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MASSACHUSETTS MASS STATE LIFE
INSURANCE EXAM PRACTICE ACTUAL PREP
QUESTIONS AND WELL REVISED ANSWERS -
LATEST AND COMPLETE UPDATE WITH
VERIFIED SOLUTIONS – ASSURES PASS
Which of the following describes a participating life insurance policy?
A participating life policy is one in which the policy owner 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?
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?
Upon completion of the application
The State Guaranty Association guarantees
that a claim will be paid if an admitted insurer becomes insolvent
Dividends from a mutual insurance company are paid to whom?
Policyholders
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What is considered the accounting measurement of an insurance company's future
obligations to its policy owners?
reserves
A group-owned insurance company that is formed to assume and spread the
liability risks of its members is known as
a risk retention group
Which of the following is a syndicate established by a group of insurers to share
underwriting duties?
Lloyd's organization
An agent's authority to bind an insurer to an insurance contract may be granted in
the
agent's contract and the insurance company's appointment
Dividends from a stock insurance company are normally sent to
shareholders
Law of Large numbers
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-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
-involves opportunity for either loss or gain
-not covered by insurance companies
pure risk
-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 simply avoiding as many risks as possible
-effective but not always practical
treatment of risk through- reduction
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
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
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treatment of risk through- retention
also known as self-insurance: when individuals have the financial ability to fund
losses by themselves when they occur
treatment of risk through- transfer 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 -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
loss ( based on law of large numbers)
- Loss must be definite and measurable - Time, place, amount, and when payable
nature of insurance
-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
MASSACHUSETTS MASS STATE LIFE
INSURANCE EXAM PRACTICE ACTUAL PREP
QUESTIONS AND WELL REVISED ANSWERS -
LATEST AND COMPLETE UPDATE WITH
VERIFIED SOLUTIONS – ASSURES PASS
Which of the following describes a participating life insurance policy?
A participating life policy is one in which the policy owner 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?
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?
Upon completion of the application
The State Guaranty Association guarantees
that a claim will be paid if an admitted insurer becomes insolvent
Dividends from a mutual insurance company are paid to whom?
Policyholders
,2|Page
What is considered the accounting measurement of an insurance company's future
obligations to its policy owners?
reserves
A group-owned insurance company that is formed to assume and spread the
liability risks of its members is known as
a risk retention group
Which of the following is a syndicate established by a group of insurers to share
underwriting duties?
Lloyd's organization
An agent's authority to bind an insurer to an insurance contract may be granted in
the
agent's contract and the insurance company's appointment
Dividends from a stock insurance company are normally sent to
shareholders
Law of Large numbers
,3|Page
-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
-involves opportunity for either loss or gain
-not covered by insurance companies
pure risk
-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 simply avoiding as many risks as possible
-effective but not always practical
treatment of risk through- reduction
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
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
, 4|Page
treatment of risk through- retention
also known as self-insurance: when individuals have the financial ability to fund
losses by themselves when they occur
treatment of risk through- transfer 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 -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
loss ( based on law of large numbers)
- Loss must be definite and measurable - Time, place, amount, and when payable
nature of insurance
-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
