Under one of the Medicare Advantage Plans, beneficiaries can receive care at a
discounted rate by using health care providers that belong to the plan network. Care
outside the network is also covered, but beneficiaries must pay higher out-of-pocket
costs. This type of Medicare Advantage Plan is a
A) Point of Service (POS) plan.
B) Medical Savings Account (MSA) plan.
C) Health Maintenance Organization (HMO) plan.
D) Preferred Provider Organization (PPO) plan.
Inland marine insurance provides coverage for
A) goods being shipped on land.
B) premature death of members of the armed forces.
C) goods being shipped on ocean-going vessels.
D) liability exposures of nonprofit organizations.
Which of the following statements about the equipment breakdown protection coverage
form is (are) true?
I. The covered cause of loss is a breakdown of covered equipment, including boilers,
machinery, and electrical and mechanical equipment.
II. It provides coverage for the reasonable cost of expediting permanent repair or
replacement of damaged property.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following statements about adjustment bureaus is (are) true?
I. They are frequently used to settle claims when a large number of losses occur in a
given geographic location as a result of a catastrophic event.
II. Their major advantage is low cost because of the use of part-time adjustors.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following statements about experience rating is (are) true?
I. The insured’s past loss experience is used to determine the premium for the next
policy period.
II. Its use is generally limited to small firms whose actual experience lacks credibility.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following statements about industrial life insurance (also called home
service life insurance) policies is true?
A) Most policies have a face value exceeding $100,000.
B) Most industrial life insurance policies are cash value coverage.
C) Industrial life insurance is group term insurance coverage marketed to employers.
D) This popular product accounts for over 40 percent of the life insurance sold today.
Bill was severely injured by an uninsured driver. Bill did not purchase uninsured
motorists coverage, and the other driver, although held liable, could not pay the
damages awarded. After exhausting all sources of recovery, Bill obtained some relief
from a state fund designed to compensate individuals like Bill. These state funds are
called
A) guaranty funds.
B) unsatisfied judgment funds.
C) rainy-day funds.
D) second injury funds.
RST Company has production facilities in Salt Lake City and Cleveland. The
probability that in any given year a fire will damage the production facility in Salt Lake
City is 5 percent. The probability that in any given year a fire will damage the
Cleveland production facility is 4 percent. What is the probability that BOTH
production facilities will be damaged by fire in any given year?
A) 0.20 percent
B) 2.00 percent
C) 4.50 percent
D) 9.00 percent
The period of time during which an employee can sign up for group insurance coverage
without furnishing evidence of insurability is called a(n)
A) probationary period.
B) noninsurability window.
C) waiting period.
D) eligibility period.
Which of the following statements is (are) true with respect to the cash (lump sum)
annuity settlement option?
I. The taxable portion of the distribution is subject to federal and state income taxes.
II. The option results in adverse selection against the insurer as those in poor health are
more likely to take cash than to annuitize the funds.
A) I only
B) II only
C) both I and II
D) neither I nor II
What major feature distinguishes a participating policy from a nonparticipating policy?
A) the availability of a waiver-of-premium provision
B) the existence of settlement options
C) the payment of dividends
D) the method by which beneficiaries can be named
Apex Insurance Company wrote a large number of property insurance policies in an
area where earthquake losses could occur. When the president of Apex was asked if she
feared that a severe earthquake might put the company out of business, she responded,
“Not a chance. We transferred most of that risk to other insurance companies.” An
arrangement by which an insurer that initially writes insurance transfers to another
insurer part or all of the potential losses associated with such insurance is called
A) hedging.
B) speculating.
C) reinsurance.
D) loss avoidance.
Which of the following statements about subrogation is true?
A) It is used primarily for losses paid under life insurance policies.
B) It allows the insurer to sue its own insured who is negligent.
C) The insured’s right to collect benefits may be forfeited if the insured interferes with
the insurer’s subrogation rights after a loss occurs.
D) The insurer is required to exercise its subrogation rights.
Which of the following statements is (are) true concerning the use of an individual’s
credit history as an insurance rating factor?
I. Individuals with poor credit histories, as a group, generally file more homeowners
claims than do individuals with good credit histories.
II. The use of credit history as an insurance rating factor is controversial.
A) I only
B) II only
C) both I and II
D) neither I nor II