RIBO Practice Exam 6 Flashcards
(100 cards)
Which type of risk can be insured?
Select one:
a.
Moral risk
b.
Pure risk
c.
Speculative risk
d.
Assumed risk
Reference: C81 - Study 1 - LO1
The correct answer is: Pure risk
What is the definition of risk?
Select one:
a.
The chance of a hazard
b.
The probability of profit
c.
The chance of loss
d.
The probability of an event
Reference: C81 - Study 1 - LO1
The correct answer is: The chance of loss
Q: What does the term “moral hazard” refer to?
Select one:
a.
The location of the property insured
b.
The personal character of the insured
c.
The physical condition of the property insured
d.
A life insurance risk
Reference: C81 - Study 1 - LO2
The correct answer is: The personal character of the insured
What is a peril?
Select one:
a.
An event that may cause a loss
b.
A type of speculative risk
c.
An event that will prevent a loss
d.
A type of pure risk
Reference: C81 - Study 1 - LO2
The correct answer is: An event that may cause a loss
Q: Insurance is based on the existence of which of the following?
Select one:
a.
Risk
b.
Loss
c.
Indemnity
d.
Consideration
Reference: C81 - Study 1 - LO1
The correct answer is: Risk
Q: What is proximate cause?
Select one:
a.
The first cause in a chain of events that results in a loss
b.
The cause that sets a remote cause of loss into motion
c.
The suspected cause of a loss
d.
The immediate and effective cause of loss
Reference: C81 - Study 1 - LO3
The correct answer is: The immediate and effective cause of loss
When a loss occurs, the peril that was the proximate cause of the loss must be one of the perils insured for the damage to be recovered from the insurer. Proximate cause is the immediate and effective cause of the loss, which in a chain or circumstances leads naturally and directly to the loss.
What is a contract?
Select one:
a.
A promise to indemnify the client in the event of a loss
b.
A bond that is required to be part of an insurance pool
c.
A legal agreement of the arrangements between the insured and the insurer
d.
A document that provides evidence of the insurance policy
A legal agreement of the arrangements between the insured and the insurer
Why do individuals purchase insurance?
Select one:
a.
Because it is government mandated for all
b.
To hold their funds as an alternative to a savings account
c.
To protect themselves from being financially penalized if something happens to their property
d.
As an investment with plans to gain in their financial future
Reference: C81 - Study 2 - LO1
The correct answer is: To protect themselves from being financially penalized if something happens to their property
What is the primary function of insurance?
Select one:
a.
Providing employment, directly and indirectly, in the industry
b.
A method of profiting after a loss occurs
c.
Protecting assets and securing credit
d.
A method of sharing the losses of a few people among the many
Reference: C81 - Study 2 - LO2
The correct answer is: A method of sharing the losses of a few people among the many
What is the class of business that is NOT directly concerned with life or fire insurance?
Select one:
a.
Marine
b.
Crime
c.
Casualty
d.
Cyber
Casualty
- general insurance
- casualty refers to bonds, prime policy
- casualty does not concern life or fire
Casualty is more applicable to bodily and personal injury, but can also include crime, robbery, burglary, aviation, or surety bonding.
What type of insurance would cover losses arising from libel and slander?
Select one:
a.
Liability insurance
b.
Legal expense
c.
Surety bonds
d.
Crime insurance
Reference: C81 - Study 2 - LO3
The correct answer is: Liability insurance
Liability insurance covers personal liability and liability resulting from ownership of premises, operations, products, rendering of professional services, libel, slander, and virtually any other situation where one individual might hold another responsible for some action or lack of action that resulted in injury or damage to that individual or that person’s property.
Q: Which one (1) of the following statements is TRUE about insurers?
Select one:
a.
A stock company is owned jointly by the insureds.
b.
The Facility Association is an insurance cooperative.
c.
Mutual insurance companies are NOT required to be licensed by the Department of Insurance
d.
Lloyd’s of London is NOT an insurance company
Reference: C81 - Study 3 - LO1
The correct answer is: Lloyd’s of London is NOT an insurance company
What is the role of the technical services division of an insurer?
Select one:
a.
Make loss prevention recommendations and to recommend payment of losses
b.
To make final decisions with respect to rates and to determine which classes of insurance to write
c.
Assist in rating, to decide which risk to insure and to investigate suspicious losses
d.
Inspect and report on special hazards, assist in rating and to make loss prevention recommendations
Reference: C81 - Study 3 - LO2
The correct answer is: Inspect and report on special hazards, assist in rating and to make loss prevention recommendations
What is treaty insurance?
Select one:
a.
