STATE FARM STATE TEST
QUESTIONS & CORRECT ANSWERS
Insurance producer - correct answer ✔✔An individual or an entity authorized in writing by a
lawfully qualified insurance company to transact, negotiate or effect contracts of insurance of
behalf of that insurance company.
Resident Producer - correct answer ✔✔Any person that lives in Kansas and is licensed to
transact insurance business for at least one insurer.
A Non-resident producer - correct answer ✔✔A producer that lives in some other state; they
are licensed in their Owen home state and has written permission from the Kansas insurance
commissioner to sell in our state.
Commissioner - correct answer ✔✔The insurance industry is regulated by the Kansas insurance
commissioner, who is elected by the people to a 4 year term in Kansas
Purpose of the commissioner - correct answer ✔✔The insurance commissioner administers or
regulates the laws that have been passed by the legislature. The commissioner does not make
or change insurance laws, but instead has the power to make reasonable rules and regulations
to ensure that the laws are being followed.
Redlining - correct answer ✔✔the practice of not selling insurance to those who live in the low-
income, high-crime areas of town and is considered to be a form of unfair discrimination.
Unfair Trade Practices Act - correct answer ✔✔a state law that details illegal actions performed
by producers. if a producer is found guilty of any of the following actions, penalties could
include licensure suspension or revocation, fines, cease and desist orders and redress of injury.
, Fair Credit Reporting Act - correct answer ✔✔The Kansas property and casualty guarantee
association provide payment for covered claims under certain insurance policies in the event of
insolvency of the insurer. All insurance companies holding certificates of authority to conduct
business in Kansas must be members and participate in this program through assessments. Each
member is assessed a pro-rata share based on net written premiums from the previous year. the
maximum assessment is 2% of net written premiums.
Peril - correct answer ✔✔a specific "cause of loss"
Direct loss - correct answer ✔✔The cost to repair the damaged property. The physical loss to
the property, auto, etc. cause by the peril itself. The direct loss is visible physical loss.
Indirect/consequential loss - correct answer ✔✔the financial loss suffered because of the "loss
of use" of the covered property. the loss incurred because of the "loss of use" of the covered
property. such as hotel expenses or rental care expenses.
Exposure - correct answer ✔✔The amount of money the insured or company could conceivable
incur
Catastrophic - correct answer ✔✔damage, flood loss and nuclear damage are not covered by
standard insurance policies because of the high exposure to loss if the loss were to occur
Binder - correct answer ✔✔Provides immediate, temporary evidence of coverage until the
policy is issued
Producer responsibility - correct answer ✔✔Producers may be obligated to reimburse their
company for their actions.
Law of large numbers - correct answer ✔✔The larger the number, the more accurate the
statistic. The data collected is separated into homogenous exposure units to get the most
accurate prediction possible.
QUESTIONS & CORRECT ANSWERS
Insurance producer - correct answer ✔✔An individual or an entity authorized in writing by a
lawfully qualified insurance company to transact, negotiate or effect contracts of insurance of
behalf of that insurance company.
Resident Producer - correct answer ✔✔Any person that lives in Kansas and is licensed to
transact insurance business for at least one insurer.
A Non-resident producer - correct answer ✔✔A producer that lives in some other state; they
are licensed in their Owen home state and has written permission from the Kansas insurance
commissioner to sell in our state.
Commissioner - correct answer ✔✔The insurance industry is regulated by the Kansas insurance
commissioner, who is elected by the people to a 4 year term in Kansas
Purpose of the commissioner - correct answer ✔✔The insurance commissioner administers or
regulates the laws that have been passed by the legislature. The commissioner does not make
or change insurance laws, but instead has the power to make reasonable rules and regulations
to ensure that the laws are being followed.
Redlining - correct answer ✔✔the practice of not selling insurance to those who live in the low-
income, high-crime areas of town and is considered to be a form of unfair discrimination.
Unfair Trade Practices Act - correct answer ✔✔a state law that details illegal actions performed
by producers. if a producer is found guilty of any of the following actions, penalties could
include licensure suspension or revocation, fines, cease and desist orders and redress of injury.
, Fair Credit Reporting Act - correct answer ✔✔The Kansas property and casualty guarantee
association provide payment for covered claims under certain insurance policies in the event of
insolvency of the insurer. All insurance companies holding certificates of authority to conduct
business in Kansas must be members and participate in this program through assessments. Each
member is assessed a pro-rata share based on net written premiums from the previous year. the
maximum assessment is 2% of net written premiums.
Peril - correct answer ✔✔a specific "cause of loss"
Direct loss - correct answer ✔✔The cost to repair the damaged property. The physical loss to
the property, auto, etc. cause by the peril itself. The direct loss is visible physical loss.
Indirect/consequential loss - correct answer ✔✔the financial loss suffered because of the "loss
of use" of the covered property. the loss incurred because of the "loss of use" of the covered
property. such as hotel expenses or rental care expenses.
Exposure - correct answer ✔✔The amount of money the insured or company could conceivable
incur
Catastrophic - correct answer ✔✔damage, flood loss and nuclear damage are not covered by
standard insurance policies because of the high exposure to loss if the loss were to occur
Binder - correct answer ✔✔Provides immediate, temporary evidence of coverage until the
policy is issued
Producer responsibility - correct answer ✔✔Producers may be obligated to reimburse their
company for their actions.
Law of large numbers - correct answer ✔✔The larger the number, the more accurate the
statistic. The data collected is separated into homogenous exposure units to get the most
accurate prediction possible.
