Application, Underwriting, and delivering the policy Questions
An insurance contract must contain all of the following to be considered legally binding EXCEPT Offer and acceptance Consideration Competent parties Beneficiary's consent
Beneficiary's consent
Which of the following is NOT an example of a valid insurable interest? Business partners in each other's lives Employer in key employee's life Child in parents' lives Debtor in the life of the creditor
Debtor in the life of the creditor
Untrue statements on the application unintentionally made by insured that, if discovered, would alter the underwriting decision of the insurance company, are called Common errors Material misrepresentations Fraudulent statements Warranties
Material misrepresentations
Untrue statements on the application unintentionally made by insureds that, if discovered, would alter the underwriting decision of the insurance company, are called Fraudulent statements Warranties Common errors Material misrepresentations
Material misrepresentations
Another name for a substandard risk classification is Controlled Declined Elevated Rated
Rated
When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is Aleatory Personal Unilateral Conditional
Conditional
Most agents try to collect the initial premium for submission with the application. When an agent collects the initial premium from the applicant, the agent should issue the applicant a Backdated receipt Warranty Premium receipt Statement of good health
Premium receipt
What is the timeframe for filing relevant suspicious activity reports? Within 90 days of initial discovery Within 90 days of the suspicious transaction Within 30 days of initial discovery Within 30 days of the suspicious transaction
Within 30 days of initial discovery
Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained? 3 days 5 days 10 days 14 days
3 days
Which of the following documents delivered to the policy owner includes information about premium amounts, cash values, surrender values, and death benefits for specific policy years? A notice regarding the replacement A privacy notice A buyer's guide A policy summary
A policy summary
An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe? Aleatory Good health Adhesion Conditional
Aleatory
In insurance, an offer is usually made when The insurer approves the application and receives the initial premium The agent hands the policy to the policyholder An agent explains a policy to a potential applicant An applicant submits an application to the insurer
An applicant submits an application to the insurer
When an insurer begins underwriting procedures for an applicant, what will be the main source for its underwriting information? Interviews State records Medical records Application
Application
Stranger-originated life insurance policies are in direct opposition to the principle of Insurable interest Law of large numbers Good faith Indemnity
Insurable interest
An applicant who receives a preferred risk classification qualifies for Dividends payable for lack of claims Higher premiums than a person who receives a sub-standard risk Higher premiums than a person who receives a standard risk Lower premiums than a person who receives a standard risk
Lower premiums than a person who receives a standard risk
Which of the following individuals must have insurable interest in the insured? Beneficiary Underwriter Producer Policyowner
Policyowner
If an agent fails to obtain an applicant's signature on the application, the agent must Sign the application for the applicant Sign the application, stating it was by the agent Send the application to the insurer with a note explaining the absence of signature Return the application to the applicant for a signature
Return the application to the applicant for a signature
An individual applied for an insurance policy and paid the initial premium. The insurer issued a conditional receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued, what would be the policy's effective date? The date of policy delivery The date of issue The date of application The date of medical exam
The date of medical exam
Which of the following would provide an underwriter with information concerning an applicant's health history? The medical information bureau A medical examination The agent's report The inspection report
The medical information bureau
Which of the following would qualify as a competent party in an insurance contract? The applicant is a 12-year-old student The applicant is under the influence of a mind-impairing medication at the time of application The applicant has a prior felony conviction The applicant is intoxicated at the time of application
The applicant has a prior felony conviction
Under the Fair Credit Reporting Act, individuals are rejected for insurance due to information contained in a consumer report Must be advised that a copy of the report is available to anyone who requests it May sue the reporting agency in order to get inaccurate data corrected Must be informed of the source of the report Are entitled to obtain a copy of the report from the party who ordered it
Must be informed of the source of the report
Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information? The guaranty association Consumer privacy act The fair credit reporting act Unfair trade practices law
The fair credit reporting act
If an insurer issued a policy based on the application that had unanswered questions, which of the following will be TRUE? The policy will be void The insurer may deny coverage later, because of the information missing on the application The policy will be interpreted as if the insurer waived its right to have an answer on the application The policy will be interpreted as if the insured did not have an answer to the question
The policy will be interpreted as if the insurer waived its right to have an answer on the application
Which is the primary source of information used for insurance underwriting? Applicant interviews Medical records Private investigations Application
