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49 Cards in this Set
- Front
- Back
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1 In insurance transactions, fiduciary responsibility means |
A Being liable with respect to payment of claims. B Commingling premiums with agent's personal funds. C Handling insurer funds in a trust capacity. D Maintaining a good credit record. |
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2 Which of the following is NOT a characteristic of an insurable risk? |
A The loss must be catastrophic. B The loss must be due to chance. C The loss must be measurable. D The loss exposure must be large. |
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3 In order for an insurer to legally transact insurance, it must obtain which of the following? |
A Certificate of Authority B Power of Authority C Director's Decree D Authorization of Power |
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4 The risk management technique that is used to prevent a specific loss by not exposing yourself to that activity is called |
A Transfer. B Reduction. C Sharing. D Avoidance. |
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5 When doing business in this state an insurance company that is formed under the laws of another state is known as which type of insurer? |
A Domestic B Alien C Nonadmitted D Foreign |
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6 The requirement that agents not commingle insurance monies with their own funds is known as |
A Accepted accounting principal. B Fiduciary responsibility. C Premium accountability. D Express authority. |
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7 An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following terms best describes what the insurer has violated? |
A Adhesion B Consideration C Good Faith D Representation |
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8 Insurance is a contract by which one seeks to protect another from |
A Hazards. B Loss. C Exposure. D Uncertainty. |
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9 Which of the following insurers are owned by stockholders who have the usual rights of ownership, including the right of voting? |
A Stock B Mutual C Reciprocal D Fraternal |
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10 What do individuals use to transfer their risk of loss to a larger group? |
A Insurable interest B Exposure C Indemnity D Insurance |
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11 In forming an insurance contract, when does acceptance usually occur? |
A When an insurer approves a prepaid application B When an insurer delivers the policy C When an insurer receives an application D When an insured submits an application |
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12 Statements made by an applicant for a life insurance policy that are true to the best of the applicant's knowledge are referred to as |
A Warranties. B Information. C Representations. D Facts. |
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13 Which authority is NOT stated in an agent's contract but is required for the agent to conduct business? |
A Assumed B Express C Implied D Apparent |
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14 Which statement regarding insurable risks is NOT correct? |
A Insurance cannot be mandatory. B The insurable risk needs to be statistically predictable. C An insurable risk must involve a loss that is definite as to cause, time, place and amount. D Insureds cannot be randomly selected. |
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15 In which of the following examples would a contract between an insurer and prospective insured be legal? |
A The applicant is a 12-year-old student. B The applicant is under the influence of medication at the time of application. C The applicant has a prior felony conviction. D The applicant is intoxicated at the time of application. |
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1General Insurance
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1
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1Chapter: General Insurance
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1Statements made by an applicant for a life insurance policy that are true to the best of the applicant's knowledge are referred to as
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A Warranties. B Information. C Representations. D Facts |
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1 Statements made by an applicant for a life insurance policy that are true to the best of the applicant's knowledge are referred to as
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Correct!
C Representations. Representations are statements that the applicant believes to be true, but that are not guaranteed. |
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2
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. |
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2
Which statement regarding insurable risks is NOT correct? |
Correct!
B Insureds cannot be randomly selected. Correct! Granting insurance must not be mandatory, selecting insureds randomly will help the insurer to have a fair proportion of good risks to poor risks. All other statements are true. |
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3
Which of the following is NOT true regarding a Certificate of Authority? |
A
It may be necessary for transacting business in a specific state. B It is an equivalent of insurance license. C It is issued by the state department of insurance. D It is issued to group insurance participants. |
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3
Which of the following is NOT true regarding a Certificate of Authority? |
Correct!
A It is issued to group insurance participants. Before insurers may transact business in a specific state, they must apply for a license or Certificate of Authority from the state department of insurance and meet any financial (capital and surplus) requirements set down by the state. |
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4
Which of the following is NOT the consideration in a policy? |
A
The premium amount paid at the time of application B The promise to pay covered losses C The application given to a prospective insured D Something of value exchanged between parties |
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4
Which of the following is NOT the consideration in a policy? |
Correct!
C The application given to a prospective insured Consideration is something of value that is transferred between the two parties to form a legal contract. |
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5
Which of the following insurers are owned by stockholders who have the usual rights of ownership, including the right of voting? |
A
Reciprocal B Fraternal C Stock D Mutual |
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5
Which of the following insurers are owned by stockholders who have the usual rights of ownership, including the right of voting? |
Correct! C
Stock Only stock insurance companies are owned and controlled by stockholders. |
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6
Insurance is the transfer of |
A
Peril. B Risk. C Loss. D Hazard. |
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6 Insurance is the transfer of
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Correct!
