California Life, Accident And Health Final Exam Questions And Answers (Rated A+), Exams of Health sciences

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California Life, Accident And Health Final Exam

Questions And Answers (Rated A+)

A moral hazard – ANSWER – is a dishonest person (lacking in morals) A morale hazard - – ANSWER – a careless person. A peril - – ANSWER – is a cause of loss Pure risk - – ANSWER – is insurable & includes only a chance of loss. The highest premium - – ANSWER – would be found with a substandard risk classification. Agent commissions - – ANSWER – are an insurer expense "Insurance" - – ANSWER – is a contract that transfers risk from one party to another. An "insurance policy" - – ANSWER – is a written contract Neglect to communicate that which a party knows is "concealment" - – ANSWER – may cause the injured party to rescind the policy "Materiality" - – ANSWER – is determined solely by the probable and reasonable influence of the facts upon the part to whom the communication is due The "materiality of concealment" - – ANSWER – is the rule used to determine the importance of the misrepresentation. An insurance policy - – ANSWER – must specify the parties between whom the contract is made The financial rating of an insurer - – ANSWER – is not required to be included in the insurance policy In a direct response marketing system - – ANSWER – the mail and/or internet is used to sell policies, not agents An insurance broker is a person who - – ANSWER – for compensation and on behalf of another person, transacts insurance. An insurance agent is a person who - – ANSWER – for compensation, transacts insurance for the insurer. An insurance solicitor - – ANSWER – is a person employed by an insurance agent or broker to aid in insurance transactions A person can always use their legal name - – ANSWER – to transact insurance The state may disapprove the use of any true or fictitious name except - – ANSWER – a person's legal name

An insurance agent or broker hires a third party to prepare their website - – ANSWER – The insurance agent or broker, not the third party, is responsible for the content of the website. An admitted insurer - – ANSWER – is an insurer entitled to transact business in this state A mutual insurer - – ANSWER – is owned by the policyholders and issues participating policies The Insurance Commissioner in California - – ANSWER – is elected by the people. The Insurance Commissioner may serve - – ANSWER – up to two (2) four-year terms A mutual insurer must pay out - – ANSWER – dividends at minimum annually. An insurance policy - – ANSWER – is a legal contract. A representation in an insurance contract - – ANSWER – is an implied warranty Concealment, whether intentional or unintentional, entitles the injured party to - – ANSWER – rescind an insurance contract. Agents of insurers who utilize "direct response" marketing systems do not - – ANSWER – conduct personal interviews with customers. Any person who transacts insurance without a valid license - – ANSWER – is guilty of a misdemeanor. Transacting insurance does not include subscribing to newspapers that - other agents advertise in It is the insurer who is responsible for - – ANSWER – filing an agent's appointment with the Commissioner A solicitor - – ANSWER – is employed by an insurance agent or broker When a partnership is dissolved - – ANSWER – it ceases to be eligible to hold a license Insurance licenses may be renewed by - – ANSWER – submitting the applicable renewal application and fee Licensees must notify the Commissioner of a change in their background information - – ANSWER – within 30 days. It is a misdemeanor to refuse to deliver any books or records to the Commissioner - – ANSWER – once a seizure order has been executed in an insolvency proceeding Under the California File and Record documentation rules, every licensees' claim files - – ANSWER – are subject to examination by the Commissioner for the current year and the preceding four years. A "loss exposure" - – ANSWER – is a condition that could result in a loss. Gambling - – ANSWER – is an example of speculative risk.

