Font size
WorksheetsBasic and General Insurance
Total questions: 100
Worksheet time: 50mins
What is insurance? _________
Transfer of the possibility of loss (risk) to an insurance company.
A way to increase your income quickly.
A method to avoid paying taxes.
A process to guarantee profits in business.
What is a risk? _________.
The uncertainty of financial loss.
A guaranteed way to make profit.
A type of insurance policy.
A fixed interest rate.
What are the two types of loss? _________
Pure and Speculative
Direct and Indirect
Physical and Emotional
Temporary and Permanent
Which risk is insurable? Pure Why? _________
Loss must be financial and uncertain. No financial gain can occur.
Loss must be certain and profitable.
Risk must be speculative and controllable.
Only risks with guaranteed outcomes are insurable.
What causes a loss? _________.
Peril; such as fire, accident or flood.
Profit from investments.
Increase in property value.
Government regulations.
What causes a peril? ________. What is a hazard? _________.
A hazard. Increases the likelihood of a loss; such as smoking.
A peril. Reduces the risk of loss; such as insurance.
A hazard. Eliminates all risks; such as safety measures.
A peril. Prevents losses from occurring; such as fire alarms.
What are the 6 elements that make pure risk insurable?
Loss must be due to chance, Loss must be definite and measurable, Loss must be statistically predictable, Loss cannot be catastrophic, Loss exposure must be large and insurance must not be mandatory.
Loss must be intentional, Loss must be immeasurable, Loss must be unpredictable, Loss can be catastrophic, Loss exposure must be small and insurance must be mandatory.
Loss must be due to certainty, Loss must be indefinite and immeasurable, Loss must be unpredictable, Loss can be catastrophic, Loss exposure must be small and insurance must be optional.
Loss must be due to chance, Loss must be indefinite and immeasurable, Loss must be unpredictable, Loss can be catastrophic, Loss exposure must be small and insurance must be mandatory.
What is meant by loss cannot be catastrophic? _________
Certain types of perils are unpredictable and thus uninsurable; such as war, nuclear risk and floods.
It refers to losses that are always covered by insurance.
It means all losses are predictable and insurable.
It describes losses that are always minor and insignificant.
What is the concept called that predicts the appropriate number of deaths that should occur within a similar group of people (exposure) within a given period of time?
Law of Large Numbers
Central Limit Theorem
Regression to the Mean
Survivorship Bias
What is adverse selection? _________
People in bad health keep their policy in force longer than people in good health.
Insurance companies always make a profit regardless of claims.
Only healthy people apply for insurance coverage.
Adverse selection is when premiums are always lower than claims paid.
Why do people buy life insurance? _________
Survivor Protection, Estate Creation, Viatical Settlements
To avoid paying taxes, To increase debt, To reduce income
For entertainment purposes, For travel discounts, For shopping rewards
To avoid medical checkups, To get free vacations, To lower car insurance
What is a viatical settlement? _________
Allows someone living with a life threatening condition to sell their existing life insurance policy and use the proceeds when and where the need it most needed, before death. The policyowner sells it for a percentage of the face value.
A type of annuity that guarantees income for life regardless of how long the annuitant lives.
A loan taken against the cash value of a life insurance policy, to be repaid with interest.
A settlement option where the beneficiary receives the death benefit in installments over a period of time.
What would the beneficiary receive upon the death?
Nothing
A lifetime supply of groceries
A vacation package
A new car
As an agent, you are the legal representative of the _________
company
employee
customer
government
The person who pays for the policy of insurance is the _________.
policyowner
beneficiary
agent
underwriter
The person covered by the insurance policy is the _________
insured
insurer
agent
beneficiary
The insurance company is the _________
insurer
policyholder
beneficiary
agent
To buy insurance, the policyowner must have ________ in the insured at the time of purchase but not at time of insured’s death.
insurable interest
beneficiary status
financial obligation
ownership rights
The recognized areas of insurable interest are 1. ________, 2. ________, 3. ________, 4. ________, 5. ________.
1. your own life, 2. family members, 3. business partners, 4. key employee, 5. financial obligation
1. your own life, 2. friends, 3. business partners, 4. key employee, 5. property damage
1. your own life, 2. family members, 3. business partners, 4. property, 5. accidental loss
1. your own life, 2. family members, 3. business partners, 4. key employee, 5. travel insurance
When determining life insurance needs using the Needs Approach, what is taken into consideration?
Final Expenses, Housing Education, Monthly Income and Emergency Fund.
Only the policyholder's age and gender.
The current value of the policyholder's car.
