What do individuals use to transfer their risk of loss to a larger group?
An insurance policy paid a nontaxable dividend to the insured one year, and nothing the next. From what type of insurer did the insured purchase the policy?
A mutual insurer
An insurance company that is formed under the laws of another state is known as what type of insurer?
A foreign insurer
In insurance, when is the offer usually made on the contract?
When the insurance application is submitted
What entities make up the Medical Information Bureau?
What are the strategies used by underwriters to prevent adverse selection?
Restriction of coverage, refusal to accept a risk, and accepting a risk at a high rate
If an applicant does not receive his or her insurance policy, who would be held responsible?
The insurance agent
A situation in which a person can only experience a loss and no gain presents what type of risk?
A pure risk
What are the three types of agent authority?
Express, implied, and apparent
The type of insurance company organized to return any surplus money to its policyholders is known as what?
A mutual company
Insurance is used to transfer what to the insurance company?
Financial responsibility for loss
Whose responsibility is it to determine that all the questions on an insurance application are answered?
The insurance agents
What law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated?
The law of large numbers
What type of risk is insurable?
A pure risk
What type of insurer is a voluntarily formed organization that provides insurance benefits for members of affiliated lodge or religious organizations with a representative form of government?
A Fraternal insurer
What are the three types of insurance hazards?
Physical, moral, and morale
Whom does an insurance agent represent?
An insurance company
When would a misrepresentation on an insurance application be considered fraud?
When it is intentional and material
According to the Law of Agency, a principal is represented by whom?
The agent or the producer
If an agent fails to obtain the applicant's signature on the insurance application, what must the insurer do?
Send the application back to the applicant for a signature
Conditions that increase the chance of loss are known as what?
An insurance company is domiciled in California and transacts insurance in Nevada. What is the insurer's classification in Nevada?
For the purpose of insurance, what is risk?
Uncertainty or loss
The insurer organized to return a profit to the stockholders is what type of insurer?
If an insurer needs to obtain information about the applicant from investigators, what is the insurer required to do?
Provide the applicant with a Disclosure Authorization Notice
When agents act within the scope of their contract, their actions will be assumed to be the acts of whom?
Who owns stock companies?
Insurance is a contract that protects the insured from what?
What law protects consumers from the circulation of inaccurate or obsolete information?
The Fair Credit Reporting Act
A person who does not lock the doors to his or her house shows an indifferent attitude. This person presents what type of hazard?
A morale hazard
A state-issued document empowering an insurance company to become an admitted insurer is called what?
A Certificate of Authority
What two elements are necessary for a life insurance contract to have legal purpose?
What are the most common penalties for violations of insurance statutes?
A cease and desist order, a fine, and license suspension or revocation
When risks with higher probability of loss are seeking insurance more often than other risks, this is known as what?
In order to transact insurance within a given state, an alien insurer must first obtain what?
A certificate of authority
What type of report provides information about the applicant's hobbies, habits, and financial status?
An inspection report
An applicant conceals relevant health information on the application. The applicant represents what type of hazard?
A moral hazard
Insurers are classified according to their domicile. What are the three types of insurers?
Domestic, foreign, and alien
When does an insurance policy go into effect?
When the policy is delivered and the premium is paid
What is the best way to handle incomplete insurance applications?
Return the application to the applicant for completion
Wagering on a sporting event is known as what type of risk?
What are the four elements of an insurance contract?
Agreement (offer and acceptance), consideration, competent parties, and legal purpose
The reduction, decrease, or disappearance of value of the person of property insured in a policy is known as what?
What type of insurer is formed under the laws of another country?
An alien insurer
What two elements are necessary for a life insurance contract to have a legal purpose?
Insurable interest and consent
In forming an insurance contract, when does an acceptance usually occur?
When the insurer approves a prepaid application
When a change needs to be made on the application for insurance, which is the best method for correcting the information?
Complete a new application or ask the applicant to initial the correction on the original application