WISCONSIN LIFE INSURANCE EXAM QUESTIONS &
ANSWERS
The uncertainty or chance of a loss occurring. - answers :risk
Situations that can only result in a loss or no change. No opportunity for financial gain.
Only type of risk that insurance companies accept. - answers :pure risk
Involves the opportunity for either loss or gain. - answers :speculative risk
A unit of measure used to determine rates charged for insurance coverage. Age,
medical history, occupation, sex - answers :exposure
Conditions or situations that increase the probability of an insured loss occurring. -
answers :hazards
Individual characteristics that increase the chances of the cause of loss. Past medical
history, condition at birth like blindness - answers :physical hazards
Tendencies towards increased risk. Involve evaluating the character and reputation of
the proposed insured. Refer to those applicants who may lie on an application for
insurance, or in the past, have submitted fraudulent claims against an insurer. - answers
:moral hazards
Loss that results from the insured worrying less about losses - answers :morale hazards
The reduction, decrease, or disappearance of value of the person or property insured in
a policy. - answers :loss
Planned assumption of risk by an insured through the use of deductibles, co-payments,
or self-insurance. - answers :retention
Dealing with risk for a group of individual persons or businesses with the same or
similar exposure to loss to share the losses that occur within that group. - answers
:sharing
Attempt to lessen the possibility or severity of a loss - answers :reduction
The larger the number of people with a similar exposure to loss, the more predictable
actual losses will be. - answers :law of large numbers
The insuring of risks that are more prone to losses than the average risk - answers
:adverse selection
,Owned by the stockholders who provide the capital necessary to establish and operate
the insurance company and who share in any profits or losses. - answers :stock
companies
Policy owners do not share in profits or losses. Does not pay dividends to policyowners,
however, taxable dividends are paid to stockholders. - answers :nonparticipating
Owned by the policyowners and issue participating policies. - answers :mutual
companies
Policyowners are entitled to dividends. Non taxable. - answers :participating policies
An organization formed to provide insurance benefits for members of an affiliated lodge,
religious organization, or fraternal organization with a representative form of
government. Only sell to members and considered charitable institutions and not
insurers - answers :fraternal benefit society
Not an insurance company. Provides support facilities for underwriters or groups of
individuals that accept insurance risks. - answers :lloyds
Is a liability insurance company owned by its members. Purpose is to assume and
spread all or part of the liability of its group member. - answers :risk retention group
Entity which offers insurance to groups of similar business with similar exposures to
risk. - answers :risk purchasing group
Insurance resulting from an interchange of reciprocal agreements of indemnity among
persons known as subscribers, - answers :reciprocal
In state - answers :domestic insurer
Out of state - answers :foreign insurer
Out of country - answers :alien
1 independent agent represents several companies, nonexclusive, commissions on
personal sales, business renewal with any company - answers :independent agency
system
1 agent represents 1 company
Exclusive
Commissions on personal sales
Renewals can only be placed with the appointing insurer - answers :exclusive agency
system
-general agent-entrepreneur represents 1 company
, -exclusive
-compensation and commissions
-appoints subagents - answers :general agency system
-branch manager (supervises agents)
-salaried
-agents can be insurer's employees or independent contractors - answers :managerial
system
- no agents
- company advertises directly to consumers
- consumers apply directly to the company - answers :direct response marketing system
A contract under which one insurance company (the reinsurer) indemnifies another
insurance company for part or all of its liabilities. - answers :reinsurance
Represents the insurer - answers :agent
The authority a principal intends to grant to an agent by means of the agent's contract -
answers :express authority
Not expressed or written into the contract, but which the agent is assumed to have in
order to transact the business. - answers :implied authority
The appearance or the assumption of authority based on the actions, words, or deeds
of the principal or because of circumstances the principal created. - answers :apparent
authority
An ethical and legal obligation to perform a person's duties in a trustworthy manner. -
answers :fiduciary responsibility
Binding force in any contract. Something of value that each party gives to the other. -
answers :consideration
There is an exchange of unequal amounts or values - answers :aleatory
Requires that certain conditions must be met by the policyowner and the company in
order for the contract to be executed, and before each party fulfills its obligations. -
answers :conditional contract
A provision in an insurance policy that states that in the event of loss, an insured or a
beneficiary is permitted to collect only to the extent of the financial loss and is not
allowed to gain financially because of the existence of an insurance contract. - answers
:indemnity
ANSWERS
The uncertainty or chance of a loss occurring. - answers :risk
Situations that can only result in a loss or no change. No opportunity for financial gain.
