Quiz Questions Flashcards
How long does one premium payment
Cover in a single premium whole life policy?
A. Until the policy first renewal date
B. One month
C. One year
D. Full life of the policy
D. Full life of the policy
Which of the following accurately describes a participating insurance policy?
A. Policyowners may be 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.
A. Policyowners may be 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?
A. Treaty insurer
B. Risk retention group
C. Risk assumption group
D. Captive insurer
B. Risk retention group
Risk _____ is the process of analyzing exposures that create risk and designing programs to handle them.
A. Acceptance
B. Management
C. Administration
D. Transfer
B. Management
A(n) _______ agent is an insurance agent who represents only ONE insurance company.
A. Exclusive
B. Captive
C. Domestic
D. Inclusive
B. Captive
A condition that increases the possibility of financial loss is called a(n)?
A. Risk
B. Peril
C. Hazard
D. Exposure
C. Hazard
Which group is the Do Not Call Registry designed to protect against?
A. Telemarketers
B. Charities
C. Political organizations
D. Relatives
A. Telemarketers
An insurer has a contractual agreement which transfers a portion of its risk exposure to another insurer. What type of contractual arrangement is this?
A. Coinsurance contract
B. Mutuality agreement
C. Reinsurance contract
D. Reciprocity arrangement
C. Reinsurance contract
Which of the following outlines the authority given to the producer on behalf of the insurer?
A. Rebating arrangement
B. Commingling contract
C. Controlled business clause
D. Producer contract
D. Producer contract
Dividends from a stock insurance company are normally sent to?
A. Beneficiaries
B. Shareholders
C. Policyowners
D. Insureds
B. Shareholders
What type of risk involves the potential for loss with no possibility for gain?
A. Speculative Risk
B. Pure Risk
C. Adverse Risk
D. Morale Risk
B. Pure Risk
Which of the following is NOT an objective of the National Association of Insurance Commissioners?
A. Encourage uniformity in state insurance laws.
B. Protect the interest of policyowners and consumers
C. Regulate state insurance commissioners
D. Promote efficiency in the administration of state insurance laws
C. Regulate state insurance commissioners
Which one of these is NOT considered to be an element of an insurable risk?
A. Speculative risk
B. Pure risk
C. Loss cannot be catastrophic
D. Loss must be due to chance
A. Speculative risk
Insurance is NOT characterized as which of the following?
A. Transference of risk
B. Pooling of premium dollars
C. Method of risk management
D. As the number of insureds increase the number of losses decrease
D. As the number of insureds increase the number of losses decrease
ABC Company is attempting to minimize the severity of potential losses within its company. The company is engaged in risk?
A. Transference
B. Retention
C. Reduction
D. Avoidance
C. Reduction
Which of these statements regarding insurance is false?
A. One way insurers deal with catastrophic loss is through reinsurance
B. As the number of insured units increases, the number of losses decreases
C. Speculative risk cannot be insured
D. Pure risk can be insured
B. As the number of insured units increases, the number of losses decreases
Which reinsurance contract between two insurers involves an automatic sharing of the risks assumed?
A. Arbitrage reinsurance
B. Facultative reinsurance
C. Excess reinsurance
D. Treaty reinsurance
D. Treaty reinsurance
Which of the following involves sharing an uncertain risk with another similar group?
A. Transfer
B. Speculative
C. Operational
D. Physical
A. Transfer
A reciprocal insurer typically has an administrator who manages the premiums collected from the group’s members. This administrator is called a(n)?
A. Reciprocal commissioner
B. Attorney general
C. Attorney-in-fact
D. Reciprocal director
C. Attorney-in-fact
Which of the following is a syndicate established by a group of insurers to share underwriting duties?
A. Reinsurer
B. Lloyd’s organization
C. NAIC
D. Multi-line insurers
B. Lloyd’s organization
An insurable risk requires?
A. That the chance for both a loss or gain exists
B. The loss must be catastrophic
C. That the chance of loss be calculable
D. That the loss must be incalculable
C. That the chance of loss be calculable
Dividends from a mutual insurance company are paid to whom?
A. Policyholders
B. Beneficiaries
C. Preferred stockholders
D. Stockholders
A. Policyholders
Which of the following types of insurers limits the exposures it writes to those of its owners?
