Unit 1 Flashcards
A life insurance company that shares its surplus earnings with its insureds is known as:
(A) a mutual insurance company
(B) a fraternal organization
(C) an association
(D) an admitted company
(A) a mutual insurance company
A beneficiary is NOT protected from creditors’ claims if the beneficiary is the insured’s:
(A) estate
(B) spouse
(C) child
(D) business partner
(A) estate
Which of the following factors is NOT a primary consideration when a life insurance company computes the basic premium for a policy?
(A) Mortality factor
(B) Interest factor
(C) Expense factor
(D) Lien factor
(D) Lien factor
All of the following groups would be eligible for group life insurance under Florida law EXCEPT:
(A) a labor union
(B) a debtor group
(C) an employee-dependents group
(D) an employer-employee group
(C) an employee-dependents group
Which of the following insurance concepts is founded on the ability to predict the approximate number of deaths or frequency of disabilities within a certain group during a specific time?
(A) Principle of large loss
(B) Quantum insurance principle
(C) Indemnity law
(D) Law of large numbers
(D) Law of large numbers
The owner of a camera store is worried that her new employees may help themselves to items from inventory without paying for them. What kind of hazard is described?
(A) Physical hazard
(B) Ethical hazard
(C) Morale hazard
(D) Moral hazard
(D) Moral hazard
All of the following actions are examples of risk avoidance EXCEPT:
(A) Bill won’t fly in an airplane
(B) Wendy keeps her money out of the stock market
(C) Pat pays his insurance premium
(D) John never drives a car
(C) Pat pays his insurance premium
Which of the following statements is CORRECT?
(A) Only speculative risks are insurable
(B) Only pure risks are insurable
(C) Both pure risks and speculative risks are insurable
(D) Neither pure risks nor speculative risks are insurable
(B) Only pure risks are insurable
Which of the following statements does NOT describe an element of an insurable risk?
(A) The loss must not be due to chance
(B) The loss must be definite and measurable
(C) The loss cannot be catastrophic
(D) The loss exposures to be insured must be large
(A) The loss must not be due to chance
In the insurance business, risk can best be defined as:
(A) sharing the possibility of a loss
(B) uncertainty regarding the future
(C) uncertainty regarding financial loss
(D) uncertainty regarding when death will occur
(C) uncertainty regarding financial loss
Buying insurance is one of the most effective ways of:
(A) avoiding risk
(B) transferring risk
(C) reducing risk
(D) retaining risk
(B) transferring risk
Which of the following best describes the function of insurance?
(A) It is a form of legalized gambling
(B) It spreads financial risk over a large group to minimize the loss to any one individual
(C) It protects against living too long
(D) It creates and protects risks
(B) It spreads financial risk over a large group to minimize the loss to any one individual
A tornado is an example of:
(A) a physical hazard
(B) a speculative risk
(C) a peril
(D) a moral hazard
(C) a peril
Tom buys his wife Mary a $50,000 diamond ring. When she is not wearing the ring, she keeps it in a safe deposit box at a local bank. This is an example of risk:
(A) avoidance
(B) reduction
(C) retention
(D) transference
(B) reduction
