Deck 35: Insurance

Question 1

The person who receives the proceeds under an insurance policy is called a beneficiary.

Answer 1

True

Question 2

An insurance broker is ordinarily an independent contractor.

Answer 2

True

Question 3

Only real property can be insured.

Answer 3

False

Question 4

An insurance contract is called a policy.

Question 5

Insurers can estimate fairly accurately the amount they will have to pay if they insure the members of a particular group.

Question 6

An applicant for an insurance policy is called an underwriter.

Question 7

The existence of an insurable interest is a primary concern when determining liability under an insurance policy.

Question 8

Insurance is classified according to the nature of the risk involved.

Question 9

Insurance policies are governed by the principles of common law.

Question 10

Life insurance and title insurance apply to different types of risks.

Question 11

A business firm may have an insurable interest in the life of a key employee.

Question 12

Risk management is the transfer of certain risks from an individual to an insurance company.

Question 13

A person can insure anything in which he or she has an insurable interest.

Question 14

An insurance agent ordinarily works for the insurance company.

Question 15

All-risk insurance is property insurance that covers damage resulting from all risks not specifically excluded.

Question 16

Insurance coverage is always effective the moment an insurance broker accepts the appli?cant's first payment toward the premium.

Question 17

"Major medical" and "marine" insurance are military policies.

Question 18

There is little state regulation for the insurance industry.

Question 19

A person has an insurable interest in property if he or she would sustain a financial loss from damage to the property.

Question 20

Liability insurance provides indemnity against losses in trade or losses caused by the dishonesty of employees.

Question 21

An arbitration clause requires arbitration of disputes that arise between the insurer and the insured concerning the settlement of claims.

Question 22

Dhani is the beneficiary of a life insurance policy on Elmo's life obtained from Famed Insurance Company.The insured under this policy is

A)Dhani.
B)Elmo.
C)Famed.
D)the agent or broker through whom the policy was obtained.

Question 23

Under an antilapse clause,an insurance policy will not lapse under any circumstances.

Question 24

The insured can only cancel a policy in certain circumstances.

Question 25

Insurance coverage can be effective before a formal written policy is issued.

Question 26

Jaclyn is the beneficiary of Erin's life insurance policy.Trusted Life Insurance Company provides Erin's life insurance policy.The underwriter under this policy is

A)Jaclyn.
B)Trusted Life Insurance Company.
C)Erin.
D)Erin or Jaclyn.

Question 27

An incontestability clause prohibits an insured from entering a contest during the term of a policy.

Question 28

An insurer has a duty to investigate to determine the facts and provide reasons for any decision to deny or reduce coverage of a particular claim.

Question 29

The words used in an insurance contract are interpreted against the party who applied for the policy.

Question 30

An insurance application is part of the insurance contract.

Question 31

An incorrect statement as to the age of the insured provides an insurance company with an excuse to avoid payment on the insured's death.

Question 32

The words used in an insurance contract are given special meaning.

Question 33

A binder is an oral,temporary insurance policy.

Question 34

Allie applies for a life insurance policy with Long Life Insurance Company.The consideration Allie pays to Long Life is a(n)

A)premium.
B)fee.
C)policy.
D)insurable interest.

Question 35

A loss sustained between the time of application and the delivery of an insurance policy may not be covered.

Question 36

Grace applies for a homeowners' insurance policy on her house with Heroic Insurance Company through Ian,a broker.In this transaction,Ian is

A)an agent for both parties.
B)Grace's agent,and not Heroic's agent.
C)Heroic's agent,and not Grace's agent.
D)not an agent.

Question 37

Property insurance cannot be canceled for nonpayment of premiums.

Question 38

Misstatements or misrepresentations in an application for insurance can void a policy.

Question 39

Automobile insurance can be canceled for suspension of the insured's driver's license.

Question 40

Phil is an insurance broker.This means that Phil is

A)an employee of an insurance company.
B)an independent contractor.
C)not allowed to deal directly with an insurance company.
D)in charge of determining the appropriate premium for an insurance policy.

Question 41

Adam and Britney are partners who own and operate Chick'n Hut,a chain of fast food restaurants.Their partnership obtains insurance on Adam's and Britney's lives.This is

A)casualty insurance.
B)fidelity insurance.
C)key-person insurance.
D)liability insurance.

Question 42

International Corporation (IC) makes and sells kitchen appliances.To cover injuries to consumers if the appliances prove de?fective,IC should obtain

A)group insurance.
B)health insurance.
C)liability insurance.
D)life insurance.

