Easy way to pass the Ad Banker exams, All versions of quetsions and answers, rated A.
AD Banker Ch. 1 – General Ins. All
Quizzes with Exact Answers. Graded A
Insurers (Insurance companies or Carriers) – ✔✔manufacture and sell insurance coverage by way of
insurance policies or contracts. In California, any person capable of making a contract may be an insurer,
subject to the restrictions imposed by the insurance code. In this case, a person is defined as any
individual (natural person), association, organization, partnership, business trust, limited liability
company, or corporation.
Insurance Agencies – ✔✔are independent organizations that recruit, contract with, and support sales
agents and producers.
Insurance Agents or Producers – ✔✔are licensed individuals authorized, by and on behalf of an insurer,
to transact insurance through an admitted insurance company.
Insured – ✔✔is the person or entity that buys insurance for protection from loss of property or liability.
National Association of Insurance Commissioners (NAIC) – ✔✔consists of all state and territorial
insurance commissioners or regulators. It provides resources, research, legislative and regulatory
recommendations and interpretations for state insurance regulators. It also promotes uniformity among
states. Members may accept or reject recommendations. The NAIC has no legal authority to enact or
enforce insurance laws.
Insurance Regulation at the State Level – ✔✔The insurance industry is regulated primarily at the state
level. The legislative branch writes and passes state insurance laws, or statutes, to protect the insuring
public. The judicial branch is responsible for interpreting and determining the constitutionality of the
statutes. The role of a state’s executive branch is to enforce the existing statutes that have been put in
place. The Commissioner of Insurance supervises and regulates insurance affairs in California. The
Commissioner has the power to issue rules and regulations to help enforce these statutes.
Insurance Regulation at the Federal Level – ✔✔The McCarran-Ferguson Act of 1945 determined that the
federal government cannot regulate insurance in areas over which states have the authority to do so.
Congress created federal agencies to provide regulatory oversight impacting insurance practices.
Government insurers step in (as a last resort) when private insurers are unable to provide protection
relative to the catastrophic nature or unpredictability of a risk.
Private vs. Government Insurers – ✔✔Most insurance is written through private insurers. However,
there are instances where governmental-based insurers step in to offer an insurance alternative when
private insurers are unable to provide protection. This usually relates to the catastrophic nature of the
risk, capacity to handle the risk, and lack of desire to engage in a line of insurance where experience to
evaluate necessary premium intake to offset potential loss is lacking.
Stock Insurance Company – ✔✔A stock company is owned by stockholders or shareholders. Directors
and officers are elected by stockholders and carry out the company’s mission. Stockholders may receive
taxable corporate dividends as a share of the company’s profit when and if declared by the Directors.
Traditionally, stock insurers issue Non-Participating policies.
Mutual Insurance Company – ✔✔A mutual company is owned by policyholders (who may be referred to
as members). A Board of Trustees or Directors is elected by policyholders to manage the company.
Policyholders may receive non-taxable dividends as a return of any divisible surplus when and if
declared by the directors. Traditionally, mutual insurers issue Participating policies.
Most mutual companies are non-assessable, meaning they cannot charge members a pro rata share of
loss and expense at the end of the policy period.
Demutualization – ✔✔the process where a domestic incorporated mutual life insurer, or life and
disability insurer, issuing nonassessable policies on a reserve basis may be converted into an
incorporated stock insurer.
Reciprocal Insurance Company – ✔✔A reciprocal insurance company is a group-owned insurer whose
main activity is risk sharing. A reciprocal insurer is unincorporated, and is an aggregation of individuals,
firms, and business corporations, which exchange insurance on one another. Each member is known as
a subscriber. The exchange of insurance is affected through an Attorney-In-Fact. Each subscriber
assumes a part of the risk of all other subscribers. If premiums collected are insufficient to pay losses, an
assessment of additional premium can be made.
Fraternal Benefit Societies – ✔✔Fraternal societies are primarily social organizations that engage in
charitable and benevolent activities that provide insurance, primarily life insurance to its members. They
are usually organized on a nonprofit basis. Membership is typically drawn from members of a given
lodge, order, or society.
Risk Retention Groups (RRG) – ✔✔As defined by the federal Liability Risk Retention Act, this is a
corporation or other limited liability association whose primary activity consists of assuming and
spreading all or any portion of the liability exposure of its group members. Membership is limited to
risks with similar liability exposures through a common business, trade, product, service, premises or
operation. RRGs are insurers licensed as a liability insurance company under the laws of any state and
may insure members of the group in any other state.
Example: Theme parks, go-cart tracks, waterslides
Purchasing Group – ✔✔Any group which purchases liability insurance only for its group members and
only to cover similar or related liability exposure. A purchasing group must be domiciled in any state and
may purchase insurance through a Risk Retention Group.
Self-Funding (Self-Insurers) – ✔✔Groups such as employers can self-fund their coverage. Employer selffunded plans are governed by the Employer Retirement Income Security Act (ERISA). They are appealing
to employers because of the greater level of flexibility that comes with being able to tailor the plan to
their needs with fewer state-mandated features. While firms take on additional financial risk, they are
able to limit their total risk through the purchase of a stop-loss policy. Further, they benefit from the
increased cost savings typical of self-funded modes.
Residual Markets – ✔✔A residual market is one designed for those risks unable to find coverage in the
ordinary market.
Joint Underwriting or Joint Reinsurance Pool – ✔✔Participating insurers accept every eligible risk, and
then may choose to reinsure some of those risks.
Risk Sharing Plan – ✔✔Insurers agree to apportion among themselves those risks that are unable to
obtain insurance through normal channels.
