ALABAMA LIFE AND HEALTH INSURANCE EXAM 2024-2025, Exams of Nursing

Download ALABAMA LIFE AND HEALTH INSURANCE EXAM 2024-2025 and more Exams Nursing in PDF only on Docsity! 1 | P a g e ALABAMA LIFE AND HEALTH INSURANCE EXAM 2024-2025 WITH ACTUAL CORRECT QUESTIONS AND VERIFIED DETAILED ANSWERS |FREQUENTLY TESTED QUESTIONS AND SOLUTIONS |ALREADY GRADED A+|NEWEST|GUARANTEED PASS |LATEST UPDATE John is an attuitant who has surrendered his annuity at age 55. What will he pay? A surrender penalty Tax on the interest earned A surrender penalty and tax on the interest earned No tax and no penalty Tax on the interest earned Which of the following is NOT an example of insurance interest? An airline insuring the lives of its passengers A corporation insuring the life of a key executive A person insuring his/her own life A husband insuring the life of his spouse An airline insuring the lives of its passengers 2 | P a g e With Renewable Term Insurance The premium decreases at renewal The face amount increases at renewal Proof of insurability is needed for renewal The premium increases at renewal The premium increases at renewal when the gross premium of a life insurance policy is computed, which of these factors is NOT included? Interest income Number of beneficiaries Mortality factor Operating expenses Number of beneficiaries All of these are correct concerning group life insurance, EXCEPT: Whole life insurance is the form of insurance typically used in group life insurance Term life insurance is the form of insurance typically used in group insurance Group life insurance can cover a spouse and dependents Group life insurance can be converted to individual coverage upon employment termination Whole life insurance is the form of insurance typically used in group insurance Pat the producer just sold an insurance policy to a client explaining that he has the authority to issue the policy. Pat was not specifically granted this power from the insurance company. Pat is exercising: Apparent authority Implied authority Express authority Conditional authority Implied authority An insurance company may cancel a life insurance policy under which of the following conditions? 5 | P a g e Use the $10,000 to buy term insurance of the same face amount as her original policy Which is not true regarding Medicare supplement policies? Designed for individuals who are enrolled in Medicare Must define all terms the same as the federal Medicare program Must include a minimum 20 day free look provision Must not duplicate Medicare benefits Must include a minimum 20 day free look provision Which type of life insurance policy combines insurance protection with an accumulation of cash value? Interim insurance Permanent insurance Bilateral insurance Temporary insurance Permanent insurance The automatic premium loan provision is not used in which of the following policies? Whole life policy Increasing term policy 20-year endowment policy Limited pay policy Increasing term policy Ed has an insurance policy with an insurance company. Before Ed's policy will pay a claim, certain events must occur. Because of this, an insurance policy is considered to be: Unilateral Conditional Aleatory Guaranteed Conditional A preferred provider organization (PPO) contract typically uses which payment arrangement? Negotiated fee for service Capitation Closed panel Prepaid basis 6 | P a g e Negotiated fee for service Which of the following statements regarding a life insurance policy is true: An issued policy can never be changed An issued policy can be changed by an authorized company officer without the policy owner knowing An issued policy can never be changed by a producer A policy can be changed by a producer if the policy owner requests the change in writing An issued policy can never be changed by a producer Which dividend option allows a policy owner to use his/her dividends to buy life insurance on a single premium basis? Premium reduction option Single premium option Paid up additions option Cash option Paid up additions option The Notice of Claim Provision states that the insured notify the insurance company within _ days of a claim. 7 10 20 31 20 A life insurance policy owner has just exercised the policy's reduced paid up option. Which of the statements is true? The amount of coverage will be much less than the original coverage The premiums will be higher than the original policy The policy's cash value will stop accumulating The premiums will be lower than the original policy The amount of coverage will be much less than the original policy. 