Life and Health Insurance Exam Bank
Course Introduction
This course provides a comprehensive introduction to the principles and practices of life and health insurance. Students will explore fundamental concepts such as risk management, the structure and types of life and health insurance products, underwriting processes, policy provisions, and claims management. The course also examines the regulatory environment, ethical considerations, and the role of insurance in financial planning. Real-world examples and case studies are used to illustrate how life and health insurance protect individuals and families from financial loss due to unforeseen events, ensuring a thorough understanding of their significance in personal and societal contexts.
Recommended Textbook
Principles of Risk Management and Insurance 13th Edition by George E. Rejda
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27 Chapters
1397 Verified Questions
1397 Flashcards
Source URL: https://quizplus.com/study-set/239
Page 2
Chapter 1: Risk and Its Treatment
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59 Verified Questions
59 Flashcards
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Sample Questions
Q1) Jim and Paula Franklin started a dry cleaning business. The business may be successful or it may fail. The type of risk that is present when either a profit or loss could occur is called
A) pure risk.
B) subjective risk.
C) nondiversifiable risk.
D) speculative risk.
Answer: D
Q2) Five years ago, Shannon decided to start investing monthly in the common stock of ABC Telecom Company. Her financial well-being will be harmed if the price of ABC Telecom stock drops significantly. The risk of investment loss can be reduced if she invests in other companies and other types of financial assets. The risk Shannon faces with regard to her investments is a(n)
A) enterprise risk.
B) diversifiable risk.
C) pure risk.
D) nondiversifiable risk.
Answer: B
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Page 3
Chapter 2: Insurance and Risk
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47 Verified Questions
47 Flashcards
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Sample Questions
Q1) Which of the following statements regarding private insurance and government insurance is (are) true?
I.Private insurance programs include life and health insurance and property and liability insurance.
II.Social insurance programs are government insurance programs that are voluntary and financed entirely by contributions from covered employers.
A) I only
B) II only
C) both I and II
D) neither I nor II
Answer: A
Q2) All of the following are benefits to society that result from insurance EXCEPT A) less worry and fear.
B) elimination of moral hazard.
C) indemnification for loss.
D) loss prevention.
Answer: B
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Page 4
Chapter 3: Introduction to Risk Management
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60 Verified Questions
60 Flashcards
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Sample Questions
Q1) David never stopped to consider the possible consequences of a long-term, permanent, disability. So David did not include disability income insurance in his personal risk management program. David is dealing with the risk of disability through A) passive retention.
B) active retention.
C) risk control.
D) risk avoidance.
Answer: A
Q2) Which of the following statements about an excess insurance plan is true?
A) The insurer does not participate in a loss until the loss exceeds the amount the firm has decided to retain.
B) The insurer pays first up to some specified level; the insured then pays all losses exceeding the insurer's retention level.
C) Losses in excess of a specified amount are not covered.
D) The insured and insurer share equally in any loss that occurs.
Answer: A
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Chapter 4: Enterprise Risk Management and Related Topics
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56 Verified Questions
56 Flashcards
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Sample Questions
Q1) When announcing that an enterprise risk management program would be implemented at XYZ Company, the president of the company observed, "We must overcome the silo mentality for the program to be successful." The "silo mentality" refers to
A) over-emphasis on pure risks and ignoring speculative risks.
B) using too much of one risk treatment measure and ignoring other risk treatment methods.
C) focusing narrowly on one area and not viewing risk holistically.
D) everyone assuming someone else is responsible for managing a risk and no one taking leadership.
Q2) Which of the following statements is (are) true with regard to the use of technology in risk management programs?
I.Risk management Intranets are networks intended for an internal audience.
II.Risk management information systems can be used to store and track workers compensation claims data.
A) I only
B) II only
C) both I and II
D) neither I nor II
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Chapter 5: Types of Insurers and Marketing Systems
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46 Verified Questions
46 Flashcards
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Sample Questions
Q1) Which of the following statements about life insurance marketing systems is true?
A) Insurance brokers are not permitted to sell life insurance.
B) Some exclusive agents who market property and liability insurance also sell life insurance.
C) Independent insurance agents are not permitted to market life insurance.
D) Financial institutions such as banks are not permitted to market life insurance.
Q2) R.I.P. Company manufactures herbicide and pesticide. The company had difficulty finding affordable liability insurance. R.I.P. established its own insurance company based in Bermuda for the purpose of insuring R.I.P.'s loss exposures. The company that R.I.P. formed is called a
A) captive insurer.
B) reciprocal insurer.
C) fraternal insurer.
D) holding company.
