General Insurance (flash cards)- ExamFX

1
Q

What are the four elements of an insurance contract?

A

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

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2
Q

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

A

Loss

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3
Q

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

A

The agent

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4
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

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5
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

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6
Q

Whom does an insurance agent represents?

A

Insurance company

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7
Q

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

A

Speculative

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8
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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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

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

A

The agent’s

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11
Q

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

A

Pure risk

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12
Q

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

A

Peril

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13
Q

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

A

Insurer

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14
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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15
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

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16
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

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17
Q

When does an insurance policy go into effect?

A

When the policy is delivered and the premium is paid

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18
Q

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

19
Q

Insurance is a contract that protects the insured from what?

20
Q

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

A

Insurable interest and consent

21
Q

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

22
Q

What type of risk is insurable?

23
Q

What the five characteristics of an ideally insurable risk?

A

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

24
Q

When a chance 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

25
In insurance, when is the offer usually made on a contract?
When the insurance application is submitted
26
An insurance company is formed under the laws of another state is known as what type of insurer?
Foreign
27
According to the Law of Agency, a principal is represented by whom?
Agent or producer
28
The insurer organized to return a profit to the stockholders is what type of insurer?
Stock company
29
What do individuals use to transfer their risk of loss to a larger group?
Insurance
30
What are the three types of hazard?
Physical, moral and morale
31
What is the best way to handle incomplete insurance applications?
Return the application to the applicant for completion
32
Who owns stock companies?
Stockholders
33
What document is required for an insurance company to transact insurance?
Certificate of Authority
34
What type of insurer is formed under the laws of another country?
Alien
35
What are the three types of agent authority?
Express, implied and apparent
36
What is a warranty on an insurance contract?
An absolute true statement upon which the validity of the insurance contract is based
37
For the purpose of insurance, what is risk?
Uncertainty of loss
38
An applicant conceals relevant health information on the application. The applicant presents what type of hazard?
Moral
39
Insurers are classified according to their domicile. What are the three types of insurers?
Domestic, foreign and alien
40
When would a misrepresentation on an insurance application be considered fraud?
When it is intentional and material
41
In forming an insurance contract, when does an acceptance usually occur?
When the insurer approves a prepaid application
42
The type of insurance company organized to return any surplus money to its policyholders is known as what?
Mutual company
43
If an agent fails to the obtain the applicant’s signature on the insurance application, what must the insurer do?
Send the application back to the applicant for signature
44
What entities make up the Medical Information Bureau?
Insurers