7 | P a g e Carol is a life insurance policyowner who has transferred her ownership to a third party in exchange for a percentage of the death benefit. What is this called? Ownership transfer option Viatical settlement agreement Accelerated benefit agreement Spendthrift option Viatical settlement agreement Which of the following is a true statement regarding dental insurance? Comprehensive dental care policies usually cover a percentage of reasonable and customary changes for non routine treatment Comprehensive dental care policies usually cover ALL reasonable and customary charges for non routine treatment Comprehensive health benefit plans always include dental insurance Specialized dental care is usually covered with the same maximums and deductibles as routine dental treatments Comprehensive dental care policies usually cover a percentage of reasonable and customary changes for non routine treatment Replacement regulation in Alabama does NOT apply to: Decreasing term insurance Adjustable life insurance Universal life insurance Credit life insurance Credit life insurance The withholding of facts in an insurance application is called: Fabrication Concealment Misrepresentation Omission Concealment The agreement between a producer and the insurance company specifies the authority given to a producer to act on behalf of the insurer. This is called: Apparent authority 10 | P a g e Low mortality Higher reserves Higher reserves Rick owns $100,000 life insurance policy with a cash value of $10,000. How much can he borrow up to? The policy face amount ($100,000) The accumulated cash value ($10,000 less interest) Twice the policies accumulated cash value ($20,000 less interest) Twice the policies face amount ($200,000) The accumulated cash value ($10,000 less interest) The life and health insurance marketing system utilizing non employee agents that represent just one insurance company and are often paid in allowance to cover office expense and staffing is the: Dependent agency system General agency system Managerial system Direct response system General agency system Don and Marie are married and each have a major medical plan provided by their employers. Don was born in August of 1969 and Marie was born in March of 1976. For their two dependent children. Dons plan is primary and Marie's is secondary Marie's plan is primary and dons is secondary The older child is covered by Marie's plan and the younger child is covered by Dons plan The two insurance companies cover the children 50/50 Marie's plan is primary and dons is secondary John purchases insurance because he expects to experience a loss. This is known as: Hazardous selection Speculative selection Adverse selection 11 | P a g e Pure selection Adverse selection an insurer pays a large claim for medical expenses after the insured has only made one premium payment. this is an example of a(n): Aleatory contract Adhesion contract Unilateral contract Mismatch contract Aleatory contract At certain ages or dates, an insured can increase the stated benefit (within limits) under their disability income policy, regardless of health. Which policy rider BEST describes this? Cost of living adjustment Future income option Rehabilitation option Social security adjustment Future income option Which of the following permanent life insurance policy riders add more coverage for a limited amount of time? Term rider Waiver of premium rider Automatic premium loan rider Guaranteed insurability rider Term rider Which of the following best describes a Health Maintenance Orgnization (HMO)? Operated in a few for service bases Members select preferred providers Consists of small employers who have joined to provide health benefits for their employees Provides full medical services that stress preventative medicine 12 | P a g e Provides full medical services that stress preventative medicine A policy owner with an automatic premium loan provision must: Agree to credit check before the loan is approved Agree to forfeit the policy if loan is not repaid Pay back the loan amount to keep the policies cash value at its maximum Pay back the interest to keep the policy active Pay back the loan amount to keep the policies cash value at its maximum Policy dividends for life insurance are: Not legal Taxable Not guaranteed Guaranteed Not gauranteed A life insurance beneficiary has chosen a settlement option in which the principle never decreases unless the beneficiary makes a withdrawal. This settlement option is called a : Interest only option Lump sum option Fixed amount option Life income option Interest only option If insurance premiums are paid more frequently than annually, the policy owner can expect to: Pay the premiums through an automatic deduction from their bank account Have a higher total outlay of the dollars for the coverage for that year Have a higher total outlay for the coverage for that year Have the same outlay of dollars for the coverage Have a higher total outlay of dollars for the coverage for that year Which of the following is true concerning the fixed period option? The principle amount gradually decreases to zero 15 | P a g e To make insurance more affordable and protect the insurance company from paying out too much in claims, insurers will: Reinsure the risk Reinsurance is what makes insurance affordable. Reinsurance companies are insurance companies that accept all or a portion of the financial risk of loss from the insurance company. The field underwriter is the _________ and is not a determiner of insurability. Producer The producer is in the field soliciting applications for insurance and in effect is another pair of eyes and ears for the insurer in helping to issue policies to insurable prospects. Third-party ownership refers to: A situation where the policyowner is someone other than the insured Which statement best describes the term reserve? That amount that, when increased by future premiums on outstanding policies, and interest on those premiums will enable the company to meet