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Chapter 6: Insurance Company Operations
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52 Verified Questions
52 Flashcards
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Sample Questions
Q1) Ross studied engineering in college. After graduation, he went to work for an insurance company. Ross visits properties insured by his company. He conducts inspections and makes recommendations about alarm systems, sprinkler systems, and building construction. In what functional area does Ross work?
A) underwriting
B) loss control
C) information systems
D) claims adjusting
Q2) Which of the following statements about claims settlement is true?
A) Agents are never authorized to settle claims.
B) Independent adjustors may be used in a geographic area where the volume of business is too low for an insurer to have its own adjustors.
C) A public adjustor is a salaried employee who works for one insurer.
D) A staff claims representative is hired by a policyholder to represent him or her if the policyholder does not agree with the claim settlement offered by the insurer.
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8
Chapter 7: Financial Operations of Insurers
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48 Verified Questions
48 Flashcards
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Sample Questions
Q1) In schedule rating, each building is individually evaluated based on several rating factors. One factor refers to the possibility that the building will be damaged or destroyed by a fire that starts at an adjacent property and spreads to the building. This rating factor is known as
A) occupancy.
B) protection.
C) maintenance.
D) exposure.
Q2) Reasons for the unearned premium reserve include which of the following?
I.To pay losses that occur during the policy period.
II.To pay premium refunds to policyholders in the event of cancellation.
A) I only
B) II only
C) both I and II
D) neither I nor II
Q3) The assets of a property and liability insurance company are primarily
A) investments such as stocks and bonds.
B) loss reserves.
C) plant and equipment.
D) premiums paid by policyholders.
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Chapter 8: Government Regulation of Insurance
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51 Verified Questions
51 Flashcards
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Sample Questions
Q1) Under what type of rate regulation are insurers required to obtain approval of rates before using them if the rate change exceeds a specified predetermined range?
A) flex-rating law
B) prior-approval law
C) file-and-use law
D) use-and-file law
Q2) The right of the states to regulate the business of insurance was first established by
A) the South-Eastern Underwriters Association case.
B) the case of Paul v. Virginia.
C) the Financial Modernization Act.
D) the Sherman Act.
Q3) In which of the following did the Court decide that insurance was interstate commerce when conducted across state lines, and therefore was subject to federal regulation?
A) Paul v. Virginia
B) South-Eastern Underwriters Association case
C) McCarran-Ferguson Act
D) Financial Modernization Act
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10
Chapter 9: Fundamental Legal Principles
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Sample Questions
Q1) Which of the following statements about subrogation is true?
A) It is used primarily for losses paid under life insurance policies.
B) It allows the insurer to sue its own insured who is negligent.
C) The insured's right to collect benefits may be forfeited if the insured interferes with the insurer's subrogation rights after a loss occurs.
D) The insurer is required to exercise its subrogation rights.
Q2) Dave is an agent for Easy Pay Insurance. Easy Pay insures only high-quality applicants. Dave wanted to earn more commissions, so he sold some policies to applicants he knew were below-average risks. When these policyowners started filing claims, Easy Pay tried to deny the claims stating that Dave had not acted appropriately. Which general rule of agency makes Easy Pay responsible for the claims of the higher-than-average risk policyowners?
A) There is no presumption of an agency relationship.
B) Agents should be compensated based on the quality of the business they generate.
C) A principal is responsible for the acts of its agents who are acting within the scope of their authority.
D) An agent must have authority to represent the principal.
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Page 11
Chapter 10: Analysis of Insurance Contracts
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49 Verified Questions
49 Flashcards
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Sample Questions
Q1) The exclusion of flood in a homeowners policy is an example of an
A) excluded activity.
B) excluded condition.
C) excluded property.
D) excluded peril.
Q2) Jane purchased a $50,000 liability insurance policy from Insurer A. Fearing that she did not have enough liability insurance, she purchased an additional $100,000 of liability coverage from Insurer B. As a result of a negligent act, Jane was ordered to pay $75,000 in damages. Assuming the coverage from Insurer A is primary and the coverage from Insurer B is excess, how will this claim be settled?
A) Insurer A will pay $50,000 and Insurer B will pay $25,000.
B) Insurer A will pay $37,500 and Insurer B will pay $37,500.
C) Insurer A will pay $25,000 and Insurer B will pay $50,000.
D) Insurer A will pay nothing and Insurer B will pay $75,000.
Q3) Deductibles are not used in which of the following type of insurance?
A) life insurance
B) health insurance
C) property insurance
D) disability income insurance
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Page 12
Chapter 11: Life Insurance
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60 Verified Questions
60 Flashcards
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Sample Questions
Q1) What is the length of the readjustment period which is considered when the needs approach is used to determine the amount of life insurance to own?