Question 43

Bret obtains a fire insurance policy on his rental house with Continental Insurance Company.Like all insurance,this policy is an arrangement for

A)avoiding the assumption of responsibility.
B)predicting a potential loss based on unknown factors.
C)shifting the imposition of liability.
D)transferring and allocating risk.

Question 44

Mena applies for a homeowners' insurance policy on her house with Neighbors Insurance Company through Obie,an agent who works for Neighbors.In this transaction,Obie is

A)an agent for both parties.
B)Mena's agent,and not Neighbors's agent.
C)Neighbors's agent,and not Mena's agent.
D)not an agent.

Question 45

Land Sales Company insures its real and personal property,as well as the lives of its key employees,to protect its financial interest should some event undermine its security.This is

A)risk management.
B)risk pooling.
C)risky.
D)risqué.

Question 46

U-Rents Company wants to insure the equipment that it rents to consum?ers.To obtain insurance,U-Rents must have an insurable inter?est in the property

A)at any time.
B)at the time a loss occurs.
C)at the time a policy is obtained.
D)continuously from the time a policy is obtained to the time a loss occurs.

Question 47

Ricky obtains an insurance policy that protects him from major hospital,medical or surgical expenses.This is

A)casualty insurance.
B)major medical insurance.
C)life insurance.
D)malpractice insurance.

Question 48

American Manufacturing Company obtains an insurance policy to pro?tect against losses incurred by the firm as a result of being held liable for personal injuries or property damage sustained by others.This is

A)casualty insurance.
B)employer's liability insurance.
C)fidelity or guaranty insurance.
D)life insurance.

Question 49

Quality Care Insurance Company provides life insurance policies.Quality Care applies a concept of insuring a large number of people with the knowledge that only a small proportion of them will die in a given year.The large number of premiums provides the funds to pay for the small number of deaths.This concept is known as

A)risk avoidance.
B)risk pooling.
C)risk rating.
D)risk transferring.

Question 50

Donald applies for a life insurance policy with Equity Insurance Company through Fletch,an agent who works for Equity.Donald pays the initial premium.Fletch writes a binder,which

A)acknowledges the application and promises to consider it.
B)attests to the truth of each statement in the application
C)evidences receipt of the payment of the initial premium.
D)indicates that a policy is pending and states its essential terms.

Question 51

American Auto Parts Company applies to Liberty Business Insurance Corporation for a liability policy.If there is an ambiguity in the policy,the provision will be interpreted against

A)the insured.
B)the insurance company.
C)the state in which the insurance company is based.
D)the federal government.

Question 52

Andy obtains an insurance policy that protects him against some risks of loss to the contents of his residence.This is

A)homeowners' insurance.
B)title insurance.
C)casualty insurance.
D)liability insurance.

Question 53

Best Products Corporation obtains an insurance policy that provides in?demnity against losses in trade or losses caused by the dis?honesty of em?ployees,the insolvency of debtors,or breaches of contract. This is

A)casualty insurance.
B)fidelity or guaranty insurance.
C)liability insurance.
D)key-person insurance.

Question 54

Simple Simon,Inc.,a software maker,wants to in?sure itself against in?juries to employees sustained during the course of their em?ployment.Simple Simon should obtain

A)casualty insurance.
B)employer's liability insurance.
C)fidelity or guaranty insurance.
D)malpractice insurance.

Question 55

Allen applies for,and obtains,casualty insurance coverage from Business Insurance Company for his business,Country Club,Inc.The effective date of the policy is the date

A)Allen submits the application.
B)Business Insurance accepts the first premium.
C)Business Insurance issues the policy.
D)the application specifies as the effective date.

Question 56

Jillian obtains an insurance policy that protects her against liability for personal injuries and property damage resulting from the operation of her vehicle.This is

A)casualty insurance.
B)liability insurance.
C)malpractice insurance.
D)automobile insurance.

Question 57

Harold is a doctor.To protect himself against malpractice claims brought against him by his clients,Harold should obtain

A)liability insurance.
B)life insurance.
C)health insurance.
D)malpractice insurance.

Question 58

To cover the loss of its inventory in the event of a fire,Great Goods,Inc.,seeks an insurance policy from United Insurance Company. On May 1,Great Goods pays United a quarterly premium. On May 2,United issues a policy that provides coverage begins after thirty days. On May 15,Great Good's inventory is lost in a fire. Regarding the proceeds,United

A)must pay,because the possibility of a fire was the reason Great Goods obtained the insurance.
B)must pay,because Great Goods paid the premium.
C)must pay,because United issued a policy.
D)need not pay.

