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Life insurance > Chap. 1 > Flashcards

Chap. 1 Flashcards

1
Q

-5 types of insurable risk

A 
Due to chance
Definite and Measurable
Statistically predictable
not catastrophic 
coverage not mandatory
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2
Q

-3 Types of hazards

A

physical
moral
morale

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3
Q

-What is risk?

A
  1. Uncertainty of loss
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4
Q

Which statement regarding insurable risks is NOT correct?

A

Insureds cannot be randomly selected

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5
Q

-4 elements of insur. contract?

A

Agreement
Consideration
competent parties
legal purpose

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6
Q

Which authority is NOT stated in an agent’s contract but is required for the agent to conduct business?

A

Implied

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7
Q

a) An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?
b) When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?

A

Consideration

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8
Q

a) Experience loss no gain

b) A situation in which a person can only lose or have no change represents

A

Pure Risk

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9
Q

What type of risk is insurable?

A

pure

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10
Q

Term for cause of loss insured against in policy

The causes of loss insured against in an insurance policy are known as

A

Peril

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11
Q

The reduction, decrease, or disappearance of value of the person or property insured in a policy by a peril insured against is known as

A

Loss

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12
Q

What entities medical info.?

A

insurers

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13
Q

2 elements necessary for life insurance

A

insurable interest

consent

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14
Q

Strategies prevent adverse selection

A

restriction of coverage
refusal to accept risk
accepting a risk at a higher rate

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15
Q

Requirement agents account and promptly remit all insurance funds collected

A

Fiduciary

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16
Q

Agent authority

A

Express, implied and apparent

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17
Q

Risks w/ higher probability of loss

A

adverse selection

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18
Q

Wagering on a sporting event

A

Speculative

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19
Q

Insurer meets state’s financial requirements

A

Authorized or admitted

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20
Q

Agents act within scope of contract

A

Insurer

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21
Q

What is a warranty in an insurance contract?

A

An absolute true statement, validity of insurance contract is based

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22
Q

What doc. Required for insure. Comp. to transact insurance

A

Certificate of Authority

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23
Q

The document that indicates that an insurer has been approved and is authorized to transact insurance in a particular state is known a

A

Certificate of Authority

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24
Q

Which of the following is issued by the state Department of Insurance to show that the insurer has power to write insurance contracts in that state?

A

Certificate of Authority

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25
Q

Applicant conceals relevant health info.

A

Moral

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26
Q

a)In forming an insurance contract, when does acceptance occur?

A

1) Insurer approves prepaid application

2) When an insurer’s underwriter approves coverage

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27
Q

What entities make up the medical information bureau

A

Insurers

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28
Q

Conditions that increase the chance of a loss are known as

A

Hazards

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29
Q

Law of agency, principal represented by?

A

Agent/ producer

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30
Q

Misrepresentation on application fraud?

A

Intentional and material, statement that would affect underwriting decision of insurance company

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31
Q

Insurance policies are not drawn up through negotiations

A

Adhesion: prepared by only the insurer, the insured’s only option is to accept or Reject the policy as it is written.

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32
Q

A producer who fails to segregate premium monies

A

Commingling

33
Q

The requirement that agents not commingle insurance monies with their own funds is known as

A

Fiduciary responsibility.

34
Q

In insurance transactions, fiduciary responsibility means

A

Handling insurer funds in a trust capacity

35
Q

Which insurance principle states if a policy allows for greater compensation
Than financial loss incurred..

A

indemnity

36
Q

Which of the following is owned by a corporation to serve that organization’s needs

A

Captive Insurer

37
Q

An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible?

A

The insured will need a written consent of the insurer.

38
Q

An insurance company sells an insurance policy over the phone in response to a TV ad. Which of the following best describes this act

A

Direct response marketing

39
Q

Installing deadbolt locks on the doors of a home is an example of which method of handling risk?

A

Reduction

40
Q

What is the term for the entity that an agent represents regarding contractual agreements with third parties?

A

Principal

41
Q

An insurance company receives an application with some information missing and issues the policy anyway. What is this called?

A

Waiver

42
Q

Units with the same or similar exposure to loss are referred to as

A

Homogenous

43
Q

Who might receive dividends from a mutual insurer?