Reinsurance Companies – ✔✔Reinsurance is a device used by insurers to transfer or share in a risk with a
third party. Reinsurance takes place to limit the loss an insurer will face if a very large claim becomes
AD Banker Comprehensive Practice
Exam Questions (Answered). 100%
Verified. Rated A
All of the following are true in general about riders, except:
A) A rider can modify conditions of the policy by expanding or decreasing its benefits
B) Riders are optional
C) All riders are provided for as long as the policy is in effect
D) Riders typically are available for an additional premium – ✔✔C) All riders are provided for as long as
the policy is in effect
What type of insurance is designed for someone with a large insurance need but with limited cash flow?
- ✔✔Term Life Insurance
What is the purpose of nonforfeiture values? – ✔✔Without them, any cash values would be retained by
the insurer when the policy lapses due to non-payment of premium
If a company wishes to share information about a customer’s health with a third party: – ✔✔The
customer must actively opt-in to allowing the disclosure
Adjustable life allows the policyowner to do all of the following, except:
A) Adjust the premium
B) Change the insured
C) Adjust the premium paying period
D) Adjust the death benefit – ✔✔B) Change the insured
Nancy has an IRA and wants to move her funds directly from one financial institution to another while
still maintaining the assets within an IRA account. How many times can she do this? – ✔✔As often as she
likes
An annuity or pure endowment contract must provide a grace period of: – ✔✔1 month of at least 30
days
ERISA is intended to: – ✔✔Accomplish pension equality by requiring reporting for establishing qualified
plans
All of the following regarding employer group life insurance are true, except:
A) Death benefit proceeds paid to an employee’s named beneficiary are received income tax-free
B) Employer-paid premiums do not constitute taxable income to the employee unless the death benefit
exceeds $50,000
C) Employee-paid premiums are tax-deductible to the employee
D) Premiums paid by an employer are tax-deductible to the business as an ordinary and necessary
business expense – ✔✔C) Employee-paid premiums are tax-deductible to the employee
When are Errors and Omissions claims filed? – ✔✔When clients file a report or a complaint
The current rate of interest paid to the cash value account of a universal life policy consists of: –
✔✔Guaranteed interest plus excess interest
If a home office underwriter obtains MIB codes inconsistent with information provided on the
application, what is the underwriter required to do? – ✔✔Conduct further investigation to obtain more
information prior to making a decision
Most often, life policies pay death claims in a single lump sum. The options that allow benefits to be paid
other than lump sum are called _. – ✔✔Settlement Options
All of the following are true regarding changes or modifications to insurance policies, except:
A) They must be in writing
B) They must be signed-off by an executive officer of the insurer
C) They must be approved by the policy owner
D) They can be taken care of by the producer – ✔✔D) They can be taken care of by the producer
Eva dies without having paid the $500 premium on her $50,000 policy that was due a week before her
death. With no outstanding policy loans, Eva’s beneficiary can expect to receive: – ✔✔$49,500, which is
the face amount less the premium owed
Should an insured become totally and permanently disabled two months before the cut-off date for the
waiver of premium rider: – ✔✔The insured remains eligible for all provisions
_ is/are not considered material to the policy issuance.
A) 12 driving under the influence tickets within 6 months prior to application
B) Age and/or gender
C) Recent major inpatient hospital surgeries
D) Hazardous occupations and/or hobbies – ✔✔B) Age and/or gender
The MIB obtains its information from who? – ✔✔Insurers
Travis owns his own insurance agency and sells and places business with 12 different insurers, each of
which he represents by contract. Travis is a(n): – ✔✔Independent Agent
If an insured commits suicide within the time specified by the suicide clause, the insurance company
may do all of the following, except:
A) Void the policy
B) Refuse to pay any death benefit
C) Refund to the beneficiary only the amount of premium paid to date
A.D. Banker Final Exam Questions with
answers. 100% Verified. Rated A
Which of the following situations will require proof of insurability? – ✔✔Adjusting the face amount up
on a Universal Life insurance policy with Option A death benefit selected
Sean has a home with an mortgage. He needs life insurance to protect his family but also wants to leave
them without a mortgage payment if he dies. Ideally which of the following riders should he acquire? –
✔✔Decreasing Term Rider
What rider is designed to help the insured offset the effects of future inflation on the policy’s face
amount? – ✔✔Cost of Living
A good example of Risk Reduction might be: – ✔✔When one takes action to minimize the severity of a
potential loss
In an insurance contract the value that each party gives the other is said to be the: – ✔✔Consideration
When an applicant does not smoke, exercises regularly, seldom drinks, and eats moderately and is
considered to be an above-average risk, they would likely qualify for: – ✔✔Preferred status and pay a
lower premium
A group plan is designed to insure all of the following, except: – ✔✔Creditors
Which of the following is included in Part II of a Life Insurance Application? – ✔✔Family member’s age
and cause of death
All of the following policies end when an insured dies, except: – ✔✔Joint Survivorship
Money accumulated in a permanent policy that the policyowner may borrow via a policy loan or receive
if the policy is surrendered, refers to: – ✔✔Cash Value
The owner of a Variable Life Policy may allocate the premium into a sub-account which is owned by the
insurer, this sub-account is a part of what is also known as the: – ✔✔Separate Account
Level, decreasing and increasing term refer to which policy feature? – ✔✔Death Benefit
All of the following are statements are true of a juvenile policy, except: – ✔✔The insured is the premium
payor
A married couple purchases a $250,000 Joint Life Policy. When the older of the two dies, what is the
amount payable to the survivor? – ✔✔$250,000
Which of the following situations will require proof of insurability? – ✔✔Adjusting the face amount up
on a Universal Life insurance policy with Option A death benefit selected
In a life settlement transaction who represents only the owner and owes a fiduciary duty to the owner
to act in the best interest according to the owner’s instructions, regardless of the manner in which they
are compensated? – ✔✔The Life Settlement Broker
Which of the following policies must be sold by prospectus? – ✔✔Variable Whole Life
Which of the following beneficiary designations is a class designation? – ✔✔Any Children of this
marriage
Annuities may be funded with either a lump sum or on either a _ or a _ basis. – ✔✔Periodic,
flexible
Generally, corporations can use annuities to fund all of the following, except: – ✔✔Estate Creation
AD BANKER AL P&C PRACTICE COMP
EXAM Questions with answers.