future death claims The applicant, if other than the proposed insured, must have: An insurable interest in the life of the insured Controlled business may be defined as insurance sold: To the producer, the producer's family and friends, and the producer's business associates With regard to life insurance policies, loading refers to: Assignment of the appropriate share of the company's operating expenses to each policy Which of the following statements about the average number of people who die each year is true? It is called the mortality rate Mortality Rate: which is the statistical probability of death in a large population of insureds. Which of the following is NOT a characteristic of life insurance as property? It requires a fund portfolio manager Characteristics: It creates an immediate estate It requires no physical maintenance 16 | P a g e It may be paid for in installments The most effective way to ensure that the applicant will accept the policy when it is issued is: To have the applicant pay the initial premium at the time of application Allen purchases an estate builder (jumping juvenile) policy for his 5-year old son, Donald. Suppose that when Donald reaches age 21 his father presents him with the policy as a gift. Which of the following statements is NOT correct? Donald must change the beneficiaries immediately CORRECT: The premium will continue to be based on his original age of 5 Donald has enjoyed protection against the problems of premature death The face value of Donald's policy has increased by 5 times Term insurance differs from permanent insurance in that term: Builds no cash value, pays a death benefit only An indeterminate premium policy offers: A low initial premium with succeeding premiums based on the company's investment return, mortality and expenses With regard to the waiver of premium rider, after the disability a policyowner normally: Need not repay the premiums paid by the company during disability In many jurisdictions, permanent policies are required to have some cash value by the end of: The Third Year Loan values and retirement income are: Called the living benefits of life insurance With a modified premium whole life contract, premium payments: Are lower in the early years of the contract A variable life policy: Death benefit varies to reflect the investment results of the underlying separate account, but never falls below a guaranteed minimum The type of policy that can be changed from one that does not accumulate cash values to one that does is a: 17 | P a g e Convertible term policy A limited pay life policy: Requires premium payments for a specified number of years or until a specified age is reached Should an insured become totally and permanently disabled two months before the cut-off date for the waiver of premium rider: The insured remains eligible for all provisions Warren and Wilma have a joint life policy. Warren dies and the policy pays nothing. Later on, Wilma dies and the policy death benefit is paid to the beneficiary. This is called a: Survivorship or second-to-die policy A whole life policy: Requires the insured to pay premiums for life and endows at age 100 If Greg's policy on his own life has a guaranteed insurability rider, it means that he can purchase more insurance: On his own life at certain specified ages without proof of insurability Any extra premium charged for the waiver of premium rider: Does not apply to the policy's cash value If a policyowner has a $100,000 policy with an accumulated cash value of $6,000, the policyowner can borrow up to: The entire accumulated cash value of $6,000, less interest for 1 year An insured allows a permanent policy to lapse. Unless otherwise instructed, the insurance company: Will automatically institute the extended term option Each of the following statements about policy loans is correct, except: Policy loans may be made on any type of policy What is a postmortem dividend? A dividend earned, but not yet paid, in the year of the insured's death and paid with the death claim The factors that determine the amount of each payment under the fixed period settlement option are: Length of the fixed period, face amount of the policy and interest Fred purchased a $100,000 policy naming his wife, Wilma, as primary beneficiary, and his only child, Pebbles, to receive any proceeds if Wilma dies before Fred, or if she dies after Fred, but before receiving all the policy proceeds. Fred elected the interest settlement option for Wilma, with the right of withdrawal after 5 years. No settlement option was stipulated for Pebbles. Fred dies on May 6th, 1991. When Fred dies, his insurance company will make settlement by paying: 20 | P a g e The amount of life insurance that may be included in a qualified retirement plan If a policyowner paid $18,000 in premiums for a policy that is cashed in for $21,000, how much of the policy's cash surrender value would be subject to federal income tax? $3,000 Any proceeds from a surrendered or matured life insurance policy that exceed policy costs are subject to federal income tax. This is referred to as the cost recovery rule. Distributions from a qualified retirement plan: Are received tax-free only if they result from previously taxed contributions A group deferred annuity or an individual deferred