Insurance contracts are considered to be "unilateral" since - – ANSWER – only one party to the contract makes an enforceable promise The word "may" - – ANSWER – implies permissiveness. A "claimant" - – ANSWER – is a person who asserts a right of recovery under an insurance policy. Insurers are not allowed to discriminate in their claim settlement practices based upon a person's - – ANSWER – race, age, gender, income, religion, language, sexual orientation, ancestry, national origin, or physical disability An insurance agent or broker must include on their website the following: - – ANSWER – o Their name, as it appears on their license, as well as any other fictitious name approved by the Commissioner o The state of their domicile and principal place of business o Their license number The Law of Large Numbers states that the more similar risks the insurance company combines together - – ANSWER – the better they can guess approximately how many losses they will have in a given time period A speculative risk - – ANSWER – is a risk situation that includes a chance of loss and a potential for gain Speculative risks - – ANSWER – are not insurable. An insurer organized in California and selling in California - – ANSWER – is considered to be a domestic insurer in California. An insurance company based in Utah that is selling in California - – ANSWER – is a foreign insurer in California An insurance company that has enough reserves to pay for all its liabilities - – ANSWER – is referred to as a solvent insurer. The State Insurance Guarantee Fund provides protection to policyholders whose - – ANSWER – insurer becomes insolvent (financially impaired). This fund only covers member insurers (licensed insurance companies). An insurance company that is based in Canada and doing business in California - – ANSWER – a alien insurer in California. An insurance company that has enough reserves to pay for all its liabilities - – ANSWER – is referred to as a solvent insurer. The State Insurance Guarantee Fund provides protection to policyholders whose insurer becomes insolvent (financially impaired). - – ANSWER – This fund only covers member insurers (licensed insurance

companies). An insurance company that is based in Canada and doing business in California - – ANSWER – is an alien insurer. If the insurer discovers the insured has violated a material warranty, - – ANSWER – they can rescind the contract (void the policy). An intentional concealment entitles the injured party - – ANSWER – the option to rescind the contract Neither party to a contract of insurance is bound to communicate, even upon inquiry, information of his own judgment upon - – ANSWER – the matters in question. Providing free insurance coverage in connection with the sale of services as an inducement for completing the transaction - – ANSWER – is not legal. The following information does not need to be communicated in a contract: - – ANSWER – o known information o information that should be known o information which the other party waives o information that is not material to the risk A representation in an insurance contract qualifies as - – ANSWER – an implied warranty A representation is false when the facts fail to - – ANSWER – correspond with its assertions or stipulations. Either intentional or unintentional concealment entitles an injured party to - – ANSWER – rescission of a contract. Each authorized insurer is required - – ANSWER – to establish a division within the insurer to investigate fraudulent claims. The Principle of Indemnity - – ANSWER – is most closely associated with insurable interest A "prohibited" person may not engage in the business of insurance - – ANSWER – without the written consent of the Commissioner. Under federal law, a "prohibited" person is a person whose activities affect interstate commerce and who knowingly, with the intent to deceive - – ANSWER – makes any false material statement or financial report to any insurance regulator for the purpose of influencing their actions. Under federal law, upon conviction, a "prohibited" person may be imprisoned - – ANSWER – 10 to 15 years and fined up to a maximum of $50,000 per violation. Before making a sale, the first thing an agent should do - – ANSWER – is identify the client's overall financial objectives The price of insurance for each exposure unit - – ANSWER – is called the rate. You must be able to identify who may be an insurer: - – ANSWER – person, association, organization, partnership, business trust, limited liability company or corporation.

Life insurance creates an immediate estate upon the death of the insured in that the death benefit will

• – ANSWER – be paid to the beneficiary upon their death. Claims forms are required to include the following statement related to fraudulent claims: - – ANSWER - "Any person who knowingly presents a false or fraudulent claim for the payment of a loss is guilty of a crime and may be subject to fines and confinement in state prison." Under Section 770 of the CIC, the insurance Commissioner will usually issue a cease and desist order For - – ANSWER – a violation of more than one transaction if the violation dealt with loans on the security of real or personal property The process whereby a mutual insurer becomes a stock company - – ANSWER – is called demutualization. Any situation that presents the possibility of a loss - – ANSWER – is known as a loss exposure Dividends received by policyholders of a mutual insurer - – ANSWER – are not taxable It is a misdemeanor to refuse to deliver any books, records, or assets to the Commissioner - – ANSWER - once a seizure order has been executed in an insolvency proceeding. If an insured signs a fraudulent claim form, - – ANSWER – the insured may be guilty of perjury Financial exposure - – ANSWER – is not one of the three major types of loss exposures If an agent issues a binder for a company they are not appointed by - – ANSWER – the Commissioner can suspend or revoke the agent's license. An MGA (managing general agent) can be any - – ANSWER – person, firm, association, partnership, or corporation that manages all or part of an insurer's business (including a separate division, department or underwriting office). An MGA acts as an agent and produces and underwrites gross direct written premium equal to or more than 5 percent of the policyholder surplus as reported in the insurer's last annual statement and either: - – ANSWER – o Adjusts or pays claims in excess of an amount determined by the Commissioner, or; o Negotiates and binds ceding reinsurance on behalf of the insurer There are specific duties of a partnership whose membership has changed. - – ANSWER – To return the old license with signatures of the original members to the Commissioner is not one of those duties. The interpretation of policy provisions - – ANSWER – is not a primary objective of insurance regulation. A primary insurer - – ANSWER – is the insurance company who transfers its loss exposure to another insurer in a reinsurance transaction The CIC defines "insurance" as a contract whereby - – ANSWER – one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event.

