Which definition below best defines retaining the possibility of loss?
A)Preventing loss.
B)Managing risk.
C)Obtaining insurance.
D)Eliminating risk.
B. Managing risk.
Preventing loss is taking steps to stop a loss from occurring such as installing a sprinkler system to put out a potential fire
Obtaining insurance is transferring risk to an insurance company
Eliminating risk means not engaging in any a
All of the following are major classes of policy provisions EXCEPT?
A)Declarations.
B)Definitions.
C)Exclusions.
D)Endorsements.
D. Endorsements
3.
Which one of the following is NOT part of a legally binding contract?
A)Consideration.
B)Agreement.
C)Legal Purpose.
D)Binder.
D. Binder.
Jay wants to purchase an insurance policy, what is he required to have in relation to the exposure being insured?
A)Insurable interest in the exposure.
B)The full premium due at the time the policy is written.
C)Bank statement proving that he can afford t
A. Insurable interest in the exposure.
Which term below means "statements made by the insured on an application that are believed to be true?"
A)Solicitations.
B)Representations.
C)Warranties.
D)Legal statements.
B. Representations
A representation is a statement:
A)Guaranteed to be accurate.
B)Believed to be true to the best of one's knowledge.
C)Enforceable in court.
D)Unimportant to the underwriting process
B. Believed to be true to the best of one's knowledge.
Warranties are statements guaranteed to be accurate
Representations are important in the underwriting process
Representations are statements that are true to the best of one's knowledge
When a woman purchases insurance to protect her 3-karat diamond ring, what type of risk management technique is she practicing?
A)Sharing.
B)Transferring.
C)Avoiding.
D)Retaining.
B. Transferring
Insurance companies make predictions by analyzing a large sample of the population in order to make predictions about the population as a whole, what would this term be called?
A)Law of large numbers.
B)Catastrophic loss.
C)An uncertain loss.
D)Indemnity.
A. Law of large numbers.
Which characteristic of an insurance contract states that the insurer MUST pay claims made by the insured but the insured is not obligated to uphold the contract?
A)Adhesion.
B)Aleatory.
C)Conditional.
D)Unilateral.
D. Unilateral
Adhesion is a contract where one party writes the language in the contract and the other party accepts the contract as written on a take it or leave it basis
Aleatory is a contract where there is an exchange of unequal values such as a small
Joe has insurance with ABC insurance company. In an investigation of an occurrence, it was determined that Joe was 50% at fault. Which term below best defines this concept?
A)Contributory negligence.
B)Comparative negligence.
C)Legal negligence.
D)No faul
A. Contributory negligence.
Which term below is best defined as "causing harm to others and/or their stuff?"
A)Personal liability.
B)Liability to others.
C)Strict liability.
D)Progressive liability.
A. Personal liability.
Jeremy has an insurance policy with ABC insurance company. On the policy, there is a section that states where the losses are not covered. Which of the following sections below can this be found?
A)Declarations page.
B)Insuring agreement.
C)Insurance agre
D. Exclusions
Which term means an exchange of a small amount of money such as a monthly premium for a large return such as a claim paid?
A)A unilateral contract.
B)A bilateral contract.
C)An aleatory contract.
D)A contract of indemnity.
C. An aleatory contract.
Which term below best defines the term actual cash value?
A)Depreciated Value.
B)Replacement cost.
C)Consumer value.
D)Insurable interest.
A. Depreciated value.
The declarations page in the insurance policy contains a lot of important information . Which item listed below is not part of the declaration page?
A)Exclusions.
B)The amount of the insurance.
C)The policy number.
D)The named insured's address.
A. Exclusions
Justin saved his paper route money for five years so that he could buy a car when he turned sixteen. What type of risk is Justin taking by buying a car?
A)Assumptive risk.
B)Speculative risk.
C)Insurance risk.
D)Pure risk.
D. Pure risk.
Which term below identifies a document added to change and insurance policy in any way?
A)A supplement.
B)An endorsement.
C)A bond.
D)An authorization.
B. An endorsement.
A peril is defined as?
A)The uncertainty of loss.
B)The cause of loss.
C)Something that increases the chance of loss.
D)The result of a loss.
