unit 3-7

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Question 1

One of the reasons higher prices will not always increase the supply of insurance is:

		consumers will not buy insurance if prices are increased.
		the loss and therefore the expense ratio both will increase.
		the premiums to surplus ratio must be maintained at a reasonable level.
		the number of insurance contracts written by an insurer is totally regulated.

Question 2

Insurance obtained from insurers licensed by the state in which the insurance is purchased is called:

Answer

		admitted insurance.
		alien insurance.
		domestic insurance.
		nonadmitted insurance.

Question 3

Paul v. Virginia stipulated that solvency regulation and investment regulation fell under the jurisdiction of which of the following:

Answer

		federal insurance departments.
		state insurance departments.
		local insurance departments.
		Congress.

4 points

Question 4

A foreign insurer is one that:

Answer

		is home-officed outside the U.S.
		has offices both in the U.S. and in other countries.
		is incorporated in another state.
		has not been in existence for at least three fiscal years.

4 points

Question 5

Which of the following is the most important goal of insurance regulation?

Answer

		Limiting the number of insurance companies so the law of large numbers is able to work adequately.
		Promoting the solvency of insurance companies.
		Mandating that all drivers of automobiles purchase insurance coverage.
		Approving the contractual language of insurance policies sold in the state.

4 points

Question 6

All of these are reasons why an insurer might legitimately deny claims except the insured:

Answer

		may have attempted to defraud the insurer.
		may have failed to pay the premiums.
		may have been circulating false literature about insurer.
		violated a contract condition.

4 points

Question 7

All of the following insurance areas and activities are regulated by the states except:

Answer

		investment decisions.
		policy form approval and expense limitations.
		taxation.
		e-commerce.

4 points

Question 8

The purposes of the Gramm-Leach-Bliley Act of 1999 included all the following except to:

Answer

		make financial markets more competitive.
		formalize regulation of financial services markets.
		modernize U.S. financial services markets.
		prohibit federal licensing of financial markets.

4 points

Question 9

"Best's Insurance Reports" allows you to determine which of the following about your insurer?

Answer

		Its reputation for settling claims.
		Its customer service rating.
		How many complaints have been filed against it.
		It's financial strength rating.

Question 10

In choosing an insurance company, the most important factor is:

Answer

		how many dollars it pays for claims.
		the number of employees it has.
		its financial strength and stability.
		the state in which it is domiciled.

4 points

Question 11

In the market for most consumer goods and services we assume the law of supply and demand, operating through open competition, determines the price. Competition, however, does not necessarily work to the consumer's advantage in the insurance market. Here are the questions. How does the pricing of an insurance policy for the insurer differ from a bologna manufacture's pricing its product? Why does the difference in pricing problems require that insurance pricing be subject to regulation? Why might be lowest-priced insurance policy be undesirable from the consumer's standpoint?

Answer

Question 12

We all know football is enjoyable for spectators and participants because of comprehensive roles. Similarly, insurance transaction also needs regulation. So, what is meant by the term insurance regulation"? Why is the solvency of insurers of such great importance to regulators? How do the regulators try to establish and maintain insurers' solvency?

UNIT 4

Question 1

The tangible evidence of a contract is called:

		acceptance.
		capacity.
		consideration.
		indemnity.

Question 2

All of the following are requirements of a contract of insurance except:

		the contract must be in writing.
		it must be for a legal purpose.
		there must be legal capacity of the parties.
		there needs to be an offer and an acceptance.

Question 3

A contract that will not be enforced due to lack of a feature of a valid contract is said to be a:

		binder contract.
		void contract.
		valid contract.
		unilateral contract.

Question 4

Replacement cost is defined as amount:

		of fair market value of a property.
		of replacement cost minus depreciation.
		required to rebuild a structure similar to the original.
		replacement cost at the time of loss.

Question 5

Common elements of commercial and personal property insurance policies include all of the following except:

		exclusions.
		deductibles.
		hedging.
		riders.

Question 6

The appraisal procedure is used to determine the:

		inventory covered by a contract.
		value of property losses.
		purpose for immediate notice.
		value of undamaged property.

Question 7

Mr. Yuga purchases an insurance contract with the following warranty attached. In return for a reduction in premium, the "fire alarm system will be in good working order." What type of warranty is thi

		The statement is not a warranty.
		Implied affirmative.
		Express affirmative.
		Express promissory.

Question 8

Sam Iyam has a $50,000 property loss. His insurance policy's coverage limit is $35,000, and has a $500 deductible applied to the loss. How much will Sam collect?

