Which of the following statements about stock insurers is true?
A) They issue assessable policies.
B) They are not permitted to write property and liability insurance.
C) Stockholders bear any losses and share in any profits.
D) They are owned by their policyholders.
Big Life Insurance Company purchased Regional Bank. Regional Bank has 27 branches
in four states. Big Life Insurance Company required one employee at each bank branch
to become a licensed life insurance agent and to sell Big Life Insurance Company
annuities and life insurance products. This distribution channel is an example of the
A) career agent distribution system.
B) direct response distribution system.
C) financial institution distribution system.
D) worksite marketing distribution system.
Some directors and officers (D&O) liability policies include an insuring agreement that
covers the legal liability of a corporation arising out of the acts of directors and officers.
This coverage for the organization is called
A) blanket coverage.
B) corporate reimbursement coverage.
C) personal liability of directors and officers coverage.
D) entity coverage.
All of the following are potential disadvantages to employees covered by a
money-purchase pension plan EXCEPT
A) The contribution rate by the employer is uncertain.
B) The retirement benefit can only be estimated in advance of retirement.
C) The benefit formula may produce an inadequate benefit if an employee enters the
plan at an older age.
D) The investment losses are borne by the employees.
Ryan decided to review his personal risk management program. His car is 10 years old,
and he would receive little money from his insurer if the car was damaged or destroyed.
Ryan decided to drop the physical damage insurance on the car. From a risk
management perspective, dropping the physical damage insurance on the car is best
described as
A) increasing the use of avoidance in the risk management program.
B) increasing the use of noninsurance transfer in the risk management program.
C) increasing the use of retention in the risk management program.
D) increasing the use of risk control in the risk management program.
Linda wants to purchase a homeowners policy, but she has some valuable personal
property to which internal policy limits apply. Her agent said that she could obtain
coverage under her homeowners policy by attaching a list of this valuable property with
specific amounts of insurance. Such a listing is called a(n)
A) binder.
B) schedule.
C) application.
D) warranty.
All of the following statements about HMOs are true EXCEPT
A) They organize and deliver health care services.
B) HMOs place a heavy emphasis on controlling the cost of covered services.
C) HMO members pay nothing for medical care until care is provided, then they must
pay high deductibles and large coinsurance payments.
D) The selection of physicians is usually limited to physicians affiliated with the HMO.
Len is considering the purchase of a home. As a home is a large investment, Len wants
to make sure that there are no liens, easements, or other encumbrances preventing him
from an unchallenged right to possess and enjoy his property. Len can protect this right
through the purchase of
A) extended coverage insurance.
B) replacement cost insurance.
C) personal umbrella insurance.
D) title insurance.
Advantages of the direct response system for marketing life insurance include which of
the following?
I. Advertising can be specifically directed to selected markets.
II. Complex products can be easily sold.
A) I only
B) II only
C) both I and II
D) neither I nor II
Most family heads need substantial amounts of life insurance. However, with limited
income, money spent on life insurance reduces the amount of discretionary income
available for other high-priority needs. What an insured person gives up when he or she
purchases life insurance instead of using the premium dollars for other purposes is
called the
A) estimated cost of life insurance.
B) net cost of life insurance.
C) real (inflation-adjusted) cost of life insurance.
D) opportunity cost of buying life insurance.
Insurers obtain data which can be used to determine rates from
A) pricing pools.
B) insurance advisory organizations.
C) banks.
D) reciprocal exchanges.
Which of the following statements about the Miscellaneous-Type Vehicle Endorsement
to the PAP is (are) true?
I. It provides bodily injury liability coverage for any vehicle rented by the insured.
II. To lower premiums when a motorcycle is insured, bodily injury to passengers can be
excluded.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following statements is (are) true about the federal estate tax?
I. The gross estate can be reduced by a number of deductions.
II. If the person who died had any ownership interest in a life insurance policy at the
time of death, the proceeds are included in the gross estate for federal estate tax
purposes.
A) I only
B) II only
C) both I and II
D) neither I nor II
All of the following statements about the tax treatment of Health Savings Accounts
(HSAs) are true EXCEPT
A) Contributions to a qualified HSA are tax deductible.
B) Distributions from a qualified HSA used to fund medical expenses are taxable
income.
C) Investment income in a qualified HSA accumulates income tax free.
D) Distributions from a qualified HSA prior to age 65 for nonmedical purposes are
subject to a 10 percent penalty tax.
All of the following statements about the interest settlement option are true EXCEPT
A) The minimum guaranteed interest rate is usually equal to the prime rate.
B) The interest can be paid monthly, quarterly, semiannually, or annually.
C) The beneficiary may be allowed to withdraw part or all of the proceeds.
D) The beneficiary may be allowed to change to another settlement option.
Which of the following statements about converting a traditional IRA to a Roth IRA is
(are) true?
I. Such conversions can be done with no income tax consequences.
II. Qualified distributions from a Roth IRA after a conversion are received tax-free.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following types of loss exposures are best handled by the use of
avoidance?
A) low-frequency, low-severity loss exposures
B) low-frequency, high-severity loss exposures
C) high-frequency, low-severity loss exposures
D) high-frequency, high-severity loss exposures
Antonio is a claims adjustor for LMN Insurance Company. After the insurer is notified
that there has been a loss, Antonio meets with the insured. The first step in the claims
process that Antonio should follow is to
A) determine the amount of the loss.
B) attempt to deny the claim regardless of whether he believes the claim is covered.
C) verify that a covered loss has occurred.
D) delay paying the claim if the claim is covered.
JKL Company just converted its traditional defined-benefit plan to another type of plan.
Under the plan, benefits are defined in terms of a hypothetical account balance, with
retirement benefits dependent upon the value of the participant’s account at retirement.
Each year, employees receive an interest rate credit and a pay credit which is a specified
percentage of compensation. This type of plan is called a
A) section 401(k) plan.
B) deposit-administration plan.
C) cash-balance plan.
D) trust fund plan.
Which of the following statements is (are) true concerning investments of property and
casualty insurers and life insurers?
I. Property and casualty insurance companies place greater emphasis on liquidity than
do life insurers.
II. Life insurance company investments are, on average, of longer duration than
property and casualty insurance company investments.
A) I only
B) II only
C) both I and II
D) neither I nor II