Insurance MCQ

An insurer's claim settlement practices are regulated by the  A) Securities and Exchange Commission (SEC) B) National Association of Claims Adjusters (NACA) C) National Association of Insurance Commissioners (NAIC) D) State insurance departments Answer: D) State insurance departments

A plan in which an employer pays insurance benefits from a fund derived from the employer's current revenues is called A) A self-derived plan B) A multiple-employer plan C) A blanket plan D) A self-funded plan Answer: D) A self-funded plan

Which of the following is a type of insurance where an insurer transfers loss exposures from policies written for its insureds?  A) Treaty insurance B) Reinsurance C) Mutual insurance D) Captive insurance Answer: B) Reinsurance

Karen is a producer who has obtained personal information about a client without having a legitimate reason to do so. Under the McCarran-Ferguson Act, what is the minimum penalty for this? A) $0 B) $5,000 C) $10,000 D) $15,000 Answer: C) $10,000

AAA Insurance Company has transferred a portion of its loss exposure to BBB Insurance Company. In this reinsurance transaction, what is AAA Insurance Company called? A) Captive insurer B) Tertiary insurer C) Primary insurer D) Secondary insurer Answer: C) Primary insurer

A life insurance company has transferred some of its risk to another insurer. The insurer assuming the risk is called the A) mutual insurer B) reinsurer C) reciprocal insurer D) participating insurer Answer: B) reinsurer

A nonparticipating policy will  A) provide a return of premium B) provide tax advantages C) not pay dividends D) give policyowners special privileges Answer: C) not pay dividends

An insurer enters into a contract with a third party to insure itself against losses from insurance policies it issues. What is this agreement called? A) Reinsurance B) Reserves C) Mutual D) Multi-line Answer: A) Reinsurance

Which of the following is NOT considered advertising? A) A rating from a rating service company, such as A.M. Best B) An illustration C) A sales presentation D) Direct mailing from an agency Answer: A) A rating from a rating service company, such as A.M. Best

An insurer owned by its policyholders is called a A) stock insurer B) reinsurer C) mutual insurer D) multi-line insurer Answer: C) mutual insurer

What is considered to be the primary reason for buying life insurance? A) Provide death benefits B) Provide money for retirement C) Provide living benefits D) Provide money for college Answer: A) Provide death benefits

Which of the following is NOT a benefit of insurance?  A) Losses due to fraud are eliminated B) Reduces the uncertainty of loss exposures C) Makes a loss whole again D) Source of investment funds Answer: A) Losses due to fraud are eliminated

John owns an insurance policy that gives him the right to share in the insurer's surplus. What kind of policy is this?  A) Nonparticipating B) Participating C) Contributory D) Surplus Answer: B) Participating

A nonparticipating company is sometimes called a(n) A) alien insurer B) mutual insurer C) reinsurer D) stock insurer Answer: D) stock insurer

Ken is a producer who has obtained Consumer Information Reports under false pretenses. Under the Fair Credit Reporting Act, what is the maximum penalty that may be imposed on Ken? A) $1,000 B) $3,000 C) $5,000 D) $7,000 Answer: C) $5,000

What kind of life insurance policy issued by a mutual insurer provides a return of divisible surplus? A) nonparticipating life insurance policy B) participating life insurance policy C) divisible surplus life insurance policy D) straight life insurance policy Answer: B) participating life insurance policy

An insurer's ability to make unpredictable payouts to policyowners is called A) investment values B) liquidity C) assets D) capital Answer: B) liquidity

A participating company is also referred to as which type of insurer?  A) Re-insurer B) Mutual insurer C) Domestic insurer D) Reciprocal insurer Answer: B) Mutual insurer

Which of the following statements regarding a life insurance policy dividend is TRUE? A) It represents a refund of overcharged premium in a non-participating whole life policy B) It represents the build-up of cash value in a permanent insurance policy C) It is the distribution of excess of funds accumulated by the insurer on participating policies D) It is a stockholders return on his investment to the company Answer: C) It is the distribution of excess of funds accumulated by the insurer on participating policies

Which of the following is NOT a characteristic of reinsurance? A) Increases the unearned premium reserve B) Protects against a very large claim C) Enables insurer to meet certain objectives D) A specialized branch of the insurance industry Answer: A) Increases the unearned premium reserve