Tina purchased a personal umbrella policy with a $1 million limit. Her insurer required
her to carry liability limits of 250/500/50 under her auto insurance policy. The personal
umbrella policy was written with a $1,000 self-insured retention. Tina was responsible
for an auto accident in which the other driver was severely injured. The other driver’s
bodily injuries were $400,000 and the property damage was $20,000. How much will
the insurer pay under Tina’s umbrella policy?
A) nothing
B) $149,000
C) $150,000
D) $170,000
Which of the following statements about tax-deferred retirement plans in the U.S. is
true?
I. Women, on average, receive lower employment-based retirement income than men.
II. One way to hedge against inflation is to invest lump-sum pension distributions in
fixed-income investments.
A) I only
B) II only
C) both I and II
D) neither I nor II
A defendant who is only slightly liable may be required to pay the full amount of
damages under which of the following?
A) the joint and several liability rule
B) the collateral source rule
C) arbitration
D) res ipsa loquitor
Methods by which insurers may minimize or avoid catastrophic losses include which of
the following?
I. The use of reinsurance
II. Concentrating coverage written in one geographic region
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following statements about the needs approach for estimating the amount
of life insurance to purchase is (are) true?
I. It involves an analysis of various family needs which must be met if a family
breadwinner dies.
II. Its use is appropriate only if a person currently has no life insurance protection.
A) I only
B) II only
C) both I and II
D) neither I nor II
Tamara purchased a term insurance policy when she had high life insurance needs and
limited income. Now Tamara can afford whole life insurance. What term life insurance
provision will permit Tamara to switch her term insurance to whole life insurance
without having to show that she is still insurable?
A) renewal provision
B) tax-free exchange provision
C) conversion provision
D) free look provision
Fifth National Bank decided to loan $200,000 to Fred Franklin. As collateral for the
loan, Fred posted stock certificates. When Fred defaulted on the loan, Fifth National
tried to sell the stock. They discovered the stock certificates were stolen from someone
else. Which insuring agreement in a financial institution bond is designed to cover such
losses?
A) Insuring Agreement B – On Premises
B) Insuring Agreement C – In Transit
C) Insuring Agreement D – Forgery or Alteration
D) Insuring Agreement E – Securities
Which of the following statements about dividend options is (are) true?
I. The interest on dividends left to accumulate with the insurer is not considered to be
taxable income.
II. Paid-up additions are additional units of whole life insurance.
A) I only
B) II only
C) both I and II
D) neither I nor II
All of the following statements about ordinary life insurance are true EXCEPT
A) Premiums are level throughout the policy period.
B) The face amount of the policy is paid if the insured lives to age 65.
C) There is a build-up of cash value that can be borrowed by the policyholder.
D) It offers the policyholder the flexibility to meet a wide variety of financial
objectives.
Under many cafeteria plans, employees make premium contributions with pre-tax
dollars. Then they use money from the salary reduction to purchase group health
insurance or dental insurance. This type of cafeteria plan is called a
A) health reimbursement arrangement plan.
B) premium conversion plan.
C) full-choice plan.
D) flexible spending account plan.
Which of the following statements about high deductible health insurance plans is (are)
true?
I. Coverage under a high deductible health plan is necessary to establish a qualified
health savings account (HSA).
II. High deductible health plans provide a maximum limit on annual out-of-pocket
expenses.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following statements about the exclusive agency system for marketing
property and liability insurance is true?
A) Exclusive agents typically have complete ownership of policy expirations.
B) A higher commission rate is usually paid on exclusive agents’ renewal business than
on new business.
C) Exclusive agents represent several different insurance companies.
D) New exclusive agents may start as employees and after a training period become
independent contractors.
State X hired Build-Right Construction to build a bridge. State X required that
construction be completed within 2 years after the contract was signed. Les Johnson is
the president of Build-Right. State X required that Build-Right’s promise to perform be
guaranteed by a third party. Build-Right purchased a performance bond from Rock
Solid Indemnity. The bond requires Rock Solid to be responsible if Build-Right does
not have the project completed on time. In this scenario, which party is the obligee?
A) State X
B) Build-Right Construction
C) Les Johnson
D) Rock Solid Indemnity
Which of the following statements about group universal life insurance is true?
A) The interest rate credited to a policy varies over time, but is subject to a minimum
guarantee.
B) The employee selects where the cash value of the policy is invested.
C) The coverage is not convertible to individual insurance if the employee leaves the
group.
D) The employer usually funds most of the cost of group universal life insurance.
Which of the following statements about Medigap policies is (are) true?
I. Insurers are required to have an open enrollment period of 6 months from the date an
applicant first enrolls in Medicare Part B and is age 65 or older.
II. Most policies are of limited value because they largely duplicate benefits already
provided by Medicare.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following statements is (are) true concerning the automatic premium loan
provision?
I. Unlike other policy loans, interest is not charged on automatic premium loans.
II. The basic purpose of an automatic premium loan is to prevent a life insurance policy
from lapsing.
A) I only
B) II only
C) both I and II
D) neither I nor II
A burglar took some blank checks during a break-in at XYZ Company. He was careful
to make sure that the theft would be difficult to discover. Three months later, he wrote
himself a check for $20,000 and signed the company treasurer’s name on the check.
After the check was cashed, the loss was discovered. Which commercial crime
coverage form would cover this loss?
A) Inside the Premises – Theft of Money and Securities
B) Money Orders or Counterfeit Currency
C) Forgery or Alteration
D) Outside the Premises