Module 1 Principles of Insurance

Question 1

What is IGADCIM?

Answer 1

IDENTIFY risk management goals
GATHER relevant data for risk exposure
ANALYZE the info to determine risk exposure
DEVELOP a risk management plan
COMMUNICATE the recommendations
IMPLEMENT the recommendations
MONITOR the recommendations for any needed changes

Question 2

You’re driving and the person in front of you slams their brakes, has broken taillights and you hit them. Due to ___ the person you hit can’t collect damages from you.

Answer 2

Contributory Negligence

Question 3

You’re driving and the person in front of you slams their brakes and you hit them. If this is the case, which law would prevent you from paying the full cost of damages?

Answer 3

Comparative Negligence.

Question 4

With this kind of contract, you can only accept or reject.

Answer 4

Adhesion

Question 5

With this type of contract you cannot modify the terms.

Answer 5

Adhesion

Question 6

HOA contract and the limited degree of freedom to modify the terms would be an example of which type of contract?

Answer 6

Adhesion

Question 7

What’s the difference between an insurance producer and an insurance company?

Answer 7

Insurance producer would be an insurance agent. Insurance company would be an insurance company. Yes I typed that.

Question 8

Damages in court come in several forms. Which type of damages would be granted “pain and suffering”?

Answer 8

General Damages

Question 9

What are some examples of insurance agents that represent several different companies?

Answer 9

Independent agent, broker, surplus line agent

Question 10

What’s a big difference between an independent agent and a captive agent?

Answer 10

Independent agent represents several Different companies, while a captive agent represents either only one company or one Group of companies

Question 11

What’s a big difference between a surplus line agent and a captive agent?

Answer 11

Surplus line agents represent several different companies while a captive agent represents either only one company or one Group of companies

Question 12

Whats an example of an agent that represents one company or one group of companies?

Answer 12

Captive agent

Question 13

People that are most likely to make insurance claims are the most likely to purchase forms of insurance. What’s this called?

Answer 13

Adverse Selection

Question 14

Hazard vs Peril. Handling propane is an example of?

Answer 14

Hazard. There is no inherent danger in handling it, but things can go south quickly, and that makes it hazardous

Question 15

Hazard vs Peril. You park your car at the top of a hill and you have a faulty handbrake. Example of?

Answer 15

Hazard. Nothing has happened, but if the handbrake fails, things will go south quickly and that makes it hazardous

Question 16

Hazard vs Peril. A fire breaks out in the kitchen. Example of?

Answer 16

Peril. Something has happened, things are going south quickly, and that makes it perilous

Question 17

Hazard vs Peril. I’m moving apartments and drop a piano down a long flight of stairs. Example of?

Answer 17

Peril. Something has happened, things (piano) are going south quickly, and that makes it perilous

Question 18

The potential for a dangerous situation or condition that increases the likelihood of a loss.

Pure risk
Risk
Hazard
Peril

Answer 18

Hazard. Nothing has happened, but the chances of something bad are higher than normal.

Question 19

The actual cause of a loss

Pure risk
Risk
Hazard
Peril

Answer 19

Peril. Something bad has happened. Things have migrated south.

Question 20

Which section of an insurance contract contains this information: what is insured, to what amount, and under what conditions?

Answer 20

Insuring agreement

Question 21

What information is found in the insuring agreement section of an insurance policy?

Answer 21

What is insured, to what amount, and under what conditions

Question 22

What information is found in the exclusion section of an insurance policy?

Answer 22

What is excluded…

Question 23

In which section would you find exclusions from the insurance policy?

Answer 23

Exclusion section

Question 24

In Insurance contracts, what does the term unilateral mean?

Answer 24

Only one side is bound to the contract and has to perform.

Question 25

Only one side is bound to the contract and has to perform. This would match what characteristic of an insurance policy?

Answer 25

Unilateral

Question 26

In insurance contracts, the outcome is affected by chance and the amounts collected by parties are generally unequal. Which characteristic of an insurance policy does this exhibit?

Answer 26

Aleatory

Question 27

In insurance contracts, what does the term aleatory mean?

Answer 27

The amounts paid to each party are generally unequal and the outcomes are affected by chance.

Question 28

In insurance contracts, what is meant by "utmost good faith"?

Answer 28

All parties must disclose all facts honestly, or the policy may be rescinded

Question 29

In insurance contracts, all parties must disclose all facts honestly, or the policy may be rescinded. Which characteristic is this?

Answer 29

Utmost Good Faith

Question 30

You live in a dangerous neighborhood and decide to install an extra deadbolt on your door, which type of risk management is this? And would this be risk financing or risk control?

Answer 30

Risk reduction - you're reducing the risk of someone being able to break in. Risk control - you're not actively putting money into the risk itself, only into controlling the likelihood of the risk turning into a peril - robbery/theft.

Question 31

You live in a dangerous neighborhood and decide to move to a neighborhood (or state) with less crime. Which type of risk management is this? And would this be risk financing or risk control?

Answer 31

Risk avoidance - you're avoiding the risk entirely. Risk control - you're not actively putting money into the risk itself, only into controlling the likelihood of the risk turning into a peril - robbery/theft.

Question 32

You live in a dangerous neighborhood and decide to increase the coverage on your home insurance. Which type of risk management is this? And would this be risk financing or risk control?

Answer 32

Risk transfer - you're transferring the risk to the insurance company (it's their problem now). Risk financing - you're paying money into the management of the risk

Question 33

You live in a dangerous neighborhood and decide to buy a shotgun. Which type of risk management does this most closely resemble? And would this be risk financing or risk control?

Answer 33

Risk retention - you're deciding to let them f-around and find out. Risk financing - you will have to pay money if the risk becomes more than just a risk. New door, deadbolts, damaged property, walls with bullet holes in them..

Question 34

Which of these are under the umbrella of risk financing? Risk avoidance Risk transfer Risk retention Risk reduction

Answer 34

Risk transfer and risk retention

Question 35

Which of these are under the umbrella of risk control? Risk avoidance Risk transfer Risk retention Risk reduction

Answer 35

Risk avoidance and risk reduction

Question 36

*Which of these is the most effective method of risk financing? Risk avoidance Risk transfer Risk retention Risk reduction

Answer 36

Risk transfer

Question 37

*Which of these is the most effective method of risk control? Risk avoidance Risk transfer Risk retention Risk reduction

Answer 37

Risk Avoidance

Question 38

Decreasing your deductibles would be an example of which type of risk management? Risk avoidance Risk transfer Risk retention Risk reduction

Answer 38

Risk transfer. By decreasing your deductible you're increasing your premium, paying more to transfer your risk.

Question 39

What type of company is owned by the policyholders of the company?

Answer 39

Mutual Companies

Question 40

What type of company is owned by the shareholders?

Answer 40

Stock Companies

Question 41

What is a PLUP?

Answer 41

Personal Liability Umbrella Policy. It acts as an extension to whatever insurance you already have. If you don't have coverage on something, the PLUP will not cover it either. Under a PLUP, there may be "drop down" limits, where the underlying insurance type will have to be exhausted before the umbrella will "drop down" to help out. Standard amount $1 Million. Maximum $10 Million. Exclusions include work liability, professional liability, and any intentional actions.

Question 42

What type of policy is a "drop down" policy which helps out only after the underlying policy is exhausted?

