2 - Chapter 15 Insurance Companies True/False Questions 1....

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Chapter 15 Insurance Companies True/False Questions 1. The primary function of insurance companies is to compensate policy holders or their beneficiaries if some specific adverse event occurs. Answer: True Page: 442 Level: Easy 2. Most large life insurers used to be mutually owned but have now converted to stock ownership. Answer: True Page: 443 Level: Easy 3. In a variable life policy some of the policyholder's premium payments are invested in variable rate investments usually chosen by the policyholder. Answer: True Page: 445 Level: Medium 4. In a universal life policy the cash value of the contract grows at a fixed rate set by the life insurer. Answer: False Page: 445 Level: Medium 5. A 65 year old person has saved $550,000 and wishes to receive 10 annual annuity payments, beginning in one year. If the annuity rate is 6%, he can expect to receive $79,425 per year. Answer: False Page: 446 Level: Medium 6. Premiums on standard annual renewable term life will generally increase as the policyholder ages. Answer: True Page: 445 Level: Easy 7. Policy reserves are the primary asset of the typical life insurer. Answer: False Page: 448 Level: Medium 8. Life insurers write over 50% of all health insurance premiums. Answer: True Page: 446-447 Level: Easy 207
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9. Life insurance policy reserves are the estimated current worth of expected future payouts. Answer: True Page: 448 Level: Medium 10. The cash surrender value of a life insurance policy is the present value of expected future payouts on the policy. Answer: False Page: 448 Level: Medium 11. The McFadden Act allows states the primary right to regulate insurance companies. Answer: False Page: 449 Level: Medium 12. The National Association of Insurance Commissions (NAIC) examines and regulates insurance companies. Answer: False Page: 449-450 Level: Medium 13. Most states maintain a permanent reserve fund to resolve insurance company failures. Answer: False Page: 450-451 Level: Easy 14. The top ten property and casualty firms underwrite about 45% of all the P&C premiums written. Answer: True Page: 450 Level: Medium 15. The primary asset for P&C insurers are bonds. Answer: True Page: 453 Level: Easy 16. As of 2004, life insurers held a greater percentage of assets in common stocks for their own account than did property and casualty insurers. Answer: False Page: 449,453 Level: Medium 17. Property loss risk is generally easier to estimate than liability loss risk. Answer: True Page: 454 Level: Easy 208
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18. Liability lawsuits related to asbestos claims are an example of long tail losses. Answer: True Page: 454 Level: Medium 19. Liability losses are more subject to social inflation than property losses. Answer: True Page: 454-455 Level: Easy Multiple Choice Questions 20. Policy reserves are a/an A) Balance sheet liability B) Balance sheet asset C) Separate account item D) Insurance guarantee fund payment E) Income statement revenue item Answer: A Page: 448 Level: Medium 21. The following type(s) of life insurance policies do not have a savings feature
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This note was uploaded on 01/16/2012 for the course ECON 101 taught by Professor Tom during the Spring '11 term at FH Joanneum.

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2 - Chapter 15 Insurance Companies True/False Questions 1....

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