Application
If a change needs to be made to the application for insurance, the agent may do all of the following EXCEPT Erase the incorrect answer and record the correct answer Draw a line through the first answer, record the correct answer, and have the applicant initial the change Note on the application the reason for the change Destroy the application and complete a new one
Erase the incorrect answer and record the correct answer
Which of the following documents delivered to the policyowner includes information about premium amounts, cash values, surrender values and death benefits for specific policy years? A policy summary A notice regarding replacement A privacy notice A buyer's guide
A policy summary
The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective? As of the policy delivery date As of the first of the month after the policy issue As of the policy issue date As of the application date
As of the application date
An insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable. What contract characteristic does this describe? Conditional Contingent Aleatory Unilateral
Conditional
Which of the following resorts will provide the underwriter with the information about an insurance applicant's credit? Inspection report Agent's report Any federal report Consumer report
Consumer report
When Y appl,ied for insurance an paid the initial premium on August 14, he was issued a conditional receipt. During the underwriting process, the insurance company found no reason to reject the risk or classify it other than as standard. Y was killed in an automobile accident on August 22, before the policy was issued. In this case, the insurance company will Issue the policy anyway and pay the face value to the beneficiary Negotiate a reduced settlement with the beneficiary due to the unusual circumstances involved Return the premium to Y's estate, since it has no obligation to pay the death claim Keep the premium and reject the risk on the basis that the applicant died before the policy could be issued
Issue the policy anyway and pay the face value to the beneficiary
A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will Automatically pay the policy proceeds Pay the policy proceeds only if it would have issued the policy Pay the policy proceeds up to an established limit Not pay the policy proceeds under any circumstances
Pay the policy proceeds only if it would have issued the policy
Upon policy delivery, the producer may be required to obtain any of the following EXCEPT Payment of premium Delivery receipt Signed waiver of premium Statement of good health
Signed waiver of premium
What is the purpose of the buyer's guide To allow the consumer to compare the costs of different policies To provide the name and address of the agent/producer issuing the policy To list all policy riders To provide information about the issued policy
To allow the consumer to compare the costs of different policies
Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract? Indemnity Representation Warrant Concealment
Warrant
According to the Fair Credit Reporting Act, all of the following would be considered negative information about a consumer EXCEPT Late payments Failure to pay off a loan Disputes regarding consumer report information Tax delinquencies
Disputes regarding consumer report information
When is the earliest a policy may go into effect? When the first premium is paid and the policy has been delivered When the insurer approves the application After the underwriter reviews the policy When the application is signed and a check is given to the agent
When the application is signed and a check is given to the agent
The insurer discovered that one of the applicants for life insurance missed a couple of questions on the application. What must the insurer do with the application? Acknowledge the missed questions with a signature and continue the policy issue process Proceed with issuing a policy Return to the applicant for completion Answer the missed questions for the applicant
Return to the applicant for completion
Which of the following is a risk classification used by underwriters for life insurance? Poor Normal Excellent Standard
Standard
All of the following are duties and responsibilities of producers at the time of application EXCEPT Change any incorrect statement on the application by personally initialing next to the correct statement Explain the nature and type of any receipt the producer is giving to the applicant Probe beyond the stated questions if the producer feels the applicant is misrepresenting or concealing information Check to make sure that there are no unanswered questions on the application
Change any incorrect statement on the application by personally initialing next to the correct statement
Representations are written or oral statements made by the applicant that are Guaranteed to be true Found to be false after further investigation Immaterial to the actual acceptability of the insurance contract Considered true to be the best of the applicant's knowledge
Considered true to be the best of the applicant's knowledge
A life insurance policy has a legal purpose if both of which of the following elements exist? Offer and counteroffer Policyowners and named beneficiaries Insurable interest and consent Underwriting and reciprocity
Insurable interest and consent
In informing an insurance contract, when does acceptance usually occur? When an insured submits an application When an insurer's underwriter approves coverage When an insurer delivers the policy When an insurer receives an application
When an insurer's underwriter approves coverage
If an applicant for a life insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about Which individual will pay the premium Whether an insurable interest exists between the individuals The gender of the applicant The type of policy requested
Whether an insurable interest exists between the individuals