The hobbies and interests of the policyholder.
What are the business uses of life insurance?
Buy-Sell funding, Key Person and Executive Bonus.
Retirement planning, Health insurance, and Auto insurance.
Home loan repayment, Travel insurance, and Pet insurance.
Vacation funding, Grocery shopping, and Movie tickets.
A company with an employee who could not be replaced without considerable expense might consider buying a ________ on that individual.
key employee life insurance policy
group health insurance plan
property insurance policy
general liability insurance
________ are owned by the policyowner and ________ are owned by the shareholder.
Mutual Companies; Stock Companies
Stock Companies; Mutual Companies
Insurance Agents; Policyholders
Underwriters; Brokers
An ________ insurance company is admitted to do business in a state.
authorized
alien
domestic
foreign
The three types of incorporation are: ________, ________, and ________.
domestic (in the state), foreign (outside the state) and alien (outside the US)
public, private, and nonprofit
general, limited, and special
corporate, partnership, and sole proprietorship
The financial status of insurance companies is rated by: ________.
AM Best, Fitch, Standard and Poors, Moody’s and Weiss.
FDIC, SEC, FINRA, and OCC.
IRS, Treasury, and Federal Reserve.
World Bank, IMF, and WTO.
What is a contract?
An agreement between two or more parties.
A type of currency used in trade.
A document for recording weather data.
A tool used for measuring distance.
What are the 4 elements of a contract?
Offer and Acceptance, 2) Consideration, 3) Legal Purpose, 4) Competent Parties.
Offer and Acceptance, 2) Written Agreement, 3) Legal Purpose, 4) Witnesses.
Offer and Acceptance, 2) Consideration, 3) Mutual Friends, 4) Competent Parties.
Offer and Acceptance, 2) Consideration, 3) Legal Purpose, 4) Government Approval.
The applicant’s consideration consists of _________. The insurance company’s consideration is the promise to pay contained in the policy.
premium and statements on the application
the insurance company’s assets
the agent’s commission
the policy’s expiration date
Parties to a contract are required to be _________
competent, of legal age, sane, and sober
minors, insane, and intoxicated
unaware of the contract terms
not present at the time of agreement
What does offer and counter-offer mean?
Offer made by the applicant with application and acceptance of policy; counter-offer is the company offering an insurance policy with higher premiums due to the increase risk of the applicant.
Offer is the payment of premiums; counter-offer is the rejection of the policy by the applicant.
Offer is the cancellation of a policy; counter-offer is the refund of premiums.
Offer is the claim made by the insured; counter-offer is the denial of the claim by the insurer.
What are the Distinct Characteristics of a Legal Contract?
Contract of Adhesion, Personal Contract, Unilateral Contract and Conditional Contract.
Contract of Guarantee, Contract of Sale, Contract of Lease and Contract of Agency.
Contract of Partnership, Contract of Employment, Contract of Bailment and Contract of Indemnity.
Contract of Assignment, Contract of Novation, Contract of Subrogation and Contract of Rescission.
Insurance contracts are ________ because only one party, the insurance company, makes any legally enforceable promises.
unilateral
bilateral
reciprocal
mutual
What are the legal interpretations affecting contracts?
Ambiguities in a Contract of Adhesion, Reasonable Expectations, Indemnity, Utmost Good Faith and Statements of the Insured.
Contractual Capacity, Offer and Acceptance, Consideration, Legal Purpose.
Breach of Contract, Damages, Specific Performance, Rescission.
Assignment, Novation, Accord and Satisfaction, Waiver.
What is reasonable expectation?
Some coverage’s must be provided by the insurance company, even though they are not specifically stated in the policy.
It is the amount of premium paid for an insurance policy.
It refers to the maximum claim amount allowed by the insurer.
It is the period during which the policyholder can cancel the policy without penalty.
What is it called when both parties are trusted to reveal relevant facts?
Utmost Good Faith
Adverse Selection
Moral Hazard
Indemnity
A warranty is the literal or absolute truth.
warranty
guarantee
promise
assumption
Representations are statements made by an applicant that are true to the best of his/her knowledge. ________ is a false statement given to the insurer with the intent to defraud.
Misrepresentation
Disclosure
Warranty
Indemnity
What is it called when an applicant fails to disclose known material facts?
Concealment
Disclosure
Misrepresentation
Notification
What authority is granted in means of the agent’s contract?
Expressed
Implied
Apparent
Customary
What is it called when someone deliberately conceals or misrepresents a material truth on an application?
Fraud
Negligence
Omission
Error
Which kind of authority not expressly granted but which the agent is assumed to have authority in order to transact business?
