Insurance Questions & Answers. 2022/2023. 100% Accurate, Graded A

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Insurance Questions & Answers. 2022/2023. 100% Accurate, Graded A The law of large numbers states that: A) the smaller the number of risks combined into one group, the less uncertainty there... will be as to the amount of loss that will be incurred. B) the larger the number of risks combined into one group, the less uncertainty there will be as to the amount of loss that will be incurred. C) the larger the number of risks combined into one group, the smaller the loss will be to any one individual in that group. D) the smaller the number of risks combined into one group, the larger the loss will be to any one individual in that group. - ✔?B) the larger the number of risks combined into one group, the less uncertainty there will be as to the amount of loss that will be incurred. Self-insurance is an example of what kind of risk treatment? A) Transference. B) Retention. C) Avoidance. D) Reduction. - ✔?B) Retention. Self-insurance is a form of risk retention because the individual or business entity personally retains the risk and must accept any resulting economic loss. Which of the following does NOT describe a penalty for violating the Fair Credit Reporting Act? A) Punitive damages awarded by a court. B) Reasonable attorney's fees. C) Either fines or imprisonment. D) loss of license indefinitely - ✔?D) loss of license indefinitely Who would NOT have an insurable interest for a life insurance policy? A) The spouse of the insured. B) The closest friend of the insured. C) The employer of a key employee insured. D) The daughter of the insured. - ✔?B) The closest friend of the insured. An advertisement for health insurance that uses an unusual amount paid for a unique claim on an advertised policy as an illustration of the policy's benefits: A) must be approved by the Insurance Commissioner before it can be published. B) is misleading and must not be used. C) may be used if it is actually true. D) serves as an excellent example to inform the public about the policy's benefits. - ✔?B) is misleading and must not be used. A corporation or other limited liability association that assumes and spreads the liability exposure for any of its group members is called: A) a stock insurer. B) a risk retention group. C) a mutual insurer. D) a reciprocal insurer. - ✔?B) a risk retention group. All members of a risk retention group have an ownership interest in the group and must be in businesses that expose them to similar liabilities. With regard to life insurance, all of the following statements are correct EXCEPT: A) spouses are automatically considered to have insurable interests in each other. B) A creditor has an insurable interest in a debtor. C) insurable interest must be maintained throughout the life of the contract. D) all individuals are considered to have insurable interests in themselves. - ✔?C) insurable interest must be maintained throughout the life of the contract. It does not have to be maintained throughout the life of the contract, nor is it necessary at the time of claim. What authority establishes the minimum number of persons to be insured under a group health insurance policy? A) State law. B) The employer. C) Federal law. D) The insurance company. - ✔?A) State law. Which of the following actions is best described as misrepresentation? A) Intentionally telling a prospect that a particular life insurance policy provides for the payment of dividends when it does not. B) Convincing a policyowner to lapse their present policy in order to sell them a new policy with a different insurance company. C) Not informing a health insurance policy buyer that the policy excludes preexisting conditions. D) Inducing a policyowner to replace their current policy with a new policy with that same insurer. - ✔?C) Not informing a health insurance policy buyer that the policy excludes preexisting conditions. Omitting or misrepresenting information about the benefits, advantages, conditions or terms of a policy is considered misrepresentation. All of the following, if performed frequently enough to indicate a general business practice, are unfair claims settlement practices EXCEPT: A) attempting to settle claims on the basis of an application that was altered without the insured's consent. B) making claim payments not accompanied by a statement setting forth the coverage under which payments are made. C) refusing to pay claims without conducting a reasonable investigation based on all available information. D) delaying the payment of claims by requiring submission of preliminary claim reports and formal proof of loss that contain different information. - ✔?C) refusing to pay claims without conducting a reasonable investigation based on all available information. All of the following have an insurable interest in the person insured EXCEPT: A) a neighbor. B) an employer. C) a spouse. D) a child. - ✔?A) a neighbor. Controlled business is insurance sold to cover the lives, businesses, properties, or risks of all the following EXCEPT: A) the insurance producer. B) a friend of the insurance producer. C) an employer of the insurance producer. D) the spouse of the insurance producer. - ✔?B) a friend of the insurance producer. Which of the following statements describes franchise insurance? A) It is treated in the same manner as any group insurance plan. B) It may be issued to individuals with or without evidence of insurability. C) It is available only to persons who deliver materials to a central point. D) It is issued only to certain businesses that are owned by individuals. - ✔?B) It may be issued to individuals with or without evidence of insurability. Franchise insurance is coverage issued as individual accident and health insurance policies distributed on a mass merchandising basis. It is administered by group methods with or without evidence of insurability. A stock insurance company that issues both participating and nonparticipating policies is classified as: A) a combined company. B) a mixed company. C) an all lines company. D) a blended company. - ✔?B) a