All of the following statements about the boatowners package policy are true EXCEPT
A) Physical damage coverage for the boat is usually written to cover all losses except
those losses specifically excluded.
B) Liability coverage is provided for bodily injury only.
C) Some policies provide optional uninsured boaters coverage.
D) Medical payments coverage for water-skiers is available under the policy.
In 2008, Liberty Mutual Insurance Company acquired Safeco Insurance Company. This
acquisition demonstrates which financial services industry trend?
A) convergence
B) demutualization
C) mass merchandising
D) consolidation
Ellen purchased a health insurance policy. Under the provisions of the Affordable Care
Act, which of the following renewal provisions must the insurer use in the policy?
A) cancellable
B) guaranteed issue
C) renewable at the insurer’s option
D) conditionally renewable
Traditionally, risk has been defined as
A) any situation in which the probability of loss is one.
B) any situation in which the probability of loss is zero.
C) uncertainty concerning the occurrence of loss.
D) the probability of a loss occurring.
All of the following statements about yacht insurance are true EXCEPT
A) Property damage coverage includes damage from insects, weathering, and wear and
tear.
B) Liability coverage includes the cost of raising, removing, or destroying a sunken or
wrecked yacht.
C) Coverage can be added for maritime workers covered by the United States
Longshoremen and Harbor Workers Compensation Act.
D) Medical payments coverage pays for medical expenses because of accidental bodily
injury.
If an underwriter suspects moral hazard, the underwriter may ask an outside firm to
investigate the applicant and make a detailed report to the insurer. This report is called
a(n)
A) inspection report.
B) application.
C) M.I.B. report.
D) agent’s report.
Temporary evidence of insurance until a policy is actually issued is provided by a(n)
A) binder.
B) brokerage agreement.
C) pre-approval form.
D) endorsement.
Kristen has an individual medical expense policy with a $1,000 calendar-year
deductible, a $5,000 out-of-pocket limit, and a 20 percent coinsurance requirement.
Kristen was hospitalized for a surgical procedure in March, her first health care
treatment received during the year. The total bill was $20,000. Considering the
deductible and coinsurance, how much of this amount must Kristen pay?
A) $4,400
B) $4,800
C) $5,000
D) $5,100
Preloss objectives of risk management include which of the following?
I. Preparing for potential losses in the most economical way
II. Reduction of anxiety
A) I only
B) II only
C) both I and II
D) neither I nor II
Curt borrowed money from a bank to purchase a fishing boat. He purchased property
insurance on the boat. Curt had difficulty making loan payments because he did not
catch many fish, and fish prices were low. Curt intentionally sunk the boat, collected
from his insurer, and paid off the loan balance. This scenario illustrates the problem of
A) adverse selection.
B) moral hazard.
C) nondiversifiable risk.
D) attitudinal hazard.
Members of Mid-South Petroleum Distributors, a trade group, had trouble obtaining
affordable pollution liability insurance. The members formed a group captive that is
exempt from many state laws that apply to other insurers. This group captive is called
a(n)
A) reinsurance pool.
B) Lloyd’s association.
C) alien insurer.
D) risk retention group.
Eric’s property was damaged in an accident. He phoned his agent to see if the loss was
covered under his property insurance policy. The agent said, “As long as the cause of
loss is not specifically excluded in the policy, the loss is covered.” Based on the agent’s
answer, what type of insuring agreement appears in the policy?
A) unconditional coverage
B) named-perils coverage
C) extended-perils coverage
D) “open-perils” coverage
Which of the following statements about the definition of the insured is (are) true?
I. In some cases, a person who is not specifically named may be classified as an
insured.
II. Under no circumstances can more than one person be named as an insured.
A) I only
B) II only
C) both I and II
D) neither I nor II
The Affordable Care Act has provisions that improve the quality of health care and
provide several advantages. All of the following are examples of these provisions
EXCEPT
A) reducing paperwork and administrative expenses.
B) increasing the number of physician specialists and reducing the number of general
practitioners.
C) compensating physicians based on value rather than service volume.
D) encouraging integrated health care systems.
A deductible under which expenses are accumulated on an annual basis, and once a
specified total is reached, the deductible is satisfied for the year is called a
A) calendar-year deductible.
B) prospective deductible.
C) straight deductible.
D) waiting period.
Which of the following statements about underwriting policy is (are) true?
I. A company must establish an underwriting policy consistent with company
objectives.
II. Underwriting policy is usually subjective and allows the underwriter considerable
flexibility with respect to lines written and forms used.
A) I only
B) II only
C) both I and II
D) neither I nor II
Each accounting period, Harris Company Department Store charges a bookkeeping
account for its estimated shoplifting losses. The method that Harris Company
Department Store uses to fund its retained shoplifting losses is a(n)
A) private insurance policy.
B) captive insurer.
C) credit line.
D) unfunded reserve.