annuity would be most likely used: To fund a defined benefit plan When a group deferred annuity is used to fund a defined benefit plan, specified amounts of deferred annuity are bought by the employer each year to provide the 'defined benefit' for the employee at retirement, thus providing a guaranteed defined benefit at retirement. Defined Contribution Plan Which of the following would NOT be permitted as a Section 1035 policy exchange? An annuity contract exchanged for a life contract TSAs are tax-sheltered retirement programs for employees of all the following kinds of organizations, except: Corporations How are employer paid premiums on a group life insurance plan treated for tax purposes? As an ordinary and necessary business expense With a Profit Sharing Plan contributions must generally be made in at least ________ consecutive years. 3 out of last 5 A stay at home father wants to open up an IRA. What is required in order for him to do so? Be married to a spouse that has earned income The tendency for poor risks to seek and be covered for insurance more than average risks is known as: Adverse Selection What type of policy pays weekly or monthly benefits for loss of income due to sickness or injury? Disability Income 21 | P a g e Disability income pays benefits either weekly or monthly when an insured becomes disabled and unable to perform some or all of their job duties, due to a sickness or injury. The specified period that must elapse before new coverage is effective for nonaccidental losses is known as which of the following? Probationary Period All of the following statements regarding an insurance application are correct, except: It is not included as part of the contract Correct: It is a formal written request by an applicant to an insurer requesting a policy It is the primary source of information for underwriting purposes It must be signed by at least the applicant and producer If a policy was issued at a higher premium due to a higher risk exposure, all of the following can be used to reflect the higher risk, except: Declined Information about an applicant's work behavior or character gathered from neighbors or co-workers would be included on an? Inspection Report Timothy owns an individual A&H policy, and in the event of an accident, he is required to prove only that the injury itself is unforeseen and unintended. Tim's policy is based on which of the following definitions of accident? Accidental Bodily Injury If the insurer issues a health insurance policy without an initial premium, the producer must obtain a signed: Statement of Good Health Comprehensive dental plans usually provide: Routine dental care services without deductibles or coinsurance Which of the following is NOT a common exclusion for a dental expense policy? The preventative care exclusion Common Exclusions: The 5-year replacement exclusion 22 | P a g e The missing tooth exclusion The cosmetic exclusion Under a credit health policy, what is the maximum amount of any accidental death benefit included? The amount of outstanding indebtedness at any given time Dental policies that limit benefits to specified maximums per procedure, with first dollar coverage are: Scheduled: policies provide first dollar coverage, but limit benefits to specified maximums per procedure. A policy that pays surgical expense benefits does not schedule the approved benefit payable for every type of surgery. Instead, surgeries not listed are paid on the basis of a comparison to one or more types of commonly-performed major surgeries that are scheduled. Under this arrangement, the unscheduled surgeries are paid on the basis of: Their relative value Which of the following statements is FALSE regarding credit health insurance? Credit health insurance operates like an HMO and provides death benefit protection regardless of the cause of death Which provision allows medical expenses from the last 3 months of a calendar year to be used during the next calendar year to meet a deductible? Carryover provision For nonroutine treatments, a comprehensive policy generally pays: A specified percentage of the reasonable and customary charges A certain major medical policy states a maximum number of days for which convalescent care will be paid as well as a maximum number of X-rays that will be paid for under any one claim. These are examples of: Inside Limits The limits sometimes placed on specific coverages in a major medical policy are called inside or internal limits. These limits resemble scheduled benefits, as to the fact that they are stated in the policy as either maximum lifetime limits or limits per policy period. Either way they are stated inside the policy. Which of the following is true about a policy that pays for room and board expenses on a indemnity basis? The policy pays a specified, pre-established amount per day for a maximum number of days 25 | P a g e All of the following statements about noncancellable policies are true, except: The insurer may choose not to renew the policy, but only on the policy renewal or anniversary date The only right to cancel a noncancellable policy is nonpayment of premium, because it is guaranteed renewable to age 65. The only type of renewal provision that allows an insurer the right not to renew on the policy anniversary