2022/2023 update. Graded A
Which rating method listed below is established by the underwriter?
A. Manual rating
B. Retrospective rating
C. Individual rating
D. Judgment rating – ✔✔D.
Judgment rating is the Only rating method that is determined by the underwriter. All other rating
methods are determined by the actuarial department of the insurance company. 1.11
The type of insurance company in which the policyholder is considered an owner, with the right to vote
and share in the profits, is a:
A. Fraternal benefit society
B. Mutual company
C. Stock company
D. Risk retention group – ✔✔B.
A mutual company is mutually owned by the policyholders. Policyholders participate in the company’s
profits in the form of dividends and each policyholder has voting rights. Stock companies are owned by
stock holders. Fraternal benefit societies are non-profit organizations and are member owned. Risk
retention groups are group-owned insurers specializing in limited risks such as: theme parks, go-cart
tracks, etc. 1.2
A morale hazard:
A. Is being dishonest on an application or claim form
B. Is the extent to which one may be affected by a peril
C. Is a physical condition that increases the probability of loss
D. Arises through an individual’s carelessness or irresponsible actions – ✔✔D.
A morale hazard refers to a persons behavior, or a persons morale. It refers to an increase in the
possibility of loss through an individual’s carelessness or irresponsible actions.
1.8
A good example of Risk Reduction might be:
A. When one takes action to minimize the severity of a potential loss
B. Insuring only those risks that threaten the financial stability of the insured
C. The transfer of the risk to an insurance company
D. The elimination of the exposure to a specific risk – ✔✔A.
Risk Reduction involves applying techniques for prevention or reduction of potential loss, such as
installing sprinkler systems, burglar alarms, safety guards on machinery, etc. 1.8
Insurance binders are:
A. Limited to personal lines risks
B. Valid for 30 days
C. Temporary or interim insuring agreements
D. Required to be written – ✔✔C.
An insurance binder is considered to be an interim insuring agreement, which is basically a temporary
policy. It may be oral or written and is generally valid for up to 90 days. It does not guarantee the issue
of the policy and may be cancelled at anytime by the insurer. 2.1
Which of the following would NOT be found in the policy declarations page?
A. Limits of insurance, deductibles, amount of premium
B. A description of the property to be insured
C. A legal representative in the event of the insured’s death
D. Insurers promise of protection – ✔✔D.
The insurers promise of protection would be found in the policy’s Insuring Clause, not the Declarations.
Remember, the Declarations describe the: Who, What, Where, When and How Much, parts of the
policy. It is the policy cover page providing a quick overview of the policy. 2.4
The right to request an appraisal belongs to:
A. Both answers
B. The insurance company
C. Neither answer
D. The insured – ✔✔A.
When the insured and the insurer cannot agree on the amount of indemnification/claims settlement,
either party may demand an appraisal of a loss.
In PURE contributory states, when an individual is found to have contributed to his or her own loss in
any way, another party:
A. May be held liable only in the case of gross negligence
B. Will be assigned a degree of fault and both parties share in the loss settlement pro rata
C. May not be held liable
D. Is not liable because the claimant is sued under the common law: Assumption of Risk – ✔✔C.
Contributory negligence prevents recovery if the claimant is found to have contributed to the loss in any
way, case dismissed. Assumption of risk is a common law defense that indicates if a person consciously
exposes himself to danger, he must assume part of the risk. A degree of fault is assigned to each party
only in the case of comparative negligence, under statutory law. Gross negligence is not a common law
defense, it is a term to describe negligence. 3.2
Which of the following is NOT negligence?
AD Banker Property and Casualty
Comprehensive Exam Questions
(Answered). Rated A. 2022/2023.
Temporary Total Disability may be described as: – ✔✔Inability to return to any employment while
recovering
Supplementary Payment under Part A of the Personal Auto Policy? – ✔✔A Up to $250 for the cost of bail
bonds
B Payment for lost earnings up to $200/day
C Medical payments for an occupant of an insured vehicle (Not included)() D Reasonable expenses incurred at the insurer’s request The Commercial basic Cause of Loss Form does not cover which of the following perils? – ✔✔A Sinkhole collapse B Sprinkler leakage C Smoke D Earth Movement ( Not Covered )()
Which of the following would not be covered under an Installation Floater? – ✔✔A Electrical equipment
B Carpeting
C Construction equipment ( Not Covered )(*)
D Elevators
Under the PAP, a temporary substitute would be covered if used: – ✔✔A temporary substitute is a
covered auto as long as an owned car is out of normal use due to breakdown, repair, servicing, loss, or
destruction.
preservation of property under the Building and Personal Property Coverage Form? – ✔✔The policy
provides open perils coverage for 30 days on insured property that is being moved or temporarily stored
at another location because of the endangerment of a covered peril
Employee theft or dishonesty
a commercial crime policy – ✔✔covers loss of, or damage to, money, securities, and other property
committed by an employee, whether acting alone or in collusion with others, that results directly from
theft.
After noticing the disappearance of office supplies from within a private office facility is an example.
