Personal Lines Study Guide ACTUAL
UPDATED Exam Questions and CORRECT
Answers
Insurance is - CORRECT ANSWER - a way of managing the risk of loss from a covered
peril.
law of large numbers - CORRECT ANSWER - makes similar losses in larger volumes
statistically predictable.
insurance coverage is purchased from private insurers through the - CORRECT
ANSWER - voluntary market (also called the standard market).
Coverage is also available from government insurers or through a - CORRECT
ANSWER - residual market
A stock insurer is owned by - CORRECT ANSWER - its stockholders
A mutual insurer is owned by - CORRECT ANSWER - its policyholders.
Insurance purchased by insurance companies to protect themselves against catastrophic loss is
called - CORRECT ANSWER - reinsurance.
A domestic insurer is - CORRECT ANSWER - organized under the laws of a given state
A foreign insurer is organized - CORRECT ANSWER - under the laws of another state,
district, or territory.
An alien insurer is organized - CORRECT ANSWER - outside of the United States.
,An insurer is said to be admitted in a given state if - CORRECT ANSWER - it is issued a
certificate of authority by that state's department of insurance.
Unauthorized or non-admitted insurers that are permitted to write policies on risks that admitted
insurers cannot underwrite are called - CORRECT ANSWER - surplus lines insurers.
Insurers use _ to select risks that fall into the normal range of the insurer's expected losses -
CORRECT ANSWER - underwriters.
The underwriter uses the _ and other information sources to check for the applicant's insurability
- CORRECT ANSWER - insurance application.
The file and use method allows insurers to - CORRECT ANSWER - use rates as soon as
they are filed with the state regulatory authority.
The use and file method allows insurers to - CORRECT ANSWER - use rates as long as
they are filed within a certain number of days after use.
The prior approval method - CORRECT ANSWER - requires the rates to be accepted by
the state regulatory authority before they can be used.
An agent - CORRECT ANSWER - transacts insurance on behalf of an insurer.
A broker - CORRECT ANSWER - transacts insurance on behalf of an insured.
An agent is granted authority to represent the insurer under the __ which assigns responsibility to
the insurer for the agent's contractual acts - CORRECT ANSWER - law of agency
An agent has a __ to handle the funds of others - CORRECT ANSWER - fiduciary duty
, Authority that is written in the agency contract is called - CORRECT ANSWER - express
authority
Authority that is presumed or interpreted based on the agent's actions is called - CORRECT
ANSWER - implied authority.
Authority that arises when the insurer does not act to stop an agent from exceeding contractual
authority is called - CORRECT ANSWER - apparent authority. (All three are equally
binding)
The business of insurance is regulated on the - CORRECT ANSWER - state level.
The __ protects the privacy of consumer credit information by regulating the ways insurers
collect/use and store credit reports - CORRECT ANSWER - Fair Credit Reporting Act.
The___ provides consumers with the legal right to opt out of information sharing and requires
insurers to provide privacy notices at the time the customer relationship is established and
annually thereafter - CORRECT ANSWER - Gramm-Leach-Bliley Act (GLBA)
The __ is a temporary program to provide reinsurance for losses arising from the peril of
terrorism which is generally too catastrophic to be covered in the private market - CORRECT
ANSWER - Terrorism Risk Insurance Act (TRIA)
The Terrorism Insurance Program is administered by the ___ who determines what is considered
an act of terrorism - CORRECT ANSWER - Secretary of Treasury
A contract - CORRECT ANSWER - is an agreement between two or more parties that is
enforceable by law.
UPDATED Exam Questions and CORRECT
Answers
Insurance is - CORRECT ANSWER - a way of managing the risk of loss from a covered
peril.
law of large numbers - CORRECT ANSWER - makes similar losses in larger volumes
statistically predictable.
insurance coverage is purchased from private insurers through the - CORRECT
ANSWER - voluntary market (also called the standard market).
Coverage is also available from government insurers or through a - CORRECT
ANSWER - residual market
A stock insurer is owned by - CORRECT ANSWER - its stockholders
A mutual insurer is owned by - CORRECT ANSWER - its policyholders.
Insurance purchased by insurance companies to protect themselves against catastrophic loss is
called - CORRECT ANSWER - reinsurance.
A domestic insurer is - CORRECT ANSWER - organized under the laws of a given state
A foreign insurer is organized - CORRECT ANSWER - under the laws of another state,
district, or territory.
An alien insurer is organized - CORRECT ANSWER - outside of the United States.
,An insurer is said to be admitted in a given state if - CORRECT ANSWER - it is issued a
certificate of authority by that state's department of insurance.
Unauthorized or non-admitted insurers that are permitted to write policies on risks that admitted
insurers cannot underwrite are called - CORRECT ANSWER - surplus lines insurers.
Insurers use _ to select risks that fall into the normal range of the insurer's expected losses -
CORRECT ANSWER - underwriters.
The underwriter uses the _ and other information sources to check for the applicant's insurability
- CORRECT ANSWER - insurance application.
The file and use method allows insurers to - CORRECT ANSWER - use rates as soon as
they are filed with the state regulatory authority.
The use and file method allows insurers to - CORRECT ANSWER - use rates as long as
they are filed within a certain number of days after use.
The prior approval method - CORRECT ANSWER - requires the rates to be accepted by
the state regulatory authority before they can be used.
An agent - CORRECT ANSWER - transacts insurance on behalf of an insurer.
A broker - CORRECT ANSWER - transacts insurance on behalf of an insured.
An agent is granted authority to represent the insurer under the __ which assigns responsibility to
the insurer for the agent's contractual acts - CORRECT ANSWER - law of agency
An agent has a __ to handle the funds of others - CORRECT ANSWER - fiduciary duty
, Authority that is written in the agency contract is called - CORRECT ANSWER - express
authority
Authority that is presumed or interpreted based on the agent's actions is called - CORRECT
ANSWER - implied authority.
Authority that arises when the insurer does not act to stop an agent from exceeding contractual
authority is called - CORRECT ANSWER - apparent authority. (All three are equally
binding)
The business of insurance is regulated on the - CORRECT ANSWER - state level.
The __ protects the privacy of consumer credit information by regulating the ways insurers
collect/use and store credit reports - CORRECT ANSWER - Fair Credit Reporting Act.
The___ provides consumers with the legal right to opt out of information sharing and requires
insurers to provide privacy notices at the time the customer relationship is established and
annually thereafter - CORRECT ANSWER - Gramm-Leach-Bliley Act (GLBA)
The __ is a temporary program to provide reinsurance for losses arising from the peril of
terrorism which is generally too catastrophic to be covered in the private market - CORRECT
ANSWER - Terrorism Risk Insurance Act (TRIA)
The Terrorism Insurance Program is administered by the ___ who determines what is considered
an act of terrorism - CORRECT ANSWER - Secretary of Treasury
A contract - CORRECT ANSWER - is an agreement between two or more parties that is
enforceable by law.
