Chapter 1 quiz

Return application to applicant for completion

What is the best way to handle incomplete insurance applications?

Domestic, foreign, alien

What are the three types of insurers?

Hazards

Conditions that increase the chance of a loss are known as

Stockholders

Who owns stock companies?

When it is intentional and material

When would a misrepresentation on an insurance application be considered fraud

Uncertainty of loss

What is risk

Physical, moral, morale

What are the three types of hazards

Pure risk

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

Peril

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

Insurance company

Whom does an insurance agent represent

Adverse selection

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

Loss

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

Express, implied, and apparent

What are the three types of agent authority

Insurer

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

Agreement, consideration, competent parties, legal purpose

What are the four elements of an insurance contract

Authorized or admitted

If an insurer meets the state’s financial requirements an is approved to transact business in the state it is considered what type of insurer

Loss

Insurance is a contract that protects the insured from what

Insurable interest and consent

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

Fiduciary

The requirement that agents must account for an promptly remit all insurance funds collected us known as what type of agent responsibility

Pure

What type of risk is insurable

Insurer

In the agent/insurer relationship who is considered the principal

Stock company

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

The agent’s

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

Restriction of coverage, refusal to accept a risk, accepting a risk at a higher rate

What are the strategies used by underwriters to prevent adverse selection

Foreign

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

When insurer approves a prepaid application

In forming an insurance contract, when does acceptance usually occur

Morale

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

Due to chance, definite and measurable, statistically predictable, not catastrophic, coverage cannot be mandatory

What are the five characteristics of an ideally insurable risk

Mutual

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 the policy

Foreign

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

Agent/producer

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

Mutual company

The type of insurance company organized to return any surplus money to its policyholders is known as

When the application is submitted

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

Send the application back to the applicant

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

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

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

Insurance

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

Moral

An applicant conceals relevant health information on the application, the applicant presents what type of hazard

Alien

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

Insurers

What entities make up the Medical Information Bureau

An absolutely true statement upon which the valiidity of the insurance contract is based

What is a warrant in an insurance contract

Speculative

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

Certificate of Authority

What document is required for an insurance company to transact insurance

When the policy is delivered and the premium is paid

When does an insurance policy go into effect

Agent

Who is responsible for making sure the applicant receives the new insurance policy once it’s issued

The cause of loss insured against

Peril is most easily defined as

Moral hazard

An individual’s tendency to be dishonest would be indicative of a

Whether an insurable interest exists between the individuals

If an applicant for a life insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about what

Hazards

Events or conditions that increase the chances of an insured loss occurring are referred to as

At the time of application

When must insurable interest exist in a life insurance policy

Loss

What is the basis for a claim against an insurance policy

Waiver

An insurance company receives an application with some missing info and issues the policy anyway, what is that called

Purchase insurance

What’s the most common way to transfer risk

No

Does a debtor have insurable interest in the life of a lender

Contracts of adhesion

Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as

Conditional

The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract

An applicant submits an application to the insurer

In insurance, an offer is usually made when

Aleatory

An insured pays $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe

Concealment

What term best describes the act of witholding material info that would be crucial to an underwriting decision

Reciprocal

Which insurance option would be best considered a risk-sharing arrangement

The insured will need the written consent of the insurer

Excluding life insurance, under what condition may a policyowner transfer their personal insurance policy to another person

No

Are premiums an example of risk retention