In which section of the Workers’ Compensation and Employer Liability policy would the policy conditions
be found? – ✔✔The policy Workers’ Compensation contains the following parts: General Section, Part
One – Workers’ Compensation Insurance, Part Two – Employers Liability Insurance, Part Three – Other
States Insurance, Part Four – Your Duties if Injury Occurs, Part Five – Premium, Part Six – (Conditions).
Which of the following powers describes the authority stated in an agent’s agency contract? –
✔✔Express
The agency contract, which exists between an insurer and a producer, sets forth the powers that are
granted to the producer. These powers are referred to as express because they are directly stated in the
contract.
Pure Risk
Insurance is designed to provide protection against which of the following? – ✔✔With pure risk, the only
consideration is the possibility of loss or no loss. By contrast, speculative entails a chance of gain as well
as a chance of loss.
Contribution by equal shares – ✔✔Under a contribution by equal shares provision, each insurer pays an
equal amount to the loss settlement until the loss is paid, or until each insurer has exhausted its limits of
insurance, whichever comes first.
The policy limit – ✔✔A total loss under a valued policy is payable based on the policy limit listed on the
declarations page.
An insured owns a home with a replacement cost of $300,000 and a market value of $250,000. What is
the most a valued policy will pay in the event of a total loss without a deductible( is an example )
Occurrence – ✔✔An event that happens
An occurrence form provides coverage for losses that take place during the policy period.
It doesn’t matter when the loss is reported; what matters is when the loss occurred.
The key in this form is the date the loss actually happened and if it happened when the policy was in
effect.
Supplementary payments under Part A of the Personal Auto Policy – ✔✔Only bail bonds is a
supplementary payment. The policy limit is $250.
$100 for bail bonds
Choose the statement that is false about the FAIR plan. – ✔✔A FAIR means Fair Access to Insurance
Requirements
B It provides basic property coverage to those who have been rejected in the standard market
C It provides property coverage to both residential and farm dwellings (Farm property is not eligible)() D Agents cannot bind FAIR plan coverage Which of the following workers would be eligible for Workers’ Compensation? – ✔✔A Domestic employees B Part-time worker ()
C Casual laborer
D Farm laborer
Which of the following is true regarding the Self-Insured Workers’ Compensation Program? – ✔✔A
Sometimes large employers are attracted to self-insurance plans because losses can be predictable and
benefits are capped by statute (*)
B
Self-insurance for Workers’ Compensation is most generally used by smaller employers, who cannot
afford to purchase Workers’ Compensation insurance
C
Benefits under self-insurance differ from those provided by Workers’ Compensation insurers
D
Self-insurance is allowed in all states
Choose the false statement regarding the application of coverage under the Products Exposure Liability
Coverage. – ✔✔A
Coverage applies to damage to the product itself () B Coverage applies to property damage the product causes C Coverage applies to bodily injury the product causes D Coverage applies to bodily injury occurring away from premises the insured owns or rents When his client’s homeowners policy application is rejected by an insurance company due to underwriting rules, an insurance agent may request coverage under which of the following? – ✔✔A Write Your Own Homeowners Program B FAIR Plan ()
C Assigned Risk Plan
D Joint Underwriting Association
Custodian – ✔✔keeper, guardian, conservator
The custodian is the insured or any of the insured’s partners or employees, while having care and
custody of covered property inside the premises, excluding any person acting as a watchperson or
janitor.
The Other Insurance condition – ✔✔specifies the process to be followed when more than one policy
covers the same loss. For property insurance, losses are settled on a pro rata basis, where each policy
pays no more than its pro rata share of the loss.
Section III of the Businessowners Coverage Form includes: – ✔✔Common Policy Conditions
AD Banker Chapter 1 Exam Questions &
Answers. LATEST UPDATE. Rated A
A person who negotiates insurance contracts with insurers on behalf of an applicant is known as a(n):
a. Broker
b. Consultant
c. Advisor
d. Agent/Producer – ✔✔a. Broker
The contract type in which only one party is legally bound to its contractual obligations after a premium
is paid is a(n) _ contract.
a. Personal
b. Conditional
c. Unilateral
d. Aleatory – ✔✔c. Unilateral
An insurer authorized to do business within this state is considered what type of insurer?
a. Domestic
b. Foreign
c. Alien
d. Admitted – ✔✔d. Admitted
The Law of Agency states that a person or entity who acts on behalf of another person, company, or
government, is known as the __.
a. Contractor
b. Servant
c. Employee
d. Agent – ✔✔d. Agent
An unincorporated organization that is formed by individuals, firms, and business corporations that
exchange insurance on one another and whose members are known as subscribers is called a:
a. Mutual Insurance Company
b. Fraternal Benefit Society
c. Risk Retention Group
d. Reciprocal Insurance Company – ✔✔d. Reciprocal Insurance Company
Which of the following would be considered legally competent to enter into a contract?
a. A person who is under the influence of drugs or alcohol
b. A person deemed to be mentally incapacitated
c. A 13-year-old honor student
d. A 25-year-old self-employed person – ✔✔d. A 25-year-old self-employed person
Which of the following is not marketing and distribution system used by the insurers?
a. Independent Agency
b. Direct Writing
c. Captive Agency
d. Broker Agency – ✔✔d. Broker Agency
Before an insurer can operate in this state, it must have which of the following?
a. Approval of the National Association of Insurance Commissioners (NAIC)
b. Articles of Incorporation filed with the Secretary of State
c. State Governor’s approval
d. Certificate of Authority issued by the state Insurance Department – ✔✔d. Certificate of Authority
issued by the state Insurance Department
Which of the following is not a type of hazard for insurance underwriting purposes?
a. Morale
AD Banker Comprehensive Exam
Questions & answers. Rated A.