is the optionally renewable option. Required/Mandatory Provision 'Proof of Loss' indicates that except in the absence of the insured's legal capacity, if it was not reasonably possible for the insured to provide proof of loss as required in a policy, the latest time the proof of loss may be furnished is: 1 year from the time proof is otherwise required Each of the following would be found in the insuring clause of an insurance policy, except: General information about the named insured Under Optional Provision 'Unpaid Premiums', when premiums are unpaid at the time a claim is submitted, the insurer may: Deduct unpaid premiums from benefits before paying the claim Required Provision 'Reinstatement' addresses reinstatement of a lapsed policy. According to this provision, when an insured applies for reinstatement and receives a conditional receipt, how long does the insurer have to approve or deny reinstatement before the policy will be automatically reinstated? 45 days from the date of the conditional receipt The Time Limit on Certain Defenses (Incontestable) period is _____ years under individual health and disability contracts. 2 Under the Legal Actions Mandatory Uniform Provision, an insured must wait at least _____ days after providing proof of loss before he or she can take legal action against the insurer. 60 days John has had his individual Health and Disability Income policies for many years. While intoxicated, he was injured as the driver in a single car accident. Who covers the medical expenses for John? John is liable for all expenses According to the Intoxicants and Narcotics Provision (an Optional Uniform Provision), the insurer may deny coverage for John's injuries, making John liable for all expenses. An insured should receive necessary claim forms within _____ days after notice of claim. 15 Which of the following is not a Mandatory Uniform Provision of an Accident and Health policy? 26 | P a g e Waiver of Premium Precertification, Mandatory Second Surgical Opinion, and Concurrent Review are provisions in health insurance policies known as: Case Management Provisions Managed Health Care attempts to contain costs by controlling the behavior of participants in all of the following ways, except: Partial Case Management Which statement concerning individual A&H policy renewal provisions is most correct from the perspective of the insured? The more favorable the renewal provision to the insured, the higher the cost The more favorable a renewal provision is to the insured, the higher the premium will be. A Noncancellable policy will cost the most because its premium may not be changed in the future. Which of these is a Mandatory Uniform Provision? Legal Actions The Coordination of Benefits Provision is designed to: Give insureds as much coverage as possible while eliminating overinsurance Which of the following statements is NOT true concerning a coordination of benefits situation? Where children are involved, the primary group insurer is the insurer for the parent who is oldest by age at the time of claim When double coverage exists, the coordination of benefits provision simply steps in and stipulates which insurer pays and when. The insured's plan is always primary, the spouses plan is secondary, the parent whose birthday comes first in the calendar year is primary for the children, not who is oldest. The purpose of this provision is to provide the most possible coverage without allowing any overinsurance from occurring. A plan in which employees select health benefits from a variety of coverage options, based on their individual coverage needs is a: Cafeteria Plan The main benefit of 501(c)9 trusts is: Contributions to these trusts may be deducted immediately, instead of when benefits are distributed Contributions to a 501(c)9 trust can be deducted immediately, where as contributions to regular self- funded plans may not be deducted until benefits are distributed. Maintaining these trusts may be high enough to eliminate any tax advantages offered. Distributions may be taxable. 27 | P a g e Which of the following would NOT be a likely consideration in determining premium rates for group health insurance? Whether the company produced a profit or a loss in the previous year What would? Degree of occupational hazard associated with the group Length of the waiting period Maximum indemnity period The federal law that governs employer-sponsored employee retirement and welfare and benefit plans is: ERISA The Employee Retirement Income Security Act (ERISA) of 1974 is the federal law that governs employer- sponsored employee retirement and welfare and benefit plans. Among other things, ERISA provides protections for participants and beneficiaries in employee benefit plans (participant rights), including providing access to plan information. Which of the following policies would allow the business to deduct premiums paid? Business overhead expense insurance Premiums paid for disability policies, whether held on key employees or put in place to fund a buy-sell agreement, are not deductible. A business overhead expense policy is sold and marketed as a business loss income policy and therefore qualifies as a tax deductible business expense. Buy Sell Agreement When an employee pays part of the premiums for group disability insurance: The benefits are received tax free to the extent that the employee paid the premiums Which of the following might be eligible to participate in an MSA? Charles, who works for a small bakery with only 15 employees MSA: are limited to self-employed individuals or individuals employed by a small employer having 50 or fewer employees. On which of the following policies would any proceeds be taxable? Business overhead expense insurance Generally, when premiums are deductible, the policy proceeds will be taxed. When premiums are not 30 | P a g e Imposing penalties for violations of the insurance code, including but not limited to fines, suspensions or revocations of licenses and Certificates of Authority, and requesting that the Attorney General prosecute a violator Approving rates and rate increases for regulated lines of insurance Subpoenaing witnesses and administering oaths in order to further any examination, investigation, or hearing on insurance matters Which of the following can be listed on an illustration? The insurer's name, producers name, address, and the policy generic name The proposed insured's name, age, gender, and the initial death benefit The dividend option selected or any nonguaranteed elements Non-financial regulatory activities are known as: Market conduct Non-financial regulatory activities of an insurance department fall under the broad heading of market conduct. Proper market conduct means conducting insurance business fairly and responsibly. Which of the following IS true about an HMO under Alabama Law? The Commissioner of insurance can regulate them but cannot impose a fine HMOs are already Government regulated both at the State and Federal levels. However, the Commissioner does have the right to regulate all insurers in their state, but they cannot impose a fine. That would be equivalent to the State government issuing a fine to themselves and the federal government. The Commissioner may certainly accept an examination from the HMO's home states insurance commissioner and may examine any company in its own state as it relates to protecting the general public Which of the following IS NOT a type of illustration under the Alabama regulation governing life insurance illustrations? Annualized Illustration TYPES: In force illustration Supplemental illustration Basic illustration 31 | P a g e Which of the following provided the federal government the right to regulate the insurance industry, regarding fraud and false statements? McCarran/Ferguson Act Jay, who is employed by Carson Company, is assigned to work temporarily in another state. While in the other state, Jay is injured on the job. He is entitled to benefits of the Workers' Compensation law in the state in which he was hired even though his injury occurred in a different state. This indicates that the Workers' Compensation law in the state where Jay was hired: Includes extraterritorial provisions TEFRA is intended to: Prevent group plans from discriminating in favor of key employees The minimum capital required to form and organize a new domestic stock life insurance company in Alabama is: $1,000,000 To be able to start operations, a mutual company must have all of the following, except: Min number of stockholders Must have: The advanced premium payment for each application A minimum surplus as specified by the state A minimum number of applications for insurance A licensee must inform the Commissioner of a change of legal name or address within ______ days of the change. 30 The maximum liability of the Life and Disability Insurance Guaranty Association for all benefits, including cash values, for any one life is: $300,000 The Life and Disability Insurance Guaranty Association protects insureds, beneficiaries, annuitants, and their assignees from insurer insolvency. Its aggregate limit of liability may not exceed $100,000 in cash values or $300,000 for all benefits including cash values, with respect to any one life. An insurer can deny an otherwise valid claim under a long-term care insurance policy solely on the basis of a misrepresentation that is material to the acceptance for coverage: If the policy has been in force for less than 6 months 32 | P a g e A life insurance policy is incontestable, except for nonpayment of premiums, after it has been in force during the lifetime of the insured for ______ from its date of issue. 2 years When the owner of the policy and insurer must meet certain conditions in order for the health insurance policy to be enforceable, it is referred to as a(n): Conditional Contract A Conditional Contract is one in which both parties to a contract must perform certain duties to make the contract enforceable. Contract of Adhesion Unilateral Contract When an applicant for life insurance faces potential financial loss in the event of injury or sickness of an insured, it is said the applicant has: Insurable Interest Insurable interest in life insurance is based upon a reasonable expectation of pecuniary advantage through the continued life of another person and consequent loss by reason of that person's death or a substantial interest engendered by love and affection in the case of individuals closely related by blood or law. The reinsurance agreement that automatically accepts all new