Ohio Life and Health Insurance Exam Cram Questions & Answers Solved 100% Correct!!, Exams of Nursing

Download Ohio Life and Health Insurance Exam Cram Questions & Answers Solved 100% Correct!! and more Exams Nursing in PDF only on Docsity! Ohio Life and Health Insurance Exam Cram Questions & Answers Solved 100% Correct!! The term describing the insured's notification to the insurer requesting payment for a covered loss is: a. Limit of liability b. Premium c. Claim d. Deductible Answer- An insurance claim is the insured's notification to the insurer that a payment is requested for a covered loss. The correct answer is: Claim Which of the following is the consideration an insured pays for insurance coverage? Select one: a. Deductible b. Premium c. Limit of liability d. Coinsurance Answer- Premiums are the cost of insurance coverage and the insured's consideration. The correct answer is: Premium Adverse selection is characterized by: Select one: a. Unfair discrimination b. Rating risks c. A healthy person purchasing health insurance d. A sick person purchasing health insurance Answer- Adverse selection is the tendency for poorer than average risks to seek insurance. The correct answer is: A sick person purchasing health insurance Judith is injured in a car accident. She incurs a covered loss of $50,000. She is required to pay $3,000 before the insurer will cover 80% of the covered loss. Which of the following terms best describes the $3,000 Judith must pay? a. Premium b. Deductible c. Coinsurance d. Claim Answer- A deductible is the amount an insured must pay before the insurer will begin to pay benefits. The correct answer is: Deductible Judith's health insurance will pay a maximum of $3 million for all of her claims. Which of the following terms best describes this policy feature? Select one: a. Indemnity b. Limit of liability c. Coinsurance d. Claim Answer- A limit of liability is the total amount the insurer will pay for an insured risk. The correct answer is: Limit of liability The tendency for poorer than average risks to seek out insurance is the definition of: Select one: a. Indemnity b. Reinsurance c. Adverse selection d. Coinsurance Answer- Insurers must minimize adverse selection, which is defined as the tendency for poorer than average risks to seek out insurance. The correct answer is: Adverse selection Cost-sharing between the insurer and the insured that is often expressed as the percent for insurer and insured is known as: Select one: a. Coinsurance b. Deductible c. Premium d. Claim Answer- Coinsurance is the cost-sharing between the insurer and the insured. It is usually expressed as the percent for insurer and insured, such as 80/20. The correct answer is: Coinsurance Which of the following types of insurance covers a debt? Select one: a. Credit b. Casualty c. Property d. Legal liability Answer- Credit insurance is used to protect against the risk of inability to repay a debt. Property, casualty and legal liability do not cover debts. The correct answer is: Credit Reinsurance is defined as: Select one: a. Risk reduction b. Spreading risk from one insurer to another c. To make whole d. Adverse selection Answer- Your answer is correct When an insurer incurs too much loss, it can spread risk to another insurer. b. Hazard c. Loss d. Exposure Answer- Insurance is the transfer of risk that spreads the uncertainty of loss over a large group of people. The correct answer is: Insurance Risk pooling is best described by which of the following? Select one: a. As a group increases in size, it is easier to predict the number of future losses over a certain period of time. b. A valid concern for the continuation of life or well being of the person insured c. The chance of loss occurring d. Combining similar losses from many people so the average loss over the entire group remains relatively constant Answer- With risk pooling, the losses of many people are averaged together and the uncertainty of one loss occurrence is spread over a large number of people. The correct answer is: Combining similar losses from many people so the average loss over the entire group remains relatively constant Which of the following best explains why death protection may be covered by an insurance policy, even though all people eventually die? Select one: a. Loss must occur by chance or accident. b. Most life insurance policies are purchased at face amounts of less than $50,000. c. Most people buy life insurance when they are in their twenties. d. Loss does not cause significant economic hardship. Answer- Premature death is a feasible risk to insure because life insurance protects against the uncertainty of when a person will die, not whether or not a person will die (death is a known eventuality). It is by chance or accident that a person's death arrives too soon, such as death in while traveling as a fare-paying passenger in an airplane, an unexpected car accident, or sudden death without medical explanation. Premature death can adversely affect the insured's dependents, especially if the insured's family depends on the insured's income earnings. The correct answer is: Loss must occur by chance or accident. All of the following are examples