B. The cause of loss.
The uncertainty of loss is RISK
Something that increases the chance of loss is a HAZARD such as a flammable fluid stored near an open flame
The result of a loss is what happens when a PERIL occurs such as having to pay to repair the
The contract for transferring the risk of loss from an insured to an insurer is called what?
A)Insurance.
B)Insurable interest.
C)Risks.
D)Moral hazard.
A. Insurance.
Insurable interest exists when someone will suffer a financial loss if property is damaged
Risk is the uncertainty of loss
Hazard is a condition that increases the likelihood of loss
Insurance is the process of transferring risk to an insure
What type of hazard is it called when the insured lies about the amount of damage to his/her property?
A)Moral.
B)Morale.
C)Legal.
D)Physical.
A. Moral
Legal duty owed, breach of legal duty owed, proximate cause, and damages are all elements required to establish a charge of what?
A)Liberalization.
B)Negligence.
C)Subrogation.
D)Adhesion.
B. Negligence.
There are two types of risk, speculative and pure, which example below best describes pure risk?
A)Someone places a bet on a football game.
B)Someone walks their dog to the park but the dog has already bitten three other people.
C)Someone purchases stocks
B)Someone walks their dog to the park but the dog has already bitten three other people.
Sam is walking his dog in the neighborhood in the afternoon. While crossing the street he decides to take the dog's leash off so they both can walk freely. Sam's neighbor Jim is jogging by when suddenly Sam's dog bites Jim. Which insurance term below best
B)Negligent.
Joe, an agent, arranges coverage with ABC insurance company for Sam the insured. Before the policy is issued to Sam, Joe provides evidence to Joe that he has coverage. What type of temporary coverage is in effect for Sam?
A)The Declaration Agreement.
B)Th
D)The Binder.
The triplets, Belinda, Beverly and Bridget started a business called the "The Three Bee's." When they got their insurance policy they noticed that only Belinda's name was listed on the policy. Which term below defines why this occurred?
A)She is the oldes
C)She is the first named insured.
Which of the following provision is not a major policy provision in all Property policies?
A)Declarations.
B)Exclusions.
C)Conditions.
D)Endorsements.
D)Endorsements
Vincent walked into ABC insurance company to purchase insurance. Terry, the agent asked Vincent several questions and wrote the answers on an application. Terry collected a check from Vincent as a deposit that goes with the application of insurance. Which
B)Consideration.
An insurance contract is a unilateral contract which means that?
A)Only the insurer makes an enforceable promise
B)Both parties must give up something of value
C)Contract provisions are not required
D)Both parties must perform with utmost good faith
A)Only the insurer makes an enforceable promise
Most contracts are bilateral in that both parties make an enforceable promise however an insurance policy is a unilateral contract where only one party makes an enforceable promise and that would be the insu
All of the following have an insurable interest in John's property (home or auto) EXCEPT?
A)John's bank where he has a loan on the car.
B)John's wife who is a named insured.
C)John's neighbor who borrows the car on Saturday for a paper route.
D)John.
C)John's neighbor who borrows the car on Saturday for a paper route.
Terrence was in a local caf� speaking with some friends. He got the attention of the group and began to speak poorly about a friend that was not there. Which insurance term below best describes when there is a defamation of character?
A)Personal verbal ab
C)Personal injury.
When the wind blows the door open, the door hits the table with a candle that has a flame in it and the candle falls on the carpet and burns the house down to the ground, what is the proximate cause?
A)The wind.
B)The door.
C)The fire.
D)The table.
A)The wind.
Which term best describes to add, to take away or change an insurance policy?
A)A supplement.
B)Subrogation.
C)Endorsement.
D)Liberalization.
C)Endorsement.
The underwriters with ABC insurance company looks at different sources to make a final decision about the insured. Which item below best describes the primary source the underwriters consider?
A)The insured's employment history.
B)The insured's income his
C)The policy application taken by the agent.
Which of the following parts of an insurance contract would identify the nature of the coverage provided by the insurer?
A)Endorsements
B)Insuring agreements
C)Conditions
D)Exclusions
B)Insuring agreements
Endorsements modify the basic contract in some form or fashion.
Conditions are the rules of conduct for the various parties involved.
Exclusions indicate which instances will not be covered.