		$50,000
		$49,500
		$35,000
		$34,500

Question 9

Transferring your rights and duties under a contract to another party is known as:

		assignment.
		adhesion.
		subrogation.
		replacement.

Question 10

Funeral expenses are covered under which insuring agreement?

		HO - 2
		PAP Part A
		PAP Part B
		PAP Part C

Question 11

In insurance terminology, a warranty is a promise something has happened or exists (affirmative warranty) or something will happen (promissory warranty). Give two examples of promissory and affirmative warranties. What difference does it make to an insured if a false statement made by the insured is considered a warranty or a representation

Question 12

The insured's duties after a loss are usually extensive. Please describe some of the duties of the insured after a loss occurs. What can happen if the insured fails to perform these duties? Explain your answer.

UNIT 5

Question 1

Property coverages within the HO include all of the following: except:

		your dwelling on the residence premises.
		other structures on the residence premises.
		land under the structures on the residence premises.
		materials and supplies on the residence premises.

Question 2

Requiring evidence of purchasing at least the minimum required amount of insurance before the state issues automobile license plates falls under:

		financial responsibility laws.
		compulsory insurance laws.
		unsatisfied judgment fund laws.
		excess coverage laws.

Question 3

Within coverage E and F of the HO, which of the following are included within the limits of insurer's liability:

		motor vehicle liability.
		watercraft liability.
		aircraft liability.
		registered automobile liability.

Question 4

Your PAP collision coverage covers the upset of your covered automobile when the loss is incurred due to damage from

		malicious mischief or vandalism.
		explosion or earthquake.
		another automobile.
		hail, water or flood.

Question 5

Exclusions to the HO-2 list several sources of loss for which the insurer is not liable. These exclusions do one or more of the following except:

		eliminate coverage for catastrophic perils.
		specify covered claims.
		control the moral and morale hazard.
		control costs.

Question 6

In a PAP, property damage includes all of the following except:

		occupation of property.
		physical injury to property.
		destruction of property.
		loss of use of tangible property.

Question 7

Which of the following kinds of insurance coverage is/are included in the PAP?

		rental replacement from any cause of loss
		liability insurance
		medical expense for disease
		personal property coverage

Question 8

The HO _________ protects creditors making loans secured by the insured property.

		coinsurance requirement
		limits of liability
		mortgage clause
		replacement cost provision

Question 9

Automobile liability insurance pays for all of the following except:

		bodily injury due to auto accidents.
		defense costs resulting from claims.
		bodily injury not covered under the policy.
		property damage due to auto accidents.

Question 10

All of the following are available under the HO-2 contract except:

		personal liability insurance.
		theft insurance.
		medical Payments coverage for others.
		automobile comprehensive coverage.

Question 11

Property insurance policies cover lots of damages loss caused directly or indirectly. But not all. There are still some loss excluded regardless of any other cause or event contributing concurrently. Why do property insurance policies contain exclusions? Will an exclusion result in partial recovery? Illustrate your answer to the previous two questions with examples from the HO.

Question 12

Bob, the named insured, is an auto mechanic. Bob and his wife, Belle, own and drive a Ford. They have 2 children, Ben and Bill. Ben, age 26, is in the U.S. Army, and comes home to visit about twice a year. Bill is 16, lives at home and has a learner's permit but no permanent drivers license. Ben often rents cars on weekends and drives battle tanks as his assignments. Bob drives the church van to pick-up older members each Sunday. He also test drives vehicles after he has repaired them at his place of employment, Barney's Garage. Bill has been known to lend the family car to his teenage pal, Bubba. Once, Bubba actually lent the auto to his girlfriend, Brenda. Explain why or why not each of the following characters has coverage under Part A of the PAP. Does the PAP provide coverage if a named insured drives a non-owned auto? What is the definition of a "non-owned auto?"

UNIT 6

Question 1

The period when the insurer makes payments to the annuitant is called:

		the retirement period.
		the accumulation period.
		the liquidation period.
		the deferral period.

Question 2

Group life insurance purchased by a lender for its group of debtors is knows as:

		debit life insurance.
		industrial life insurance.
		ordinary life insurance.
		credit life insurance.

Question 3

Annuities are designed to:

		protect against premature death.
		protect against outliving one's income.
		protect against growing old.
		be a form of life insurance.

4 points

Question 4

An annuitant makes one payment to the insurer 15 years before he retires. At retirement, the insurer pays the annuitant a lifetime income on a monthly basis. This transaction is an example of a:

		flexible premium annuity.
		variable annuity.
		single-premium deferred annuity.
		single-premium immediate annuity.

