Chapter 1 Flashcards
Courts will interpret any ambiguity in an insurance contract
In favor of the insured
The requirement that agents not commingle insurance monies with their own funds is known as
Fiduciary responsibility
An individual tendency to be dishonest would be indicative of a
Moral hazard
When transacting business in this state an insurer formed under the laws of another country is known as a/an
Alien insurer
An insurance organization that does not issue insurance policies but provides a meeting place for underwriters to conduct business is known as/a
A. Lloyd’s association
B. Fraternal society
C. Mutual company
D. Capital stock company
Lloyd’s association
Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as
Contracts of adhesion
Which of the following insurers are owned by stockholders?
Stock
In insurance, an offer is usually made when
An applicant submits an application to the insurer
What documentation grants express authority to an agent?
A. Fiduciary contract
B. State provisions
C. Agent’s contract with the principal
D. Agent’s insurance license
Agent’s contract with the principal
What is a definition of a unilateral contract?
One-sided: only one party makes an enforceable promise.
Which of the following is considered to be a morale hazard?
Driving recklessly (Morale hazards arise from a state of mind that causes indifference to loss, such as careless driving)
In case of a loss, the indemnity provision in insurance policies
Restores an insured person to the same financial state as before the loss.
Which of the following is an example of a producer’s fiduciary duty?
A. An obligation to state every known fact about the policy the producer is selling
B. A duty to base all transactions upon the principle of Utmost Good Faith
C. The obligation to tell the truth to the best of one’s knowledge.
D. The trust that a client places in the producer in regard to handling premiums.
The trust that a client places in the producer in regard to handling premiums.
Which of the following entities is not an insurer but an organization formed to provide benefits to members of an affiliated lodge or religious organization?
Fraternal benefit society
What is a foreign insurer?
An insurer with a home office in another state.
Pertaining to insurance, which of the following is an example of a producer’s fiduciary responsibility?
A. Helping insureds to file a claim
B. Performing reviews of insured’s coverage
C. Offering additional coverage to insureds
D. Promptly forwarding premiums to the insurance company
Promptly forwarding premiums to the insurance company.
What method do insurers use to protect themselves against catastrophic losses?
Reinsurance
All of the following would be considered an insurance transaction EXCEPT
Obtaining an insurance license
On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are
Not taxable since the IRS treats them as a return of a portion of the premium paid
Which authority is NOT stated in an agents contract but is required for the agent to conduct business?
A. Apparent
B. Assumed
C. Express
D. Implied
Implied
Insurance is a contract by which one seeks to protect another from
Loss
What is a material misrepresentation?
A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company
The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract?
Conditional
Which of the following is NOT an essential element of an insurance contract?
Counteroffer
