Archives: Quiz

The use of marketing research to monitor marketing performance takes place prior to implementing marketing strategies. Large sample size bias refers to a belief that sample size determines a sample’s representativeness. Answer: TRUE The primary advantage of laboratory experiments is […]

Which of the following is considered a nonadmitted asset for an insurer? A) cash B) preferred stocks C) real estate D) office furniture Which of the following statements about the commercial crime insurance policy is true? A) Loss from the […]

By misrepresenting the true facts, Gretchen was able to convince a client to drop a life insurance policy with another company and to purchase a policy from the company that Gretchen represents. Gretchen has engaged in an illegal sales practice […]

Patricia purchased a Personal Auto Policy (PAP). Her car was rear-ended by a driver who fled the scene. Patricia suffered whiplash, migraine headaches, and she was unable to work. Which of the following coverages will cover her lost work earnings? […]

Marion owns substantial financial assets. She was surprised that she qualified for Social Security retirement benefits when she retired because of her high investment income. What characteristic of social insurance programs is Marion overlooking with respect to her Social Security […]

Pac-Coast Insurance (PCI) concentrates its underwriting activities in California. The company is concerned that if a catastrophic earthquake occurs, it might threaten the solvency of the company. To address this risk, PCI issued some debt securities. If a catastrophic earthquake […]

The loss settlement under which of the following supports the principle of indemnity? A) life insurance B) valued policies C) replacement cost property insurance D) actual cash value property insurance To level a net single premium (NSP), the NSP is […]

A useful measure for an organization is the total of the organization’s expenditures for treating loss exposures including retained losses, loss control expenses, insurance premiums, and other related expenses. This measure is called the organization’s A) cost of capital. B) […]

The assets of a property and liability insurance company are primarily A) investments such as stocks and bonds. B) loss reserves. C) plant and equipment. D) premiums paid by policyholders. Joyce was injured by an uninsured drunk driver while she […]

What is the effect of the optional agreed value provision in the building and personal property coverage form? A) It provides replacement cost coverage. B) It increases insured values along with inflation. C) It suspends the coinsurance clause. D) It […]

Under one of the Medicare Advantage Plans, beneficiaries can receive care at a discounted rate by using health care providers that belong to the plan network. Care outside the network is also covered, but beneficiaries must pay higher out-of-pocket costs. […]

Reggie just purchased a home. A friend told him to consider insurance coverage for natural disasters when insuring the home. A loss from which of the following perils is covered under an unendorsed Homeowners 3 policy? A) tsunami B) earthquake […]

A manufacturing company just hired a new risk manager, and she has instituted several employee safety programs. She has persuaded the insurer writing the company’s workers compensation insurance to base the premium on the company’s actual loss experience during the […]

Problems with the current health care system in the United States include which of the following? I. Rising health care expenditures II. Considerable waste and inefficiency in the health care system A) I only B) II only C) both I […]

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 […]

All of the following statements about the boatowners package policy are true EXCEPT A) Physical damage coverage for the boat is usually written to cover all losses except those losses specifically excluded. B) Liability coverage is provided for bodily injury […]

Which of the following statements is true regarding the information systems functional area of an insurance company? I. Computers and information systems are able to perform some tasks that previously were performed directly by employees. II. Information systems can speed […]

Which of the following statements about the replacement cost provision of the Homeowners 3 policy is true? A) It applies to personal property losses only. B) Except for small losses, the insured must repair or replace the damaged property in […]

Which of the following statements is (are) true with regard to Roth IRAs? I. The portion of a Roth IRA distribution that is attributable to investment income is taxable. II. There is a maximum income level above which Roth IRA […]

The gross premium is defined as A) the net premium plus the loading allowance. B) the terminal reserve plus the commission. C) the net premium minus expenses. D) the sum of all acquisition expenses. Maria is covered under a group […]

Tina purchased a personal umbrella policy with a $1 million limit and a $1,000 self-insured retention. Her insurer required her to carry a $300,000 liability limit under her homeowners policy. Tina was held responsible for slandering a public official. The […]

Bridget started to fund a variable annuity. Three years later, she experienced financial difficulty. She called her agent and cancelled the contract. The insurer returned all but 4 percent of the account balance. The 4 percent kept by the insurer […]

Carl and Carol Williams, a married couple, are doing some estate planning. Upon his death, Carl plans to leave $1,000,000 in property to his wife. This amount will reduce the value of Carl’s gross estate and will be taxed later […]

A managed care plan under which members can receive medical care from non-network providers at higher out-of-pocket costs is an example of a(n) A) group practice plan. B) individual practice plan. C) exclusive provider organization. D) point-of-service plan. The primary […]

