LOMA 308 Module 2 Practice Questions
and Answers | 100% Pass
Suppose that you want to start your own insurance company. The first thing you need to
decide is what kind of structure your company will have. Which organizational structures
do you think you can choose from?
a. sole proprietorship
b. partnership
c. corporation - Answer✔️✔️-c. - Laws in most jurisdictions require insurance companies
to be organized as corporations. In this lesson, you'll learn why that structure is
required. You'll also learn how organizational form and management affect the way an
insurance company does business.
Sole Proprietorship - Answer✔️✔️-is created, owned, and operated by one person.
he owner earns all company profits and is responsible for all company debts.
Company operations cease if the owner dies.
The company is considered a privately held company because ownership is restricted to
a specified individual.
privately held company - Answer✔️✔️-A company in which ownership is restricted to
specified individuals. Contrast with publicly held company.
partnership - Answer✔️✔️-is created, owned, and operated by two or more partners.
Partners earn all company profits and are responsible for all company debts.
©SOPHIABENNETT 2024/2025
7:35 PM
,A two-owner partnership dissolves if a partner dies or withdraws; a partnership with
many owners will continue as long as there are two or more owners.
The company is considered a privately held company because ownership is limited to
specified individuals.
Corporation - Answer✔️✔️-is a legal entity created by government authority.
It's separate from its owners, so owners can't be held responsible for company debts.
Operations continue even if one or more owners die or withdraw.
It can sue or be sued, enter into contracts, and own property.
It can be a privately held company or a publicly held company that sells ownership
shares to the public.
publicly held company - Answer✔️✔️-A company that sells ownership shares to the
public. Contrast with privately held company.
requirements for incorporation - Answer✔️✔️-In the U.S., insurance companies are
incorporated at the state level.
A description of the company, including its name, location, plan for organizing
operations, and the type of business it intends to conduct
The names of the company's original directors
The amount of initial investment being made by company owners
Licensing - Answer✔️✔️-license granting the insurer the legal authority to conduct
insurance business in a specific jurisdiction. An insurer that intends to do business in
©SOPHIABENNETT 2024/2025
7:35 PM
,more than one jurisdiction must obtain a license from each jurisdiction. In the U.S., that
means a license from each state in which the insurer will operate.
The purpose of licensing is to ensure that an insurance company is
Financially sound and able to meet its obligation to policyowners
Directed by knowledgeable and capable managers
Which of the following are characteristics of a sole proprietorship? (Choose all that
apply.)
A. Owned and operated by one person
B. All profits on sales belong to company owner(s)
C. Privately held organization
D. Operations cease if only one owner remains
E. Owned and operated by two or more people
F. Created by government authority
G. Owner(s) responsible for company debts
H. Publicly held organization
I. Owner(s) not responsible for company debts - Answer✔️✔️-A, B, C, & G
Which of the following are characteristics of a partnership? (Choose all that apply.)
A. Owned and operated by one person
B. All profits on sales belong to company owner(s)
C. Privately held organization
D. Operations cease if only one owner remains
E. Owned and operated by two or more people
©SOPHIABENNETT 2024/2025
7:35 PM
, F. Created by government authority
G. Owner(s) responsible for company debts
H. Publicly held organization
I. Owner(s) not responsible for company debts - Answer✔️✔️-B, C, D, E & G
Which of the following are characteristics of a corporation? (Choose all that apply.)
A. Owned and operated by one person
B. All profits on sales belong to company owner(s)
C. Privately held organization
D. Operations cease if only one owner remains
E. Owned and operated by two or more people
F. Created by government authority
G. Owner(s) responsible for company debts
H. Publicly held organization
I. Owner(s) not responsible for company debts - Answer✔️✔️-C, E, F, H & I
In the United States, an insurance company must be incorporated at
A. The state level only
B. The federal level only
C. Either the state level or the federal level
D. Both the state level and the federal level - Answer✔️✔️-A.- In the U.S., insurance
companies are incorporated at the state level. In Canada, insurers can be incorporated
at the provincial or federal level. In India and many other countries, insurers are
incorporated at the federal level.