2022/2023
John is the agent for ABC Insurance and Jane is the insured. Who is the principal in this agency
relationship?
A. ABC Insurance
B. None
C. John
D. Jane – ✔✔A. ABC Insurance
In an insurance contract the value that each party gives the other is said to be the:
A. Subject matter
B. Consideration
C. Acceptance
D. Offer – ✔✔B. Consideration
Which of the following is classified as an insurance broker?
A
A person in the home office who does not solicit outside of the office
B
An employee who negotiates insurance contracts for his/her employer
C
A person who places coverage for his/her own insurance
D
A person who negotiates insurance contracts on behalf of an insured – ✔✔D
Insurance is designed to provide protection against which of the following?
A
Involuntary risk
B
Speculative risk
C
Pure Risk
D
Certain Risk – ✔✔C
A breach under the Doctrine of Warranty may result in:
A
A waiver of the provisions of the Warranty
B
Establishment of a monetary penalty
C
Voidance of the contract
D
A Nullification of the Warranty – ✔✔C
Which of the following is not within an agent’s authority?
A
Providing quotes
B
Representing the insured in an insurance transaction
C
Accepting premiums on behalf of the insurer
D
Completing applications on insurer’s behalf – ✔✔B
A(n) __ insurer is authorized to write insurance policies in a particular state.
A
Foreign
B
Non-Admitted
C
Domestic
D
Admitted – ✔✔D
A good example of Risk Reduction might be:
A
Insuring only those risks that threaten the financial stability of the insured
B
The transfer of the risk to an insurance company
C
The elimination of the exposure to a specific risk
D
When one takes action to minimize the severity of a potential loss – ✔✔D
An insurer that is authorized to do business in a particular state is said to be:
A
Non-Admitted
B
Domestic
C
Foreign
D
AD Banker Ch. 1 – General Ins. All
Quizzes with Exact Answers. Graded A
Insurers (Insurance companies or Carriers) – ✔✔manufacture and sell insurance coverage by way of
insurance policies or contracts. In California, any person capable of making a contract may be an insurer,
subject to the restrictions imposed by the insurance code. In this case, a person is defined as any
individual (natural person), association, organization, partnership, business trust, limited liability
company, or corporation.
Insurance Agencies – ✔✔are independent organizations that recruit, contract with, and support sales
agents and producers.
Insurance Agents or Producers – ✔✔are licensed individuals authorized, by and on behalf of an insurer,
to transact insurance through an admitted insurance company.
Insured – ✔✔is the person or entity that buys insurance for protection from loss of property or liability.
National Association of Insurance Commissioners (NAIC) – ✔✔consists of all state and territorial
insurance commissioners or regulators. It provides resources, research, legislative and regulatory
recommendations and interpretations for state insurance regulators. It also promotes uniformity among
states. Members may accept or reject recommendations. The NAIC has no legal authority to enact or
enforce insurance laws.
Insurance Regulation at the State Level – ✔✔The insurance industry is regulated primarily at the state
level. The legislative branch writes and passes state insurance laws, or statutes, to protect the insuring
public. The judicial branch is responsible for interpreting and determining the constitutionality of the
statutes. The role of a state’s executive branch is to enforce the existing statutes that have been put in
place. The Commissioner of Insurance supervises and regulates insurance affairs in California. The
Commissioner has the power to issue rules and regulations to help enforce these statutes.
Insurance Regulation at the Federal Level – ✔✔The McCarran-Ferguson Act of 1945 determined that the
federal government cannot regulate insurance in areas over which states have the authority to do so.
Congress created federal agencies to provide regulatory oversight impacting insurance practices.
Government insurers step in (as a last resort) when private insurers are unable to provide protection
relative to the catastrophic nature or unpredictability of a risk.
Private vs. Government Insurers – ✔✔Most insurance is written through private insurers. However,
there are instances where governmental-based insurers step in to offer an insurance alternative when
private insurers are unable to provide protection. This usually relates to the catastrophic nature of the
risk, capacity to handle the risk, and lack of desire to engage in a line of insurance where experience to
evaluate necessary premium intake to offset potential loss is lacking.
Stock Insurance Company – ✔✔A stock company is owned by stockholders or shareholders. Directors
and officers are elected by stockholders and carry out the company’s mission. Stockholders may receive
taxable corporate dividends as a share of the company’s profit when and if declared by the Directors.
Traditionally, stock insurers issue Non-Participating policies.
Mutual Insurance Company – ✔✔A mutual company is owned by policyholders (who may be referred to
as members). A Board of Trustees or Directors is elected by policyholders to manage the company.
Policyholders may receive non-taxable dividends as a return of any divisible surplus when and if
declared by the directors. Traditionally, mutual insurers issue Participating policies.
Most mutual companies are non-assessable, meaning they cannot charge members a pro rata share of
loss and expense at the end of the policy period.
Demutualization – ✔✔the process where a domestic incorporated mutual life insurer, or life and
disability insurer, issuing nonassessable policies on a reserve basis may be converted into an
incorporated stock insurer.
Reciprocal Insurance Company – ✔✔A reciprocal insurance company is a group-owned insurer whose
main activity is risk sharing. A reciprocal insurer is unincorporated, and is an aggregation of individuals,
firms, and business corporations, which exchange insurance on one another. Each member is known as
a subscriber. The exchange of insurance is affected through an Attorney-In-Fact. Each subscriber
assumes a part of the risk of all other subscribers. If premiums collected are insufficient to pay losses, an
assessment of additional premium can be made.