A

Policyholders

44
Q

Following a career change, an insured is no longer required to perform many physical activities, so he has implemented a program where he walks and jogs for 45 minutes each morning. The insured has also eliminated most fatty foods from his diet. Which method of dealing with risk does this scenario describe?

A

Reduction

45
Q

The authority granted to an agent through the agent’s contract is referred to as

A

Express authorities

46
Q

Because an agent is using stationery with the logo of an insurance company, applicants for insurance assume that the agent is authorized to transact on behalf of that insurer. What type of agent authority does this describe?

A

Apparent

47
Q

Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract

A

Warranty

48
Q

What term best describes the act of withholding material information that would be crucial to an underwriting decision?

A

Concealment

49
Q

Which of the following entities is not an insurer but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization?

A

Fraternal benefit society

50
Q

What is a definition of a unilateral contract?

A

One-sided: only one party makes an enforceable promise.

51
Q

Which of the following statements is an accurate comparison between private and government insurers?

A

Private insurers may be authorized to transact insurance by state insurance departments.

52
Q

Which of the following is owned by a corporation to serve that organization’s needs at lower rates than would otherwise be available with commercial insurance?

A

Captive

53
Q

Which of the following is NOT the consideration in a policy?

A

The application given to a prospective insured

54
Q

What is the major difference between a stock company and a mutual company?

A

Ownership

55
Q

If a court ordered payment for a loss that was not covered in the policy even if it was clearly worded, it would be an example of which legal concept?

A

Reasonable expectations

56
Q

What method do insurers use to protect themselves against catastrophic losses?
An agreement between a ceding insurer an assuming insurer

A

Reinsurance

57
Q

In case of a loss, the indemnity provision in insurance policies

A

Restores an insured person to the same financial state as before the loss.

58
Q

When an individual purchases insurance, what risk management technique is he or she practicing?

A

Transfer

59
Q

Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe?

A

Adhesión

60
Q

On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are

A

Not taxable since the IRS treats them as a return of a portion of the premium paid.

61
Q

Which of the following is a characteristic of a Reciprocal Insurance Exchange?

A

The chief administrator of the insurer is called an “attorney-in-fact”.

62
Q

Which of the following insurance options would be considered a risk-sharing arrangement?

A

Reciprocal

63
Q

An insured stated on her application for life insurance that she had never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. Which of the following will explain the reason a death benefit claim is denied?

A

Material misrepresentation

64
Q

Which of the following best describes the aleatory nature of an insurance contract?

A

Exchange of unequal values

65
Q

The insurer must be able to rely on the statements in the application, and the insured must be able to rely on the insurer to pay valid claims. In the forming of an insurance contract, this is referred to as

A

Utmost good faith

66
Q

Which of the following is true regarding a risk retention group?

A

It is a liability insurance company owned by its members.

67
Q

Representations are written or oral statements made by the applicant that are

A

Considered true to the best of the applicant’s knowledge.

68
Q

What type of reinsurance arrangement is negotiated on a case by case basis?

A

Facultative

69
Q

An individual applies for a life policy. Two years ago he suffered a head injury from an accident, so he cannot remember parts of his past, but is otherwise competent. He has also been hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of his history one year later. What will probably happen?

A

The policy will not be affected.

70
Q

Which of the following would qualify as a competent party in an insurance contract?

A

The applicant has a prior felony conviction.

71
Q

An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy?

A

Mutual

72
Q

Which type of insurance is based on mutual agreements among subscribers?

A

Reciprocal insurance

73
Q

When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is….
An insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable. What contract characteristic does this describe?

A

Conditional

74
Q

All of the following are examples of risk retention EXCEPT

A

Premiums

75
Q

Insurance is a contract by which one seeks to protect another from

A

Loss.

76
Q

What documentation grants express authority to an agent?

A

Agent’s contract with the principal

77
Q

Courts will interpret any ambiguity in an insurance contract

A

In favor of the insured

78
Q

An agent ethically in all situations; Working within the conditions of his/her contract.
Representing the insurer, not the insured.
Keeping customers’ best interests in mind.

Except:

A

Always representing the insured

Life insurance (8 decks)

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