MASSACHUSETTS LIFE AND HEALTH
INSURANCE EXAM CORRECT
QUESTIONS & ANSWERS(RATED A+)
Insurance - ANSWER Transfer of Risk
Risk - ANSWER Uncertainty/ Possibility of Loss
Exposure - ANSWER Risks for which the insurance company would be liable
Peril - ANSWER Cause of Loss
Hazard - ANSWER Something that causes an increase in the chance of loss
Physical Hazard - ANSWER Hazard that can be seen
Moral Hazard - ANSWER A belief that intentionally causing a loss is acceptable
Morale Hazard - ANSWER Carelessness
STARR - ANSWER Method of handling risk
S- Method of handling risks - ANSWER Sharing
T- Method of handling risk - ANSWER Transfer
A- Method of handling risk - ANSWER Avoidance
R- Method of handling risk - ANSWER Retention
R- Method of handling risk - ANSWER Reduction
Contract Policy - ANSWER An agreement between the insured and the insurer
Law of Large Numbers - ANSWER The larger the group, the more accurate losses can
be predicted
CANHAM Risks - ANSWER Can be insured with the following characteristics
C- CANHAM Risks - ANSWER Calculable
A- CANHAM Risks - ANSWER Affordable
,N- CANHAM Risks - ANSWER Non- Catastrophic
H- CANHAM Risks - ANSWER Homogeneous
A- CANHAM Risks - ANSWER Accidental
M- CANHAM Risks - ANSWER Measurable
Adverse Selection - ANSWER risks that have a greater than average chance of loss
Reinsurance- - ANSWER An insurance company sells some of its risk to other
insurance companies.
Facultative Reinsurance - ANSWER the reinsurer evaluates each risk before allowing
the transfer
Treaty Reinsurance - ANSWER the reinsurer accepts the transfer according to an
agreement called a treaty
Stock Insurer - ANSWER An insurer that is owned by its stockholders and formed as a
corporation for the purpose of earning a profit for the stockholders.- Issues Non Par
Policies
Mutual Insurer - ANSWER An insurer that is owned by its policyholders and formed as a
corporation for the purpose of providing insurance to them.- Non Taxable dividends &
Participating Polcies
Fraternal Insurer - ANSWER provides insurance and other benefits
must be a member of the society to get the benefits
Reciprocal Insurers - ANSWER unincorporated groups of people that provide insurance
for one another through individual indemnity agreements
Llyod's Associations - ANSWER Organizations that provide support facilities for
underwriters or groups of individuals that accept insurance risk.
Risk Retention Group - ANSWER A liability insurance company owned by its members,
which are exposed to similar liability risks by virtue of being in the same business or
industry.
Risk Purchasing Groups - ANSWER Groups of people with similar insurance needs who
form an organization to buy insurance as a group.
Self-insurance - ANSWER a business that pays its own claims
Residual Market - ANSWER insurance from the state or federal government
,Insurance Company Locations - ANSWER Domestic, Foreign, and Alien
Certificate of Authority - ANSWER state license for an insurance company
Admitted or Authorized - ANSWER state requires the insurance company to have a
certificate of authority
Non-admitted - ANSWER unauthorized-insurance company not required to have a
Certificate of Authority from the state
Surplus Lines - ANSWER any type of insurance for which there is no available market
within the state, and the coverage must be placed with a non admitted insurer
Methods of Marketing - ANSWER - Independent
- Exclusive or captive
- General agents or managing general agents
- direct writing companies
Agency - ANSWER The insurance agent acts on behalf of principal (Insurance
Company)
Agent Authority - ANSWER express, implied, apparent
Fiduciary Trust - ANSWER - Promptly sends premiums to insurer
- Has knowledge of products
- Complies with laws and regulations
- Does not commingle funds
Legal Contract - ANSWER Consideration, Legal Purpose, Offer (Made by Insured),
Acceptance, Competent Parties
Adhesion - ANSWER Policy written by the insurance company
aleatory - ANSWER not equal value - small premium for a large amount of coverage
Utmost Good Faith - ANSWER An obligation to act in complete honesty and to disclose
all relevant facts.
indemnity - ANSWER pay for the loss but with no gain
representation - ANSWER believed to be true
Misrepresentation - ANSWER information that is not true, but would not affect the
insurance company decision
, Material Misrepresentation - ANSWER - a false statement that changes the outcome of
issuing a policy
- generally with the health statement
warranty - ANSWER guaranteed to be true
concealment - ANSWER failure to disclose known facts
fraud - ANSWER intentional act to cheat another
waiver - ANSWER voluntary giving up of a right
estoppel - ANSWER actions reasonably relied on by one party cant be denied by the
party that accepted the same previously
Fraud and False Stataments - ANSWER Fine and or imprisonment (10-15 years)
*Embezzlement included
Changes in the Application - ANSWER must be initialed by the applicant
Backdating - ANSWER Usually no more than 6 months
Required Signatures - ANSWER - insured
- producer/agent
- applicant (if not the insured)
producers report - ANSWER - completed by the producer (agent).
- not attached to policy if issued.
