PROPERTY AND CASUALTY PRACTICE EXAM WITH COMPLETE VERIFIED SOLUTIONS

Ch.1 General Insurance Estoppel Prevents the denial of a fact previously established to be true The concept that the insured should not profit from an insurance transaction is called The principle of indemnity When an individual faces the risk of economic loss in the event of property damage, this indicates which of the following Insurable Interest What is not an option for managing risk Subrogating the risk What is not true of insurance It eliminates risk The law of large number provides that As the number of insured units increases, predictability of losses improves What does an agent not have the authority to do Represent the insured's interest What is not a characteristic of a mutual insurance company Stockholder have ownership Insurance is and example of which type of risk management technique Transfer of risk A hazard is best defined as Something that increases the chance of a loss Which term is described as the relinquishment of a legal right Waiver What is not a type of insurer Proprietary Insurers When both parties to a contract must perform certain duties in order to make the contract enforceable, is known as a(n): Conditional contract Which term is defined as the probability of loss Risk Which type of risk involves the possibility of loss or gain Speculative Which insurance company department determines the probability of loss and sets the premium rates Actuarial An agent that enters into agreements with more than one insurer is called Independent When a producer exceeds the authority expressed in the agency contract and the insurer does not take action, which of the following types of authority is created Apparent A state requiring that the commissioner agree that a company's rates are appropriate before they are made effective uses which type of rating approval Prior approval What is true about a stock insurance company A stock insurance company is run by officers and directors and has a stated amount of capital stock owned by stockholders Where can you find insurance coverage after being rejected by voluntary market insurers Residual market What is the name for an insurer organized in the same state in which it is authorized to do business Domestic What is not true about insurance Insurance covers intentional as well as unintentional losses Statements in the application that are guaranteed true but later found to be false at the time of application may result in Voidance of the contract A false statement in the application for insurance is Misrepresentation Which of the following can place business with an unauthorized insurer Surplus lines producer Minimizing the chance of a loss is considered which of the following ways of managing risk? Reduction Who is not restricted from entering into an insurance contract Retired Persons Which is the correct term to describe a contract prepared by one party and submitted to the other party on a "take it or leave it" basis, without negotiations Contract of adhesion Risk is defined as Uncertainty or chance of loss What is not true about risk management Insurance is designed to cover both intentional and unintentional losses Insurance company c has decided that it is insuring too many homes in a particular area. Therefore, it decides to reinsure Mr. R's homeowners policy because of the high value of his dwelling. The reinsurance contract can best be described as: An agreement between Insurance company C and the reinsurer What is not true about the financial rating services Agents and producers must place business through an insurer with the lowest rates What describes the purpose of the Gramm-Leach Bliley Act Establishing privacy protection for consumers What is not true about a reciprocal insurance company Reciprocal companies may only transact liability insurance Who places insurance with non-admitted insurer when insurance cannot be place with an admitted insurer Surplus Lines Producer What is the term for a cause of loss, such as the theft of a car A peril