License Exam: Basic Insurance, Contract Law, Producers Section I & Ii

Front 1

Cause of loss (P&C Insurance)

Back 1

Peril

Front 2

Law of Large Numbers

Back 2

The more an event occurs, the more predictable the outcome

Front 3

What do we call the loss exposure associated with death, sickness, or disability of a key employee?

Back 3

Personnel Loss Exposure

Front 4

What constitutes a Preferred or Ideal risk?

Back 4

1) applicant belongs to large group

2) facing economic hardship

3) not catastrophic

4) measurable

5) predictable losses

Front 5

Insurance Events refer to events relating to _____ & _____ insurance.

Back 5

Life & Disability

Front 6

An Insurable Interest refers to loss of a financial or legal interest. (_____ & _____ Insurance)

Back 6

Property & Casualty

Front 7

Indemnity

Back 7

Insured for equal exchange

Front 8

What are some examples of adverse selection in both L&H and P&C coverage?

Back 8

Life & Health- applicant may not proclaim his drinking problem or diabetes

Property & Casualty- applicant lies about zip code for better auto rates

Front 9

Spread of Risk doesn’t just mean an insurer accepts multiple level risks to assure profit (Substandard->Standard->Preferred), it also means an insurer will accept _____________.

Back 9

Special coverage for wide geographic regions due to geographic reasons (like Florida shorelines)

Front 10

Benefits of deductibles include:

Back 10

-helps eliminate small claims

-affordable premiums

Front 11

What are the 4 elements referred to as an endorsement in an insurance policy?

Back 11

Addition (+)

Deletion (-)

Amendment (change)

Excludable (exclude event or group)

Front 12

What is a rider? When do you use one?

Back 12

An additional-only endorsement to Life and Disability Insurance Policy Contract

Front 13

Contract Law -VS- Tort Law

Back 13

Constitution -VS- Non-Constitutional

Specified -VS- Implied (libel and slander)

Front 14

What are the 4 conditions for a Contract to be made?

Back 14

Competent Parties (18+, right

minded)

Legal Purpose

Offer and Acceptance

Compensation (Consideration)

Front 15

A _____ is a type of contract based on contingent, or unknown, events.

Back 15

Aleatory Contract

Front 16

A _____ is a type of contract based on contingent, or unknown, events.

Back 16

Aleatory Contract

Front 17

A _____ is a type of contract where one party has significantly more power than the other.

Back 17

Adhesion Contract

Front 18

A _____ is a type of contract based on contingent, or unknown, events.

Back 18

Aleatory Contract

Front 19

A _____ is a type of contract where one party has significantly more power than the other.

Back 19

Adhesion Contract

Front 20

A _____ is a type of contract based on one or more conditional events occurring.

Back 20

Conditional Contract

Front 21

What is a Unilateral Contract?

Back 21

One in which a promise is only made to one party (opposed to a Multilateral Contract)

Front 22

What is a Unilateral Contract?

Back 22

One in which a promise is only made to one party (opposed to a Multilateral Contract)

Front 23

Insurance contracts are considered _____ and cannot be transferred between people. Which line of insurance is the exception to this rule?

Back 23

Personal Contract; Life Insurance

Front 24

When you rescind/ void a contract it’s called _____.

Back 24

Rescission

Front 25

When you rescind/ void a contract it’s called _____.

Back 25

Rescission

Front 26

Why is Materiality, the estimated measure of the potential risk exposure of having mis or withheld information, important to a policy?

Back 26

Helps measure loss

Front 27

What’s an example of Estoppel, a party taking action due to its own inconsistent behavior or words?

Back 27

If your landlord goes after you for being late on rent after they stopped sending out reminder notices.

Front 28

When asked a question, your Representation is not considered a promise because it is _____.

Back 28

A response believed to be true to your best knowledge

Front 29

When may representations be made or withdrawn?

Back 29

At or before the time of the policy’s execution.

Front 30

When giving insurer information based on what you hear from others, you must _____.

Back 30

explain the information is based on knowledge of others

Front 31

What is the PENALTY of Misrepresentation for a person?

Back 31

Fine: up to $25,000 (or 3x victims loss if over $10,000)

—and/or—

Imprisonments: up to 1 year

Front 32

What is the PENALTY of Misrepresentation for an agent/broker/solicitor?

Back 32

Imprisonment: up to 3 years in prison

Front 33

What is the PENALTY of Misrepresentation for an insurer?

Back 33

Having their Certificate of Authority revoked

Front 34

In terms of insurance a Warranty is a _____.

Back 34

a more weighted representation in the form of a legal promise

Front 35

What is the different between an Express Warranty and an Implied Warranty?

Back 35

Express- statements expressed in policy

Implied- statements implied about policy (your ship must be able to sail)

Front 36

What form offers a warning in writing from the CIC about fraudulent activity?

Back 36

Claim Form

Front 37

What are the 4 reasons an Insurer can rescind a policy?

Back 37

1) Concealment

2) Fraudulent Omission

3) Material Representation is false

4) Material Warranty Violated

Front 38

What are the 4 reasons an Insurer can rescind a policy?

Back 38

1) Concealment

2) Fraudulent Omission

3) Material Representation is false

4) Material Warranty Violated

Front 39

What 6 items must be listed on an Insurance Policy?

Back 39

1) Parties Involved

2) Person/Property being Insured

3) Policy Period

4) Risks

5) Premium

6) Insured’s Interest (if property they’re not owner of)

Front 40

What is NOT a requirement for Insurance Policies?

Back 40

The Insurer’s financial rating

Front 41

What are some thing that would cause a Policy Cancelation?

Back 41

Non-Payment of a Premium

Insurer Property Sold

Etc.

Front 42

Other than a policy expiration, what would cause a Non-Renewal?

Back 42

Insurer not renewing contract but allowing period to finish

Front 43

What is the Grace Period?

Back 43

time allowed for insured to be covered after non-payment to make payment

Front 44

What happens when you Lapse due to the end of the Grace Period?

Back 44

You non-pay during period and coverage is terminated

Front 45

What does an Exposure Unit, used to measure loss potential, come in?

Back 45

Usually $100s or $1000s

Front 46

What does an Exposure Unit, used to measure loss potential, come in?

Back 46

Usually $100s or $1000s

Front 47

The portion of your policy you _____ payed is called Earned Premium; and the portion you ____ pat is called the Unearned Premium.

Back 47

Have; didn’t

Front 48

A _____ is an agent who only works with one insurer.

Back 48

Captive Agent

Front 49

An _____ is an agent who works for multiple insurers.

Back 49

Independant Agent

Front 50

Direct Response, when insurers use advertisements to sell to consumers, use _____ instead of contracted agents.

Back 50

Employees

Front 51

In terms of an Agent, what is Express Authority?

Back 51

Authority of what he expressly can/cannot do on behalf of the Principal

Front 52

In terms of an agent, what is considered Implied Authority?

Back 52

Collecting premiums is expected but not expressed

Front 53

In terms of an agent, what is considered Implied Authority?

Back 53

Collecting premiums is expected but not expressed

Front 54

What does the term Apparent Authority mean?

Back 54

When a party believes the agent has certain authority because he has no reason not to believe him

Front 55

Even though they both help negotiate Policy Contracts, What’s the difference between an Agent and a Broker?

Back 55

Agents- behalf of insurer

Broker- behalf of applicant