XYZ Insurance Company markets a wide range of coverages. One type of coverage
provides monetary compensation if a bonded party fails to perform certain acts. This
coverage is called
A) property insurance.
B) liability insurance.
C) a fidelity bond.
D) a surety bond.
Beth purchased a $50,000 nonparticipating whole life insurance policy. The annual
premium was $1,278. The cash value of the policy after 10 years will be $13,740. The
future value of $1 deposited at the start of the year for 10 years, assuming 5 percent
interest, is $13.207. If the premiums were invested at 5 percent interest for 10 years, the
premiums would grow to $16,878.55. Assuming 5 percent interest, what is the
surrender cost of this policy, per thousand per year, over the first 10 years the policy is
in force?
A) $4.48
B) $4.75
C) $4.92
D) $5.16
A provision included in a claims-made commercial general liability policy provides
coverage for claims filed after the policy has expired. This provision is called a(n)
A) extended reporting period provision.
B) agreed amount endorsement.
C) retroactive date provision.
D) per-occurrence limit clause.
Which of the following is a demographic factor that has increased losses from climate
change in the United States?
A) The increasing life expectancy in the United States.
B) The increasing population in Southern coastal regions of the United States.
C) The declining fertility rate (live births per women of child-bearing age) in the United
States.
D) The growth in the number of families living below the poverty line in the United
States.
The premium that insurance companies charge does not cover the cost of expected
losses only. The premium must also cover the cost of compensating agents and other
costs of doing business. The amount added to the pure premium to cover these costs is
called the
A) expense loading.
B) deductible.
C) dividend.
D) loss reserve.
Kate is covered under her employer’s group health plan. She is also covered as a
dependent under her husband’s group health plan. Under the usual
coordination-of-benefits provision, how will each company respond to a claim filed by
Kate?
A) Kate’s plan is primary, and her husband’s plan is excess.
B) Her husband’s plan is primary, and Kate’s plan is excess.
C) The plan of the person with the birthday earliest in the year pays first, and the other
plan is excess.
D) Each plan will pay 50 percent of the claim.
RST Company offers a qualified retirement plan. Each employee contributes 4 percent
of his or her pretax income to the plan, and RST matches each employee’s contribution.
An employee’s benefit at retirement is determined by his or her account balance at the
time of retirement. What type of retirement plan does RST offer?
A) defined benefit, flat percentage of annual earnings
B) defined benefit, flat dollar amount for all employees
C) defined benefit, unit-credit formula
D) defined contribution money purchase plan
A few states have dual automobile insurance systems. A motorist can pay a higher
premium and retain the right to sue under the tort system, or pay a lower premium and
be covered under the state’s no-fault law. This dual system is called a
A) pure no-fault plan.
B) modified no-fault plan.
C) “no pay, no play” law.
D) choice no-fault plan.
Shauna purchased a condominium unit. Which homeowners policy is specially
designed for condominium unit owners?
A) HO-2
B) HO-3
C) HO-4
D) HO-6
All of the following statements about risk retention are true EXCEPT
A) It may be used intentionally if commercial insurance is unavailable.
B) It may be used passively because of ignorance.
C) Its use is most appropriate for low-frequency, high-severity types of risks.
D) Its use results in cost savings if losses are less than the cost of insurance.
Sue double-majored in mathematics and statistics in college. She also enrolled in a
number of finance courses. After graduation, she was hired by Econodeath Insurance
Company. Her job is to calculate premium rates for life insurance coverages. Sue is a(n)
A) actuary.
B) underwriter.
C) claims adjustor.
D) producer.
All of the following are major rating factors for determining private passenger
automobile insurance premiums EXCEPT
A) gender.
B) age.
C) race.
D) marital status.
Which of the following statements about title insurance is true?
A) A premium must be paid annually to keep the policy in force.
B) The policy term runs for 30 years or the length of the insured’s mortgage loan,
whichever is shorter.
C) The policy guarantees that the owner will keep possession of the property if a defect
in the title is discovered.
D) The policy provides protection against title defects that occurred prior to the
effective date of the policy.
Which ocean marine coverage provides comprehensive liability insurance for property
damage caused by the ship to piers and docks, damage to the ship’s cargo, and injury to
the passengers or crew?
A) collision liability clause
B) hull insurance
C) freight insurance
D) protection and indemnity insurance
Which of the following is a common dividend option found in a participating life
insurance policy?
A) reduced paid-up insurance
B) fixed period
C) paid-up additions
D) life income