Day 1

If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply?

5 days

The Medical Information Bureau is (MIB)

A nonprofit trade organization put together by insurance companies to alert insurers to adverse medical history

A contract offered on a "take-it-or leave it" basis by the insurer, in which the insured's only option is to either accept or reject the contract

Adhesion

An insurer mails a new policy to the policy owner. When the insurer relinquishes control of the policy, it is considered

Delivered

When would a misrepresentation on the insurance application be considered fraud?

If it is intentional and material

What term means the frequency of premium payment?

Mode

What individual must have insurable interest in the insured

Policyowner

For the purposes of life insurance underwriting, a 35-year-old male who is in excellent physical condition with no known medical problems or hazardous hobbies would most likely pay the lowest premium and be classified as a

Preferred risk

A type of risk that is insurable, which can only result in a loss and has no opportunity for financial gain

Pure Risk

Which of the following best describes the purpose of the USA PATRIOT Act with regard to the insurance industry?

To prevent terrorism and money laundering activities through monitoring of financial transactions

In insurance policies, the insured is not legally bound to any particular action in the insurance contract. Only one party, the insurer makes an enforceable promise and is legally obligated to pay losses covered by the policy. What contract element does this describe?

Unilateral

What is the time frame for filing relevant Suspicious Activity Reports?

Within 30 days of initial discovery

Untrue statements on the application that are discovered during the underwriting process that could void the contract are called

misrepresentation

Medical examinations, when required by the insurance company, are conducted by physicians or paramedics. What is true regarding this process?

the insurer must disclose the use of testing to the applicant and obtain written consent from the applicant on the approved form

What would be considered an offer?

An applicant submitting the application

Who must sign the Insurance applicaiton?

The agent, the policyowner, and the insured

In comparison to consumer reports, which of the following describes a unique characteristic of investigative consumer reports?

The customer's associates, friends, and neighbors provide the report's data

What is the purpose of a disclosure statement in life insurance policies?

To explain the features and benefits of a proposed policy to the consumer

In forming an insurance contract, when does acceptance usually occur?

When an insurer's underwriter approves coverage

When is a statement of good health required?

When the policy is delivered and the initial premium is collected

Insurers must provide applicants with a buyer's guide...

at the time of application

Which policy provision states that each party must provide something of value to each other in order for the contract to be valid?

Consideration

The social mechanism for the transfer of risk

Insurance

When Y applied for insurance and paid the initial premium on August 14th, he was issued a conditional receipt. During the underwriting process, the insurance company found no reason to reject the application. Y was killed in an automobile accident August 22nd, before the policy was issued. In this case the insurer will

Issue the policy anyway and pay the death benefit to the beneficiary

Statements in an insurance application that must be true to the best of the applicant's knowledge are called

Representations

Which is the appropriate action by the insurer if it receives an incomplete application?

Return the application to the applicant for completion

Adverse selection is a concept best describe as

Risks with higher probability of loss seeking insurance more often than other risks

What is the risk classification for those who are insurable, but have a higher than average risk?

Substandard

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 issued, what would be the policy's effective date?

The date of the medical exam

a presentation or depiction that distinguish between guaranteed and nonguaranteed elements of a policy is called

a policy illustration

What is considered to be the most important source of information available to the insurer...

the field underwriter (agent's report)

If an insurer issued a policy based on the application that had unanswered questions, how do you proceed with it?

the policy will be interpreted as if the insurer waived its rights to have answer on the application

What are the requirements for life insurance policy illustration...

they must differentiate between guaranteed and non guaranteed elements in a policy, may only be used as approved by the insurer and not be altered or changed

What is defined as an absolutely try statement upon which the validity of the insurance policy depends?

waranty

Which receipt issued at the time of application may provide coverage on the date the receipt is issued or after the results of medical tests

Conditional

What federal law protects health information

Health Insurance Portability and Accountability Act (HIPAA)

A financial interest in the life of another person or the possibility of loosing something of value in the event of a loss is called

Insurable interest

What is the purpose of a conditional receipt

It is intended to provide coverage on a date earlier than the date of the issuance of the policy

The USA PATRIOT Act was enacted on

Oct. 26, 2001

Information regarding the insured's general information can be found in which part of the application for life insurance?

Part 1

Information regarding the insured's medical history can be found in which part of the application for life insurance?

Part 2

What best details the underwriting process for life insurance?

Selection, classification, and rating of risks

A contract in which both parties exchange unequal values. For example, the insured pays a small amount of premium for a large amount of risk on the part of the insurance company, what is this called?

Aleatory

What includes information regarding a person's credit, character, reputation, and habits

Consumer Report

Upon policy delivery, the producer may be required to obtain what?

