TEXAS LIFE AND HEALTH CHAPTER 1 EXAM QUESTIONS

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TEXAS LIFE AND HEALTH CHAPTER 1 EXAM QUESTIONS

Actual Qs and Ans - Expert-Verified Explanation -Guaranteed passing score -66 Questions and Answers

-Format: Multiple-choice / Flashcard

Question 1: Mutual Insurance Company

Answer:

The company is owned by the policyholders (customers).-Board of directors chosen by policyholders -If the company is profitable, excess premiums can be returned to its policyholders as a nontaxable dividend Issues participating (par) policies

• Liberty Mutual or Mutual of Omaha for example

-Never a grantee of dividend

Question 2: Fiduciary

Answer:

A person in a position of financial trust - TRUST

Question 3: Residual Market - State Level

Answer:

Unemployment insurance, workers' compensation, disability insurance

Question 4: Treaty Reinsurer

Answer:

The reinsurer accepts the transfer according to an agreement called a treaty.

Question 5: General agents (GAs) or managing general agents (MGAs)

Answer:

hire, train and supervise other agents within a specific geographical area. They receive overriding commissions on the business produced by the agents they manage

Question 6: Calulable

Answer:

Actuary helps the insurance company to determine when losses will likely occur in the future and how much they will cost the insurance company.Allows the insurance company to properly price their policies so they can operate profitably.

Question 7: Law of Agency

Answer:

The law that governs the relationship between a principal and his or her agent.

Question 8: Transfer

Answer:

Insurance policy transfers risk to the insurance company however the deductible is the amount of risk we retain (retention).

Question 9: Measurable

Answer:

Statistical data - when a loss occurs adjuster can determine how and why an accident happened

Question 10: Homogenous

Answer:

Similar - insured by the same type of policy

Question 11: Direct Response Marketing

Answer:

No producer/agent involved - Sold through the mail, ads, television, radio, and internet

Question 12: Certificate of Authority

Answer:

State license for an insurance company

Question 13: Sharing

Answer:

A method of dealing with risk for a group of individual persons or businesses with the same or similar exposure to loss who share the losses that occur within that group.

Question 14: Independent agent (Broker)

Answer:

sell the insurance products of several companies and work for themselves or other agents. They own the expiration of the policies they sell meaning the agent may place that business with another insurer upon renewal if it is in the best interest of the client to do so. These agents represent the insured.

Question 15: Affordable

Answer:

If policies are overpriced the consumer won't be able to afford to pay the premium. Must be affordable for the consumer.

Question 16: Reciprocal Insurer

Answer:

Unincorporated - Members are known as subscribers - Members assessed the amount they have to pay if a loss to any member of the group occurs - Run by an attorney in fact Members are insurers and the insured

Question 17: What is CANHAM?

Answer:

The six elements of an insurable RISK - Not all risks are insurable.

Question 18: Adverse Selection

Answer:

Risks that have a greater than average chance of loss - Poor health - risky occupation - considered high risk - Determines who will and who will not get a policy.

Question 19: Methods of Handling Risk (STARR)

Answer:

Sharing Transfer Avoidance Retention Reduction

Question 20: Physical Hazard

Answer:

Can be seen or determined - a wet floor - driving a car with bad brakes - broken handrail on stairs - walking on a wet floor

Question 21: Risk Retention Group (RGG)

Answer:

Liability insurance company created for policyholders from the sale industry. For example - car dealers can be policyholders.

Question 22: Risk Retention Group (RGG) misc.

Answer:

Formed by an insurance company - the purpose is to provide liability insurance for the members of the group Policyholders must all be members of the same type of business - Regulated by the state where they are headquartered but can operate in other states as well

Question 23: Express Authority

Answer:

What the agent's written contract with the company states

Question 24: If a fire causes damage to a building, the fire is a?

Answer:

Peril

Question 25: Non-catastrophic

Answer:

Insurance cannot insure events that cause widespread losses to large numbers of insureds at the same time. War is an example of catastrophic risk.

Question 26: Peril

Answer:

Cause of a loss - Death and /or sickness - Fire, lightning, etc.