| A | B |
|---|
| A device for the transfer of individual risk to a company for consideration is called. | Insurance |
| The three types of economic death are | Physical, Retirement and living deaths. |
| The principle that enables insuracne carriers to be so accurate in their mortality predictions is called the | Law of Large Numbers |
| Risks can be defined as | uncertainty of loss |
| The two basis kinds of insurance companies that exist today are the | Stock and mutual |
| A stock company is iperated for the benefit of the | stockholders |
| A mutual company is operated for the benefit of the | policyholders |
| A _____company issues participating polices. | mutual insurance |
| A ____company issues non-participating polices. | stock insurance |
| When a company transfers part of the exposure and part of the premium to another company, the process is known as | Reinsurance |
| ______ is defined as chance of loss. | Risk |
| If an insurance company is admitted to do business in a state, it is known as a(n) company. | Authorized |
| It is possible to reduce the premiums paid to an insurance company by which of the following. | Avoiding risk, and Retaining risk |
| Which of the following is your greatest asset? | Your earning ability. |
| Consideration is which of the following? | Something of value. |
| The consideration given by a proposed insured to form a contract could include which of the following? | Money, Statements in the application. |
| Dividends may be paid to which of the following? | The policyowners of a mutual company and the stockholders of a stock company. |
| The type of company which has no stockholders and no membership requirements. | Mutual companies |
| The type of company that is often formed by a religious, national or ethnic organization. | Fraternals |
| The type of company in which the stockholders elect the board of directors. | Stock companies |
| Which of the following types of insurance companies is managed by an attorney-in-fact? | Reciprocal |
| A contract is a legally enforceable____between two or more legally competent parties. | agreement |
| A contract's agreement is composed of an ____ and an _____. | offer and acceptance. |
| To make a contract legally binding, there must be an exchange of values. This is called | consideration |
| An individual who handles the lgal affairs of a child is called a | guardian |
| An alternative proposal by one of the parties during a contract negotiation is referred to as a | counter-offer (optional element) |
| The applicant's consideration consists of ____ and ____ | Money, statements made in the application |
| The insurance company's consideration is the ____contained in the policy. | promise |
| A prepaid application, in legal terms, is considered to be an ___by the applicant. | offer |
| The issuance and delivery of a policy exactly as requested on a prepaid application is legally called a(n) | acceptance |
| One form of an interim insuring agreement that makes a qualified promise to the applicant is called a____ | Conditional receipt |
| The first premium payment is normally collected by the | agent |
| When a Conditional Receipt is issued, the effective date of coverage is the ____date or the date of the ____, whichever come last, If the applicant is insurable for the policy applied for on that date.. | applicantion, medical exam |
| The concept which states that a person must be in a position to lose something of value in order to buy life or health insurance on someone else is called___. | insurable interest |
| A ___is the literal or absolute truth. | warranty |
| Hiding the truth is referred to as | concealment |
| If an applicant lies on an application for insurance, it is called a _____. | misrepresentation |
| ____are statements made by an applicant that are taken as accurate to the best of his or her knowledge and belief. | Representation |
| Policies with a face value, such as life insurance polices, are referred to as ___contracts. | stated amount (valued) |
| The voluntary giving up of a legal right is called a____ | waiver |
| ______is the act of deception or cheating another in order to financially benefit oneself. | Fraud |
| As an agent, you are the legal representative of the ____ | insurance company |
| All of the following are necessary to the formation of a contractual agreement | legal purpose, consideration, offer |
| You have just taken a prepaid application for life insurance on a new customer. Which of the following would be true regarding the effective date of the coverage? | If a conditional receipt were issued, the effective date would be the date of the application or the date of the medical exam, whichever comes last, if the applicant (insured) is insurable on that date. |
| Except in cases of fraud, each statement made by an applicant for life or health insurance is considered a | Representation |
| On an application for life insurance there is a question that asks if the applicant has applied for any other life insurance within the past three months. The applicant states that he applied for a $5,000 policy last month but fails to state that he also applied for a $100,000 policy. The applicant is fuilty of | Concealment |
