Nevada Finish Carpentry (C-3B) Contractor Practice Exam
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Course
Computers
Institution
Computers
This practice exam is for contractors specializing in finish carpentry in Nevada. Topics include interior trim, cabinetry, door and window installation, and woodworking techniques. Candidates are tested on their ability to install and finish woodwork in both residential and commercial buildings, en...
1. What is the primary purpose of risk management?
A) Increase profits
B) Reduce potential losses
C) Increase sales
D) Promote products
Answer: B) Reduce potential losses
Explanation: Risk management aims to identify, assess, and mitigate risks to minimize
potential losses to an organization.
2. Which of the following is NOT a method of handling risk?
A) Avoidance
B) Reduction
C) Ignoring
D) Transfer
Answer: C) Ignoring
Explanation: Ignoring risks does not manage them; effective risk management involves
avoiding, reducing, transferring, or sharing risks.
3. The concept of "sharing" in risk management refers to:
A) Dividing losses among multiple parties
B) Eliminating the risk entirely
C) Selling insurance
D) Combining different risks into one
Answer: A) Dividing losses among multiple parties
Explanation: Sharing involves multiple parties taking on a portion of the risk, thus spreading
potential losses.
4. The law of large numbers states that:
A) Larger samples give more reliable predictions
B) Small samples are more accurate
C) Risk cannot be managed
D) Insurance companies should avoid large risks
Answer: A) Larger samples give more reliable predictions
Explanation: The law of large numbers suggests that as the number of similar exposures
increases, the actual loss experience will converge to the expected loss experience.
5. What does adverse selection refer to in insurance?
A) Insurers choosing only healthy individuals
B) The tendency for high-risk individuals to purchase insurance
C) Selecting the best risks
D) Insuring low-risk individuals only
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, Michigan Surety and Fidelity Producer/Solicitor
Answer: B) The tendency for high-risk individuals to purchase insurance
Explanation: Adverse selection occurs when individuals who perceive themselves as high
risk are more likely to purchase insurance, potentially leading to greater losses for insurers.
6. Which of the following best describes the producer/insurer relationship?
A) Independent contractor
B) Employer-employee
C) Agency
D) Partnership
Answer: C) Agency
Explanation: The producer acts as an agent for the insurer, facilitating the sale of insurance
products to clients.
7. Express authority of a producer means:
A) Authority implied by the nature of the job
B) Authority explicitly granted by the insurer
C) Authority that arises from the relationship with the client
D) No authority
Answer: B) Authority explicitly granted by the insurer
Explanation: Express authority is specifically stated in a contract or agreement, allowing the
producer to act on behalf of the insurer.
8. Implied authority refers to:
A) Authority not explicitly granted but necessary to perform duties
B) Authority defined by law
C) Authority limited to specific tasks
D) Authority that does not exist
Answer: A) Authority not explicitly granted but necessary to perform duties
Explanation: Implied authority allows producers to take actions that are not specifically
outlined but are necessary to carry out their responsibilities.
9. Apparent authority is defined as:
A) Authority given in writing
B) Authority perceived by third parties
C) Authority that does not exist
D) Authority granted by the government
Answer: B) Authority perceived by third parties
Explanation: Apparent authority exists when a third party reasonably believes that the
producer has authority to act, based on the conduct of the insurer.
10. What is the purpose of a Power of Attorney in the context of insurance?
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, Michigan Surety and Fidelity Producer/Solicitor
A) To give the producer the right to bind the insurer
B) To allow the insurer to pay claims
C) To allow the producer to act on behalf of the client
D) To limit the insurer's liabilities
Answer: A) To give the producer the right to bind the insurer
Explanation: A Power of Attorney grants the producer authority to act on the insurer's
behalf, particularly in binding coverage.
11. What is considered a legal contract in insurance?
A) An agreement with no consideration
B) An agreement that meets the legal requirements
C) An informal understanding
D) A verbal agreement only
Answer: B) An agreement that meets the legal requirements
Explanation: A legal contract in insurance must have elements like offer, acceptance,
consideration, competent parties, and a legal purpose.
12. Which of the following is NOT an element of a legal contract?
A) Offer
B) Acceptance
C) Unilateral obligation
D) Consideration
Answer: C) Unilateral obligation
Explanation: A contract must be bilateral, meaning both parties have obligations; unilateral
contracts do not fit the definition.
13. In insurance, consideration refers to:
A) The promise to pay premiums
B) The amount of coverage
C) The risk taken by the insurer
D) The services provided by the agent
Answer: A) The promise to pay premiums
Explanation: Consideration in a contract typically refers to the exchange of value, which in
insurance involves the payment of premiums for coverage.
14. What does "competent parties" mean in a legal contract?
A) Both parties must be competent to contract
B) Only one party needs to be competent
C) Parties must have a law degree
D) Parties must be at least 18 years old
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, Michigan Surety and Fidelity Producer/Solicitor
Answer: A) Both parties must be competent to contract
Explanation: Competent parties are individuals who have the legal capacity to enter into a
contract, which includes being of legal age and mentally sound.
15. The legal purpose of a contract means:
A) The contract must involve illegal activities
B) The contract must have a lawful objective
C) The contract must be signed by a lawyer
D) The contract can be oral or written
Answer: B) The contract must have a lawful objective
Explanation: A legal purpose ensures that the contract does not involve illegal activities and
serves a legitimate goal.
16. What is indemnity in insurance?
A) A payment made to an insurer
B) Compensation for losses incurred
C) A guarantee of profit
D) A method to increase premiums
Answer: B) Compensation for losses incurred
Explanation: Indemnity is designed to restore the insured to the same financial position they
were in before the loss occurred.
17. What principle requires insurers to act honestly and disclose all material
facts?
A) Representations
B) Indemnity
C) Utmost Good Faith
D) Waiver
Answer: C) Utmost Good Faith
Explanation: The principle of utmost good faith (uberrima fides) obligates both parties to act
honestly and disclose relevant information.
18. A representation is:
A) A statement of fact made by the insured
B) A promise made by the insurer
C) An assumption made by the agent
D) A guess about future events
Answer: A) A statement of fact made by the insured
Explanation: A representation is a statement made by the insured during the application
process, which the insurer relies on.
19. Misrepresentation in insurance refers to:
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