risk avoidance
risk reduction
risk retention
risk transfer - correct answer risk transfer
What is the mathematical concept of probability that
... [Show More] helps insurers estimate the statistical likelihood of mortality or morbidity losses at any given age?
law of large numbers
underwriting principle
law of probability
actuarial principle - correct answer law of large numbers
A person who refuses to engage is risky activities like rock climbing for fear of injury or death is demonstrating which risk management technique?
risk avoidance
risk reduction
risk retention
risk sharing - correct answer risk avoidance
Which of the following is an insurable risk?
the possibility of losing money in stock investments
the possibility of losing money gambling in Las Vegas
the possibility of becoming disabled and unable to earn an income
the possibility of one's home value decreasing due to a drop in market prices - correct answer the possibility of becoming disabled and unable to earn an income
All the following statements regarding reinsurance are correct EXCEPT:
Reinsurance is a risk-sharing process used by insurance companies.
Claims are paid to the policyowner separately by each insurer participating in the reinsurance agreement.
The insurer accepting some of the risk being transferred from another insurer is known as the reinsuring company.
The insurer seeking to transfer some of its risk to another insurer is known as the ceding company. - correct answer Claims are paid to the policyowner separately by each insurer participating in the reinsurance agreement.
All of the following are characteristics of a stock insurance company EXCEPT:
They are governed by a board of directors.
They may issue dividends.
They have minimum financial capital requirements that must be met before they can conduct business.
They are owned by policyowners. - correct answer They are owned by policyowners.
All of the following statements regarding the career agency distribution system are correct EXCEPT:
The managerial form of career agency system uses company employees as the agency managers.
There are two types, the general agency system and the managerial system.
It uses agents who primarily if not exclusively represent one insurer.
Personal producing general agents (PPGAs) are commonly hired to manage career agencies. - correct answer Personal producing general agents (PPGAs) are commonly hired to manage career agencies.
The federal Risk Retention Act of 1986 contains guidelines for which of the following entities?
reinsurance companies
surplus lines insurance companies
Fraternal insurance companies
risk retention groups - correct answer risk retention groups
Which of the following best describes an agent's responsibilities?
An agent has no fiduciary duty toward insurers, applicants, or insureds.
An agent has to act in the best interests of insureds, applicants, and insurers.
An agent only has to act in the best interests of the insured or applicant, but not the insurer.
An agent only has to act in the best interests of the insurer he or she represents. - correct answer An agent has to act in the best interests of insureds, applicants, and insurers.
An insurance producer tells a life insurance applicant that he has the authority to waive the medical exam that is normally required by the insurer with every application. The insurer may be required to accept the application without a medical exam due to the producer's:
implied authority
express authority
apparent authority
imputed authority - correct answer apparent authority
All of the following are part of a producer's responsibilities to an applicant EXCEPT:
avoiding replacing an insurance policy unless doing so will clearly benefit the applicant
research other insurance companies' insurance products if requested by the applicant
disclose all important information about a proposed policy
recommend insurance products that are suitable for the customer's needs - correct answer research other insurance companies' insurance products if requested by the applicant
The purpose for the Policy Summary, which must be given to every insurance applicant before an application is signed, is to:
explain the step-by-step process involved in purchasing the recommended product
explain the general features, benefits, and conditions of the type of insurance being considered
disclose all the hidden costs associated with the policy being applied for
provide buyers with details of the specific insurance contract they are considering for purchase - correct answer provide buyers with details of the specific insurance contract they are considering for purchase
If an applicant for an insurance policy submits an application without the first premium, which of the following is correct?
The insurer may not make a counteroffer to the applicant.
The applicant has invited the insurer to make an offer.
The insurer has made an offer to the applicant.
The applicant has made an offer to the insurer. - correct answer The applicant has invited the insurer to make an offer.
How long from when an insurance contract is issued does an insurance company have to void a life insurance policy on the basis of fraud?
12 months
24 months
18 months
6 months - correct answer 24 months
Statements made on a life insurance application are considered:
conditional promises
representations
warranties
unconditional promises - correct answer representations
An applicant for a $500,000 whole life insurance policy pays the initial premium along with his application. In this case, what has the applicant done?
accepted an offer from the insurer
accepted a counteroffer from the insurer
made a counteroffer to the insurer
made an offer to the insurer - correct answer made an offer to the insurer
All the following statements regarding perils and hazards are correct EXCEPT:
A hazard is a condition that raises the chance of a peril occurring.
Smoking cigarettes is an example of a peril.
A peril is the immediate cause of a loss and is the event that insurance protects against.
Indifference to loss is an example of a hazard. - correct answer Smoking cigarettes is an example of a peril.
The tendency of a person diagnosed with a serious illness to try to buy life or health insurance is known as:
adverse selection
concealment
risk avoidance
exposure reduction - correct answer adverse selection
All of the following are elements of an insurable risk EXCEPT:
Any losses resulting from the insured peril must be definable as to time, cause, and location.
The loss must be measurable.
The insured peril must be outside of the insured's control.
Losses resulting from the insured peril must be potentially catastrophic. - correct answer Losses resulting from the insured peril must be potentially catastrophic.
From an insurance perspective, the term "loss exposure" means: [Show Less]