Q-Bank Life & Health

1278 terms by pwc5001 

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Which of the following statements BEST summarizes the function of insurance?

It spreads financial risk over a large group so as to minimize the loss to any one individual.

With regard to insurance, risk can be defined as:

uncertainty regarding loss

The risk that involves the chance of both loss and gain is:

speculative risk.

All of the following statements pertaining to risk are correct EXCEPT

a stock market venture is an example of a pure risk

Which of the following statements regarding risk factors is NOT correct?

Jill is 15 years younger than her supervisor, and as such, poses a higher risk to an insurance company.

All forms of insurance are alike in all of the following ways EXCEPT:

the nature of the perils covered is the same

Alcoholism is an example of a:

moral hazard.

For health insurance purposes, which of the following is NOT a peril?

Alcoholism

Major risk factors in health insurance underwriting include the following EXCEPT:

marital status.

Which of the following would be considered a moral hazard in underwriting a health insurance risk?

Excessive drinking

Assume lightning strikes a home and starts a fire that destroys its structure and contents. By insurance definition, the fire is the:

peril

A flood is an example of

a peril

Self-insurance is an example of what kind of risk treatment?

Retention

Treating risk by purchasing insurance is an example of:

transferring risk

Paul is a single father with two young daughters. He has decided to give up his two favorite hobbies--skydiving and race car driving--because they are risky pursuits that could lead to his premature death. This method of dealing with risk is called risk:

avoidance

Bob and Tina's California neighborhood was ravaged by wildfires last summer. As a result, they installed a sprinkler system in their home to minimize damage in the event of a fire. This method of dealing with risk is called:

risk reduction

The law of large numbers states that:

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.

Assume there are four different mortality tables. Of these, the most reliable would be the mortality table covering:

10,000,000 lives

Which of the following situations constitutes an insurable interest?

The policyowner must expect to suffer a loss when the insured dies or becomes disabled.

With regard to life insurance, all of the following statements are correct EXCEPT:

insurable interest must be maintained throughout the life of the contract.

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:

insurable interest

Alan, age 39, is married and has a small son. He is employed as a sales manager by R.J. Links, a sole proprietorship that owes much of its success to Alan's efforts. He recently borrowed $50,000 from his brother-in-law, Pete, to finance a vacation home. On the basis of these facts, which of the following individuals does NOT have an insurable interest in Alan's life?

One of his customers

With a life insurance contract, an insurable interest must exist:

at the inception of the contract

Upon the issuance of a life insurance policy, an insurable interest must exist between:

the applicant and the insured

Who would NOT have an insurable interest for a life insurance policy?

The closest friend of the insured

Which of the following people would NOT have an insurable interest for a life insurance policy?

The closest friend of the insured

An insurable interest may be found in which of the following?

An employer in the life of a key employee

An individual may purchase a life insurance policy on all of the following persons EXCEPT:

a neighbor

With regard to life insurance, all of the following statements are correct EXCEPT:

an insurable interest must exist at the time of the claim

Insurable interest must exist between the policyowner and the beneficiary:

at the time the contract is entered into

An insurable interest exists between all of the following individuals EXCEPT:

two neighbors who are not related.

Insurable interest exists in all of the following relationships EXCEPT

teacher and student

If Tony is insured under a life insurance policy, all of the following individuals have an insurable interest in Tony EXCEPT:

Marcie, his ex-wife, who has remarried

All of the following are considered to have insurable interests when they purchased insurance on the life of another EXCEPT:

a woman who buys insurance on her next-door neighbor

All of the following statements about insurable interest are correct EXCEPT:

A policy obtained by a person without an insurable interest in the insured is enforceable

Which of the following risks is insurable?

Pure risks.

All of the following are elements of an insurable risk EXCEPT

the loss must be catastrophic

In order to be insured, a group must be randomly selected in order to avoid:

adverse selection

From an insurer's perspective, when a group is organized for some definite purpose other than to obtain group insurance, it is known as:

a natural group

With regard to insurable risks, which of the following statements is NOT correct?

An insurable risk must involve loss that is within the insured's control.

A contract based on the principle of indemnity:

attempts to return the insured to his original financial position

Which of the following is an "insurer"?

Insurance company.

commercial insurer can take all of the following forms EXCEPT

individual benefit society

All of the following are considered to be insurers EXCEPT:

a group of employees enrolled in an insurance plan.

Which one of the following would be considered an insurer?

Company

Which of the following statements pertaining to life insurance companies is CORRECT?

The primary purpose of a life insurance company that is organized as a stock company is to earn a profit for its stockholders.

A stock insurance company that issues both participating and nonparticipating policies is classified as:

a mixed company

All of the following statements about stock insurance companies are correct EXCEPT:

they must be nonprofit corporations

An incorporated insurer whose capital is divided into shares and owned by its stockholders is a:

stock insurer

Which kind of insurance company is owned by individuals who buy shares of it and receive the profits in the form of dividends?

Stock insurance company

Which one of the following is owned by shareholders and receives profits in the form of dividends?

