Michigan Personal Lines Exam || QUESTIONS WITH
A+ VERIFIED SOLUTIONS.
transfer of risk from person or business to insurer. correct answers insurance
can end up with a loss or win correct answers Speculative risk
can only end up with a loss correct answers pure risk
Risks the insurance company are liable for. correct answers exposure
the cause of a loss correct answers peril
the unintended, unforeseen damage to property, injury, or amount paid. correct answers Loss
physical loss to property with no intervening cause. correct answers Direct Loss
Consequential loss as the result from a direct loss. correct answers Indirect Loss
anything that increases the chance that a loss will occur. correct answers Hazard
A hazard that can be seen. correct answers Physical Hazard
Dishonesty correct answers moral hazard
Carelessness correct answers morale hazard
Two or more individuals or businesses agree to pay a portion of any loss. correct answers
Sharing
insurance company pays the insured if they have a loss. (the insured no longer bears that risk.
correct answers Transfer
eliminating any particular risk by not engaging in a certain activity. correct answers avoidance
the individual or business will pay for the loss if it occurs or a portion of the loss via a
deductible. correct answers Retention
Lessening the chance that a loss will occur, or lessening the extent of a loss. correct answers
Reduction
An agreement between the insured and insurer.
- 1st party - insured (customer)
-2nd party - insurer (insurance company) correct answers Contract (policy)
,The larger the group, the more accurately losses can be predicted. correct answers Law Of Large
Numbers
the tendency for higher risk individuals to get and keep insurance as compared to individuals that
represent an average level of risk.
-Risks that are greater than average chance of loss.
-Not wanted by insurers.
-Tendency for high risk individuals to get and keep insurance.
-Why insurers go through the underwriting process
-High risk= higher rate to insure or refusal correct answers Adverse Selection
insurance for insurers. It transfers risk from one insurer to another insurer. correct answers
Reinsurance
The reinsurer considers each risk before allowing the transfer from the ceding company. correct
answers facultative reinsurance
The reinsurer accepts all risks of a certain type from the ceding company. correct answers treaty
reinsurance
business formed as a corporation and owned by its stockholders
-Owned by stockholders
-Dividend is not guaranteed
-Dividend is paid to stockholder
-Dividend is taxable to stockholder
-Issue non-participating policies correct answers Stock Insurer
does not have stock or stockholders. It is owned by its policyholders (customers) also known as
policy owners.
-Owned by policyholders
-Dividend is not guaranteed
-Dividend is paid to policyholder
-Dividend is not taxable
-Issue participating policies correct answers Mutual Insurer
the state where a company is incorporated correct answers Domestic
company is incorporated in another state or US territory. correct answers Foreign
company is incorporated in another country correct answers Alien
-Insurance company
-Admitted
-Certificate of authority
-Sell, place, and service most insurance contracts correct answers Authorized
, -insurance company
-Nonadmitted
-No certificate of authority
-Sell surplus lines insurance products correct answers Unauthorized
-Insurance sold by unauthorized/nonadmitted insurers
-Can only be sold to certain high risk insureds
-Cannot be sold solely for a cheaper rate than licensed/admitted insurers correct answers Surplus
lines
individuals that represent only one company. They are independent contractors, not employees of
the insurer. correct answers Captive agents
contracts made by the agent are considered to be contracts of the insurer. correct answers Law Of
Agency
Authorities written in agent contract correct answers Express authority
authorities not written in agent contract but tasks agent must perform. correct answers Implied
authority
tasks the agent does that a reasonable person would assume as authority. correct answers
Apparent authority
Trust
-Promptly sends premiums to the insurer.
-Has knowledge of products
-Complies with laws and regulations.
-Does not commingle funds correct answers Fiduciary
CLOAC
Consideration: Money and statements made on application:
Legal Purpose: Risk transfer that does not violate the law
Offer:
- insured submits application and first month premium to insurer.
- Insurer accepts or insurer declines the risk
CounterOffer:
Agrees to issue policy but with higher premium or restrictions
Insured either accepts the conditions or withdraws their application.
Acceptance: Offer must be unconditional and unqualified.
