Exam FX Questions Variable Michigan || with Complete
Solutions.
In insurance trasnactions, a fiduciary responsability means? correct answers Handling insurer
funds in a trust capacity
If a court ordered payment for a loss that was not covered in the policy even if it was clearly
worded, it would be an example of which legal concept? correct answers Reasonable
expectations
Events in which a person has both the chance of winning or losing are classified as correct
answers Speculative risk (not insurable)
Which of the following is an example of a producer's fiduciary duty? correct answers The trust
that a clent has when
A situation in which a person can only lose or have no change represents correct answers Pure
risk
What is a material misrepresetation? correct answers A material misrepresentation is a statement
that, if discovered, would alter the underwriting decision of the insurance company.
Which of the following is another term for an authorized insurer? correct answers Admitted
The risk of loss may be classified as correct answers Pure risk and speculative risk
An insurer that holds a Certificate of Authority in the state in which it transacts business is
considered a/an correct answers Authorized Insurer
An individual applies for a life policy. Two years ago he suffered a head injury from an accident,
so he cannot remember parts of his past, but is otherwise competent. He has also been
hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer
issues the policy and learns of his history one year later. What will probably happen? correct
answers The policy will not be affected.
In what way can an agent demonstrate a high standard of ethics? correct answers Putting the
clients best intrests before their own
ABC insurance company receives an incomplete application and issues the policy anyway. Six
months later ABC realizes the missing information. What term is used that prevents ABC from
forcing the policyowner to answer further questions? correct answers Estoppel
Which services are associated with Standard & Poor's and AM Best? correct answers Rating the
financial strength of insurance companies
,A tornado would be an example of which of the following correct answers A peril is the cause of
loss insured against in an insurance policy.
If an insurer meets the state's financial requirements and is approved to transact business in the
state, it is considered to be correct answers Authorized
What documentation grants express authority to an agent? correct answers Agents contract with
the princiapl
All of the following are examples of risk retention EXCEPT correct answers Premiums
An insured wants to transfer his personal insurance policy to a friend. Under what conditions
would this be possible? correct answers The insured will a written consent of the insurer
The risk management technique that is used to prevent a specific loss by not exposing oneself to
that activity is called correct answers Avoidance
The authority granted to an agent through the agent's contract is referred to as correct answers
Express authority
Which of the following is the basis for a claim against an insurance policy? correct answers Loss
Which of the following insurers are owned by stockholders? correct answers Stock
A producer who fails to separate premium monies from his own personal funds is guilty of
correct answers Commingling
When an individual purchases insurance, what risk management technique is he or she
practicing?
ARetention correct answers Transfer
In insurance, an offer is usually made when correct answers An applicant submits an application
to the insurer
What is a definition of a unilateral contract? correct answers One sided, one party makes an
enforceable promise
An applicant knowingly fails to communicate information that would help an underwriter make a
sound decision regarding coverage. This is an example of correct answers Concealment
An insurance company receives an application with some information missing and issues the
policy anyway. What is this called? correct answers Waiver
Which authority is NOT stated in an agent's contract but is required for the agent to conduct
business? correct answers Implied authority
, is not written in the agent's contract but is required in order for the agent to conduct business.
Implied authority exists because not every single detail of an agent's authority can be written in a
contract.
Which of the following is the most common way to transfer risk? correct answers Buy insurance
Units with the same or similar exposure to loss are referred to as correct answers Homogenous
Which of the following is NOT true regarding a Certificate of Authority? correct answers A It is
equivalent to an insurance license.
B It is issued by the state department of insurance.
C It is issued to group insurance participants.
D It may be necessary for transacting business in a specific state.
Which of the following is an example of a producer's fiduciary duty? correct answers A The trust
that a client places in the producer in regard to handling premiums.
B An obligation to state every known fact about the policy the producer is selling.
C A duty to base all transactions upon the principle of Utmost Good Faith.
D The obligation to tell the truth to the best of one's knowledge
Which of the following is NOT a goal of risk retention? correct answers To minimize the
insured's level of liability in the event of loss
Which of the following produces evaluations of insurers' financial status often used by state
departments of insurance? correct answers Am Best
Question 1 of 10
Because an agent is using stationery with the logo of an insurance company, applicants for
insurance assume that the agent is authorized to transact on behalf of that insurer. What type of
agent authority does this describe? correct answers Apparant (perceived)
When transacting business in this state an insurer formed under the laws of another country is
known as a/an correct answers Alien insurer.
Question 4 of 10
Which of the following best describes the concept that the insured pays a small amount of
premium for a large amount of risk on the part of the insurance company? correct answers
Aletory (unequal)
To legally transact insurance in this state, an insurer must obtain which of the following? correct
answers Certificate of Authority
Solutions.