In the United States, an insurance company must be licensed in
©SOPHIABENNETT 2024/2025
7:35 PM
and Answers | 100% Pass
Suppose that you want to start your own insurance company. The first thing you need to
decide is what kind of structure your company will have. Which organizational structures
do you think you can choose from?
a. sole proprietorship
b. partnership
c. corporation - Answer✔️✔️-c. - Laws in most jurisdictions require insurance companies
to be organized as corporations. In this lesson, you'll learn why that structure is
required. You'll also learn how organizational form and management affect the way an
insurance company does business.
Sole Proprietorship - Answer✔️✔️-is created, owned, and operated by one person.
he owner earns all company profits and is responsible for all company debts.
Company operations cease if the owner dies.
The company is considered a privately held company because ownership is restricted to
a specified individual.
privately held company - Answer✔️✔️-A company in which ownership is restricted to
specified individuals. Contrast with publicly held company.
partnership - Answer✔️✔️-is created, owned, and operated by two or more partners.
Partners earn all company profits and are responsible for all company debts.
©SOPHIABENNETT 2024/2025
7:35 PM
,A two-owner partnership dissolves if a partner dies or withdraws; a partnership with
many owners will continue as long as there are two or more owners.
The company is considered a privately held company because ownership is limited to
specified individuals.
Corporation - Answer✔️✔️-is a legal entity created by government authority.
It's separate from its owners, so owners can't be held responsible for company debts.
Operations continue even if one or more owners die or withdraw.
It can sue or be sued, enter into contracts, and own property.
It can be a privately held company or a publicly held company that sells ownership
shares to the public.
publicly held company - Answer✔️✔️-A company that sells ownership shares to the
public. Contrast with privately held company.
requirements for incorporation - Answer✔️✔️-In the U.S., insurance companies are
incorporated at the state level.
A description of the company, including its name, location, plan for organizing
operations, and the type of business it intends to conduct
The names of the company's original directors
The amount of initial investment being made by company owners
Licensing - Answer✔️✔️-license granting the insurer the legal authority to conduct
insurance business in a specific jurisdiction. An insurer that intends to do business in
©SOPHIABENNETT 2024/2025
7:35 PM
,more than one jurisdiction must obtain a license from each jurisdiction. In the U.S., that
means a license from each state in which the insurer will operate.
The purpose of licensing is to ensure that an insurance company is
Financially sound and able to meet its obligation to policyowners
Directed by knowledgeable and capable managers
Which of the following are characteristics of a sole proprietorship? (Choose all that
apply.)
A. Owned and operated by one person
B. All profits on sales belong to company owner(s)
C. Privately held organization
D. Operations cease if only one owner remains
E. Owned and operated by two or more people
F. Created by government authority
G. Owner(s) responsible for company debts
H. Publicly held organization
I. Owner(s) not responsible for company debts - Answer✔️✔️-A, B, C, & G
Which of the following are characteristics of a partnership? (Choose all that apply.)
A. Owned and operated by one person
B. All profits on sales belong to company owner(s)
C. Privately held organization
D. Operations cease if only one owner remains
E. Owned and operated by two or more people
©SOPHIABENNETT 2024/2025
7:35 PM
, F. Created by government authority
G. Owner(s) responsible for company debts
H. Publicly held organization
I. Owner(s) not responsible for company debts - Answer✔️✔️-B, C, D, E & G
Which of the following are characteristics of a corporation? (Choose all that apply.)
A. Owned and operated by one person
B. All profits on sales belong to company owner(s)
C. Privately held organization
D. Operations cease if only one owner remains
E. Owned and operated by two or more people
F. Created by government authority
G. Owner(s) responsible for company debts
H. Publicly held organization
I. Owner(s) not responsible for company debts - Answer✔️✔️-C, E, F, H & I
In the United States, an insurance company must be incorporated at
A. The state level only
B. The federal level only
C. Either the state level or the federal level
D. Both the state level and the federal level - Answer✔️✔️-A.- In the U.S., insurance
companies are incorporated at the state level. In Canada, insurers can be incorporated
at the provincial or federal level. In India and many other countries, insurers are
incorporated at the federal level.
In the United States, an insurance company must be licensed in
©SOPHIABENNETT 2024/2025
7:35 PM
