Chapter 5

An agent makes a mistake on the application and then corrects his mistake by physically entering the necessary information. Who must then initial that change? A. Applicant B. Executive officer of the company C. Insured D. Agent

A. Applicant Any changes made to the application must be initialed by the applicant.

When delivering a policy, which of the following is an agent's responsibility? A. Collect payment at the time of delivery B. Issue the policy if the applicant is present C. Approve or decline the risk D. Collect medical statement from a physician

A. Collect payment at the time of delivery

Before a customer's agent delivers his policy, the insurer makes a last-minute change to the policy. The agent informs the customer of this change, and he accepts it. What must the agent do now? A. The agent should ask the customer to sign a statement acknowledging that he is aware of the change. B. Nothing. After the explanation, the agent is not legally bound to do anything else. C. The agent must notify the beneficiary of the change in policy. D. If the change would affect the premium, the agent must have the customer sign a statement acknowledging the change.

A. The agent should ask the customer to sign a statement acknowledging that he is aware of the change. If the insurer makes a change to the policy, the changes must be explained to the insured, and the insured must sign a statement acknowledging that the changes were explained.

The insurance policy, together with the policy application and any added riders form what is known as A. Entire contract. B. Certificate of coverage. C. Contract of adhesion. D. Whole life policy.

A.Entire contract. When a policy is issued, a copy of the application, any riders and amendments are attached to the back of the policy and become part of the entire contract.

Under the Privacy Rule for HIPAA, protected information includes all individually identifiable health information A. Held or transmitted in paper form. B. Held or transmitted in any form. C. Transmitted electronically only. D. Held in a computer format.

B. Held or transmitted in any form. Correct! Under the Privacy Rule for HIPAA, protected information includes all individually identifiable health information held or transmitted by a covered entity or its business associate in any form or media, whether electronic, paper or oral. This is called protected health information (PHI).

Which of the following entities can legally bind coverage? A. Agent B. Insurer C. The insured D. Federal Insurance Board

B. Insurer Correct! Only insurers, not agents, can bind coverage.

Which of the following is true about the requirements regarding HIV exams? A. HIV exams may not be used as a basis for underwriting. B. The applicant must give prior informed written consent. C. Results may be disclosed to the agent and the underwriter. D. Prior informed oral consent is required from the applicant.

B. The applicant must give prior informed written consent. A separate written consent form must be obtained prior to an HIV exam. HIV exam results may be disclosed to underwriters, but not agents.

On a health insurance application, a signature is required from all of the following individuals EXCEPT A. The agent. B. The spouse of the policyowner. C. The proposed insured. D. The policyowner.

B. The spouse of the policyowner. Every health insurance application requires the signature of the proposed insured, the policyowner (if different than the insured), and the agent who solicits the insurance.

An agent is ready to deliver a policy to an applicant but has not yet received payment. Upon delivery, the agent collects the applicant's premium check, answers any questions the applicant may have, and then leaves. What did he forget to do? A. Ask the applicant to sign a statement that acknowledges that the policy had been delivered B. Collect a late payment fee C. Ask her to sign a statement of good health D. Offer her a secondary policy

C. Ask her to sign a statement of good health If the premium is not collected until the policy is delivered, the agent must receive a statement of good health, which acknowledges that the insured's health status has not changed since the policy was approved.

To comply with Fair Credit Reporting Act, when must a producer notify an applicant that a credit report may be requested? A. When the policy is delivered B. At the initial interview C. At the time of application D. When the applicant's credit is checked

C. At the time of application Correct! A notice to the applicant must be issued to all applicants for health insurance coverage.

What is the best way to change an application? A. White-out the previous answer B. Draw a line through the incorrect answer and insert the correct one. C. Start over with a fresh application D. Erase the previous answer and replace it with the new answer

C. Start over with a fresh application Most companies require that the app be filled out in ink. The agent might make a mistake when filling out the app or the applicant might answer a question incorrectly and want to change it. There are two ways to correct an application. The first and best is to simply start over with a fresh application. If that is not practical, draw a line through the incorrect answer and insert the correct one. The applicant must initial the correct answer.

Whose responsibility is it to determine if all of the questions on an application have been answered? A. The applicant B. The beneficiary C. The agent D. The insurer

C. The agent It is the responsibility of the agent to make sure that the application has been properly signed and that all questions have been answered correctly.

Which is true regarding obtaining underwriting sources? A. The insurer only needs to inform the applicant of how the information is being gathered; it is not necessary to disclose the sources. B. It is illegal to obtain information from outside sources in order to determine an applicant's insurability. C. The applicant must be informed of the sources contacted and how the information is being gathered. D. The insurer does not need to inform the applicant of how the information is gathered; informing only of the source is sufficient.

C. The applicant must be informed of the sources contacted and how the information is being gathered. It is required by law that an insurer informs the applicant of all sources that will be contacted in determining the applicant's insurability, in addition to how the information will be gathered.

What is the term used for an applicant's written request to an insurer for the company to issue a contract, based on the information provided? A. Policy Request B. Insurance Request Form C. Request for Insurance D. Application

D. Application An individual can submit an application to an insurer, which requests that the insurer review the information and issue an insurance contract.

Who must pay for the cost of a medical examination required in the process of underwriting? A. Applicant B. Underwriters C. Department of Insurance D. Insurer

D. Insurer Correct! If an insurer requests a medical examination, the insurer is responsible for the costs of the exam.