Competent Parties:
- Legal age (usually 18)
- Mentally sane
- Sober correct answers Elements Of A legal Contract
Money and statements made on application: correct answers Consideration
A+ VERIFIED SOLUTIONS.
transfer of risk from person or business to insurer. correct answers insurance
can end up with a loss or win correct answers Speculative risk
can only end up with a loss correct answers pure risk
Risks the insurance company are liable for. correct answers exposure
the cause of a loss correct answers peril
the unintended, unforeseen damage to property, injury, or amount paid. correct answers Loss
physical loss to property with no intervening cause. correct answers Direct Loss
Consequential loss as the result from a direct loss. correct answers Indirect Loss
anything that increases the chance that a loss will occur. correct answers Hazard
A hazard that can be seen. correct answers Physical Hazard
Dishonesty correct answers moral hazard
Carelessness correct answers morale hazard
Two or more individuals or businesses agree to pay a portion of any loss. correct answers
Sharing
insurance company pays the insured if they have a loss. (the insured no longer bears that risk.
correct answers Transfer
eliminating any particular risk by not engaging in a certain activity. correct answers avoidance
the individual or business will pay for the loss if it occurs or a portion of the loss via a
deductible. correct answers Retention
Lessening the chance that a loss will occur, or lessening the extent of a loss. correct answers
Reduction
An agreement between the insured and insurer.
- 1st party - insured (customer)
-2nd party - insurer (insurance company) correct answers Contract (policy)
,The larger the group, the more accurately losses can be predicted. correct answers Law Of Large
Numbers
the tendency for higher risk individuals to get and keep insurance as compared to individuals that
represent an average level of risk.
-Risks that are greater than average chance of loss.
-Not wanted by insurers.
-Tendency for high risk individuals to get and keep insurance.
-Why insurers go through the underwriting process
-High risk= higher rate to insure or refusal correct answers Adverse Selection
insurance for insurers. It transfers risk from one insurer to another insurer. correct answers
Reinsurance
The reinsurer considers each risk before allowing the transfer from the ceding company. correct
answers facultative reinsurance
The reinsurer accepts all risks of a certain type from the ceding company. correct answers treaty
reinsurance
business formed as a corporation and owned by its stockholders
-Owned by stockholders
-Dividend is not guaranteed
-Dividend is paid to stockholder
-Dividend is taxable to stockholder
-Issue non-participating policies correct answers Stock Insurer
does not have stock or stockholders. It is owned by its policyholders (customers) also known as
policy owners.
-Owned by policyholders
-Dividend is not guaranteed
-Dividend is paid to policyholder
-Dividend is not taxable
-Issue participating policies correct answers Mutual Insurer
the state where a company is incorporated correct answers Domestic
company is incorporated in another state or US territory. correct answers Foreign
company is incorporated in another country correct answers Alien
-Insurance company
-Admitted
-Certificate of authority
-Sell, place, and service most insurance contracts correct answers Authorized
, -insurance company
-Nonadmitted
-No certificate of authority
-Sell surplus lines insurance products correct answers Unauthorized
-Insurance sold by unauthorized/nonadmitted insurers
-Can only be sold to certain high risk insureds
-Cannot be sold solely for a cheaper rate than licensed/admitted insurers correct answers Surplus
lines
individuals that represent only one company. They are independent contractors, not employees of
the insurer. correct answers Captive agents
contracts made by the agent are considered to be contracts of the insurer. correct answers Law Of
Agency
Authorities written in agent contract correct answers Express authority
authorities not written in agent contract but tasks agent must perform. correct answers Implied
authority
tasks the agent does that a reasonable person would assume as authority. correct answers
Apparent authority
Trust
-Promptly sends premiums to the insurer.
-Has knowledge of products
-Complies with laws and regulations.
-Does not commingle funds correct answers Fiduciary
CLOAC
Consideration: Money and statements made on application:
Legal Purpose: Risk transfer that does not violate the law
Offer:
- insured submits application and first month premium to insurer.
- Insurer accepts or insurer declines the risk
CounterOffer:
Agrees to issue policy but with higher premium or restrictions
Insured either accepts the conditions or withdraws their application.
Acceptance: Offer must be unconditional and unqualified.
Competent Parties:
- Legal age (usually 18)
- Mentally sane
- Sober correct answers Elements Of A legal Contract
Money and statements made on application: correct answers Consideration
