2014 Life & Health Crash Course

1. 2014 Life & Health Crash Course

2. What is the definition of insurance? A. It is an oral contract B. It is a written contract whereby one seeks to indemnify another against loss, damage, or liability arising from a contingent or unknown event C. It is a bilateral contract D. All of the above

3. A written contract that indemnifies another party against loss, damage, or liability arising out of a contingent or unknown event describes which of the A. A written provision B. Adhesion C. Insurance D. Incontestability

4. To make one whole again by returning an insured to his previous financial condition prior to the loss is: A. Principle of adhesion B. Principle of utmost good faith C. Principle of indemnity D. Aleatory

5. What is the definition of risk? A. A peril B. A certainty of loss C. Proximate cause D. An uncertainty or chance of loss

6. STARR is an acronym for: Share Transfer Avoid Retain Reduce

7. A risk management technique that eliminates a loss exposure and reduces the chance of loss to zero is: A. Loss Prevention B. Retention C. Loss Reduction D. Avoidance

8. Loss retention is an effective risk management technique when all of the following conditions exist except: A. The probability of loss is unknown B. The losses are highly predictable C. The insured chooses to assume the losses incurred D. The worst possible loss is not serious

9. The purpose of insurance is: A. To retain risk B. To avoid risk C. To transfer risk D. To reduce risk

10. What is true about insurance? A. It is a form of gambling B. It is a form of reducing risk C. It is the principle of adhesion D. It is a form of transferring risk

11. The purchase of an insurance contract by an applicant is the process of risk: A. Sharing B. Transfer C. Avoidance D. Retention

12. An insurance policy may not provide which of the following? A. Transfer of risk B. Elimination of risk C. Give the insured a piece of mind D. None of the above

13. A pure risk involves a chance of: A. Gain B. Loss (or no loss) C. Both A&B D. Neither A or B

14. An example of a pure risk would be: A. Ed plays the slot machines and loses money B. John invests in the stock market and the prices go down C. A corporation invests in overseas investments and suffers a loss due to devaluation of the dollar D. Mary has a financial loss due to an auto accident (medical bills)

15. Which of the following is insurable? A. Pure Risk B. Speculative Risk C. Both are insurable D. Neither are insurable

16. All of the following would be needed to determine if a risk was insurable except: A. The loss must be calculable B. The loss must be definite C. The loss must be catastrophic in nature D. The loss must not apply to a large number of insureds at the same time

17. What is one of the main reasons for the existence of federal government programs? A. The large amount of resources needed to cover some catastrophic losses B. Strict federal regulations discourage private insurers from writing certain types of business C. Too much competition in some markets discourages new insurers from writing some types of policies D. Companies lack authorization to write business in all states

18. What is a hazard? A. Anything that increases the chance of a loss B. A broken promise C. Any possibility of financial loss D. A peril or loss of property

19. Which of the following is a hazard? A. A large number of similar exposure units B. A peril C. A condition that might increase the likelihood of a loss occurring D. A speculative risk

20. John has two jobs. How would the insurance company rate him? A. On the job that he has been working at the longest. B. On the most dangerous job. C. On the job that pays him the most. D. On the job that he works the most hours per week

21. Which of the following best describes a moral hazard? A. Running a red light B. Lying on an application C. Speeding D. Not purchasing insurance

22. Which of the following best describes a morale hazard? A. Driving fast and reckless B. Lying on an application C. Stealing from an employer D. An applicant’s house is located next to a manufacturer of explosives

23. If a house is located next door to a manufacturer of explosives, what type of hazard is this? A. Moral B. Morale C. Physical D. Legal

24. What is a peril? A. Anything that increases the chance of a loss B. A cause of loss C. Indifference to loss D. Either morale or moral

25. What does insurable interest mean in life insurance? A. Amount of loss must be large enough to cause a hardship B. Financial interest in having the life of the insured continue C. Financial benefits of the policy that the beneficiary will receive D. Benefits that the policy will develop

26. In life insurance, insurable interest must exist: A. When the insurance takes effect, but not at the time of death B. When the loss occurs C. When the insurance takes effect and the loss occurs D. When the insurance takes effect and the loss occurs, but need not exist after the loss occurs

