FREE RIBO Insurance Fundamentals Test 1

Question 1

John owns an insurance policy that gives him the right to share in the insurer's surplus. What kind of policy is this?

Accepted Answer

Participating

Answer

Surplus

Answer

Nonparticipating

Answer

Contributory

Question 2

What is a participating life insurance policy?

Accepted Answer

Contract that allows the policy owner to receive a share of surplus in the form of policy dividends.

Answer

Agreement that allows two or more beneficiaries to share in the death benefit

Answer

Agreement that insurers two or more lives

Answer

Contract that gives beneficiaries the right to participate in any dividends.

Question 3

Which of the following is Not a characteristic of reinsurance?

Accepted Answer

Increases the unearned premium reserve

Answer

Enables insurer to meet certain objectives

Answer

A specialized branch of the insurance industry

Answer

Protects against a very large claim

Question 4

A participating company is also referred to as which type of insurer?

Accepted Answer

Mutual insurer

Answer

Domestic insurer

Answer

Re-insurer

Answer

Reciprocal insurer

Question 5

One important function of an insurance company is to identify and sell to potential customers. Which of these BEST describes this function?

Accepted Answer

Marketing

Answer

Underwriting

Answer

Reinsurance

Answer

Regulation

Question 6

Which of the following is a type of insurance where an insurer transfers loss exposures from policies written for its insureds?

Accepted Answer

Reinsurance

Answer

Treaty insurance

Answer

Mutual insurance

Answer

Captive insurance

Question 7

AAA Insurance Company has transferred a portion of its loss exposure to BBB Insurance Company. In this reinsurance transaction, what is AAA Insurance Company called?

Accepted Answer

Primary Insurer

Answer

Tertiary Insurer

Answer

Captive Insurer

Answer

Secondary Insurer

Question 8

What does an "endorsement" refer to in an insurance policy?

Accepted Answer

A written agreement to change the terms of the policy

Answer

The process of applying for insurance coverage

Answer

The premium amount for the policy

Answer

The policyholder’s right to cancel the policy

Question 9

Which of the following is a contract that involves one party which indemnifies another when a loss arises from an unknown event?

Accepted Answer

Insurance policy

Answer

Loss contract

Answer

Warranty arrangement

Answer

Indemnification arrangement

Question 10

When a mutual insurer becomes a stock company, the process is called

Accepted Answer

Demutualization

Answer

Reinsurance

Answer

Reorganization

Answer

Mutualization