One requirement for proving that an act was negligent is the existence of an unbroken
chain of events between the act and the injury or harm that occurred. This unbroken
chain of events is called
A) condition precedent.
B) cause and effect.
C) proximate cause.
D) condition subsequent.
XYZ Insurance Company writes coverage for most perils which can damage property.
XYZ, however, does not write flood insurance on property located in flood plains.
Which requirement of an ideally insurable risk might be violated if XYZ wrote flood
insurance on property located in flood plains?
A) There must be a large number of similar exposure units.
B) The loss should not be catastrophic.
C) The chance of loss must be calculable.
D) The losses must be determinable and measurable.
All of the following statements about inland marine forms are true EXCEPT
A) A mail coverage form covers securities in transit by first-class mail, registered or
certified mail, or express mail.
B) A commercial articles coverage form is used to insure photographic equipment and
musical instruments.
C) A jewelers block coverage form is used by individuals to insure jewelry limited in
coverage by the homeowners form.
D) The signs coverage form covers neon, mechanical, and electrical signs.
Martin would like to insure valuable personal property limited in coverage by his
homeowners policy. Martin has two options. He can purchase the coverage through a
separate personal articles floater policy or he can add an endorsement to his
homeowners policy. The endorsement is called the
A) extended coverage endorsement.
B) scheduled personal property endorsement.
C) personal injury endorsement.
D) replacement cost endorsement.
Early distributions from qualified retirement plans are assessed a 10 percent penalty tax.
However, there are some exceptions to this rule. All of the following distributions
would be exempt from the penalty tax EXCEPT
A) distributions made after age 59.5.
B) distributions made when an employee of any age changes employers.
C) distributions made after the death or permanent disability of the employee.
D) distributions that are part of a series of substantially equal payments over the
worker’s life expectancy.
Disadvantages of automobile insurance plans include which of the following?
I. High premiums may cause many high-risk drivers to go uninsured.
II. Large underwriting profits have resulted in high-risk drivers subsidizing the cost of
insurance for good drivers in the voluntary markets.
A) I only
B) II only
C) both I and II
D) neither I nor II
JKL Insurance Company reported the following information on its accounting
statements last year:
What was JKL’s loss ratio last year?
A) 70.0 percent
B) 75.0 percent
C) 83.3 percent
D) 90.0 percent
Which of the following statements about the medical insurance (Part B) portion of
Medicare is (are) true?
I. Participation in Part B of Medicare is voluntary.
II. It is provided at no cost to anyone who is fully insured under Medicare.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following statements about HMO managed care plans is (are) true?
I. There is an emphasis on controlling costs.
II. They usually have high deductibles.
A) I only
B) II only
C) both I and II
D) neither I nor II
Rob purchased a Personal Auto Policy (PAP) with collision and other-than-collision
coverage. Which of the following losses would be covered under his policy?
A) Rob wrecked his car while using it as a taxi cab.
B) Thieves took Rob’s radar detector from his car.
C) A flash flood washed Rob’s car off the road and damaged it.
D) The new tires Rob had on the car were defective and wore out after 2 months.
Jane purchased a $50,000 liability insurance policy from Insurer A. Fearing that she did
not have enough liability insurance, she purchased an additional $100,000 of liability
coverage from Insurer B. As a result of a negligent act, Jane was ordered to pay $75,000
in damages. Assuming the coverage from Insurer A is primary and the coverage from
Insurer B is excess, how will this claim be settled?
A) Insurer A will pay $50,000 and Insurer B will pay $25,000.
B) Insurer A will pay $37,500 and Insurer B will pay $37,500.
C) Insurer A will pay $25,000 and Insurer B will pay $50,000.
D) Insurer A will pay nothing and Insurer B will pay $75,000.
Lisa does not want her life insurance policy included in her gross estate when she dies.
Lisa can remove the life insurance policy from her estate if she does which of the
following more than 3 years before she dies?
A) borrow the cash value of the policy
B) make an absolute assignment of the policy to someone else
C) change the beneficiary to someone who does not have insurable interest
D) select a lump sum settlement option and name her estate the beneficiary
Which of the following statements about unsatisfied judgment funds is (are) true?
I. An accident victim must obtain a judgment against the motorist who caused an
accident and must show the judgment cannot be collected.
II. The major disadvantage is that the negligent uninsured motorist is relieved of legal
liability.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following statements about variable universal life insurance is (are) true?
I Variable universal life insurance has fixed premium payments.
II. Variable universal life insurance allows the policyowner to decide where the
premiums are invested.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following statements is (are) true with regard to the inflation-indexed
annuity option?
I. The initial monthly payment is lower than the initial payment a fixed annuity would
have provided if purchased at the same age.
II. Periodic payments to the annuitant are adjusted for inflation.
A) I only
B) II only
C) both I and II
D) neither I nor II
Under an equity-indexed annuity, what name is given to the percentage increase in the
stock index that is credited to the contract?
A) the expense rate
B) the exclusion ratio
C) the indexing rate
D) the participation rate
Which of the following is classified as casualty insurance?
A) workers compensation insurance
B) fire insurance
C) marine insurance
D) life insurance
From the standpoint of the insurer, which of the following is a characteristic of an
ideally insurable risk?
A) The loss must be intentional.
B) There must be a small number of unique loss exposures.
C) The chance of loss must be calculable.
D) The loss must be indeterminable.
Adverse selection occurs
A) when an insurance company loses money on its investments.
B) when insurance purchasers buy insurance but do not have a loss.
C) when catastrophic losses occur as a result of a natural disaster.
D) when applicants with a higher-than-average chance of loss seek insurance at
standard rates.
Richard is using the capital retention approach to determine how much life insurance to
purchase. Richard would like to provide $35,000 per year to his family, forever, if he
dies. The assets that he has today will provide $25,000 in annual income without the
liquidation of these assets. If life insurance proceeds can be invested to earn a 5 percent
annual return, how much life insurance should Richard purchase to fund the additional
income needed to meet the $35,000 annual income goal?
A) $10,000
B) $100,000
C) $150,000
D) $200,000