By misrepresenting the true facts, Gretchen was able to convince a client to drop a life
insurance policy with another company and to purchase a policy from the company that
Gretchen represents. Gretchen has engaged in an illegal sales practice called
A) bait and switch.
B) rebating.
C) retaliating.
D) twisting.
Dan picked up his friend Rodney to drive to their softball game. Both Dan and Rodney
have a Personal Auto Policy (PAP) with $5,000 of medical payments coverage. Dan hit
a parked car, and Rodney was injured, incurring $9,000 of medical expenses. How will
this claim be settled under the other insurance provision of the PAP?
A) Both insurers will pay $4,500.
B) Dan’s insurer will pay $5,000 and Rodney’s insurer will pay $4,000.
C) Dan’s insurer will pay $4,000 and Rodney’s insurer will pay $5,000.
D) Dan’s insurer will pay $3,000, Rodney’s insurer will pay $3,000, and Rodney must
pay $3,000 out of his own pocket.
Jane purchased a life insurance policy on her own life and named her daughter, Cheryl,
as beneficiary. Cheryl has a history of not managing money well. Jane wants the death
benefit paid to Cheryl in monthly installments over 20 years. Which settlement option
should Jane pre-select for Cheryl?
A) lump sum
B) fixed amount
C) fixed period
D) interest option
The voluntary relinquishment of a legal right is called
A) subrogation.
B) adhesion.
C) estoppel.
D) waiver.
Why is a large number of exposure units generally required before a pure risk is
insurable?
A) It prevents the insurer from losing money.
B) It eliminates intentional losses.
C) It minimizes moral hazard.
D) It enables the insurer to predict losses more accurately.
Ashley opened an all-you-can-eat buffet restaurant. The cost per-person was based on
what Ashley believed an average restaurant patron would consume. The restaurant
began to lose money. Ashley concluded that her patrons had “above average” appetites,
and were attracted to her restaurant because they could eat as much as they wanted
while being charged an average price. A similar phenomenon exists in insurance
markets. This problem is called
A) legal hazard.
B) adverse selection.
C) attitudinal hazard.
D) nondiversifiable risk.
Congress passed the Sarbanes-Oxley Act to address which of the following problems?
A) deficiencies in the tort liability system
B) corporate fraud and lax corporate governance
C) inefficiencies in state regulation of the insurance industry
D) inadequate availability of certain insurance coverages
In the context of a surety agreement, the party who agrees to perform certain acts or
fulfill certain obligations is called the
A) fidelity.
B) obligee.
C) surety.
D) principal.
In the state where Susan lives, drivers whom private insurance companies do not want
to insure are placed in a common pool, and each insurer pays its pro rata share of pool
losses and expenses. A common policy is used for all high-risk drivers. Susan’s state
handles high-risk drivers through a(n)
A) automobile insurance plan.
B) joint underwriting association.
C) pure no-fault plan.
D) specialty auto insurer.
Which of the following statements is (are) true regarding the results of studies by
LIMRA and New York Life Insurance Company on the adequacy of life insurance
owned by households in the United States?
I. The average household is adequately insured against the risk of premature death.
II. The average household is significantly underinsured against the risk of premature
death.
A) I only
B) II only
C) both I and II
D) neither I nor II
All of the following are commonly excluded by personal umbrella policies EXCEPT
A) acts committed with the intent to cause bodily injury or property damage.
B) professional liability.
C) aircraft liability.
D) libel, slander, and other types of personal injury.
All of the following are typical characteristics of individual medical expense coverage
EXCEPT
A) first-dollar coverage.
B) broad coverage.
C) deductibles.
D) coinsurance.
Which of the following statements about a personal risk management program is (are)
true?
I. Insurance and retention are the only techniques used to handle potential losses.
II. The steps in a personal risk management process are the same steps used by
businesses.
A) I only
B) II only
C) both I and II
D) neither I nor II