Conditional Receipt - ANSWER Premium with the application; coverage effective as of
the date of application or medical exams - whichever is later
Binding Receipt - ANSWER Temporary, not commmon in life insurance
Underwriting Sources of Information - ANSWER application, medical exams, physicians
statement, AIDS Testing, Medical Information Buereau, Consumer Reports,
Investigative Reports
Classification of Risks - ANSWER Standard, Preferred, Substandard, Declined
Agent Delivery - ANSWER Usually must get signed delivery receipt
Statement of Good Health - ANSWER Required if no premium with application, if health
changed- agent can't deliver policy
Effective Date of coverage - ANSWER - Terms of conditional receipt is issued
INSURANCE EXAM CORRECT
QUESTIONS & ANSWERS(RATED A+)
Insurance - ANSWER Transfer of Risk
Risk - ANSWER Uncertainty/ Possibility of Loss
Exposure - ANSWER Risks for which the insurance company would be liable
Peril - ANSWER Cause of Loss
Hazard - ANSWER Something that causes an increase in the chance of loss
Physical Hazard - ANSWER Hazard that can be seen
Moral Hazard - ANSWER A belief that intentionally causing a loss is acceptable
Morale Hazard - ANSWER Carelessness
STARR - ANSWER Method of handling risk
S- Method of handling risks - ANSWER Sharing
T- Method of handling risk - ANSWER Transfer
A- Method of handling risk - ANSWER Avoidance
R- Method of handling risk - ANSWER Retention
R- Method of handling risk - ANSWER Reduction
Contract Policy - ANSWER An agreement between the insured and the insurer
Law of Large Numbers - ANSWER The larger the group, the more accurate losses can
be predicted
CANHAM Risks - ANSWER Can be insured with the following characteristics
C- CANHAM Risks - ANSWER Calculable
A- CANHAM Risks - ANSWER Affordable
,N- CANHAM Risks - ANSWER Non- Catastrophic
H- CANHAM Risks - ANSWER Homogeneous
A- CANHAM Risks - ANSWER Accidental
M- CANHAM Risks - ANSWER Measurable
Adverse Selection - ANSWER risks that have a greater than average chance of loss
Reinsurance- - ANSWER An insurance company sells some of its risk to other
insurance companies.
Facultative Reinsurance - ANSWER the reinsurer evaluates each risk before allowing
the transfer
Treaty Reinsurance - ANSWER the reinsurer accepts the transfer according to an
agreement called a treaty
Stock Insurer - ANSWER An insurer that is owned by its stockholders and formed as a
corporation for the purpose of earning a profit for the stockholders.- Issues Non Par
Policies
Mutual Insurer - ANSWER An insurer that is owned by its policyholders and formed as a
corporation for the purpose of providing insurance to them.- Non Taxable dividends &
Participating Polcies
Fraternal Insurer - ANSWER provides insurance and other benefits
must be a member of the society to get the benefits
Reciprocal Insurers - ANSWER unincorporated groups of people that provide insurance
for one another through individual indemnity agreements
Llyod's Associations - ANSWER Organizations that provide support facilities for
underwriters or groups of individuals that accept insurance risk.
Risk Retention Group - ANSWER A liability insurance company owned by its members,
which are exposed to similar liability risks by virtue of being in the same business or
industry.
Risk Purchasing Groups - ANSWER Groups of people with similar insurance needs who
form an organization to buy insurance as a group.
Self-insurance - ANSWER a business that pays its own claims
Residual Market - ANSWER insurance from the state or federal government
,Insurance Company Locations - ANSWER Domestic, Foreign, and Alien
Certificate of Authority - ANSWER state license for an insurance company
Admitted or Authorized - ANSWER state requires the insurance company to have a
certificate of authority
Non-admitted - ANSWER unauthorized-insurance company not required to have a
Certificate of Authority from the state
Surplus Lines - ANSWER any type of insurance for which there is no available market
within the state, and the coverage must be placed with a non admitted insurer
Methods of Marketing - ANSWER - Independent
- Exclusive or captive
- General agents or managing general agents
- direct writing companies
Agency - ANSWER The insurance agent acts on behalf of principal (Insurance
Company)
Agent Authority - ANSWER express, implied, apparent
Fiduciary Trust - ANSWER - Promptly sends premiums to insurer
- Has knowledge of products
- Complies with laws and regulations
- Does not commingle funds
Legal Contract - ANSWER Consideration, Legal Purpose, Offer (Made by Insured),
Acceptance, Competent Parties
Adhesion - ANSWER Policy written by the insurance company
aleatory - ANSWER not equal value - small premium for a large amount of coverage
Utmost Good Faith - ANSWER An obligation to act in complete honesty and to disclose
all relevant facts.
indemnity - ANSWER pay for the loss but with no gain
representation - ANSWER believed to be true
Misrepresentation - ANSWER information that is not true, but would not affect the
insurance company decision
, Material Misrepresentation - ANSWER - a false statement that changes the outcome of
issuing a policy
- generally with the health statement
warranty - ANSWER guaranteed to be true
concealment - ANSWER failure to disclose known facts
fraud - ANSWER intentional act to cheat another
waiver - ANSWER voluntary giving up of a right
estoppel - ANSWER actions reasonably relied on by one party cant be denied by the
party that accepted the same previously
Fraud and False Stataments - ANSWER Fine and or imprisonment (10-15 years)
*Embezzlement included
Changes in the Application - ANSWER must be initialed by the applicant
Backdating - ANSWER Usually no more than 6 months
Required Signatures - ANSWER - insured
- producer/agent
- applicant (if not the insured)
producers report - ANSWER - completed by the producer (agent).
- not attached to policy if issued.
Conditional Receipt - ANSWER Premium with the application; coverage effective as of
the date of application or medical exams - whichever is later
Binding Receipt - ANSWER Temporary, not commmon in life insurance
Underwriting Sources of Information - ANSWER application, medical exams, physicians
statement, AIDS Testing, Medical Information Buereau, Consumer Reports,
Investigative Reports
Classification of Risks - ANSWER Standard, Preferred, Substandard, Declined
Agent Delivery - ANSWER Usually must get signed delivery receipt
Statement of Good Health - ANSWER Required if no premium with application, if health
changed- agent can't deliver policy
Effective Date of coverage - ANSWER - Terms of conditional receipt is issued