Answer 42

PLUP. Personal Liability Umbrella Policy.

Question 43

What type of policy is typically seen as an overarching extension with massive limits that increases your overall insurance in each area you have insured?

Answer 43

PLUP. Personal Liability Umbrella Policy.

Question 44

What is the standard amount of coverage offered under a PLUP?

Answer 44

$1,000,000

Question 45

What is the minimum amount of coverage offered under a PLUP?

Answer 45

$1,000,000

Question 46

*What is the maximum amount of coverage offered under a PLUP?

Answer 46

$10,000,000

Question 47

What is the maximum amount that can be paid out when the insured loss occurs? Coinsurance amount Policy Limit Actual Cash Value Replacement Cost

Answer 47

Policy Limit

Question 48

What is the policy limit?

Answer 48

The maximum amount that can be paid out when the insured loss occurs

Question 49

*What is the typical percentage of coinsurance coverage?

Answer 49

80%

Question 50

What may refer to the minimum percentage of insurance that is required to avoid being penalized for inadequate insurance when there are partial losses?

Answer 50

Coinsurance. Before getting overwhelmed by question, remember this example: 300k replacement cost for a house. 200k insurance on it. 100k in losses. 1k deductible. 100k is a PARTIAL LOSS. I'd guess the penalization would be the fact that you'd be required to pay part of the cost if your coverage is less than that 80% of the replacement cost.

Question 51

The replacement cost of a property minus depreciation is?

Answer 51

Actual Cash Value of the property

Question 52

How is the Actual Cash Value calculated on a property?

Answer 52

Replacement cost of the property minus depreciation

Question 53

What refers to the determination of how an insurance policy should be priced?

Answer 53

Actuarial pricing

Question 54

What is actuarial pricing?

Answer 54

The determination of how an insurance policy should be priced

Question 55

What is insurance underwriting?

Answer 55

The process of evaluating risks to determine whether they're reasonable to accept and to what degree

Question 56

What is the process of evaluating risks to determine whether they're reasonable to accept and to what degree?

Answer 56

Insurance underwriting

Question 57

What is the significance of the McCarran Ferguson Act of 1945?

Answer 57

The McCarran-Ferguson Act of 1945 granted states the authority to regulate and tax the business of insurance

Question 58

Which act gave states the authority to regulate the insurance business?

Answer 58

McCarran Ferguson Act of 1945

Question 59

What does consideration mean in insurance contracts?

Answer 59

Refers to the exchange of something of value. Generally means Payment.

Question 60

Which characteristic of insurance refers to the exchange of something of value?

Answer 60

Consideration

Question 61

Which type of insurance insures personal properties that are in transit?

Answer 61

Inland Marine

Question 62

Which type of insurance insures floater risks?

Answer 62

Inland Marine

Question 63

What does an inland marine insurance policy cover?

Answer 63

Floater risks - Essentially valuable personal properties that are transported which are at risk of damage.

Question 64

Your client has two homes and typically likes to spend six months at each of them. Because of this, he has valuable personal properties moved back and forth. Which type of insurance would be able to cover these migrations of property?

Answer 64

Inland Marine

Question 65

Risk vs Hazard vs Peril. Which of these is the chance of loss?

Answer 65

Risk

Question 66

What is a pure risk?

Answer 66

The chance of loss or no loss, no chance for gain.

Question 67

The chance of loss or no loss, with no chance for gain is called? Hazard Pure risk Fundamental Risk Static Risk

Answer 67

Pure Risk

Question 68

Fire, smoke, water, lightning are examples of? Hazards Risks Perils

Answer 68

Perils

Question 69

Which risks would be types of economic-centric risks? Particular Risks Dynamic Risks Speculative Risks Static Risks Fundamental Risks Pure Risks

Answer 69

Static Risks and Dynamic Risks. Related to the economy vs Not Related.

Question 70

Which risks would be types of people-centric risks? Particular Risks Dynamic Risks Speculative Risks Static Risks Fundamental Risks Pure Risks

Answer 70

Fundamental Risks and Particular Risks. Affects large groups of people vs Affects small groups/individuals

Question 71

Which types of risks help to determine insurability? Particular Risks Dynamic Risks Speculative Risks Static Risks Fundamental Risks Pure Risks

Answer 71

Pure risks and speculative risks. Possibility of loss/no loss vs loss/no loss/gain

Question 72

This type of risk is not related to the economy, and can typically be insured.

Answer 72

Static Risk. Examples: earthquakes and floods.

Question 73

This type of risk is related to the economy, typically uninsurable.

Answer 73

Dynamic Risk. Examples: changes in business cycle, inflation.

Question 74

This type of risk affects large groups of people.

Answer 74

Fundamental risk. Examples: earthquakes, recessions

Question 75

This type of risk affects individuals/small groups of people.

Answer 75

Particular risk. Examples: burglary, car accidents.

Question 76

*You're about to go driving, which types of risk would you be exposed to on the road? Particular Risks Dynamic Risks Speculative Risks Static Risks Fundamental Risks Pure Risks

Answer 76

Particular (small groups affect by car crash risk) Static (wouldn't be related to economy) Pure risk (no chance of gain)

Question 77

*You decide to live in California, which is on the San Andreas Fault Line. Which types of risk would you be exposed to living in an area with high rates of earthquakes? Particular Risks Dynamic Risks Speculative Risks Static Risks Fundamental Risks Pure Risks

Answer 77

Fundamental (large groups affected by earthquake risks) Static (not related to economy) Pure risk (no chance of gain)

Question 78

*You decide to live in a country that continuously borrows money and prints more money to pay for those debts. Inflation inevitably occurs. Which risks would be associated with this situation? Particular Risks Dynamic Risks Speculative Risks Static Risks Fundamental Risks Pure Risks

Answer 78

Dynamic Risk (inflation is economic) fundamental risk (affects a large group of people)

Question 79

What are the seven steps of the risk management process?

Answer 79

IGADCIM Identify Gather Analyze Develop Communicate Implement Monitor

Question 80

Which risk management technique is most appropriate for: High severity, High frequency?

Answer 80

Risk avoidance (avoid at all costs)

Question 81

Which risk management technique is most appropriate for: High severity, low frequency?

Answer 81

Risk transfer (insure it)

Question 82

Which risk management technique is most appropriate for: Low severity, high frequency?

Answer 82

Risk reduction (don't drive behind big trucks on freeway, often get chips on windscreen)

Question 83

Which risk management technique is most appropriate for: low severity, low frequency?

Answer 83

Risk retention (probably won't happen, but if it does you'll be fine, just deal with it)

Question 84

Which risk management technique would apply to self-insurance?

Answer 84

Risk retention. You're still retaining the risk by transferring it to yourself.

Question 85

Why is self-insurance not a true type of insurance?

Answer 85

True insurance is a transfer of risk, not a retention of risk.

Question 86

Elements of Insurable Risk. What's the law of large numbers?

Answer 86

There must be a sufficiently large number of homogeneous exposure units to make the losses reasonably predictable. Have to be widely distributed geographically as well.

Question 87

There must be a sufficiently large number of homogeneous exposure units to make losses reasonably predictable, and it has to be widely geographically distributed as well. Which element of insurable risk is this?