Fraternal Benefit Societies – ✔✔Fraternal societies are primarily social organizations that engage in
charitable and benevolent activities that provide insurance, primarily life insurance to its members. They
are usually organized on a nonprofit basis. Membership is typically drawn from members of a given
lodge, order, or society.
Risk Retention Groups (RRG) – ✔✔As defined by the federal Liability Risk Retention Act, this is a
corporation or other limited liability association whose primary activity consists of assuming and
spreading all or any portion of the liability exposure of its group members. Membership is limited to
risks with similar liability exposures through a common business, trade, product, service, premises or
operation. RRGs are insurers licensed as a liability insurance company under the laws of any state and
may insure members of the group in any other state.
Example: Theme parks, go-cart tracks, waterslides
Purchasing Group – ✔✔Any group which purchases liability insurance only for its group members and
only to cover similar or related liability exposure. A purchasing group must be domiciled in any state and
may purchase insurance through a Risk Retention Group.
Self-Funding (Self-Insurers) – ✔✔Groups such as employers can self-fund their coverage. Employer selffunded plans are governed by the Employer Retirement Income Security Act (ERISA). They are appealing
to employers because of the greater level of flexibility that comes with being able to tailor the plan to
their needs with fewer state-mandated features. While firms take on additional financial risk, they are
able to limit their total risk through the purchase of a stop-loss policy. Further, they benefit from the
increased cost savings typical of self-funded modes.
Residual Markets – ✔✔A residual market is one designed for those risks unable to find coverage in the
ordinary market.
Joint Underwriting or Joint Reinsurance Pool – ✔✔Participating insurers accept every eligible risk, and
then may choose to reinsure some of those risks.
Risk Sharing Plan – ✔✔Insurers agree to apportion among themselves those risks that are unable to
obtain insurance through normal channels.
Reinsurance Companies – ✔✔Reinsurance is a device used by insurers to transfer or share in a risk with a
third party. Reinsurance takes place to limit the loss an insurer will face if a very large claim becomes
AD Banker Comprehensive Final Exam
Questions with answers. 100% pass
rate. 2022/2023.
Dividends if declared are paid:
A. Annually
B. Semi-annually
C. Monthly
D. Quarterly – ✔✔A. Annually
An insured dies within the time limit of an Increasing Term Rider and the beneficiary receives the face
amount plus the value of all paid premiums. Which rider is attached to the policy?
A. Return of Cash Value
B. Term to age 100
C. Return of Premium
D. Waiver of Premium – ✔✔C. Return of Premium
Medicare Part A enrollment is mandatory for all citizens and legal residents at age:
A. 60
B. 62
C. 65
D. 59 1/2 – ✔✔C. 65
Once a policy is classified as a MEC, it will maintain that classification for
A. For 7 years
B. The life of the policy
C. For 10 years
D. Until the issue of overfunding is resolved – ✔✔B. The life of the policy
Life insurance will be considered ‘incidental’ to a qualified plan if the insurance amount is not more than
__ times the expected monthly benefit amount.
A. 200
B. 250
C. 100
D. 150 – ✔✔C. 100
Which of the following would likely be considered a deceptive advertising?
A. Failure to include a statement that the insurer is a member of the California Insurance Guarantee
Association
B. A statement that the insurer handles claims quickly and efficiently
C. A magazine advertisement for a product not available for sale in California without a disclaimer
concerning its availability
D. Including a statement of the insurer’s current financial strength rating – ✔✔C. A magazine
advertisement for a product not available for sale in California without a disclaimer concerning its
availability
A copy of an application becomes part of the entire contract:
A. When it is signed by the applicant
B. If the policy is issued as applied for
C. If it is attached to the policy
D. When it is mailed to the insurer by the producer – ✔✔C. If it is attached to the policy
Under the California Senior Market and Policy Illustrations rules, all preprinted illustrations containing
non-guaranteed values must show the:
A. Guaranteed portion of any dividends projected
B. Columns of any guaranteed values in bold print
C. Historical interest rates credited by the insurer to such polices
D. Agent’s license number and other relevant contact information – ✔✔B. Columns of any guaranteed
values in bold print
If a person does not enroll in Medicare Part D when first eligible after age 65 and goes more than 63
days before enrolling, a cumulative penalty of _% for each month the beneficiary has no ‘creditable
coverage’ for prescription medications will be charged upon subsequent enrollment.
A. 1.5%
B. 1%
C. 1.75%
D. 1.25% – ✔✔B. 1%
When reviewing an application, the underwriter decides to reclassify the risk. What does that mean for
the client?
A. The premium could increase or decrease
B. The death benefit could increase or decrease
C. The mode could increase or decrease
D. The policy period could lengthen or shorten – ✔✔A. The premium could increase or decrease
Which Settlement Option pays a specified dollar amount until benefits are exhausted?
A. Fixed Period
B. Life Income
C. Fixed Amount
D. Interest Only – ✔✔C. Fixed Amount
Which of the following defines a Surplus Lines Broker?
A. They are brokers who deal with direct writing companies only
B. They are brokers who accept business only from non-resident agents
C. They place risks with nonadmitted insurers when coverage cannot be placed with admitted insurer
carriers
D. They are brokers that deal with admitted carriers only – ✔✔C. They place risks with nonadmitted
insurers when coverage cannot be placed with admitted insurer carriers
All life insurance HIV tests require what from the proposed insured?