risks presented by the company seeking or requesting reinsurance from the reinsurer is known as a ____________ agreement. Treaty In a whole life insurance policy: The cash value is greatest at the end of the policy period, and the insurance protection is greatest at the start of the policy Concerning the Paid-Up Additions Dividend Option, all of the following are true, except: Eventually, no more premiums will be due on the policy The Paid-Up Additions purchased under this Option have their own values and do not change the face amount of the original policy. Each additional segment of insurance contains both a death benefit and increasing cash surrender value, and by purchasing paid-up additions, larger dividends may be paid ins the future. Paid up additions do not eliminate need to pay premiums on the original policy. Which of the following death benefits is paid out to the beneficiary income tax free? Life insurance when the insured dies while the policy is in force 35 | P a g e what is the name of the process that insurance companies use to determine if an applicant is insurable? provide the aplicant with a Disclosure Authorization Notice if an insurer needs to obtain information about the applicant from investigators, what is the insurer required to do? Alien what type of insurer is formed under the laws of another country? adverse selection when risks with higher probability of loss are seeking insurance more often than other risks, is known as what? when to policy is delivered and the premium is paid. when does an insurance policy go into effect? an agent or producer according to the Law of Agency, a principal is represented by whom? pure what type of risk is insurable? stockholders who owns stock companies? Insurers what entities make up the Medical Information Bureau? complete a new application of ask the applicant to initial the correction on the original application when a change needs to be made on the application for insurance, which is the best method for correcting the information? Certificate of Authority in order to transact insurance within a given sate, an alien insurer must first obtain what? Loss Insurance is a contract that protects the insured from what? when the application is submitted in insurance, when is the offer usually made on a contract? stock company the insurer organized to return a profit to the stockholders is what type of insurer? 36 | P a g e when the insurer approves a prepaid application in forming an insurance contract, when does an acceptance usually occur? Foreign an insurance company that is formed under the laws of another state is known as what type of insurer? financial responsibility for loss insurance is used to transfer what to the company? inspection report what type of report provided information about the applicants hobbies, habits, and financial status? Certificate of Authority what document is required for an insurance company to transact insurance? Certificate of Authority a state issued document empowering an insurance company to become an admitted insurer is called what? Insurance what do individuals use to transfer their risk of loss to a larger group? Insurer in the agent/insurer relationship, who is considered the principal? insurance company whom does an insurance agent represent? express, implied and apparent what are the three types of agent authority? moral what type of hazard does an applicant present when they conceal health information? mutual an insurance policy paid a nontaxable dividend to the insured one year, and nothing the next. From what type of insurer did the insured purchase the policy? Loss the reduction, decrease, or disappearance of value of the person or property insured is a policy is known as what? physical moral, and morale 37 | P a g e what are the 3 types of hazards? send it back to the applicant to get the signature if an agent fails to obtain the applicants signature on the application, what must an insurer do? insurable interest and consent what two elements are necessary for a life insurance contract to have a legal purpose when it is intentional and material when would a misrepresentation on an insurance application be considered fraud? uncertainty of loss for the purpose of insurance, what is risk? the agent's whose responsibility is it to determine that all the questions on an application are answered? restriction of coverage; refusal to accept risk; accepting a risk at a higher rate what are the strategies used by underwriters to prevent adverse selection? foreign an insurance company is domiciled in California and transacts business in Nevada. what is the insurer's classification in Nevada? speculative wagering on a sporting event is known as what type of risk? loss must be: due to chance, definite and measurable, statistically predictable, not catastrophic, coverage cannot be mandatory what are the 5 characteristics of an ideally insurable risk? morale a person who does not lock the doors to his or her house shows an indifferent attitude. This person presents what type of hazard? pure risk a situation in which a person can only experience a loss and no gain presents what type of risk? agreement (offer and acceptance), consideration, competent parties, and legal purpose what are the 4 elements of an insurance contract?