Which statement concerning towing and labor coverage under the PAP is (are) true?
I. There’s no coverage for towing if the auto breaks down – towing is only covered if the
auto needs to be towed after a collision has occurred.
II. Towing and labor coverage pays for repairs at a service station or garage.
A) I only
B) II only
C) both I and II
D) neither I nor II
Shauna hurt her back and was unable to work. She filed a claim under her disability
income insurance policy. Under terms of the policy, 60 days must pass between the date
of the injury and when the insurer begins to replace lost earnings. This 60-day period is
called a(n)
A) grace period.
B) enrollment period.
C) probationary period.
D) elimination (waiting) period.
Insurance Brokerage Company uses a computer-based method of estimating the losses
its clients will suffer if a severe storm or earthquake occurs. This method of estimating
losses is called
A) capital budgeting.
B) securitization of risk.
C) risk mapping.
D) catastrophe modeling.
Which of the following statements about the yearly-rate-of-return method (also known
as the Belth method) of calculating the yearly rate of return for a life insurance policy is
(are) true?
I. The formula requires the use of benchmark prices per $1,000 of protection.
II. The main drawback of the formula is its complexity, necessitating the use of a
computer to calculate the rate of return.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following statements about buying homeowners insurance is true?
A) There is no reason to carry insurance for more than 80 percent of a dwelling’s
replacement cost.
B) The deduction for depreciation will be increased if a personal property replacement
cost endorsement is purchased.
C) Premiums often can be reduced substantially by selecting a higher deductible.
D) There is little reason to compare cost since the lack of competition results in little
price variation among companies.
All of the following are defects which limit the usefulness of the human life value
approach in determining the correct amount of life insurance to purchase EXCEPT
A) The effects of inflation are ignored.
B) Other sources of income for survivors are ignored.
C) Earnings are assumed to remain constant.
D) Earnings during the individual’s productive lifetime are ignored.
Under state workers compensation programs, employers may not use common law
defenses to defend against claims of workers who are injured on the job. In such cases,
proof of a worker’s injury is proof of responsibility of the employer. Because of this
characteristic, workers compensation is an example of
A) personal injury.
B) absolute liability.
C) comparative negligence.
D) tort liability.
Which of the following statements about modified no-fault laws is (are) true?
I. Claims less than a certain dollar threshold must be assumed by the injured accident
victim, but the injured person has the right to sue a negligent driver.
II. Claims above a certain dollar threshold are paid in full by an injured accident
victim’s insurer, and the right to sue a negligent driver is eliminated.
A) I only
B) II only
C) both I and II
D) neither I nor II
During the funding period, the premiums paid for a variable annuity are used to
purchase
A) annuity units.
B) immediate participation shares.
C) mutual fund shares.
D) accumulation units.
Which of the following statements about state insurance guaranty funds is (are) true?
I. They limit the amount that policyholders can collect if an insurer becomes insolvent.
II. They are usually funded by general revenues of the states.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following statements about problems and issues in workers compensation
insurance is (are) true?
I. The cost of medical care under workers compensation continues to rise.
II. Enactment of workers compensation statutes has eliminated litigation with respect to
work-related illnesses and injuries.
A) I only
B) II only
C) both I and II
D) neither I nor II
Tracy had continuous group health insurance coverage at her previous employer for 6
years. Tracy decided to change jobs. Under federal law, if Tracy changes jobs, the new
employer or group health plan must give her credit for previous and continuous health
insurance coverage. This characteristic is called
A) renewability.
B) vesting.
C) portability.
D) convertibility.
Ross studied engineering in college. After graduation, he went to work for an insurance
company. Ross visits properties insured by his company. He conducts inspections and
makes recommendations about alarm systems, sprinkler systems, and building
construction. In what functional area does Ross work?
A) underwriting
B) loss control
C) information systems
D) claims adjusting