JKL Insurance Company reported the following information on its accounting
statements last year:
What was JKL’s expense ratio last year?
A) 5.0 percent
B) 30.0 percent
C) 33.3 percent
D) 50.0 percent
Which of the following statements about group short-term disability income plans is
true?
A) Most plans have a short elimination period for accidents but cover sickness from the
first day of disability.
B) Disability is usually defined in terms of any substantial, gainful, employment.
C) The amount of disability income benefits typically is equal to some percentage of a
worker’s normal earnings.
D) Most short-term plans cover occupational disability only.
Reasons for NOT purchasing an accidental death benefit rider include which of the
following?
I. Most people die as a result of a disease rather than from an accident.
II. The economic value of a human life is not increased if death occurs because of an
accident.
A) I only
B) II only
C) both I and II
D) neither I nor II
The financial services field is currently experiencing consolidation and convergence. If
both of these trends continue, in the future we should observe
A) fewer financial institutions offering a narrower range of financial services products.
B) fewer financial institutions offering a wider range of financial services products.
C) more financial institutions offering a narrower range of financial services products.
D) more financial institutions offering a wider range of financial services products.
Which of the following losses would be covered under Section II of an unendorsed
Homeowners 3 policy?
A) The homeowner accidentally dropped a bowling ball, injuring another bowler’s foot.
B) The homeowner’s nanny was injured on her day off while hiking at a state park.
C) The insured slandered a city council member at a city council meeting.
D) The homeowner’s dog bit the homeowner’s daughter.
Which of the following is authority given to the Federal Insurance Office created by the
Dodd-Frank Act?
A) to represent the federal government in international discussions of insurance
regulation
B) to license and charter new insurance companies that plan to operate nationally
C) to be the primary monitor of insurance company solvency
D) to be the primary regulator of all aspects of insurance
Marcy advises her clients on investments, taxes, wealth management, estate issues,
budgeting, and insurance. Marcy is also a licensed life insurance agent. When Marcy
sells life insurance to a client, the distribution channel used is a(n)
A) stock broker.
B) financial planner.
C) financial institution.
D) independent agent.
In Maryland, drivers who are unable to obtain auto insurance in the voluntary market
are insured through a(n)
A) state fund.
B) reinsurance facility.
C) joint underwriting association
D) automobile insurance plan.
All of the following are insured persons under the liability coverage of the PAP
EXCEPT
A) a friend to whom the named insured loans a covered auto.
B) the employer of the named insured for actions resulting from the named insured’s
use of a covered auto.
C) the former spouse of the named insured who moved out of the home 2 years ago
when the divorce was finalized.
D) a relative of the named insured if a member of the same household.
A false material statement made by an applicant for insurance is an example of
A) concealment.
B) breach of warranty.
C) lack of offer and acceptance.
D) misrepresentation.
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 principal?
A) State X
B) Build-Right Construction
C) Les Johnson
D) Rock Solid Indemnity
Some events cannot occur together because the occurrence of one event makes the
occurrence of the second event impossible. Such events are called
A) dependent events.
B) independent events.
C) conditional events.
D) mutually exclusive events.
What happens to the premiums for yearly renewable term insurance as an insured gets
older?
A) They increase at an increasing rate.
B) They increase at a decreasing rate.
C) They decrease at a constant rate.
D) They remain level.
Which of the following is a post-loss risk management objective?
A) treating loss exposures in the most economical way
B) continuing operations
C) reduction of anxiety
D) meeting externally imposed legal obligations
The process of transferring risk to the capital markets through the use of financial
instruments such as bonds, futures contracts, and options is known as
A) consolidation of risk.
B) avoidance of risk.
C) securitization of risk.
D) compartmentalization of risk.
Disadvantages of the capital retention approach include which of the following?
I. Assets are often liquidated too quickly.
II. It underestimates the amount of life insurance needed.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following statements about the Social Security cost-of-living adjustment
is (are) true?
I. The amount of the adjustment is limited to a maximum of 2.5 percent annually.
II. Increases are based on changes in the consumer price index.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following statements about the ownership of a life insurance policy is
(are) true?
I. Under the ownership clause, the policyholder and beneficiary equally share all
contractual rights in the policy while the insured is living.
II. The policyholder can designate a new owner by filing an appropriate form with the
insurance company.
A) I only
B) II only
C) both I and II
D) neither I nor II