Buying life or health insurance is an example of which risk management technique?
risk avoidance
risk reduction
risk retention
risk transfer - risk
... [Show More] transfer
What is the mathematical concept of probability that 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 - 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 - 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 - 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. - 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. - 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. - 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 - 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. - 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 - 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 - 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 - 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. - 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 - 24 months
Statements made on a life insurance application are considered:
conditional promises
representations
warranties
unconditional promises - 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 - 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. - 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 - 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. - Losses resulting from the insured peril must be potentially catastrophic.
From an insurance perspective, the term "loss exposure" means:
the extent to which an insurer discloses its marketing practices
the extent to which insurers are required to open their financial books for public inspection
the extent to which an insurer is subject to a possible loss
the extent to which an insurer discloses the components making up its policy premium rates - the extent to which an insurer is subject to a possible loss
A not-for-profit insurance provider operated by an organization that has a representative form of leadership, operates on a lodge system, and exists solely for the benefit of its members and their beneficiaries is called a:
mutual insurance company
home service insurance company
risk retention group
fraternal insurance company - fraternal insurance company
Which of the following is an example of an unauthorized insurance company in Illinois?
Company C, a Florida-based company that does not hold a certificate of authority Illinois but whose products are approved by the Illinois insurance department
Company A, an Illinois-based company that holds a certificate of authority in Illinois and 32 other states
Company B, an Iowa-based company that does not hold a certificate of authority in Illinois and sells products that are not approved by the Illinois insurance department
Company D, a Canadian company that holds a certificate of authority in Illinois - Company B, an Iowa-based company that does not hold a certificate of authority in Illinois and sells products that are not approved by the Illinois insurance department
The Excalibur Insurance Company, domiciled in Iowa, transacts business legally in Nebraska. In Nebraska, Excalibur is a(n):
non-admitted insurance company
alien insurance company
foreign insurance company
domestic insurance company - foreign insurance company
The Royale Insurance Company, domiciled in Toronto, Canada, transacts business legally in New York. In New York, Royale is classified as a(n):
unauthorized insurance company
domestic insurance company
alien insurance company
foreign insurance company - alien insurance company
The contract between the producer and insurer, setting forth certain acts and duties the producer is specifically authorized to perform, describes the producer's:
express authority
implied authority
agency authority
apparent authority - express authority
The main purpose for errors and omissions insurance (E&O) is to:
cover damages that arise due to services a producer non-willfully failed to render
allow the producer to be less diligent in complying with insurance sales disclosure requirements
provide legal protection to the producer who is charged with willfully engaging in an unfair trade practice
pay for an insurance company executive to meet with a policyowner to correct an error made by the producer during the sales process - cover damages that arise due to services a producer non-willfully failed to render
With respect to the field of insurance, who are the two parties bound by the law of agency?
the producer and the policyowner
the insurance company and the producer
the insurer and the insured
the state insurance department and the insurer - the insurance company and the producer
In its fiduciary responsibility to its principal, a producer is required to do all the following EXCEPT:
fully disclose to the insurer all pertinent information that affects the placement of an insurance policy
solicit business that is certain to be profitable to the insurer
fully account for premiums and submit them to the insurer on a timely basis
carry out authorized activities with reasonable care - solicit business that is certain to be profitable to the insurer
When first meeting prospective insurance applicants, a producer must give them a document that explains the general features, benefits, and conditions of the type of insurance being considered, which is called a
policy summary
buyer's guide
key points document
prospectus - buyer's guide
In addition to the fiduciary responsibility they have with all customer premiums and assets, producers are expected to do all the following EXCEPT:
avoid all forms of rebating
disclose all pertinent information concerning a proposed policy
seek opportunities to replace existing policies with newer products
make sure all product recommendations are suitable for the customer - seek opportunities to replace existing policies with newer products
All the following statements regarding apparent authority are correct EXCEPT:
The agent's contract does not create it.
The insurer does not intend it.
The insurer is not liable for an agent's acts when he or she is acting under apparent authority.
A third party reasonably believes that the producer has it based on the reasonable statements and actions by the insurer and agent. - The insurer is not liable for an agent's acts when he or she is acting under apparent authority.
