Mass State Life Insurance Exam Practice Questions and Answers (100% Pass

Mass State Life Insurance Exam Practice Questions and Answers (100% Pass) Which of the following describes a participating life insurance policy? - Answer️️ -A participating life policy is one in which the policyowner receives dividends deriving from the company's divisible surplus What type of reinsurance contract between two insurers involves an automatic sharing of the risks assumed? - Answer️️ -Under treaty reinsurance, each party automatically accepts specific percentages of the insurer's business. At what point must a life insurance applicant be informed of their rights that fall under the Fair Credit Reporting Act? - Answer️️ -Upon completion of the application The State Guaranty Association guarantees - Answer️️ -that a claim will be paid if an admitted insurer becomes insolvent Dividends from a mutual insurance company are paid to whom? - Answer️️ -Policyholders What is considered the accounting measurement of an insurance company's future obligations to its policyowners? - Answer️️ -reserves A group-owned insurance company that is formed to assume and spread the liability risks of its members is known as a - Answer️️ -risk retention group ©SOPHIABENNET@ Thursday, August 22, 2024 10:21 AM 2 Which of the following is a syndicate established by a group of insurers to share underwriting duties? - Answer️️ -Lloyd's organization An agent's authority to bind an insurer to an insurance contract may be granted in the - Answer️️ -agent's contract and the insurance company's appointment Dividends from a stock insurance company are normally sent to - Answer️️ -shareholders Law of Large numbers - Answer️️ --insurance is based on the sharing of risks among a large group of people -states that the larger the number of people, the more predictable the actual losses will be -companies use this data to calculate rates Speculative risk - Answer️️ --involves opportunity for either loss or gain -not covered by insurance companies pure risk - Answer️️ --a situation that can only result in a loss, there is no opportunity for financial gain -only type of risk that is insurable treatment of risk through: avoidance - Answer️️ -simply avoiding as many risks as possible -effective but not always practical ©SOPHIABENNET@ Thursday, August 22, 2024 10:21 AM 3 treatment of risk through- reduction - Answer️️ -since we cannot avoid risk entirely we often attempt to lessen the possibility of a loss by taking acting to reduce the risk - treatment of risk through- sharing - Answer️️ -when a group of individuals or businesses with similar exposures share the losses that occur within that group -reciprocal insurance exchange is a formal risk sharing arrangement treatment of risk through- retention - Answer️️ -also known as self- insurance: when individuals have the financial ability to fund losses by themselves when they occur treatment of risk through- transfer - Answer️️ -the most effective way to handle risk - risk is transferred to another party - insurance is the most common method of transferring risk from an individual or group to an insurance company elements of insurable risk - Answer️️ --must be due to chance -cannot be catastrophic -must be randomly selected • Loss exposure to be insured must be large - Insurance company must be able to predict ©SOPHIABENNET@ Thursday, August 22, 2024 10:21 AM 4 loss ( based on law of large numbers) - Loss must be definite and measurable - Time, place, amount, and when payable nature of insurance - Answer️️ --to provide financial protection against losses that may be incurred due to a chance happening or event such as death, illness, or accident -protection is provided through an insurance policy which is a simple device for accumulating funds to meet these uncertain losses ABC Company is attempting to minimize the severity of potential losses within its company. The company is engaged in risk - Answer️️ -Risk reduction can reduce the chance that a particular loss will occur, or it can reduce the amount of a potential loss if it occurs. How can an insurance company minimize exposure to loss? - Answer️️ - Many insurers are able to minimize exposure to loss by reinsuring risks. For insurance purposes, similar objects which are exposed to the same group of perils are referred to as - Answer️️ -Similar objects of insurance that are exposed to the same group of perils are called homogeneous exposure units. Which of the following can be defined as "the potential for loss"? - Answer️️ -risk An insurer has a contractual agreement which transfers a portion of its risk exposure to another insurer. What type of contractual arrangement is this? ©SOPHIABENNET@ Thursday, August 22, 2024 10:21 AM 5 - Answer️️ -Reinsurance contracts accept a portion of the risk underwritten by another insurer who has contracted for the entire coverage amount. Which of the following can be defined as a cause of a loss? - Answer️️ - peril What type of risk involves the potential for loss and the possib