Insurance Ch 2

Question 1

Wrongful act other than the breach of contract, for which a civil action may be brought against the tortfeasor, generally regarded as a crime.

Answer 1

Tort

Question 2

A deliberately performed act such as assault, battery, libel, slander, or false arrest.

Answer 2

Intentional tort

Question 3

Negligence or carelessness

Answer 3

Unintentional tort

Question 4

The situation in which a high degree of care is imposed on the land occupier for certain conditions on the land. Examples include a pool that isn’t screened or fenced, vacant land, where children play, and land, with access to a river or lake.

Answer 4

Attractive nuisance

Question 5

A situation where the standard of care is set by statute. Examples include school zones and crosswalks.

The defendant violated a statute enacted for safety purposes; The violation caused the plaintiff’s injury; The act caused the kind of harm the statute was designed to prevent

Answer 5

Negligence per se

Question 6

Generally limited to manufactures and distributors of products found to be defective.

Answer 6

Strict liability

Question 7

An extra hazardous condition which results in losses to others.

Example include keeping wild animals and blasting.

Answer 7

Absolute liability

Question 8

When one person is held responsible for the negligent behavior of another person

Branch manager at the broker dealer who was responsible for the representatives

A manager at the insurance agency who is responsible for the agents

Answer 8

Vicarious liability

Question 9

If one party recognizes and understands danger in an activity, yet voluntarily chooses to encounter it, another party cannot be held responsible for the injury.

Answer 9

Assumption of risk

Question 10

Any negligence on the part of the injured party, although slight, defeats the claim. Examples include jaywalking and driving while drunk.

Answer 10

Contributory negligence

Question 11

Any degree of negligence on the part of the injured party, does not defeat the claim, but is used in some manner to mitigate damages, payable by the other party. Damages are adjusted proportionally.

Answer 11

Comparative negligence

Question 12

Any contributory negligence of the injured party will not bar recovery of damages if the other party, immediately prior to the accident, had a ________ to prevent the accident, but failed to do so. Example: road rage

Answer 12

Last clear chance

Question 13

The party negligently pulled out onto the highway in front of another auto. The second auto would still be liable for the accident if there was sufficient time to swerve out of the way, but that second driver failed to see it.

Answer 13

Last clear chance

Question 14

The jury determined that the injured party was half to blame for her injury. She has awarded half of the damages incurred.

Answer 14

Comparative negligence

Question 15

The party falls as an extra hazardous situation through dangerous activities.

Answer 15

 absolute liability

Question 16

The interparty recognized and understood the danger in an activity and voluntarily chose to encounter it; another party cannot be held responsible for the injury.

Answer 16

Assumption of risk

Question 17

One party is held liable for the acts of another

Answer 17

Vicarious liability

Question 18

Factors annuitization to fund future income needed, but leaves no money at the end of the anticipated distribution period.

Calculate the present value of a future need.

Answer 18

Capital Utilization

Question 19

This method of determining life insurance needs presumes that only interest is distributed. The original capital is still left at the end of the income period.

Answer 19

Capital Retention or capital preservation

Question 20

Disability carriers will typically only issue about ______ of earned income.

Answer 20

50-60%

Question 21

Long-term care insurance is generally purchased to cover a certain dollar amount per day. Per diem typically range from ______.

Answer 21

$200-$400

Question 22

True or false: health insurance is standardized by government regulations.

Answer 22

False Although there are certain mandates under the Affordable Care Act, health insurance is not standardized.

Question 23

Insurance should be used for risks with _____ severity and_____ frequency.

Answer 23

High/low

Question 24

________ should be used for risks with low severity and low frequency.

Question 25

______ acts are excluded from a basic liability insurance policy.

Answer 25

Intentional

Question 26

Some coverage, like _______, may only be needed until retirement, or age 65. Coverage, like _____ , Maybe needed for lifetime or until children have completed college.

Answer 26

Disability/life insurance

Question 27

A _________ pay an annual dividend to the policyholder, it charges a larger premium. If the extra premium is not needed, it is then returned to the policyholders as a dividend (generally tax-free).

Answer 27

Participating policy

Question 28

In a _________ policy, the company retains the profits for shareholders

Question 29

Rating Services

A++ to F
AAA to CCC
Aaa to C
A+ to F

Answer 29

A.M. Best
Standard & Poor’s
Moody’s
Weiss

Question 30

If a CFP professional wanted to research the background of an insurance company, which rating service with the financial planner review?

Answer 30

A.M. Best. Provides detailed historical data on insurance carriers

Question 31

The process of selecting and classifying exposures.

Answer 31

Underwriting

Question 32

The underwriter must complete both of the following activities:

Cover a large number of individual insured so that the ________ works.

Obtain _________ so that there is reasonable equity between the better and poor individual insureds.

Answer 32

Law of large numbers/homogeneity of insureds