Unit 1 Checkpoint Exam

At the state level, the government is involved in providing

• federal crop insurance

• flood insurance

• unemployment insurance

• war risk insurance

Which of the following risk management methods is used by insurance companies?

• Reduction

• Sharing

• Retention

• Transfer

ABC insurance is licensed to sell insurance in Wisconsin. When a company is licensed in a state, it is considered

• Certified

• Admitted

• Nonadmitted

• Unauthorized

All of the following statements regarding mutual insurers are correct EXCEPT

• Mutual insurers pay dividends to policyholders

• Mutual insurers have stock and stockholders

• Mutual insurers do not guarantee dividends

• Mutual insurers are owned by their policyholders

Susan decides to drive fast in a horrible snowstorm because she knows that if she gets in an accident, her insurance will cover her. This is an example of

• A physical hazard

• A moral hazard

• A situational hazard

• A morale hazard

According to the law of agency, the person on whose behalf the insurance agent is called upon to act is called

• The principal

• The agent

• The underwriter

• The insured

All of the following statements regarding surplus lines insurers are correct EXCEPT

• States keep a list of acceptable surplus lines insurers

• Surplus lines insurance is placed with an admitted carrier by a surplus lines agent

• Surplus lines insurance covers high-risk exposures

• Surplus lines insurance is placed with a nonadmitted carrier by a surplus lines agent

Josephine sells insurance for one company and is an independent contractor, NOT an employee of the insured. She is

• A direct writing agent

• An independent agent

• A captive agent

• A general agent

Insurance is a contract that

• Transfers the risk of financial loss from an insurance company to an individual or business

• Transfers the risk of financial loss from an individual or business to an insurance company

• Eliminates all hazards for an individual

• Eliminates all risk for an individual

Which of the following represents a pure risk?

• Gambling at a casino

• Playing high-stakes poker with friends

• A car accident

• Investing money in the stock market