A) 3 to 6 months
B) 1 to 2 years
C) until the youngest child reaches age 18
D) until the surviving spouse reaches age 65
Q2) Gwen purchased an interesting life insurance policy. A minimum interest rate is guaranteed on the cash value, but additional interest may be credited based on the investment performance of a group of common stocks. There is also a cap on the additional interest credited to the policy. Based on this information, what type of life insurance did Gwen purchase?
A) variable life insurance
B) indexed universal life insurance
C) current assumption whole life insurance
D) variable universal life insurance
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Chapter 12: Life Insurance Contractual Provisions
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Sample Questions
Q1) Bruce lied about his health history when he purchased a life insurance policy. He died 3 years after the policy was issued. Which life insurance policy provision will require the life insurer to pay the beneficiary even though Bruce lied on the application?
A) incontestable clause
B) entire contract clause
C) ownership clause
D) change-of-plan provision
Q2) Which of the following statements about the guaranteed purchase option is true?
A) It is usually available with term insurance policies.
B) The premium when an option is exercised is based on the insured's age at the time the original policy was issued.
C) The option permits the insured to purchase specified amounts of life insurance in the future even if the insured has become uninsurable.
D) If a guaranteed purchase option expires without being used, it can be exercised at a later date.
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14
Chapter 13: Buying Life Insurance
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48 Verified Questions
48 Flashcards
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Sample Questions
Q1) Which of the following statements is (are) true about the federal estate tax?
I.The gross estate can be reduced by a number of deductions.
II.If the person who died had any ownership interest in a life insurance policy at the time of death, the proceeds are included in the gross estate for federal estate tax purposes.
A) I only
B) II only
C) both I and II
D) neither I nor II
Q2) According the 2001 CSO mortality table, the yearly probability of dying for a 40 year-old man is .00165. The present value of $1 one year from today, assuming a 5.5 percent interest rate, is .9479. What is the net single premium per $1,000 for a one-year term insurance policy sold to a man at age 40 assuming a 5.5 percent interest rate?
Assume the premium is paid at the start of the year and the death benefit is paid at the end of the year.
A) $1.56
B) $2.45
C) $7.18
D) $952.81
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Page 15
Chapter 14: Annuities and Individual Retirement Accounts
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50 Verified Questions
50 Flashcards
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Sample Questions
Q1) Which of the following statements is true concerning traditional and Roth IRAs?
A) The investment income portion of Roth IRA distributions must be reported as taxable income.
B) Roth IRA contributions are tax deductible.
C) There are minimum distribution requirements for traditional IRAs.
D) There are no limits on the tax deductibility of traditional IRA contributions once the account owner has reached age 50.
Q2) Which of the following statements is (are) true with regard to Roth IRAs?
I.The portion of a Roth IRA distribution that is attributable to investment income is taxable.
II.There is a maximum income level above which Roth IRA contributions are not allowed.
A) I only
B) II only
C) both I and II
D) neither I nor II
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Chapter 15: Health-Care Reform; Individual Health Insurance Coverages
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47 Verified Questions
47 Flashcards
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Sample Questions
Q1) One provision of the Affordable Care Act is designed to benefit young adults up to age 26. This provision allows these young adults to
A) remain covered under their parents' health insurance policies.
B) receive a tax credit for their health insurance premium if they are unemployed.
C) receive low-interest government loans to finance their health insurance.
D) receive coverage under Medicare if they are not covered by a private health insurance plan.
Q2) One long-term care insurance benefit trigger considers whether the insured needs supervision to protect against threats to health or safety due to memory loss or disorientation. This benefit trigger is referred to as a(n)
A) activities of daily living trigger.
B) medical necessity trigger.
C) needs test trigger.
D) severe cognitive impairment trigger.
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Chapter 16: Employee Benefits: Group Life and Health
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53 Verified Questions
53 Flashcards
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Sample Questions
Q1) Which of the following statements about group accidental death and dismemberment (AD&D) insurance is (are) true?
I.The principal sum is paid if the employee dies in an accident.
II.A percentage of the principal sum is paid for certain types of dismemberments.
A) I only
B) II only
C) both I and II
D) neither I nor II
Q2) Which of the following statements about group short-term disability income plans is true?
A) Most plans have a short elimination period for accidents but cover sickness from the first day of disability.
B) Disability is usually defined in terms of a worker being unable to work in any substantial, gainful, employment.
C) The amount of disability income benefits typically is equal to some percentage of a worker's normal earnings.
D) Most short-term plans cover occupational disability only.