Answer 87

Law of Large Numbers

Question 88

Losses produced by risk HAVE to be: Definite/Measurable Indefinite/Immeasurable Fortuitous/Accidental Intentional Catastrophic Not Catastrophic

Answer 88

Definite/Measurable, Fortuitous/Accidental, and Not Catastrophic

Question 89

Limiting Insurer's Liability. Which factor would address the fact that a loss will be suffered? Actual Cash Value of loss Policy Limits Subrogation Insurable Interest Coinsurance Other Insurance ( (we) will not profit) Deductible

Answer 89

Insurable interest

Question 90

Limiting Insurer's Liability. Which factor concerns the replacement cost minus depreciation? Actual Cash Value of loss Policy Limits Subrogation Insurable Interest Coinsurance Other Insurance ( (we) will not profit) Deductible

Answer 90

Actual Cash Value of loss

Question 91

Limiting Insurer's Liability. Which factor concerns the maximum amount that can be paid? Pick one. Actual Cash Value of loss Policy Limits Subrogation Insurable Interest Coinsurance Other Insurance ( (we) will not profit) Deductible

Answer 91

Policy Limit

Question 92

Limiting Insurer's Liability. Which factor concerns the fact that the client will not profit?Actual Cash Value of Loss Policy Limits Subrogation Insurable Interest Coinsurance Other Insurance ( (we) will not profit) Deductible

Answer 92

If you got this wrong, go exercise, shower, go to sleep, wake up, have some breakfast, fire up the laptop, and read the question and answer choices, Slowly.

Question 93

Limiting Insurer's Liability. Which factor concerns the minimum percentage of insurance that's required to avoid being penalized for inadequate insurance when partial losses occur? Actual Cash Value of Loss Policy Limits Subrogation Insurable Interest Coinsurance Other Insurance ( (we) will not profit) Deductible

Answer 93

Coinsurance

Question 94

Limiting Insurer's Liability. Which factor refers to a portion of insured losses that the insured is expected to pay before the insurance company pays anything? Actual Cash Value of Loss Policy Limits Subrogation Insurable Interest Coinsurance Other Insurance ( (we) will not profit) Deductible

Answer 94

Deductible

Question 95

Limiting Insurer's Liability. Which factor pertains to the right of the insurance company that has paid for a loss to recover its payments if it's found that another party is at fault and that the other party has to pay? Actual Cash Value of Loss Policy Limits Subrogation Insurable Interest Coinsurance Other Insurance ( (we) will not profit) Deductible

Answer 95

Subrogation

Question 96

What's the acronym to remember the Seven factors for limiting liability on the insurer's side? IGADCIM IAPOCDS UAAICUP UIADPIM

Answer 96

IAPOCDS refers to the seven factors of liability limits for the insurer. IGADCIM is the seven step process of the development of a risk management plan. UIADPIM is the seven step process of developing a personal financial plan [Principles of Financial Planning Course] UAAICUP is the seven special legal characteristics of insurance contracts

Question 97

Which type(s) of authority do insurance agents have? Express Implied Apparent Ostensible

Answer 97

All. Ostensible and Apparent are the same.

Question 98

Which type of insurance agent authority is specifically stated? Express Implied Apparent Ostensible

Answer 98

Express. It's "expressed"

Question 99

Which type of insurance agent authority is not stated but is obvious? Express Implied Apparent Ostensible

Answer 99

Implied

Question 100

Which type of insurance agent authority refers to the type that the client is led to believe the insurance agent has? Express Implied Apparent/Ostensible

Answer 100

Apparent/Ostensible

Question 101

What acts as the judicial branch for insurance company regulation?

Answer 101

State courts. States regulate insurance for each state and courts are judicial system.

Question 102

What acts as the legislative branch for the insurance industry regulation?

Answer 102

State legislature.

Question 103

What acts as the executive branch for the insurance industry regulation?

Answer 103

State insurance commissioners.

Question 104

Special Legal Characteristics of Insurance Contracts. Which characteristic refers to the fact that unequal amounts are generally exchanged? Personal Utmost Good Faith Indemnity Unilateral Aleatory Adhesion Conditional

Answer 104

Aleatory

Question 105

Special Legal Characteristics of Insurance contracts. Which characteristic refers to the fact that a contract can be accepted or rejected and that there's little/no option for mods? Personal Utmost Good Faith Indemnity Unilateral Aleatory Adhesion Conditional

Answer 105

Adhesion

Question 106

Special Legal Characteristics of Insurance Contracts. Which characteristic refers to the fact that payments of benefits will only happen if premiums are paid? Personal Utmost Good Faith Indemnity Unilateral Aleatory Adhesion Conditional

Answer 106

Conditional. Payments are "conditional" on premiums being paid.

Question 107

Special Legal Characteristics of Insurance Contracts. Which characteristic refers to the fact that the insured would be restored to the same position as before the loss? Personal Utmost Good Faith Indemnity Unilateral Aleatory Adhesion Conditional

Answer 107

Indemnity

Question 108

Special Legal Characteristics of Insurance Contracts. Which refers to the fact that insurance policies can't be transferred to another person? (Exception Life Insurance - Divorce common) Personal Utmost Good Faith Indemnity Unilateral Aleatory Adhesion Conditional

Answer 108

Personal

Question 109

Special Legal Characteristics of Insurance Contracts. Which refers to the fact that only one party has to perform? Personal Utmost Good Faith Indemnity Unilateral Aleatory Adhesion Conditional

Answer 109

Unilateral

Question 110

Special Legal Characteristics of Insurance contracts. Which refers to the fact that the insurance can't FORCE the client to pay? Personal Utmost Good Faith Indemnity Unilateral Aleatory Adhesion Conditional

Answer 110

Unilateral

Question 111

Special Legal Characteristics of Insurance Contracts. Which refers to the fact that full disclosure and honesty is required? Personal Utmost Good Faith Indemnity Unilateral Aleatory Adhesion Conditional

Answer 111

Utmost Good Faith.

Question 112

Special Legal Characteristics of Insurance Contracts. Under which characteristic being broken would arguments be made regarding Concealment or Misrepresentation? Personal Utmost Good Faith Indemnity Unilateral Aleatory Adhesion Conditional

Answer 112

Utmost Good Faith.

Question 113

Legal Requirements for Enforceable Contracts. Which requirement says that one party states they will do something and the other agrees. Offer and Acceptance Consideration Legal Object Legal Form Competent Parties

Answer 113

Offer and Acceptance

Question 114

Legal Requirements for Enforceable Contracts. Which requirement pertains to payment for work? Offer and Acceptance Consideration Legal Object Legal Form Competent Parties

Answer 114

Consideration

Question 115

Legal Requirements for Enforceable Contracts. Which requirement pertains to the purpose of the contract? Offer and Acceptance Consideration Legal Object Legal Form Competent Parties

Answer 115

Legal Object

Question 116

Legal Requirements for Enforceable Contracts. Which requirement pertains to the eligibility of the insured? Offer and Acceptance Consideration Legal Object Legal Form Competent Parties

Answer 116

Competent Parties

Question 117

Legal Requirements for Enforceable Contracts. Which requirement pertains to how the contract must be drawn? Offer and Acceptance Consideration Legal Object Legal Form Competent Parties

Answer 117

Legal Form. Certain contracts must be prescribed by state law - car titles for example.