The insuring agreement also known as the i
The Declaration page is located on the first page of an insurance policy. It contains information such as the people who are insured, the insurance company, how much is insured, the property insured and other pertinent information. What is the insurance t
B)The insured.
In an insurance contract, this is something that is guaranteed to be true?
A)Binder
B)Warranty
C)Endorsement
D)Rider
B. Warranty
Statements made in the application by the applicant are representations that he/she believes to be true to the best of their knowledge.
A warranty is statement guaranteed to be accurate
Company A has 5,000 policyholders. Company B has 25,000 policyholders. Company B is able to make more accurate predictions concerning the number of claims it will have to pay than Company A because of which principle idea listed below?
A)Principle of Info
C)Principle of law of large numbers
Law of Large Numbers means as the number of sample items in a sample increases and reaches a critical number the predictive capability of the sample increases
What may "increase the likelihood of a loss?"
A)Risk.
B)Loss.
C)Hazard.
D)Accident.
C)Hazard.
ABC insurance company made a promise to provide financial protection to Joseph, an insured if he incurred a loss with a covered peril. Which section of an insurance policy can this be found?
A)Declarations.
B)Endorsement.
C)Insurance Agreement.
D)Insuring
D)Insuring Agreement.
Which term below is defined as, "failure to use the care that is required to protect others from unreasonable chance of hurt or harm?"
A)Fraud.
B)Negligence.
C)Liability.
D)Insurance.
B)Negligence.
Which term best describes when you add or take away something from an insurance policy?
A)Declaration.
B)Exclusion.
C)Endorsement.
D)Risk.
C)Endorsement.
When must insurable interest be present in order for an insured to be paid for a loss?
A)During the term of the policy.
B)Just prior to the loss.
C)At time of the loss.
D)On the first effective day of the policy.
C)At time of the loss.
Sally's insurance policy is with ABC insurance company. When her house burned to the ground, she was required to follow certain steps outlined by the insurer. All of the following are steps that she needed to take EXCEPT?
A)Notify the insurance company.
B
B)Notify the Department of Insurance.
On an insurance policy there are major classes of policy provisions, all of the following are part of this sections EXCEPT?
A)Definitions.
B)Insuring agreements.
C)Conditions.
D)Law of large numbers.
D)Law of large numbers.
All of the following are requirements for making a legal contract EXCEPT:
A)The parties to the contract must be citizens of the United States.
B)There must be consideration given.
C)There must be an offer by one party, which is accepted in the same terms
A)The parties to the contract must be citizens of the United States.
The North Carolina Department of Insurance made a decision to add an addendum to all N.C. insurance policies which significantly changed all policies for the better. The Liberalization clause was utilized. Which statement below best describes the idea of
B)Better coverage at no higher premium.
Which of the following below does not describe what a mutual insurance company is?
A)Controlled by stockholders
B)Owned by policyholders
C)Controlled by trustees and officers
D)Is an insurance company offering insurance in N.C.
A)Controlled by stockholders
A Mutual insurer is owned by the policyholders and controlled by trustees and officers.
The Board of Directors is sometimes referred to as Board of Trustees.
Mutual insurers do not have stockholders. Stock companies have stock
A deductible in an insurance contract is an example of which means of handling risk?
A)Control
B)Avoidance
C)Retention
D)Transfer
C) Retention
Buying an insurance policy is an example of transferring risk.
Installing a sprinkler system is an example of controlling risk.
Selecting a deductible is an example of retaining risk where the insured pays for the first part of the loss.
All of the following are essential elements in an insurance contract EXCEPT?
A)Agreement
B)Consideration
C)Competent parties
D)Counter-offer
D)Counter-offer
The acronym used for elements of a contract are CALC.
Consideration
Agreement
Legal purpose
Competent Parties
Counter offer may be involved if the insurer makes a counter offer but the insurer may accept the original offer without counteri
All of the following are true regarding a reciprocal insurance company EXCEPT?
A)If funds are insufficient to pay claims, the subscribers can be assessed for additional revenue
B)It is managed by an attorney-in-fact
C)Each subscriber assumes part of the r
D)Members are grouped into syndicates
Reciprocals are not grouped into syndicates.
Reciprocals are managed by an attorney in fact and are allowed to assess its members if the claims exceed available funds.
Members assume part of the risk for each other me