Chapter 1 - Quiz Flashcards
The authority granted to an agent through the agent’s contract is referred to as
Express Authority
An individual was in a head-on collision while driving home one day. His injuries were not serious, and he recovered. However, he decided that in order to never be involved in another accident, he would not drive or ride in a car ever again. What method of risk management does this describe?
Avoidance
Who might receive dividents from a mutual insurer?
Policyholders
Events in which a person has both the chance of winning or losing are classified as:
Speculative risk
An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy?
Mutual
Which of the following would classify as a competent party in an insurance contract?
-The applicant is a 12-year-old student
-The applicant is under the influence of a mind-impairing medication at the time of application
✔️ -The applicant has a prior felony conviction
-The applicant is intoxicated at the time of application
A state-issued document empowering an isurance agency to become an admitted insurer is called:
Certificate of Authority
Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company?
Aleatory
Which authority is NOT stated in an agent’s contract, but is required for the agent to conduct business?
Implied Authority
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?
Unilateral
In terms of parties to a contract, which of the following does NOT describe a competent party?
- The person must be mentally competent to understand the contract.
✔️- The person must have at least completed secondary education - The person must not be under the influence of drugs or alcohol.
- The person must be of legal age
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principals has the insurer violated?
- Representation
- Adhesion
✔️ - Consideration - Good Faith
In insurance transactions, fiduciary responsibility means:
Handling insurer funds in a trust capacity
Which of the following is NOT a characteristic of an insurable risk?
The loss must be catastrophic
An insured stated on her application for life insurance that she has never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. Which of the following will explain the reason a death benefit claim is denied?
Estoppel
✔️Material misrepresentation
Waiver
Utmost good faith
A participating insurance policy may do which of the following?
Pay dividends to the policy owner
Because an agent is using stationery with the logo of the 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?
Apparent
Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company?
Aleatory
A life insurance policy has a legal purpose if both of which of the following elements exist?
Insurable interest and consent
Which of the following best describes an insurance company that has been formed under the laws of this state?
Domestic (domicile)
Which of the following types of agent authority is also called “perceived authority”?
Apparent Authority
For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become:
Larger
Peril is most easily defined as:
The cause of loss insured against
An applicant knowingly fails to communicate information that would help an underwriter make a sound decision regarding coverage. This is an example of:
Concealment
