AD Banker Chapter 1 Exam Questions &
Answers 2023/2024
A person who negotiates insurance contracts with insurers on behalf of an
applicant is known as a(n):
a. Broker
b. Consultant
c. Advisor
d. Agent/Producer - CORRECT ANSWER-a. Broker
The contract type in which only one party is legally bound to its contractual
obligations after a premium is paid is a(n) _____________ contract.
a. Personal
b. Conditional
c. Unilateral
d. Aleatory - CORRECT ANSWER-c. Unilateral
An insurer authorized to do business within this state is considered what type of
insurer?
a. Domestic
b. Foreign
c. Alien
d. Admitted - CORRECT ANSWER-d. Admitted
The Law of Agency states that a person or entity who acts on behalf of another
person, company, or government, is known as the ______________.
a. Contractor
b. Servant
c. Employee
d. Agent - CORRECT ANSWER-d. Agent
An unincorporated organization that is formed by individuals, firms, and business
corporations that exchange insurance on one another and whose members are
known as subscribers is called a:
a. Mutual Insurance Company
b. Fraternal Benefit Society
,c. Risk Retention Group
d. Reciprocal Insurance Company - CORRECT ANSWER-d. Reciprocal
Insurance Company
Which of the following would be considered legally competent to enter into a
contract?
a. A person who is under the influence of drugs or alcohol
b. A person deemed to be mentally incapacitated
c. A 13-year-old honor student
d. A 25-year-old self-employed person - CORRECT ANSWER-d. A 25-year-old
self-employed person
Which of the following is not marketing and distribution system used by the
insurers?
a. Independent Agency
b. Direct Writing
c. Captive Agency
d. Broker Agency - CORRECT ANSWER-d. Broker Agency
Before an insurer can operate in this state, it must have which of the following?
a. Approval of the National Association of Insurance Commissioners (NAIC)
b. Articles of Incorporation filed with the Secretary of State
c. State Governor's approval
d. Certificate of Authority issued by the state Insurance Department - CORRECT
ANSWER-d. Certificate of Authority issued by the state Insurance Department
Which of the following is not a type of hazard for insurance underwriting
purposes?
a. Morale
b. Incidental
c. Physical
d. Moral - CORRECT ANSWER-b. Incidental
All of the following are true of insurance in general, except:
a. It reduces uncertainty
b. It transfers risk
c. It eliminates risk
,d. It can reduce risk - CORRECT ANSWER-c. It eliminates risk
To act as an agent for an insurer, the producer must be __________ by the
insurer:
a. Licensed
b. Endorsed
c. Certified
d. Appointed - CORRECT ANSWER-d. Appointed
_____________ is generally an option only for large corporations who may want
to limit their risk up to a certain dollar amount, then buy insurance above and
beyond that amount.
a. Reciprocal insurance
b. Risk retention
c. Mutual insurance
d. Self-insurance - CORRECT ANSWER-d. Self-insurance
The authority of a producer or agent that is written in his/her contract is called:
a. Apparent
b. Agency
c. Implied
d. Express - CORRECT ANSWER-d. Express
All of the following are TRUE regarding agent/producer activities and
responsibilities, except:
a. They represent the insurer
b. The provide quotes and collect premiums
c. The solicit, receive, and forward applications for insurance
d. They issue policies - CORRECT ANSWER-d. They issue policies
The insurable interest on one's own life is generally regarded as:
a. Based on the number of dependents the insured has
b. Dependent upon the insured's salary
c. Dependent upon the assets the insured owns
d. Unlimited - CORRECT ANSWER-d. Unlimited
, A(n) __________ has the right to review the consumers report used in the
underwriting process.
a. Applicant
b. Producer
c. Beneficiary
d. Spouse - CORRECT ANSWER-a. Applicant
Those insurers that are incorporated in another state, but doing business in this
state, are considered:
a. Out-of-state
b. Foreign
c. Non-domestic
d. Alien - CORRECT ANSWER-b. Foreign
The intentional distortion of the truth in order to induce another to part with
something of value or to surrender a legal right is:
a. Concealment
b. Fraud
c. Warranty
d. Misrepresentation - CORRECT ANSWER-b. Fraud
Risk reduction is:
a. Not being involved in the activity that gives rise to that change of loss
b. Minimizing the chance of loss
c. Transferring the risk to another
c. Assuming the responsibility of loss - CORRECT ANSWER-b. Minimizing the
change of loss
Premium is considered the policyowner's:
a. Consideration
b. Credit
c. Fee
d. Tender - CORRECT ANSWER-a. Consideration
A voluntary surrender of a known right, claim, or privilege is known as:
a. An illegal inducement
b. A waiver
Answers 2023/2024
A person who negotiates insurance contracts with insurers on behalf of an
applicant is known as a(n):
a. Broker
b. Consultant
c. Advisor
d. Agent/Producer - CORRECT ANSWER-a. Broker
The contract type in which only one party is legally bound to its contractual
obligations after a premium is paid is a(n) _____________ contract.
