General Insurance — New York exam
10% of the scored questions — about 10 of 100. This section is general life insurance knowledge, shared with every state's exam.
1 / 8
A business installs sprinklers throughout its warehouse. Which method of handling risk is that?
Answer and explanation
Answer: A. Reduction lowers the frequency or severity of loss without removing the risk, which is what sprinklers do. Avoidance means not undertaking the activity at all, retention means bearing the loss oneself, and transfer moves the financial consequence to another party, most often by an insurance contract.Source: PSI — New York DFS Insurance Candidate Information Bulletin — Outline, methods of handling risk
2 / 8
A firm raises the deductible on its cover and keeps the first layer of loss itself. Which method of handling risk is that?
Answer and explanation
Answer: C. Retention means keeping a loss exposure for one's own account, and a deductible is the everyday form of it. Avoidance removes the exposure, reduction lowers frequency or severity, and sharing spreads a loss across a group of similarly exposed parties.Source: PSI — New York DFS Insurance Candidate Information Bulletin — Outline, methods of handling risk
3 / 8
A homeowner stores petrol in an attached garage. In risk terms, what is the petrol?
Answer and explanation
Answer: A. A hazard is a condition that increases the likelihood or severity of a loss, which is what stored petrol does. The peril is the cause of loss itself, such as fire; the loss is the reduction in value when it happens; and the exposure is the property or person at risk.Source: PSI — New York DFS Insurance Candidate Information Bulletin — Outline, General Insurance, risk management key terms
4 / 8
A life insurance policyowner may stop paying premiums at any time without legal penalty, but the insurer is legally bound to pay the death benefit if the insured dies while the policy is in force. This situation best illustrates which legal characteristic of an insurance contract?
Answer and explanation
Answer: B. Insurance is unilateral because the insurer makes the enforceable promise to pay according to the contract. The owner is not compelled to continue premiums, although nonpayment can cause lapse.Source: South Carolina Department of Insurance — Prelicensing Education Topic Outline — Life, Accident and Health Topic Outline page 12, Unique Features of Insurance Contract > Unilateral
5 / 8
A New York producer collects an application and the first premium. What does the producer owe the applicant?
Answer and explanation
Answer: C. A producer owes the applicant care in transmitting the application accurately and in handling premium properly, holding those funds in a fiduciary capacity. Issue, final rating, and claim payment are the insurer's decisions and cannot be promised by the producer.Source: PSI — New York DFS Insurance Candidate Information Bulletin — Outline, responsibilities to the applicant and insured
6 / 8
A producer collects a premium with an application and holds it for three weeks before remitting it. What duty has been breached?
Answer and explanation
Answer: C. Premiums belong to the insurer and to the applicant, not to the producer, so they must be accounted for promptly and kept apart from personal funds. Illustrations, compensation disclosure and authority to collect are separate obligations.Source: PSI — New York DFS Insurance Candidate Information Bulletin — Outline, responsibilities to applicant and insured
7 / 8
An application stipulates that coverage will not begin until the policy is delivered, accepted, and the first premium is paid. If the policy is delivered but the initial premium remains unpaid, why is the insurer not liable for a claim?
Answer and explanation
Answer: A. Because liability is expressly conditioned on several events, failure to pay the first premium means the condition has not been satisfied. This illustrates the conditional nature of insurance.Source: Interstate Insurance Product Regulation Commission — Individual Life Insurance Application Standards — § 3.K. Agreements (1)(d)
8 / 8
An insured has been careless about locking the premises since buying coverage. Which kind of hazard is that?
Answer and explanation
Answer: B. A morale hazard is indifference to loss arising because the insured is covered. A moral hazard involves dishonesty or an intent to cause loss, a physical hazard is a tangible condition of the property, and speculative risk is one carrying a chance of gain and so is not insurable.Source: PSI — New York DFS Insurance Candidate Information Bulletin — Outline, physical, moral, and morale hazard
All 62 general insurance questions
- An insured pays a single monthly premium and dies the next week, and the insurer pays the full face amount. Which contract characteristic does this illustrate?
- An insurer discovers within the contestable period that a material fact was concealed. What remedy is rescission?
- An insurer formed under the laws of Connecticut writes business in New York. How is it classified in New York?
- An insurer has not been granted authority to transact business in New York. How is it described?
- An insurer has taken late premiums for two years without comment, then declines a claim for late payment. What doctrine answers the insurer?
- An insurer incorporated in Ontario, Canada writes business in New York. How is it classified in New York?
- An insurer lets a former agent keep using its stationery and signs, and a client deals with him believing he still represents it. Which authority is in play?
- An insurer transfers part of the risk it has accepted to another insurer. What is that arrangement?
- An owner wishes to transfer a life policy to another person. Why does the personal contract character of insurance matter here?
- How do stock and mutual insurance companies differ in ownership and distributions?
- How does a warranty differ from a representation in insurance law?
- How does the principle of indemnity apply differently to life insurance than to property insurance?
- In the law of agency as it applies to insurance, who is the principal?
- In the law of agency, what is the relationship between an insurer and its appointed producer?
- Under the law of large numbers, what happens to the reliability of an insurer's loss prediction as the number of similar exposure units grows?
- What characterises a career agency, or captive, distribution system?
- What consequence follows from an insurance policy being a contract of adhesion?
- What distinguishes a captive or career distribution system from an independent one?
- What distinguishes a fraternal benefit society from a commercial insurer?
- What do independent rating services report about an insurer?
- What do independent rating services such as A.M. Best assess about an insurer?
- What does the law of large numbers allow an insurer to do?
- What does the mandatory fraud warning on a life insurance application state?
- What does the principle of utmost good faith require of the parties to an insurance contract?
- What does the term 'unilateral' mean in relation to a life insurance contract?
- What follows from an insurance policy being a personal contract?
- What is a waiver in the context of an insurance contract?
- What is adverse selection in insurance?
- What is an agent's express authority?
- What is concealment in the formation of an insurance contract?
- What is the relationship between the ceding insurer and the reinsurer?
- What makes an insurance policy a conditional contract?
- What makes an insurance policy aleatory?
- What makes an insurer admitted in a given state?
- What must be shown to establish fraud, beyond an untrue statement of material fact?
- What ordinarily distinguishes a government insurer from a private one?
- What problem does the term adverse selection describe?
- When a policyowner stops paying premiums, allowing a term life policy to lapse, the insurer cannot take legal action to force the owner to continue making payments. Which characteristic of insurance contracts does this limitation reflect?
- Which characteristic must a loss have to be an insurable risk?
- Which characteristic would ordinarily prevent a risk from being insurable?
- Which feature identifies a fraternal benefit society?
- Which four elements must be present for an insurance contract to be legally enforceable?
- Which method of handling risk does buying life insurance represent?
- Which need is customarily met by a government insurer rather than a private one?
- Which policy feature is designed chiefly to limit adverse selection?
- Which set names the elements of a legal contract as the outline lists them?
- Which statement best explains why a life insurance policy is legally considered a conditional contract?
- Who owns a mutual insurance company?
- Why do insurers treat losses from flooding along a single river valley as difficult to write as an insurable risk?
- Why is a bet on a horse race not an insurable risk?
- Why is a life insurance policy classified as an aleatory contract?
- Why is a life insurance policy described as unilateral?
- Why is an insurance contract classified as a conditional contract?
- Why is an insurance policy a contract of adhesion?
Drill general insurance until it sticks.
The app brings back the questions you miss on a spaced schedule and tracks this topic in your readiness.