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LLQP Insurance Course (LLQP) Free Preview – AceCSE.com
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Which of the following sentences defines loss exposure?
Loss exposure is a term used by authors and corporate risk managers to identify potential losses.
Loss exposure is a term used by authors and corporate risk managers to identify potential losses.
Hazard is a condition that creates or increases the frequency or severity of a loss. Which of the following are major types of hazards?
I. Physical hazard
II. Mental hazard
III. Legal hazard
IV. System hazard
The four major types of hazards are:
(1) Physical hazard
(2) Moral hazard
(3) Attitudinal hazard
(4) Legal hazard
The four major types of hazards are:
(1) Physical hazard
(2) Moral hazard
(3) Attitudinal hazard
(4) Legal hazard
Which of the following scenarios is an example of an indirect loss?
Indirect loss is defined as a financial loss that results indirectly from the occurrence of direct physical damage or theft loss.
Indirect loss is defined as a financial loss that results indirectly from the occurrence of direct physical damage or theft loss.
What is defined as a risk that involves the possibility of the loss or reduction of earned income, extra expenses, and the depletion of financial assets?
Personal risks directly affect an individual or family. Premature death, inadequate retirement income, poor health, and unemployment are some of the major personal risks that can cause great economic insecurity.
Personal risks directly affect an individual or family. Premature death, inadequate retirement income, poor health, and unemployment are some of the major personal risks that can cause great economic insecurity.
The presence of risk results in certain undesirable social and economic effects. Which of the following are the major burdens of risk on society?
I. The size of an emergency fund must be increased
II. Society is deprived of certain goods and services
III. Loss of income
IV. Worry and fear are present
The three major burdens of risk in society are:
(1) Larger emergency fund
(2) Worry and fear
(3) Loss of certain goods and services
The three major burdens of risk in society are:
(1) Larger emergency fund
(2) Worry and fear
(3) Loss of certain goods and services
What are the basic characteristics of an insurance plan or arrangement?
I. Pooling of losses
II Payment of fortuitous losses
III. Premium is economically feasible
IV. Risk transfer
The basic characteristics of an insurance plan or arrangement are the following:
(1) Pooling is the spreading of losses incurred by the few over the entire group so that in the process, the average loss is substituted for actual loss.
(2) Fortuitous loss is one that is unforeseen and unexpected by the insured and occurs as a result of chance.
(3) Risk transfer means that a pure risk is transferred from the insured to the insurer, who typically is in a stronger financial position to pay the loss than the insured.
(4) Indemnification means that the insured is restored to his or her approximate financial position before the occurrence of the loss.
The basic characteristics of an insurance plan or arrangement are the following:
(1) Pooling is the spreading of losses incurred by the few over the entire group so that in the process, the average loss is substituted for actual loss.
(2) Fortuitous loss is one that is unforeseen and unexpected by the insured and occurs as a result of chance.
(3) Risk transfer means that a pure risk is transferred from the insured to the insurer, who typically is in a stronger financial position to pay the loss than the insured.
(4) Indemnification means that the insured is restored to his or her approximate financial position before the occurrence of the loss.
What type of private insurance pays the death benefits, which will be given to the beneficiaries when the insured dies?
The benefits of life insurance pay for funeral expenses, uninsured medical bills, estate taxes, and other expenses. The death proceeds can also provide periodic income payments to the deceased’s beneficiary.
The benefits of life insurance pay for funeral expenses, uninsured medical bills, estate taxes, and other expenses. The death proceeds can also provide periodic income payments to the deceased’s beneficiary.
Fraudulent claims are one of the major social costs of insurance to society. Which of the following scenarios are examples of fraudulent claims?
I. Auto accidents are faked to collect benefits
II. Insureds exaggerate the amount and value of property stolen from a home or business
III. Disabled persons often malinger to collect disability-income benefits for a longer duration
IV. Phony burglaries, thefts, or acts of vandalism are reported to insurers
Fraudulent claims result in higher premiums to all insured. The existence of insurance also prompts some insureds to deliberately cause a loss to profit from insurance. These social costs fall directly on society.
Other examples of fraudulent claims include the following:
(1) Dishonest claimants inflate or pad an insurance claim to cover a required deductible.
(2) Dishonest claimants fake slip-and-fall accidents.
(3) False health insurance claims are submitted to collect benefits.
(4) Dishonest policyholders take out life insurance policies on unsuspecting insureds and later arrange to have them killed.
Fraudulent claims result in higher premiums to all insured. The existence of insurance also prompts some insureds to deliberately cause a loss to profit from insurance. These social costs fall directly on society.
