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AD Banker Life and Health Chapter 1 Exam
Questions with Detailed Verified Answers
An agent that enters into agreements with more than one insurer is
what?
⼀Answer:⼀ Independent
An insurer that is authorized to transact insurance in California
and has been issued a Certificate of Authority from the California
Department of Insurance is a(n):
⼀Answer:⼀ Admitted Insurer
Which statement is false regarding 'materiality' in California?
A) A statement is material if its disclosure or lack of disclosure
would change the insurer's decision to issue a policy for the same
premium
B) Materiality of a representation is determined by different rules as
compared to materiality of a concealment
C) Materiality is not determined by the event but rather by the facts
that a party failed to communicate (or miscommunicated)
D) Materiality is judged by the importance or relevance to the
contract and the influence of the facts on the party to whom the
communication is owed.
⼀Answer:⼀ Materiality of a representation is determined by
different rules as compared to materiality of a concealment
Insurance is an example of which type of risk management
technique?
A) Risk sharing
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B) Risk reduction
C) Risk transfer
D) Risk avoidance
E) Risk retention
⼀Answer:⼀ Transfer of risk
The term for dishonest tendencies that increase the probability of
loss, such as hiring someone to steal your property, is what?
⼀Answer:⼀ Moral Hazard
Which insurance company department is responsible for risk
selection?
⼀Answer:⼀ Underwriting
An underwriter will consider each of the following factors when
evaluating a risk, except:
A) Claim history
B) Hazards
C) Nature of the risk
D) Rates
⼀Answer:⼀ Rates.
(The underwriter protects the insurer against adverse selection, by
evaluating the factors likely to contribute to a loss. Rates do not have
such an impact.)
All of the following are requisites of an ideally insurable risk,
except:
A) The loss must be accidental
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B) There must be a large number of homogeneous units or groups
with the same perils
C) The loss must be unpredictable
D) The premium must be affordable/economically feasible
E) Catastrophic perils are excluded; examples include war, nuclear
hazard and illegal operations.
⼀Answer:⼀ The loss must be unpredictable
(The chance of loss must be measurable/calculable. A statistical
expectation of loss is used by insurers to calculate premiums.)
Self-insurance is an example of which of the following type of risk
management?
A) Retaining the risk
B) Sharing the risk
C) Avoiding risk
D) Transferring risk
⼀Answer:⼀ Retaining the risk
Which of the following statements is true concerning the National
Association of Insurance Commissioners?
A) Each commissioner may accept or not accept the
recommendations that concern his or her state
B) Commissioners must accept recommendations from the NAIC
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⼀Answer:⼀ Each commissioner may accept or not accept the
recommendations that concern his or her state
(The NAIC is only an advisory group and members do not have to
accept its recommendations.)
Which of the following losses would not be covered under an
insurance policy?
A) Death due to accident
B) Death due to cancer
C) Death incurred during an operation of drug smuggling
⼀Answer:⼀ An operation of drug smuggling
A Surplus Lines Broker is best described as what?
⼀Answer:⼀ They place risks with nonadmitted insurers when
coverage cannot be placed with admitted insurer carriers
Which type of risk involves the possibility of loss or gain?
⼀Answer:⼀ Speculative
Gambling is considered which of the following types of risk?
A) pure
B) speculative
⼀Answer:⼀ Speculative
Which insurance provides coverage when insurance is not
available from an admitted carrier in your state?
AD Banker Life and Health Chapter 1 Exam
Questions with Detailed Verified Answers
An agent that enters into agreements with more than one insurer is
what?
⼀Answer:⼀ Independent
An insurer that is authorized to transact insurance in California
and has been issued a Certificate of Authority from the California
Department of Insurance is a(n):
⼀Answer:⼀ Admitted Insurer
Which statement is false regarding 'materiality' in California?
A) A statement is material if its disclosure or lack of disclosure
would change the insurer's decision to issue a policy for the same
premium
B) Materiality of a representation is determined by different rules as
compared to materiality of a concealment
C) Materiality is not determined by the event but rather by the facts
that a party failed to communicate (or miscommunicated)
D) Materiality is judged by the importance or relevance to the
contract and the influence of the facts on the party to whom the
communication is owed.
⼀Answer:⼀ Materiality of a representation is determined by
different rules as compared to materiality of a concealment
Insurance is an example of which type of risk management
technique?
A) Risk sharing
, Page | 2
B) Risk reduction
C) Risk transfer
D) Risk avoidance
E) Risk retention
⼀Answer:⼀ Transfer of risk
The term for dishonest tendencies that increase the probability of
loss, such as hiring someone to steal your property, is what?
⼀Answer:⼀ Moral Hazard
Which insurance company department is responsible for risk
selection?
⼀Answer:⼀ Underwriting
An underwriter will consider each of the following factors when
evaluating a risk, except:
A) Claim history
B) Hazards
C) Nature of the risk
D) Rates
⼀Answer:⼀ Rates.
(The underwriter protects the insurer against adverse selection, by
evaluating the factors likely to contribute to a loss. Rates do not have
such an impact.)
All of the following are requisites of an ideally insurable risk,
except:
A) The loss must be accidental
, Page | 3
B) There must be a large number of homogeneous units or groups
with the same perils
C) The loss must be unpredictable
D) The premium must be affordable/economically feasible
E) Catastrophic perils are excluded; examples include war, nuclear
hazard and illegal operations.
⼀Answer:⼀ The loss must be unpredictable
(The chance of loss must be measurable/calculable. A statistical
expectation of loss is used by insurers to calculate premiums.)
Self-insurance is an example of which of the following type of risk
management?
A) Retaining the risk
B) Sharing the risk
C) Avoiding risk
D) Transferring risk
⼀Answer:⼀ Retaining the risk
Which of the following statements is true concerning the National
Association of Insurance Commissioners?
A) Each commissioner may accept or not accept the
recommendations that concern his or her state
B) Commissioners must accept recommendations from the NAIC
, Page | 4
⼀Answer:⼀ Each commissioner may accept or not accept the
recommendations that concern his or her state
(The NAIC is only an advisory group and members do not have to
accept its recommendations.)
Which of the following losses would not be covered under an
insurance policy?
A) Death due to accident
B) Death due to cancer
C) Death incurred during an operation of drug smuggling
⼀Answer:⼀ An operation of drug smuggling
A Surplus Lines Broker is best described as what?
⼀Answer:⼀ They place risks with nonadmitted insurers when
coverage cannot be placed with admitted insurer carriers
Which type of risk involves the possibility of loss or gain?
⼀Answer:⼀ Speculative
Gambling is considered which of the following types of risk?
A) pure
B) speculative
⼀Answer:⼀ Speculative
Which insurance provides coverage when insurance is not
available from an admitted carrier in your state?