| An applicant for life insurance answers No to the question "Are you a student pilot?, when she actually is one. She is guilty of | Misrepresentation |
| A statement made by an applicant for insurance that must be true in every respect is considered to be a(n) | Warranty |
| In order for a agreement to be a contract, which of the following statments must be true? | There must be two or more parties, must be legally enforceable, consideration. |
| Insurance may be considered to be in force when the | insurance company mail a policy to the agent and the agent delivers it to the proposed insured and collects the first premium. |
| In which of the following relationship does an insurable interest normally exist? | A women insures her husband's life or A employee insures the life of employer to provide funding for a business. |
| Which of the following statements about warranties and representations is true? | The statements made by the applicant on an application for insurance are considered to be representations. |
| Which of the following constitues fraud? | An agent misapporpriate premium funds given to her by a customer. |
| The voluntary abandonment of a legal right is called a(n) | Wavier |
| A life insurance policy is against public policy when | the applicant has an insurable interest in the insured, but the insured does not know about the application. |
| In life and health contracts, which of the following is part of the consideration? | The statements made on the application and settlement of the first premium, the promises contained in the policy |
| All of the following are interim insuring agreements except | the 10 Day Free Look Provision. |
| The key difference between a licensed agent and a licensed broker is that an agent is | a legal representative of the insurance company, whereas a broker is a legal representative of the customer. |
| In purchasing an insurance contract, the applicant cannot bargain for terms, rates or benefits. This type of contract is refreed to as a(n) | Conttract of adhesion |
| Which of the following principles states that in forming an insurance contract, both parties have a responsiblity to the other? | Doctrine of Utmost Good Faith |
| The authority granted to you by your insurance company and selled out in your agency agreemt is known as which of the following? | Expressed Authority |
| What is Risk? | Uncertainty of financial loss; exposure |
| What is Pure Risk? | only chance of loss |
| What is speculative? | gambling; chance of gain or loss |
| Responding to Risk | Avoid, Retain, Reduce and Transfer |
| What is Perils? | Perils-cause of loss: accident and sickness |
| What is Hazards? | increase the likelihood of loss; smoking |
| What are the three economic death? | Physical death, retirement death and living death |
| Why does the Law of Large Numbers allows insurance to work economically? | Large number and similar risk |
| The five types of insurance companies? | LLoyd's of Londan, stock, mutual, reciprocals and fraternals |
| What are the three ways to classifying companies? | By origin-domestic, foreign, alien; authority; financial soundness |
| What are the five element parts of a contract? | Offer, acceptance, consideration, legal capacity, legal purpose |
| What is an Offer? | Applicant + money=Prepaid applicantion, |
| What is an Acceptance? | Issuing + delivering the policy = acceptance |
| What is Consideration? | exchange of value; company-promises, applicant=dollars + true statements |
| What are the four statements? | warranties, representation, misrepresentation, concealment |
| What are the two principles which form the legal foundation of a contract? | Doctrine of Utmost Good Faith, Doctrine of Reasonable Expectations |
| What does Offer & Acceptance equal? | Agreement |
| What is warranty? | the absolute truth |
| What is representation? | statements that are true to the best of your knowledge |
| What is misrepresentation? | lies |
| What is concealment? | hiding the truth; undisclosure |
| What is legal capacity? | the parties to the contract must be legal age,sober, sane.... |
| What is legal purpose? | Rules: insurable interest, consent |
| Does a beneficary need insurable interest? | No |
| When does coverage start? | policy is delivery by agent |
| What factors change the general rule for coverage start? | Prepaid application; conditional receipt,acceptance form, Interim terms receipt |
| Before accepting the permium the insured must verify physical condition? | Statement of Continued Good Health |
| When is conditional receipt used? | Prepaid application=IFs, you maybe insured |
| A 30 day Interim term receipt | Prepaid application on WL & Universal Life, eliminates IFs, you are insured. |
| There are three interim insuring agreement. | Conditional receipt,acceptance form, 30 or 60 day Interim terms receipt |
| A application with no money is | Invitation to make a offer |