Implied
Express
Apparent
Customary
What kind of authority is the appearance of, the assumption of; because of the circumstances the principle created?
Apparent (apparently there is a relationship between the agent and the insurance company). Business cards.
Express (clearly stated in the contract).
Implied (authority that is not expressly granted, but is assumed to be granted).
Ostensible (authority that a third party is led to believe exists).
What is a person called who hold a position of special trust and confidence?
Fiduciary
Beneficiary
Agent
Trustor
Waiver is when you voluntarily give up your legal right. ________ is when you are denied the right to enforce a legal right that you have previously given up.
Estoppel AKA The Loss of Defense
Assignment
Novation
Consideration
The basic source of information used in the company’s risk selection process is the ________.
application
balance sheet
audit report
insurance policy
The agent (producer), applicant and the policyowner must sign the application. You can never use ________ to change an application. The agent is the ________.
white out; field underwriter
eraser; policyholder
pencil; beneficiary
marker; insurer
Information received from the applicant’s private physician is known as an ________.
attending physicians report
insurance summary
medical claim form
patient authorization
A ________ is completed by a paramedic or registered nurse for small amounts of insurance and for applicants with no prior medical concern.
Paramedical report
Attending physician's statement
Underwriting summary
Medical examiner's report
The medical information bureau (MIB) receives and maintains medical information from insurance companies. Allows companies to compare information they have collected on potential insured. Protects the company from ________.
adverse selection
over-insurance
policy lapse
premium inflation
Mutual Companies are owned by
Stockholders
Policyowners
Insurers
Board of Trustees
If an emergency fund is set up in the needs approach. What should it be used for:
Unexpected Expenses
Mortgage
School Expenses
Debt
When must insurable interest exist?
Death of the insured
Policy delivery date
Policy issue date
Date of the application
Two business partners own life insurance on each other. If one partner dies, which of the following contracts will allow the surviving partner to use the death benefit to purchase the deceased’s business interests?
Buy-Sell Agreement
Key employee life insurance
Survivorship life insurance
Joint and Survivorship annuity
Which is not an element of a legal contract?
Offer and Acceptance
Consideration
Competent Parties
Unilateral
An insurance company doing business in this state must operate under
An advisory board
A resident board of directors
A certificate of authority
Articles of incorporation filed with the Secretary of State
ABC Insurance Company is incorporated in Georgia but is doing business in Texas, it is
A domestic insurer
A foreign insurer
An alien insurer
An export insurer
All the following would have an insurable interest in an insured EXCEPT:
Your spouse
Your child
Your mother
Your close friend
An Agent’s actions or deeds show what kind of authority
Expressed
Agent
Implied
Apparent
Investigative Consumer Reports are used to investigate an applicant in all the following areas EXCEPT:
Hobbies
Habits
Employment
Place of residency
What is the period called during which a policyholder can still be covered even if the premium is not paid, as per the Grace Period provision?
30/31 days
7 days
15 days
60 days
Which clause allows the policy owner to make the policy 'right' and adjust the face amount in case of misstatement?
Misstatement of Age and Sex
Incontestability Clause
Suicide Clause
Grace Period Clause
How many days does a company promise to pay claims after the death of the insured, according to the Payment of Claims provision?
Within 30 days
Within 10 days
Within 60 days
Within 90 days
Which of the following is NOT a required provision in a life insurance policy?
Grace Period
Reinstatement Clause
Aviation Clause
Incontestable Clause
What is the time limit for a policyholder to contest the death benefit under the Incontestable Clause?
2 years
1 year
5 years
10 years
Which rider provides coverage for additional insureds such as spouse or children?
Riders covering additional insureds
Waiver of premium rider
Accidental death benefit rider
Guaranteed insurability rider
The Spendthrift Clause allows creditors of the insured to go after the beneficiary's death benefit.
True
False
Which clause allows the policy owner to assign ownership of the policy either permanently or temporarily?
Assignment Clause
Incontestability Clause
Suicide Clause
Reinstatement Clause
What is the main purpose of the Medical Examination provision in a life insurance policy?
To require a medical examination for the insured as part of the policy process.
To provide a discount on premiums for healthy applicants.
To waive all future premiums for the insured.
To guarantee acceptance regardless of health status.
Which option allows choices on how to distribute a sum of money from a life insurance policy?
Options (such as Policy Loans, Nonforfeiture Options, Dividends and dividend options)
Premium Payment Frequency
Grace Period Provision
Incontestability Clause
What is the main purpose of an Accelerated (Living) Benefit Provisions Rider in a life insurance policy?
