A Pony Express Armored Car was transporting bank receipts from six branch banks to
the main bank. A group of robbers staged a daring robbery. They forced the armored car
off the road, shot two guards, and took over $120,000 in cash. Which insuring
agreement in a financial institution bond would cover the stolen money in this case?
A) Insuring Agreement A – Fidelity
B) Insuring Agreement B – On Premises
C) Insuring Agreement C – In Transit
D) Insuring Agreement D – Forgery or Alteration
The cost-of-living rider typically bases increases in the policy face value on changes in
the
A) gross national product.
B) interest rate for short-term U.S. government securities.
C) consumer price index.
D) national wage level.
The purpose of the Miscellaneous-Type Vehicle Endorsement to the PAP is to
A) add coverage for newly-acquired autos.
B) provide coverage for when the insured is using someone else’s auto with the
permission of the owner.
C) insure motorcycles, mopeds, motor scooters, and similar vehicles.
D) provide coverage for when the insured is using someone else’s auto without the
permission of the owner.
Which of the following statements about the scope of risk management is (are) true?
I. Traditionally, risk management was limited in scope to speculative loss exposures.
II. In the 1990s, some businesses began to expand the scope of risk management to
include financial risks.
A) I only
B) II only
C) both I and II
D) neither I nor II
In addition to providing coverage in the United States, its territories and possessions,
and Puerto Rico, where else does the PAP provide coverage?
A) in Mexico
B) in Canada
C) in both Mexico and Canada
D) anywhere in the world
Mid-States Beef is a commercial feedlot business. Currently, the company has over
10,000 cattle in feedlots. Mid-States is concerned that the price of corn, the grain fed to
the cattle, will increase significantly. The risk that the price of corn may increase and
harm the profitability of Mid-States Beef’s operations is a(n)
A) currency exchange rate risk.
B) property risk.
C) commodity price risk.
D) interest rate risk.
Which of the following is a permissible IRA investment alternative?
A) mutual funds
B) fine art
C) antiques
D) life insurance
Big Mutual Insurance Company would like to take advantage of financial services
deregulation by acquiring a bank and a stock brokerage firm. Big Mutual, however,
would have trouble raising the funds needed to make these acquisitions under the
mutual form of organization. Big Mutual is planning to switch from the mutual form of
organization to the stock form, and to issue shares of common stock to raise capital.
This change in organizational structure is called
A) mutualization.
B) retrocession.
C) reinsurance.
D) demutualization.
Which of the following statements is (are) true regarding the calendar-year deductible
used in most individual medical expense policies?
I. Once the deductible is satisfied, no additional deductible is payable during the
calendar year.
II. A carryover provision helps to avoid paying two deductibles in a short period of
time.
A) I only
B) II only
C) both I and II
D) neither I nor II
Dale, age 65, was dismayed to learn about all of the deductibles, co-pays, limits, and
exclusions in the Medicare program. Dale bought a type of health insurance specifically
designed to supplement Medicare, and selected his coverage from among 10 standard
policies that private insurers offer. What type of health insurance did Dale purchase?
A) long-term care insurance
B) Medigap insurance
C) major medical insurance
D) viatical insurance
State insurance regulators require LMN Life Insurance Company to maintain a separate
account. The assets in the separate account would support the liabilities for which of the
following products?
A) term life insurance
B) whole life insurance
C) fixed annuity
D) variable life insurance
Which of the following statements about Blue Cross Plans is (are) true?
I. They typically provide service benefits rather than cash benefits to members.
II. They usually provide very limited benefits for hospital charges.
A) I only
B) II only
C) both I and II
D) neither I nor II
Charles, age 65, owns a paid-up $250,000 whole life policy on his own life. Charles is
doing some estate planning and would not like this policy to be included in his gross
estate for federal estate tax purposes. Which of the following statements is (are) true
regarding the tax treatment of this policy?
I. Charles can avoid having the policy proceeds included in his gross estate by naming
his estate the beneficiary.
II. If Charles make an absolute assignment of the policy and dies more than three years
later, the policy is not counted as part of his gross estate.
A) I only
B) II only
C) both I and II
D) neither I nor II
Amber believes that her auto insurance premium is too high. Which of the following
would most likely lower Amber’s premium?
A) Amber could increase her physical damage deductible.
B) Amber could move from the rural area where she lives to an urban or suburban area.
C) Amber could increase the amount of liability insurance that she carries.
D) Amber could add “other-than-collision loss” coverage to her policy.
Which of the following statements about group insurance underwriting principles is
(are) true?
I. If a plan is contributory, 100 percent of the eligible employees must be covered.
II. Employees should be allowed to determine their own level of benefits.
A) I only
B) II only
C) both I and II
D) neither I nor II
Executives of a Fortune 500 firm blocked an acquisition attempt by a larger company.
When the stockholders learned they could have made large profits had the acquisition
not been blocked, they filed a lawsuit against the executives of the firm. What type of
liability insurance protects the executives of the organization against such suits?
A) dram shop liability insurance
B) directors and officers liability insurance
C) employers liability insurance
D) employment related practices liability insurance
All of the following losses are subject to special limits of liability under the
Homeowners 3 policy EXCEPT the
A) theft of firearms.
B) destruction by fire of property used for business purposes.
C) storm damage to a boat at a marina.
D) destruction of jewelry by fire.
Which of the following statements is (are) true with respect to catastrophe bonds?
I. The bonds are issued by the U.S. Government.
II. The bonds have relatively high interest (coupon) rates.
A) I only
B) II only
C) both I and II
D) neither I nor II
Under the Medicare Prescription Drug Program, a coverage gap (also called a “donut
hole”) exists after the beneficiary and drug plan pay a certain amount for covered drugs.
The coverage gap refers to
A) the large, up-front deductible that must be satisfied if the patient has a prescription
for a covered brand-name drug.
B) the temporary gap in coverage that begins when the beneficiary and drug plan pay a
certain amount for covered drugs during the year and ends when the catastrophic limit
is reached and coverage resumes.
C) the temporary gap in coverage that begins after beneficiaries reach the lifetime limit
on catastrophic drug expenses and ends when a new deductible is met and coverage
resumes.
D) the temporary gap in coverage that begins when prescription benefits terminate for
beneficiaries who attain age 68 and resumes when beneficiaries attain age 72.
Ratemakers at ABC Insurance Company calculated the pure premium to be $280 for a
risk they were considering insuring. What is the gross rate for this risk, assuming a 30
percent expense ratio?
A) $364
B) $400
C) $430
D) $520