All of the following will support an insurable interest for purposes of purchasing property and liability insurance EXCEPT A) close family relationship. B) potential legal liability. C) secured creditors. D) a contract right. All of the following statements about the […]

Which of the following statements about Section 401(k) plans is true? A) Elective salary deferrals to these plans are free of federal income taxation until the funds are actually withdrawn. B) These plans are exempt from rules that prevent discrimination […]

In a surety arrangement, the party who benefits from the bond if the bonded party fails to perform is the A) principal. B) obligee. C) fidelity. D) surety. Which of the following statements about the financing of the Social Security […]

All of the following are ISO commercial crime coverage exclusions EXCEPT A) dishonest acts committed by a named insured or partner of the named insured. B) indirect loss resulting from covered losses. C) theft committed by an employee of the […]

Which of the following statements about the entire contract clause is true? A) It allows the insurer to change the policy terms without the insured’s consent. B) It specifies that all statements in the application are considered warranties. C) It […]

One requirement for proving that an act was negligent is the existence of an unbroken chain of events between the act and the injury or harm that occurred. This unbroken chain of events is called A) condition precedent. B) cause […]

Which of the following statements is (are) true concerning high deductible health plans? I. An employee can withdraw money tax-free from a health savings account or health reimbursement account to pay covered medical costs. II. There is a cap on […]

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 […]

Betty’s personal property is insured for $100,000 under her Homeowners 3 policy. If she usually keeps some personal property at a mountain cabin that she owns, how much coverage for this property is available under her homeowners policy? A) $10,000 […]

Tina purchased a personal umbrella policy with a $1 million limit. Her insurer required her to carry liability limits of 250/500/50 under her auto insurance policy. The personal umbrella policy was written with a $1,000 self-insured retention. Tina was responsible […]

Mark reviewed his homeowners policy. He learned that his personal property was insured on an actual cash value basis. He would like replacement cost coverage on his personal property. He contacted his agent who said, “I’ll simply add an amendment […]

A property and casualty insurer in which the salesperson is an employee of the insurer, not an independent contractor, is called a A) fraternal insurance company. B) risk retention group. C) direct writer. D) captive insurance company. Jan is employed […]

Which distinct legal characteristic of insurance contracts states that only the insurer’s promise to perform is legally enforceable? A) contracts of adhesion B) unilateral contracts C) aleatory contracts D) personal contracts Which of the following statements about the personal property […]

All of the following requirements must be met to satisfy the doctrine of res ipsa loquitur EXCEPT A) The injured party has not contributed to the accident in any way. B) The injured party must prove negligence on the part […]

Connors Company self-funds the medical expense benefits that it provides to its employees. Connors Company has a contract with a commercial health insurance company providing that the health insurance company will pay all claims in excess of $250,000. The arrangement […]

All of the following statements about conditions under a homeowners policy are true EXCEPT A) If an insurer broadens coverage without an additional premium during the policy period, the broadened coverage applies immediately to the present policy. B) A waiver […]

Which of the following statements about monetary damages awarded by a court is (are) true? I. The purpose of general damages is to provide benefits for medical expenses or loss of earnings. II. The purpose of punitive damages is to […]

ABC Appliance offers a warranty requiring an annual fee. The warranty may be purchased at the time of sale or at any time within the first year after the appliance was purchased. The warranty fee after the date of purchase […]

Which of the following statements about a typical personal umbrella policy is (are) true? I. Losses covered under an underlying policy and the umbrella policy are settled on a pro rata basis. II. Losses not covered by the basic underlying […]

Gwen is in charge of accounting at Integrity Insurance Company. Integrity is a publicly-traded insurer. In describing her job, Gwen said, “There aren’t too many businesses where you are required to keep two sets of book.” Gwen’s comment most likely […]

The Dodd-Frank Act created a federal body with some limited regulatory authority. For example, the organization can represent the federal government in international negotiations regarding insurance and it can preempt state law where it conflicts with negotiated international agreements. This […]

Cal is renting an apartment. Which homeowners policy is specially designed to insure renters? A) HO-2 B) HO-3 C) HO-4 D) HO-6 Which of the following statements about life insurance marketing systems is true? A) Insurance brokers are not permitted […]

Which of the following $100,000 whole life insurance policies, issued by the same company to a man age 32, would require the highest first-year premium? A) continuous premium (ordinary) life B) whole life paid-up at 65 C) 10-payment whole life […]

David never stopped to consider the possible consequences of a long-term, permanent, disability. So David did not include disability income insurance in his personal risk management program. David is dealing with the risk of disability through A) passive retention. B) […]

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) […]

The National Association of Insurance Commissioners (NAIC) has drafted a “Life Insurance Policy Illustration” model law that most states have adopted. Which of the following statements concerning this model law is (are) true? I. The policy illustration must include a […]