A. Informed consent
B. Payment in advance
C. An exclusion
D. A wavier – ✔✔A. Informed Consent
Group blanket insurance covers a group of individuals whose membership changes frequently, such as
students, passengers traveling on a common carrier, sports teams, volunteer firefighters, or other
groups of people while being exposed to a(n) _ risk:
A. Quantifiable
B. Specific
C. Guaranteed
D. Uninsurable – ✔✔B. Specific
Ad Banker Comprehensive Exam Questions
with accurate answers, 100% verified. Rated
A
Which insurer’s owner receives taxable corporate dividends as a return of profit? – ✔✔Stock
To make insurance more affordable and protect the insurance company from paying out too much in
claims, insurers will: – ✔✔Reinsure the risk
The direct writing distribution model utilizes: – ✔✔Salaried employees
A good example of Risk Reduction might be: – ✔✔When one takes action to minimize the severity of a
potential loss
In insurance, to determine acceptable risks is the primary responsibility of the: – ✔✔Underwriter
When an insurance policy is not clear, the court will usually interpret in favor of the insured because: –
✔✔The policy is a Contract of Adhesion
A Contract of Adhesion is a contract between two parties that does not allow for negotiation, i.e. take it
or leave it. An insurance policy, drawn up by the insurer, is such a contract. Any ambiguity in the
contract is construed against the party who drew it up.
All of the following are true of the Law of Large Numbers, except: – ✔✔The prediction of individual
losses is based upon past experience
Which of the following is classified as an insurance broker? – ✔✔A person who negotiates insurance
contracts on behalf of an insured
An insurer that is not approved by the state Department of Insurance to transact insurance is called a(n)
insurer. – ✔✔Non-admitted
Which of the following best describes a Contract of Indemnity under insurance? – ✔✔The insured is
restored to the same financial condition as prior to the loss, with no intent of loss or gain
In insurance, the insurer’s promise to pay a covered loss and defend the insured in a lawsuit and the
insured’s payment of the first premium, are all examples of: – ✔✔Consideration
A(n) _ insurer is authorized to write insurance policies in a particular state. – ✔✔Admitted
In insurance, when an applicant intentionally fails to make a material fact known, it is known as: –
✔✔Concealment
Concealment is defined as the withholding of known facts, the knowledge of which would change the
decision of an insurer with respect to underwriting, settling a loss, or determining the premium.
Which of the following is true about a Stock Insurance Company? – ✔✔The company is directed by
officers and directors and has a stated amount of capital stock owned by stockholders
A contract whereby only one party is bound to future performance, is said to be: – ✔✔A unilateral
contract
All of the following are true of a substandard risk, except: – ✔✔The premium would be discounted
A producer submits a completed application to the insurer along with the premium check after giving
the applicant a conditional receipt. If the applicant completes the required medical exam, but dies prior
to the insurer declining the application based upon the results of the medical exam, what is the insurer’s
responsibility? – ✔✔Refund any and all premiums paid with the application
In a policy summary all of the following must be shown on both a guaranteed and non-guaranteed basis,
except: – ✔✔Dividends
When a producer receives an application for life insurance that is completed and signed, but without
premium payment, when does coverage start? – ✔✔On the date the policy is delivered and premium
collected
Buying life insurance so that the death benefit will be available for paying estate taxes due upon the
death of the insured is known as: – ✔✔Estate conservation
A personalized computer-generated illustration detailing premiums, cash values, interest rates, and
surrender values is called __. – ✔✔A policy summary
Which of the following is included in Part II of a Life Insurance Application? – ✔✔Family member’s age
and cause of death
Part II of the application contains questions pertaining to medical background, present health, any
medical visits in recent years, medical status of family members and causes of death of deceased
relatives.
A married couple wants to make sure that if either of them dies, the survivor has enough funds to
maintain their standard of living but want to accomplish this in the most economical way. Which of the
following recommendations is best suited to accomplish their goal? – ✔✔Purchase a Joint life policy
Joint Life pays on the death of the first insured. It is less expensive than buying two separate policies.
The owner of a Variable Life Policy may allocate the premium into a sub-account which is owned by the
insurer, this sub-account is a part of what is also known as the: – ✔✔Separate Account
Owners of Variable insurance products may allocate their cash value into the insurer’s separate account,
with subaccounts that work like mutual funds, or into a guaranteed interest fund.
All of the following are correct pertaining to Decreasing Term, except: – ✔✔The premium declines
throughout the term of the policy
Which of the following policies must be sold by prospectus? – ✔✔Variable Whole Life
Variable Whole Life is a security. It is required that the producer have a securities registration in order to
sell it and the policy must be sold with a prospectus detailing all fees, charges, risks, and expenses.
In a life settlement transaction who represents only the owner and owes a fiduciary duty to the owner
to act in the best interest according to the owner’s instructions, regardless of the manner in which they
are compensated? – ✔✔The life settlement broker
A life settlement broker represents only the owner and owes a fiduciary duty to the owner to act in the
best interest according to the owner’s instructions, regardless of the manner in which the broker is
compensated.
Which of the following is a true characteristic of a Variable Universal Life policy? – ✔✔As long as there is
sufficient cash value to cover policy expenses when due, the insured is not required to pay the planned
premium
A characteristic of universal life insurance is that there is no requirement to pay any premium other than
the first. As long as there is sufficient cash value to pay policy expenses (cost of insurance, riders, and
other fees) when due, the policy remains in force.
A participating life insurance policy has a long-term care rider. The insured qualifies for the benefit.
Where does the initial benefit money come from? – ✔✔It is an advance of the face amount of the policy
The Long-Term Care Rider’s initial benefit is from an advance of the death benefit, after which additional
dollars are paid out by the insurer. The amount the insurer is responsible to pay out maximum is
determined at the time the rider is acquired. The bigger the benefit the more the rider costs.