| An application for a life policy, with the first premium, is an | Offer |
| What is Contract Law? | An agreement between two or more parties |
| Elements of a contract | Offer, Acceptance, Consideration, Legal Capacity & Legal Purpose |
| Insurable interest two purposes | Only need by applicant, at the time of application |
| The 4 sequence for reaching agreement? | Invitation to make an offer, offer, counter-offer, acceptance |
| The 3 process for reaching agreement? | invitation to make an offer, offer, acceptance |
| The three interim insuring agreement? | conditional receipt, acceptance form receipt, 30 or 60 day Interim Term |
| When do coverage starts for applicant, no $ | manual delivery of policy + $ |
| When do coverage starts for applicant + $ | manual delivery of policy |
| When do coverage starts for applicant +$+ conditional receipt | The date of application if no medical exam or the date of medical exam |
| When do coverage starts for applicant + $+ 30 day Interim Term | The date of application(two offers: applicant+$ & company-offer+acceptance) |
| When do coverage for applicant + $ + Acceptance form receipt? | Approval date at home office |
| Unique characteristics of insurance contracts? | conditional, Value, Reimbursement, Service, Unilateral, Adhesion, Personal, Aleatory |
| Conditional | If...then |
| Value(stated amount) | Face amount |
| Reimbursement | Make whole |
| Service | Does the job |
| Unilateral | One sided |
| Adhesion | We wrote it, we're stuck with it |
| Personal | Your loss |
| Aleatory | Not always balanced |
| Giving up a contractual right is referred to as a? | waiver |
| Once a legal right is surrendered, it cannot be enforced; this is referred to as? | Estoppel |
| An _________represents the Insured? | Broker |
| An ________represents the Company? | Agent |
| An ________represents the Agent? | Solicitor |
| Authority granted to an Agent? | Expressed Authority |
| Authority granted to an Agent in order to fulfill their duties | Implied Authority |
| Authority which may not be granted, but was to the public by the Agent? | Apparent Authority |
| The characteristics of underwriting? | Law of Lrge Nums, Risk Uncertainty, Economically significant-Insr. Intrs., Catastrophic losses, measurable in dollars |
| The basis for underwriting? | Selection, Classification & pricing of risks. |
| Why is the fair share doctrine important? | premium rate |
| What is the mortality table? | life insurance |
| What is the morbidity table? | heath insurance |
| Most application contain six parts? | Part I (general), Part II Med., Agent rept, Med. Exam, 2 Discls. statms, Interim agrmt. |
| Application Part I | General History |
| Application Part II | Non medical=no M.D. |
| Agent's report | what is your impression or observations? |
| What is a sources of underwriting information | credit report, disclosure, investigative report, med. inf., agent rpt., application I&II |
| Medical Information | MIB report- disclosure, Attending Physician's report, Med. exam. |
| How many selection and classifying factors for underwriting | 12: age, sex, tobacco, build, phys. cond., Health, Occup., P living habits, Moral Hazard, Aviat., Mil. Srv., Other |
| What sex paid more for health or life insurance? | health-women, life-men |
| What are the three classification of risks? | Preferred, standard, substandard |
| What is adverse or anti selection? | adverse-poor risk buy insur., anti-health don't |
| Premium are determine by | risk, expense & interest |
| Gross Premium | risk+expense-interest |
| Net Premium | risk-interest |
| Premium mode | Frequency of premium payments-annually, monthly, single payment |
| What are the six systems for insurance distribution | Independent Agency, Captive A, General A, Managerial System, Direct Response |
| The best source of insurability information is usually the | application |
| The fed legislation that protects the applicant's right to be notified for credit | Fed Credit Reporting Act |
| The process of selection&clasification of risk is | underwiriting |
| Less desirable risks are | substandard |
| The tendency for poor risks to purchase insurance is | adverse selection |
| The estimated claims cost for life policy are compile by what table | mortality |
| The three factors used to generate a gross premium are | risk+expense- interest |
| The net premium is | risk-interest |
| Underwriting safeguards include | Fair Credit disclosure & MIB disclosure |
| The _____always pays the deductible. | policyowner |
| Under the ___, the applicant can questions the validity& source of credit information | Fair Credit Reporting Act |
| Under the MIB disclosure statement, an applicant's med. records released through his or her | Family doctor |
| The statement that advises an applicant that certain medical information can be share | MIB |
| Losses that are not coverded by a policy | exclusions |
| The part of a claim that the policyowner must pay | deductible |
| Insurance contracts written for substandard groups are | rated |
