Mass State Life Insurance Exam Latest Update 2025|
Questions and Correct Answers | Grade A | 100%
Correct
Which of the following describes a participating life insurance policy? - CORRECT
ANSWER-A participating life policy is one in which the policyowner receives
dividends deriving from the company's divisible surplus
What type of reinsurance contract between two insurers involves an automatic
sharing of the risks assumed? - CORRECT ANSWER-Under treaty reinsurance, each
party automatically accepts specific percentages of the insurer's business.
At what point must a life insurance applicant be informed of their rights that fall
under the Fair Credit Reporting Act? - CORRECT ANSWER-Upon completion of the
application
The State Guaranty Association guarantees - CORRECT ANSWER-that a claim will be
paid if an admitted insurer becomes insolvent
,Dividends from a mutual insurance company are paid to whom? - CORRECT ANSWER-
Policyholders
What is considered the accounting measurement of an insurance company's
future obligations to its policyowners? - CORRECT ANSWER-reserves
A group-owned insurance company that is formed to assume and spread the
liability risks of its members is known as a - CORRECT ANSWER-risk retention group
Which of the following is a syndicate established by a group of insurers to share
underwriting duties? - CORRECT ANSWER-Lloyd's organization
An agent's authority to bind an insurer to an insurance contract may be granted in
the - CORRECT ANSWER-agent's contract and the insurance company's appointment
Dividends from a stock insurance company are normally sent to - CORRECT ANSWER-
shareholders
Law of Large numbers - CORRECT ANSWER--insurance is based on the sharing of risks
among a large group of people
-states that the larger the number of people, the more predictable the actual
losses will be
-companies use this data to calculate rates
,Speculative risk - CORRECT ANSWER--involves opportunity for either loss or gain
-not covered by insurance companies
pure risk - CORRECT ANSWER--a situation that can only result in a loss, there is no
opportunity for financial gain
-only type of risk that is insurable
treatment of risk through: avoidance - CORRECT ANSWER-simply avoiding as many
risks as possible
-effective but not always practical
treatment of risk through- reduction - CORRECT ANSWER-since we cannot avoid risk
entirely we often attempt to lessen the possibility of a loss by taking acting to
reduce the risk
-
treatment of risk through- sharing - CORRECT ANSWER-when a group of individuals or
businesses with similar exposures share the losses that occur within that group
-reciprocal insurance exchange is a formal risk sharing arrangement
treatment of risk through- retention - CORRECT ANSWER-also known as self-
insurance: when individuals have the financial ability to fund losses by themselves
when they occur
, treatment of risk through- transfer - CORRECT ANSWER-the most effective way to
handle risk
- risk is transferred to another party - insurance is the most common method of
transferring risk from an individual or group to an insurance company
elements of insurable risk - CORRECT ANSWER--must be due to chance
-cannot be catastrophic
-must be randomly selected
• Loss exposure to be insured must be large - Insurance company must be able to
predict
loss ( based on law of large numbers)
- Loss must be definite and measurable - Time, place, amount, and when payable
nature of insurance - CORRECT ANSWER--to provide financial protection against
losses that may be incurred due to a chance happening or event such as death,
illness, or accident
-protection is provided through an insurance policy which is a simple device for
accumulating funds to meet these uncertain losses
ABC Company is attempting to minimize the severity of potential losses within its
company. The company is engaged in risk - CORRECT ANSWER-Risk reduction can
reduce the chance that a particular loss will occur, or it can reduce the amount of
a potential loss if it occurs.
Questions and Correct Answers | Grade A | 100%
Correct
Which of the following describes a participating life insurance policy? - CORRECT
ANSWER-A participating life policy is one in which the policyowner receives
dividends deriving from the company's divisible surplus
What type of reinsurance contract between two insurers involves an automatic
sharing of the risks assumed? - CORRECT ANSWER-Under treaty reinsurance, each
party automatically accepts specific percentages of the insurer's business.
At what point must a life insurance applicant be informed of their rights that fall
under the Fair Credit Reporting Act? - CORRECT ANSWER-Upon completion of the
application
The State Guaranty Association guarantees - CORRECT ANSWER-that a claim will be
paid if an admitted insurer becomes insolvent
,Dividends from a mutual insurance company are paid to whom? - CORRECT ANSWER-
Policyholders
What is considered the accounting measurement of an insurance company's
future obligations to its policyowners? - CORRECT ANSWER-reserves
A group-owned insurance company that is formed to assume and spread the
liability risks of its members is known as a - CORRECT ANSWER-risk retention group
Which of the following is a syndicate established by a group of insurers to share
underwriting duties? - CORRECT ANSWER-Lloyd's organization
An agent's authority to bind an insurer to an insurance contract may be granted in
the - CORRECT ANSWER-agent's contract and the insurance company's appointment
Dividends from a stock insurance company are normally sent to - CORRECT ANSWER-
shareholders
Law of Large numbers - CORRECT ANSWER--insurance is based on the sharing of risks
among a large group of people
-states that the larger the number of people, the more predictable the actual
losses will be
-companies use this data to calculate rates
,Speculative risk - CORRECT ANSWER--involves opportunity for either loss or gain
-not covered by insurance companies
pure risk - CORRECT ANSWER--a situation that can only result in a loss, there is no
opportunity for financial gain
-only type of risk that is insurable
treatment of risk through: avoidance - CORRECT ANSWER-simply avoiding as many
risks as possible
-effective but not always practical
treatment of risk through- reduction - CORRECT ANSWER-since we cannot avoid risk
entirely we often attempt to lessen the possibility of a loss by taking acting to
reduce the risk
-
treatment of risk through- sharing - CORRECT ANSWER-when a group of individuals or
businesses with similar exposures share the losses that occur within that group
-reciprocal insurance exchange is a formal risk sharing arrangement
treatment of risk through- retention - CORRECT ANSWER-also known as self-
insurance: when individuals have the financial ability to fund losses by themselves
when they occur
, treatment of risk through- transfer - CORRECT ANSWER-the most effective way to
handle risk
- risk is transferred to another party - insurance is the most common method of
transferring risk from an individual or group to an insurance company
elements of insurable risk - CORRECT ANSWER--must be due to chance
-cannot be catastrophic
-must be randomly selected
• Loss exposure to be insured must be large - Insurance company must be able to
predict
loss ( based on law of large numbers)
- Loss must be definite and measurable - Time, place, amount, and when payable
nature of insurance - CORRECT ANSWER--to provide financial protection against
losses that may be incurred due to a chance happening or event such as death,
illness, or accident
-protection is provided through an insurance policy which is a simple device for
accumulating funds to meet these uncertain losses
ABC Company is attempting to minimize the severity of potential losses within its
company. The company is engaged in risk - CORRECT ANSWER-Risk reduction can
reduce the chance that a particular loss will occur, or it can reduce the amount of
a potential loss if it occurs.