Reinsurance in which an agreement between the insurer and the reinsurer requires the insurer to submit every risk to the reinsurer for approval
b.
Insurance that is placed on an individual case by case basis
c.
Insurance that is placed on a facultative excess basis
d.
Reinsurance in which an agreement between the insurer and the reinsurer provides for automatic reinsurance without the insurer having to submit every risk to the reinsurer
Reference: C81 - Study 3 - LO3
The correct answer is: Reinsurance in which an agreement between the insurer and the reinsurer provides for automatic reinsurance without the insurer having to submit every risk to the reinsurer
What is the role of a broker?
Select one:
a.
To act on behalf of an insured in placing business with insurance companies
b.
To review loss statistics and establishes rate by each coverage
c.
To make recommendations about the payment of benefits
d.
To approve changes to standardized application forms for the industry
Reference: C81 - Study 4 - LO1
The correct answer is: To act on behalf of an insured in placing business with insurance companies
Which type of distribution method sells policies on behalf of several insurers?
Select one:
a.
Independent brokerage system
Independent brokerage or agency systems represent multiple insurers.
b.
Direct writing companies
c.
Exclusive agency companies
d.
Independent general agents
Reference: C81 - Study 4 - LO1
The correct answer is: Independent brokerage system
Q: A cover note is defined as which of the following?
Select one:
a.
The document evidencing the commission rate allowed the agent for having produced the business
b.
A notice and confirmation to the insurer that it has been bound to a contract
c.
An attachment to a policy that overrules any wording in the policy inconsistent with it
d.
That portion in the insuring agreement of a policy that lists the perils insured against
Reference: C81 - Study 4 - LO2
The correct answer is: A notice and confirmation to the insurer that it has been bound to a contract
When agents and brokers bind coverage, they should prepare a binder right away and send a copy to the insurer. A copy of the binder should also be given to the insured. It will serve as a written binder. A cover note is a document with insurance or the insurance protection provided.
Q: What is the purpose of a contract between an insurer and an insurance broker (company/broker agreement)?
Select one:
a.
To formalize in writing what the broker and the insurer expect from each other.
b.
To authorize the broker to operate a Trust Account.
c.
To meet the requirements of RIBO.
d.
To satisfy the requirements of the Department of Insurance.
Reference: C81 - Study 4 - LO2
The correct answer is: To formalize in writing what the broker and the insurer expect from each other.
Insurance intermediary is authorized to represent an insurer in setting up insurance policies for third parties. Governed by the law of agency, insurance agents and brokers must comply with the terms of the agency contract between them and the insurer(s) they represent.
What is an endorsement?
Select one:
a.
An amount of the loss that the insured must pay before the insurer will pay the claim
b.
A clause requiring the insured to bear a portion of every loss if there is underinsurance
c.
A discount applied to the policy premium
d.
An attachment to the policy that varies the terms of the contract
Reference: C81 - Study 5 - LO6
The correct answer is: An attachment to the policy that varies the terms of the contract
An endorsement is an amendment added to a written document, altering its provisions.
What forms the basis of most insurance contracts?
Select one:
a.
Subrogation
b.
Contribution
c.
Prevention of Risk
d.
Indemnity
Reference: C81 - Study 5 - LO3
The correct answer is: Indemnity
Q: The legal process by which an insurer, who has paid a loss, pursues any rights of recovery against a responsible third party is which of the following?
Select one:
a.
Indemnification
b.
Consideration
c.
Subrogation
d.
Contribution
Reference: C81 - Study 5 - LO4
The correct answer is: Subrogation
Q: Which of the following parties would be considered to have an insurable interest?
Select one:
a.
A fur shop owner who has a mink stolen while it is in his/her care, custody and control.
b.
A grandson who is going to inherit property sometime in the future.
c.
A member of a golf club.
d.
A prospective purchaser of an automobile.
Reference: C81 - Study 5 - LO2
The correct answer is: A fur shop owner who has a mink stolen while it is in his/her care, custody and control.
Q: With regards to contract law, a “meeting of the minds” is necessary to fulfill which element of a contract?
Select one:
a.
Agreement
b.
Genuine intention
c.
Consideration
d.
Legal capacity
Reference: C81 - Study 5 - LO1
The correct answer is: Agreement
Q: Complete the sentence: The insured’s three-year-old sofa was destroyed by fire. Establishing the cost of a new similar sofa and then deducting the accumulated depreciation will determine the ___.
a.
Replacement cost
b.
Coinsurance penalty
c.
Purchase price new
d.
Actual cash value
Reference: C81 - Study 5 - LO3
The correct answer is: Actual cash value