of morale hazards EXCEPT: Select one: a. An insured who believes that because he has a health insurance policy, he doesn't need to get a flu shot b. An insured who doesn't wash his hands, believing that if he gets sick, his insurance policy will cover the doctor visit and medicine to get better c. An insured that doesn't wear a seat belt and drives above the speed limit, believing that if he gets in a car accident, his insurance policy will cover the cost of any damages to his car, or medical bills d. An insured who intentionally slips and falls on the floor in order to receive disability income benefits Answer- A person who takes fewer precautions and preventive measures to remain in good health because 'the health insurance policy will cover the medical bills,_ is committing a morale hazard. An insured who attempts to defraud the insured by feigning an illness or causing self-inflicted bodily injury is committing a moral hazard. The correct answer is: An insured who intentionally slips and falls on the floor in order to receive disability income benefits An insurable risk is characterized by all of the following EXCEPT: Select one: a. Loss is measurable. b. Large number of homogenous exposure units c. Loss must be catastrophic d. Loss must be definite and measurable Answer- Your answer is correct Insurable risks cannot be so severe that the insurance company cannot afford to pay the claim. The correct answer is: Loss must be catastrophic All of the following are elements of insurable risks EXCEPT: Select one: a. Loss must occur by chance or accident b. Large number of homogenous units c. Loss must be predictable d. Exposure must not be chosen randomly Answer- For insurable risks, the following must be true: 1.) loss must be definite and measurable; 2.) the loss must be predictable; 3.) loss exposures must be chosen randomly; and 4.) loss must not be catastrophic. The correct answer is: Exposure must not be chosen randomly A hazard is best defined as: Select one: a. A legal hazard b. A loss c. A peril d. Something that increases the chance of loss Answer- Hazard is anything (a condition) that increases the chance of a loss occurrence. The correct answer is: Something that increases the chance of loss All of the following are legal hazards EXCEPT: Select one: a. Suing a person without evidence of damage suffered b. Health insurance policies with mandatory coverage for alcoholism c. Health insurance policies with mandatory maternity coverage d. Improperly stored toxic waste Answer- Legal court rulings which increase the chance or amount of loss. A physical hazard is defined as physical characteristics which raise the loss potential for a particular peril. Some examples of physical hazards include: poorly constructed roofs, uneven sidewalks, icy roads and improperly stored toxic waste. The correct answer is: Improperly stored toxic waste A moral hazard can be described by all of the following statements EXCEPT: Select one: a. An insured's careless attitude or lack of responsibility b. The predisposition, character, habits and values of a person which increase the chance of a loss occurrence c. An insured who submits a false claim has committed a moral hazard d. An insured who attempts to defraud the insurer in order to make a profit from policy benefits is an example of a moral hazard. Answer- An insured's careless attitude or lack of responsibility describe a morale hazard. The correct answer is: An insured's careless attitude or lack of responsibility Matthew is a janitor for the local high school. He washes the hallway floors every night during the winter to make sure the slush, snow and salt from outside don't pose a hazard to students. One night, Matthew unintentionally forgets to wash the hallway that connects the science wing to the main lobby. The next morning, three students walk in through the school's lobby, slip on a puddle of water, fall and are injured. What type of hazard is shown in this example? Select one: a. Legal b. Physical c. Morale d. Moral Answer- Wet and slippery floors are an example of physical hazards. A moral hazard is not demonstrated because Matthew is not a corrupt or cruel janitor _ he didn't intentionally forget to clean up the floors in hopes that students would hurt themselves, nor is a morale hazard demonstrated because Matthew diligently cleans the floors every night as a proactive measure against students slipping on wet floors. Matthew unintentionally forgot to clean the floor. The correct answer is: Physical Which of the following is not a type of hazard? Select one: a. Physical hazard b. Morale hazard c. Moral hazard d. Perilous hazard Answer- Perilous is not a recognized type of hazard. The correct answer is: Perilous hazard Which of the following terms best describes something that increases the chance of a loss occurring from a particular peril? Select one: a. Exposure b. Loss c. Hazard d. Risk Answer- A hazard is distinguished from exposure as being something that elevates the chance of a loss occurring. The correct answer is: Hazard Risk Avoidance Answer- is deliberately steering clear of exposure to a risk. Risks are avoided by refusing to engage in activities that expose a person