Questions and Answers
Adverse selection is a concept best described as?
What documentation grants express authority to an agent?
A tornado that destroys property would be an example of which of the following?
All of the following actions by a person could be described as risk avoidance except?
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When doing business in this state, an insurance company that is formed under the laws of another state is known as which type of insurer?
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An insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable. What contract characteristic does this describe?
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Which of the following insurers owned by stockholders who have the usual rights of ownership, include the right of voting?
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Events or conditions that increase the chances of an insured loss occurring are referred to as?
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In insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe?
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For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become?
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An insurance company receives an application with some information missing and issues the policy anyway. What is this called?
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A life insurance policy has a legal purpose if both of which of the following elements exist?
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Which type of insurance is based on mutual agreements among subscribers?
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A person who does not lock the doors or does not repair leaks shows an indifferent attitude. This person presents what type of hazard?
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Which of the following is an example of a producer's fiduciary duty?
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In terms of parties to a contract, which of the following does NOT describe a competent party?
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Which of the following entities is not an insurer but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization?
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Which of the following types of agent authority is also called 'perceived authority'?
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Contracts that are prepared by one party and submitted to another party on a take-it-or-leave-it basis are classified as?
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Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company?
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What is surplus lines insurance?
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What is reinsurance?
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Two years ago he suffered a head injury from an accident, so he cannot remember parts of his past, but is otherwise competent. He has also been hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of his history one year later. What will probably happen?
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Which of the following is NOT an essential element of an insurance contract?
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If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it?
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If a court ordered payment for a loss that was not covered in the policy even if it was clearly worded, it would be an example of which legal concept?
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When applying for an individual life insurance policy, an applicant states that he went to the doctor for nausea, but fails to mention that he was also having severe chest pains. This is an example of?
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An insured stated on her application for life insurance that she had never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. Which of the following will explain the reason a death benefit claim is denied?
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Representations are written or oral statements made by the applicant that are?
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What is a foreign insurer?
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An applicant knowingly fails to communicate information that would help an underwriter make a sound decision regarding coverage. This is an example of?
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Which insurance principle states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost?
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In insurance transactions, fiduciary responsibility means?
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An insurance contract must contain all of the following to be considered legally binding except?
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Which of the following is considered to be a morale hazard?
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Study Notes
Key Concepts in General Insurance
- Adverse Selection: Occurs when risks with higher probability of loss seek insurance more frequently, skewing insurer statistics.
- Agent Authority: Agents must have express authority from their principal, typically through a formal contract.
- Peril: A tornado destroying property exemplifies a peril, indicating a specific risk event.
- Risk Avoidance: Actions like avoiding flying or scuba diving demonstrate risk avoidance, while investing in stocks does not.
- Types of Insurers: A foreign insurer is one formed under another state's laws when doing business in a new state.
- Contract Characteristics: Insurance contracts are conditional, meaning enforceability relies on both parties meeting specified conditions.
- Insurer Ownership: Stock insurers are owned by stockholders who have ownership rights, including voting rights.
Risk and Hazards
- Hazards: Events or conditions that increase the likelihood of loss are termed hazards.
- Morale Hazard: Indifference towards risk management, such as not locking doors, exemplifies a morale hazard.
- Representations: Statements made by policy applicants are considered true to the best of their knowledge but can affect acceptability.
Contract Elements and Obligations
- Unilateral Contracts: Insurance contracts are unilateral since only the insurer is legally obligated to pay for covered losses.
- Essential Elements: Essential contract elements include agreement, legal purpose, and consideration; beneficiary's consent is not required.
- Waivers and Concealments: Waiver occurs when an insurer overlooks incomplete information. Concealment involves failing to disclose critical information.
Insurance Principles and Responsibilities
- Indemnity: Ensures benefits do not exceed the actual loss suffered by the insured.
- Fiduciary Responsibility: Obligates agents to manage insurer funds in a trust capacity, ensuring no mixing with personal funds.
- Expected Conditions: Policies are based on reasonable expectations of coverage, even if court interpretation differs from contract wording.
Types of Insurance and Policies
- Reciprocal Insurance: Based on mutual agreements among members, distinct from traditional insurance modalities.
- Surplus Lines Insurance: Refers to high-value insurance coverage exceeding standard policies, placed with authorized insurers.
- Reinsurance: An agreement between a ceding insurer (original insurer) and an assuming insurer to manage risk and liability.
Miscellaneous Concepts
- Material Misrepresentation: When crucial information is misrepresented, it can lead to the denial of claims, exemplified in medical history cases.
- Competent Parties: A competent party may be defined by mental capacity and legal age; educational background is not a requirement.
- Legal Status of Insurers: A foreign insurer operates with a home office in a different state but is not necessarily involved internationally.
Behavioral Considerations
- Risk Attitude: Driving recklessly is classified as a morale hazard, reflecting a careless attitude toward potential losses.
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Description
Test your knowledge with these flashcards on General Insurance concepts, focusing on key definitions such as adverse selection. This quiz is designed to help reinforce your understanding of insurance fundamentals and prepare you for more advanced topics. Perfect for students and professionals alike.
