XCEL Health & Life Insurance PART 1 -
Comprehensive Exam Review (Alabama)
An insurance company may cancel a life insurance policy under which of the following conditions? ANS:
The outstanding policy loan exceeds the cash value of the policy
Which of the following statements does not describe an element of insurable risk?
A. The loss must not be due to chance
B. The loss must be definite and measurable
C. The loss cannot be catastrophic
D. The loss expsoures to be insured must be large ANS: The loss must not be due to chance
An insurance applicant MUST be informed of an investigation regarding his/her reputation and character
according to the? ANS: Fair Credit Reporting Act
At what point must a life insurance applicant be informed of their rights that fall under the Fair Credit
Reporting Act? ANS: Upon completion of the application
Insurance policies issued by companies which are owned by stockholders and do not pay policy
dividends are known as: ANS: Non-participating policies
The life and health insurance marketing system utilizing non-employee agents that represent just one
insurance company and are often paid an allowance to cover office expense and staffing is the: ANS:
General agency system
Who elects the governing body of a mutual insurance company? ANS: Policyholders
,An insurance company that cedes a portion of an insured's coverage to another insurer is said to be
engaged in: ANS: Reinsurance
Which of these describe a participating insurance policy:
A. Policyowners are entitled to receive dividends
B. Policyowners pay assessments for company losses
C. Stock companies allow their policyowners to share in any company earnings
D. Policyowners are not entitles to vote for members of the board of directors ANS: Policyowners are
entitled to receive dividends
What type of reinsurance contract involves two companies automatically sharing their risk exposure?
ANS: Treaty
The stated amount or percent of liquid assets that an insurer must have on hand that will satisfy
obligations to its policyholders is called ANS: Reserves
A life insurance producer's agency agreement normally authorizes the licensee to do all of the following
EXCEPT:
A. solicit insurance
B. sell insurance
C. issue policies
D. collect premiums ANS: Issue policies
Insurance policies issued by companies which allow their policyowners to participate in favorable
experience of the company through payment of the dividends are known as: ANS: Participating policies
Purchasing disability insurance best represents which treatment of risk? ANS: Transference
,The objective of insurance is: ANS: The transfer of risk
In the insurance business, risk can best be defined as: ANS: The uncertainty regarding financial loss
Which of the following best describes the function of insurance? ANS: It spreads financial risk over a
large group to minimize the loss to any one individual
Buying land with anticipation of it going up in value is an example of: ANS: Speculative risk
Risk is best defined as the: ANS: Uncertainty of loss
Individual tendencies that arise from attitude or state of mind, causing indifference to loss is what kind
of hazard? ANS: Morale
Which of the following insurance concepts is founded on the ability to predict the approximate number
of deaths or frequency of disabilities within a certain group during a specific time?
A. Principle of large loss
B. Quantum Insurance principle.
C. Indemnity lawd.
D. Law of large numbers ANS: Law of large numbers
John purchases insurance because he expects to experience a loss. this is known as: ANS: Adverse
selection
The principle that the larger the amount of exposures that are combined into a group, the more
certainty there is to the amount of loss incurred in any given period is known as ANS: Law of Large
Numbers
, Buying insurance is one of the most effective ways of
A. Avoiding risk
B. Transferring risk
C. Reducing risk
D. Retaining risk ANS: Transferring risk
When does "adverse selection" exist? ANS: When the risks accepted for insurance has a HIGHER
likelihood of experiencing loss than an average group
The withholding of facts in an insurance application is called: ANS: Concealment
Which of the following is a true statement?
A. The withholding of information that should have been provided to an insurer is called concealment
B. Warranties are statements that are NOT guaranteed to be true
C. Representations are statements that ARE guaranteed to be true
D. All statements made on an insurance application are considered to be warranties ANS: The
withholding of information that should have been provided to an insurer is called concealment
An insurance contract is said to be a ____ because there is a mutual reliance of truthfulness on both
parties: ANS: Contract of utmost good faith
What is the applicant's consideration in an insurance contract? ANS: Premiums
Comprehensive Exam Review (Alabama)
An insurance company may cancel a life insurance policy under which of the following conditions? ANS:
The outstanding policy loan exceeds the cash value of the policy
Which of the following statements does not describe an element of insurable risk?