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Chapter 17: Employee Benefits: Retirement Plans
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Sample Questions
Q1) Which of the following statements is (are) true regarding cash-balance pension plans?
I.Cash balance plans are defined contribution plans.
II.Under a cash balance plan, the employer creates an investment account for each employee into which the employer makes actual contributions and allocates investment gains and losses.
A) I only
B) II only
C) both I and II
D) neither I nor II
Q2) ACME Company is considering starting a retirement plan for its employees. One option ACME is considering is a profit-sharing plan. All of the following are advantages of this type of retirement plan EXCEPT
A) The employer's cost is not affected by the age and the number of employees.
B) Profit sharing plans provide an incentive for employees to work harder and more efficiently.
C) The 10 percent penalty tax does not apply to distributions prior to age 59.5.
D) ACME enjoys greater flexibility in employer contributions.
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Chapter 18: Social Insurance
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Sample Questions
Q1) Which of the following is a current problem with workers compensation programs?
A) declining involvement of lawyers in workers compensation claims
B) exclusion of deaths and injuries attributable to terrorism
C) exclusion of benefits for occupational illness
D) overuse of opiate prescription drugs in workers compensation.
Q2) Which of the following expenses is covered under the medical insurance (Part B) portion of the Medicare program?
A) long-term care in a skilled nursing facility
B) the fee charged by a surgeon for an operation
C) the cost of a semi-private room during a hospital stay
D) routine prescription drugs outside of the hospital
Q3) Which of the following statements about the characteristics of social insurance programs is true?
A) They are designed to provide a floor of income with respect to the risks that are covered.
B) Social insurance benefits payments are unrelated to income.
C) Participants are required to satisfy a means test to receive benefits.
D) With few exceptions, participation in social insurance programs is voluntary.
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Page 20
Chapter 19: The Liability Risk
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Sample Questions
Q1) Steve was involved in an auto accident. Both drivers were partially at fault for the accident. Steve's actual damages were $50,000. He was judged to be 20 percent at fault. If Steve's state has a contributory negligence law, how much will Steve collect?
A) $0
B) $10,000
C) $25,000
D) $40,000
Q2) Unmanned aircraft systems are gaining in popularity. These systems are creating new liability exposures. Unmanned aircraft systems are also known as
A) rockets.
B) hovercraft.
C) ultralights.
D) drones.
Q3) Which of the following is an intentional tort?
A) slander
B) negligence
C) strict liability
D) murder
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21
Chapter 20: Auto Insurance
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55 Verified Questions
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Sample Questions
Q1) Which of the following situations would be covered by the liability section of an unendorsed PAP if the insured is legally liable?
A) The insured injures a pedestrian while operating a friend's new motorcycle.
B) The insured backs into and damages the garage door of his rented house.
C) The insured intentionally runs into another motorist's car after the driver cut in front of him.
D) The insured damages a parked car while driving a dump truck for his employer.
Q2) Which of the following is a covered person under the medical payments coverage of the PAP?
A) a family member of the named insured if struck by an auto while crossing the street
B) a pedestrian struck by the named insured's auto
C) the named insured while she is operating her car as a taxi
D) a carjacker who is involved in an accident after stealing the insured's car
Q3) A vehicle is considered a constructive total loss when
A) it cannot be repaired.
B) the repair cost exceeds the actual cash value.
C) it can be repaired, but the insured prefers a cash settlement.
D) it can be repaired, but the insurer prefers a cash settlement.
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Chapter 21: Auto Insurance (continued)
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Sample Questions
Q1) Scott had trouble obtaining auto insurance. After three companies refused to insure him, he called the state insurance department. A representative suggested he obtain coverage through Last Chance Insurance Company because "that's all they insure-high-risk drivers." Scott contacted Last Chance. He was not refused coverage; however, the premium Scott was required to pay was three times greater than the average premium in the market. Last Chance Insurance Company is a(n)
A) reinsurance facility.
B) automobile insurance plan.
C) specialty auto insurer.
D) joint underwriting association.
Q2) Which of the following statements about shopping for auto insurance is true?
A) Adequate physical damage insurance on your auto is the most important consideration.
B) Consideration should be given to dropping liability coverage if you drive an older car with a low market value.
C) To obtain the lowest premium, an applicant should review his or her eligibility for all discounts offered.
D) Price comparisons are of little value since auto insurers tend to charge the same premiums.
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Page 23
Chapter 22: Homeowners Insurance, Section I
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Sample Questions
Q1) Persons insured under Section I of the Homeowners 3 policy include which of the following?
