PEARSON VUE LIFE INSURANCE EXAM 2 LATEST
VERSIONS 2024 (VERSION A AND B) COMPLETE 170
QUESTIONS AND CORRECT DETAILED ANSWERS
(VERIFIED ANSWERS) |ALREADY GRADED A+
An insured purchased an insurance policy 5 years ago. Last year, she received a
dividend check from the insurance company that was not taxable. This year, she did
not receive a check from the insurer. From what type of insurer did the insured
purchase the policy?
a. mutual
b. reciprocal
c. nonprofit service organization
d. stock - ANSWER: A. mutual
funds not paid out after paying claims and other operating costs are returned to the
policy owners in the form of a dividend. if all funds are paid out, no dividends are
paid
Following a career change, an insured is no longer required to perform many
physical activities, so he has implemented a program where he walks and jogs for 45
minutes each morning. The insured has also eliminated most fatty foods from his
diet. Which method of dealing with risk does this scenario describe?
a. retention
b. reduction
c. transfer
d. avoidance - ANSWER: B. reduction
the insured's change in lifestyle and habits would likely reduce the chances of health
problems
In insurance, an offer is usually made when
a. an applicant submits an application to the insurer
b. the insurer approves the application and receives the initial premium
c. the agent hands the policy to the policyholder
d. an agent explains a policy to a potential applicant - ANSWER: A. an applicant
submits an application to the insurer
in insurance, the offer is usually made by the applicant in the form of an application.
acceptance takes place when an insurer's underwriter approves the application and
issues a policy
the causes of loss insured against in an insurance policy are known as
,a. perils
b. losses
c. risks
d. hazards - ANSWER: A. perils
perils are the causes of loss insured against in an insurance policy
what documentation grants express authority to an agent?
a. agents contract with the principal
b. agents insurance license
c. fiduciary contract
d. state provisions - ANSWER: A. agents contract with the principal
the principal grants authority to an agent through the agent's contract
which of the following best describes an insurance company that has been formed
under the laws of this state?
a. domestic
b. sovereign
c. alien
d. foreign - ANSWER: A. domestic
a company is domestic when doing business within the state in which it is
incorporated
which of the following factors is NOT considered by an underwriter when
determining the premium rates for an individual seeking insurance?
a. medical history
b. sex
c. age
d. race - ANSWER: D. race
age, medical history, and sex provide sound statistical date for determining the
probability of loss. Race, religion, sexual orientation, etc. are the factors that cannot
be used because there is not sound statistical data to show that they effect the
probability of loss; therefore, they are considered to be discriminatory
in insurance transactions, fiduciary responsibility means
a. handling insurer funds in a trust capacity
b. maintaining good credit record
c. being liable with respect to payment of claims
,d. commingling premiums with agents personal funds - ANSWER: A. handling insurer
funds in a trust capacity
an agents fiduciary responsibility includes handling insurer funds in a trust capacity
the authority granted to an agent through the agent's contract is referred to as
a. absolute authority
b. express authority
c. apparent authority
d. implied authority - ANSWER: B. express authority
express powers are written into the contract between the insurer and the agent
insurance policies are not drawn up though negotiations, and an insured has little to
say about its provisions. what contract characteristic does this describe?
a. unilateral
b. conditional
c. personal
d. adhesion - ANSWER: D. adhesion
a contract of adhesion is prepared by only the insurer; the insured's only option is to
accept or reject the policy as its written
which of the following insurers are owned by stockholders who have the usual rights
of ownership, including the right of voting?
a. reciprocal
b. fraternal
c. stock
d. mutual - ANSWER: C. stock
only stock insurance companies are owned and controlled by stockholders
which of the following best describes the concept that the insured pays a small
amount of premium for a large amount of risk on the part of the insurance
company?
a. subrogation
b. warranty
c. aleatory
d. adhesion - ANSWER: C. aleatory
an insurance contract is an aleatory contract in that it requires a relatively small
amount of premium for a large risk
, When an insured makes truthful statements on the application for insurance and
pays the required premium, it is known as which of the following?
a. legal purpose
b. contract of adhesion
c. acceptance
d. consideration - ANSWER: D. consideration
consideration is something of value that each party gives to the other. The
consideration on the part of the insured is the payment of premium and the
representations made in the application
which of the following would qualify as a competent party in an insurance contract?
a. the applicant is intoxicated at the time of application
b. the applicant is 12 year old student
c. the applicant is under the influence of a mind-impairing medication at the time of
application
d. the applicant has a prior felony conviction - ANSWER: D. the applicant has a prior
felony conviction
when an insurer and insured enter into a contract, both parties must be legal of age
and mentally competent. It is legal for a person convicted of a felony to buy an
insurance contract. An intoxicated person, however, may not be mentally
competent, a 12 year old student is considered to be underage in most states and a
person under mind-impairing medication most likely would not be mentally
competent
an insurer neglects to pay a legitimate claim that is covered under the terms of the
policy. Which of the following insurance principles has the insurer violated?
a. representation
b. adhesion
c. consideration
d. good health - ANSWER: C. consideration
the binding force in any contract is consideration. consideration on the part of the
insureds the payment of premiums and the health representations made in the
application. Consideration on the part of the insurer is the promise to pay in the
even of loss
which of the following is a primary source of information used for insurance
underwriting?
a. application
b. applicant interviews
c. medical records.
VERSIONS 2024 (VERSION A AND B) COMPLETE 170
QUESTIONS AND CORRECT DETAILED ANSWERS
(VERIFIED ANSWERS) |ALREADY GRADED A+
An insured purchased an insurance policy 5 years ago. Last year, she received a
dividend check from the insurance company that was not taxable. This year, she did
not receive a check from the insurer. From what type of insurer did the insured
purchase the policy?
a. mutual
b. reciprocal
c. nonprofit service organization
d. stock - ANSWER: A. mutual
funds not paid out after paying claims and other operating costs are returned to the
policy owners in the form of a dividend. if all funds are paid out, no dividends are
paid
Following a career change, an insured is no longer required to perform many
physical activities, so he has implemented a program where he walks and jogs for 45
minutes each morning. The insured has also eliminated most fatty foods from his
diet. Which method of dealing with risk does this scenario describe?
a. retention
b. reduction
c. transfer
d. avoidance - ANSWER: B. reduction
the insured's change in lifestyle and habits would likely reduce the chances of health
problems
In insurance, an offer is usually made when
a. an applicant submits an application to the insurer
b. the insurer approves the application and receives the initial premium
c. the agent hands the policy to the policyholder
d. an agent explains a policy to a potential applicant - ANSWER: A. an applicant
submits an application to the insurer
in insurance, the offer is usually made by the applicant in the form of an application.
acceptance takes place when an insurer's underwriter approves the application and
issues a policy
the causes of loss insured against in an insurance policy are known as
,a. perils
b. losses
c. risks
d. hazards - ANSWER: A. perils
perils are the causes of loss insured against in an insurance policy
what documentation grants express authority to an agent?
a. agents contract with the principal
b. agents insurance license
c. fiduciary contract
d. state provisions - ANSWER: A. agents contract with the principal
the principal grants authority to an agent through the agent's contract
which of the following best describes an insurance company that has been formed
under the laws of this state?
a. domestic
b. sovereign
c. alien
d. foreign - ANSWER: A. domestic
a company is domestic when doing business within the state in which it is
incorporated
which of the following factors is NOT considered by an underwriter when
determining the premium rates for an individual seeking insurance?
a. medical history
b. sex
c. age
d. race - ANSWER: D. race
age, medical history, and sex provide sound statistical date for determining the
probability of loss. Race, religion, sexual orientation, etc. are the factors that cannot
be used because there is not sound statistical data to show that they effect the
probability of loss; therefore, they are considered to be discriminatory
in insurance transactions, fiduciary responsibility means
a. handling insurer funds in a trust capacity
b. maintaining good credit record
c. being liable with respect to payment of claims
,d. commingling premiums with agents personal funds - ANSWER: A. handling insurer
funds in a trust capacity
an agents fiduciary responsibility includes handling insurer funds in a trust capacity
the authority granted to an agent through the agent's contract is referred to as
a. absolute authority
b. express authority
c. apparent authority
d. implied authority - ANSWER: B. express authority
express powers are written into the contract between the insurer and the agent
insurance policies are not drawn up though negotiations, and an insured has little to
say about its provisions. what contract characteristic does this describe?
a. unilateral
b. conditional
c. personal
d. adhesion - ANSWER: D. adhesion
a contract of adhesion is prepared by only the insurer; the insured's only option is to
accept or reject the policy as its written
which of the following insurers are owned by stockholders who have the usual rights
of ownership, including the right of voting?
a. reciprocal
b. fraternal
c. stock
d. mutual - ANSWER: C. stock
only stock insurance companies are owned and controlled by stockholders
which of the following best describes the concept that the insured pays a small
amount of premium for a large amount of risk on the part of the insurance
company?
a. subrogation
b. warranty
c. aleatory
d. adhesion - ANSWER: C. aleatory
an insurance contract is an aleatory contract in that it requires a relatively small
amount of premium for a large risk
, When an insured makes truthful statements on the application for insurance and
pays the required premium, it is known as which of the following?
a. legal purpose
b. contract of adhesion
c. acceptance
d. consideration - ANSWER: D. consideration
consideration is something of value that each party gives to the other. The
consideration on the part of the insured is the payment of premium and the
representations made in the application
which of the following would qualify as a competent party in an insurance contract?
a. the applicant is intoxicated at the time of application
b. the applicant is 12 year old student
c. the applicant is under the influence of a mind-impairing medication at the time of
application
d. the applicant has a prior felony conviction - ANSWER: D. the applicant has a prior
felony conviction
when an insurer and insured enter into a contract, both parties must be legal of age
and mentally competent. It is legal for a person convicted of a felony to buy an
insurance contract. An intoxicated person, however, may not be mentally
competent, a 12 year old student is considered to be underage in most states and a
person under mind-impairing medication most likely would not be mentally
competent
an insurer neglects to pay a legitimate claim that is covered under the terms of the
policy. Which of the following insurance principles has the insurer violated?
a. representation
b. adhesion
c. consideration
d. good health - ANSWER: C. consideration
the binding force in any contract is consideration. consideration on the part of the
insureds the payment of premiums and the health representations made in the
application. Consideration on the part of the insurer is the promise to pay in the
even of loss
which of the following is a primary source of information used for insurance
underwriting?
a. application
b. applicant interviews
c. medical records.