In a life insurance policy illustration "nonguaranteed elements" - " – ANSWER – means the premiums, benefits, values, credits or charges under a policy of life insurance that are not guaranteed or not determined at issue. Life Insurance policy illustration regulations - – ANSWER – were not created to eliminate disclosure A representation may be - – ANSWER – altered or withdrawn before the insurance is effected, but not afterwards In life insurance, insurable interest must - – ANSWER – exist when a policy is first issued. In life insurance, the measure of liability - – ANSWER – is the sum or sums payable as provided in the policy to the person entitled thereto. The Insurance Commissioner - – ANSWER – shall be elected by the people in the same time, place and manner as the Governor. Policies issued by Mutual insurers pay dividends to policyholders - – ANSWER – The dividend option is selected by the policyholder on the insurance application. A nonparticipating policyowner will not receive dividends. - – ANSWER – Nonparticipating policies are issued by stock insurers. Stock insurers pay dividends to stockholders, not policyholders. Dividends are declared by the board of - – ANSWER – directors and cannot be guaranteed. California Insurance Code includes senior code protections. - – ANSWER – A person age 60 or older who buys life insurance in California is required to receive a 30-day minimum free look. People under age 60 who buy life insurance are required to receive a minimum 10-day free look. The Doctrine of Utmost Good Faith allows - – ANSWER – each party to rely on the representations made by the other party. In order to transact insurance (sell insurance) agents must hold - – ANSWER – at least one insurer appointment. Every insurer offering individual life insurance policies or annuities to senior citizens that use nonguaranteed elements in illustrations - – ANSWER – must provide a statement to that effect which must appear in bold print. The agent's commission comes from the insurer expenses - – ANSWER – portion of the premium charged. In addition to completing the pre-licensing requirement, - – ANSWER – Life Agent, Fire and Casualty broker-agents and Personal Lines agents must also complete a 12-hour Ethics and Code course. Under the CIC, all advertisements, policies and certificates of term life insurance sold to those age 55 and older must include a term life insurance monetary value index, which is similar to the Life Insurance Surrender Cost Index. - – ANSWER – In developing a term life insurance monetary value index, the Commissioner shall consider actual premiums and policy and certificate benefits and the manner in which they are affected with the passage of time. Any term life insurance monetary value index developed pursuant to this section shall assume an insured's desire to retain coverage for at least 10 years.

Term life insurance directed to individuals 55 years of age or older must prominently - – ANSWER – disclose any change in premium resulting from the aging of the insured, policy duration, or any other factor. If the insurer retains any right to modify premiums in the future, that fact shall also be disclosed If a senior has purchased an annuity which is invested in a mutual fund and they cancel during the free look, the CIC requires - – ANSWER – they be refunded the value of the account. The free look notice for seniors must be - – ANSWER – printed in no less than 10-point uppercase type, on the cover page of the policy or certificate and the outline of coverage. Insurance agents must keep - – ANSWER – records regarding policies sold in this state for a minimum of five (5) years In order to determine the amount of premium an insured will pay - – ANSWER – the insurer multiplies the rate by the number of exposure units purchased. Insurance agents are acting in a fiduciary capacity - – ANSWER – when they are handling their customer's premiums. An "Illustration" is a presentation or depiction - – ANSWER – that includes nonguaranteed elements of a policy of life insurance over a period of years If you no longer hold any insurer appointments - – ANSWER – your license is considered to be inactive If an employer holds your license and wants to cancel it, - – ANSWER – they are required to send written notice to the Commissioner. If an applicant has had a professional license revoked in the past five (5) years - – ANSWER – , the insurance Commissioner can deny their licensing application without a prior hearing. The insurance company that purchases reinsurance - is referred to as the primary insurer (a.k.a. ceding insurer) Agent records must be - – ANSWER – made available to the Commissioner at any time. If an insured is found guilty of turning in a fraudulent claim - – ANSWER – they can face imprisonment and/or a $150,000 fine or twice the dollar amount of the fraudulent claim, whichever is greater. For example, if an insured turned in a fraudulent claim totaling $85,000, they would be fined $170,000. The rules regarding life insurance policy illustrations are not - – ANSWER – intended to ensure that the illustration specify that nonguaranteed elements will continue unchanged for all years shown. If an insurer is inadvertently found guilty of unfair trade practices while issuing, renewing and servicing a policy - – ANSWER – the insurer could be prosecuted for three violations, one for each act If an individual increases their insurance policy limits - – ANSWER – they are not eliminating their risk; they are transferring more of their risk. An insurance binder always creates immediate coverage which - – ANSWER – is the main difference between a binder and a conditional receipt. Under the California Insurance Code (CIC) life insurance agents cannot - – ANSWER – issue binders

