NC LIFE INSURANCE EXAM PREP CHAPTER I

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NC LIFE INSURANCE EXAM PREP CHAPTER I

Actual Qs and Ans - Expert-Verified Explanation -Guaranteed passing score -25 Questions and Answers

-Format: Multiple-choice / Flashcard

Question 1: mutualization

Answer:

a stock company may be converted into a mutual company through a process called

Question 2: policy dividends

Answer:

represent a "refund" of the portion of premium that remains after the company has set aside the necessary reserves and has made deductions for claims and expenses and can also include a share in the company's investment, mortality, and operating profits.

Question 3: The independent agency system

Answer:

does not tie a sales staff or agency to any one particular insurance company. Instead, they represent any number of insurance companies through contractual agreements.

Question 4: Insurance

Answer:

evolved to produce a practical solution to economic uncertainties and losses

Question 5: Health Insurance

Answer:

evolved from scientific principles to provide funds for medical expenses due to sickness or injury and to cover loss of income during a disability.

Question 6: industrial insurance

Answer:

is characterized by relatively small face amounts (usually $1,000 to $2,000) with premiums paid weekly.

Question 7: Stock insurance company

Answer:

a private organization, organized and incorporated under state laws for the purpose of making a profit for its stockholders

Question 8: risk retention group (RRG)

Answer:

a mutual insurance company formed to insure people in the same business, occupation, or profession (e.g., pharmacists, dentists, or engineers).

Question 9: Career Agency System

Answer:

branches of major stock and mutual insurance companies that are contracted to represent an insurer in a specific area; this system focuses on building sales staffs.

Question 10: 1945-The McCarran-Ferguson Act

Answer:

This act led each state to revise its insurance laws to conform to the federal laws. Today, the insurance industry is considered to be state-regulated.

Question 11: multi-line insurers.

Answer:

Companies that sell more than one line of insurance

Question 12: A stock company

Answer:

referred to as a nonparticipating company because policyholders do not participate in dividends resulting from stock ownership.

Question 13: demutualization

Answer:

mutuals can convert to stock companies through a process called

Question 14: National Association of Insurance Commissioners

(NAIC)

Answer:

This organization has committees that work regularly to examine various aspects of the insurance industry and to recommend appropriate insurance laws and regulations

Question 15: Annuities

Answer:

provide income by making a series of payments to the annuitant for a specific period of time or for life

Question 16: treaty reinsurance

Answer:

A common reinsurance contract between two insurance companies which involves an automatic sharing of the risks assumed.

Question 17: Lloyd's of London

Answer:

an association of individuals and companies that individually underwrite insurance. Its function is to gather and disseminate underwriting information, help its associates settle claims and disputes and, through its member underwriters, provide coverages that might otherwise be unavailable in certain areas.

Question 18: Liquidity

Answer:

indicates a company's ability to make unpredictable payouts to policy owners

Question 19: Reinsurers

Answer:

a specialized branch of the insurance industry that insures insurers

Question 20: state guaranty association

Answer:

exists to protect consumers if an insurer becomes insolvent and are funded by insurance companies.

Question 21: Reserves

Answer:

the accounting measurement of an insurer's future obligations to its policyholders.They are classified as liabilities on the insurance company's accounting statements since they must be settled at a future date.

Question 22: personal producing general agency (PPGA) system

Answer:

They do not recruit, train, or supervise career agents. They primarily sell insurance, although they may build a small sales force to assist them.

Question 23: Reciprocal insurers

Answer:

organized on the basis of ownership by their policyholders; it is the policyholders themselves who insure the risks of the other policyholders. Each policyholder assumes a share of the risk brought to the company by others and are managed by an attorney-in-fact.

Question 24: 1970-Fair Credit Reporting Act

Answer:

is the authority that requires fair and accurate reporting of information about consumers, including applications for insurance. Insurers must inform applicants about any investigations that are being made.

Question 25: The role of insurance

Answer:

to transfer the risk of financial loss from an individual or business to an insurance company