Chap 5 Underwriting and Policy Issue

The USA Patriot Act was enacted in:

2001. The USA Patriot Act was enacted in 2001 to detect and deter terrorism.

An incomplete life insurance application submitted to an insurer will result in which of these actions?

Application will be returned to the writing agent. If the company discovers a mistake or incompletion, it usually returns the application to the producer.

Which factors are taken into consideration when an insurance company determines the premium rate for a Whole Life policy on an applicant?

Risk classification. To determine the premium rate on a Whole Life policy, an insurance company will consider the risk classification of the applicant.

Any changes made on an insurance application requires the initials of whom?

Applicant. When an applicant makes a mistake in the information given to an agent in completing the application, the applicant can have the agent correct the information, but the applicant must initial the correction.

A student pilot can pay regular premium costs for her life insurance policy with the addition of which of the following?

Aviation exclusion. A student pilot can pay standard premium costs for her life insurance policy with the addition of an aviation exclusion.

Who is NOT required to sign a life insurance application?

Beneficiary

From what authority derives the requirement that an insurance application contains a disclosure stating that an investigative consumer report may be obtained on an applicant?

Fair Credit Reporting Act. The Fair Credit Reporting Act requires that an insurance application state that an investigative consumer report may be obtained on an applicant.

Which of these factors do NOT play a role in the underwriting of a life insurance policy?

Marital Status.

The underwriting process involves all of these, EXCEPT for:

Policy Loan. A policy loan is not a factor in the underwriting process.

Which of these do not constitute policy delivery?

Policy issued with a rating.

The reason for backdating a policy is

To obtain a premium rate based on an earlier age. The purpose of backdating a life insurance policy is to use premiums based on an earlier age.

ABC insurance company has accepted a life insurance application which contains unanswered questions. The company then makes the application part of the life contract. In this situation, the insurer has:

Waived one of its legal rights. Is an insurer accepts an application that contains unanswered questions and makes the application part of the life contract, the company has waived one of its legal right.

Which parts of a life insurance policy are guaranteed to be true?

Warranty. Warranties are statements that are considered literally true. A warranty that is not literally true in every detail, even if made in error, is sufficient to render a policy void.

Upon delivery of a rated life insurance policy, the Producer must obtain each of the following, except:

Signed HIPPA disclosure. The HIPAA disclosure should be taken at the time of sale with the application.

On August 6, D submitted an application for a $50,000 Life Insurance policy and did not pay the initial premium. On August 18, D went to his doctor complaining on chest pains and some tests were given by the doctor. The life policy was delivered by the producer on August 20 and D explains what had recently taken place with the doctor. What action should the producer then take?

Collect initial premium along with a signed health statement. In this situation, the producer should deliver the policy and obtain a premium payment along with a signed health statement.

T applies for a life insurance policy and is told by the producer that the insurer is bound to the coverage as of the date of the application or medical examination, whichever is later. Assuming that T is an acceptable risk, what item is given to T?

Conditional Receipt. A conditional receipt binds the insurer to coverage as of the date of the application or medical exam, provided the proposed insured is determined to be an acceptable risk.

K applies for a life insurance policy on herself and submits the initial premium with the application. She is given a receipt by the agent stating that coverage begins immediately if the application is approved. What kind of receipt was used?

Conditional. A conditional receipt indicated that certain conditions must be met in order for the insurance coverage to go into effect.

What action should a producer take if the initial premium is NOT submitted with the application?

Forward the application to the insurer without the initial premium. In this situation, the producer should submit the application to the insurance company without the premium. However, if a premium is not paid with the application, the policy will not become valid until the initial premium is collected.

What is being delivered during a policy delivery?

Insurance contract to the proposed insured. Policy deliver refers to the delivery of the insurance contract to the applicant.

What is the purpose of a Policy Summary?

It highlights the critical parts of the policy issued. A policy summary highlights the critical parts of the policy issued and describes the coverages, riders, and exclusions.

On January 8, an applicant filled out an application for a life insurance policy but did not include the initial premium. The insurance company approved the application on January 14 and issued the policy January 15. The producer delivered the policy on January 26 and collected the first premium. When did the coverage become effective?

January 26. In this situation, coverage became effective on the date the policy was delivered and first premium collected.

All of these are considered sources of underwriting information about an applicant, except:

Rating Services (A.M. Best Standard & Poor's).

Which of these items accurately defined an underwriter's assessment of information on a life insurance application?

Risk classification. Underwriting, another term for risk selection, is the process of reviewing the may characteristics that make up the risk profile of an applicant to determine if the applicant is insurable and, if so, at standard for substandard rates.

An applicant's medical information received from the Medical Information Bureau (MIB) may be furnished to the:

applicant's physician. Information received from the Medical Information Bureau about a proposed insured may be released to the proposed insured's physician.