Why can an insurer refuse to pay a claim if an insured fails to abide by the policy
provisions?
A) because insurance contracts are aleatory
B) because insurance contracts are unilateral
C) because insurance contracts are conditional
D) because insurance contracts are contracts of adhesion
XYZ Insurance Company expects $500,000 in claims and loss adjustment expenses for
each 1,000 properties that it insures in a certain category of business insurance. What
pure premium should XYZ charge for each property insured?
A) $69.99
B) $166.67
C) $350.00
D) $500.00
John has an auto which is covered for collision losses subject to a $250 deductible.
Kate’s auto also has collision coverage but her deductible is $500. Which of the
following statements describes how a $2,000 collision loss will be paid if it occurs
when John borrows Kate’s car because his car is in the shop for repairs?
A) John’s policy will pay $1,500, and Kate’s policy will pay nothing.
B) John’s policy will pay $1,750, and Kate’s policy will pay nothing.
C) Kate’s policy will pay $1,750, and John’s policy will pay nothing.
D) Kate’s policy will pay $1,500, and John’s policy will pay $250.
All of the following are examples of personal risks EXCEPT
A) poor health.
B) unemployment.
C) premature death.
D) loss of business income.
Which of the following statements about the eligibility requirements for insuring
mobile homes by endorsing a homeowners policy is (are) true?
I. The mobile home must be designed for year-round living.
II. The mobile home must be located in a fenced area with security guards.
A) I only
B) II only
C) both I and II
D) neither I nor II
The function of an actuary is to
A) adjust claims.
B) determine premium rates.
C) negotiate reinsurance treaties.
D) invest insurance company assets.
Bert purchased a life insurance policy 4 years ago. He inadvertently stated that he was 1
year younger than his actual age. If Bert dies today, how much will the insurance
company pay?
A) nothing
B) less than the policy face value
C) the policy face value
D) more than the policy face value
Purposes of life insurance policy reserves include which of the following?
I. Legal test of the insurer’s solvency
II. Formal recognition of the obligation to pay future claims
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following statements about offer and acceptance for insurance contracts is
true?
A) In property and liability insurance, agents typically do not have the authority to bind
coverage.
B) In life insurance, the agent can usually accept an offer by immediately binding
coverage.
C) In property insurance, the offer and acceptance are usually in writing but may be
oral.
D) In life insurance, the offer is merely the promise to pay the first premium.
Section II of the homeowners policy has exclusions applying to all of the following
EXCEPT
A) activities of the named insured’s minor children.
B) business activities.
C) transmission of a communicable disease.
D) intentional injuries.
According to the law of large numbers, what should happen as an insurer increases the
number of units insured?
A) The amount the insurer expects to pay in claims should decrease.
B) Underwriting expenses should decrease.
C) Actual results will more closely approach expected results.
D) The insurer’s profitability should become more variable.
Mike and Susan built their “dream home.” They insured their home for its full
replacement cost. They also added an endorsement that will pay up to an additional 20
percent of the policy limit in case the cost of rebuilding the home after a loss is greater
than the policy limit. The basis under which Mike and Susan insured their home is
called
A) actual cash value.
B) valued policy coverage.
C) extended replacement cost.
D) guaranteed replacement cost.
Louise was in a hurry and tried to cross the street in the middle of the block rather than
at a street corner. A car struck her. Even though Louise placed herself in danger, she
may still be able to collect for her injuries if the driver had an opportunity to avoid
hitting her but failed to do so. This rule is called the
A) last clear chance rule.
B) collateral sources rule.
C) alternative dispute resolution rule.
D) joint and several liability rule.
Which of the following statements about personal producing general agents is (are)
true?
I. They often have the option of recruiting and training sub-agents.
II. They are independent agents who produce substantial amounts of life insurance with
one insurer.
A) I only
B) II only
C) both I and II
D) neither I nor II
In the context of employee benefits, the term “discrimination” refers to benefit
comparisons between
A) male and female employees.
B) current employees and retirees.
C) highly compensated employees and non-highly compensated employees.
D) members of an under-represented group (by religious preference, race, or national
origin) and the majority of employees.
Which of the following statements about the immunity of governmental entities is (are)
true?
I. Governmental entities are more likely to be immune from liability when performing
proprietary functions than when performing governmental functions.
II. Many courts have eliminated the immunity of government entities.
A) I only
B) II only
C) both I and II
D) neither I nor II
The policy provision requiring the filing of proof of loss with the insurer is an example
of a(n)
A) declaration.
B) condition.
C) insuring agreement.
D) miscellaneous provision.
Which of the following statements about federal flood insurance is true?
A) It is available even if property has been previously flooded.
B) It is unavailable in high-risk flood areas.
C) It is available only for residences, not for businesses.
D) Waiting periods are not used in the federal flood insurance program.