I.A spouse of the named insured if living in the same household
II.The named insured's children who are under age 24 and who are full-time college students
A) I only
B) II only
C) both I and II
D) neither I nor II
Q2) Section I of the Homeowners 3 policy provides coverage for which of the following?
A) loss of use
B) personal liability
C) disability of the homeowner
D) medical payments
Q3) If there is a conflict between state law and a provision in a homeowners policy, A) the policy wording takes precedence.
B) the state law takes precedence.
C) the policyholder is entitled to whichever provides broader coverage.
D) the policy is null and void.
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Page 24
Chapter 23: Homeowners Insurance, Section II
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Sample Questions
Q1) All of the following situations are excluded from coverage under Section II of the homeowners policy EXCEPT
A) the rental of a spare bedroom which is used by the tenant as an office.
B) the use of a rented airplane to take a vacation.
C) the ownership of a ten-unit apartment house as an investment.
D) the performance of professional services by the insured at the residence premises.
Q2) Section II of the homeowners policy has exclusions applying to all of the following EXCEPT
A) activities of the named insured's minor children.
B) business activities.
C) transmission of a communicable disease.
D) intentional injuries.
Q3) Which of the following statements is true regarding the Homeowners 3 policy and identity theft?
A) Identity theft is covered under Coverage D-Loss of Use.
B) Identity theft is covered under Coverage C-Personal Property.
C) Identity theft is covered under Coverage E-Personal Liability.
D) Identity theft is covered by adding an endorsement.
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25
Chapter 24: Other Property and Liability Insurance Coverages
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Sample Questions
Q1) While the Homeowners Flood Insurance Affordability Act of 2014 rolled-back some premium increases in the Biggert-Waters Act, it included a provision to help fund the large deficit in the National Flood Insurance Program. The provision to help fund the deficit is
A) a surcharge on every new home that is constructed in a flood plain.
B) additional income tax paid by building supply companies in states where the largest flood losses have occurred.
C) additional premium taxes charged to each insurer in the Write-Your-Own program. purchaser.
D) a surcharge on every flood insurance policy that is sold.
Q2) Perils insured under Dwelling Property 1 (basic form) include which of the following? I.Earthquake
II.Smoke
A) I only
B) II only
C) both I and II
D) neither I nor II
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26
Chapter 25: Commercial Property Insurance
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Sample Questions
Q1) All of the following are extensions of coverage under the building and personal property coverage form EXCEPT
A) newly acquired or constructed property.
B) valuable papers and records.
C) personal property temporarily off the premises.
D) currency and securities.
Q2) Which of the following is (are) included in the common declarations page of a commercial package policy?
I.A description of the insured property
II.A listing of the causes-of-loss that are covered by the policy
A) I only
B) II only
C) both I and II
D) neither I nor II
Q3) A firm wishing to insure a single shipment of merchandise sent by a common carrier would purchase a(n)
A) annual transit policy.
B) trip transit policy.
C) bailee's liability policy.
D) equipment floater.
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Chapter 26: Commercial Liability Insurance
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Sample Questions
Q1) A-1 Electrical Service is an electrical contractor that employs 14 electricians. A-1 faces many loss exposures. One general liability exposure arises out of faulty work that A-1 electricians may perform for customers at their homes or businesses. This liability exposure is known as
A) premises and operations liability.
B) products liability.
C) completed operations liability.
D) contingent liability.
Q2) Which of the following exposures is covered under a Commercial General Liability Policy with no endorsements?
A) liability arising out of seepage of pollutants
B) employment-related practices liability
C) personal injury liability
D) aircraft liability
Q3) Liability arising out of work performed by independent contractors is referred to as A) contractual liability.
B) contingent liability.
C) care, custody, and control liability.
D) customer's liability.
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Page 28
Chapter 27: Crime Insurance and Surety Bonds
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Sample Questions
Q1) State X hired Build-Right Construction to build a bridge. State X required that construction be completed within 2 years after the contract was signed. Les Johnson is the president of Build-Right. State X required that Build-Right's promise to perform be guaranteed by a third party. Build-Right purchased a performance bond from Rock Solid Indemnity. The bond requires Rock Solid to be responsible if Build-Right does not have the project completed on time. In this scenario, which party is the principal?
A) State X
B) Build-Right Construction
C) Les Johnson
D) Rock Solid Indemnity
Q2) An armed robber pulled a gun on a teller at the Fourth National Bank. He made off with over $10,000 in cash. Which insuring agreement in a financial institution bond is designed to cover such losses?
A) Insuring Agreement A-Fidelity
B) Insuring Agreement B-On Premises
C) Insuring Agreement C-In Transit
D) Insuring Agreement D-Forgery or Alteration
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