EXAM CRAM - Bonus Exam Questions (p. 1- 4)

Question 1

1. It is a FEDERAL offense for an insurance agent to:

• the insured & insurer contribute equally to the contract.
• loss exposure.
• misrepresent facts on an insurance application.
• Fiduciary.

Answer 1

Misrepresent facts on an insurance application.

ATTN: This is ALSO referenced as #42 on MY copy of the Bonus Exam Questions (Exam Cram) pdf.

BOTH questions were ambiguous, so I attempted to “fix” them and make em’ more relevant for you!

Question 2

2. All of the following statements about ALEATORY contracts are TRUE except:

• the elimination of fraudulent losses.
• they eliminate risk.
• the insured and insurer contribute equally to the contract.
• a telephone call from an agent.

Answer 2

The insured and insurer contribute equally to the contract.

Insurance policies use aleatory contracts whereby the insurer doesn’t have to pay the insured until an event, such as a fire resulting in property loss.

Question 3

3. It is considered an unfair method of competition for an agent to advertise that the insurer the agent is appointed with is:

• Promise.
• a member of the Insurance Guarantee Association.
• The greater the number insured, the more accurately the insurer the insurer can predict losses and set appropriate premiums.
• The elimination of risk.

Answer 3

A member of the Insurance Guarantee Association.

Question 3

All of the occurrences listed below are examples of an insurable event as defined by the California Insurance Code, EXCEPT:

• There must be an offer and acceptance of the contract terms.
• The insured suffers a financial loss in the State Lottery.
• The insured and insurer contribute equally to the contract.
• Only pure risks are insurable.

Answer 3

The insured suffers a financial loss in the State Lottery.

Question 4

Unless it is merely a statement of an expectation or belief, a representation as to the future is considered which of the following?

• To avoid selecting a disproportionate number of bad risks.
• Promise.
• premiums.
• A misdemeanor

Answer 4

Promise.

Question 5

All of the following qualify as “background information” as defined in Section 1729.2 of the California Insurance Code, EXCEPT:

• Rescission of the contract.
• Speculative risk.
• Fiduciary.
• Misdemeanor charges filed, but NOT resulting in a conviction.

Answer 5

Misdemeanor charges filed, but NOT resulting in a conviction.

Question 6

Making an insured whole by restoring them to the same condition as before a loss, is an example of:

• Making them whole.
• The principle of indemnity.
• By interview appointment with the agent of record.
• The insured and insurer contribute equally to the contract.

Answer 6

The principle of indemnity.

Question 7

In insurance terminology, “indemnify” means:

• insure
• lump sum
• make whole
• rider

Answer 7

make whole

Question 8

What would a person be guilty of who refuses to deliver any books, records, or assets to the commissioner once a seizure order has been executed?

Answer 8

A misdemeanor.

Question 9

All of the occurrences listed below are examples of an “insurable event” as defined by California Insurance Code EXCEPT:

• A misdemeanor.
• An insured suffers a financial loss in the state lottery
• speculative risk
• an insurance policy

Answer 9

An insured suffers a financial loss in the state lottery.

Question 10

When must insurance records of insurance agents and brokers be made available to the Insurance Commissioner?

• Promise
• the principle of indemnity
• at all times
• make whole

Answer 10

at all times.

Question 11

All of the following are applicable to insurance EXCEPT:

• Prior approval
• Fiduciary
• a telephone call from an agent
• it eliminates fraudulent losses

Answer 11

It eliminates fraudulent losses.

Question 12

In insurance terminology, “indemnity” means:

• Contract
• one party is restored to the same financial position that it was in BEFORE the loss occurred
• to avoid selecting a disproportionate number of bad risks
• misrepresent facts on an insurance application

Answer 12

One party is restored to the same financial position that it was in BEFORE the loss occurred.

Principle of Indemnity. This states that insurers pay no more than the actual loss suffered. The purpose of an insurance contract is to leave you in the same financial position you were in immediately prior to the incident leading to an insurance claim. When your old Chevy Cavalier is stolen, you can’t expect your insurer to replace it with a brand new Mercedes-Benz.

• LOOK:
  https://www.investopedia.com/articles/pf/06/insurancecontracts.asp

Question 13

Loss retention is an effective risk management technique EXCEPT when the following condition exists:

• Mary Brown Insurance Services
• it eliminates fraudulent losses
• the probability of loss is unknown
• that the name is the licensee’s actual name

Answer 13

The probability of loss is unknown.

Loss prevention and loss reduction are used to minimize risk, not eliminate it—the same concept is used in healthcare with preventative care.

In contrast to speculative risk, pure risk involves situations where the only outcome is loss.

Question 14

A situation in which there is a possibility of a loss or a gain is a:

• telephone call from an agent.
• a member of the Insurance Guarantee Association.
• chance of a loss occurring due to an insured’s dishonest tendencies.
• speculative risk.

Answer 14

speculative risk.

Question 15

According to the California Insurance Code, an insurance policy must specify all of the following EXCEPT:

• the financial rating of the insurer.
• the probability of loss is unknown.
• the principal of indemnity.
• misdemeanor charged filed, not resulting a conviction.

Answer 15

the financial rating of the insurer.

Question 16

Unintentional concealment entitles the injured party to which course of action, if any?

