Cal is renting an apartment. Which homeowners policy is specially designed to insure
renters?
A) HO-2
B) HO-3
C) HO-4
D) HO-6
Which of the following statements about life insurance marketing systems is true?
A) Insurance brokers are not permitted to sell live insurance.
B) Some exclusive agents who market property and liability insurance also sell life
insurance.
C) Independent insurance agents are not permitted to market life insurance.
D) Financial institutions such as banks are not permitted to market life insurance.
Which of the following statements about long-term care insurance is (are) true?
I. Long-term care insurance is inexpensive, especially if purchased at older ages.
II. Purchasers have a choice of daily benefits and benefit periods.
A) I only
B) II only
C) both I and II
D) neither I nor II
Scott had trouble obtaining auto insurance. After three companies refused to insure him,
he called the state insurance department. A representative suggested he obtain coverage
through Last Chance Insurance Company because “that’s all they insure – high-risk
drivers.” Scott contacted Last Chance. He was not refused coverage; however, the
premium Scott was required to pay was three times greater than the average premium in
the market. Last Chance Insurance Company is a(n)
A) reinsurance facility.
B) automobile insurance plan.
C) specialty auto insurer.
D) joint underwriting association.
A bond that guarantees that the person responsible for the property of another will
faithfully exercise his or her duties is called a
A) fiduciary bond.
B) performance bond.
C) court bond.
D) contract bond.
One additional coverage under the homeowners policy makes available up to 10 percent
of the Coverage A limit to cover increased repair costs after a loss in order to comply
with a stricter building code. This additional coverage is called
A) ordinance or law.
B) reasonable repairs.
C) concurrent causation.
D) debris removal.
XYZ Insurance Company uses class rating to determine the rate to charge for insurance.
For one type of insurance, the pure premium XYZ actuaries calculated is $75 per unit.
If XYZ’s expense ratio is 25 percent, what is the gross rate for this coverage?
A) $37.50
B) $55.25
C) $75.00
D) $100.00
LMN Insurance Company is concerned about its exposure to hurricane losses for
property risks it insured on the Gulf Coast. LMN borrowed money from investors by
issuing financial securities. LMN promised to repay the money it borrowed with
interest if hurricane losses do not exceed a specified level. If hurricane losses exceed
the specified level, LMN will repay less than it borrowed and use the extra money to
fund hurricane losses. The securities that LMN issued are
A) call options.
B) futures contracts.
C) weather options.
D) catastrophe bonds.
One source of life and health insurance underwriting information is an organization that
life and health insurance companies can join. As a member, life and health insurance
companies report health impairments of applicants, and this information is shared with
member companies. Although the information is shared, the underwriting decision of
the member company is not disclosed. What is this organization called?
A) Fair Isaac Corporation (FICO)
B) Medical Information Bureau (MIB)
C) National Association of Insurance Commissioners (NAIC)
D) National Association of Mutual Insurance Companies (NAMIC)
At what point in time must an insured meet the coinsurance requirement in a property
insurance policy in order to avoid having to pay a portion of the loss?
A) only at the time of loss
B) only at the time when the policy is issued
C) only at the time of policy application
D) both at the time when the policy is issued and at the time of loss