Insurance MCQ

Mutual insurers pay dividends to participating policyowners if the insurer has which of the following? A) Divisible surplus. B) Reciprocal Dividend Agreement. C) Certificate of Authority. D) Participating clause. Answer: A) Divisible surplus.

Which law gives chief financial officers the power to investigate insurance companies and producers, to issue cease and desist orders, and to impose penalties on violators? A) Unfair Trade Practices Act. B) McCarran-Ferguson Act. C) Fair Credit Reporting Act. D) Financial Services Modernization Act. Answer: A) Unfair Trade Practices Act.

An agent is required to provide which of the following to the applicant when they make a proposal of insurance. A) Buyer's guide. B) Policy summary. C) Buyer's guide and policy summary. D) Financial history and stock information of insurer. Answer: C) Buyer's guide and policy summary.

Which of the following requires insurers to disclose when an applicant's consumer or credit history is being investigated? A) 1970 - Fair Credit Reporting Act. B) 1959 - Intervention by (SEC) The Securities and Exchange Commission. C) 1999 - Financial Services Modernization Act. D) 1945 - The McCarran-Ferguson Act. Answer: A) 1970 - Fair Credit Reporting Act.

Explain the difference between what a general agent does as compared to a PPGA? A) Both basically train agents and transact insurance. B) Both basically just transact insurance. C) PPGA's primarily sell. General agents primarily recruit, train, and manage. D) General agents primarily sell. PPGA's primarily recruit, train, and manage. Answer: C) PPGA's primarily sell. General agents primarily recruit, train, and manage.

Nonparticipating insurers do not allow their policyowners to receive the following? A) cash advances. B) dividends. C) preferred premium rates. D) stock options. Answer: B) dividends.

Companies that sell more than one type of insurance are? A) multi-line insurers. B) property and causalty. C) mutual company. D) life company. Answer: A) multi-line insurers.

The State Guaranty Association guarantees? A) that a policy will be issued. B) that a claim will be paid if an insurer becomes insolvent. C) that dividends will be paid. D) the rate of return on a policy. Answer: B) that a claim will be paid if an insurer becomes insolvent.

Which of the following is NOT a service provider? A) HMO. B) Benefit plans offering medical services to subscribers. C) Lloyd's of London. D) PPO. Answer: C) Lloyd's of London.

Which entity has as one of its objectives preserving state regulation of insurance? A) American Council of Life Insurance. B) National Association of Life Underwriters. C) National Committee to Preserve the Republic. D) National Association of Insurance Commissioners. Answer: D) National Association of Insurance Commissioners.

What type of agent may represent a number of insurance companies under separate contractual agreements? A) Career agent. B) Captive agent. C) Company agent. D) Independent agent. Answer: D) Independent agent.

What is the purpose of insurance? A) To replace the uncertainty of risk with guarantees. B) To replace guarantees with the certainty of risk. C) To remove the possibility of loss. D) To remove the predictability of loss. Answer: A) To replace the uncertainty of risk with guarantees.

Which of the following statements is correct when comparing participating policies with non-participating policies? A) Premiums for participating policies are usually higher than for non-participating policies. B) Dividends from participating policies are treated as taxable income, but dividends from non-participating policies are not. C) The dividends on participating policies increase the value of the policyholder's stock, but non-participating dividends do not. D) The guaranteed cash values in a participating policy are greater than in a non-participating policy. Answer: A) Premiums for participating policies are usually higher than for non-participating policies.

Who is considered the owner of a mutual insurance company? A) Stockholders. B) Policyholders. C) Mutual fund shareholders. D) Attorney in fact. Answer: B) Policyholders.

The major difference between participating and nonparticipating policies is the. A) interest assumption. B) premium payment method. C) settlement options. D) presence of policy dividends. Answer: D) presence of policy dividends.

Dividends from a stock company are paid to stockholders, whereas in a mutual company dividends are? A) reinvested as capital gains, used to reduce rates for policyowners. B) paid quarterly to the corporate officers and directors as a bonus. C) paid to the policyowners. D) paid to the stockholders. Answer: C) paid to the policyowners.

All of the following are systems that support the sale of insurance through agents and brokers EXCEPT. A) Career Agency System. B) Fraternal Benefit Society System. C) Personal Producing General Agency System. D) Independent Agency System. Answer: B) Fraternal Benefit Society System.

A life insurance company that shares its suplus earnings with its insureds is known as? A) a participating company. B) a fraternal organization. C) an association. D) an admitted company. Answer: A) a participating company.

Which of the following mandated that insurance would be regulated by the states as well as made possible the application of federal antitrust laws? A) Paul v. Virginia. B) McCarran-Ferguson. C) Armstrong investigation. D) U.S. v. Southeastern Underwriters. Answer: B) McCarran-Ferguson.

All the following types of insurance companies may be approved to operate in nearly all states EXCEPT? A) Fraternal insurance companies. B) Mutual insurance companies. C) Lloyds of London. D) Stock insurance companies. Answer: C) Lloyds of London.