to risk. Some risks are effectively dealt with by risk avoidance. For example, if a person wants to avoid the risk of injury or accident from being a passenger in an airplane, they could completely avoid air travel. In discussing a potentially lucrative group policy with a business owner who had purchased a business and just moved into the community, an established producer jokingly remarked, "Well, would it sweeten the pot if I could assure you membership in the country club?"The producer added, "I'm on the membership committee and while we're not accepting new application right now, I'm sure something could be worked out." These remarks constituted: Select one: a. Nothing more than an effort to establish a warm relationship with the potential client b. Misrepresentation c. Rebating d. Intimidation Answer- While it is possible a little intimidation was intended in the producer's mention of serving on the membership committee of the closed club, it is clearer the producer is engaging in rebating. The producer is offering something that can have significant value to a new member of the business community (club membership) as a bonus for the purchase of a policy. The offer to, sweeten the pot, was clear and the context of the following conversation made it unmistakable rebating. Obviously the producer did not intend to include that service in the insurance contract. Any inducement in the sale of insurance that is not specified in the insurance contract itself is a rebate. The correct answer is: Rebating An example of an unfair claim settlement practice would include: Select one: a. Denying the payment of a claim because it does not meet the conditions of the insurance contract b. Delaying the payment of a claim while it is investigated for possible fraud c. Advising a claimant of the possibility that, should the claimant reject a settlement offer, an arbitration award might be less than the offer d. Denying the claim because it occurred after the cancellation of the policy Answer- Trying to discourage a claimant from arbitrating a claim by implying that arbitration might result in an award lower than the amount offered is an unfair claim settlement practice. The correct answer is: Advising a claimant of the possibility that, should the claimant reject a settlement offer, an arbitration award might be less than the offer The practice of using misrepresentation to induce a policyholder to replace a policy issued by the insurer the producer represents is called: a. Twisting b. Misrepresentation c. Churning d. Intimidation Answer- When a producer misrepresents a policy from the company he or she represents in order to induce a policyholder to replace it with another policy issued by the insurer, the producer has engaged in churning. He or she has recirculated funds and policies within their own company, generally in order to secure a first-year commission. The correct answer is: Churning Defamation occurs when: Select one: a. An individual or entity makes false, derogatory statements about an insurer's financial condition that are calculated to injure the insurer's business b. An individual or entity acts to create a general action that in any way to intimidate an insurer in order to gain a monopoly in business c. An individual or entity refuses to insure or limit the amount of coverage only because another insurer has cancelled an existing policy on that person d. An individual or entity takes legal action against an insurer or producer Answer- Defamation occurs when an individual or entity makes false, deliberately malicious and derogatory statements about an insurer's financial condition that are calculated to injure the insurer's business. The individual literally _de fames_ the insurer _ i.e., robs the insurer of its fame or reputation. The correct answer is: An individual or entity makes false, derogatory statements about an insurer's financial condition that are calculated to injure the insurer's business Which of the following is considered an unfair claims practice? Select one: a. Splitting a commission with a prospect b. Failing to affirm or deny coverage within a reasonable time after receiving proof of loss c. Convincing a policyholder to lapse or surrender an existing policy to sell another policy d. Making any oral or written statement that is false, maliciously critical, or calculated to injure a competing producer Answer- Splitting a commission, convincing a policyholder to lapse or surrender an existing policy so the agent may sell another policy; making statements that are false, maliciously critical, or calculated to injure a competing producer are all unfair marketing practices. Failing to acknowledge coverage within a reasonable time after receiving proof of loss is an unfair claims practice. The correct answer is: Failing to affirm or deny coverage within a reasonable time after receiving proof of loss Which of the following insurers cannot be categorized as commercial? Select one: a. Mutual insurer b. Stock insurer c. Demutualized insurer d. BlueCross BlueShield Answer- BlueCross BlueShield organizations are noncommercial organizations. However, they are not technically insurers and are better described as