CHAPTER 1

Question 1

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

Answer 1

Homogeneous

Question 2

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

Answer 2

Loss

Question 3

In insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe?

Answer 3

Unilateral

Question 4

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

Answer 4

Principal

Question 5

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

Answer 5

Warranty

Question 6

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?

Answer 6

Consideration

Question 7

If an insurer meets the states financial requirements and is approved to transact business in the state, it is considered to be

Answer 7

Authorized

Question 8

A certificate of authority

Answer 8

Is required in order to transact insurance

Question 9

To ensure legal purpose of a life insurance policy

Answer 9

It must have both insurable interest and consent

Question 10

Insurers use:

Answer 10

Reinsurance to protect themselves from catastrophic losses

Question 11

Retention usually results from 3 basic desire of the insured:

Answer 11

To reduce expenses and improve cash flow, to increase control of claim reserving and claims settlements, and to fund losses that cannot be insured

Question 12

Court will interpret any ambiguity in an insurance contract

Answer 12

In favor of the insured

Question 13

Alien insurer

Answer 13

An insurer formed under the laws of another country

Question 14

All insurers

Answer 14

Must obtain a certificate of authority

Question 15

An insurance contract is an ___________ contract in that it requires a relatively small amount of premium for a large risk.

Answer 15

Aleatory

Question 16

An insurance company sells an insurance policy over the phone in response to a TV ad, which best describes this act?

Answer 16

Direct response marketing

Question 17

An insureds change in lifestyle and habits would likely ____ the chances of health problems.

Answer 17

Reduce (reduction)

Question 18

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

Answer 18

Implied authority is not written in the agents contract

Question 19

The insurer must be able to rely on the statements given by the insured in the application

Answer 19

Upmost good faith.

The insured must be able to rely on the insurers promise to pay covered losses

Question 20

Four essential elements of all legal contracts:

Answer 20

Offer and acceptance, consideration, competent parties, and legal purpose.

Question 21

All policies issued within the state of New York must use __ ____ ___-___ ____

Answer 21

At least 10-point type fonts

Question 22

A misinterpretation would be considered fraud if it is _______ and _______

Answer 22

Intentional and material

Question 23

Individuals use ____ to transfer their risk of loss to larger group

Answer 23

Insurance

Question 24

Insurance company that has been formed under the laws of this state

Answer 24

= domestic

Question 25

Insurance is the transfer of

Answer 25

Risk

Question 26

Representations =

Answer 26

Statements made by an applicant that they believe to be true to the best of their knowledge

Question 27

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

Answer 27

Waiver

Question 28

Which of the following is not a characteristic of an insurable risk?

Answer 28

The loss must be catastrophic

Question 29

fraternal benefit society is

Answer 29

Not an insurer, but an organization