Stock insurers

An insurance company that is owned by its policyowners is known as a:

mutual life insurance company

The term mutualization refers to:

transferring control of a company from stockholders to policyowners

An advance premium assessable mutual company:

charges a premium at the beginning of the policy period.

John works for a mutual insurance company that was formed to handle the insurance needs of lawyers. The type of company that John works for is called a:

risk retention group

Who are the owners of a mutual insurance company?

Policyowners

Concerning group health insurance plans, which of the following is a CORRECT statement?

Plans issued by mutual companies usually provide for dividends.

In a mutual insurance company, any surplus remaining after the company pays its operating costs is:

distributed to policyholders through policy dividends

Which of the following is incorporated without capital stock and has an elected governing body?

Mutual insurer

Which of the following is an incorporated insurer that is owned by its policyholders and does not have capital stock or shares?

Mutual company.

Which of the following statements regarding insurance company organization is CORRECT?

A policyholder in a mutual company may receive a dividend.

A mutual insurance company is an incorporated entity owned by its:

policyowners

All of the following statements about mutual insurance companies are correct EXCEPT:

they are unincorporated

An incorporated insurer that does not have permanent stock is a

mutual insurer

Which one of the following is an incorporated insurer, without capital stock, that has a governing body elected by its policyholders?

Mutual insurer

What type of insurance companies are organized and incorporated under state laws but have no stockholders?

Mutual insurers

A group of individuals who agree to share each others' losses is known as:

a reciprocal exchange

An unincorporated group of subscribers who operate through an attorney-in-fact to provide indemnity insurance for each other is called:

a reciprocal exchange

To qualify as a fraternal benefit society, an organization must have all of the following EXCEPT:

a large sales force

The Goodwill Society was formed as a fraternal benefit society to help underprivileged children. The founding members set up the society as a for-profit entity, and established a representative form of government with elected officers. The society also sells life insurance only to members of the society, and is considering offering sickness and accident insurance to its members as well. Which one of the following statements about the society is CORRECT?

The society must be operated as a nonprofit entity if it is a fraternal benefit society.

The Order of the Benevolent Brothers was formed to raise money for private religious schools in cities. A nonprofit organization with a representative form of government and elected officers, it sells life insurance only to its members, and is considering offering health insurance as well. The Order would be considered a:

fraternal benefit society

Which of the following statements is NOT correct regarding fraternal benefit societies?

They operate solely for profit.

All of the following statements about fraternal benefit societies are correct EXCEPT:

insurance may be sold to members as well as nonmembers.

A nonprofit incorporated society that does not have capital stock and operates for the sole benefit of its members is known as:

a fraternal benefit society

Which one of the following is NOT a characteristic of fraternal benefit societies?

Organization as profit-making operation with capital stock.

Which one of the following statements about fraternal benefit societies is NOT correct?

They are exempt from the licensing requirements if they provide insurance benefits to their members only

Which of the following statements about Lloyd's of London is NOT correct?

It was formed to insure people in the same business or profession.

An insurer of an insurer is known as:

a reinsurer

A contract in which one insurer cedes all or part of a risk to another insurer is known as:

reinsurance.

In reinsurance, the insurance company that transfers part of a risk it underwrites to another insurer is called the

ceding insurer

Agent licenses can be issued for all of the following kinds of insurance EXCEPT:

surplus lines through appropriate brokers.

A corporation or other limited liability association that assumes and spreads the liability exposure for any of its group members is called

a risk retention group

Self-insurance is:

practiced by organizations that establish reserves to protect themselves against loss.

Suppose a life insurance company is organized in Detroit, where it maintains its home office. In Michigan, the company is classified as

a domestic company

Which of the following terms correctly describes a life insurance company that is organized outside the United States or its possessions?

Alien

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 foreign company.

An insurance company formed under the laws of any country other than the United States would be considered a(n):

alien insurance company.

Professional Insurers, Inc. was incorporated in Delaware, where it holds a certificate of authority. It would like to do business in Massachusetts but is not licensed in the state. In Massachusetts, Professional Insurers, Inc. is considered a(n):

nonadmitted insurer

An individual appointed by a life and health insurer to administer its business in a given territory is called

a general agent

A field representative who works between the insurance company's central office and the agency force in the representative's territory is:

a special agent

An agent represents an insurance company in all of the following ways EXCEPT:

the agent searches for the least expensive insurance for a consumer

A captive agent who has an exclusive contract with an insurer may:

not represent another insurer selling an identical policy.

A licensed independent life or health insurance producer may represent:

1 or more authorized insurers

Which of the following statements regarding mass marketing insurance is CORRECT?

It is marketed through various forms of print, visual, and aural media.

Insurers that deal directly with insureds without the use of agents are known as:

direct writers

Jessica saw an advertisement in the local newspaper for a new type of health insurance policy offered by Protective Insurers, Inc. She noticed that Protective Insurers was also selling these policies through vending machines. Protective Insurers would be considered what type of insurer?

Direct writer

An insurance company that transacts insurance directly with consumers without the assistance of producers is called

a direct response company.

In the direct-selling marketing system, insurance can be sold to the public through all of the following methods EXCEPT

agents

Which of the following statements describes franchise insurance?