The purpose for the Buyer's Guide, which must be given to every insurance prospect in the first meeting with a producer, is to:
advise the buyer to consider an alternative to the insurance product being considered
explain the general features, benefits, and conditions of the type of insurance being considered
provide buyers with details of the insurance policy they are considering for purchase
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
All the following types of insurance involve a personal contract EXCEPT:
a life insurance policy
an automobile policy
a disability income insurance policy
a medical expense insurance policy - a life insurance policy
What is the term for voluntarily giving up a known right?
estoppel
waiver
conditional
voidable - waiver
Tim had paid only four premiums totaling $1000 on his health insurance policy when he was diagnosed with cancer. The insurance company paid more than $100,000 to cover the medical bills for his treatment during the next year. This situation demonstrates which of the following characteristics of insurance contracts?
They are contracts of adhesion.
They are unilateral.
They are personal.
They are aleatory. - They are aleatory.
Which of the following statements about representations and warranties is most correct?
Promises made by the insurer in the insurance contract are deemed representations.
Insurers can rescind (cancel) an insurance contract if a misrepresentation is discovered on the application during the contestability period.
A statement made on the application which is true to the applicant's best knowledge is deemed a misrepresentation if it is later discovered to be inaccurate.
Statements made by the applicant on the application are deemed warranties. - Insurers can rescind (cancel) an insurance contract if a misrepresentation is discovered on the application during the contestability period.
If the Texas insurance commissioner asks an insurer or producer for information about its financial condition or any matter involving its business transactions, the insurer or agent must reply in writing within:
45 days
48 hours
30 days
10 days - 10 days
To a consumer in Texas, an insurance company that is headquartered in Missouri but admitted to do business in Texas is a(n):
nonresident insurer
domestic insurer
alien insurer
foreign insurer - foreign insurer
It is illegal for an insurance company to transact insurance business in Texas without:
selling all types insurance
maintaining its corporate home office in Texas
a certificate of authority
maintaining both a career agency and independent broker distribution system - a certificate of authority
The Texas Department of Insurance regulates the state's insurance industry. Which of the following is NOT one of its responsibilities?
issuing certificates of authority to insurers
licensing producers
imposing civil and criminal penalties on producers who violate the state's insurance laws
overseeing the marketing practices of insurers - imposing civil and criminal penalties on producers who violate the state's insurance laws
Harvey and Jim want to set up an insurance partnership that would advertise and place insurance. They both will sell policies in the partnership. How many licenses are required?
three licenses-one for each partner and one for the partnership
two licenses only-one each for Jim and Harvey
one license, for the partnership only
one agent's license for either Jim or Harvey - three licenses-one for each partner and one for the partnership
Abby, who lives in New Mexico where she is a licensed life insurance agent, wants to apply for a nonresident license in Texas. To do so, she must submit which of the following to TDI?
a copy of her criminal history records
an application, fee and letter of certification from her home state
a set of her fingerprints
proof that she has completed an insurance pre-license education course - an application, fee and letter of certification from her home state
Which of the following persons must obtain a life and health insurance counselor's license?
a licensed life insurance agent who sells policies for a commission
a licensed lawyer
a salaried employee of an insurance company
a financial advisor who offers insurance recommendations for a fee - a financial advisor who offers insurance recommendations for a fee
Tom, Henry, Stacey, and Alison are licensed agents in Texas. Given the following circumstances, which of them will NOT be subject to disciplinary action by the Texas Department Insurance?
Alison, who was convicted of a misdemeanor traffic violation
Tom, who misrepresented the terms of an insurance policy to induce a prospect to buy the policy
Stacey, who is primarily engaged in controlled business
Henry, who willfully violated Texas insurance laws by misappropriating premiums - Alison, who was convicted of a misdemeanor traffic violation
Samantha has a life insurance license in Missouri and wants to sell life insurance part-time in Texas. Which of the following describes what she can or cannot do given her licenses?
She can sell in Texas using her Missouri license.
She must work full-time as an agent in Texas for Texas to grant a license to her.
She must submit a letter of certification and an application.
She cannot sell in Texas unless she establishes a residence here. - She must submit a letter of certification and an application.
Larry, Brian, Susan, and Jennifer just started working for AllPro Insurance Company in Texas. Based on their job descriptions below, which of them is NOT an agent?
