Insurance MCQ

When an insurance company cancels a policy, what is the method used to determine the premium due? A) Short rate. B) Premature. C) Flat. D) Pro rata. Answer: D

A warranty is a statement made by the applicant regarding the risk to be insured. Which of the following statements is NOT true about warranties? A) A warranty is guaranteed to be true. B) A warranty must refer to a material fact. C) A policy can be cancelled if the warranty is false. D) A warranty is part of the contract. Answer: B

In legal terms, voluntary relinquishment of a known right is called: A) a withdrawal. B) a waiver. C) a concealment. D) a warranty. Answer: B

In insurance, a waiver is best considered as: A) a material representation. B) the suspension of a policy right. C) the voluntary surrender of a known right. D) a warranty. Answer: C

Joan and Steven have applied for automobile insurance with ABC Auto Insurers. They do not tell the agent that their neighbor, George, who lost his drivers license due to drunk driving, uses one of their cars on a regular basis to drive to work. Once the company found out about George after he had an accident, they denied the claim, citing what legal concept as the reason? A) Misrepresentation. B) Breach of warranty. C) Concealment. D) Fraud. Answer: C

Joan and Steven have applied for automobile insurance with ABC Auto Insurers. The ABC agent asked Joan and Steven if their resident 18-year-old son, Henry, has had any moving traffic violations in the past 2 years. Both answer no. The fact is, Henry had 4 speeding tickets, but never told his parents. Once the company found out about Henry's record, they voided the policy citing misrepresentation as the reason. Did Joan and Steve misrepresent Henry's driving record? A) No. They must have known about the tickets, but the company could not prove it. B) No. They answered to the best of their knowledge. C) No. The representation was not material. D) Yes. Though not fraudulent, the misstatement was material. Answer: D

Joan and Steven have applied for automobile insurance with ABC Auto Insurers. The ABC agent asked Joan and Steven if their resident 18-year-old son, Henry, has had any moving traffic violations in the past 2 years. Both answer no. The fact is, Henry had 4 speeding tickets, but never told his parents. What legal concept does this scenario describe? A) Misrepresentation. B) Warranty. C) Fraud. D) Representation. Answer: D

Statements made on an application that are guaranteed to be true are: A) representations. B) promises. C) misrepresentations. D) warranties. Answer: D

Which of the following terms describes an insured's oral or written statement that becomes part of an insurance contract? A) Misrepresentation. B) Warranty. C) Representation. D) Waiver. Answer: B

Knowingly lying on an application in order to obtain coverage would be an example of: A) misrepresentation. B) recession. C) fraud. D) concealment. Answer: C

Joan and Steven have applied for automobile insurance with ABC Auto Insurers. When the agent asks if anyone else drives the car, they do not tell him that their neighbor, George, who lost his drivers license due to drunk driving, uses one of their cars on a regular basis to drive to work. Once the company found out about George after he had an accident, they denied the claim, citing what legal concept as the reason? A) Concealment. B) Breach of warranty. C) Fraud. D) Misrepresentation. Answer: C

What is the cost of a unit of insurance? A) Premium. B) Loss. C) Reserve. D) Rate. Answer: D

Which of the following is an example of adverse selection? A) An individual buys a new house and the mortgage company requires homeowner insurance. B) An individual with a new car purchases collision coverage. C) An individual, who has a new, healthy baby, purchases medical insurance. D) An individual with a terminal illness purchases health insurance. Answer: D

All of the following consumer characteristics are considered in a consumer report regulated by the Fair Credit Reporting Act EXCEPT: A) creditworthiness. B) credit standing. C) character. D) occupation. Answer: D

Which one of the following requires that insurance applicants be advised that a consumer report may be requested on them and the scope of any investigation resulting from the application? A) Financial Freedom Act. B) Fair Credit Reporting Act. C) Fair Disclosure Act. D) Freedom of Privacy Act. Answer: B

An insurance binder is best described as: A) a temporary agreement to pay a claim pending final settlement. B) temporary, short-term evidence of coverage. C) a bound collection of rules, rates, and forms. D) a rate manual supplied by one of the rating organizations. Answer: B