It may be issued to individuals with or without evidence of insurability.

In an insurance transaction, who does a licensed agent legally represent?

Insurer

Which of the following statements regarding professions in the insurance business is CORRECT?

A public adjuster represents the insured.

In general, people who represent fraternal benefit societies to solicit insurance are:

considered insurance producers and must meet all licensing requirements.

An insurance producer who solicits insurance on behalf of an insurer represents the:

insurer

Who represents an insurance company in an insurance transaction?

Agent

According to insurance law, an insurance agent is defined as a person who:

solicits, negotiates, procures or effects insurance or annuity contracts on behalf of an insurer

The individual who represents the insured, not an insurer, in any controversy and helps to negotiate insurance contracts for others is known as a(n):

Broker

In an insurance contract, who represents the insured?

Broker

Who does an insurance broker represent in an insurance transaction?

Insured

Who negotiates insurance contracts and represents the insured in a controversy?

Broker

In an insurance transaction, licensed brokers legally represent which of the following?

Applicant and insured

A person authorized by an agent or broker to solicit insurance applications and collect premiums is called a(n):

solicitor

Which of the following individuals is an independent contractor who is paid a fee from his client to provide advice about insurance?

Consultant

Which of the following insurance professionals advises others about their insurance needs and coverages and receives compensation that is not directly related to the amount of any insurance sold?

Consultant

Suppose a mid-sized insurance company makes a modest contribution to a candidate's gubernatorial campaign. This contribution is

illegal

What did passage of the McCarran-Ferguson Act accomplish with respect to the regulation of the insurance industry?

It ensured continued state regulation of insurance

The insurance industry in the United States is primarily regulated by:

State government.

Of the following governmental entities, which has primary responsibility for regulating the insurance industry in the United States?

State

All of the following statements regarding when a person may purchase a credit report on another are correct EXCEPT:

it is not necessary to inform an applicant that a report on him has been ordered

Which of the following statements regarding the consumers' right to opt out of having their financial information shared with third parties is CORRECT?

The privacy notice given to consumers must explain how a consumer may opt out of having his information shared.

What is the purpose of the Fair Credit Reporting Act?

It gives consumers the right to question reports made about them by investigative agencies.

All of the following statements pertaining to the Fair Credit Reporting Act are correct EXCEPT:

the Fair Credit Reporting Act is a state law that helps to assure accurate reporting of information about consumers.

Which of the following acts of legislation requires fair and accurate reporting of a consumer's buying and bill-paying history?

Fair Credit Reporting Act.

Typically, within how many days must an applicant be notified that a credit report has been requested by the insurer?

3 days.

What authority establishes the minimum number of persons to be insured under a group health insurance policy?

State Law

When conducting examinations, the Commissioner of Insurance can do all of the following EXCEPT:

require parties to appear only in person.

Which of the following is the organization that actively opposes federal oversight of insurance business?

NCOIL

Parties to a public hearing held by the Commissioner of Insurance have the right to do all of the following EXCEPT

withhold incriminating evidence

The Commissioner of Insurance is responsible for all of the following duties EXCEPT:

passing insurance laws and regulations

All of the following are duties of the director of insurance EXCEPT:

creating insurance laws for the state.

When appropriate, the Commissioner reports a violation of insurance law to:

attorney general

The Commissioner is responsible for all of the following duties EXCEPT:

reporting violations of insurance laws to the state police

All the following are duties of the Commissioner EXCEPT:

drafting and enacting insurance laws

When appropriate, the Commissioner reports a violation of insurance law to the:

district attorney or the attorney general

The chief officer of the state insurance department is NOT responsible for

enacting insurance laws

All of the following are examples of unfair claim settlement practices EXCEPT:

requiring a claimant to fill out extensive proof of loss forms

All of the following are considered to be unfair claims settlement practices EXCEPT:

compelling a claimant to undergo medical examinations by an independent physician.

An example of an unfair claim settlement practice would include

advising a claimant of the possibility that, should the claimant reject a settlement offer, an arbitration award might be less than the offer.

All of the following actions are considered unfair claim practices EXCEPT

insisting on investigating a claim for which the cause of death is uncertain.

Which of the following practices is NOT an unfair claims method?

Investigating a claim that appears suspicious

Which of the following is the practice of using misrepresentation to induce a policyholder to replace a policy?

Twisting

All of the following are unfair claim settlement practices EXCEPT

requiring the submission of a proof of loss form before paying a claim.

Which of the following is NOT considered to be an unfair claims settlement practice?

Replacing one insurance policy with another.

All the following are considered unfair claim practices EXCEPT:

investigating a claim in which the cause of death is uncertain

All of the following, if performed frequently enough to indicate a general business practice, are unfair claims settlement practices EXCEPT

delaying the payment of claims by requiring submission of preliminary claim reports and formal proof of loss that contain different information

Which of the following actions is NOT an unfair claims method?

Denying a claim within a reasonable time after a proof of loss statement was completed

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:

is misleading and must not be used

The amount of money an insurer sets away to pay future claims is called the

reserve

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++ to A-

Domestic insurers may invest their assets in all of the following EXCEPT:

obligations of any European country