General Insurance

Question 1

What are the three types of agent authority?

Answer 1

• Express
• Implied
• Apparent

Question 2

If an insurer needs to obtain information about the applicant from investigators, what is the insurer required to do?

Answer 2

Provide the applicant a Disclosure Authorization Notice

Question 3

What are the two elements necessary for a life insurance contract to have a legal purpose?

Answer 3

• Insurable Interest

- Consent

Question 4

In forming an insurance contract, when does acceptance usually occur?

Answer 4

When the insurer approves a prepaid application

Question 5

What document is required for an insurance company to transact insurance?

Answer 5

Certificate of Authority

Question 6

What is the best way to handle incomplete insurance applications?

Answer 6

Return the application to the applicant for completion

Question 7

What law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated?

Answer 7

Law of large number

Question 8

If an applicant does not review their insurance policy, who would be held responsible?

Answer 8

The agent

Question 9

An insurance company that is formed under the laws of another state is known as what type of insurer?

Answer 9

Foreign

Question 10

What type of report provides information about the applicant’s hobbies, habits, and financial status?

Answer 10

Inspection Report

Question 11

A state-issued document empowering an insurance company to become an admitted insurer is called what?

Answer 11

Certificate of Authority

Question 12

In the agent/insurer relationship, who is considered the principal?

Answer 12

Insurer

Question 13

Insurer are classified according to their domicile. What are the three types of insurers?

Answer 13

• Domestic
• Foreign
• Alien

Question 14

The insurer organized to return a profit to the stockholders is what type of insurer?

Answer 14

Stock company

Question 15

What entities make up the Medical Information Bureau?

Answer 15

Insurers

Question 16

When does an insurance policy go into effect?

Answer 16

When the policy is delivered and the premium is paid

Question 17

When agents act within the scope of their contract, their actions will be assumed to be the acts of whom?

Answer 17

Insurer

Question 18

What is the term for the causes of loss insured against in an insurance policy?

Answer 18

Peril

Question 19

Insurance is used to transfer what to the insurance company?

Answer 19

Financial responsibility for loss

Question 20

What type of insurer is a voluntarily formed organization that provides insurance benefits for members of an afflicted lodge or religious organization with a representative form of government?

Answer 20

Fraternal Insurer

Question 21

The type of insurance company organized to return any surplus to its policy is known as what?

Answer 21

Mutual company

Question 22

For the purpose of insurance, what is risk?

Answer 22

Uncertainty of loss

Question 23

If an agent fails to obtain the applicant’s signature on the insurance application, what must the insurer do?

Answer 23

Send the application back to the applicant for signature

Question 24

In order to transact insurance with a given state, an alien insurer must first obtain what?

Answer 24

Certificate of Authority

Question 25

Whose responsibility is it to determine that all the questions on an insurance application are answered?

Answer 25

The agent's

Question 26

A situation in which a person can only experience a loss and no gain presents what type of risk?

Answer 26

Pure risk

Question 27

What type of insurer is formed under the laws of another country?

Answer 27

Alien

Question 28

What are the strategies used by underwriters to prevent adverse selection? 3

Answer 28

- Restriction of coverage - Refusal to accept a risk - Accepting a risk at a higher rate

Question 29

Insurance is a contract that protects the insured from what?

Answer 29

Loss

Question 30

When risks with higher probability of loss are seeking insurance more often than other risks, this is known as what?

Answer 30

Adverse selection

Question 31

An insurance policy paid a nontaxable dividend to the insured one year, and nothing the next. From what type of insurer did the insured purchase a policy?

Answer 31

Mutual

Question 32

A person who does not lock the doors to their house shows an indifferent attitude. The person presents what type of hazard?

Answer 32

Morale

Question 33

The reduction, decrease, or disappearance of value of the person or property insured in a policy is known as what?

Answer 33

Loss

Question 34

What do individuals use to transfer their risk of loss to a larger group?

Answer 34

Insurance

Question 35

What is the name of the process that insurance companies use to determine whether or not an applicant is insurable?

Answer 35

Underwriting

Question 36

Whom does an insurance agent represent?

Answer 36

Insurance company

Question 37

When would a misrepresentation on an insurance application be considered fraud?

Answer 37

When it is intentional and material

Question 38

What type of risk is insurable?

Answer 38

Pure

Question 39

An insurance company is domiciled in California and transacts insurance in Nevada. What is the insurer's classification in Nevada?

Answer 39

Foreign

Question 40

Wagering on a sporting event is known as what type of risk?

Answer 40

Speculative

Question 41

When a change needs to be made on the application for insurance, which is the best method for correction the information?

Answer 41

Complete a new application or ask the applicant to initial the correction on the original application

Question 42

An applicant conceals relevant health information on the application. The applicant presents what type of hazard?

Answer 42

Moral

Question 43

What law protects consumers from the circulation of inaccurate or obsolete information?

Answer 43

The Fair Credit Reporting Act

Question 44

What are the five characteristics of an ideally insurable risk?

Answer 44

Loss must be: - Due to chance - Definite and measurable - Statistically predictable - Not catastrophic - Coverage cannot be mandatory

Question 45

What are the four elements of an insurance contract?

Answer 45

- Agreement (offer and acceptance - Consideration - Competent parties - Legal purpose

Question 46

In insurance, when is the offer usually made on a contract?

Answer 46

When the insurance application is submitted

Question 47

What are the three types of hazards?

Answer 47

- Physical - Moral - Morale

Question 48

According to the Law of Agency, a principal is represented by whom?

Answer 48

Agent or producer

Question 49

Who owns stock companies?

Answer 49

Stockholders

Question 50

Conditions that increase the chance of a loss are known as what?

Answer 50

Hazards