A. The loss must not be due to chance
B. The loss must be definite and measurable
C. The loss cannot be catastrophic
D. The loss expsoures to be insured must be large ANS: The loss must not be due to chance
An insurance applicant MUST be informed of an investigation regarding his/her reputation and character
according to the? ANS: Fair Credit Reporting Act
At what point must a life insurance applicant be informed of their rights that fall under the Fair Credit
Reporting Act? ANS: Upon completion of the application
Insurance policies issued by companies which are owned by stockholders and do not pay policy
dividends are known as: ANS: Non-participating policies
The life and health insurance marketing system utilizing non-employee agents that represent just one
insurance company and are often paid an allowance to cover office expense and staffing is the: ANS:
General agency system
Who elects the governing body of a mutual insurance company? ANS: Policyholders
,An insurance company that cedes a portion of an insured's coverage to another insurer is said to be
engaged in: ANS: Reinsurance
Which of these describe a participating insurance policy:
A. Policyowners are entitled to receive dividends
B. Policyowners pay assessments for company losses
C. Stock companies allow their policyowners to share in any company earnings
D. Policyowners are not entitles to vote for members of the board of directors ANS: Policyowners are
entitled to receive dividends
What type of reinsurance contract involves two companies automatically sharing their risk exposure?
ANS: Treaty
The stated amount or percent of liquid assets that an insurer must have on hand that will satisfy
obligations to its policyholders is called ANS: Reserves
A life insurance producer's agency agreement normally authorizes the licensee to do all of the following
EXCEPT:
A. solicit insurance
B. sell insurance
C. issue policies
D. collect premiums ANS: Issue policies
Insurance policies issued by companies which allow their policyowners to participate in favorable
experience of the company through payment of the dividends are known as: ANS: Participating policies
Purchasing disability insurance best represents which treatment of risk? ANS: Transference
,The objective of insurance is: ANS: The transfer of risk
In the insurance business, risk can best be defined as: ANS: The uncertainty regarding financial loss
Which of the following best describes the function of insurance? ANS: It spreads financial risk over a
large group to minimize the loss to any one individual
Buying land with anticipation of it going up in value is an example of: ANS: Speculative risk
Risk is best defined as the: ANS: Uncertainty of loss
Individual tendencies that arise from attitude or state of mind, causing indifference to loss is what kind
of hazard? ANS: Morale
Which of the following insurance concepts is founded on the ability to predict the approximate number
of deaths or frequency of disabilities within a certain group during a specific time?
A. Principle of large loss
B. Quantum Insurance principle.
C. Indemnity lawd.
D. Law of large numbers ANS: Law of large numbers
John purchases insurance because he expects to experience a loss. this is known as: ANS: Adverse
selection
The principle that the larger the amount of exposures that are combined into a group, the more
certainty there is to the amount of loss incurred in any given period is known as ANS: Law of Large
Numbers
, Buying insurance is one of the most effective ways of
A. Avoiding risk
B. Transferring risk
C. Reducing risk
D. Retaining risk ANS: Transferring risk
When does "adverse selection" exist? ANS: When the risks accepted for insurance has a HIGHER
likelihood of experiencing loss than an average group
The withholding of facts in an insurance application is called: ANS: Concealment
Which of the following is a true statement?
A. The withholding of information that should have been provided to an insurer is called concealment
B. Warranties are statements that are NOT guaranteed to be true
C. Representations are statements that ARE guaranteed to be true
D. All statements made on an insurance application are considered to be warranties ANS: The
withholding of information that should have been provided to an insurer is called concealment
An insurance contract is said to be a ____ because there is a mutual reliance of truthfulness on both
parties: ANS: Contract of utmost good faith
What is the applicant's consideration in an insurance contract? ANS: Premiums
