Health and Life Licensing: Chapter 1
What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act?
$2500
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
If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply?
5 Days
What is a material misrepresentation?
A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company
Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe?
Adhesion
Which of the following is NOT an example of a valid insurable interest?
Debtor in the life of the creditor
A producer agent must do all of the following when delivering a new policy to the insured EXCEPT
Disclose commissions earned from the sale of the policy.
According to the Fair Credit Reporting Act, all of the following would be considered negative information about a consumer EXCEPT
Disputes regarding consumer report information.
All of the following information about the applicant is identified in the General Information section of a life insurance application EXCEPT
Education
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.
When would a misrepresentation on an insurance application be considered fraud?
If it is intentional and material
When would a misrepresentation on the insurance application be considered fraud?
If it is intentional and material
An insurer receives a report regarding a potential insured that includes that insured's financial status, hobbies and habits. What type of report is that?
Inspection Report.
A life insurance policy has a legal purpose if both of which of the following elements exist?
Insurable interest and consent
What do individuals use to transfer their risk of loss to a larger group?
Insurance
What is the purpose of a conditional receipt?
It is intended to provide coverage on a date prior to the policy issue.
Insurance is a contract by which one seeks to protect another from
Loss
Which of the following information about the applicant is NOT included in the General Information section of the application for insurance?
Medical background
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.
What is a definition of a unilateral contract?
One-sided: only one party makes an enforceable promise
Part 2 of the application for life insurance provides questions regarding all of the following EXCEPT
Other insurance coverages.
A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will..
Pay the policy proceeds only if it would have issued the policy.
What describes the specific information about a policy?
Policy summary
Which of the following will included in a policy summary?
Premium amounts and surrender values.
Insurance is the transfer of
Risk
Which of the following best details the underwriting process for life insurance?
Selection, classification, and rating of risks
Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information?
The Fair Credit Reporting Act
Which of the following is NOT the consideration in a policy?
The application given to a prospective insured.
Which is generally true regarding insureds who have been classified as preferred risks?
Their premiums are lower.
What is the purpose of the buyer's guide?
To allow the consumer to compare the costs of different policies.
Which employees of an insurance company are responsible for the final risk selection?
Underwriters
If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it?
Unilateral
Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract?
Warranty
In insurance, an offer is usually made when
An applicant submits an application to the insurer
In classifying a risk, the Home Office underwriting department will look at all of the following EXCEPT
Applicant's pas income.
Which of the following is the basic source of information used by the company in the risk selection process?
Application
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 application date.
An insurance contract must contain all of the following to be considered legally binding EXCEPT
Beneficiary's consent
Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPT
Conditions
When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?
Consideration
Which of the following reports will provide the underwriter with the information about an insurance applicant's credit?
Consumer Report
Which of the following includes information regarding a person's credit, character, reputation, and habits?
Consumer report.
Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classifies as
Contracts of adhesion
Which of the following best describes the aleatory nature of an insurance contract?
Exchange of unequal values.
An applicant is denied insurance because of information found on a consumer report. Which of the following requires that the insurance company supply the applicant with the name and address of the consumer reporting company?
Fair Credit Reporting Act
The Medical information Bureau (MIB) was created to protect
Insurance companies from adverse selection by high risk persons.
In the underwriting process, it was determined that the applicant for life insurance is in poor health and has some dangerous habits. Which of the following is ture concerning the policy premium?
It will likely be higher because the applicant is a substandard risk.
An applicant who receives a preferred risk classification qualifies for
Lower premiums than a person who receives a standard risk.
Which part of an insurance application would contain information regarding the cause of death of the applicant's deceased relatives?
Medical Information
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 statements is correct about a standard risk classification in the same age group and with similar lifestyles?
Standard risk is representative of the majority of people.
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.
Whose responsibility is it to make certain that an application for insurance is filled out completely and correctly?
The producer
In forming an insurance contract, when does acceptance usually occur?
When an insurer's underwriter approves coverage.
If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant no later than
With the policy.
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.
As a field underwriter, a producer is responsible for all of the following tasks EXCEPT
Issue the policy that is requested.
Which of the following best describes the MIB
It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance.
Which of the following is a risk classification used by underwriters for life insurance?
Standard
Which of the following types of risk will result in the highest premium?
Substandard risk.
An applicant sign an application for a $25000 life insurance policy, pays the initial premium and receives a conditional receipt. If the applicant dies the following day, which of the following is TRUE?
The beneficiary will receive the full death benefit if it is determined that the applicant qualified for the policy.
In insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe?
Unilateral
In forming an insurance contract, when does acceptance usually occur?
When and insurer's underwriter approves coverage.
When is the earliest a policy may go into effect?
When the application is signed and a check is given to the agent
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 tot the correct statement.
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
Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company?
Aleatory
If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, and if a notice of insurance information practices has been provided, the report may contain all of the following information EXCEPT the applicant's
Ancestry
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
When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is
Conditional
Which of the following is NOT an essential element of an insurance contract?
Counteroffer.
When Y applied for insurance and 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 issues. In this case, the insurance company will..
Issue the policy anyway and pay the face value to the beneficiary.
Untrue statements on the application unintentionally made by insureds that, if discovered, would alter the underwriting decision of the insurance company, are called
Material misrepresentations
Under the Fair Credit Reporting Act, if a consumer challenges the accuracy of the information contained in a consumer or investigative report, the reporting agency must.
Respond to the consumer's complaint.
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?
Return to the applicant for completion.
Upon policy delivery, the producer may be required to obtain any of the following EXCEPT
Signed waiver of premium.
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 medical exam.
All of the following are true regarding a decreasing term policy except
The payable premium amount steadily declines throughout the duration of the contract.
If an insurer issues a policy based on the application that has unanswered questions, which of the following will be TRUE?
The policy will be interpreted as if the insurer waived its right to have an answer on the application.
An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. When will coverage begin?
When the agent delivers the policy, collects the initial premium, and the applicant completes and acceptable Statement of Good Health