Question 118

Legal Requirements for Enforceable Contracts. An error on which aspect could yield a voidable contract? Offer and Acceptance Consideration Legal Object Legal Form Competent Parties

Answer 118

Competent parties. For example, if a minor signed up for insurance, they would be unbound because the contract would be un-enforceable.

Question 119

Legal Requirements for Enforceable Contracts. What does "unbound" mean in the context of a voidable contract?

Answer 119

The unbound party can cancel, while the bound party cannot.

Question 120

Legal Requirements for Enforceable Contracts. An error on which aspect could yield a void contract? Offer and Acceptance Consideration Legal Object Legal Form Competent Parties

Answer 120

Competent party

Question 121

Legal Requirements for Enforceable Contracts. What characteristics would yield either a void or a voidable contract? Minor party Mentally impaired party Under the influence party

Answer 121

All

Question 122

What is the act of relinquishing a known right?

Answer 122

Waiver. Think about "waiving" your right to remain silent. It's known, because the cops give you miranda rights.

Question 123

What is the act of preventing a party from utilizing a known right?

Answer 123

Estoppel. Think about a cop continuing to force questions after the suspect asks for a lawyer.

Question 124

Torts are public wrongs and crimes are private wrongs. T or F

Answer 124

False

Question 125

Torts are private wrongs and crimes are public wrongs. T or F

Answer 125

True

Question 126

Some actions can result in both a Tort and a Crime. T or F

Answer 126

True

Question 127

*What does personal liability insurance protect against? Intentional Torts Negligent Torts Vicarious Torts Crimes

Answer 127

Negligent torts *and Vicarious torts

Question 128

What are the three types of torts?

Answer 128

Vicarious, Negligent, Intentional

Question 129

Vicarious, Negligent and Intentional are the three types of what? Contracts Crimes Torts Waivers

Answer 129

Torts

Question 130

Your employee crashes your business vehicle. Under what would cause you to be liable?

Answer 130

Vicarious tort. Liability through the actions of others.

Question 131

You get mad and punch someone in the nose. Would this action be insurable and what kind of tort would this be?

Answer 131

Intentional Tort. Intentional acts are not insurable (exception professional insurance: Errors & Omissions and Malpractice)

Question 132

You are texting and suddenly you crash into a car you didn't realize had stopped. Under which tort would you be liable?

Answer 132

Negligent Tort. You were negligent.

Question 133

How many elements of Negligence are there? (Torts, I believe)

Answer 133

There are four elements of Negligence: Duty owed, Breach of Duty, Damages or losses, Proximate Cause.

Question 134

What are the four elements of Negligence?

Answer 134

Duty owed, Breach of Duty, Damages/Loss, Proximate Cause

Question 135

All of the following are elements of an insurable risk except: Must not be definite Must be measurable Must not be intentional A sufficiently large and similar sample of people or events must be present.

Answer 135

Must not be definite.

Question 136

In settling an insured's loss, the duties of the insured do NOT include which of the following? Protecting Property Accepting any settlement offered by the insurer Providing notice of loss Providing proof of loss

Answer 136

Accepting any settlement offered by the insurer. You don't HAVE to accept ANY settlement offered by the insurer. The other three are the duties of the insured.

Question 137

Which of the following are examples of managing risk through risk retention. (MULTIPLE) I Having a coinsurance provision in medical insurance II Increasing the amount of auto insurance deductible III Increasing the benefit period on disability income insurance. IV Having a waiver of premium rider on life insurance.

Answer 137

I and II. I-Having a coinsurance provision on med insurance means that you're willing to pay (example) 20% of the med insurance in exchange for lower premiums. This would be as opposed to paying higher premiums for little to no med expenses (risk transfer). II-Increasing the amount of auto insurance deductible. Basically you're betting a higher amount of your money (risk retention) that you won't be in an accident. III and IV are not. III-Increasing the benefit period on disability income insurance expands the coverage of the policy by basically saying that benefits will be paid for a longer period of time. IV-Disability waiver of premium rider, this one simply adds coverage. Specifically what it does is it adds a rider (dlc kinda) that says "you don't have to pay premiums if you suffer a disability". III and IV are risk transfer methods.

Question 138

Which of the following typically are enacted by the state legislative branch to government to regulate insurers? I Laws that a foreign company must follow to obtain a license II Laws that govern the conduct of insurers in that state III Laws that determine the meaning of policy terms IV Laws that set forth the standards of solvency for insurance companies in that state

Answer 138

I II IV III - Policy terms are defined by the insurance companies who write them. Laws don't determine the meanings of policy terms - Judicial branch (courts) determine the meaning of the terms.

Question 139

Which of the following gave states the authority to regulate the insurance industry? NAIC COBRA State Insurance commissioners The McCarran-Ferguson Act of 1945

Answer 139

McCarran-Ferguson Act of 1945. Insurance is regulated primarily at the state level. NAIC issues model insurance and has NO authority in any state. COBRA requires certain employers to provide identical health insurance to employees after the occurrence of a qualifying event (divorce, termination, resignation, etc.)

Question 140

Which of the following is the role of the judicial branch in regulating the insurance industry within a state? To create model legislation relative to the insurance industry To interpret and apply the laws in place relative to the insurance industry To enforce the laws in place relative to the insurance industry To pass laws relative to the insurance industry

Answer 140

Interpret and apply the laws in place relative to the insurance industry. NAIC creates model legislation. Executive branch (state insurance commissioner) enforces the laws. Legislative branch passes the laws.

Question 141

Frank is severely injured in an auto accident caused by another driver Henry. At trial, the court orders Henry to pay Frank 100,000 as compensation for the pain and suffering resulting from his injuries. Which is the type of damages? Comparative Punitive Special General

Answer 141

General. General damages compensate an injured party for INTANGIBLE losses such as pain and suffering which can't be measured monetarily. If you see "PAIN AND SUFFERING" think "GENERAL" Comparative is a type of negligence that leads to an auto accident. Basically means that both parties are at fault to some degree. Punitive is basically "Pay more bc fuck you" kind of ruling Special, I. *THINK* is for measurable damages. For example, $14,000 worth of damages to a car, and the judge awarding that to the victim would be special.

Question 142

All of the following statements regarding torts are correct except: A tort is a private wrong that occurs when one person infringes upon the rights of another Negligence is a type of tort An individual can only be liable for torts he personally committed Torts can either be intentional or unintentional

Answer 142

An individual can only be liable for torts he personally committed.. Wrong, Vicarious liability exists. Example: ?YOU employ a delivery driver and he crashes a company car into another car. The company (YOU) could possibly be held liable for the actions of the delivery driver.

Question 143

Which of the following is NOT a provision frequently contained in the sections of insurance policies that address the insured's duties relating to loss settlement? Proof of loss Negotiation of settlement with a third party Protection of damaged property Notice of loss

Answer 143

Negotiation of settlement with a third party. The insurance company pays you the amount you're owed, you sign over your right to the insurance company to go after the person who wronged you, and the insurance company assumes the right to go after the other party's insurance company for the amount owed. This is called subrogation.

Question 144

What is subrogation? Negotiation of settlement with a third party The insurance company takes over your right to sue the party at fault for damages Policyholders agree not to accept any compensation from the party at fault The insurance company pays you for the damages inflicted upon you

Answer 144

The insurance company takes over your right to sue the party at fault for damages.

