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All of the following will support an insurable interest for purposes of purchasing
property and liability insurance EXCEPT
A) close family relationship.
B) potential legal liability.
C) secured creditors.
D) a contract right.
All of the following statements about the settlement of a claim are true EXCEPT
A) The insurance policy usually has a provision specifying how a notice of loss is to be
made to the insurance company.
B) One step in the investigation of a claim is to determine whether the policy was in
force when the loss occurred.
C) The adjustor must file the proof of loss, which is a sworn statement supporting his or
her decision regarding a claim.
D) A policy provision may determine how disputes over claim settlements are resolved.
Which of the following situations is covered under Section II of an unendorsed
homeowners policy?
A) injuries which occur at a park resulting from a motorcycle owned by the insured
B) injuries resulting from an auto not subject to registration because it is in dead storage
C) injuries resulting from an auto rented by the insured while on a vacation
D) injuries resulting from a trailer being pulled by the insured's auto
Which of the following statements about the assignment of a life insurance policy is
(are) true?
I. Under a collateral assignment, the policyowner assigns a life insurance policy to
secure a loan.
II. Under an absolute assignment, only limited ownership rights in a policy are
transferred.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following would be a valid reason for an insurer to contest a policy after
the contestable period has ended?
A) The policyholder made a material misrepresentation in the application process.
B) The insurer's loss ratio is running higher than the insurer anticipated.
C) The applicant had someone else take the medical examination required for policy
approval for her.
D) The policyholder concealed a material fact at the time of application.
Which of the following items is (are) contained in the common policy conditions page
of the commercial package policy?
I. The policy period
II. A provision describing the insurer's right to audit the insured's books and records
A) I only
B) II only
C) both I and II
D) neither I nor II
Kevin has three liability policies which provide for contribution by equal shares if other
insurance applies to a loss. How much will each policy pay for a $3,000,000 liability
judgment if policy A provides $500,000 of coverage, policy B provides $1,000,000 of
coverage, and policy C provides $3,000,000 of coverage?
A) Each policy will pay $500,000, and Kevin must pay the remaining $1,500,000.
B) Policy A will pay $500,000, policies B and C will each pay $1,000,000, and Kevin
must pay the remaining $500,000.
C) Policy A will pay nothing, policy B will pay $1,000,000, and policy C will pay
$2,000,000.
D) Policy A will pay $500,000, policy B will pay $1,000,000, and policy C will pay
$1,500,000.
The number of title insurance companies operating in State Z is relatively low.
Recently, the largest of these companies (50 percent market share) acquired the second
largest company (30 percent market share). Immediately after the acquisition, the
insurer raised premiums by 75 percent. This scenario demonstrates which of the
following rationales for the regulation of insurance?
A) maintain insurer solvency
B) prohibit unfair sales practices by agents
C) ensure reasonable rates
D) make insurance available
Which life insurance policy provision specifies that it is the policyholder, and not the
insured or beneficiary, who possesses all contractual rights while the policy is in force?
A) nonforfeiture options
B) entire contract clause
C) incontestable clause
D) ownership clause
Exclusions are used in insurance policies for all of the following reasons EXCEPT
A) to reduce moral hazard.
B) to waive policy conditions.
C) to eliminate coverage for uninsurable perils.
D) to eliminate coverage not needed by typical insureds.
Which of the following statements regarding the Emergency Unemployment
Compensation (UEC) program is true?
A) EUC benefits are limited to individuals who have exhausted regular state benefits
and have annual incomes below the federal poverty level.
B) EUC benefits are funded entirely by the federal government.
C) EUC benefits are limited to employees who have lost their job because of a labor
dispute.
D) EUC benefits are available on a case-by-case based and awarded at the discretion of
the Secretary of Labor.
Which of the following statements about a decreasing term insurance policy is true?
A) The face amount of the policy decreases during the policy period, and the premium
increases.
B) The face amount of the policy decreases during the policy period, but the premium
remains level.
C) The premium decreases during the policy period, but the face amount remains
constant.
D) Both the premium and the face amount of the policy decrease gradually over the
policy period.
The business income and extra expense coverage form covers loss of business income
and continuing normal operating expenses. How is business income (revenue) defined?
A) total sales
B) total sales less cost of goods sold
C) pre-tax net profit
D) after-tax net income
An HMO physician who determines if medical care from a specialist is necessary is
called a(n)
A) capitator.
B) internist.
C) network facilitator.
D) gatekeeper.
The relative level of surplus in the insurance industry is called the industry's
A) capacity.
B) liabilities.
C) reserves.
D) admitted assets.
Beta Corporation has 1,000 employees eligible to participate in the firm's pension plan,
and 100 of these employees are considered highly compensated. All of the highly
compensated employees are covered by the plan. What is the minimum number of the
900 non-highly compensated employees who must be covered by the plan in order for
the plan to satisfy the ratio percentage test?
A) 500
B) 630
C) 667
D) 900