In insurance trasnactions, a fiduciary responsability means? correct answers Handling insurer
funds in a trust capacity
If a court ordered payment for a loss that was not covered in the policy even if it was clearly
worded, it would be an example of which legal concept? correct answers Reasonable
expectations
Events in which a person has both the chance of winning or losing are classified as correct
answers Speculative risk (not insurable)
Which of the following is an example of a producer's fiduciary duty? correct answers The trust
that a clent has when
A situation in which a person can only lose or have no change represents correct answers Pure
risk
What is a material misrepresetation? correct answers A material misrepresentation is a statement
that, if discovered, would alter the underwriting decision of the insurance company.
Which of the following is another term for an authorized insurer? correct answers Admitted
The risk of loss may be classified as correct answers Pure risk and speculative risk
An insurer that holds a Certificate of Authority in the state in which it transacts business is
considered a/an correct answers Authorized Insurer
An individual applies for a life policy. Two years ago he suffered a head injury from an accident,
so he cannot remember parts of his past, but is otherwise competent. He has also been
hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer
issues the policy and learns of his history one year later. What will probably happen? correct
answers The policy will not be affected.
In what way can an agent demonstrate a high standard of ethics? correct answers Putting the
clients best intrests before their own
ABC insurance company receives an incomplete application and issues the policy anyway. Six
months later ABC realizes the missing information. What term is used that prevents ABC from
forcing the policyowner to answer further questions? correct answers Estoppel
Which services are associated with Standard & Poor's and AM Best? correct answers Rating the
financial strength of insurance companies
,A tornado would be an example of which of the following correct answers A peril is the cause of
loss insured against in an insurance policy.
If an insurer meets the state's financial requirements and is approved to transact business in the
state, it is considered to be correct answers Authorized
What documentation grants express authority to an agent? correct answers Agents contract with
the princiapl
All of the following are examples of risk retention EXCEPT correct answers Premiums
An insured wants to transfer his personal insurance policy to a friend. Under what conditions
would this be possible? correct answers The insured will a written consent of the insurer
The risk management technique that is used to prevent a specific loss by not exposing oneself to
that activity is called correct answers Avoidance
The authority granted to an agent through the agent's contract is referred to as correct answers
Express authority
Which of the following is the basis for a claim against an insurance policy? correct answers Loss
Which of the following insurers are owned by stockholders? correct answers Stock
A producer who fails to separate premium monies from his own personal funds is guilty of
correct answers Commingling
When an individual purchases insurance, what risk management technique is he or she
practicing?
ARetention correct answers Transfer
In insurance, an offer is usually made when correct answers An applicant submits an application
to the insurer
What is a definition of a unilateral contract? correct answers One sided, one party makes an
enforceable promise
An applicant knowingly fails to communicate information that would help an underwriter make a
sound decision regarding coverage. This is an example of correct answers Concealment
An insurance company receives an application with some information missing and issues the
policy anyway. What is this called? correct answers Waiver
Which authority is NOT stated in an agent's contract but is required for the agent to conduct
business? correct answers Implied authority
, is not written in the agent's contract but is required in order for the agent to conduct business.
Implied authority exists because not every single detail of an agent's authority can be written in a
contract.
Which of the following is the most common way to transfer risk? correct answers Buy insurance
Units with the same or similar exposure to loss are referred to as correct answers Homogenous
Which of the following is NOT true regarding a Certificate of Authority? correct answers A It is
equivalent to an insurance license.
B It is issued by the state department of insurance.
C It is issued to group insurance participants.
D It may be necessary for transacting business in a specific state.
Which of the following is an example of a producer's fiduciary duty? correct answers A The trust
that a client places in the producer in regard to handling premiums.
B An obligation to state every known fact about the policy the producer is selling.
C A duty to base all transactions upon the principle of Utmost Good Faith.
D The obligation to tell the truth to the best of one's knowledge
Which of the following is NOT a goal of risk retention? correct answers To minimize the
insured's level of liability in the event of loss
Which of the following produces evaluations of insurers' financial status often used by state
departments of insurance? correct answers Am Best
Question 1 of 10
Because an agent is using stationery with the logo of an insurance company, applicants for
insurance assume that the agent is authorized to transact on behalf of that insurer. What type of
agent authority does this describe? correct answers Apparant (perceived)
When transacting business in this state an insurer formed under the laws of another country is
known as a/an correct answers Alien insurer.
Question 4 of 10
Which of the following best describes the concept that the insured pays a small amount of
premium for a large amount of risk on the part of the insurance company? correct answers
Aletory (unequal)
To legally transact insurance in this state, an insurer must obtain which of the following? correct
answers Certificate of Authority
