Which of the following statements about term insurance is true?
A) The coverage is appropriate if the goal is permanent lifetime protection.
B) Most policies can be renewed for additional periods without evidence of insurability.
C) Premiums increase at a constant rate each time the policy is renewed.
D) Most policies have a cash value that is refunded when coverage ceases.
Which of the following is a covered peril under the personal property coverage
(Coverage C) of an unendorsed Homeowners 3 policy?
A) earthquake
B) nuclear radiation
C) windstorm
D) flood
Characteristics of a fortuitous loss include which of the following?
I. The loss is certain to occur.
II. The loss occurs as a result of chance.
A) I only
B) II only
C) both I and II
D) neither I nor II
The net single premium for a life insurance policy is
A) the premium the insurer charges to cover the death benefit and the insurer’s
expenses.
B) the future value of the future death benefit.
C) the present value of the future death benefit.
D) the face value of the policy discounted back for the number of year the policy will
be in force.
Situations under which parents can be held liable for the actions of a child include
which of the following?
I. The child uses a parent’s gun to injure someone.
II. The child is acting as an agent of the parent.
A) I only
B) II only
C) both I and II
D) neither I nor II
Sam’s furniture was destroyed by a fire. The furniture cost $1200 when it was
purchased, but similar new furniture now costs $1800. Assuming the furniture was 50
percent depreciated, what is the actual cash value of Sam’s loss?
A) $600
B) $900
C) $1200
D) $1800
Consumer experts typically recommend which of the following rules for purchasing life
insurance?
I. Avoid policies which pay dividends.
II. Purchase life insurance equal to ten times your annual salary.
A) I only
B) II only
C) both I and II
D) neither I nor II
Carolyn is considering the purchase of a large (60-foot) boat. She called her insurance
agent to see if she needs a separate policy for the boat. The agent said that a special
category of insurance policies was designed to insure large watercraft. These policies
are called
A) yacht insurance policies.
B) flood insurance policies.
C) floater policies.
D) Dwelling Property 3 (special form) policies.
Which of the following statements about the assignment of a life insurance policy is
true?
A) The insurer must be notified of any assignment or the death proceeds will be paid to
the named beneficiary.
B) Under an absolute assignment, the only right transferred to a new owner is the right
to change the beneficiary designation.
C) As long as a collateral assignment exists, a creditor will receive the entire death
benefit even if the loan has been repaid.
D) Assignment may be made only with the permission of the insurer and the
beneficiary.
Amy heads the legal staff of a large property and liability insurance company. Amy’s
staff is likely involved in which of the following activities?
A) reviewing investment options for the insurer’s assets
B) reviewing language and policy provisions in insurance contracts
C) calculating premiums to be charged for the insurer’s products
D) reviewing applications to determine if the company should insure the risk
The Affordable Care Act requires all new medical expense plans to provide a
comprehensive set of coverages and services. This comprehensive set of coverages and
services that must be provided are called
A) essential health benefits.
B) dread disease benefits.
C) long-term care benefits.
D) respite care benefits.
Jennifer was just asked to serve on the Board of an insurance company. Jennifer is
concerned that if the company is mismanaged, the policyowners, stockholders, and
employees might sue the management team. What type of liability insurance will
protect Jennifer from such claims if she accepts a position on the insurance company’s
Board?
A) commercial general liability insurance
B) employment-related practices liability insurance
C) workers compensation and employer liability insurance
D) directors and officers liability insurance
Which of the following statements about life insurance policy loans is (are) true?
I. Interest is not required on a life insurance policy loan, as the policyholder is
borrowing his or her own money.
II. If there is an outstanding loan when the insured dies, payment to the beneficiary is
reduced by the amount of the loan.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following statements about the coverage for medical payments to others
(Coverage F) under the homeowners policy is true?
A) Medical payments may be made for any resident of the named insured’s household.
B) Medical expenses incurred within 3 years of an accident are covered.
C) Medical payments are made only if the insured is not legally liable.
D) Covered medical expenses are limited to emergency room charges.
ABC Insurance Company would like to purchase a bank. For many years, ABC was not
permitted under federal law to enter into banking operations. Which of the following
legislative acts eliminated the prohibition that prevented banks, insurers, and
investment firms from entering into one another’s markets?
A) The McCarran-Ferguson Act
B) The Tax Reform Act
C) The Consolidated Omnibus Budget Reconciliation Act
D) The Financial Modernization Act (Gramm-Leach-Bliley Act)
The exterior walls, the roof, and the plumbing, heating and air conditioning systems of
a residential condominium can be insured through the purchase of which of the
following forms?
I. Condominium association coverage form
II. Condominium commercial unit-owners coverage form
A) I only
B) II only
C) both I and II
D) neither I nor II
All of the following losses are excluded under Part D (coverage for damage to your
auto) of an unendorsed PAP EXCEPT
A) vandals damaged a portable cell phone kept in the car.
B) theft of a compact disc player which was permanently installed in the auto.
C) damage caused to a car’s engine because the named insured never changed the oil.
D) destruction of a radar detector which overheated and caught on fire.
All of the following statements about the methods of regulating insurance are true
EXCEPT
A) All states have insurance laws that regulate the operations of insurers.
B) Insurers are totally exempt from regulation by federal agencies and laws.
C) The courts regulate insurance in many ways, including the interpretation of policy
clauses and provisions.
D) State insurance commissioners, through administrative rulings, have considerable
power over insurers doing business in their states.
An Econodeath Insurance Company actuary calculated the present value of the
expected death claim the company will pay if it sells whole life insurance to a
30-year-old woman. This value is called the
A) net level premium.
B) gross premium.
C) net single premium.
D) life insurance policy reserve.