Jennifer, who advertises insurance policies for AllPro
Larry, who receives insurance applications from the public
Susan, who collects insurance premiums for AllPro
Brian, who is a vice president in AllPro's human resources department and does not receive commissions - Brian, who is a vice president in AllPro's human resources department and does not receive commissions
Molly, Lisa, Andy, and Chris want to become licensed agents in Texas. Which of them would be eligible to obtain a license?
Andy, who only wants to work part-time as an agent but otherwise meets the licensing requirements
Chris, who passed the licensing examination 18 months ago and otherwise meets the licensing requirements to become a resident agent
Molly, who is 17 years old and will be graduating from high school this year
Lisa, who failed the licensing examination but completed an insurance prelicense education course - Andy, who only wants to work part-time as an agent but otherwise meets the licensing requirements
In Texas, a person is considered to be an agent (producer) if he or she does any of the following on behalf of an insurance company, EXCEPT:
distributes information relating to coverage or rates
adjusts a claim or loss
writes and submits an insurance application to the insurer
processes applications as a salaried employee in the insurer's home office - processes applications as a salaried employee in the insurer's home office
Janet has been continuously licensed as an agent in Texas for the past 25 years. Her friend Steven is a nonresident licensee in Texas and every year completes his state's continuing education requirements. When they ask you for advice on meeting the Texas continuing education requirements, you inform them that:
only Steven must complete Texas's continuing education requirements
neither Steven nor Janet needs to comply with Texas's continuing education requirements
only Janet must complete Texas's continuing education requirements
both Steven and Janet must comply with Texas's continuing education requirements - neither Steven nor Janet needs to comply with Texas's continuing education requirements
Janet is a licensed life insurance agent in Texas and was so busy with her insurance practice that she forgot to complete all of her continuing education credits. How long is the grace period she has to make up the missing credits?
six months
45 days
She cannot make up the missing credits.
90 days - She cannot make up the missing credits.
To maintain their license, resident insurance producers in Texas must meet a continuing education (CE) requirement:
once, before the end of their initial two-year license renewal cycle
once, within five years of becoming licensed
every year
in every two-year license renewal cycle - in every two-year license renewal cycle
Fred's license was revoked on January 15, 2019 because he had engaged in controlled business on a regular basis. If he did not seek a judicial review of the license revocation, what is the earliest date that he can re-apply for an agent's license?
January 15, 2024
January 15, 2023
January 15, 2021
Fred cannot re-apply for an agent's license. - January 15, 2024
Which of the following is NOT a penalty that TDI may impose?
reprimand
suspension of license
imprisonment for up to 5 years
administrative penalty - imprisonment for up to 5 years
Harry meant to complete his CE courses on time but was just too busy to do it. How long of an extension is available to Harry to make up the missing credits?
6 months
one year
none
90 days - none
Agents who willfully violate a Texas insurance law may be subject to disciplinary action. Which of the following is NOT a remedy available to the insurance commissioner?
requiring the agent to make restitution
assessing an administrative penalty
suspending or revoking the agent's license
imposing a jail sentence - imposing a jail sentence
In Texas, holders of limited lines and county mutual licenses must complete how many hours of continuing education (CE) every two years?
five hours
24 hours
10 hours
two hours - 10 hours
The Commissioner issued a cease and desist order against Nether Insurance Company for committing certain practices when settling claims. Nether ignores the order. The Commissioner may refer the case to which of the following for enforcement?
State attorney general
State supreme court
Sheriff
Governor - State attorney general
An insurer's record of complaints must include all of the following information EXCEPT:
The total number of complaints received
A classification of complaints by line of insurance
The time spent processing each complaint
The commissions paid on policies for which complaints were received - The commissions paid on policies for which complaints were received
Superior Insurance Company receives a claim and proof of loss from an insured on April 1. It investigates the claim on April 5 and determines that the claim is a valid one on April 12. The insured submits additional information in support of the claim on May 1. On which date did Superior first become obligated to settle the claim?
May 1
April 1
April 5
April 12 - April 12
Which of the following practices may an insurer adopt for lawfully settling its claims?
Compelling insureds to sue the insurer first before it offers a settlement.
Requiring the insured to sign a full release after getting payment on part of a claim.
Requiring the insured to provide his or her federal income tax records with a claim.
Requiring a prompt investigation of a claim, even if the insured has not submitted all proofs of loss. - Requiring a prompt investigation of a claim, even if the insured has not submitted all proofs of loss. [Show Less]