Question 145

Which of the following statements regarding the primary forms of insurance company ownership are CORRECT? Mutual companies are owned by the employees of the insurance company Stock companies are owned by stockholders who are policyowners of the insurance company I, II, Both, Neither

Answer 145

Neither Mutual companies are owned by the policyholders. Stock companies are owned by stockholders BUT, they're not necessarily policyowners.

Question 146

Which of the following is the result of physical harm, emotional harm, or financial loss? Physical Hazard Tort Criminal Act Estoppel

Answer 146

Tort Asked GPT to tell me why not Criminal act. I couldn't see why not as those could also be the result of a criminal act. Estoppel is stopping someone from utilizing a known right. Imagine someone asks the interrogator for a lawyer and the cop continues to force questions.

Question 147

Which of the following statements regarding mutual companies and stock companies is correct? MULTIPLE Mutual companies are owned by their policyholders and offer participating policies a share in the profits of the company through the payment of policy dividends. Stock companies are owned by the stockholders and usually offer nonparticipating policies. Stock companies are owned by policyholders, while mutual companies are owned by the stockholders.

Answer 147

I and II Not III

Question 148

You have a meeting with Oscar, 26 and his wife Judith, 25 this afternoon to review risk management plan. They have two kids, two cars a home and a boat. Oscar is a business banker and judith is an office manager. Which of the following statements redgarding their risk management plan is correct? I They have a limited amount of liability exposure II They have a higher probability of becoming disabled versus experiencing premature death. III Having liability insurance on their cars is more important than collision coverage. IV Long term care insurance need not be an immediate priority within their risk management plan.

Answer 148

II, III, IV I is false, they have an unlimited amount of liability exposure. Liability insurance is more important than collision coverage because liability claims can be unlimited.

Question 149

Which of the following are important when selecting an insurance company. I Competence II Training III Ratings by the ratings companies IV History

Answer 149

III IV Notice "Company" Competence refers more towards "Areas of competence" that describes an individual's skills. Training also refers to agents.

Question 150

Which of the following is important when selecting an insurance producer? I Length of service with the company II Professional designations earned III Inclination to service IV Production awards earned

Answer 150

II, III Professional designations, Inclination to service, along with: competence, experience, specialization, and quality of reputation.

Question 151

Which of the following are particular risks? I Premature death II Disability III Unemployment IV Earthquake

Answer 151

I II III Particular risks only affect individuals. This is in contrast to fundamental risks which affect large groups of people. Weakness: Unemployment. I keep getting it wrong. Think of it this way: you get fired and suffer unemployment individually. It's not referring to widescale unemployment. Misleading question tbh.

Question 152

Which of the following types of damages may a court award against a person who commits a tort? I Special II General III Punitive

Answer 152

All

Question 153

Special vs General vs Punitive (exemplary) Damages awarded by a court. Intended to punish an individual who acted maliciously, egregiously, or recklessly. Intended to compensate for intangible losses, usually in tangent with "Pain and suffering". Intended to compensate for tangible losses that can be calculated with a degree of accuracy.

Answer 153

General - Intangible, Pain and Suffering Special - Calculable, tangible Punitive - To Punish

Question 154

The state insurance department, headed by the state insurance commissioner, does which of the following? Administers compliance Sets regulations implementing legislation I, II, Both or Neither

Answer 154

Both The State Insurance Commissioner is the executive branch as it relates to the insurance industry. The state insurance commissioner sets up the systems allowing the passed legislation to be enforced, and then they enforce them (administer compliance).

Question 155

In property insurance, an insurable interest must exist: At the time of the loss only When the policy is issued only Neither at the time of issuance nor at the time of loss Both at the time of issuance and at the time of loss

Answer 155

Both at the time of issuance and at the time of loss.

Question 156

Characteristics that have to be present for a risk to be insurable? I The loss must be intentional II Must be uncertain III Cannot be catastrophic to society IV Must be measurable

Answer 156

III, IV Losses cannot be intentional, must be certain and measurable, and cannot be catastrophic to society.

Question 157

The primary purpose of the conditions section of an insurance policy is to: (pick one) Permit the inclusion of additional coverages Add exclusions that eliminate coverage for certain periods Define the duties and rights of both parties Contain the statements made by the insured

Answer 157

Define the duties and rights of both parties.

Question 158

For a life insurance policy, an insurable interest must exist: Neither when the policy is written nor when the insured dies Only at the time of issuance Only when the insured dies Both when the policy is written and when the insured dies

Answer 158

Only at the time of issuance.

Question 159

The "Pair and Sets" option of loss settlement under a homeowners policy allows the insurance company to Sell the pair or set for its salvage value Sell the damaged property as a pair or set only Repair or replace any part of the pair or set to its value before the loss Pay the full replacement cost of the pair or set

Answer 159

Repair or replace any part of the pair or set to its value before the loss. This allows the insurer to repair or replace any part of a set/pair OR pay the insured the difference between the actual cash value (ACV) of the pair/set before and after the loss. ?

Question 160

Which of the following statements regarding maximum possible loss and probability of loss is Correct? I The Max possible health care loss or claim is unlimited II The probability of experiencing long term care costs below age 60 is high III The maximum loss to personal property is limited to its value

Answer 160

I and III The probability of experiencing long term care costs below age 60 is *low*.

Question 161

Which of the following is an example of a moral hazard? Car is damaged by a hailstorm A driver slams on his brakes for no reason other than to cause the driver behind him to rear-end his car A homeowner carelessly burns leaves on a windy day, resulting in fire damage to his house A person falls and breaks her hip

Answer 161

A driver slams on his brakes for no reason other than to cause the driver behind him to rear end his car A MORAL hazard occurs when DISHONESTY causes loss or causes the loss to be overstated on a claim. The leaves burning was a stupid mistake, not a dishonest action.

Question 162

Which of the following statements regarding the roles of the NAIC in regulating insurance is correct? I The NAIC is composed of the state insurance commissioners from all 50 states II The NAIC makes recommendations for legislation and policy III The NAIC has the legal authority to require states to adopt its regulations

Answer 162

I and II. NAIC has no regulatory power whatsoever.

Question 163

What does the NAIC stand for?

Answer 163

National Association of Insurance Commissioners

Question 164

The main purposes of regulating the insurance industry include all of the following except: To maintain competition To minimize market failures To minimize costs to consumers To prevent abuse of consumers

Answer 164

Minimizing the costs to consumers is NOT a main purpose of insurance regulation. However, costs will likely be minimized indirectly by the regulation of the insurance industry with regards to maintaining competition.

Question 165

Which of the following statements would be appropriate in explaining the underwriting process? Underwriting is the process of selecting and classifying risk exposures The process attempts to eliminate all risks that might result in a loss The process involves nothing more than accepting or rejecting the application for insurance Underwriting is a formality and is generally an unimportant part of hte insurance purchasing process

Answer 165

Underwriting is the process of selecting and classifying risk exposures The process of underwriting attempts to match ACTUAL losses with EXPECTED losses, supported by adequate premiums. The goal is to avoid having too many bad risks.

Question 166

Which of the following types of risk is most suited to treatment by insurance? Low Prob, High severity Low prob, low severity High prob, high severity High prob, low severity

Answer 166

Low prob, high severity Car crashes, earthquakes, flood insurance, theft insurance.