Only type of risk that insurance companies accept. - answers :pure risk
Involves the opportunity for either loss or gain. - answers :speculative risk
A unit of measure used to determine rates charged for insurance coverage. Age,
medical history, occupation, sex - answers :exposure
Conditions or situations that increase the probability of an insured loss occurring. -
answers :hazards
Individual characteristics that increase the chances of the cause of loss. Past medical
history, condition at birth like blindness - answers :physical hazards
Tendencies towards increased risk. Involve evaluating the character and reputation of
the proposed insured. Refer to those applicants who may lie on an application for
insurance, or in the past, have submitted fraudulent claims against an insurer. - answers
:moral hazards
Loss that results from the insured worrying less about losses - answers :morale hazards
The reduction, decrease, or disappearance of value of the person or property insured in
a policy. - answers :loss
Planned assumption of risk by an insured through the use of deductibles, co-payments,
or self-insurance. - answers :retention
Dealing with risk for a group of individual persons or businesses with the same or
similar exposure to loss to share the losses that occur within that group. - answers
:sharing
Attempt to lessen the possibility or severity of a loss - answers :reduction
The larger the number of people with a similar exposure to loss, the more predictable
actual losses will be. - answers :law of large numbers
The insuring of risks that are more prone to losses than the average risk - answers
:adverse selection
,Owned by the stockholders who provide the capital necessary to establish and operate
the insurance company and who share in any profits or losses. - answers :stock
companies
Policy owners do not share in profits or losses. Does not pay dividends to policyowners,
however, taxable dividends are paid to stockholders. - answers :nonparticipating
Owned by the policyowners and issue participating policies. - answers :mutual
companies
Policyowners are entitled to dividends. Non taxable. - answers :participating policies
An organization formed to provide insurance benefits for members of an affiliated lodge,
religious organization, or fraternal organization with a representative form of
government. Only sell to members and considered charitable institutions and not
insurers - answers :fraternal benefit society
Not an insurance company. Provides support facilities for underwriters or groups of
individuals that accept insurance risks. - answers :lloyds
Is a liability insurance company owned by its members. Purpose is to assume and
spread all or part of the liability of its group member. - answers :risk retention group
Entity which offers insurance to groups of similar business with similar exposures to
risk. - answers :risk purchasing group
Insurance resulting from an interchange of reciprocal agreements of indemnity among
persons known as subscribers, - answers :reciprocal
In state - answers :domestic insurer
Out of state - answers :foreign insurer
Out of country - answers :alien
1 independent agent represents several companies, nonexclusive, commissions on
personal sales, business renewal with any company - answers :independent agency
system
1 agent represents 1 company
Exclusive
Commissions on personal sales
Renewals can only be placed with the appointing insurer - answers :exclusive agency
system
-general agent-entrepreneur represents 1 company
, -exclusive
-compensation and commissions
-appoints subagents - answers :general agency system
-branch manager (supervises agents)
-salaried
-agents can be insurer's employees or independent contractors - answers :managerial
system
- no agents
- company advertises directly to consumers
- consumers apply directly to the company - answers :direct response marketing system
A contract under which one insurance company (the reinsurer) indemnifies another
insurance company for part or all of its liabilities. - answers :reinsurance
Represents the insurer - answers :agent
The authority a principal intends to grant to an agent by means of the agent's contract -
answers :express authority
Not expressed or written into the contract, but which the agent is assumed to have in
order to transact the business. - answers :implied authority
The appearance or the assumption of authority based on the actions, words, or deeds
of the principal or because of circumstances the principal created. - answers :apparent
authority
An ethical and legal obligation to perform a person's duties in a trustworthy manner. -
answers :fiduciary responsibility
Binding force in any contract. Something of value that each party gives to the other. -
answers :consideration
There is an exchange of unequal amounts or values - answers :aleatory
Requires that certain conditions must be met by the policyowner and the company in
order for the contract to be executed, and before each party fulfills its obligations. -
answers :conditional contract
A provision in an insurance policy that states that in the event of loss, an insured or a
beneficiary is permitted to collect only to the extent of the financial loss and is not
allowed to gain financially because of the existence of an insurance contract. - answers
:indemnity
