Insurance Exam Questions and Answers: Understanding Insurance Contracts, Exams of Nursing

Download Insurance Exam Questions and Answers: Understanding Insurance Contracts and more Exams Nursing in PDF only on Docsity! FL 6-20 Claims Adjuster Exam Questions with Verified Answers What is Insurance? - Correct answer financial tool that protects individuals and organizations from unforeseen and extraordinary financial losses by transferring risk to another party. What is the Principle of Indemnity? - Correct answer Restoration of approximate previous financial condition; no more, no less. What is a Premium? - Correct answer a fee that the insured pays in exchange for insurance coverage. What is a Reserve? - Correct answer a pool of collected premiums that the insurer sets aside to pay claims. Legal Contract - Correct answer Insurance Policy - Correct answer a contract to provide financial protection for a fee. Four Requirements of a Legal Contract - Correct answer 1. Agreement (i.e. Offer and Acceptance) 2. Consideration 3. Competent Parties 4. Legal purpose Termination of Offer - Correct answer Offer may be terminated by: 1. Revocation by offer or 2. Rejection by offered 3. Time lapse 4. Termination by operation of law: a. Either party does or becomes disabled b. Performance of contract becomes illegal after offer c. Subject matter is destroyed Six Special Characteristics of Insurance Contracts - Correct answer 1. Personal 2. Adhesion 3. Utmost Hood Faith 4. Lavatory 5. Unilateral 6. Conditional Personal Contract - Correct answer 1. It protects the policyholder from financial losses. 2. It does not protect property from becoming damaged. 3. Coverage follows the person, not the property. Contract of Adhesion - Correct answer 1. The insurer is responsible for the terms of the contract. 2. The insured has no say in the wording. 3. Courts favor the insured in the event of an ambiguity. 4. The contract should be interpreted as a reasonable person would interpret it. Utmost Good Faith - Correct answer 1. Applicants are expected to be completely honest about the risk to the insurer. 2. The insurer must rely on the applicants not to conceal or misrepresent pertinent facts. Lavatory Contract - Correct answer (It depends on an unknown future event) 1. Neither party can know future losses. 2. Insurer only has to pay if and when covered losses occur. 3. Policyholders could pay more in premiums than they ever get for claims, or insurer could pay more in claims than it receives. Unilateral Contracts - Correct answer 1. The insurer has an obligation to pay for covered losses. 2. The insured has no obligation (he can stop paying premiums). Conditional Contracts - Correct answer 1. The insurer only has to perform if certain conditions are met (such as a covered loss). 2. The insured must fulfill all conditions listed in the policy. DICE - Correct answer an insurance contract has four essential parts: 1. Declaration Page 2. Insuring Agreement 3. Conditions 4. Exclusions Declarations Page - Correct answer makes the contract specific to the policyholder. Always the first section. It establishes: 1. Names of both parties (insured and insurer) 2. Policy number 3. Location and description of insured item 4. Value of insured item 5. Dates of the policy (beginning and end) 6. Amount and limit of coverage 7. Deductible 8. Premium - owned by their members - provide commercial liability insurance RRG Requirements - Correct answer - members must be involved in similar business endeavors - need not be licensed in multiple states Classification Based on Location - Correct answer Insurance companies can be classified according to their location: 1. Domestic Insurer: located in a particular state, abides by that state's laws 2. Foreign Insurer: Obeys a state's or US laws, but can be located elsewhere 3. Alien Insurer: Obeys laws of another country altogether Risk - Correct answer a risk can be the potential for financial loss; being exposed or open to damage. Or it can be an insured item. Speculative Risk - Correct answer - is undertaken with no certainty of either gain or loss - is made knowingly, by conscious choice - cannot be insured Pure Risk - Correct answer - is a risk with no chance of gain - can only result in either loss or no loss Can be insured Exposure - Correct answer the extent to which a person, item, or organization is open to damage or loss. Insurers consider a risks exposure when deciding whether or not to insure it (ex. Gulf Coast - high exposure to hurricanes, CA - earthquakes, high crime areas - theft). Evaluating Exposure - Correct answer Exposure is: - expressed in dollars or units - A determining factor in issuing a policy and setting premium Hazard - Correct answer a condition increasing the likelihood or severity of a loss Ex. storing dangerous materials in a building, a record of drunken driving, smoking, etc. Hazard vs. Exposure - Correct answer - exposure is the possibility of loss - Hazards are things that increase that possibility - More hazards = higher exposure Peril - Correct answer the actual cause of loss or damage (ex. lightning, fire, flood, vandalism, etc.). Insurance policies can be: - "Named Peril": lists each peril that is covered - "All Peril" ("Open Peril"): covers all perils except those specifically excluded Loss - Correct answer 1. Reductions in value of insured item 2. Financial loss due to an occurrence or accident 3. for insurers: the amount paid out in a claim settlement Insurable Risk - Correct answer