Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Personal & Casualty > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

Courts will interpret any ambiguity in an insurance contract

A

In favor of the insured

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

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

A

Fiduciary responsibility

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

An individual tendency to be dishonest would be indicative of a

A

Moral hazard

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

When transacting business in this state an insurer formed under the laws of another country is known as a/an

A

Alien insurer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

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

A

Lloyd’s association

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as

A

Contracts of adhesion

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Which of the following insurers are owned by stockholders?

A

Stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

In insurance, an offer is usually made when

A

An applicant submits an application to the insurer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

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

A

Agent’s contract with the principal

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is a definition of a unilateral contract?

A

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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Which of the following is considered to be a morale hazard?

A

Driving recklessly (Morale hazards arise from a state of mind that causes indifference to loss, such as careless driving)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
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.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

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.

A

The trust that a client places in the producer in regard to handling premiums.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

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?

A

Fraternal benefit society

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is a foreign insurer?

A

An insurer with a home office in another state.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

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

A

Promptly forwarding premiums to the insurance company.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What method do insurers use to protect themselves against catastrophic losses?

A

Reinsurance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

All of the following would be considered an insurance transaction EXCEPT

A

Obtaining an insurance license

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
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

20
Q

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

A

Implied

21
Q

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

A

Loss

22
Q

What is a material misrepresentation?

A

A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company

23
Q

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?

A

Conditional

24
Q

Which of the following is NOT an essential element of an insurance contract?

A

Counteroffer

25
Q

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

A

Waiver

26
Q

All of the following are examples of risk retention EXCEPT

A

Premiums

27
Q

An insurer that holds a Certificate of Authority in the state in which it transacts business is considered a/an

A

Authorized insurer

28
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 (perceived authority)

29
Q

Which statements 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 significant predictable.

A

Insureds cannot be randomly selected

30
Q

In terms of parties to a contract, which of the following does NOT describe a competent party?
A. The person must not be under the influence of drugs or alcohol
B. The person must be of legal age
C. The person must be mentally competent to understand the contract
D. The person must have at least completed secondary education

A

The person must have at least completed secondary education

31
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

32
Q

An insurance producer who by contract is bound to write insurance for only one company is classified as a/an
A. Captive agent
B. Solicitor
C. Broker
D. Independent producer

A

Captive agent

33
Q

In insurance transactions, fiduciary responsibility means

A

Handling insurer funds in a trust capacity

34
Q

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

A

Exchange of unequal values

35
Q

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

A

Transfer

36
Q

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

A

Express authority

37
Q

A person who does not lock the doors or does not repair leaks shows an indiffent attitude. This person presents what type of hazard?

A

Morale

38
Q

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

A

Principal

39
Q

The risk of loss may be classified as

A

Pure risk and speculative risk

40
Q

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. Contract of adhesion
B. Acceptance
C. Consideration
D. Legal purpose

A

Consideration

41
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. Conditional
B. Personal
C. Adhesion
D. Unilateral

A

Adhesion

42
Q

What insurance concept is associated with the names Weiss and Fitch?
A. Index used by stock companies
B. Guides describing company financial integrity
C. Policy dividends
D. Types of mutual companies

A

Guides describing company financial integrity

43
Q

Representations are written or oral statements made by the applicant that are
A. Guaranteed to be true
B. Found to be false after further investigation
C. Immaterial to the actual acceptability of the insurance contract.
D. Considered true to the best of the applicant’s knowledge

A

Considered true to the best of the applicant’s knowledge

44
Q

Not all losses are insurable, and there are certain requirements that must be met before a risk is a proper subject for insurance. These requirements include all of the following EXCEPT
A. The loss must not be catastrophic
B. There must be a sufficient number of homogeneous exposure units to make losses reasonably predictable.
C. The loss produced by the risk must be definite
D. The loss may be intentional

A

The loss may be intentional

45
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. Nonforfeiture
B. Indemnity
C. Reasonable expectations
D. Cease and desist

A

Reasonable expectations

Personal & Casualty (3 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions