A provision in a disability income insurance policy that requires a person to be disabled
for 60 days before receiving benefits is an example of a(n)
A) calendar year deductible.
B) grace period.
C) elimination period.
D) probationary period.
The Homeowners 3 policy limits the amount of coverage provided on certain personal
property (e.g. coin collections and silverware). This personal property can be
adequately insured by
A) lowering the deductible which applies to personal property losses.
B) storing the property away from the home at another location.
C) adding a schedule to the policy listing the property with specific amounts of
insurance.
D) adding an appraisal clause to the policy.
When must an insurable interest legally exist in property insurance for an insured to
receive payment for a loss from the insurer?
A) only at the time of the loss
B) only at the inception of the policy
C) only at the time the loss settlement process takes place
D) both at the time of the loss and at the inception of the policy
When a fraternal insurer began operations, it asked each member, regardless of age, to
pay $20 per month to the fraternal’s group life insurance plan. In exchange, each
member received the same amount of life insurance. Soon younger members of the
group began to drop out when they realized their premiums were subsidizing a group
with a higher chance of loss. Which important underwriting principle was violated in
this case?
A) An underwriting profit should be attained.
B) Moral hazard should be avoided.
C) Insureds should be selected according to underwriting standards.
D) There should be equity among policyholders.
Which of the following statements about shopping for auto insurance is true?
A) Adequate physical damage insurance on your auto is the most important
consideration.
B) Consideration should be given to dropping liability coverage if you drive an older
car with a low market value.
C) To obtain the lowest premium, an applicant should review his or her eligibility for all
discounts offered.
D) Price comparisons are of little value since auto insurers tend to charge the same
premiums.
The purpose of adding garagekeepers legal liability coverage to the Garage Coverage
Form is to
A) eliminate the care, custody, and control exclusion under the policy.
B) eliminate the contractual liability exclusion under the policy.
C) add workers compensation coverage for persons working in the garage business.
D) add comprehensive and collision coverage for vehicles held for sale.
One long-term care insurance benefit trigger considers whether the insured needs
supervision to protect against threats to health or safety due to memory loss or
disorientation. This benefit trigger is referred to as a(n)
A) activities of daily living trigger.
B) medical necessity trigger.
C) needs test trigger.
D) severe cognitive impairment trigger.
A systemic risk is a risk that
A) can be eliminated through diversification.
B) can be the cause of the collapse of an entire system.
C) can be insured privately.
D) can be easily contained so that it does not spread.
Which of the following perils is not included in the causes-of-loss basic form of the ISO
commercial package policy?
A) fire
B) lightning
C) explosion
D) flood
The Affordable Care Act includes a provision designed to help small employers make
health insurance coverage available to their employees. This provision allows small
employers to directly reduce their federal income tax by a percentage of the employer’s
contribution to funding health care for employees. This subsidy, in the form of
reduction of income taxes, is called a
A) marginal tax rate.
B) tax credit.
C) tax bracket.
D) tax deduction.
Which of the following distributions from a qualified retirement plan would be exempt
from the 10 percent penalty tax if the distribution occurred before the covered employee
was age 59.5?
I. A distribution made to an employee with a qualifying disability.
II. A distribution made to a beneficiary or to the employee estate’s after the employee’s
death.
A) I only
B) II only
C) both I and II
D) neither I nor II
Inter-Ocean Transfer owns 12 large cargo ships which transport goods. Inter-Ocean
Transfer can obtain physical damage insurance on these vessels by purchasing
A) hull insurance.
B) cargo insurance.
C) protection and indemnity insurance.
D) freight insurance.
Which of the following statement is true regarding return of premium term insurance?
A) The insurance is free because premiums are refunded at the end of the coverage
period.
B) Life insurers charge less for this coverage than for regular term insurance that does
not include a refund provision.
C) The return of premium is only offered on one-year term insurance policies.
D) The coverage is expensive and is not free when time value of money is considered.
All of the following are burdens to society because of the presence of risk EXCEPT
A) The size of an emergency fund must be increased.
B) Risk provides an incentive for people to engage in loss control.
C) Society is deprived of certain goods and services.
D) Mental fear and worry are present.
Paul is shopping for a life insurance policy. An agent asked Paul if he would like to
purchase a participating policy. What is a “participating” policy?
A) a policy which has a cash value
B) a policy which pays dividends
C) a policy which invests in common stock
D) a policy which provides for an increasing death benefit
Following good health habits can be categorized as
A) loss prevention.
B) risk retention.
C) noninsurance transfer.
D) personal insurance.
All of the following statements about insurance regulation are true EXCEPT
A) Insurance commissioners are appointed in some states and elected in some states.
B) Insurers are subject to regulation by certain federal agencies and laws.
C) The National Association of Insurance Commissioners (NAIC) can force states to
adopt the model laws that it drafts.
D) An insurance commissioner can revoke or suspend an insurer’s license to do business
in his or her state.