FP2 1.04 Legal Considerations in Insurance

Mason, an insurance agent, receives an application from a client for a standard auto policy. Without consulting the client, Mason changes the type of coverage on the application to comprehensive coverage before submitting it to the insurance company. Which is an example of altering an insurance application?

• an agent changing the type of coverage on a policy

• an agent lying to a client about the amount of dividends

• an agent advising a client that an auto policy will cover liability when it only covers collision

• an agent telling a customer that he/she represents several companies when he/she only represents one

Ava visits an insurance agent to discuss auto insurance. The agent tells Ava that her new auto policy will cover liability, when in reality, it only covers collision. Which is an example of an insurance agent's misrepresentation to a customer?

• changing the type of coverage on a policy

• adding extra zeroes to the amount of coverage

• advising a client that an auto policy will cover liability when it only covers collision

• failing to be in full compliance with state regulations regarding licensing requirements

Aria is a captive insurance agent working for a large insurer. She services many clients, but her relationship with the insurer determines how accounts are managed. Which is true about Aria's captive agent relationship?

• A captive agent owns all clients that he/she services.

• The captive agent is guided by dual agency guidelines.

• The insurer owns and maintains control of all accounts serviced by the captive agent.

• A captive agent has the right to rewrite the insured if he/she terminates his/her relationship with the insurer.

Jackson runs an insurance company. To protect his company from the risk of a major claims event, he decides to purchase insurance from another insurance company. This type of insurance is called:

• reinsurance.

• excess insurance.

• standard insurance.

• exclusion insurance.

Grace is reviewing her new insurance policy and notices a section that eliminates coverage for certain types of risks. This provision is called a/an:

• adjustment.

• excess.

• exclusion.

• standard.

Daniel parks his car in the driveway of his home. One night, someone breaks into the car and steals his laptop. What type of insurance coverage will pay for the laptop?

• reinsurance

• auto insurance

• excess insurance

• property insurance

Anna is an insurance agent who is working with Tracy, the sole proprietor of a small dental practice, to determine the type of liability insurance she needs. Anna suggests that Tracy needs to purchase insurance that will cover her legal expenses in the event a patient sues her for negligence. What type of liability insurance is Anna advising Tracy to purchase?

• workers' compensation
• commercial
• malpractice
• healthcare

Anika recently purchased an insurance policy. She wonders how the insurance company is able to pay out claims to policyholders like herself. The insurance industry generates the funds needed to pay the claims of policyholders by:

• obtaining loans from financial institutions.

• investing money from premiums.

• consolidating stock portfolios.

• selling related merchandise.

Daniel is considering joining a health maintenance organization (HMO) for his healthcare needs. Which statement is true about health maintenance organizations (HMOs)?

• HMO member fees vary annually and are based on the frequency of visits to physicians.

• HMOs provide comprehensive health services but often restrict the insured's choice of physicians.

• To control costs, HMOs cover doctor visits but require members to pay for X-ray and laboratory services.

• Because HMOs emphasize preventative care to members, they do not impose co-payment policies on patient visits to the doctor.

Hannah is an insurance agent whose clients live in areas prone to floods and earthquakes. In addition to basic homeowner's insurance coverage, what might Hannah suggest her clients purchase?

• optional perils endorsements.

• rental unit coverage.

• assisted living coverage.

• limited term riders.