Study 7 Multiple Choice Questions Flashcards
Identify the benefit of using a written and signed application for insurance.
Select one:
a. It provides accurate documentation of what was requested, and it indicates the intentions of the parties at the time the application was made.
b. It allows the insured to get a premium discount of 15 percent.
c. It is less costly for the insurer to underwrite written applications than oral applications.
d. It allows the insured to choose which questions to answer and which to leave blank.
a. It provides accurate documentation of what was requested, and it indicates the intentions of the parties at the time the application was made.
In the first step in rate making, what criteria are used to classify risks?
Select one:
a. Types of objects insured and hazards of exposure
b. Types of objects insured and cost of premium
c. Location of exposure and cost of premium
d. Location of exposure and claims history
a. Types of objects insured and hazards of exposure
What can be a consequence of the applicant misrepresenting material facts on the application for insurance?
Select one:
a. The applicant could be charged with criminal fraud.
b. The application could be charged a penalty premium of 15 percent.
c. Losses could be denied or the insurance policy could be voided.
d. The broker could be charged a penalty fee by the insurer of $200.
c. Losses could be denied or the insurance policy could be voided.
What does it mean to underwrite a risk?
Select one:
a. To calculate the pure premium for a risk
b. To scrutinize a risk and then decide on its eligibility for insurance
c. To investigate losses and pay claims
d. To conduct statistical analysis and create rates to charge for classes of insurance
b. To scrutinize a risk and then decide on its eligibility for insurance
What is an insurer’s retention?
Select one:
a. The maximum amount that the insurer can insure
b. The amount of premium required to pay for all expected losses during a calendar year
c. The amount of exposure and premium that is passed on to the reinsurer on a proportional basis
d. The insurer’s acquisition costs for a calendar year
a. The maximum amount that the insurer can insure
What is pure premium?
Select one:
a. The total premium for insuring the risk including loadings
b. The cost of the loadings added to the base premium to cover acquisition costs
c. The cost of a unit of insurance
d. The portion of the total premium that is needed to pay expected losses
d. The portion of the total premium that is needed to pay expected losses
When the insured has disclosed pertinent information to the broker or agent in the automobile insurance application, this knowledge of the broker or agent is considered as which of the following?
Select one:
a. The knowledge of the insured
b. The knowledge of the insurer
c. Not relevant to the application
d. The most important factor in deciding whether a loss would be payable
b. The knowledge of the insurer
Which of the following is a special class of loss payee that has a registered interest on real property offered as security for the money that the mortgagee has loaned the property owner? Select one: a. Insured b. Mortgagee c. Named insured d. Applicant
b. Mortgagee
Which of the following is the person or party designated in the policy as the insured, as opposed to someone who may be covered by the policy but is not specifically named? Select one: a. Named insured b. Mortgagee c. Applicant d. Insurer
a. Named insured
Which statement about loss history on insurance applications is true?
Select one:
a. A loss can occur whether or not it was an insurable claim.
b. All losses result in insurance claims.
c. Loss history only concerns actual claims under a policy.
d. Applications only require information for past claims exceeding the $500 threshold.
a. A loss can occur whether or not it was an insurable claim.
