General Insurance

Question 1

The transfer of PURE risk to the insurance company in consideration for a
premium.

Answer 1

Insurance

Question 2

The chance of loss without any chance of gain is…

Answer 2

Pure risk

Question 3

Has the possibility for gain or loss and is not insurable, (gambling is an example of this).

Answer 3

Speculative risk

Question 4

The chance of loss.

Answer 4

Risk

Question 5

A condition that could result in a loss is known as an…

Answer 5

Exposure

Question 6

Something that increases the

chance of loss.

Answer 6

Hazard

Question 7

Defined as a cause of loss, such as fire

Answer 7

Peril

Question 8

This allows insurers to predict claims more accurately

Answer 8

Law of Large Numbers

Question 9

To be insurable, losses must be…

Answer 9

Calculable

Question 10

The Law of Large Numbers applies to…

Answer 10

Groups of people, not to individuals. The more people in the

group, the more accurate the predictions are.

Question 11

Most insurers buy___to protect themselves from catastrophic loss.

Answer 11

Reinsurance

Question 12

Insurance laws are_____to be uniform from one state to another.

Answer 12

Not required

Question 13

T/F

Insurers cannot enforce a contract that they enter into with a minor, but the minor can enforce the
contract against the insurer.

Answer 13

True

Question 14

T/F

A stock insurer may pay dividends to its shareholders (stockholders), and they’re
guaranteed.

Answer 14

False, they may not be guaranteed

Question 15

T/F

The government offers insurance primarily based upon social needs, such as flood insurance and
workers compensation, but does not offer insurance for the purpose of preventing fraud.

Answer 15

True

Question 16

A_____company has their home or office in another state.

Answer 16

Foreign

Question 17

• An insurer based in Canada who sells in the U.S. is an…

Answer 17

Alien

Question 18

T/F

Producers represent the insurance company, not the insured.

Answer 18

True

Question 19

T/F

A producer isn’t personally liable when violating the producer’s contract.

Answer 19

False. They are liable.

Question 20

T/F

Independent producers own their own accounts and are not insurance company employees.

Answer 20

True

Question 21

Producers have___, ___ and ___ authority.

Answer 21

Express, implied, apparent

Question 22

The authority a producer has that is written in his or her contract is known as…

Answer 22

Express authority

Question 23

The authority not expressly (written) granted, but is actual authority the producer has to transact
normal business activities, is known as…

Answer 23

Implied authority

Question 24

T/F

A producer’s binding authority (if any) is expressed (written down) in the producer’s contract
with the insurer the producer represents.

Answer 24

True

Question 25

The elements of a legal contract are…

Answer 25

Consideration, Offer, Acceptance, Legal purpose and Legal Capacity (C-O-A-L)

Question 26

A requirement for a valid contract is…

Answer 26

Offer and acceptance

Question 27

A specific and definite proposal to enter into a contract is known as an…

Answer 27

Offer

Question 28

T/F

The consideration on a policy needs to be equal

Answer 28

False. It need not be equal.

Question 29

T/F

A policy may not be voided due to unequal consideration.

Answer 29

True

Question 30

Under the consideration clause, something of___must be exchanged.

Answer 30

Value

Question 31

T/F

An aleatory contract is one where the outcome depends upon chance.

Answer 31

True, (and unequal values)

Question 32

The doctrine of adhesion states that…

Answer 32

Policy ambiguities always favor the insured.

Question 33

Insurance policies are considered to be___contracts, in that only one party makes an
enforceable promise the insurer.

Answer 33

Unilateral

Question 34

The principle of indemnity states…

Answer 34

The purpose of insurance is to restore the insured to the same
position as before the loss occurred.

Question 35

The doctrine of utmost good faith states that…

Answer 35

All parties to an insurance transaction are honest.

Question 36

A representation is defined as…

Answer 36

The truth to the best of one’s knowledge.

Question 37

A warranty is defined as…

Answer 37

Sworn statement of truth, guaranteed to be true.

Question 38

Concealment is defined as…

Answer 38

The failure to disclose a material fact.

Question 39

When an insurer voluntarily gives up the right to obtain information that they are entitled to.

Answer 39

Waiver