Chapter 5 Exam - Underwriting

An incomplete life insurance application submitted to an insurer will result in which of these actions? A. Application will be returned to the writing agent. B. Application will be approved with restrictions. C. Application will be pending until a MIB report is sent to the insurer. D. Application will be automatically declined.

A. Application will be returned to the writing agent.

A pilot applies for life insurance. The insurer approves the application with a $10 additional monthly premium modification due to the risk involved. The pilot declines the additional premium modification. The insurer will likely then issue the coverage with a... A. Aviation Exclusion B. Graded Benefit C. Disability Rider D. Waiver of Premium

A. Aviation Exclusion

K is an agent who takes an application for individual life insurance and accepts a check from the client. He submits the application and check to the insurance company, however the check was never signed by the applicant. If the application is approved, when will coverage be effective? A. The date the sales appointment was made. B. The date the application was submitted to the insurance company. C. The date of application. D. The date the agent delivered the policy, collected the initial premium, and obtained a good health statement from the insured.

D. The date the agent delivered the policy, collected the initial premium, and obtained a good health statement from the insured.

All are true statements regarding the underwriting process, EXCEPT: A. Signed consent from the applicant must be provided in order to test for AIDS, and HIV virus. B. AIDS and HIV virus exams can be conducted in a discriminatory fashion. C. The cost of any examination is paid for by the insurer. D. The original application is the primary source of information used in the underwriting process.

B. AIDS and HIV virus exams can be conducted in a discriminatory fashion.

When an insurance application is taken by a producer, which of these statements is true? A. The applicant should have an attorney present during the application process. B. Any changes made on the application require the applicant's initials. C. Any changes made on the application can later be initialed by the producer if the applicant is unavailable. D. The producer has the discretion to ask or not to ask any of the questions listed on the application.

B. Any changes made on the application require the applicant's initials.

On August 6, D submitted an application for $50,000 life insurance policy and did not pay the initial premium. On August 18, D went to his doctor complaining of chest pains and some test were given by the doctor. The life policy was delivered by the produced on August 20 and D explains what had recently taken place with the doctor. What action should the producer then take? A. Collect initial premium B. Collect initial along with a signed health statement. C. Explain to the applicant the policy is no longer in effect due to change in health condition. D. Collect initial premium and leave a binding receipt.

B. Collect initial 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, provided that T is an acceptable risk. What item is given to T? A. Binding Receipt B. Conditional Receipt C. Warranty Receipt D. Backdated Receipt

B. Conditional Receipt

The underwriting process involves all of these EXCEPT for A. Credit Report B. Policy Loan C. Risk Classification D. Application

B. Policy Loan

Agent J takes an application and initial premium from an applicant and sends the application and premium check to the insurance company. The insurance company returns the check back to J because the check is made out to J instead of the insurance company. What action should J take? A. Deposit the applicant's check into his account and make a personal check out to the insurance company from his person account. B. Return to the customer, collect a new check made out to the insurance company, and send the new check out to the insurance company. C. Cross of his name on the "pay to" portion of the check, write the name of the insurance company, and send the check back to the insurance company. D. Deposit the check into his personal account, use the funds to purchase a cashiers check, and send the new cashier check back to the insurance company. D.

B. Return to the customer, collect a new check made out to the insurance company, and send the new check out to the insurance company.

The reason for backdating a policy is A. to avoid being considered a substandard risk due to a recent cancer diagnosis B. to obtain a premium rate based on an earlier age C. to decrease the face amount D. to decrease the contestable period

B. to obtain a premium rate based on an earlier age.

Which of the following correctly explains the actions of an agent should take if a customer wants to apply for an insurance policy? A. Have the customer sign a blank application, then take the application back to his office to complete prior to sending it off to the insurance company. B. Complete the application over the phone with the customer, sign the application for the customer, then send the application off to the insurance company. C. Complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company. D. Have the customer fill out the application and send it to his office for him to sign, then send it off to the insurance company.

C. Complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company.

What is the purpose of the USA Patriot Act? A. Detect and deter fraud B. Detect and deter alien insurance companies C. Detect and deter terrorism D. Detect and deter misrepresentations

C. Detect and deter terrorism

M completes an application for life insurance but does not pay the initial premium. All of these actions must occur before M's policy goes into effect EXCEPT: A. Policy is delivered B. Free-look period has expired C. Insurance company issues policy D. Initial premium is collected

C. Insurance company issues policy.

Which factors are taken into consideration when an insurance company determines the premium rate for a Whole Life policy on an applicant? A. Geographical Location B. Source of Income C. Risk Classification D. Marital Status

C. Risk Classification