Basic Princinples

Question 1

A reciprocal insurer typically has an administrator who manages the premiums collected from the groups members. This administrator is called a(n)

Answer 1

Attorney in fact 

Question 2

Which of the following financial products creates an instant estate, no matter when the date of death?

Answer 2

Life insurance

Question 3

Which of the following accurately describes a participating insurance policy?

A. Policy owners may be entitled to receive dividends.
B. Policy owners pay assessments for company, losses,
C. stock companies allow their policy owners to share in any company earning
D. policy owners are not entitled to vote for members of the board of directors 

Answer 3

A. Policy owners may be entitled to receive dividends

Question 4

A business becoming incorporated is an example of risk

Answer 4

Transfer 

Question 5

Which of the following is not an objective of the national association of insurance commissioners ?

A. Encourage uniformity and states insurance laws
B. Protect the interest of policy owners and customers.
C. regulate state insurance commissioners
D. promote efficiency in the administration of state insurance laws 

Answer 5

C. regulate state insurance commissioners. 

Question 6

Which of the following is NOT an example of risk retention?
A. becoming aware of a risk and taking no action
B. self, ensuring a given risk
C. Deciding a business deal is risky, but going through with it anyways
D. not a business deal after deciding it would be too risky 

Answer 6

D. not doing a business deal after deciding it would be too risky. 

Question 7

Which of the following is an unincorporated association, whose members provide coverage for one another?

A. Self insurer.
B. Lloyds
C. reciprocal.
D. surplus lines 

Answer 7

Reciprocal 

Question 8

Its agents authority to bind an insurer to an insurance contract, may be granted in the

A.Agents contract and the insurance companies appointment
B. Agents license and insurance companies certificate of Authority
C.Buyers guide and policy summary
D.State guaranty association

Answer 8

A.Agents contract and the insurance companies appointment 

Question 9

What type of risk involves the potential for loss with no possibility for gain? 

Answer 9

Pure Risk 

Question 10

A group of insurance company that is formed to assume and spread the liability risk of its members is known as a. 

Answer 10

risk retention group 

Question 11

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 or predicting losses.
C. Predictability of losses will be improved.
D. ability to predict losses decreases. 

Answer 11

Predictability of losses will be improved.

Question 12

The law of large numbers enables an isurer to 

Answer 12

Predict losses 

Question 13

Dividends from a mutual insurance company are paid to whom?

Answer 13

Policy holders

Question 14

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

Answer 14

Captive insurer 

Question 15

A _______insurer assumes risk from another insurance company

Answer 15

Reassurance 

Question 16

Which of the following can be defined as a cause of a loss?

Answer 16

Peril

Question 17

Dividends from a stock insurance company are normally sent to 

Answer 17

Shareholders 

Question 18

Which reinsurance contract between two insures involves in automatic sharing of the risk assumed ?

Answer 18

Treaty reinsurance 

Question 19

A stock insurance company is owned by its 

Answer 19

Shareholders 

Question 20

Insurance is NOT characterized as which of the following ?

A. Transference of risk
B. Pulling of premium dollars.
C. Method of risk management.
D. as the number of insureds increase the number of losses decrease. 

Answer 20

As the number of insureds increase the number of losses decrease 

Question 21

ABC company is attempting to minimize the severity of potential losses within its company. The company is engaging in risk. 

A. transference
B. retention
C. reduction
D. Avoidance 

Answer 21

C.Reduction

Question 22

How can an assurance company minimize exposure to loss? 

Answer 22

Reassuring risk

Question 23

A ______agent may represent several insurers 

Answer 23

Independent 

Question 24

When a seating, insurer transfers, a portion of its risk to an assume, insurer on a case by case basis, this process is referred to as 

Answer 24

Facultative Reinsurance 

Question 25

Which group is the do not call registry designed to protect against ?

Answer 25

Telemarketers 

Question 26

Which of the following can be defined as the potential for loss ? 

Answer 26

Risk

Question 27

Purchasing insurance is an example of risk 

Answer 27

Transference

Question 28

Which of the following outlines the authority given to the producer on behalf of the insurer?

A.Rebating arrangement
B.Commingling Contains
C. Controlled business clause
D. Producer contract 

Answer 28

Producer contract 

Question 29

Which term describes the elimination of a hazard ?

Answer 29

Risk avoidance 

Question 30

Which of these statements regarding insurance is false 

A. One way insurance 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.Purist can’t be insured 

Answer 30

B.As the number of insured units increases the number of losses decreases