Question 59

Gary has a life insurance policy that requires uniform payments over the term of the policy.The coverage of the policy decreases over time.This is

A)health insurance.
B)all-risk insurance.
C)decreasing-term life insurance.
D)floater insurance.

Question 60

An insurance policy that provides for the replacement of a portion of the insured's monthly income from employment in the event that illness or injury causes a short or long-term disability is

A)life insurance.
B)health insurance.
C)disability insurance.
D)credit insurance.

Question 61

Clark obtains from Delta Insurance,Inc.,a policy that pro?vides if a dis?pute arises between the parties concerning the settle?ment of a claim,the dispute must be submitted to an impartial third party,not a court,for resolution.This is

A)an antilapse clause.
B)an arbitration clause.
C)an appraisal clause.
D)an incontestability clause.

Question 62

Burt obtains from Capital Insurance Company a policy that provides that if the parties cannot agree on the amount of a loss covered by the policy,an estimate of the value by an impartial third party can be de?manded.This is

A)an antilapse clause.
B)an arbitration clause.
C)an appraisal clause.
D)an incontestability clause.

Question 63

Edy obtains a homeowners' insurance policy with First Source Insurance Company.First Source can cancel the policy

A)if Edy appears as a witness in a case against First Source.
B)if Edy fails to pay the premiums.
C)if Edy makes changes that add to the home's value.
D)under no circumstances.

Question 64

Speedy Shipping Corporation applies to TransInsurance Company for a fire insurance pol?icy on Speedy's warehouse.On the application,Speedy misrepresents the age of the property to obtain a lower premium.When a fire soon destroys the ware?house,TransInsurance can

A)deny payment,because a fire destroyed Speedy's warehouse.
B)deny payment,because of Speedy's fraud in the application.
C)not deny payment,because a fire destroyed Speedy's warehouse.
D)not deny payment,because the application is not part of the policy.

Question 65

Kelsy,a minority business owner,obtains a business liability insurance policy from Luminous Insurance Company for Kelsy's Framing & Art Supplies store.Luminous can cancel the policy

A)if Kelsy increases the hazard covered by the insurance.
B)if Kelsy files a claim.
C)if Luminous decides to no longer insure minority business owners.
D)under no circumstances.

Question 66

Trustworthy Insurance,Inc.,has a valid reason to cancel a policy issued to USA Sales Company.In most states,Trustworthy could cancel the policy with

A)oral notice.
B)oral or written notice.
C)no notice.
D)written notice.

Question 67

Rob applies to Standard Insurance Company for a life insurance policy.On the ap?pli?cation,Rob understates his age.Rob obtains the policy,but for a lower pre?mium than he would have had to pay had he disclosed his ac?tual age.The policy includes an incontestability clause.Five years later,Rob dies.Can Standard refuse payment on the policy?

Question 68

Ginny obtains a health-insurance policy for her family from Hope Insurance Company.The policy includes an incontestability clause.Under such a clause,after a policy has been in force for a specified period or time,such as two or three years

A)Ginny cannot enter a contest sponsored by Hope or its affiliate.
B)Ginny cannot contest Hope's refusal to pay a claim under the policy.
C)Hope cannot contest Ginny's eligibility for continued coverage.
D)Hope cannot contest Ginny's statements in the application.

Question 69

Kerin obtains a property insurance policy for her art collection from Lawton Insurance Company.Kerin can cancel the policy

A)at any time.
B)only at the end of a period for which a premium has been paid.
C)only if Kerin no longer has an insurable interest in the property.
D)only on advance written notice.

Question 70

Patty,who is divorced,owns a house.She has no reasonable expectation of benefit from the life of Quinn,her ex-spouse,but she applies for insur?ance on his life anyway.She also obtains a fire insurance policy on the house,which she later sells.Five years later,Quinn dies and the house is destroyed in a fire.Can Patty obtain payment on either the death of Quinn or the loss of the house? Explain.

Question 71

Greg obtains from Helpful Insurance Company a policy that provides that Greg has thirty days after a premium's due date to pay it before the policy will be canceled.This is

A)a coinsurance clause.
B)an antilapse clause.
C)an appraisal clause.
D)an incontestability clause.

Question 72

Homestead Insurance Company tells its customer Teresa that she need not respond to questions about her national origin or race on her insur?ance application. Teresa provides the information anyway. Homestead

A)can use the information to avoid its obligations under its policy with Teresa.
B)cannot use the information to avoid its obligations under its policy with Teresa.
C)can use the information to refuse to renew its policy with Teresa.
D)cannot use the information,except to cancel its policy with Teresa.