A. Restricted insurer
B. Limited insurer
C. Confined insurer
D. Captive insurer
D. Captive insurer
Which of the following is an unincorporated association whose members provide coverage for one another?
A. Self insurer
B. Lloyd’s
C. Reciprocal
D. Surplus Lines
C. Reciprocal
Which of the following is NOT an example of risk retention?
A. Becoming aware of a risk and taking no action
B. Self-insuring a given risk
C. Deciding a business deal is risky but going through with it anyways
D. Not doing a business deal after deciding it would be too risky
D. Not doing a business deal after deciding it would be too risky
When a ceding insurer transfer a potion of its risk to an assuming an insurer on a case by case basis, this process is referred to as?
A. Treaty Reinsurance
B. Quotative pooling
C. Reciprocity
D. Facultative reinsurance
D. Facultative reinsurance
Which of the following financial products creates an instant estate, no matter when the date of death?
A. Mutual Funds
B. Life insurance
C. Certificate of deposit
D. Deferred annuity
B. Life insurance
According to the law of large numbers, how would losses be affected if the number of similar insured units increases?
A. The higher the exposure, the higher the cost of each loss
B. No effect on predicting losses
C. Predictability of losses will be improved
D. Ability to predict losses decreases
C. Predictability of losses will be improved
Which of the following types of risk is insurable?
A. Pure
B. Speculative
C. Operational
D. Physical
A. Pure
A(n) ________ agent may represent several insurers.
A. Captive
B. Free
C. Independent
D. Career
C. Independent
A business becoming incorporated is an example of risk _______ .
A. Reduction
B. Severance
C. Retention
D. Transfer
D. Transfer
A stock insurance company is owned by its?
A. Officers
B. Board of directors
C. Policyowners
D. Shareholders
D. Shareholders
A hold-harmless clause is an example of risk?
A. Avoidance
B. Retention
C. Transfer
D. Sharing
C. Transfer
What type of risk involves the potential for loss AND the possibility for gain?
A. Homogeneous
B. Adverse
C. Pure
D. Speculative
D. Speculative
Which of these statements is NOT a characteristic of the law of large numbers?
A. Individual losses can be predicted based on past experience
B. Group losses can be predicted based on past experience
C. Losses can be predicted in large groups with a higher degree of accuracy
D. Rates can be calculated to compensate for losses
D. Rates can be calculated to compensate for losses
Which of the following can be defined as “the potential for loss”?
A. Hazard
B. Risk
C. Transference
D. Peril
B. Risk
What is the accounting measurement of an insurance company’s future obligations to its policyowners?
A. Credits
B. Reserves
C. Surplus account
D. Retention fund
B. Reserves
Which term describes the elimination of a hazard?
A. Risk avoidance
B. Risk retention
C. Risk transference
D. Risk pooling
A. Risk avoidance
For insurance purposes, similar objects which are exposed to the same group of perils are referred to as?
A. Homogenous perils
B. Similar exposure units
C. Homogenous exposure units
D. Common hazards
C. Homogenous exposure units
Which of the following describes the act of insuring a risk against possible loss?
A. Risk avoidance
B. Risk transfer
C. Hazard reduction
D. Loss management
B. Risk transfer
A(n) ________ insurer assumes risk from another insurance company.
A. Reinsurance
B. Captive
C. Assumption
D. Reciprocal
A. Reinsurance
Which of the following can be defined as a cause of a loss?
A. Adversity
B. Risk
C. Hazard
D. Peril
D. Peril
The law of large numbers enables an insurer to?
A. Predict losses
B. Avoid adverse selection
C. Classify rates
D. Assure company profits
A. Predict losses
An agent’s authority to bind an insurer to an insurance contract may be granted in the ?
A. Agent’s contract and the insurance company’s appointment
B. Agent’s license and insurance company’s certificate of authority
C. Buyer’s guide and policy summary
D. State guaranty association
A. Agent’s contract and the insurance company’s appointment
How can an insurance company minimize exposure to loss?
A. Risk concealing
B. Reinsuring risks
C. Reissuance
D. Risk assumption
B. Reinsuring risks
Purchasing insurance is an example of risk?
A. Transference
B. Avoidance
C. Retention
D. Sharing
A. Transference
Who regulates an insurer’s claim settlement practices?
A. National Association of Claim Adjusters
B. State attorney general
C. National Association of Insurance Commissioners
D. State insurance departments
D. State insurance departments
