John purchased an unendorsed Homeowners 3 policy. The coverage will expire next
month. Which of the following changes will lower the premium that John will pay?
A) reducing the deductible
B) adding a replacement cost endorsement for personal property
C) switching to an HO-2 policy
D) adding a personal injury endorsement
Which of the following statements about health savings accounts (HSAs) is true?
A) There are no limits to annual contributions that an individual may make to his or her
HSA.
B) Once an individual has reached age 65 or is covered by Medicare, no additional
contributions to the HSA may be made.
C) The health insurance plan covering the HSA account beneficiary is not permitted to
use a deductible.
D) HSAs offer no tax benefits for the account beneficiary.
Which of the following statements regarding terrorism insurance is (are) true?
I. There is a federal backstop if terrorism claims are catastrophic.
II. Private insurers market terrorism insurance.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following statements about premium taxes is (are) true?
I. They are levied by the federal government as a result of the McCarran-Ferguson Act.
II. Their primary purpose is to provide funds for insurance regulation.
A) I only
B) II only
C) both I and II
D) neither I nor II
Under one doctrine, a person who understands the danger inherent in an activity cannot
recover damages in the event of injury from the activity. This doctrine is called the
A) contributory negligence doctrine.
B) assumption of risk doctrine.
C) comparative negligence doctrine.
D) fellow servant doctrine.
Ann is considering the purchase of a life insurance policy with these characteristics:
flexible premium payments, the insurance and savings components are separate, the
interest rate credited to the cash value is tied to a changing market interest rate but a
minimum interest rate is guaranteed, and a monthly administrative fee is charged. Ann
is considering buying
A) whole life insurance.
B) variable life insurance.
C) universal life insurance.
D) current assumption whole life.
Powers specifically conferred on an agent to act on behalf of a principal are
A) incidental authority.
B) apparent authority.
C) implied authority.
D) express authority.
Which of the following statements about physicians, surgeons, and dentists liability
insurance is true?
A) Liability coverage is restricted to accidental acts.
B) The policy eliminates the need for medical practitioners to purchase general liability
insurance.
C) The insurer must obtain the consent of medical practitioners before the insurer can
settle claims.
D) The policy covers the physician for the negligent acts of an employee.
Andrea purchased an auto insurance policy with bodily injury liability limits of 250/500
($250,000/$500,000). She also purchased a personal umbrella policy with a $1 million
limit and a $500 self-insured retention. Andrea was talking on her cell phone while
driving, and her car struck and killed a pedestrian in a crosswalk. The court ordered her
to pay $750,000 to the spouse of the person she killed. How will this claim be settled?
A) The umbrella policy will pay $749,500.
B) Each policy will pay $375,000.
C) $250,000 will be paid under the auto policy and $500,000 will be paid by the
umbrella policy.
D) The auto policy will pay $250,000, Andrea will pay $500, and the umbrella policy
will pay $499,500.
Which of the following statements about the waiver-of-premium provision in life
insurance is true?
A) Because the probability of becoming disabled exceeds the probability of premature
death, the cost to include this provision is usually prohibitive at younger ages.
B) Premiums are usually waived if the insured becomes partially disabled.
C) Life insurance protection continues in force during a period of disability, but
dividends cease and cash values are reduced.
D) The disability must occur before a stated age, such as 65, for premiums to be
waived.
Ben is concerned that if he injures someone or damages someone’s property he could be
held legally responsible and required to pay damages. This type of risk is called a
A) speculative risk.
B) liability risk.
C) nondiversifiable risk.
D) property risk.
An insurance policy specifically written and designed to meet the needs of an insurance
purchaser is called a(n)
A) manuscript policy.
B) bureau policy.
C) standard policy.
D) excess policy.
Janet was unable to obtain auto insurance in the voluntary insurance market. She was
contacted by the state insurance department and notified that XYZ Insurance would be
her insurer. Eric was also unable to obtain auto insurance, and he received a similar
notice. ABC Insurance would be his insurer. The mechanism used in Janet’s and Eric’s
state to provide auto insurance to high-risk drivers is a(n)
A) automobile insurance plan.
B) joint underwriting association.
C) specialty automobile insurer.
D) reinsurance facility.
Mary is interested in comparing life insurance policies. Rather than looking at the cost
per thousand, she would like to compare the rate of return earned on the savings portion
of the policy. Which of the following would be of the most interest to Mary?
A) the policy’s Linton Yield
B) the policy’s surrender cost
C) the policy’s traditional net cost
D) the policy’s net payment cost
All of the following are arguments for no-fault automobile insurance laws EXCEPT
A) No-fault is unnecessary as it’s easy to determine which driver was negligent when a
multiple-vehicle accident occurs.
B) A large portion of each premium dollar is used for purposes other than compensating
accident victims for their losses.
C) There are delays in compensating accident victims under the tort system.
D) Seriously injured accident victims tend to be overcompensated, while those with
small economic losses are inadequately indemnified.
Which of the following statements about the business income coverage form is true?
A) Business income is defined as gross earnings before taxes.
B) Payroll is excluded unless it is specifically added.
C) The form covers loss of business income and extra expenses incurred during
restoration.
D) The form can be used by a manufacturing operation only.
Which of the following would not appear in the asset section of an insurance company’s
balance sheet?
A) loss reserves
B) bonds
C) common stock
D) real estate
Mutual Property Insurance Company has a surplus of $2 million. According to a
conservative rule, how much new net premiums can Mutual Property Insurance
Company safely write?
A) $2 million
B) $8 million
C) $10 million
D) $20 million
If the value of a vehicle is increased after repairs, such as repainting an entire auto when
only one fender or door is damaged, the insurer will not pay for the increase in value.
Another name for the increase in value is
A) diminution.
B) betterment.
C) appraisal.
D) subrogation.