• Rescission of the contract.
• There must be an offer and acceptance of the contract terms.
• Mary Brown Insurance Services
• indemnity.

Answer 16

Rescission of the contract.

Question 17

Insureds are entitled to recover an amount NOT greater than the amount of their loss under the principal of:

• Misrepresentation of facts on an insurance application.
• an increase in the UNEARNED PREMIUM RESERVE.
• Indemnity.

Answer 17

Indemnity.

Question 18

The process by which an insurer decides whether to issue requested insurance is called:

• personal judgement
• underwriting
• there must be an offer and acceptance of the contract terms
• the probability of loss is unknown

Answer 18

Underwriting.

Question 19

All of the following are benefits of Insurance, EXCEPT:

• it’s not a contract.
• it increases the UNEARNED PREMIUM RESERVE.
• it eliminates fraudulent losses.

Answer 19

Having insurance DOES NOT eliminate fraudulent losses.

• Note re:
  UNEARNED PREMIUM RESERVE:
  An unearned premium is the portion of an insurer’s total premiums that is collected in advance by an insurance company. Unearned premiums may be subject to return if a client ends coverage before the term covered by the premium is complete. An unearned premium may be returned when an insured item is declared a total loss and coverage is no longer required, or when the insurance provider cancels the coverage.

For example, consider a client who paid an auto insurance premium one year in advance who experiences the complete destruction of his vehicle four months into the coverage period. The insurance company keeps one-third of the annual premium for coverage provided and returns the other two-thirds as unearned premium.

Question 20

What is meant by referring to an insurance policy as a “unilateral” contract?

• only one party makes a legally enforceable promise.
• one party is restored to the same financial position that it was in BEFORE the loss occurred.

Answer 20

Only one party makes a legally enforceable promise.

Question 21

Insured’s are entitled to recover an amount NOT greater than the amount of their loss, under the principle of:

• Promise.
• Misrepresentation
• Indemnity.

Answer 21

Indemnity.

Question 22

Any situation that presents the possibility of a loss is known as:

• loss exposure.
• a misdemeanor.
• the financial rating of the insurer.

Answer 22

Loss exposure.

Question 23

Unless it is merely a statement of an expectation or belief, a representation as to the future is considered which of the following?

• Money an insured pays an insurer to obtain the benefits provided in the policy.
• a contract.
• a promise.
• the financial rating of the insurer.

Answer 23

A promise.

Question 24

As defined in the California Insurance Code (CIC), “insurance” is a:

• Speculative risk.
• To avoid selecting a disproportionate number of bad risks.
• Contract.

Answer 24

Contract.

Question 25

Which of the following statements regarding risk is TRUE?

• by interview appointment with the agent of record.
• only pure risks are insurable.
• indemnity.

Answer 25

Only pure risks are insurable.

Question 26

What is the definition of “premium”?

• Money an insured pays to an insurer to obtain the benefits provided in the policy.
• There must be an offer and acceptance of the contract terms.
• Fiduciary.
• Prior approval.

Answer 26

Money an insured pays to an insurer to obtain the benefits provided in the policy.

Question 27

An agent who is acting as an insurance agent, broker, solicitor, life agent, accident and health, or bail agent, acts in which capacity when handling premiums or return premiums for an insured?

• Fiduciary
• misrepresent facts on an insurance application.
• underwriting
• make whole

Answer 27

Fiduciary.

Question 28

Which of the following information IS NOT required to be communicated in a Life Insurance contract.

Answer 28

Personal judgement.

Question 29

The DIRECT DISTRIBUTION of insurance may utilize different methods to promote the sale of insurance EXCEPT:

• a telephone call from an agent.
• an insurance policy.
• a loss exposure.

Answer 29

A telephone call from an agent.

Question 30

Loss retention is an effective risk management technique EXCEPT when the following condition exists:

• committing any act of discrimination whether it be deemed fair or unfair.
• make whole.
• when the probability of loss is unknown.
• the elimination of risk.

Answer 30

When the probability of loss is unknown.

Question 31

Upon notification of a claim, a claimant must be given access to the California Fair Claims Settlement Practices resolution by ALL of the following means EXCEPT:

• The greater the number insured, the more accurately the insurer can predict losses & set appropriate premiums.
• an insurance policy.
• the probability of loss.
• by interview appointment with the agent of record.

Answer 31

By interview appointment with the agent of record.

Question 32

According to the California Insurance Code (CIC), the Commissioner can disapprove a licensee’s request to use a fictitious name for any of the following reasons EXCEPT:

• the financial rating of the insurer.
• Life and Health insurers.
• that the name is the licensee’s actual name.
• contract.

Answer 32

The name is the licensee’s actual name.

Question 33

What is the definition of “premium”?

• Life and Health insurers.
• Money an insured pays an insurer to obtain the benefits provided in the policy.

Answer 33

Money an insured pays an insurer to obtain the benefits provided in the policy.

Question 34

Which of the following is a requirement of a contract?

• There must be an offer and acceptance of the Contract terms.
• It eliminates fraudulent losses.

Answer 34

There must be an offer and acceptance of the Contract terms.

Question 35

If an insurer must have its rates accepted by the Insurance Department prior to using them, the insurer would be operating in which of the following types of jurisdictions?

Answer 35

Prior approval.