Question 5

If, after the death of an annuitant, guaranteed payments continue to a second beneficiary, this person is called the:

		annuitant beneficiary.
		successor beneficiary.
		principal beneficiary.
		immediate beneficiary.

Question 6

A _________term life policy pays the same amount of benefits if death occurs at any point while the policy is in force.

		level
		increasing
		decreasing
		convertible

Question 7

If insureds cannot afford the ordinary level whole life premium and want to pay less in the first few years, they can still obtain insurance for the whole of life by purchasing:

		limited-payment whole life
		single premium whole life
		deferred whole life contract
		convertible term

Question 8

A person dying without a will is said to have died:

		in probate.
		intestate.
		prematurely.
		in exclusion.

Question 9

Which of the following does not influence how an insurer calculates monthly annuity benefits?

		age
		health status of insured annuitant
		sex
		amount of the premium the annuitant has paid.

Question 10

A business purchases life insurance for all the following reasons except to:

		provide employee benefits.
		protect the firm from financial loss due to death of a key employee.
		subsidize actuarial tables.
		ensure transfer of ownership rights from current to future owners.

Question 11

Develop a set of family circumstances where each of term insurance and whole life insurance are the most appropriate type of policy to meet the consumer's needs. Explain why a whole life insurance policy requires a larger premium than a term insurance.

Question 12

Students in college are sometimes sold "college special" policies designed for seniors. So, is it wise for college students to buy life insurance while they are still in college? What are some arguments on both sides of this issue?

UNIT 7

Top of Form

Question 1

Because some medical expenses may be covered by more than one policy, health insurance usually contains the _______clause to prevent overpayment to the insured.

Answer

		coordination-of-benefits.
		double indemnity.
		preexisting conditions.
		simultaneous conditions

4 points

Question 2

The incontestability clause in life insurance primarily serves to protect the:

Answer

		beneficiary.
		insured.
		insurer.
		annuitant.

4 points

Question 3

The life insurance feature that waives premiums on a life insurance policy if the insured becomes permanently disabled is called the:

Answer

		payor clause.
		double indemnity clause.
		disability income option rider.
		waiver of premium rider.

4 points

Question 4

Iniko lied on his life insurance application. He said he was 40, but he was really 60. Iniko dies during the tenth year his policy is in force. When the insurance company finds out about the misstatement of age, they will do which of the following?

Answer

		Deny the claim, based on fraud.
		Pay the face value of Iniko's policy to his beneficiary.
		Pay some fraction of the face value of Iniko's policy to his beneficiary.
		Pay the face value of Iniko's policy to his beneficiary if the beneficiary submits documentation attesting to the fact that he/she knew nothing of the misstatement.

4 points

Question 5

Which of the following is not a viable dividend option?

		accumulations at interest
		cash
		purchase of paid-up whole life insurance
		purchase of health insurance

Question 6

Disability is most strictly defined as:

		inability to engage in any occupation.
		inability to make the same income as before disabled.
		inability to earn non-wage income.
		the difference in income before and after the disability.

Question 7

Which one of the following is NOT a reason for the increase in health care costs?

		more expensive medical equipment and buildings
		increased medical malpractice insurance costs
		hospital labor operating costs
		increased cost of funeral expenses

Question 8

When circumstances create unclear beneficiary designations, such as in the case of the aftermath of Hurricane Katrina, the court system will resolve beneficiary issues that may arise through a process called:

		irrevocable beneficiary.
		evidence of insurability.
		interpleader.
		reinstatement.

Question 9

The purpose of the entire contract clause in life insurance is to:

		make sure the entire contract (written and oral) influences the interpretation of the contract.
		bar any incorporation by reference of any documents not attached to the contract.
		require that the policy application be forwarded directly to the beneficiary.
		require that the contract be interpreted by the laws of the state in which it is initially signed.

Question 10

Which of the following types of health insurers normally rewards its doctors through profit sharing?

		traditional health insurers
		Blue Cross/Blue Shield
		Health Maintenance Organizations
		Preferred Provider Organizations

Question 11

What will an insurer do if it learns that an applicant misstated his or her age on a life insurance application? Buster Brow knowingly tells the insurer his age is 28 when he is actually 38. What effect will this lie have on his insurance contract? What action should the insurer if the misstatement is found out after Buster dies?

Question 12

Long-term care insurance will be needed by an increasing number of Americans in the next few decades. But why isn't it popular now? Are there any problems with the current U.S. system to deliver long-term care? What are they? Wha

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