27. A wrongful act other than a crime or a breach of contract is a: A. Tort B. Proximate cause C. Liability D. Hazard

28. What is the main purpose of tort law? A. To minimize the amount of insurance claims made B. To determine responsibility for damages C. To prosecute the responsible party D. To assign punitive damages to the responsible party

29. If it is proven that another person’s negligence contributed to an injury, what gives the injured party the right to seek compensation?? A. Case law B. Contract law C. Criminal law D. Tort law

30. What is not an intentional tort? A. Owning a wild animal B. Libel C. slander D. Invasion of privacy

31. Under tort law, a person can face a claim for legal liability on the basis of all of the following except: A. Absolute liability B. Intentional tort C. negligence D. Breach of contract

32. For negligence to exist, all of the following must occur except: A. Duty Owed B. Breach of duty C. Resulting damages D. Concurrent causation **proximate cause must also exist

33. What is required for a life insurance contract to be a legal contract? 1. Mutual assent 2. Parties with legal capacity 3. Valuable consideration 4. Valid legal purpose A. 1&3 B. 2, 3, & 4 C. none of the above D. all of the above

34. The consideration involved in an insurance contract refers to the: A. Proceeds of the policy B. Cash or equivalent income payable to the beneficiary C. Premium to be paid by the insured D. None of the above

35. A contract was in dispute and the case went to court. The judge ruled in favor of the insured because: A. The judge always will side with the underdog B. The party who drew up the contract was responsible for the content of the contract C. The judge would not side in favor of the insured D. The insurance contract is unilateral

36. When entering a contract, any doubt or ambiguity found in the document by the person to whom it is offered will be construed against the party who drew up the contract. This is because an insurance contract is a contract of: A. Aleatory B. Adhesion C. Excessive D. Peril

37. A life insurance policy is a unilateral contract. Who is obligated to perform under the contract? A. The insured B. The insurer C. Both D. Neither

38. Which of the following describes the concept of utmost good faith? A. A judge usually would resolve a dispute over unclear language in an insurance contract in favor of the insured B. Only the insurer is bound by the terms of the insurance contract C. Each party to a contract should be able to rely on the representations of the other party D. There is an unclear outcome as to whom will end up paying the most for the insurance coverage

39. Utmost good faith must exist between all of the following except: A. Applicant B. Agent C. State D. Insurer

40. The term aleatory has to do with: A. Ambiguous language in a contract being resolved in favor of the insured B. Outcome depends on an uncertain future event C. The insurer being bound by the terms of the contract D. Something of value being given for the contract

41. What is true about an aleatory contract? A. There is always an equal exchange of money B. The insurer always pays more into the contract than the insured C. The insured always pays more into the contract than the insurer D. There may be an unequal exchange of money

42. An agent who replaces an existing life insurance contract must do all of the following except: A. Submit a copy of the replacement notice to the applicant B. Submit a copy of the replacement notice to the existing insurer C. Submit a copy of the replacement notice to the replacing insurer D. Obtained a signed statement from the applicant as to whether insurance is to be replaced

43. A table that reflects the average number of disabilities due to a sickness or accidents at various ages is a: A. Mortality table B. Morbidity table C. Claims underwriting table D. Underwriting table

44. Which of the following is not used in determining health insurance rates? A. Expenses B. Interest C. Morbidity D. Mortality

45. All of the following are contributing factors to the concept of morbidity except: A. Income B. Intelligence C. Age D. Sex

46. The factors used in determining life insurance premiums include all of the following except: A. Mortality B. Expense loading C. Reserves D. Interest

47. If the insured should choose to pay his insurance premium quarterly instead of annually, his premium will be: A. Decreased to conform to the total lifetime premium date B. Increased because of the lost interest and the added expense for handling the extra payments C. Decreased because of lost interest D. Increased because of the increased face amount

48. During the underwriting process , what is true about issues relating to HIV/AIDS? A. The insurer is not required to inform the applicant about HIV/AIDS testing B. The applicant must sign a separate disclosure form to allow for this testing C. The insurer does not need the applicant’s written consent D. None of the above

49. What has to accompany the request for an attending physician’s statement? A. Underwriting criteria B. Signed application C. Signed authorization from the insured D. Policy illustration

50. The Medical Information Bureau (MIB) is a non-profit organization supported by: A. Insurance companies B. The federal government C. State governments D. All of the above