FP2 1.04 Legal Considerations in Insurance

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

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

Which is true about a 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.

Insurance that an insurance company purchases from another insurance company to protect itself from the risk of a major claims event is called:

• reinsurance.
• excess insurance.
• standard insurance.
• exclusion insurance.

A provision in an insurance policy that eliminates coverage for some types of risks is called a/an:

• adjustment.
• excess.
• exclusion.
• standard.

If a car in the driveway of a home gets broken into and a laptop is stolen, 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

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.

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.

In addition to basic homeowner's insurance coverage, insurance agents whose clients live in flood or earthquake zones might suggest that they purchase:

• optional perils endorsements.
• rental unit coverage.
• assisted living coverage.
• limited term riders.