Question 167

Which of the following are important when selecting an insurance producer? Competence Training Specialization Length of service within the company

Answer 167

Competence, Training, Specialization. Also: Experience, inclination to service, education, and a good reputation. Length of service within a company says nothing more than the ability to keep one's job.

Question 168

Which of the following limits an insurer's liability for covered losses? Misrepresentations by an agent acting within the agent's authority Other insurance coverage for the same loss

Answer 168

Other insurance coverage for the same loss. Misrepresentations by the agent can skyrocket the insurance company's liability, because they have the ability to legally bind the insurance company to cover anything that's within their authority. Example of the correct answer: Regular Liability insurance and PLUP extension. Liability insurance would pay first, then PLUP would kick in. The PLUP's liability to pay for that claim was mitigated by the fact that the insured had another policy that covered the same losses.

Question 169

Which of the following statements regarding insurance contracts are CORRECT I An insurance policy is conditional, in that the insurer is obligated to compensate the insured only if certain conditions are met. II A warranty is merely a promise made by the insured to the insurer that is part of the insurance contract and, as such, must be adhered to by the insured III Representations are statements made by the proposed insured to the insurer in the application process. IV Concealment occurs when the insured is silent about a fact that is material to the risk.

Answer 169

All four. Yes even II. No I didn't type it wrong, trust me I checked. I believe it's along the lines of this logic: if you buy a car with a warranty, you're promising that you won't go in and fuck with the engine, because if you do, your warranty will be voided because you broke that promise.

Question 170

Once you have developed a risk management plan for the client, what is the next step in the risk management process? Identify Risk Management Goals Communicate The Recommendations Gather Pertinent Data to Determine Risk Exposure Monitor The Plan For Any Changes/Updates

Answer 170

IGADCIM C comes after D Communicate the recommendations to the client. ---- Here are all the steps: 1. Identify risk management goals 2. Gather pertinent data to determine risk exposures 3. Analyze information to identify risk exposures 4. Develop risk management plan 5. Communicate that plan to the client 6. Implement the recommendations 7. Monitor the recommendations

Question 171

All of the following are rating services that rate the financial strength of insurance companies except: Standard and Poors Moodys NAIC AM Best

Answer 171

NAIC

Question 172

Which of the following are insurance PRODUCERS who have the authority to hire agents to work for them? Captive agents Brokers Producing general agents Career agents

Answer 172

Producing general agents.

Question 173

What is one main difference between producing agents and captive agents?

Answer 173

Producing general agents can hire people to work for them.

Question 174

For life insurance to be underwritten, and insurable interest must exist: I When the policy is issued II When the insured dies

Answer 174

Only when the policy is issued. The insurable interest (the life) doesn't exist after death, making it no longer an insurable interest. I guess. This is in contrast to property insurance. With property insurance, the insurable interest (the property) must exist at the time of policy issuance, and at the time of the loss/theft.

Question 175

What is adverse selection? Choosing an insurance company is in poor financial shape The concept that people who expect to have claims will want insurance more than people who expect to have few or no claims Choosing an insurance agent who does not properly service her clients The concept that a broker represents insureds while agents represent the insurance companies

Answer 175

The concept that people who expect to have claims will want more insurance than people who expect to have few or no claims. Basically this: "I drive perfectly, I don't need insurance" from safe drivers. "I drive like shit, I'll get insurance" from unsafe drivers. Only the unsafe drivers will get the insurance and the insurance company will simply have to pay out all the time.

Question 176

Ken owns a hardware store that fills customers' propane tanks. You are ken's insurance agent and are explaining terms to Ken. Which of the following statements are correct? I Fire is a peril II Leaving oily rags in a hardware store's repair shop area is a hazard III The handling of propane is a hazard IV A pure risk is one that involves the chance of loss or no loss, with no chance of gain.

Answer 176

All Four

Question 177

What did the McCarran Ferguson Act of 1945 do?

Answer 177

It established the fact that regulation of the insurance industry would be left up to the states.

Question 178

Which established that insurance industry regulation would be left up to the states? HIPPA ERISA Department of Labor McCarran Ferguson Act

Answer 178

McCarran Ferguson Act of 1945

Question 179

Which of the following cannot bind coverage for insurance on behalf of an applicant? Captive agent Insurance broker Career agent Independent agent

Answer 179

Broker - they represent the insured and therefore cannot bind an insurance company for insurance coverage.

Question 180

Which of the following statements best describes pure risk? Possibility of loss that involves only two outcomes: loss and no loss The ability to continue employer - provided or employer-sponsored benefits after termination of employment One requirement for proving negligence The price charge for a period of coverage provided by an insurance policy and found by multiplying the periodic rate per unit by the number of units of coverage

Answer 180

Possibility of loss that involves only two outcomes: loss or no loss There is no chance of gains. The ability to continue employer provided/sponsored after termination of employment refers to Consolidated Omnibus Budget Reconciliation Act (COBRA). Fees are up to 102% of original plan price (your previous price plus 100% of the price that your employer paid plus 2% of screw you charges)

Question 181

Alec is an insurance agent and meets with Tina to arrange for her to purchase a homeowners insurance policy. They agree to the terms, and Tina writes a check for the initial premium,, but no paperwork is completed. For which of the following reasons would this verbal agreement to insure a home make it a void contract. There was no offer and acceptance There was no legal object There was no consideration There was no legal form

Answer 181

There was no legal form. Legal form refers to the contract paper. Legal object refers to the house itself. Consideration refers to the payment. Offer and acceptance refers to, well think about it.

Question 182

Which of the following types of risk are associated with damage caused by an earthquake? Particular Dynamic Static Fundamental

Answer 182

Static Fundamental Static - Related to changes other than economy Dynamic - Economic related Fundamental - lots of people Particular - few people.

Question 183

Which of the following refers to the process of evaluating and classifying the risk level of applicants for insurance? Underwriting Group insurance Adverse selection Liability review

Answer 183

Underwriting

Question 184

Which of the following statements regarding risk management are CORRECT? Misrepresentation is carelessness or indifference on the part of an individual as to whether a loss occurs and/or the size of a loos if one does occur. A Moral hazard is a false and material statement made by an applicant for insurance, providing a basis for the insurer to make the contract voidable.

Answer 184

Neither It's actually the opposite, swap Misrepresentations and Moral Hazard and you have the correct definition.

Question 185

Once you have identified the risk management goals for the client, what is the next step in the risk management process? Gather pertinent data to determine risk exposure Analyze and evaluate the info to ID risk exposures Implement risk management recommendations Monitor the plan for any changes and/or updates

Answer 185

Gather IGADCIM Identify, *Gather*, Analyze, Develop, Communicate, Implement, Monitor

Question 186

A fire destroyed the county municipal civic center. The fire would be considered

Answer 186

Peril. The fire would be the peril that caused the damage. What caused the fire would be the hazards.

Question 187

Which of the following statements regarding insurance contracts are correct? I Insurance contracts are generally contracts of Indemnity, meaning that the policyowner will be reimburesed by the insurer only up to the actual loss amount without the opportunity for profit. II Insurance contracts are of utmost good faith, meaning that both parties must disclose all facts truthfully, or the contract may be reformed or rescinded. III Insurance contracts are unilateral contracts, in that all parties to the contract are legally bound to perform. IV Insurance contracts are aleatory, meaning that the outcome is affected by chance, and the dollars collected by the parties are usually unequal.