Other examples of fraudulent claims include the following:
(1) Dishonest claimants inflate or pad an insurance claim to cover a required deductible.
(2) Dishonest claimants fake slip-and-fall accidents.
(3) False health insurance claims are submitted to collect benefits.
(4) Dishonest policyholders take out life insurance policies on unsuspecting insureds and later arrange to have them killed.
Which of the following statements are advantages of the risk retention technique in a risk management program?
I. Save on loss costs
II. Save on expenses
III. Possible higher taxes
IV. Possible higher expenses
The risk retention technique is appropriate primarily for high-frequency, low-severity risks where potential losses are relatively small.
Its major advantages in a risk management program are as follows:
(1) Save on loss costs
(2) Save on expenses
(3) Encourage loss prevention
(4) Increase cash flow
The risk retention technique is appropriate primarily for high-frequency, low-severity risks where potential losses are relatively small.
Its major advantages in a risk management program are as follows:
(1) Save on loss costs
(2) Save on expenses
(3) Encourage loss prevention
(4) Increase cash flow
Which of the following statements best describes personal risk management?
Personal risk management is the process of identifying loss exposures, measuring and analyzing it, selecting appropriate techniques for treating loss exposures, and implementing and reviewing the risk management program periodically.
Personal risk management is the process of identifying loss exposures, measuring and analyzing it, selecting appropriate techniques for treating loss exposures, and implementing and reviewing the risk management program periodically.
Financial risk management refers to the identification, analysis, and treatment of speculative financial risks. Which of the following is a speculative financial risk?
Interest rate risk is a speculative financial risk. It is the risk of loss caused by adverse interest rate movements.
Interest rate risk is a speculative financial risk. It is the risk of loss caused by adverse interest rate movements.
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?
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.
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.
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 stockholders
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.
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.
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 behalf
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.
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.
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?
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.
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.
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?
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.
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.
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 premium
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.
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.
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 account
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.
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.
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?
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.
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.
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 employment
Unemployment insurance programs are federal-state programs that pay weekly cash benefits to involuntarily unemployed workers.
Unemployment insurance programs are federal-state programs that pay weekly cash benefits to involuntarily unemployed workers.
What is this auto insurance, wherein after an auto accident involving bodily injury, each party collects from his or her insurer regardless of fault?
No-fault auto insurance is another method for compensating injured accident victims. It is not necessary to determine who is at fault and prove negligence before a loss payment is made. Regardless of who caused the accident, each party collects from his or her insurer.
No-fault auto insurance is another method for compensating injured accident victims. It is not necessary to determine who is at fault and prove negligence before a loss payment is made. Regardless of who caused the accident, each party collects from his or her insurer.
Inland marine floaters provide broad coverage on property frequently moved from one location to another and on a property used in transportation and communications. Which of the following are the basic characteristics of inland marine floaters?
I. Coverages are tailored to the specific type of personal property to be insured
II. Desired amounts of insurance cannot be selected
III. Broader coverage can be obtained
IV. Inland marine floaters are often written with a deductible
Inland marine floaters are not uniform, but they have certain common characteristics:
(1) Coverages are tailored to the specific type of personal property to be insured.
(2) Desired amounts of insurance can be selected.
(3) Broader coverage can be obtained.
(4) Most floaters cover insured property anywhere in the world.
(5) Inland marine floaters are often written without a deductible.
Inland marine floaters are not uniform, but they have certain common characteristics:
(1) Coverages are tailored to the specific type of personal property to be insured.
(2) Desired amounts of insurance can be selected.
(3) Broader coverage can be obtained.
(4) Most floaters cover insured property anywhere in the world.
(5) Inland marine floaters are often written without a deductible.
What is this type of insurance, which is defined as protection for the owner of the property and/or the lender of money for the purchase of property against any unknown defects in the title to the property under construction?
The title insurance policy provides protection against title defects that have occurred in the past, prior to the effective date of the policy. If a loss occurs, the insured is indemnified in dollar amounts up to the policy limits.
The title insurance policy provides protection against title defects that have occurred in the past, prior to the effective date of the policy. If a loss occurs, the insured is indemnified in dollar amounts up to the policy limits.
Worker’s compensation insurance policy was drafted by the National Council on Compensation Insurance to help millions of workers who are injured or become sick each year because of job-related accidents and diseases. Which of the following examples is a benefit of the worker’s compensation insurance?
Worker’s compensation insurance provides medical care, cash benefits, survivor benefits, and rehabilitation services to workers who are injured or die from job-related accidents or diseases.
Worker’s compensation insurance provides medical care, cash benefits, survivor benefits, and rehabilitation services to workers who are injured or die from job-related accidents or diseases.
