Mass State Life Insurance Exam (Already Graded) with 100% Correct Answers

Which of the following describes a participating life insurance policy? - Ans: A participating life policy is one in which the policyowner 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? - Ans: 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? - Ans: Upon completion of the application The State Guaranty Association guarantees - Ans: that a claim will be paid if an admitted insurer becomes insolvent Dividends from a mutual insurance company are paid to whom? - Ans: Policyholders What is considered the accounting measurement of an insurance company's future obligations to its policyowners? - Ans: reserves A group-owned insurance company that is formed to assume and spread the liability risks of its members is known as a - Ans: risk retention group Which of the following is a syndicate established by a group of insurers to share underwriting duties? - Ans: Lloyd's organization An agent's authority to bind an insurer to an insurance contract may be granted in the - Ans: agent's contract and the insurance company's appointment Dividends from a stock insurance company are normally sent to - Ans: shareholders Law of Large numbers - Ans: -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 - Ans: -involves opportunity for either loss or gain not covered by insurance companies pure risk - Ans: -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 - Ans: simply avoiding as many risks as possible -effective but not always practical treatment of risk through- reduction - Ans: 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 - Ans: 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 treatment of risk through- retention - Ans: also known as self-insurance: when individuals have the financial ability to fund losses by themselves when they occur