The gross premium is defined as
A) the net premium plus the loading allowance.
B) the terminal reserve plus the commission.
C) the net premium minus expenses.
D) the sum of all acquisition expenses.
Maria is covered under a group medical expense plan as an employee. She is also
covered under her husband’s plan as a dependent. If Maria is hospitalized, how will
each plan respond to her medical bills if both plans have the typical
coordination-of-benefits provision?
A) Maria’s plan is primary, and her husband’s plan is excess.
B) Her husband’s plan is primary, and Maria’s plan is excess.
C) The primary plan is determined by which birthday, Maria’s or her husband’s, is
earlier in the year.
D) Both plans will pay benefits on a pro rata basis.
David Florrell started a public accounting firm. David is concerned that accountants on
his staff may give incorrect accounting advice, and the accounting firm may be sued.
What type of liability insurance should David purchase to protect against such claims?
A) errors and omissions insurance
B) directors and officers liability insurance
C) general liability insurance
D) employers liability insurance
Jessica is an agent for LMN Life Insurance Company. She met with Brad, who was
interested in purchasing life insurance. Jessica explained the various uses of life
insurance, including income for Brad’s wife during the 1- or 2-year period following
Brad’s death. This period is known as the
A) dependency period.
B) estate clearance period.
C) blackout period.
D) readjustment period.
Which of the following statements is (are) true regarding exclusions in life insurance
contracts?
I. Life insurance policies are remarkably restrictive, including numerous exclusions.
II. A life insurer may exclude death attributable to certain activities or hobbies disclosed
on the application.
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 ISO commercial
crime coverage forms?
I. The discovery version only covers losses which occur during the policy period.
II. The loss-sustained version covers losses which occur during the policy period and
the loss is discovered during the policy period or within one year after the policy
expires.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following statements about disability and disability income insurance is
(are) true?
I. Most disability income policies replace 100 percent of gross earnings.
II. The probability of being disabled before age 65 is much higher than commonly
believed.
A) I only
B) II only
C) both I and II
D) neither I nor II
The head teller of a bank embezzled $50,000 from the bank. Which insuring agreement
in a financial institution bond is designed to cover such losses?
A) Insuring Agreement A – Fidelity
B) Insuring Agreement B – On Premises
C) Insuring Agreement C – In Transit
D) Insuring Agreement D – Forgery or Alteration
Five years ago, Shannon decided to start investing. She likes ABC Telecom Company,
and she invests in the company each month. As ABC Telecom is the only company in
which she invests, Shannon’s financial well-being will be harmed if the price of ABC
Telecom stock drops significantly. The risk of investment loss can be reduced if
Shannon invests in other companies and other types of financial assets. For Shannon,
the risk she faces with regard to her investments is a(n)
A) enterprise risk.
B) diversifiable risk.
C) pure risk.
D) nondiversifiable risk.
The worst loss that is likely to happen is referred to as the
A) maximum possible loss.
B) probable maximum loss.
C) frequency of loss.
D) severity of loss.
All of the following statements about universal life insurance are true EXCEPT
A) Interest is credited to the policy’s cash value each month.
B) Any withdrawal of a policy’s cash value reduces the amount of the death benefit.
C) Interest credited to a policy’s cash value is taxable for the policyowner in the year
credited.
D) The policyowner can add to a policy’s cash value at any time subject to policy
guidelines.
Jim would like to start a business raising thoroughbred racehorses. The business would
be the first of its kind in the state where he lives. Obtaining insurance on the horses is a
key concern, and he was dismayed to learn that none of the insurers authorized to
operate in his state offer this specialty insurance. What is the name of the intermediary
which Jim can use to place this coverage with an insurer not admitted to his state?
A) alien insurer
B) general agent
C) surplus lines broker
D) direct writer
The transfer of all ownership rights in a life insurance policy can be accomplished
through a(n)
A) absolute assignment.
B) irrevocable beneficiary designation.
C) incontestable clause.
D) participating-policy provision.