License test Flashcards
what year was the Mccarren-Ferguson act enacted?
1945
The amount of liquid assets that an insurer must have on hand that will satisfy future obligations to its policyholders is called?
Reserves
What is the name of the law that requires insurers to disclose information gathering practices and where the information was obtained?
Fair Credit Reporting Act
Who elects the governing body of a mutual insurance company?
Policy Holders
At what point must a life insurance applicant be informed of their rights that fall under the Fair Credit Reporting Act?
Upon Completion of Application
Which of these describe a participating life insurance policy?
A. Policyowners are entitled to receive dividends
B. Policyowners pay assessments for company losses
C. Stock companies allow their policyowners to share in any company earnings
D. Policyowners are not entitled to vote for members of the board of directors
Policyowners are entitled to receive dividends
A group-owned insurance company that is formed to assume and spread the liability risks of its members is known as a
Risk Retention group
What type of reinsurance contract involves two companies automatically sharing their risk exposure?
Treaty
An insurance applicant MUST be informed of an investigation regarding his/her reputation and character according to the
Fair Credit Reporting Act
Which of the following requires insurers to disclose when an applicant’s consumer or credit history is being investigated
A. 1959 - Intervention by (SEC) The Securities and Exchange Commission
B. 1970 - Fair Credit Reporting Act
C. 1999 - Financial Services Modernization Act
D. 1945 - The McCarran-Ferguson Act
1970-Fair Credit Reporting Act
A nonprofit incorporated society that does not have capital stock and operates for the sole benefit of its members is known as
a fraternal benefit society
Taking receipt of premiums and holding them for the insurance company is an example of
A. Commingling
B. Misappropriation
C. Theft
D. Fiduciary responsibility
Fiduciary responsibility
Insurance policies are considered aleatory contracts because
A. they are “take it or leave it” contracts
B. both parties consent to the contract
C. performance is conditioned upon a future occurrence
D. the contract is voidable upon proof of fraud
performance is conditioned upon a future occurrence
Which of these is NOT a type of agent authority?
A. Express
B. Implied
C. Principal
D. Apparent
Principal
The part of a life insurance policy guaranteed to be true is called a(n)
A. representation
B. exclusion
C. warranty
D. waiver
Warranty
In an insurance contract, the insurer is the only party who makes a legally enforceable promise. What kind of contract is this?
Unilateral
When must insurable interest exist for a life insurance contract to be valid?
Throughout the entire length of the contract
Statements made on an insurance application that is believed to be true to the best of the applicant’s knowledge are called
representations
When must insurable interest be present in order for a life insurance policy to be valid?
When the application is made
What is the consideration given by an insurer in the Consideration clause of a life policy?
Promise to accept an insured’s assignment of benefits
When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have
insurable interest in the proposed insured
A life insurance arrangement which circumvents insurable interest statutes is called
Investor-Originated Life Insurance
If a contract of adhesion contains complicated language, to whom would the interpretation be in favor of?
The Insured
At what point does an informal contract become binding?
When one party makes an offer and the other party accepts that offer
What is A warranty
is a statement guaranteed to be true
Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q dies suddenly and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contract features?
A. Aleatory
B. Adhesion
C. Unilateral
D. Consideration
Aleatory
Life and health insurance policies are what kind of contracts?
Unilateral contracts
In regards to representations or warranties, which of these statements is TRUE?
A. Warranties are statements considered to be true to the best of the applicant’s belief
B. If material to the risk, false representations will void a policy
C. Representations are statements guaranteed to be true in every respect
D. If material to the risk, false representations will NOT void a policy
If material to the risk, false representations will void a policy
Which of these is NOT considered to be an element of an insurance contract?
A. the offer
B. acceptance
C. negotiating
D. consideration
Negotiating
Insurance contracts are known as ____ because certain future conditions or acts must occur before any claims can be paid.
Conditional
Statements made on an insurance application that are believed to be true to the best of the applicant’s knowledge are called
representations
Which arrangements allows one to bypass insurable interest laws?
Investor-Originated Life Insurance
Life and health insurance policies are both considered ________ contracts
Unilateral
