Which of the following statements about reinsurance facilities for insuring high-risk
drivers is (are) true?
I. Underwriting losses in the reinsurance facility are shared by all auto insurers in the
state.
II. An insurer must accept all applicants for insurance, but the insurer has the option of
placing high-risk drivers in the reinsurance pool.
A) I only
B) II only
C) both I and II
D) neither I nor II
A special form of planned retention by which part or all of a give loss exposure is
retained by the firm is called
A) hedging.
B) self-insurance.
C) passive retention.
D) noninsurance transfer.
Beth purchased a participating life insurance policy 6 years ago. Her life insurance
needs have increased, but she has developed a medical condition that makes it
impossible for her to purchase more life insurance at affordable premiums. Which
dividend option makes sense for Beth to use given her medical condition?
A) cash
B) apply to premium
C) dividend accumulations
D) paid-up additions
Which of the following statements about the additional coverage for damage to
property of others in Section II of the homeowners policy is true?
A) The maximum amount of coverage is $25,000 per occurrence.
B) Payments are made on the basis of the replacement cost of the damaged property.
C) There is coverage for property damage arising out of a business engaged in on a
full-time basis by an insured.
D) There is coverage for intentional property damage by any insured who is a teenager.
A table showing losses that could occur and the corresponding chance that each loss
could occur is called a(n)
A) underwriting cycle.
B) capital budget.
C) loss distribution.
D) risk map.
Mark owns a 1998 sedan. The last time Mark renewed his auto insurance, he decided to
drop the physical damage insurance on this vehicle. How is Mark dealing with the auto
physical damage exposure in his personal risk management program?
A) risk transfer
B) passive retention
C) avoidance
D) active retention
A credit-based score that insurers claim is highly predictive of future claims costs is an
individual’s
A) combined ratio.
B) loss ratio.
C) insurance score.
D) underwriting score.
Which of the following situations would be covered under the liability section of the
PAP?
I. A mechanic is sued by a pedestrian who is injured when the mechanic has an accident
while road testing the insured’s auto.
II. The daughter of the named insured is sued after she has an accident when a new
friend she just met at a campus hangout lets her drive his car.
A) I only
B) II only
C) both I and II
D) neither I nor II
Nancy’s employer provides an interesting employee benefit plan. Each employee is
given 250 employee benefit credits to spend. A wide array of benefits is available, and
the employee uses benefit credits to select the benefits that he or she wants. This type of
employee benefit plan is called a(n)
A) defined benefit plan.
B) cafeteria plan.
C) employee selection plan.
D) contributory plan.
Which of the following statements about the withdrawal of funds from a traditional IRA
is true?
A) Withdrawals of deductible contributions between the ages of 59.5 and 65 are subject
to a tax penalty unless they are withdrawn because of specified circumstances such as
death or long-term disability.
B) Amounts attributable to nondeductible contributions are fully taxable as ordinary
income when received.
C) Withdrawals must begin no later than April 1 of the year following the calendar year
in which an individual attains age 70.5.
D) Withdrawals must be taken in the form of an annuity.
A situation in which a person is held legally liable even though fault or negligence
cannot be proven is an example of
A) general damages.
B) comparative negligence.
C) an intentional tort.
D) strict liability.