If the premium payable for the first few years of the policy (e.g. 3-5) are lower than an ordinary whole
life policy in order to make it more affordable, what premium paying method was used? – ✔✔Modified
Level, decreasing and increasing term refer to which policy feature? – ✔✔Death benefit
A.D. BANKER: Life & Health –
Comprehensive Exam Questions with
accurate answers. Rated A. 2022/2023
Legally speaking, a producer has a _ duty when handling life insurance premiums and
applications for an insurer. – ✔✔Fiduciary
It is the who issues a Certificate of Authority enabling an insurer to conduct insurance
business within a particular state. – ✔✔State Insurance Commissioner
When an applicant for life insurance faces potential financial loss in the event of injury or sickness of an
insured, it is said the applicant has: – ✔✔Insurable interest
The reinsurance agreement that automatically accepts all new risks presented by the company seeking
or requesting reinsurance from the reinsurer is known as a _ agreement. – ✔✔Treaty
Insurable interest for life insurance is necessary only at the time of: – ✔✔Application
With health and life insurance a/an is required at the time of the application. – ✔✔Insurable
interest
___ insurance allows for insurance coverage to be obtained when not available from
admitted carriers. – ✔✔Surplus lines
Which of the following is NOT considered one of the essential elements of a contract? – ✔✔Conditions
The insurance industry is primarily regulated at the _ level. – ✔✔State
A contract that is drafted by an insurer and receives no input or alteration from the insured, is
considered a(n): – ✔✔Contract of Adhesion
The reinsurance agreement that allows the reinsurer an opportunity to reject coverage for individual
risks or price them higher due to their higher risk is known as a(n) agreement. –
✔✔Facultative
When the owner of the policy and insurer must meet certain conditions in order for the health
insurance policy to be enforceable, it is referred to as a(n): – ✔✔Conditional contract
The _ market is a private source of coverage of last resort for individuals or businesses that
have been rejected by voluntary market insurers. – ✔✔Residual
To make insurance more affordable and protect the insurance company from paying out too much in
claims, insurers will: – ✔✔Reinsure the risk
All of the following are producer responsibilities to the applicant, except: – ✔✔Offering and selling only
the lowest premium policy
What should a producer do if the policy applied for is issued at a higher rate than was expected? –
✔✔Personally deliver the policy, explain the rating, and reinforce the value of the policy
What is the primary reason why States have ‘outlawed’ Stranger Originated Life Insurance (STOLI)
transactions? – ✔✔At policy inception there is a lack of insurable interest
When an insurer requires that an insured be subjected to a medical examination, who pays for the
medical exam? – ✔✔The insurer
The name used to indicate the insured’s age at time of policy renewal is the age. –
✔✔Attained
In order for a life insurance policy to be valid, insurable interest must exist at time of _. –
✔✔Application
In a policy summary all of the following must be shown on both a guaranteed and non-guaranteed basis,
except: – ✔✔Dividends
Loading includes all of the following, except: – ✔✔Mortality
A personalized computer-generated illustration detailing premiums, cash values, interest rates, and
surrender values is called _. – ✔✔A policy summary
A married couple purchases a $250,000 Joint Life Policy. When the older of the two dies, what is the
amount payable to the survivor? – ✔✔$250,000
Which of the following is TRUE of a term rider when attached to a permanent life policy? – ✔✔It can
provide additional temporary coverage on the insured or on other members of the family
All of the following are correct pertaining to Decreasing Term, except: – ✔✔The premium declines
throughout the term of the policy
When the death of an insured occurs within a specified period, causing the policy to pay double or triple
benefits, this policy must have which of the following riders? – ✔✔Accidental Death Rider
Which of the following policies must be sold by prospectus? – ✔✔Variable Whole Life
Term Life insurance is designed to provide coverage for __. – ✔✔A specified period of time
Which Whole Life policy is designed to provide a substantial immediate cash value? – ✔✔Single
Premium Whole Life Policy
A life insurance applicant wants a combination of savings and insurance protection with guarantees. If
the applicant is willing to pay premiums only until the age of 65, at which time the policy is fully paid-up,
which of the following should he/she purchase? – ✔✔Limited Pay Whole Life-Age to age 65
AD Banker Comprehensive Exam,
Questions with accurate answers.
2022/2023. Rated A
A producer who is acting as an agent is representing:
A
The insured, the applicant and the beneficiary
B
Always the insured
C
The insured and the insurer
D
Always the insurer – ✔✔D
In order to be valid, a contract must be between individuals considered legally able to enter into an
agreement. This principle is known as:
A
Restricted persons
B
Considerations
C
Competent parties
D
Agreement – ✔✔C
A company that is licensed to sell insurance in a particular state is:
A
A domiciled company
B
A nonadmitted company
C
An authorized company
D
A foreign companyA company that is licensed to sell insurance in a particular state is: – ✔✔C
An insurance contract is an aleatory contract. This means:
A
Equal value is not given by both parties to the contract
B
The contract must be for a legal purpose
C
Parties to the contract must have the legal capacity to enter into the contract
D
Statements made in the application are guaranteed to be true in all respects – ✔✔A
Which of the following would be considered a speculative risk?
A
The possibility your car is totaled in an auto accident
B
The possibility the painting you bought might be a long-lost masterpiece
C
The possibility you will die on the job at a young age
D
The possibility you will become disabled – ✔✔B
Which is the proper term for a company owned by its policyowners?
A
A charitable insurance company
B
A reciprocal insurance company
C
A domestic insurance company
D
A mutual insurance company – ✔✔D
All of the following are elements of a contract, except:
A
Offer and acceptance
B
Legal purpose
C
Authority
D
Consideration – ✔✔C
Each of the following would be an element in the definition of fraud, except:
A
A false statement on the application that is material to the acceptance of the risk
B
Withholding of known material facts
C
Intentional material misrepresentation with the intent of causing injury to another party