If an organization terminates a key employee, the organization will - – ANSWER – still be eligible to hold a license as their organization will be unaffected. If the insurance Commissioner issues a Notice of Seizure for documents and the agent fails to produce the documents - – ANSWER – they would be subject to up to one (1) year in jail and/or a $1,000 fine. Agents who receive commission related to premium financing - – ANSWER – must keep their records for three (3) years. The rate - – ANSWER – is the cost per exposure unit. To authorize the release of an attending physician's report, - – ANSWER – the applicant must sign a consent form. Members of the Medical Information Bureau are required - – ANSWER – to report medical impairments found during the underwriting process The request for an attending physician's report must be - – ANSWER – accompanied by a copy of the signed authorization. Life insurance companies are members of the - – ANSWER – Medical Information Bureau Mutual insurers - – ANSWER – are owned by policyholders Upon the death of a licensed agent, - , – ANSWER – the agent's license will be terminated. Under the CIC, if an applicant enters a plea of "nolo contendere," - – ANSWER – they will be convicted. Nolo contendere is Latin for no contest. When replacing a policy - – ANSWER – the agent is not required to send a copy of the replacement notice to the existing insurer. The new insurance company will provide notice to the existing insurer. In order to remain financially solvent under the CIC, an insurer must have enough assets to - – ANSWER – provide for its liabilities and for reinsurance for all outstanding risks and must also meet minimum requirements equal to their paid-in capital (value of company if liquidated) In insurance terms, a representation - – ANSWER – can be considered an implied warranty If an agent is engaging in unfair methods of competition, they are subject to penalties of - – ANSWER – no more than $5,000 for each act, not to exceed $10,000 if the act is judged to be willful Individuals who hold a Life-Only and/or an Accident and Health license must - – ANSWER – complete 24 hours of Continuing Education every two (2) years in order to renew their license. Concealment - – ANSWER – is when a party fails to communicate that which a party knows, and ought to communicate, so that the other party may make a sound decision. Replacement is when you replace your customer's current policy with a new one and - – ANSWER – is not illegal. However, you would not replace your customer's policy if the new policy is worse and the premium is higher. This would be considered twisting and is illegal

A captive insurer - – ANSWER – is an insurer created by a corporation to insure its own risks. If a company decides to self-insure - – ANSWER – this decision would not have any impact on claims severity The California Life and Health Insurance Guarantee Association (CLHIGA) does not cover – – ANSWER – employer self-funded plans. The California Life and Health Insurance Guarantee Association (CLHIGA) - – ANSWER – does not cover group stoploss plans. An insurance policy must specify all of the following EXCEPT: - – ANSWER – Financial Rating of the insurer All of the following would be considered a violation of federal law EXCEPT: - – ANSWER – Providing false information on an insurance application A person convicted of the federal law regulating issues that affect the insurance industry and interstate commerce can be sentenced to how many years in prison? - – ANSWER – 10 or 15 A person found guilty of a violation of the federal law regulating issues that affect the insurance industry and interstate commerce can be subject to a civil penalty of up to: - – ANSWER – $50, Which of the following classes of insurance is exempt from the California Insurance Guarantee Association (CIGA)? - – ANSWER – Life and annuity All of the following are true regarding warranties in an insurance contract EXCEPT: - – ANSWER – A particular form of words is necessary to create a warranty