Chapter 1 - General Insurance

Question 1

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

Answer 1

Stock Company

Question 2

What is a warranty in an insurance contract?

Answer 2

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

Question 3

The type of insurance company organized to return any surplus money to it’s policyholders is known as what?

Answer 3

Mutual company

Question 4

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

Answer 4

Adverse selection

Question 5

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

Answer 5

When the insurance application is submitted

Question 6

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

Answer 6

Insurance

Question 7

Insurance is a contract that protects the insured from what?

Answer 7

Loss

Question 8

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

Answer 8

Foreign

Question 9

What entities make up the Medical Information Bureau?

Answer 9

Insurers

Question 10

When does an insurance policy go into effect?

Answer 10

When the policy is delivered and premium is paid

Question 11

What is the best way to handle incomplete insurance applications?

Answer 11

Return the application to the applicant for completion

Question 12

What are the four elements of an insurance contract?

Answer 12

Agreement (offer and acceptance)
Consideration
Competant Parties
Legal Purpose

Question 13

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

Answer 13

Fiduciary

Question 14

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

Answer 14

When it is intentional and material

Question 15

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

Answer 15

Certificate of Authority

Question 16

What type of report provides information about the applicant’s hobbies, habits and financial status?

Answer 16

Inspection report

Question 17

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

Answer 17

The agent

Question 18

For the purpose of insurance, what is risk?

Answer 18

Uncertainty of loss

Question 19

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?

Answer 19

Mutual Insurer

Question 20

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

Answer 20

The agent’s

Question 21

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

Answer 21

Hazards

Question 22

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

Answer 22

Morale

Question 23

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?

Answer 23

Authorized or admitted

Question 24

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

Answer 24

Loss

Question 25

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

Answer 25

Insurable interest and consent

Question 26

What are the three types of hazards?

Answer 26

Physical
Moral
Morale

Question 27

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

Answer 27

When the insurer approves a prepaid application

Question 28

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

Answer 28

Domestic
Foreign
Alien

Question 29

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

Answer 29

Speculative

Question 30

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

Answer 30

Moral

Question 31

What owns stock companies?

Answer 31

Stockholders

Question 32

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

Answer 32

Send the application back to the applicant for signature

Question 33

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

Answer 33

Peril

Question 34

What type of risk is insurable?

Answer 34

Pure

Question 35

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

Answer 35

Alien

Question 36

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

Answer 36

Foreign

Question 37

What are the three types of agent authority?

Answer 37

Express
Implied
Apparent

Question 38

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

Answer 38

Restriction of coverage
Refusal to accept a risk
Accepting risk at a higher rate

Question 39

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

Answer 39

Pure risk

Question 40

What are the five characteristics of an ideally insurable risk?

Answer 40

Loss must be:

1) Due to chance
2) Definite and measurable
3) Statistically Predictable
4) Not catastrophic
5) Coverage cannot be mandatory

Question 41

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

Answer 41

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

Question 42

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

Answer 42

The insurer

Question 43

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

Answer 43

Agent or producer

Question 44

Whom does an insurance agent represent?

Answer 44

Insurance company

Question 45

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

Answer 45

Insurer