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Mass State Life Insurance Exam|311 Questions and answers
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Mass State Life Insurance Exam|311 Questions and answers
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Mass State Life Insurance Exam|311Questions and answers
Which of the following describes a participating life insurance policy? - -A
participating life policy is one in which the policyowner receives dividends
deriving from the company's divisible surplus
- What type of reinsurance contract between two insurers involves an
automatic sharing of the risks assumed? - -Under treaty reinsurance, each
party automatically accepts specific percentages of the insurer's business.
- At what point must a life insurance applicant be informed of their rights
that fall under the Fair Credit Reporting Act? - -Upon completion of the
application
- The State Guaranty Association guarantees - -that a claim will be paid if an
admitted insurer becomes insolvent
- Dividends from a mutual insurance company are paid to whom? - -
Policyholders
- What is considered the accounting measurement of an insurance
company's future obligations to its policyowners? - -reserves
- A group-owned insurance company that is formed to assume and spread
the liability risks of its members is known as a - -risk retention group
- Which of the following is a syndicate established by a group of insurers to
share underwriting duties? - -Lloyd's organization
- An agent's authority to bind an insurer to an insurance contract may be
granted in the - -agent's contract and the insurance company's appointment
- Dividends from a stock insurance company are normally sent to - -
shareholders
- Law of Large numbers - --insurance is based on the sharing of risks among
a large group of people
-states that the larger the number of people, the more predictable the actual
losses will be
-companies use this data to calculate rates
- Speculative risk - --involves opportunity for either loss or gain
-not covered by insurance companies
, - pure risk - --a situation that can only result in a loss, there is no
opportunity for financial gain
-only type of risk that is insurable
- treatment of risk through: avoidance - -simply avoiding as many risks as
possible
-effective but not always practical
- treatment of risk through- reduction - -since we cannot avoid risk entirely
we often attempt to lessen the possibility of a loss by taking acting to reduce
the risk
-
- treatment of risk through- sharing - -when a group of individuals or
businesses with similar exposures share the losses that occur within that
group
-reciprocal insurance exchange is a formal risk sharing arrangement
- treatment of risk through- retention - -also known as self-insurance: when
individuals have the financial ability to fund losses by themselves when they
occur
- treatment of risk through- transfer - -the most effective way to handle risk
- risk is transferred to another party - insurance is the most common method
of transferring risk from an individual or group to an insurance company
- elements of insurable risk - --must be due to chance
-cannot be catastrophic
-must be randomly selected
• Loss exposure to be insured must be large - Insurance company must be
able to predict
loss ( based on law of large numbers)
- Loss must be definite and measurable - Time, place, amount, and when
payable
- nature of insurance - --to provide financial protection against losses that
may be incurred due to a chance happening or event such as death, illness,
or accident
-protection is provided through an insurance policy which is a simple device
for accumulating funds to meet these uncertain losses
- ABC Company is attempting to minimize the severity of potential losses
within its company. The company is engaged in risk - -Risk reduction can
reduce the chance that a particular loss will occur, or it can reduce the
amount of a potential loss if it occurs.
, - How can an insurance company minimize exposure to loss? - -Many
insurers are able to minimize exposure to loss by reinsuring risks.
- For insurance purposes, similar objects which are exposed to the same
group of perils are referred to as - -Similar objects of insurance that are
exposed to the same group of perils are called homogeneous exposure units.
- Which of the following can be defined as "the potential for loss"? - -risk
- An insurer has a contractual agreement which transfers a portion of its risk
exposure to another insurer. What type of contractual arrangement is this? -
-Reinsurance contracts accept a portion of the risk underwritten by another
insurer who has contracted for the entire coverage amount.
- Which of the following can be defined as a cause of a loss? - -peril
- What type of risk involves the potential for loss and the possibility for gain?
- -speculative
- Purchasing insurance is an example of risk - -transference
- A business becoming incorporated is an example of risk ____. - -transfer
- Which of the following is NOT an example of risk retention? - -Not doing a
business deal after deciding it would be too risky
- legal contract must have: offer and acceptance - --an offer is made when
the applicant submits an application for insurance to the insurance company
-the offer is accepted after it has been approved by the insurance company's
underwriters
- legal contract must have: consideration - -something of value that each
party gives to the other
-on part of insured: payment of premium
-on part of insurance company: promise to pay in event of loss
- legal contract must have: legal purpose - --must be legal and not against
public policy
-has legal purpose if contract has a insurable interests and the insured has
provided written consent
- legal contract must have: competent parties - --all parties must be of legal
competence
-must be of legal age, mentally capable of understanding the terms, and not
under the influence of drugs or alcohol
, - specifal features of insurance contracts: aleatory - -there is not an equal
exchange of value
-premiums paid by the insured are small in relation to the amount that will
be paid by the insurance company, in the event of a loss
- specifal features of insurance contracts: adhesion - -also known as "take it
or leave it agreements" because they're prepared by only one party, the
insurance company
-accepted or rejected by the other party (the applicant) with no negotiations
or changes
- specifal features of insurance contracts: unilateral - -one sided agreement
in which only one party (the insurance company) is legally bound to do
anything
-policy owner is under no legally binding promise to pay premiums, however
the insurance company is legally bound to pay losses covered by the policy
-if the policy owner does not pay their premiums, the insurance company
does have the right to terminate the insurance policy
- personal contract - -insurance contracts are personal contracts between
an individual and the insurance company, and cannot transfer owner ship
without the insurance company's written consent
- conditional - -insurance contracts are conditional because certain
contracts must be met by all parties when a loss occurs, otherwise the
contract would not be legally enforceable
-if the policy owner is past due on his payments and the insured dies, the
insurance company does not have to pay the death benefit because a
condition was not met
- value or indemnity - --life insurance is a valued contract, which pays a
stated amount, regardless of the actual loss incurred
-health insurance is an indemnity contract (only pays equal to the loss)
-with health insurance you are not allowed to make a profit
- utmost good faith - --implies that there will be no fraud,
misrepresentation, or concealment, between the parties as it pertains to
insurance policies
-both the insurance company and the policy owner must be able to rely on
the other for relevant and accurate information
-policy owner is expected to provide accurate information on the application
for insurance
-insurance company must clearly and truthfully describe policy features and
benefits, and they must not conceal or mislead the insured
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