Answer 187

I II IV They are of Indemnity: you get back the amount of the loss and no more. They are of utmost faith: no one lies or omits facts. They are aleatory: outcome is affected by chance and amounts exchanged are usually unequal. They are also Unilateral: only ONE party is legally bound to perform.

Question 188

Which is correct? Insurance is the dispersion of actual from expected results. Moral hazard is the cause of financial loss. Law of large numbers theory asserst that with more members in a group, the probability that the actual loss will equal the expected loss is greater. A peril is the indifference to loss that creates carelessness and increases the likelihood of loss.

Answer 188

Law of large numbers one. Basically says, if you have way more data, your assumptions/calculations will be more accurate. Peril is the cause of financial loss Moral hazard is the indifference to loss that creates carelessness and increases the chance of loss RISK IS THE DISPERSION OF ACTUAL FROM EXPECTED LOSS. I didn't know this one

Question 189

Which agency specializes ONLY in rating insurance companies? AM Best S&P Moodys Fitch

Answer 189

AM Best

Question 190

Which agency specializes ONLY in rating insurance companies?

Answer 190

AM Best

Question 191

All of the following provide indirect Federal regulation of the insurance industry except: IRS, NAIC, Dodd-Frank Act, HIPAA

Answer 191

NAIC. Does nothing directly or indirectly to REGULATE the insurance industry. It does indirectly IMPACT the insurance industry I believe.

Question 192

Which defense against liability reduces the defendant's proportion of liability based upon the injured party's contribution to the total negligence that causes injury? Last clear chance rule Comparative negligence Assumption of risk Contributory negligence

Answer 192

Comparative negligence. Not contributory negligence. Contributory negligence would apply if someone had broken brake lights, slammed on their brakes, you didn't notice (bc no brake lights) and hit them.

Question 193

Which of the following statements concerning the collateral source rule are CORRECT? The rule states that a person who commits a tort will be liable for full damages. The person who commits a tort is liable for full damages, even though the plaintiff has other sources of recovery available. The collateral source rule prevents the person who committed the tort from benefitting because of fortuitous circumstances. The collateral source rule prevents an insurance company from receiving a portion of the insured's right to recover from the defendant. I III IV I II III I II II III IV

Answer 193

I II III

Question 194

Which of the following statements concerning the collateral source rule are CORRECT? The rule states that a person who commits a tort will be liable for full damages. The person who commits a tort is liable for full damages, even though the plaintiff has other sources of recovery available. The collateral source rule prevents the person who committed the tort from benefitting because of fortuitous circumstances. The collateral source rule prevents an insurance company from receiving a portion of the insured's right to recover from the defendant. I III IV I II III I II II III IV

Answer 194

I II III

Question 195

Unilateral means: 1 party can't transfer the contract to another 1 party only makes a legally enforceable promise There is no legal enforcement Both parties make legally enforceable promises

Answer 195

Only one party makes a legally enforceable promise. Uni - 1. Then from there just remember, only one side has to perform.

Question 196

What is the stated amount of money the insured is required to pay on a loss before the insrer will make any payments under the policy? Rider Exclusion Endorsement Deductible

Answer 196

Deductible

Question 197

Which are types of agent authority? Express Legal Apparent

Answer 197

Express, Apparent. Legal is not one. The three are Express, Implied and Apparent (Ostensible). Express is the actual authority the agent has. It's given to the agents by the insurance company and it's listed in the agency agreement. Implied is not expressly given to the agents BUT it's the type of authority given to other agents in similar circumstances usually possess. Example: acceptance of premium payments on behalf of the insurance company. Apparent authority occurs when an agent does not have express or implied authority, but the insured is led to believe they have the authority.

Question 198

Mega Insurance company has an A+ rating with AM best company, what should a planner tell his client about the rating? This rating is the highest given by any rating service. This rating means the company is safe, and the client will never lose money. AAA+ is the highest rating given by AM Best. An evaluation of the financial strength of an insurance company is best obtained by consulting more than one rating service.

Answer 198

An evaluation of the financial strength of an insurance company is best obtained by consulting more than one rating service.

Question 199

Requirements of an insurable risk? Large exposure to loss so as to adequately make predictions of the loss Economically feasible premium Catastrophic loss Calculable chance of loss

Answer 199

Large exposure to make predictions, calculable chance of loss and economically feasible premiums. Cannot be catastrophic.

Question 200

The law of agency implies that a fin planner Doesn't work exclusively for a firm, but represents several firms Can make recommendations to the client only after all members of the agency approve those recommendations May represent a firm; in this case, the firm is responsible for any promises the fin planner makes to the client Must be part of an agency to practice

Answer 200

May represent a firm; in this case, the firm is responsible for any promises the fin planner makes to the client.

Question 201

Tamika incurs substantial medical bills as a result of an auto accident caused by negligence of another driver. Tamika's insurance pays her med bills, and the policy requires that she assign her right to sue the other driver for the medical bills to the insurance company. Which concept is this? Aleatory nature of insurance Adverse selection Subrogation Duty of utmost good faith

Answer 201

Subrogation. Think about it. Suing the person would be for the purpose of paying for the medical bills. IF the insurance company pays you, THEY now get to sue the person who hit you to pay back the insurance company. You don't get double indemnity - specifically the right to money from the insurance company AND to money from the person who hit you.

Question 202

Insurable interest.. It determines how much insurance is needed to protect against a loss of income. An interested party will suffer a financial loss if the insured loss occurs. Permanent life insurance policy cash values increase over time. Exercising a right to the economic benefits of an asset, such a life insurance policy.

Answer 202

An interested party will suffer a financial loss if the insured loss occurs.

Question 203

Which of the following is NOT a method of managing risk? Transfer Elimination Reduction Retention

Answer 203

Elimination is not a type of risk management.

Question 204

What is the process of evaluating risks to determine if they are reasonable to accept and to what degree? Actuarial underwriting Loss adjustment Risk assessment Insurance underwriting

Answer 204

Insurance underwriting.

Question 205

Which of the following types of risk is insurance typically used to manage? Low prob, high severity Low prob, low severity High prob, high severity High prob, low severity

Answer 205

Low probability, high severity

Question 206

All of the following are steps in the risk management process except Monitoring the plan for any changes and/or updates Identifying the insurance required to cover all risks Identifying risk management goals Analyzing and evaluating the information to identify risk exposures facing the client

Answer 206

Identifying the insurance required to cover *every* risk is not necessary. There are other methods to manage risk.

Question 207

Types of agent authority? Express Implied Apparent

Answer 207

All Express - given to the agent by the insurance company and stated in the agency agreement. Implied - not expressly given to the agent, but it's implied that they have the authority because other agents in similar situations have authority. Apparent - occurs when an agent does not have the express or implied authority to do something, but the insured is led to believe the agent has the authority. Apparent = Ostensible btw

Question 208

Ronnie has been working and saving for a car since he was 13. He recently turned 165, obtained a driver's license, and purchased a car for which he paid cash. He went to his insurance agent's office and purchased the required car insurance. The agent did not notice that he is only 16. In the event of a claim, which option is available to the insurance company? Refuse to pay the claim because the contract is voidable. Pay the claim. Void the contract because Ronnie is a minor. Tell Ronnie to submit the claim on his parents' auto insurance policy.

