Life Insurance

A type of insurer that is owned by its policyowners is called

mutual

A(n) ______ company is owned by its shareholders.

stock

Fraternal Benefit Society has each of the following characteristics EXCEPT

Exist For profit

The Do Not Call Registry offers exemptions for calls placed from all of the following EXCEPT

insurance sales calls

The Fair Credit and Reporting Act's main purpose is to

protect consumers with guidelines regarding credit reporting and distribution

What is the primary purpose of a rating service company such as A.M Best?

Determine financial strength of an insurance company

A nonparticipating company is sometimes called a(n)

stock insurer

An insurer's claim settlement practices are regulated by the

State insurance departments

Why are dividends from a mutual insurer not subject to taxation?

Because dividends are considered to be a return of premium

All of the following are examples of pure risk EXCEPT

Losing money at a casino

How do insurers predict the increase of individual risks?

Law of large numbers

What is known as the immediate specific event causing loss and giving rise to risk?

peril

Which of the following is considered to be an event or condition that increases the probability of an insured's loss?

Hazard

An example of risk sharing would be

Doctors pooling their money to cover malpractice exposures

An individual who removes the risk of losing money in the stock market by never purchasing stocks is said to be engaging in

Risk avoidance

Insurance companies determine risk exposure by which of the following?

Law of large numbers and risk pooling

Insurance represents the process of risk

transference

The cause of a loss is referred to as a(n)

peril

People with higher loss exposure have the tendency to purchase insurance more often than those at average risk. This is called

adverse selection

• Competent parties

• Legal purpose

• Offer and acceptance (agreement)

• Consideration

C L O C

Legal purpose is a term used in contract law meaning

there must be legal reasons for entering into the contract

The authority granted to a licensed producer is provided via the

Law of Agency

The term which describes the fact that both parties of a contract may NOT receive the same value is referred to as

Aleatory

Under a contract of adhesion,

the terms must be accepted or rejected in full

What are an applicant's statements concerning occupation, hobbies, and personal health history regarded as?

representation

Who is responsible for assembling the policy forms for insureds?

Insurance carriers

Ambiguities in an insurance policy are always resolved in favor of the

insured

When the principal gives the agent authority in writing, it's referred to as

express authority

Intentional withholding of material facts that would affect an insurance policy's validity is called a(n)

concealment

What is implied authority defined as?

Authority that is not specifically given to an agent in the agency contract, but that an agent can reasonably assume to carry out his/her duties

The perils health and accident policies cover are accidents and sickness.

true

The risk of loss from illness or accidents is known as mortality.

false

Illness (sickness or disease) can have a sudden onset or develop over time.

true

An accident is an unintended occurrence resulting in a loss caused by an external source.

true

The term "accidental bodily injury" implies that the cause and result of an accident are unintentional.

false

What is required for limited benefit policies?

A Notice to Insured stating it is a Limited Benefit Policy

What is experience rating used for in group insurance?

To price large group contracts based on prior claims experience

Why do people choose to purchase critical illness insurance coverage?

To provide a lump sum upon diagnosis of a critical illness

What does long-term care insurance cover?

Cost of caring for those who cannot perform activities of daily living

What type of contract is medical expense insurance?

A reimbursement contract

What is the basic principle behind how HMO plans manage healthcare delivery?

To provide coordinated care through a network of providers

What is AD&D insurance?

Insurance that pays a lump sum for accidental death or dismemberment

What is morbidity?

1. The duration of disability

2. The probability or risk of getting ill or becoming disabled

3. The probability of death

4. The severity of an illness

What is required for limited benefit policies?

A Notice to Insured stating it is a Limited Benefit Policy