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Question 1 of 10
1. Question
Financial risk management refers to the identification, analysis, and treatment of speculative financial risks. Which of the following is a speculative financial risk?
Correct
Interest rate risk is a speculative financial risk. It is the risk of loss caused by adverse interest rate movements.
Incorrect
Interest rate risk is a speculative financial risk. It is the risk of loss caused by adverse interest rate movements.
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Question 2 of 10
2. Question
What is the process of transferring insurable risk to the capital markets through the creation of a financial instrument, such as catastrophe bonds, futures contracts, or other financial instruments?
Correct
Risk securitization’s impact upon the insurance marketplace is an immediate increase in capacity for insurers and reinsurers. Rather than relying on the capacity of insurers only, securitization provides access to the capital of many investors.
Incorrect
Risk securitization’s impact upon the insurance marketplace is an immediate increase in capacity for insurers and reinsurers. Rather than relying on the capacity of insurers only, securitization provides access to the capital of many investors.
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Question 3 of 10
3. Question
Which of the following statements best describes mutual insurers?
I. It is a corporation owned by the policyholders
II. It is an unincorporated organization in which insurance is exchanged among the members
III. It is a corporation owned by stockholders
IV. It is a corporation that has no stockholdersCorrect
Mutual insurers is a corporation owned by policyholders. The policyholders elect a board of directors who appoint executives to manage the corporation.
Because relatively few policyholders bother to vote, the board of directors has effective management control of the company.Incorrect
Mutual insurers is a corporation owned by policyholders. The policyholders elect a board of directors who appoint executives to manage the corporation.
Because relatively few policyholders bother to vote, the board of directors has effective management control of the company. -
Question 4 of 10
4. Question
Which of the following statements best describes a broker?
I. Someone who legally represents the insured
II. Someone who is paid a commission by insurers where the business is placed
III. Someone who has the authority to represent the insurer based on express authority, implied authority, and apparent authority
IV. Someone who legally represents the principal, and has the authority to act on the principal’s behalfCorrect
A broker legally does not have the authority to bind the insurer. Instead, he/she can solicit or accept insurance applications and then attempt to place the coverage with an appropriate insurer, but the insurance is not in force until the insurer accepts the business.
Incorrect
A broker legally does not have the authority to bind the insurer. Instead, he/she can solicit or accept insurance applications and then attempt to place the coverage with an appropriate insurer, but the insurance is not in force until the insurer accepts the business.
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Question 5 of 10
5. Question
What act was legislated by the US Congress to correct abuses in the financial services industry and to deal with the destabilizing practices of commercial banks, investment firms, mortgage companies, and other financial institutions?
Correct
Dodd-Frank Act and Insurance Regulation created the Financial Stability Oversight Council (FSOC) to treat systemic risk and to identify non-bank financial companies and insurance companies that could increase systemic risk in the economy.
Incorrect
Dodd-Frank Act and Insurance Regulation created the Financial Stability Oversight Council (FSOC) to treat systemic risk and to identify non-bank financial companies and insurance companies that could increase systemic risk in the economy.
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Question 6 of 10
6. Question
A conditional contract is an insurance contract wherein the insurer’s obligation to pay a claim depends on whether the insured or the beneficiary has complied with all policy conditions. Which of the following scenarios is an example of a conditional contract?
Correct
In a conditional contract, certain conditions are imposed on the insured if he/she wishes to collect for a loss. Although the insured is not compelled to abide by the policy conditions, he/she must do so to collect for an insured loss. The insurer is not obligated to pay a claim if thee policy conditions are not met.
Incorrect
In a conditional contract, certain conditions are imposed on the insured if he/she wishes to collect for a loss. Although the insured is not compelled to abide by the policy conditions, he/she must do so to collect for an insured loss. The insurer is not obligated to pay a claim if thee policy conditions are not met.
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Question 7 of 10
7. Question
A policy may lapse if the premium has not been paid by the end of the grace period, or if an automatic premium loan provision is not in effect. What are the requirements needed to reinstate a lapsed policy?
I. Evidence of insurability is required
II. The policy must be reinstated within a certain period, typically 10 years from the date of lapse
III. The policy must not have a surrendered cash value
IV. Half of the policy loan must be repaid or reinstated with interest from the due date of the overdue premiumCorrect
The reinstatement provision permits the owner to reinstate a lapsed policy if the following requirements are met:
(1) Evidence of insurability is required.
(2) All overdue premium plus interest must be paid from their respective due dates
(3) Any policy loan must be repaid or reinstated, with interest from the due date of the overdue premium.
(4) The policy must not have been surrendered for its cash value.
(5 The policy must be reinstated within a certain period, typically 3 or 5 years fro the date of lapse.Incorrect
The reinstatement provision permits the owner to reinstate a lapsed policy if the following requirements are met:
(1) Evidence of insurability is required.
(2) All overdue premium plus interest must be paid from their respective due dates
(3) Any policy loan must be repaid or reinstated, with interest from the due date of the overdue premium.
(4) The policy must not have been surrendered for its cash value.
(5 The policy must be reinstated within a certain period, typically 3 or 5 years fro the date of lapse. -
Question 8 of 10
8. Question
Which of the following statements is true about health savings accounts?
I. It is not tax-exempt
II. It is a custodial account established to pay qualified medical expenses of the account beneficiary who is covered under a high-deductible health insurance
III. Federal legislation allows all eligible persons under age 65 to establish a health savings account
IV. A person must be claimed as a dependent on another person’s tax return to be eligible to establish a health savings accountCorrect
A health savings account is a high-deductible health insurance policy that covers catastrophic medical bills, and an investment account from which the account holder can withdraw money tax-free for medical costs.
Incorrect
A health savings account is a high-deductible health insurance policy that covers catastrophic medical bills, and an investment account from which the account holder can withdraw money tax-free for medical costs.
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Question 9 of 10
9. Question
What type of insurance is defined as an employee benefit that pays the cost of hospital care, physician’s and surgeon’s fees, prescription drugs, and related medical expenses?
Correct
Group medical expense insurance is extremely important in providing economic security to employees and their families. Most insured workers today obtain their coverage through employer-sponsored medical expense plans.
Incorrect
Group medical expense insurance is extremely important in providing economic security to employees and their families. Most insured workers today obtain their coverage through employer-sponsored medical expense plans.
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Question 10 of 10
10. Question
Which of the following statements describes the unemployment insurance program?
I. It arose out of the unemployment insurance provisions of the Social Security Act of 1935
II. It provides cash income during involuntary unemployment
III. It helps stabilize the economy
IV. Encourage employers to stabilize employmentCorrect
Unemployment insurance programs are federal-state programs that pay weekly cash benefits to involuntarily unemployed workers.
Incorrect
Unemployment insurance programs are federal-state programs that pay weekly cash benefits to involuntarily unemployed workers.