Chapter 4 - Insurance Transactions
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A number of steps must be taken before an insurance transaction can be completed. These include making an application for insurance, underwriting the risk, and including all the steps required for forming a valid contract.
- 1.Which of the following statements concerning binders is correct?
- A.
They guarantee that a policy will be issued.
- B.
They can be issued by insurance companies, but not agents.
- C.
They expire on the effective date of the policy to which they apply, or on the expiration date of the binder if the policy is not issued.
- D.
They show an intent to consider issuing insurance, but do not include any commitment to provide coverage.
- 2.Judgment rating is based on which of the following?
- A.
An evaluation of the characteristics of the individual risk
- B.
Manual rates developed from statistical data
- C.
Calculation and evaluation of the insured's past loss experience
- D.
Loss information reported by other states
- 3.What rating method makes modifications to manual rates to reflect the unique characteristics of each risk?
- A.
Judgment
- B.
Merit
- C.
Certification
- D.
Manual
- 4.To void a policy, misrepresentation or concealment must be which of the following?
- A.
Concern material facts.
- B.
Be intentional.
- C.
Both A and B are correct.
- D.
Neither A nor B are correct.
- 5.An agreement between the insured and the insurer that certain conditions will be met is which of the following?
- A.
Misrepresentation
- B.
Warranty
- C.
Estoppel
- D.
Certificate of insurance
- 6.When an insured decides to cancel an insurance policy prior to the expiration date, the unearned premium is returned on what basis?
- A.
Flat basis
- B.
Pro rata basis
- C.
Short rate basis
- D.
Negotiated basis
- 7.Which one of these statements about the Fair Credit Reporting Act is not correct?
- A.
Prenotification is required for both regular and investigative reports.
- B.
Postnotification is required when insurance coverage is denied because of adverse information in a credit report.
- C.
An agent who obtains information from a reporting agency under false pretenses can be sent to jail and fined.
- D.
Consumers have the right to challenge information in investigative reports and to have incorrect information removed.
- 8.The insured's policy is nearing the expiration date. The insurance company doesn't want to continue the insured's coverage, so it sends the insured a notice that the policy will not continue beyond the expiration date of the policy. This is considered which of the following?
- A.
Flat cancellation
- B.
Nonrenewal
- C.
Pro rata cancellation
- D.
Unearned renewal
Questions: 35 | Attempts: 11296 | Last updated: Jan 27, 2016
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Sample QuestionThe Process of making and implementing decisions to handle loss exposure is known as __________
Questions: 6 | Attempts: 9857 | Last updated: Jan 27, 2016
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Sample QuestionLaTonya purchases a house from John. She borrows $75,000 from First City Bank that, along with her $25,000 down payment, equals the $100,000 purchase price of the home. Who has an insurable interest in this home? Choose all that apply.
Questions: 7 | Attempts: 8122 | Last updated: Dec 26, 2012
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Sample QuestionWhich of the following is not a requirement for forming a valid contract?
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