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Pearson Vue Insurance Study Exam Questions And Answers
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Pearson Vue Insurance Study Exam Questions And AnswersA group-owned insurance company that is formed to assume and spread the liability
risks of its members is known as a:
A. treaty insurer
B. risk retention group
C. risk assumption group
D. captive insurer - Answer B. risk retention group
A group-owned insurer whose primary activity consists of assuming and spreading the
liability risks of its members is called a risk retention group.
At what point must a life insurance applicant be informed of their rights that fall under the
Fair Credit Reporting Act?
A. Before the appointment is scheduled
B. Upon completion of the application
C. At the policy's delivery
D. When the insurer receives the MIB report - Answer B. Upon completion of the
application
An applicant for life insurance must be informed of their rights upon completion of the
application.
An insurance applicant MUST be informed of an investigation regarding his/her
reputation and character according to the:
,A. State Guaranty Association
B. Fair Labor Standards Board
C. Fair Credit Reporting Act
D. National Association of Insurance Commissioners - Answer C. Fair Credit Reporting
Act
The Fair Credit Reporting Act is a Federal law requiring an individual to be informed if
that individual is being investigated by an inspection company.
The stated amount or percent of liquid assets that an insurer must have on hand that will
satisfy future obligations to its policyholders is called:
A. credits
B. reserves
C. surplus
D. retention - Answer B. reserves
The stated amount or percent of liquid assets that an insurer must have on hand that will
satisfy future obligations to its policyholders is called reserves.
Who elects the governing body of a mutual insurance company?
A. chairman of the board
B. bondholders
C. stockholders
D. policyholders - Answer D. policyholders
The governing body of a mutual insurance company is elected by the policyholders.
,Insurance represents the process of risk:
A. selection
B. avoidance
C. transference
D. assumption - Answer C. transference
Insurance involves the transfer of risk.
Insurance companies determine risk exposure by which of the following?
A. Insurable interest
B. Insurance exchanges
C. Law of large numbers and risk pooling
D. Population table data - Answer C. Law of large numbers and risk pooling
All forms of insurance determine exposure through risk pooling and the law of large
numbers.
An example of risk sharing would be:
A. Adding more security to a high-risk building
B. Choosing not to invest in the stock market
C. Doctors pooling their money to cover malpractice exposures
D. Buying an insurance policy to cover potential liabilities - Answer C. Doctors pooling
their money to cover malpractice exposures
Doctors pooling their money to cover malpractice exposures is an example of risk
, sharing.
How do insurers predict the increase of individual risks?
A. Law of large numbers
B. U.S. Census
C. Average mortality incidents
D. Experience of morbidity - Answer A. Law of large numbers
The law of large numbers helps insurance companies predict the increase of individual
risks.
People with higher loss exposure have the tendency to purchase insurance more often
than those at average risk. This is called:
A. risk retention
B. preexisting conditions
C. law of large numbers
D. adverse selection - Answer D. adverse selection
Adverse selection is the tendency of persons with higher loss exposure to purchase
insurance more often than those at average risk.
What is known as the immediate specific event causing loss and giving rise to risk?
A. Peril
B. Hazard
C. Loss factor
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