licensed fire and casualty broker/agent advertises in any way a non admitted insurer

a.) True
b.) False
a.) True
An individual is in the business of providing the financing for real estate sales. Is it lawful for her to verbally recommend that property insurance be placed through a particular agent, only if that recommendation is also put in writing?

a.) Yes
b.) No
a.) Yes
The true corporate name that is used by a licensee must be approved by the Insurance Commissioner.

a.) This statement is false
b.) This statement is true
b.) This statement is true
The CA Insurance Code places limitations on what is acceptable for name approval licensees. Which of the following would be acceptable for a fire and casualty broker/agent(unincorporated) to use in newspaper advertising?

a.) Stewart Williams, CPCU

b.) Stewart Williams & Co.

c.) Stewart Williams, Property & Casualty Insurance Co.

d.) Any of these are acceptable as long as he is appointed with one or more admitted carriers
a.) Stewart Williams, CPCU