Professional liability insurance provides protection against lawsuits to physicians, attorneys, engineers, and other professionals alleging a substantial error or omission. Which of the following are the typical provisions of this coverage?
I. Three insuring agreements
II. Liability is restricted to accidental acts of the physician or surgeon
III. An extended reporting period endorsement can be added
IV. The insurer may settle the claim without the physician’s or surgeon’s consent
Professional liability insurance forms are not uniform, and insurers typically use their forms. Some typical provisions of this coverage include the following:
(1) Two insuring agreements.
(2) Liability is not restricted to accidental acts of the physician or surgeon.
(3) There is a maximum limit per medical incident and an aggregate limit for each coverage.
(4) The insurer may settle the claim without the physician’s or surgeon’s consent.
(5) An extended reporting period endorsement can be added.
(6) Professional liability insurance is not a substitute for other necessary forms of liability insurance.
Professional liability insurance forms are not uniform, and insurers typically use their forms. Some typical provisions of this coverage include the following:
(1) Two insuring agreements.
(2) Liability is not restricted to accidental acts of the physician or surgeon.
(3) There is a maximum limit per medical incident and an aggregate limit for each coverage.
(4) The insurer may settle the claim without the physician’s or surgeon’s consent.
(5) An extended reporting period endorsement can be added.
(6) Professional liability insurance is not a substitute for other necessary forms of liability insurance.
Surety bonds can be used to meet loss exposures. What are the three parties to a surety bond?
I. Principal
II. Obligee
III. Surety
IV. Insurer
A surety bond is a contract in which the surety guarantees to an obligee that the principal will faithfully perform its obligation to the obligee.
A surety bond is a contract in which the surety guarantees to an obligee that the principal will faithfully perform its obligation to the obligee.
What type of bond guarantees that the party bonded will comply with all laws and regulations that govern the party’s activities?
License and permit bonds are commonly required of parties that must obtain a license or permit from a city or town before they can engage in certain activities.
License and permit bonds are commonly required of parties that must obtain a license or permit from a city or town before they can engage in certain activities.
The automobile insurance plan makes auto insurance available to drivers who are unable to obtain insurance in the voluntary market. Under such a plan, all auto insurers in the state are assigned their proportionate share of high-risk drivers based on the total volume of auto insurance premiums written in the state. Which of the following are disadvantages of an automobile insurance plan?
I. Despite higher premiums paid by high-risk drivers, auto insurance plans have incurred substantial underwriting losses
II. Despite lower premiums paid by high-risk drivers, auto insurance plans have incurred substantial underwriting losses
III. High premiums may cause many high-risk drivers to go uninsured
IV. Low premiums may cause many high-risk drivers to be insured
The major advantage of automobile insurance plans is that a high-risk driver generally has at least one source for obtaining liability insurance. Nevertheless, such plans have several disadvantages which include the following:
(1) Despite higher premiums paid by high-risk drivers, auto insurance plans have incurred substantial underwriting losses.
(2) High premiums may cause many high-risk drivers to go uninsured
The major advantage of automobile insurance plans is that a high-risk driver generally has at least one source for obtaining liability insurance. Nevertheless, such plans have several disadvantages which include the following:
(1) Despite higher premiums paid by high-risk drivers, auto insurance plans have incurred substantial underwriting losses.
(2) High premiums may cause many high-risk drivers to go uninsured
What is this type of managed care plan, which is defined as a plan that contracts with physicians, hospitals, and other healthcare providers to provide covered medical services to policyholders at discounted fees?
Under a preferred provider organization, a policyholder can elect to receive care from any physician or healthcare provider. However, if a preferred provider is used, the policyholder pays lower deductible and coinsurance charges. If the policyholder receives care outside the network, he or she must pay a substantially higher deductible and coinsurance charges.
Under a preferred provider organization, a policyholder can elect to receive care from any physician or healthcare provider. However, if a preferred provider is used, the policyholder pays lower deductible and coinsurance charges. If the policyholder receives care outside the network, he or she must pay a substantially higher deductible and coinsurance charges.
Which of the following statements defines total disability?
I. Inability to perform the material and substantial duties of your irregular occupation
II. Inability to perform the duties of any occupation for which you are reasonably fitted by education, training, and experience
III. Inability to perform the duties of any gainful occupation
IV. Loss-of-income test
Total disability means that, due solely to injury or sickness, you are unable o perform the material and substantial duties of your regular occupation.
Total disability means that, due solely to injury or sickness, you are unable o perform the material and substantial duties of your regular occupation.
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