Delivery receipt, statement of good health, payment of premium

A life insurance 0policy has a legal purpose if both of which of the following elements exist?

Insurable interest and consent

Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report

Must be informed of the source of the report

In terms of parties to a contract, what describes a competent party?

The person must be mentally competent to understand the contract, legal of age, not under the influence

The insurer must be able to rely on the statements in the application, and the insured must be able to rely on the insurer to pay the claim. In the forming of an insurance contract, this is referred to as

Utmost good faith

Which insurance principle restores an insured person to the same financial state as before the loss?

Indemnity

The principle stating that the larger the number of similar exposure units considered, the more closely the losses reported will equal the underlying probability of loss

Law of Large Numbers

Which of the following documents delivered to the policyowner includes specific information about premium amounts, cash value, surrender values and death benefits?

a policy summary

Insurable interest exists in what?

a husband insuring the life of the wife, a business partner insuring the life of another partner, and an individual insuring his/her own life

An agent is filling out an insurance application for a client. The applicant realizes she should have answered an earlier question differently. What method should the agent use to make the change?

Cross out the incorrect information, write in the correct answer, and have applicant initial the change

What are the essential elements of a contract

Legal purpose, consideration, competent parties, agreement (offer and acceptance)

The solicitation and sale of a life insurance contract to a third party who has no insurable interest in the insured is called a/an

Life Settlement

An insurer has made all of the decisions regarding the provisions included in the insured's policy. The insured find an objectionable provision and wants to negoti8ate it with the insurer but is not allowed to do so. Her only options are to reject the policy or accept it as is. Which contract feature do these describe?

Adhesion

When an agent delivered an insurance policy to the insured, he collected the initial premium, as well as a document verifying that the insured has not had any injuries or illness since the application date. What is this document called?

Statement of good health

An insured submits the full premium along with a completed application, and the policy is issued 10 days later. When does the coverage begin?

ON THE DATE OF THE APPLICATION

The MIB helps insurers compare medical information they have collected on a potential insured with the information received from

Other member insurers

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

An insurance contract requires that both the insured and the insurer meet certain conditions for the contract to be enforceable. The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract?

Conditional

A life insurance arrangement in which a person with no relationship to the insured purchases a life policy on the insured's life therefore violating the principle of insurable interest is called

STOLI

Events in which a person has both the chance or losing are classified as

Speculative Risk

In life insurance, an insurable interest between the policyowner and the insured must exist...

at the time of application

What is considered a field underwriter

an agent

The federal law that protects consumers against the distribution of incorrect and obsolete personal or financial information and allows the consumer to question the validity and source of the information is called?

Fair Credit Reporting Act

The basic and main source of underwriting information for an insurer is the...

application

What is the risk classification of those whoa re average risk?

Standard

If a medical exam is required for the underwriting of a life insurance application who is responsible for the cost of the medical exam?

The insurer

What is a consideration in a life insurance policy?

The premium amount paid at the time of application, the promise to pay covered loss, and statements made on the application

Changes to a written life insurance application must be

Initialed by the applicant

Another name for a substandard risk classification is

rated

A producer agent must do what when delivering a new policy to the insured?

Collect any premiums due, explain the rating procedures if the policy is rated differently than applied for, and explain the policy provisions, riders, and exclusions

If an applicant for a life insurance policy is found to be a substandard risk, the insurance company is most likely to

Charge a higher premium

THE USA PATRIOT ACT makes it mandatory to report any cash transaction of

$10,000 or more

The Suspicious Activity Report Rules (SARs) makes it mandatory to report any transactions involving

$5,000 or more due to suspicious activities

The consumer publication that explains life insurance in general terms to assist the applicant in making an informed decision at the time of application is called a...

Buyer's guide

Which of the following is used to compare the cost of one life insurance policy against another in order to guide prospective purchasers to policies that are competitively priced?

Cost comparison methods

If an agent accepts a completed application without the first premium, when does coverage become effective for the insured?

When the policy is delivered and the first premium is paid and the statement of good health is collected

If the agent feels that there could be misrepresentation on the part of the applicant for insurance what must the agent do?

Inform the insurance company through the Agent's report

What is required on an illustration used in the sale of a life insurance policy...

name of insurer, underwriting or rating classifications upon which the illustration is based, generic name of the policy

What is identified in the general information section of a life insurance application?

occupation, age, gender

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

premium receipt

Which of the following premium payment modes would result in the highest overall premium for a year's worth of life insurance?

Monthly

As a field underwriter, an agent has responsibilities...

solicit business, help prevent adverse selection, and obtain appropriate signatures on the application for insurance