Basic Fundamentals of Insurance Ch 1 Exam
Review Questions with Accurate Solutions
Adverse Selection - Answer Insuring of risks that are more prone to losses than the average risk
Agent/Producer - Answer Legal representative of an insurance company; the classification of producer
Applicant/Proposed insured - Answer A person applying for insurance
Beneficiary - Answer A person who receives the benefits of an insurance policy
Death Benefit - Answer The amount paid upon the death of the insured in a life insurance policy
Fraud - Answer Intentional misrepresentation or deceit with the intent to induce a person to part with
something of value
Insurance Policy - Answer A contract between a policyowner (and/or insured) and an insurance
company which agrees to pay the insured or the beneficiary for loss caused by specific events
Insured - Answer Person covered by the insurance policy; may or may not be the policy owner
Insurer (principal) - Answer The company who issues an insurance policy
Lapse - Answer Policy termination due to nonpayment of premium
Life Insurance - Answer Coverage of human lives
Policyowner - Answer The person entitled to exercise the rights and privileges in the policy
Premium - Answer The money paid to the insurance company for the insurance policy
, Replacement - Answer Practice of terminating an existing policy or letting it lapse, and obtaining a new
one
Underwriting - Answer The risk selection and classification process.
- Insurable, yes or no?
- Gender
- Primary Criteria: health, occupation, lifestyle, hobbies, and habits
- Premium charged
Underwriter - Answer Responsible for determining the risks that are insurable and meet the insurer's
underwriting standards. The purpose is to protect the insurer against adverse selection.
Contract Law - Answer An agreement between two or more parties enforceable by law
Legal Purpose - Answer The purpose of the contract must be legal and not against public policy.
Contract of Adhesion - Answer Any contract in which one party must either accept the agreement as
written by the other party or reject it.
Aleatory Contract - Answer A contract where the values exchanged may not be equal but depend on an
uncertain event
Unilateral Contract - Answer Only one of the parties to the contract is legally bound to do anything
Conditional Contract - Answer Requires that certain conditions must be met by the policyowner and the
company in order for the contract to be executed, and before each party fulfills its obligations.
Warranty - Answer An absolutely true statement upon which the validity of the insurance policy
depends.
Review Questions with Accurate Solutions
Adverse Selection - Answer Insuring of risks that are more prone to losses than the average risk
Agent/Producer - Answer Legal representative of an insurance company; the classification of producer
Applicant/Proposed insured - Answer A person applying for insurance
Beneficiary - Answer A person who receives the benefits of an insurance policy
Death Benefit - Answer The amount paid upon the death of the insured in a life insurance policy
Fraud - Answer Intentional misrepresentation or deceit with the intent to induce a person to part with
something of value
Insurance Policy - Answer A contract between a policyowner (and/or insured) and an insurance
company which agrees to pay the insured or the beneficiary for loss caused by specific events
Insured - Answer Person covered by the insurance policy; may or may not be the policy owner
Insurer (principal) - Answer The company who issues an insurance policy
Lapse - Answer Policy termination due to nonpayment of premium
Life Insurance - Answer Coverage of human lives
Policyowner - Answer The person entitled to exercise the rights and privileges in the policy
Premium - Answer The money paid to the insurance company for the insurance policy
, Replacement - Answer Practice of terminating an existing policy or letting it lapse, and obtaining a new
one
Underwriting - Answer The risk selection and classification process.
- Insurable, yes or no?
- Gender
- Primary Criteria: health, occupation, lifestyle, hobbies, and habits
- Premium charged
Underwriter - Answer Responsible for determining the risks that are insurable and meet the insurer's
underwriting standards. The purpose is to protect the insurer against adverse selection.
Contract Law - Answer An agreement between two or more parties enforceable by law
Legal Purpose - Answer The purpose of the contract must be legal and not against public policy.
Contract of Adhesion - Answer Any contract in which one party must either accept the agreement as
written by the other party or reject it.
Aleatory Contract - Answer A contract where the values exchanged may not be equal but depend on an
uncertain event
Unilateral Contract - Answer Only one of the parties to the contract is legally bound to do anything
Conditional Contract - Answer Requires that certain conditions must be met by the policyowner and the
company in order for the contract to be executed, and before each party fulfills its obligations.
Warranty - Answer An absolutely true statement upon which the validity of the insurance policy
depends.
