AD BANKER AL P&C CH 1 GENERAL INSURANCE TEST QUESTIONS ANSWERED CORRECTLY GRADED A+

AD BANKER AL P&C CH 1 GENERAL INSURANCE TEST QUESTIONS ANSWERED CORRECTLY GRADED A+ What constitutes an agreement to enter into a valid contract? A. A specific offer by one party and acceptance by the other B. The values exchanges by both parties C. The parties to the contract must have the legal capacity to enter into a contract D. Both parties in the contract must have an insurable interest - Answers A. An Agreement consists of the 'Offer and Acceptance'. Offer is the application submitted and Acceptance is the issued policy. This is one of the four elements of a legal contract. (The values exchanges by both parties) describes considerations, (Both parties in the contract must have an insurable interest) describes the principle of insurable interest, and (The parties to the contract must have the legal capacity to enter into a contract) describes competent parties. If an insured purchased an insurance policy and suffered a claim and then found that the policy would not pay the claim as the insured thought it would, which of the following doctrines would apply? A. Principle of Indemnity B. Utmost Good Faith C. Reasonable Expectations D. Insurable Interest - Answers C. This doctrine applies to the legal terms used to defend a policyowner. It applies to what policyowners and beneficiaries should expect from an insurance contract. Reasonable expectations of policyowners and beneficiaries will be honored even though strict terms of the policy do not support these expectations. This would be used by an attorney as a defense against an insurance company that denies benefits that seem to violate the Reasonable Expectations Doctrine. Agent Ma'Chelle is under contract with the XYZ Insurance Company to represent and sell insurance only for XYZ. This is an example of what type of agency system? A. Independent Agent B. Direct Writer C. Direct Mail D. Exclusive/captive - Answers D. Under the Exclusive agency system, the insurer contracts with agencies. Each agency is owned by the general agent who then provides support staff, office space and office equipment. This agent and staff are under a captive contract to sell insurance only for that insurance company. The support staff are actually employees of the general agent, not the insurance company. In a particular state, an insurance company must file policy forms and rates with the state insurance department and wait for official approval before using the new forms and rates. This is an example of a/an: A. Mandatory rates state B. File and use state C. Open competition state D. Prior approval state - Answers D. Prior approval states require that the state review the rates and give the insurer prior approval before they may begin using the rates. File and use states may begin using the rates immediately upon filing them with the state. Some states have mandatory rates that must be used for certain lines of insurance and competition rate states rely on insurance companies to compete for rates considered to be fair and adequate. A peril is: A. Also called a hazard B. An intentional loss C. The cause of a loss D. The chance of a loss - Answers C. A peril is a cause of a loss. Example: Fire, Lightning, Wind, Hail, etc. Risk is the chance of a loss. Intentional loss is not a peril and a hazard increases the chance of a loss occurring. All of the following are Elements of Insurable Risk, except: A. Loss is accidental B. Loss is calculable C. Loss is predictable D. Loss in indeterminable - Answers D. The Elements that determine if a risk is an Insurable are: Accidental, Measureable, Calculable, Hardship (must cause financial hardship), Exclude Catastrophic Perils, Affordable (cost of insurance) and Predictable. A company established in England doing business in Alabama would be considered by Alabama residents to be a(n): A. Domestic company B. Foreign company C. All of the answers listed D. Alien company - Answers D. An insurance company operating in any country other than the one where its home office is located would be considered to be an 'Alien' company in that country.