If a fire causes damage to a building, the fire is a
C. peril
Wearing a seat belt in a car is an example of which method of managing risk?
C. Reduce
Tiffany leaves her car unlocked when she goes shopping. She figures her car and the contents are insured so there is no reason to worry. Which type of hazard is this example of?
A. Morale
An insurance company incorporated in Wisconsin and conducting business in Wisconsin is known as a domestic company.
What kind of company are they considered if they do business in Minnesota?
B. Foreign
All of the following statements about a stock insurance company are true EXCEPT
A. a stock company is a participating company
What do insurance companies use to help predict how many losses will occur in a group or class of individuals?
A. Law of large numbers
States require companies to have a license to sell insurance in the state. The license is called
C. a certificate of authority
Carl accepts the initial premium when he sells an insurance policy and he sends this to the insurance company along with the application. Which authority represents what others believe his power is by actions taken?
A. Apparent authority
Agency is a relationship in which one person is authorized to represent and act for another person or for a corporation. In insurance, the insurance agent acts on behalf of the
C. principal
Which of the following types of advertising does not involve an agent and is conducted through the mail, by advertisements in newspapers and magazines, on television and radio or through the internet?
C. Direct response
Which of the following individuals represent only one insurance company?
D. A captive agent
Which of the following terms describes a legal agreement between two competent parties that promises a certain performance in exchange for a certain consideration?
B. A contract
Which one of the following is not one of the 4 elements of a legal contract?
B. Unilateral
Jill is filling out an insurance application with information that she believes to be true. This information that she is providing is considered a
A. representation
A guarantee that something is true is a
B. warranty
All of the following statements regarding fraud and false statements are correct except:
D. a person who commits fraud is subject to imprisonment for up to 25 years
What is a contract or device for transferring risk from a person, business, or organization to an insurance company?
B. Insurance
Which of the following represents a pure risk?
C. The chance your house may burn down
Suzanne regularly leaves her side door unlocked when she leaves for work. One afternoon a thief entered her apartment and stole all of her jewelry. What was the type of hazard in this example?
A. Morale
Since he lives in a good neighborhood and across the street from the fire station, Jeff decides to cancel his fire insurance policy.
This is an example of which risk management method?
D. Retention
Sometimes an individual or business has an exceptionally large or specialized risk that no authorized insurer can or will cover. In this case they may call
C. a surplus lines insurance company
Insurance companies often purchase insurance to cover their own exposure to loss. This is called
D. reinsurance
A type of insurance owned by the federal government that is not typically available from other private insurers' is called
D. residual market insurance
A person in a position of financial trust is called
A. a fiduciary
The ABC Insurance Company is incorporated in Mexico. While doing business in Texas, it is
B. an alien insurer
The failure to disclose known facts is
A. material misrepresentation
В. waiver
C. concealment
D. fraud