Answer 208

Pay the claim. The insurance agent bound the insurance company to cover Ronnie. It's the agent's fault that the age was not verified. The contract's voidability because one of the participants is a minor simply means that the INSURED is able to void the contract, while the INSURER is bound to perform.

Question 209

Which of the following is NOT a correct statement regarding an insurer's liability? Coinsurance may be a splitting of costs. The policy limit is the max amount that will be paid when the insured loss occurs. Coinsurance may refer to the minimum percentage of insurance that is required to avoid being penalized for inadequate insurance when there are partial losses. The actual cash value of a loss is the acquisition cost of the property less depreciation.

Answer 209

The actual cash value of a loss is the *replacement* cost of the property less depreciation. Weak on this one

Question 210

Which is correct? Hazard is the cause of financial loss. Peril is the indifference to loss Insurance manages risk by having a large pool of people share in financial losses suffered by pool members Speculative risk involves the chance of loss or no loss

Answer 210

Insurance manages risk by having a large pool of people share in financial losses suffered by pool members. Peril is the cause of financial loss. Moral hazard is indifference to loss that causes carelessness. Speculative risk involves both the chance of loss or no loss Pure risk is either loss or no loss (no gain)

Question 211

Which of the following are necessary elements of an insurable risk? Loss must be indefinite There must be homogeneous exposure units Loss must be accidental Cannot be catastrophic

Answer 211

II III IV The loss can not be indefinite, it must be measurable.

Question 212

Which is correct? Aleatory contract: on party might receive benefits substantially greater in value than the benefits received by the other party. Unilateral contracts require a promise to perform from both the insurance company AND the insured. Contract of adhesion: the terms can be modified. Indemnity contract: one that allows the policyowner to be reimbursed for more than the actual amount of the loss.

Answer 212

Aleatory: one party might receive benefits way greater in value than the other party. Unilateral: only one promises to perform. I believe it's always the insurance company. Adhesion: terms cannot be modified. Always think HOA, those bitches. Indemnity: you will be reimbursed for the amount of the loss, no more no less.

Question 213

David's son will soon turn 16 and start driving. He will be driving an older car. Knowing he must keep the car insured, David decides to eliminate collision and increase the deductible on his comprehensive coverage. Which methods of handling risk is David using? Risk avoidance Risk retention Risk transfer Risk reduction

Answer 213

Risk retention for sure and risk transfer for less sure. Normally risk transfer would be by transferring risk to another source, but in this case he's transferring more risk to himself by getting rid of collision coverage and by upping the deductible on comprehensive. Risk avoidance would be if he didn't let his son drive. Risk reduction would be forcing his son to take driving lessons.

Question 214

Once you have implemented the recommendations for managing risk for the client, what is the next step in the risk management process? Identify risk management goals Monitor the plan for needed changes Develop a risk management plan Gather pertinent data to determine risk exposure

Answer 214

Monitor the plan for needed changes. IGADCIM Second I is Implement, M is Monitor.

Question 215

Which of the following organizations rate life insurance companies? S&P AM BEST Fitch Moody

Answer 215

All AM Best specializes and only rates insurance companies.

Question 216

Klaus just bought a new $75k luxury car. What form of risk management would generally be most appropriate? Pick one. Avoidance Transfer Retention Diversification Reduction Elimination

Answer 216

Transfer (via insurance) I originally said avoidance during the course itself, but that's not right because why buy a badass car and avoid using it at all costs. It's the most effective, but it's not the most appropriate form of risk management. Diversification and Elimination are silly choices and aren't forms of risk management as far as this course goes.

Question 217

Which of the following terms best describes the probability of an insured becoming disabled? Mortality rate Morbidity rate Disability rate Accident and sickness rate

Answer 217

Morbidity Rate

Question 218

Which section of an insurance contract includes information provided by the applicant? Insuring agreement Conditions section Declarations section Exclusions section

Answer 218

Declarations section. Insuring agreement identifies what is insured and for amount and under what conditions. Exclusions identifies situations that would preclude the company from paying. Conditions section states the rights and duties of the insurance company and the policy owner

Question 219

Which are examples of risk REDUCTION Decreasing insurance deductibles Moving from a high risk neighborhood Maintaining a safe speed while driving Installing deadbolt locks in a home

Answer 219

Kaplan says II III IV, but I say III and IV because to me, moving neighborhoods is straight up risk AVOIDANCE. We agree on I though, that's risk transfer. By decreasing your deductible, you're agreeing to a higher premium and transferring* more risk to the insurance company.

Question 220

Vicarious liability? Legal responsibility for criminal acts Legal responsibility for acts under the negligence per se rule Legal responsibility extended to someone other than the person who caused the injury Legal responsibility for extraordinarily dangerous activities

Answer 220

Vicarious liability refers to legal responsibility extended to someone other than the person who caused the injury. Think company owner can get sued if employee driving a company car hits someone while at fault.

Question 221

Because clients can only accept or reject an insurance contract and cannot modify its terms, the contract is said to be: Aleatory Of Indemnity Of Adhesion Of Utmost good faith

Answer 221

Adhesion

Question 222

Insurable interest.. For property and casualty insurance, insurable interest must exist when the policy is issued and at the time of the loss. For life insurance, insurable interest must exist at the time the policy is issued.

Answer 222

Both. To insure property, the interest must exist at the start of the contract (otherwise you could insure anything that exists) and at the time of the loss (you basically have to say you don't have it) [I know what you're thinking, No Fraud] To insure a life, the life must exist at the start of the contract (otherwise you could insure half of Biden's voters)

Question 223

Property insurance, insurable interest must exist: At the time of loss only At the time of policy issuance only At both times ^ At neither times ^^

Answer 223

At both times. I know it's weird to think that you have to have it at the time of loss (you lost it) but what they mean is you have to report when you lost it.

Question 224

Which of the following is correct? Mutual companies are owned by their policyholders and offer participating policies a share in the profits of the company through the payment of dividends. Stock companies are owned by the stockholders and usually offer nonparticipating policies Stock companies are owned by policyholders, while mutual companies are owned by the stockholders

Answer 224

I and II Wrong again

Question 225

Particular risks? Premature death Disability Unemployment Earthquake

Answer 225

Premature death, disability and unemployment. Unemployment can also be fundamental depending on context.

Question 226

Which of the following statements concerning the collateral source rule are correct? Mutiple. The rule states that a person who commits a tort will be liable for full damages The person who commits a tort is liable for full damages, even though the plaintiff has other sources of recovery available. It prevents the person who committed the tort from benefiting because of fortuitous circumstances. It prevents an insurance company from receiving a portion of the insured's right to recover from the defendant.

Answer 226

I, II, III Wrong again

Question 227

Which gave states the authority to regulate the insurance industry? COBRA McCarran Ferguson Act State insurance commissioners NAIC

Answer 227

McCarran Ferguson Act of 1945

Question 228

Primary purpose of the conditions sections of an insurance policy is to Permit the inclusion of additional coverages Contain the statements made by the insured Add exclusions that eliminate coverage for certain periods Define the duties and rights of both parties

Answer 228

Define the duties and rights of both parties.

Question 229

Which specializes in rating ONLY insurance companies? SP Moodys Fitch AM Best

Answer 229

AM Best

Question 230

Important when choosing an insurance producer? Length of service with company Professional designations earned Inclination to service Production awards earned

Answer 230

II and III Producer = Agent