service organizations. The correct answer is: BlueCross BlueShield What are the two distinct characteristics that distinguish mutual insurers from stock insurers? Select one: a. Mutual insurers lack capital stock and profits are distributed among the members. b. Mutual insurers are not governed by a board of directors and are owned by stockholders. c. Mutual insurers have capital stock and are owned by stockholders. d. Mutual insurers do not have policyholders and have capital stock. Answer- Mutual insurers are distinct from stock insurers in two primary ways: they lack capital stock, and profits are distributed among their members _ the policyholders. The correct answer is: Mutual insurers lack capital stock and profits are distributed among the members. The Mayflower Insurance Company is a stock insurance company. What is its operating objective? Select one: a. To have the lowest net premium b. To make a profit for stockholders c. To make a profit for policyholders d. To have the lowest gross premium Answer- The operating objective of any stock company, including a stock insurance company, is to make a profit for its stockholders. The correct answer is: To make a profit for stockholders Mutualization occurs when: Select one: a. A mutual insurer becomes a stock insurer b. A stock insurer becomes a mutual insurer c. A nonprofit insurer becomes a mutual insurer d. A nonprofit insurer becomes a stock insure Answer- Mutualization occurs when a stock insurer becomes a mutual insurer, while demutualization is when a mutual insurer becomes a stock insurer. The correct answer is: A stock insurer becomes a mutual insurer BlueCross pays: Select one: a. Surgical costs b. Medical costs c. Hospital costs d. Surgical, medical and hospital costs Answer- BlueCross health plans pay for hospital costs. The correct answer is: Hospital cost A mutual company pays dividends to: Select one: a. Stockholders b. Policyholders c. Insureds d. Debtors Answer- Dividends are considered a return of overcharged premium. Mutual companies pay dividends to policyholders. A nonparticipating insurer is: Select one: a. A stock insurer b. A mutual insurer c. BlueCross BlueShield d. Unauthorized insurers are also referred to as nonadmitted insurers, and do not hold a certificate of authority. Answer- Authorized insurers are also referred to as admitted or licensed insurers. Unauthorized, (non-licensed or nonadmitted) do not have licensure because they have not yet applied, have applied and been denied licensure, or are excess and surplus lines insurers. Even though excess and surplus lines insurers are considered unauthorized insurers in a state, they are permitted to conduct insurance business in that state. The correct answer is: Excess and surplus lines insurers must apply for a certificate of authority to become admitted. A domestic insurer is: Select one: a. An insurance company conducting business in a foreign country. b. An insurance company conducting business in the state in which it is incorporated. c. An insurance company conducting business in a state in which it wasn't incorporated. d. Always unauthorized Answer- Your answer is correct An insurer's domicile of incorporation is the state or district in which it became an incorporated company. An insurer that conducts business in the state it was incorporated is a domestic insurer. The correct answer is: An insurance company conducting business in the state in which it is incorporated. Agents are appointed to work on behalf of: Select one: a. Insurance companies b. Insureds c. Beneficiaries d. None of the above Answer- Agents are appointed to work on behalf of insurance companies. The correct answer is: Insurance companies Agents who own the policies they sell and can work for multiple insurers are known as: Select one: a. Captive agents b. Exclusive agents c. Independent agents d. Managing general agents Answer- Independent agents have control of and own the policies they sell and may work for multiple insurers. The correct answer is: Independent agents A foreign insurer is: Select one: a. An insurance company conducting business in a foreign country b. An insurance company conducting business in the state in which it is incorporated c. An insurance company conducting business in a state in which it wasn't incorporated d. Always unauthorized Answer- An insurer's domicile of incorporation is the state or district in which it became an incorporated company. A foreign insurer is any insurer that conducts business in a state or district in which it wasn't incorporated. Be sure you are not tempted to confuse foreign and alien insurers. The correct answer is: An insurance company conducting business in a state in which it wasn't incorporated LMO Insurer is incorporated in New Hampshire, conducts business in all of the eastern seaboard states and in Germany. How is LMO Insurer classified in Germany? Select one: a. Excess and surplus lines b. Alien c. Foreign d. Domestic Answer- An insurer's domicile of incorporation is the state or district in which it became an incorporated company. LMO Insurer is incorporated in the state of New Hampshire, so it is an alien insurer in Germany. The correct answer is: Alien