HS 311 MULTIPLE-CHOICE QUESTIONS AND
ANSWERS
The risk that individuals of higher than average risk will seek out or purchase insurance
policies is called?
a. Peril.
b. Hazard.
c. Law of Large Numbers.
d. Adverse Selection. - Answers - Q 1.1
d. Adverse Selection
The principle of indemnity requires that:
a. A person is entitled to compensation only to the extent that financial loss has been
suffered.
b. Insured cannot indemnify himself from both the insurance company and a negligent
third party for the same claim.
c. The insured must be subject to emotional or financial hardship resulting from the loss.
d. The insured and insurer must both be forthcoming with all relevant facts about the
insured risk and coverage provided for that risk. - Answers - Q 1.2
a. A person is entitled to compensation only to the extent that financial loss has been
suffered
When must an insurable interest exist for a life insurance claim?
a. At the policy inception and time of loss.
b. At the policy inception only.
c. At the time of the loss.
d. Either at the policy inception or at the time of the loss. - Answers - Q 1.3
b. At the policy inception only
Joe walks into his insurance agent's office and notices his agent's name on a business
card and the insurer's name on letterhead. If an agency agreement exists, what type of
authority does Joe believe his agent has to enter into an insurance contract?
a. Express Authority.
b. Implied Authority.
c. Apparent Authority.
d. None of the Above. - Answers - Q 1.4
, b. Implied Authority
Which of the following statements regarding loss severity is true?
1. Loss severity is the expected number of losses that will occur within a given period.
2. Loss severity is the potential size or damage of a loss.
a. 1 only.
b. 2 only.
c. Both 1 and 2.
d. Neither 1 nor 2. - Answers - Q 1.5
b. 2 only
Non-cancelable health insurance contracts are different from guaranteed renewable
contracts because:
a. Non-cancelable policies are not guaranteed renewable.
b. Non-cancelable policies cannot be canceled in mid-term.
c. Non-cancelable policies cannot have a premium change.
d. Non-cancelable policies have more liberal disability benefits. - Answers - Q 2.1
c. Non-cancelable policies cannot have a premium change
Mr. Johns has a major medical insurance policy with a $1,000 deductible, an 80%
coinsurance clause, and an out-of-pocket maximum of $4,000. He becomes ill and is
admitted to the hospital for several days. When he is discharged, his hospital bill is
$5,000, and his doctor bills are $2,500. What is the amount that his insurance copay will
pay?
a. $5,200.
b. $6,000.
c. $6,500.
d. $7,500. - Answers - Q 2.2
a. $5,200
COBRA coverage is available for which of the following persons?
1. A retiring employee.
2. An employee who is terminated.
3. Spouses and dependents of a deceased employee.
4. An employee no longer able to work due to disability.
a. 3 only.
b. 3 and 4.
c. 1, 2, and 3.
ANSWERS
The risk that individuals of higher than average risk will seek out or purchase insurance
policies is called?
a. Peril.
b. Hazard.
c. Law of Large Numbers.
d. Adverse Selection. - Answers - Q 1.1
d. Adverse Selection
The principle of indemnity requires that:
a. A person is entitled to compensation only to the extent that financial loss has been
suffered.
b. Insured cannot indemnify himself from both the insurance company and a negligent
third party for the same claim.
c. The insured must be subject to emotional or financial hardship resulting from the loss.
d. The insured and insurer must both be forthcoming with all relevant facts about the
insured risk and coverage provided for that risk. - Answers - Q 1.2
a. A person is entitled to compensation only to the extent that financial loss has been
suffered
When must an insurable interest exist for a life insurance claim?
a. At the policy inception and time of loss.
b. At the policy inception only.
c. At the time of the loss.
d. Either at the policy inception or at the time of the loss. - Answers - Q 1.3
b. At the policy inception only
Joe walks into his insurance agent's office and notices his agent's name on a business
card and the insurer's name on letterhead. If an agency agreement exists, what type of
authority does Joe believe his agent has to enter into an insurance contract?
a. Express Authority.
b. Implied Authority.
c. Apparent Authority.
d. None of the Above. - Answers - Q 1.4
, b. Implied Authority
Which of the following statements regarding loss severity is true?
1. Loss severity is the expected number of losses that will occur within a given period.
2. Loss severity is the potential size or damage of a loss.
a. 1 only.
b. 2 only.
c. Both 1 and 2.
d. Neither 1 nor 2. - Answers - Q 1.5
b. 2 only
Non-cancelable health insurance contracts are different from guaranteed renewable
contracts because:
a. Non-cancelable policies are not guaranteed renewable.
b. Non-cancelable policies cannot be canceled in mid-term.
c. Non-cancelable policies cannot have a premium change.
d. Non-cancelable policies have more liberal disability benefits. - Answers - Q 2.1
c. Non-cancelable policies cannot have a premium change
Mr. Johns has a major medical insurance policy with a $1,000 deductible, an 80%
coinsurance clause, and an out-of-pocket maximum of $4,000. He becomes ill and is
admitted to the hospital for several days. When he is discharged, his hospital bill is
$5,000, and his doctor bills are $2,500. What is the amount that his insurance copay will
pay?
a. $5,200.
b. $6,000.
c. $6,500.
d. $7,500. - Answers - Q 2.2
a. $5,200
COBRA coverage is available for which of the following persons?
1. A retiring employee.
2. An employee who is terminated.
3. Spouses and dependents of a deceased employee.
4. An employee no longer able to work due to disability.
a. 3 only.
b. 3 and 4.
c. 1, 2, and 3.
