Week 1 Exam Flashcards

1
Q

Which item, although still insurable, would violate the Law of Large Numbers?

a. Insurance on an original Van Gogh painting
b. Insurance on a tract house
c. Insurance on a 1977 Chevrolet
d. Insurance on a Sony TV

A

A. Insurance on an original Van Gogh

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Which of the following is NOT included in the definition of Insurance?

a. Transfer of risk to a Third party
b. Accumulation of a fund to pay losses
c. Underwriting standards
d. A large number of similar exposure units

A

C. Underwriting Standards

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

The chance than an economic loss will occur is a definition of:

a. Peril
b. Risk
c. Hazard
d. Insurance

A

B. Risk

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Which of the following best describes Indemnity?
a. Money paid in exchange for insurance protection
B. Reimbursement to the same financial position as before the loss
c. Damage or destruction of property or person
d. A cause of loss

A

B. Reimbursement to the same financial condition as before the loss

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Which definition best describes a hazard?

a. A condition that increases the chance of loss
b. The chance of loss
c. The uncertainty of whether a loss will or will not occur
d. The cause of loss

A

A. A condition that increases the chance of loss

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

A nuclear explosion is generally considered an uninsurable exposure because:

a. The loss would not be accidental
b. There would be no way to assess monetary damages
c. It would be a catastrophic event
d. The loss would not be definite in time and place

A

C. It would be a catastrophic event

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q
Insurable interest is:
a. The subject of an insurance policy
b. Ownership of property
c. Financial interest in property
D. The person insured
A

C. Financial interest in property

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Which of the following is NOT insured by an Ocean Marine policy?

a. A ship’s hull
b. A ship’s cargo
c. A ship’s routes
d. A ship’s freight

A

C. A ship’s routes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Which of the following is NOT a potential advantage to a company when creating a self-insurance program?

a. The company may incur lower costs than purchasing commercial insurance
b. The premiums are a tax deduction for the company
c. The company maintains more control over its finances
d. The company maintains more control over its operations

A

B. The premiums are tax deductible for the company

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

The retail businesses in a small community unite and agree to pay each other’s theft losses. This arrangement is:

a. a risk retention group
b. a reciprocal
c. a mutual insurer
d. a stock insurer

A

b. a reciprocal

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

An insurer that is owned by its policyholders is:

a. A stock insurer
b. A reciprocal
c. An inter-insurance exchange
d. A mutual insurer

A

D. A mutual insurer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

An insurer that is publicly traded is called:

a. A mutual
b. A reciprocal
c. An inter-insurance exchange
d. A stock company

A

D. A stock company

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

When a company sells off a danger operation, it is using which risk management technique?

a. Control
b. Non-insurance Transfer
c. Avoidance
d. Retention

A

C. Avoidance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

The part of the insurance policy that contains the “who is insured, what is insured and the premium” is called:

a. Declarations
b. Exclusions
c. Conditions
d. Endorsements

A

A. Declarations

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

The part of the insurance policy that spells out the insurer’s promise is called:

a. Declarations
b. Exclusions
c. Insuring Agreement
d. Conditions

A

C. Insuring Agreement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

An endorsement to an insurance policy:

a. Lists the causes of loss covered by the policy
b. Provides a way to tailor a policy to the specific needs of an insured
c. Spells out the rules and procedures that the insured and insurer must follow
d. Enumerates the causes of loss not covered by the policy

A

B. Provides a way to tailor a policy to the specific needs of an insured

17
Q

Arson committed by an insured to his own premises is not insurable because:

a. The loss is not accidental
b. There would be no way to assess the monetary damages
c. It would be a catastrophic event
d. The loss would not be definite

A

A. the loss is not accidental

18
Q

John is an insurance agent who represents three carriers. He wants to represent ABC insurance but does not yet have a contract. However, he does have material from ABC, including brochures and posters in his office. What is the term given to a situation where a customer of John might assume he DOES have a contract with ABC?

a. Express authority
b. Emergency authority
c. Apparent authority
d. Contractual authority

A

C. Apparent authority

19
Q

In which of the following distribution systems is the agent a salaried employee of the insurer?

a. Direct writing system
b. American agency system
c. Exclusive agency system
d. Captive system

A

A. Direct writing system

20
Q

While an Insurance Agent is an agent of an insurance company, an Insurance Broker prefers to describe him/herself as:

a. An agent of the insurer
b. An insurance company employee
c. An agent of the insured
d. An exclusive agent

A

C. An agent of the insured