mixed company. Assume an agent stresses the following points in a sales interview while recommending a participating 30-pay life policy to a 37-year-old prospect. Which of the following statements constitutes misrepresentation? A) Dividends are not guaranteed for the future. B) The policy will be fully paid up in 30 years. C) The policy endows in 30 years. D) The policy's cash value will build at a faster rate than that in a straight life policy. - ✔?C) The policy endows in 30 years. A 30-pay life policy does not endow (reach a point at which cash value equals face amount) in 30 years; it is simply paid up. A life insurance company organized in Pennsylvania, with its home office in Philadelphia, is licensed to conduct business in New York. In New York, this company is classified as: A) an alien company. B) a domestic company. C) a foreign company. D) a regional company. - ✔?C) a foreign company. A foreign insurance company operates within a state where it is not chartered and where its home office is not located. In the United States, the primarily regulatory authority for the insurance industry is the: A) U.S. Supreme Court. B) U.S. Senate. C) National Association of Insurance Commissioners. D) States. - ✔?D) States. The insurance industry is regulated primarily by the states, rather than by the federal government or a national insurance association. The Commissioner examines a domestic insurer to accomplish all of the following EXCEPT: A) to conduct periodic examinations of an insurer's books and records. B) to determine whether a company will be granted a certificate of authority. C) to approve the location of the insurer's offices. D) to investigate alleged violations of insurance law. - ✔?C) to approve the location of the insurer's offices. It is not one of the Commissioner's responsibilities to approve the location of the insurer's office. The phrase "the applicant for insurance has more to gain if the insured continues to live than if the insured dies" is the rule defining: A) a legal wagering contract. B) the aleatory nature of an insurance contract. C) insurable interest. D) one's legal capacity to enter into an insurance contract. - ✔?C) insurable interest. A person acquiring a life insurance contract must be subject to loss upon the death of the individual to be insured. This is known as insurable interest and it is required before a life insurance policy will be issued. Which of the following statements regarding insurance company organization is CORRECT? A) A stock company pays dividends to its policyholders. B) A policyholder in a mutual company may receive a dividend. C) Stock companies are owned by the policyholders. D) Mutual companies do not declare dividends. - ✔?B) A policyholder in a mutual company may receive a dividend. What is the purpose of the Fair Credit Reporting Act? A) It prohibits insurance companies from obtaining reports on applicants from investigative agencies. B) It gives consumers the right to question reports made about them by investigative agencies. C) It protects credit companies during the course of their investigations. D) It guarantees that credit reports will remain confidential and not accessible to businesses that do not sell insurance. - ✔?B) It gives consumers the right to question reports made about them by investigative agencies. A commercial insurer can take all of the following forms EXCEPT: A) mutual insurance company. B) fraternal benefit society. C) stock insurance company. D) individual benefit society. - ✔?D) individual benefit society. All of the following statements pertaining to the Fair Credit Reporting Act are correct EXCEPT: A) the Fair Credit Reporting Act is a state law that helps to assure accurate reporting of information about consumers. B) the Fair Credit Reporting Act does not apply to insurance companies who use their own staffs to investigate an applicant for insurance. C) a life insurance company obtains a consumer report on Burl, an applicant, without advising him of its intended action. The company has violated the Fair Credit Reporting Act. D) Peg has an application for life insurance rejected because of an unfavorable consumer report. She has a right to know what information the reporting agency has and can insist that any errors in the data be corrected. - ✔?A) the Fair Credit Reporting Act is a state law that helps to assure accurate reporting of information about consumers. The Fair Credit Reporting Act is a federal law, not a state law. As corrected, the statement is also true. Elizabeth is shopping for a whole life insurance policy and is evaluating the financial strength and stability of various insurers. As her financial advisor, you would advise Elizabeth to purchase a policy from a company that has a rating of: A) A++ to B+. B) A+ to A. C) A++ to B. D) A++ to A-. - ✔?D) A++ to A-. Regular notices sent to policyowners for payment of their life insurance policy premiums reflect: A) gross single premium. B) gross premium. C) net level premium. D) net single premium. - ✔?B) gross premium. Assume the following persons buy identical life insurance policies from the same company. Who would pay the LOWEST premium rate? A) Linda, age 30. B) Arthur, age 42. C) Brandon, age 34. D) Thomas, age 30. - ✔?A) Linda, age 30. Since female mortality rates are generally lower than those for males, a 30-year-old woman would pay less for life insurance than a 30-year-old man. The authority that an insurer gives to its agents by means of the agent's contract is known as: A) fiduciary responsibility. B) implied authority. C) general authority. D) express authority. - ✔?D) express authority. Express authority is what the insurer gives to its agent through means of the agency agreement. Bob is an agent for the Assured Insurance Company. He visits Mary, a prospect, in her home. He arrives with business cards, sample policies from Assured, and an Assured rate book. He recommends Assured policies that can meet Mary's needs for insurance. Which of the following terms describes the kind of authority that Bob has in this situation? [Show More]

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