A score derived from an individual’s credit history and other factors that is used by
many auto and homeowners insurers for underwriting and rating purposes is called a(n)
A) CLUE score.
B) insurance score.
C) expense ratio score.
D) combined ratio score.
Which of the following statements about claims settlement is true?
A) Agents are never authorized to settle claims.
B) Independent adjustors may be used in a geographic area where the volume of
business is too low for an insurer to have its own adjustors.
C) A public adjustor is a salaried employee who works for one insurer.
D) A company adjustor is hired by a policyholder to represent him or her if the
policyholder does not agree with the claim settlement offered by the insurer.
Med Profs is a group of 18 doctors. These doctors work out of their own offices and
treat patients on a fee-for-service basis. In addition, Med Profs doctors also agree to
treat HMO members at reduced fees. The type of HMO that uses organizations like
Med Profs is called a(n)
A) group model plan.
B) closed panel plan.
C) individual practice association plan.
D) network model plan.
One type of commercial property insurance excludes perils which are covered by the
basic coverages. Some businesses buy this coverage to fill coverage gaps, including
flood and earthquake, and to cover property in other countries. This type of insurance is
called
A) protection and indemnity insurance.
B) building and personal property coverage form.
C) difference in conditions insurance.
D) builders risk coverage form.
To calculate a human life value, it is necessary to deduct certain costs from a person’s
average annual earnings. These costs include
A) funeral costs.
B) income taxes.
C) investment income.
D) pension benefits after retirement.
Ken purchased a PAP with liability limits of 100/300/50, medical payments coverage,
and collision coverage. Ken fell asleep while driving late at night. He crossed the center
line and hit a car approaching from the other direction. The following losses occurred.
– The driver of the other car suffered $30,000 in bodily injuries.
– Ken’s car sustained $5,000 in damages.
– Ken incurred $5,000 in medical expenses.
– The car that Ken hit was a total loss.
Which of Ken’s Personal Auto Policy (PAP) coverages will cover the damage to Ken’s
car?
A) bodily injury liability
B) collision coverage
C) medical payments coverage
D) property damage liability
Which of the following is a method used to help ensure the solvency of insurers?
A) commercial lines deregulation
B) risk-based capital standards
C) use of credit-based insurance scores
D) use of no filing required rating laws
A whole life insurance policy in which premiums are reduced for an initial period (e.g.
3 years) and are higher thereafter is an example of a
A) level-term policy.
B) modified life policy.
C) limited-payment whole life policy.
D) variable life policy.
Which of the following statements describes how losses will be settled if a property
insurance policy is written on a replacement cost basis?
A) Losses are settled without the applicable deductible.
B) Losses are settled without a deduction for depreciation.
C) The insurer must replace the damaged or destroyed property in lieu of a cash
settlement.
D) The policy is converted to a valued policy.
A common use of second-to-die life insurance is
A) insuring children.
B) insuring “double income with kids” families.
C) estate planning.
D) insuring key employees of a business.
Which of the following statements concerning directors and officers liability insurance
(D&O) is (are) true?
I. D&O policies usually cover the personal liability of directors and officers.
II. D&O policies exclude coverage for claims brought by employees and by
stockholders.
A) I only
B) II only
C) both I and II
D) neither I nor II
All of the following are covered as supplementary payments under the liability section
of the PAP EXCEPT
A) the cost of an appeal bond in a lawsuit stemming from an auto accident.
B) the cost of a bail bond for a traffic violation when no accident is involved.
C) interest which accrues on a liability judgment covered by the policy.
D) reasonable expenses incurred by the insured to testify at a trial involving a lawsuit
covered by the policy.
Marv is covered by a group health insurance plan at work. His employer funds the
entire cost of the group health insurance. Because of this characteristic, the group health
insurance plan can be described as
A) defined benefit.
B) contributory.
C) defined contribution.
D) noncontributory.
Which of the following statements is true regarding unsatisfied judgment funds?
A) An accident victim can choose to collect from the negligent driver or from the fund.
B) The negligent driver is relieved of legal responsibility when the fund makes a
payment to the accident victim.
C) The maximum amount an individual can collect from the fund is usually much more
than the minimum liability limits required by the state.
D) An accident victim must have exhausted other means of recovery before collecting
from the fund.
Prior to the passage of workers compensation laws, all of the following common law
defenses could be used by employers to avoid financial responsibility for work-related
injuries EXCEPT
A) contributory negligence.
B) the fellow-servant doctrine.
C) assumption of the risk.
D) joint and several liability.
Which of the following statements about the licensing of insurance companies is (are)
true?
I. A new capital stock insurer must meet minimum capital and surplus requirements,
which vary by state and line of insurance.
II. The licensing requirements for insurance companies are less stringent than those
imposed on most other types of firms.
A) I only
B) II only
C) both I and II
D) neither I nor II