AD Banker Life & Health Chapter 1

A _______________ insurance company is owned by its policyholders.

Mutal

The JKL Insurance Company is incorporated in Switzerland, has its home office in Florida, and is authorized to conduct the business of insurance to Californians through its branch office in Fresno, California. To the state of California, JKL is a:

Alien insurer

Which of the following is also known as a "captive agent"?

Exclusive agent

Which of the following is not one of the three types of agent authority?

Assumed authority

Which types of risk are insurable?

Pure risk

A peril is:

A peril is defined as a specific cause of a loss.

Which of the following is not a type of risk management?

The types of risk management include: Avoidance, Reduction, Retention, Sharing, and Transfer.

Each of the following is an element of a legal contract, except:

Indemnity

Which term describes a contract prepared by one party and submitted to the other party on a "take it or leave it" basis, without negotiations?

A Contract of Adhesion is one that is prepared by one party and presented to the other party on a take it or leave it basis.

Aleatory Contract

The exchange of value is unequal. Insured's premium payment is less than the potential benefit to be received in the event of a loss. The insurer's payment in the event of a loss may be much greater, or much less (e.g., $0 in the event a loss doesn't occu

Contract of Adhesion

One party writes the contract, without input from the other party. One party (insurer) prepares the contract and presents it to the other party (applicant) on a "take-it-or-leave-it" basis, without negotiation. Any doubt or ambiguity found in the document

Unilateral Contract

Only one party is legally bound to the contractual obligations after the premium is paid to the insurer. Only the insurer makes a promise of future performance, and only the insurer can be charged with breach of contract.

Indemnity Contract

An agreement to pay on behalf of another party under specified circumstances, such as when a loss occurs. Under the principle of indemnity, insurance will only restore the insured to the same financial condition that existed before the loss. The insured c

Representations

An oral or written statement made at the time of application or before issuance of the policy that is believed to be true to the best of the knowledge of the applicant. A representation may only be altered or withdrawn BEFORE the policy is issued. A repre

Conditional Contract

Both parties must perform certain duties and follow rules of conduct to make the contract enforceable. The insurer must pay claims if the insured has complied with all the policy's terms and conditions.

Misrepresentation

A false statement contained in the application

Materiality

A statement is material if its disclosure or lack of disclosure would change the insurer's decision to issue a policy for the same premium.
Materiality is not determined by the event but rather by the facts that a party failed to communicate (or miscommun

Material Misrepresentation

A material misrepresentation means the insurer would not have issued coverage, or the policyowner would not have accepted the policy, if the correct information had been communicated.
A material misrepresentation may permit the injured party to rescind th

Concealment

Failure to communicate known information. Concealment of material information, whether intentional or unintentional, on the part of an applicant or insured, permits the insurer to void the contract from the time the concealment was made.

Warranties

A warranty is either express or implied. An express warranty is a statement stipulated in the policy relating to the insured risk that is considered fact. Every express warranty made at or before the execution of a policy must be contained in the policy i

Legal contract

Requires4 elements that include competent parties, legal purpose, offer and acceptance,and consideration

Principal of Indemnity

The insured is to be restored to the original financial position that they enjoyed prior to their loss

Insurable interest

A relationship that must exist when the insurance takes effect and in which a potential for financial hardship exists in the event of a loss

Which of the following risks is protected by insurance?

Pure Risk

The California Financial Information Privacy Act is sometimes known as

Cal-GLBA

Gambling is considered which of the following types of risk?

A speculative risk is one with both the possibility of gain or loss.

The predictability of loss improves when the number of similar units increase because of which principle?

The Law of Large Numbers

In insurance, to determine acceptable risks is the primary responsibility of the:

Underwriter

An underwriter will consider each of the following factors when evaluating a risk, except:

Rates

Which insurer's owner receives taxable corporate dividends as a return of profit?

Stock

A(n) ___________ insurer is organized in the laws of California.

Domestic

Which of the following defines a Surplus Lines Broker?

They place risks with nonadmitted insurers when coverage cannot be placed with admitted insurer carriers

Which of the following is true about a stock insurance company?

A stock insurance company is run by officers and directors and has a stated amount of capital stock owned by stockholders

Which statement defines a peril?

It is the specific cause of loss

A loss exposure is best defined as:

The possibility of a loss

Which one of the following must be communicated in an insurance contract?

The risks insured against

Which of the following powers describes the authority stated in an agent's agency contract?

Express

What must an insurance broker have in place in order to be able to receive, directly from an insured, any compensation or fees for services to be provided?

A Brokers Service Contract

Which insurance company department determines the probability of loss and sets the premium rates?

Actuarial

Insurance contracts are required to include all of the following, except:

...

Members are provided insurance by the company

Members are provided insurance by the company

A(n) ___________ agent enters into agreements with more than one insurer.

Independent

No one may transact insurance in California without a(n):

License

What type of agent is authorized to transact coverage for sickness and bodily injury, disability income, long-term care, supplemental benefits, and 24-hour care coverage?

Accident and Health

In insurance, the insurer's promise to pay a covered loss and defend the insured in a lawsuit and the insured's payment of the first premium, are all examples of:

Consideration

In an insurance contract the ___________ is something of value that is exchanged by the parties to the contract.

Consideration

An individual faces the risk of economic loss in the event of property damage because of which of the following?

Insurable interest

Risk is defined as:

Uncertainty or chance of loss

When a producer exceeds the authority expressed in the agency contract and the insurer does not take action, which of the following types of authority is created?

Apparent

A(n) ___________ is the likelihood that a loss can occur.

Risk

Insurance contracts are required to include all of the following, except:

The financial rating of the insurance company

Which of the following is not true about insurance?

Insurance provides coverage for a speculative risk

To make insurance more affordable and protect the insurance company from paying out too much in claims, insurers will:

Reinsure the risk

Which insurance company department is responsible for risk selection:

Underwriting

In the insurance world, a potential for a loss is said to be:

Risk

Which risk management type shifts the risk of loss to a larger homogeneous group?

Risk Transfer

Retired Persons

All of the following are considered incompetent persons under Elements of a Legal Contract, except:

Which one of the following is a correct statement regarding the premiums dollars collected from a client?

They must be kept separate and not commingled