LOMA 281 UPDATED ACTUAL Questions
and CORRECT Answers
waiver of premium for payor benefit - CORRECT ANSWER - insurer waives renewal
premiums if the policy owner, rather than the insured, dies or becomes totally disabled (must
provide evidence of insurability)
Contracts of Indemnity - CORRECT ANSWER - base benefits on the actual amount of the
financial loss that results from a covered event when it occurs, subject to maximum limits (other
than life insurance)
Valued Contract - CORRECT ANSWER - life insurance policies which state the benefit
payable at the time of the policy issue
Retrocessionaire - CORRECT ANSWER - The reinsurer that assumes all or part of the
reinsurance risk accepted by another reinsurer
Stock Insurer - CORRECT ANSWER - - can issue shares of stock
- owned by stockholders, who have voting rights in the company
- stockholders may receive shares of operating profits known as stock dividends
Mutual Insurer - CORRECT ANSWER - - owned by policyowners
- policyowners have membership rights (voting rights)
- policyowners may periodically receive an amount of money known as a policy dividend
Fraternal Benefit Society - CORRECT ANSWER - - owned by members of fraternal lodge
system
- provides social and insurance benefits only to fraternal members of their families
- legally required to have a representative form of government
,Solvency Regulation - CORRECT ANSWER - -assets must be sufficient to offset
liabilities
-calculation of reserves
-premium to surplus ratio
-investment types and quality
-annual statement must be filed
-guaranty funds
Market Conduct Regulation - CORRECT ANSWER - Regulation of the practices of
insurers in regard to four areas of operation: sales practices, underwriting practices, claims
practices, and bad-faith actions.
McCarran-Ferguson Act - CORRECT ANSWER - states that while the federal government
has authority to regulate the insurance industry, it would not exercise its right if the insurance
industry was regulated effectively and adequately on the state level.
Dodd-Frank Act - CORRECT ANSWER - Created the Federal Insurance Office (FIO)
with authority to monitor the insurance industry
The Life and Health Insurance Guaranty Association - CORRECT ANSWER - State's
association covers the company's benefits up to state-mandated maximums (usually up to $300k)
should the insurance company go insolvent
Unilateral Contract - CORRECT ANSWER - contract in which only one party makes a
legally enforceable promise when entering into the contract
Bilateral Contract - CORRECT ANSWER - Both parties make legally enforceable
promises
Commutative contract - CORRECT ANSWER - parties agree to exchange specified items
or services that are equal in value
, Aleatory contract - CORRECT ANSWER - one party exchanges something of value for
the other party's conditional promise
Bargaining Contract - CORRECT ANSWER - both parties set the terms and conditions
Contracts of Adhesion - CORRECT ANSWER - one party sets the contract terms that the
other party must accept or reject outright
Voidable contract - CORRECT ANSWER - contract under which one party has the right to
avoid their obligations under the contract and the other party is bound by the terms of the
contract
void contract - CORRECT ANSWER - contract that does not meet all legal requirements
Mutual Assent - CORRECT ANSWER - all parties to the contract have an understanding
of the terms and agree to those terms
Insurable Interest - CORRECT ANSWER - Any financial interest in life or property such
that, if the life or property were lost or harmed, the insured would suffer financially
Requirement for a valid contract - CORRECT ANSWER - - mutual assent
- legally adequate consideration
- lawful purpose
- contractual capacity
surrender benefit - CORRECT ANSWER - the amount of the cash value that a
policyowner is entitled to receive upon surrender of the policy
and CORRECT Answers
waiver of premium for payor benefit - CORRECT ANSWER - insurer waives renewal
premiums if the policy owner, rather than the insured, dies or becomes totally disabled (must
provide evidence of insurability)
Contracts of Indemnity - CORRECT ANSWER - base benefits on the actual amount of the
financial loss that results from a covered event when it occurs, subject to maximum limits (other
than life insurance)
Valued Contract - CORRECT ANSWER - life insurance policies which state the benefit
payable at the time of the policy issue
Retrocessionaire - CORRECT ANSWER - The reinsurer that assumes all or part of the
reinsurance risk accepted by another reinsurer
Stock Insurer - CORRECT ANSWER - - can issue shares of stock
- owned by stockholders, who have voting rights in the company
- stockholders may receive shares of operating profits known as stock dividends
Mutual Insurer - CORRECT ANSWER - - owned by policyowners
- policyowners have membership rights (voting rights)
- policyowners may periodically receive an amount of money known as a policy dividend
Fraternal Benefit Society - CORRECT ANSWER - - owned by members of fraternal lodge
system
- provides social and insurance benefits only to fraternal members of their families
- legally required to have a representative form of government
,Solvency Regulation - CORRECT ANSWER - -assets must be sufficient to offset
liabilities
-calculation of reserves
-premium to surplus ratio
-investment types and quality
-annual statement must be filed
-guaranty funds
Market Conduct Regulation - CORRECT ANSWER - Regulation of the practices of
insurers in regard to four areas of operation: sales practices, underwriting practices, claims
practices, and bad-faith actions.
McCarran-Ferguson Act - CORRECT ANSWER - states that while the federal government
has authority to regulate the insurance industry, it would not exercise its right if the insurance
industry was regulated effectively and adequately on the state level.
Dodd-Frank Act - CORRECT ANSWER - Created the Federal Insurance Office (FIO)
with authority to monitor the insurance industry
The Life and Health Insurance Guaranty Association - CORRECT ANSWER - State's
association covers the company's benefits up to state-mandated maximums (usually up to $300k)
should the insurance company go insolvent
Unilateral Contract - CORRECT ANSWER - contract in which only one party makes a
legally enforceable promise when entering into the contract
Bilateral Contract - CORRECT ANSWER - Both parties make legally enforceable
promises
Commutative contract - CORRECT ANSWER - parties agree to exchange specified items
or services that are equal in value
, Aleatory contract - CORRECT ANSWER - one party exchanges something of value for
the other party's conditional promise
Bargaining Contract - CORRECT ANSWER - both parties set the terms and conditions
Contracts of Adhesion - CORRECT ANSWER - one party sets the contract terms that the
other party must accept or reject outright
Voidable contract - CORRECT ANSWER - contract under which one party has the right to
avoid their obligations under the contract and the other party is bound by the terms of the
contract
void contract - CORRECT ANSWER - contract that does not meet all legal requirements
Mutual Assent - CORRECT ANSWER - all parties to the contract have an understanding
of the terms and agree to those terms
Insurable Interest - CORRECT ANSWER - Any financial interest in life or property such
that, if the life or property were lost or harmed, the insured would suffer financially
Requirement for a valid contract - CORRECT ANSWER - - mutual assent
- legally adequate consideration
- lawful purpose
- contractual capacity
surrender benefit - CORRECT ANSWER - the amount of the cash value that a
policyowner is entitled to receive upon surrender of the policy