a. Personal
b. Conditional
c. Unilateral
d. Aleatory - CORRECT ANSWER-c. Unilateral
An insurer authorized to do business within this state is considered what type of
insurer?
a. Domestic
b. Foreign
c. Alien
d. Admitted - CORRECT ANSWER-d. Admitted
The Law of Agency states that a person or entity who acts on behalf of another
person, company, or government, is known as the ______________.
a. Contractor
b. Servant
c. Employee
d. Agent - CORRECT ANSWER-d. Agent
An unincorporated organization that is formed by individuals, firms, and business
corporations that exchange insurance on one another and whose members are
known as subscribers is called a:
a. Mutual Insurance Company
b. Fraternal Benefit Society
,c. Risk Retention Group
d. Reciprocal Insurance Company - CORRECT ANSWER-d. Reciprocal
Insurance Company
Which of the following would be considered legally competent to enter into a
contract?
a. A person who is under the influence of drugs or alcohol
b. A person deemed to be mentally incapacitated
c. A 13-year-old honor student
d. A 25-year-old self-employed person - CORRECT ANSWER-d. A 25-year-old
self-employed person
Which of the following is not marketing and distribution system used by the
insurers?
a. Independent Agency
b. Direct Writing
c. Captive Agency
d. Broker Agency - CORRECT ANSWER-d. Broker Agency
Before an insurer can operate in this state, it must have which of the following?
a. Approval of the National Association of Insurance Commissioners (NAIC)
b. Articles of Incorporation filed with the Secretary of State
c. State Governor's approval
d. Certificate of Authority issued by the state Insurance Department - CORRECT
ANSWER-d. Certificate of Authority issued by the state Insurance Department
Which of the following is not a type of hazard for insurance underwriting
purposes?
a. Morale
b. Incidental
c. Physical
d. Moral - CORRECT ANSWER-b. Incidental
All of the following are true of insurance in general, except:
a. It reduces uncertainty
b. It transfers risk
c. It eliminates risk
,d. It can reduce risk - CORRECT ANSWER-c. It eliminates risk
To act as an agent for an insurer, the producer must be __________ by the
insurer:
a. Licensed
b. Endorsed
c. Certified
d. Appointed - CORRECT ANSWER-d. Appointed
_____________ is generally an option only for large corporations who may want
to limit their risk up to a certain dollar amount, then buy insurance above and
beyond that amount.
a. Reciprocal insurance
b. Risk retention
c. Mutual insurance
d. Self-insurance - CORRECT ANSWER-d. Self-insurance
The authority of a producer or agent that is written in his/her contract is called:
a. Apparent
b. Agency
c. Implied
d. Express - CORRECT ANSWER-d. Express
All of the following are TRUE regarding agent/producer activities and
responsibilities, except:
a. They represent the insurer
b. The provide quotes and collect premiums
c. The solicit, receive, and forward applications for insurance
d. They issue policies - CORRECT ANSWER-d. They issue policies
The insurable interest on one's own life is generally regarded as:
a. Based on the number of dependents the insured has
b. Dependent upon the insured's salary
c. Dependent upon the assets the insured owns
d. Unlimited - CORRECT ANSWER-d. Unlimited
, A(n) __________ has the right to review the consumers report used in the
underwriting process.
a. Applicant
b. Producer
c. Beneficiary
d. Spouse - CORRECT ANSWER-a. Applicant
Those insurers that are incorporated in another state, but doing business in this
state, are considered:
a. Out-of-state
b. Foreign
c. Non-domestic
d. Alien - CORRECT ANSWER-b. Foreign
The intentional distortion of the truth in order to induce another to part with
something of value or to surrender a legal right is:
a. Concealment
b. Fraud
c. Warranty
d. Misrepresentation - CORRECT ANSWER-b. Fraud
Risk reduction is:
a. Not being involved in the activity that gives rise to that change of loss
b. Minimizing the chance of loss
c. Transferring the risk to another
c. Assuming the responsibility of loss - CORRECT ANSWER-b. Minimizing the
change of loss
Premium is considered the policyowner's:
a. Consideration
b. Credit
c. Fee
d. Tender - CORRECT ANSWER-a. Consideration
A voluntary surrender of a known right, claim, or privilege is known as:
a. An illegal inducement
b. A waiver
