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Life Insurance Licensing > Chapter 1: > Flashcards

Chapter 1: Flashcards

1
Q

Whose responsibility is it to determine that all the questions on an insurance application are answered?

A

The agent’s

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2
Q

What are the five characteristics of an ideally insurable risk?

A

Lost must be 1) due to chance, 2) definite and measurable, 3) statistically predictable, 4) not catastrophic, and 5) Coverage cannot be mandatory

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3
Q

For the purpose of insurance, what is risk?

A

Uncertainty of loss

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4
Q

Who owns stock companies?

A

Stockholders

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5
Q

An insurance company is domiciled in California and transacts insurance in Nevada. What is this insurer’s classification in Nevada?

A

Foreign

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5
Q

What two elements are necessary for a life insurance contract to have a legal purpose?

A

Insurable interest and consent

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6
Q

What type of risk is insurable?

A

Pure

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7
Q

If an insurer meets the state’s financial requirements and is approved to transact business in the state, it is considered what type of insurer?

A

Authorized or admitted

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8
Q

What are the three types of agent authority?

A

Express, implied and apparent

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9
Q

When agents act within the scope of their contract, their actions will be assumed to be the acts of whom?

A

Insurer

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10
Q

When risks with higher probability of loss are seeking insurance more often than other risks, this is known as what?

A

Adverse selection

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11
Q

An applicant conceals relevant health information on the application. The applicant presents what type of hazard?

A

Moral

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12
Q

What entities make up the Medical Information Bureau?

A

Insurers

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13
Q

The insurer organized to return a profit to the stockholders is what type of insurer?

A

Stock company

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13
Q

If an applicant does not receive his or her insurance policy, who would be held responsible?

A

The agent

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14
Q

What do individuals use to transfer their risk of loss to a larger group?

A

Insurance

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15
Q

Insurers are classified according to their domicile. What are the three types of insurers?

A

Domestic, foreign and alien

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16
Q

What is the term for the causes of loss insured against in an insurance policy?

A

Peril

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17
Q

The requirement that agents must account for and promptly remit all insurance funds collected is known as what type of agent responsibility?

A

Fiduciary

18
Q

Insurance is a contract that protects the insured from what?

A

Loss

19
Q

What document is required for an insurance company to transact insurance?

A

Certificate of Authority

20
Q

When would a misrepresentation on and insurance application be considered fraud?

A

When it is intentional and material

21
Q

What are the three types of hazards?

A

Physical, moral and morale

22
Q

In forming an insurance contract, when does an acceptance usually occur?

A

When the insurer approves a prepaid application

23
Q

The reduction, decrease, or disappearance of value of the person or property insured in a policy is known as what?

A

Loss

24
Q

What are the four elements of an insurance contract?

A

Agreement (offer and acceptance), consideration, competent parties, and legal purpose

25
Q

What are the strategies used by underwriters to prevent adverse selection?

A

Restriction of coverage, refusal to accept a risk, and accepting a risk at a higher rate

26
Q

What type of insurer is formed under the laws of another country?

A

Alien

27
Q

Whom does an insurance agent represent?

A

Insurance company

28
Q

An insurance policy paid a nontaxable dividend to the insured one year, and nothing the next. From what type of insurer did the insured purchase the policy?

A

Mutual

29
Q

In insurance, when is the offer usually made on a contract?

A

When the insurance application is submitted

30
Q

When does an insurance policy go into effect?

A

When the policy is delivered and the premium is paid?

31
Q

Wagering on a sporting event is known as what type of risk?

A

Speculative

32
Q

What is a warranty in an insurance contract?

A

An absolutely true statement upon which the validity of the insurance contract is based

33
Q

Conditions that increase the chance of a loss are known as what?

A

Hazards

34
Q

According to the Law of Agency, a principal is represented by whom?

A

Agent or producer

35
Q

A situation in which a person can only experience a loss and no gain presents what type of risk?

A

Pure risk

36
Q

An insurance company that is formed under the laws of another state is know as what type of insurer?

A

Foreign

37
Q

In the agent/insurer relationship, who is considered the principal?

A

Insurer

38
Q

What is the best way to handle incomplete insurance applications?

A

Return the application to the applicant for completion

39
Q

When a change needs to be made on the application for insurance, which is the best method for correcting the information?

A

Complete a new application or ask the applicant to initial the correction on the original application

40
Q

If an agent fails to obtain the applicant’s signature on the insurance application, what must the insurer do?

A

Send the application back to the applicant for signature

41
Q

A person who does not lock the doors to his or her house shows an indifferent attitude. This person presents what type of hazard?

A

Morale

42
Q

Which statement regarding insurable risk is not correct?
A. Insurance cannot be mandatory
B. Insureds cannot be randomly selected.
C. The insurable risk needs to be statistically predictable
D. An insurable risk must involve a loss that is definite as to cause, time, place and amount.

A

B. Insureds cannot be randomly selected

43
Q

In forming an insurance contract, when does acceptance usually occur?

A. when an insurer’s underwriter approves coverage
B. When an insurer receives and application
C. When an insurer delivers the policy
D. When an insured submits an application

A

A. When an insurer’s underwriter approves coverage

44
Q
A

Life Insurance Licensing (1 decks)

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