General Insurance (flash cards)- ExamFX

Question 1

What are the four elements of an insurance contract?

Answer 1

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

Question 2

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

Answer 2

Loss

Question 3

If an applicant does not receive his or her insurance policy, who is help responsible?

Answer 3

The agent

Question 4

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 4

Morale

Question 5

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 5

Mutual

Question 6

Whom does an insurance agent represents?

Answer 6

Insurance company

Question 7

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

Answer 7

Speculative

Question 8

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 8

Authorized or admitted

Question 9

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

Answer 9

Insurer

Question 10

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

Answer 10

The agent’s

Question 11

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

Answer 11

Pure risk

Question 12

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

Answer 12

Peril

Question 13

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

Answer 13

Insurer

Question 14

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

Answer 14

Adverse selection

Question 15

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

Answer 15

Fiduciary

Question 16

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

Answer 16

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

Question 17

When does an insurance policy go into effect?

Answer 17

When the policy is delivered and the premium is paid

Question 18

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

Answer 18

Foreign

Question 19

Insurance is a contract that protects the insured from what?

Answer 19

Loss

Question 20

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

Answer 20

Insurable interest and consent

Question 21

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

Answer 21

Hazards

Question 22

What type of risk is insurable?

Answer 22

Pure

Question 23

What the five characteristics of an ideally insurable risk?

Answer 23

Lost must be
1) due to chance
2) definitely and measurable
3) statistically predicable
4) not catastrophic
5) coverage cannot be mandatory

Question 24

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

Answer 24

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

Question 25

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

Answer 25

When the insurance application is submitted

Question 26

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

Answer 26

Foreign

Question 27

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

Answer 27

Agent or producer

Question 28

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

Answer 28

Stock company

Question 29

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

Answer 29

Insurance

Question 30

What are the three types of hazard?

Answer 30

Physical, moral and morale

Question 31

What is the best way to handle incomplete insurance applications?

Answer 31

Return the application to the applicant for completion

Question 32

Who owns stock companies?

Answer 32

Stockholders

Question 33

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

Answer 33

Certificate of Authority

Question 34

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

Answer 34

Alien

Question 35

What are the three types of agent authority?

Answer 35

Express, implied and apparent

Question 36

What is a warranty on an insurance contract?

Answer 36

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

Question 37

For the purpose of insurance, what is risk?

Answer 37

Uncertainty of loss

Question 38

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

Answer 38

Moral

Question 39

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

Answer 39

Domestic, foreign and alien

Question 40

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

Answer 40

When it is intentional and material

Question 41

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

Answer 41

When the insurer approves a prepaid application

Question 42

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

Answer 42

Mutual company

Question 43

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

Answer 43

Send the application back to the applicant for signature

Question 44

What entities make up the Medical Information Bureau?

Answer 44

Insurers