To provide early payment if the insured is diagnosed with a specified catastrophic illness
To increase the face value of the policy
To waive premiums if the insured becomes disabled
To add children to the policy
Which rider allows for the addition of a spouse for a limited time and limited coverage, usually expiring when the spouse turns 65?
Children’s Term Rider
Spouse/Other Insured Term Rider
Family Term Rider
Accidental Death Rider
The Children’s Term Rider allows for the addition of children for a limited time and limited amount, usually until age ___.
18
21
25
16
Which rider incorporates spouse and children into one rider?
Family Term Rider
Waiver of Premium
Guaranteed Insurability
Return of Premium
Accidental Death Rider usually pays double or triple indemnity if accidental death occurs as defined in the policy.
True
False
Guaranteed Insurability Rider allows for the purchase of additional insurance at specified times without evidence of insurability.
True
False
The Return of Premium rider usually expires at a specific age, such as ___.
60
35
45
75
Which of the following is NOT a feature of the Waiver of Premium rider?
Waives premium if insured becomes totally disabled
6 month waiting period before benefit begins
Waives the cost of premiums to accumulate cash value
Expires at age 65
Disability Income Benefit rider pays a weekly or monthly income to the insured if they become disabled.
True
False
Which of the following Settlement Options pays guaranteed installments as long as the recipient lives, and the principal is forfeited upon death?
Cash Payment (Lump Sum)
Life Income
Interest Only
Fix-period Installments
Which Settlement Option is not taxable to the beneficiary?
Cash Payment (Lump Sum)
Life Income
Interest Only
Fixed-amount Installments
The ________ option pays fixed amount until proceeds are exhausted.
Fixed-amount Installments
Life Income Option
Interest-Only Option
Joint and Survivor Option
Which Dividend Option is NOT guaranteed and is a return of excess premiums?
Paid-Up Insurance
Mutual companies (Participating Policies)
Cash
One-year Term
Loans from Cash Loans are subject to income tax.
True
False
Which Nonforfeiture Option reduces the paid-up face amount?
Extended Term
Reduced paid-up
Cash
Accumulation at interest
The entire contract consists of the ______ and a copy of the application.
policy
endorsement
premium
beneficiary
The free look provision allows the policyowner ______ days to look over the policy and return it if dissatisfied.
10
5
20
30
Collateral assignment policy proceeds are assigned to a creditor to secure a loan. Once the debt is repaid, the policyowner regains the ______ benefits.
policy
tax
interest
premium
Who is the first beneficiary in a life insurance policy?
Primary
Secondary
Tertiary
Contingent
The incontestability clause prevents the company from denying a claim due to statements on the application after the policy has been in force for how many years?
Two years
One year
Five years
Ten years
The misstatement of age provision allows the insurance company to adjust the policy’s face amount at any time due to this error.
True
False
Medical Examinations (including HIV testing) may be requested by the insurer for ______ policies, age of applicant and information discovered during the underwriting process.
large policies
small policies
expired policies
group policies
If the policy has cash value, the insured may make a ______ against the amount available.
policy loan
premium payment
dividend withdrawal
beneficiary change
The waiver of premium rider waives the premium for the policy if the insured becomes totally disabled. Most companies impose a ______ waiting period.
six-month
one-month
twelve-month
two-year
The waiver of premium rider expires at age ______.
65
55
70
60
The accidental death rider will pay some multiple of the face amount if death is the result of an accident as defined in the policy. Death must usually occur within ___ of such accident. Deaths from self-inflicted injuries, war or certain hobbies are not covered.
90-days
30-days
180-days
1-year
What is a children’s term rider?
Children can be added to coverage for a limited time usually until age 18 and can convert coverage at the end of that period.
It is a policy that only covers adults over the age of 21.
It is a rider that increases the death benefit automatically every year.
It is a type of insurance that only covers accidental injuries.
What is the disadvantage of designating a trust as beneficiary?
Cost to administer the trust.
Immediate tax benefits are received.
It guarantees higher returns.
It eliminates all legal complexities.
The Accidental Death and Dismemberment Rider (AD&D) pays the ___ for accidental death or loss of any two primary parts and the ___ for the loss of any one primary part.
principal; capital
capital; principal
benefit; premium
premium; benefit
Accelerated death benefits or living riders allow for the early payment of a percentage of the death benefit due to insured having a terminal illness.
The benefit payable at death will be reduced by that amount.
The policy will be automatically renewed for free.
The insured will receive double the death benefit.
The premiums will be refunded in full.
