Basic Principles of Life and Health Insurance Flashcards
A nonparticipating policy will
not pay dividends
Which of the following is NOT a benefit of insurance?
Losses due to fraud are eliminated
A life insurance company has transferred some if its risk to another Insurer. The insurer assuming the risk is called the
reinsurer
John owns an insurance policy that gives him the right to share in the insurer’s surplus. What kind of policy is this?
Participating
What is the primary purpose of a rating service company such A.M Best?
Determine financial strength of an insurance company
AAA Insurance Company has transferred a portion of its loss exposure to BBB Insurance Company. In this reinsurance transaction, what is AAA Insurance Company called?
Primary insurer
A plan in which an employer pays insurance benefits from a fund derived from the employer’s current revenues is called
A self-funded plan
Which of the following is a contract that involves one party which indemnifies another when a loss arises from an unknown event?
Insurance Policy
A insurer’s ability to make unpredictable payouts to policy owners is called
liquidity
Ken is a producer who has obtained Consumer Information Reports under false pretense. Under the Fair Credit Report Act, what is the maximum penalty that may be imposed on Ken?
$5,000
A nonparticipating company is sometimes called a(n)
stock insurer
Why are dividends from a mutual insurer not subject to taxation?
Because dividends are considered to be a return of premium
What is considered to be the primary reason for buying life insurance?
Provide death beneftis
Which of the following statements regarding a life insurance policy dividend is TRUE?
It is the distribution of excess of funds accumulated by the insurer on participating policies.
What is a participating life insurance policy?
Contract that allows the policyowner to receive a share of surplus in the form of policy dividends
What kind of life insurance policy issued by a mutual insurer provides a return of divisible surplus?
participating life insurance policy
Which of the following is a type of insurance where an insurer transfers loss exposures from policies written for its surrender.
Resinsurance
Which of the following is an insurer established by a parent company for the purpose of insuring the parent company’s loss exposures?
Captive Insurer
Fraternal Benefit Society has each of the following characteristics EXCEPT
Exist for profit
The Do Not Call Registry offers exemptions for calls placed from all of the following EXCEPT
insurance sales calls
When a mutual insurer becomes a stock company, the process is called
Demutualization
An insurer owned by its policyholders is called
mutual insurer
An insurer’s claim settlement practices are regulated by the
State Insurance departments
One Important function of an insurance company is to identify and sell to potential customers. Which of the BEST describes this function?
Marketing
The Fair Credit and Reporting Act’s main purpose is to
protect consumers with guidelines regarding credit reporting and distribution
Which of the following is NOT a characteristic of reinsurance?
Increases the unearned premium reserve
Which of the following is NOT considered advertising?
A rating from a rating service company, such as A.M. Best
A participating company is also referred to as which type of insurer
Mutual insurer
Karen is a producer who has obtained personal information about a client without having a legitimate reason to do so. Under the McCarran-Ferguson Act, what is the minimum penalty for this?
$10,000
An insurer enters into a contract with a third party to insure itself against losses from insurance policies its issues. What is this agreement called?
Reinsurance
A type of insurance that is owned by its policyowners is called
Mutual