B Risk. Correct! Insurance is the transfer of financial responsibility associated with a potential of a loss (risk) to an insurance company. |
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7 The requirement that agents not commingle insurance monies with their own funds is known as |
A
Express authority. B Accepted accounting principal. C Fiduciary responsibility. D Premium accountability. |
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7 The requirement that agents not commingle insurance monies with their own funds is known as
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Correct!
C Fiduciary responsibility. Money collected with respect to an insurance transaction must be held in a position of trust by the agent or broker. |
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8
All of the following actions by a person could be described as risk avoidance EXCEPT |
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Investing in the stock market. B Refusing to scuba dive. C Never flying in an airplane. D Taking a flu shot each year. |
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8 All of the following actions by a person could be described as risk avoidance EXCEPT
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Correct!
A Investing in the stock market. Investing in the stock market is not an example of risk avoidance; it creates a possibility of a loss.Review ContentNext Question |
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9
The authority granted to an agent through the agent's contract is referred to as |
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Absolute Authority. B Express Authority. C Apparent Authority. D Implied Authority. |
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9
The authority granted to an agent through the agent's contract is referred to as |
Correct!
A Express Authority. Express powers are written into the contract between the insurer and the agent. |
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10
The insurer may suspect that a moral hazard exists if the policyholder |
A
Frequently is depressed. B Has an indifferent view of activities that may be dangerous. C Always drives over the speed limit. D Was not honest about all aspects regarding his health on an application for insurance. |
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10
The insurer may suspect that a moral hazard exists if the policyholder |
Correct!
D Was not honest about all aspects regarding his health on an application for insurance. Moral hazards refer to those applicants that may lie on an application for insurance, or in the past, have submitted fraudulent claims against an insurer. |
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11
An individual was involved in a head-on collision while driving home one day. His injuries were not serious, and he recovered. However, he decided that in order to never be involved in another accident, he would not drive or ride in a car ever again. Which method of risk management does this describe? |
A
Retention B Avoidance C Reduction D Sharing |
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11 An individual was involved in a head-on collision while driving home one day. His injuries were not serious, and he recovered. However, he decided that in order to never be involved in another accident, he would not drive or ride in a car ever again. Which method of risk management does this describe?
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Correct!
B Avoidance Avoidance is a method of risk management by which a person tries to eliminate risk of loss by avoiding any exposure to an event that could give rise to such loss. Risk avoidance is effective but seldom practical. |
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12
An applicant knowingly fails to communicate information that would help an underwriter make a sound decision regarding coverage. This is an example of |
A Concealment. B Waiver. C Fraud. D Breach of warranty. |
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12
An applicant knowingly fails to communicate information that would help an underwriter make a sound decision regarding coverage. This is an example of |
Correct! A Concealment. In insurance, concealment is the withholding of information that will result in an imprecise underwriting decision. |
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13
In which of the following examples would a contract between an insurer and prospective insured be legal? |
A
The applicant is under the influence of medication at the time of application. B The applicant has a prior felony conviction. C The applicant is intoxicated at the time of application. D The applicant is a 12-year-old student. |
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13
In which of the following examples would a contract between an insurer and prospective insured be legal? |
Correct!
B The applicant has a prior felony conviction. When an insurer and insured enter into a contract, both parties must be of legal age and mentally competent. It is legal for a person convicted of a felony to buy an insurance contract. An intoxicated person, however, may not be mentally competent, and a 12-year-old student is considered to be underage in most states. |
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14
Which authority is NOT stated in an agent's contract but is required for the agent to conduct business? |
A Implied B Apparent C Assumed D Express |
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14
Which authority is NOT stated in an agent's contract but is required for the agent to conduct business? |
Correct!
A Implied Implied authority is not written in the agent's contract but is required in order for the agent to conduct business. Implied authority exists because not every single detail of an agent’s authority can be written in a contract. |
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15
An insurer incorporated in which of the following locations would be considered a foreign insurer in Washington D.C.? |
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Washington D.C. B Maryland C Mexico D Canada |
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15 An insurer incorporated in which of the following locations would be considered a foreign insurer in Washington D.C.?
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Correct!
B Maryland Correct! A foreign insurer is an insurance company that is incorporated in another state or territorial possession. Mexico and Canada are foreign countries, so their insurers will be considered alien. An insurer that is incorporated and that operates in Washington D.C. would be considered domestic. |
