Application, Underwriting, and Delivering

When is the earliest a policy may go into effect?

! The policy can be effective as early as the date of the application, if the premium is submitted with the application and the policy is issued as applied for.

What is an example of a valid insurable interest?

-key employee -child/parent -business partner

What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act?

2,500

What describes the specific information about a policy?

A policy summary describes the features and elements of the specific policy

What must be included in a policy summary?

A policy summary must be delivered along with the policy and will provide the producer's name and address, the insurance company's home office address, the generic name of the policy issued, and premium, cash value, surrender value and death benefit figures for specific policy years.

What documents delivered to the policyowner includes information about premium amounts, cash values, surrender values and death benefits for specific policy years?

A policy summary usually includes all the listed information, and must be delivered along with a new policy.

Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as

Adhesion. The insured does not have any input into the contract, but simply adheres to the contract.

What 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 a contract in that it requires a relatively small amount of premium for a large risk.

what happens when a policy is issued with missing information

Any unanswered questions need to be answered before the policy is issued. If a policy is issued with questions left unanswered, the contract will be interpreted as if the insurer waived its right to have an answer for the question, and will not be able to deny coverage later because of unanswered questions.

What report will provide the underwriter with the information about an insurance applicant's credit?

Consumer reports include written and/or oral information regarding a consumer's credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other public sources.

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?

If the full premium was submitted with the application and the policy was issued as requested, the policy coverage effective date would generally coincide with the date of application.

Why should the producer personally deliver the policy when the first premium has already been paid?

It is the producer's responsibility to make sure that the policy is understood by the insured and all of their questions are satisfied, and the delivery receipt is signed.

What is a definition of a unilateral contract?

One-sided: only one party makes an enforceable promise

what information is needed for the General Information section of an application

Part 1 - General Information of the application includes the general questions about the applicant, including name, age, address, birth date, gender, income, marital status, and occupation. The applicant's medical background is addressed in Part 2

What is a generic consumer publication that explains life insurance in general terms in order to assist the applicant in the decision-making process?

The Buyer's Guide is a consumer publication that explains life insurance in general terms in order to assist the applicant in the decision-making process.

An applicant signs an application for a $25,000 life insurance policy, pays the initial premium, and receives a conditional receipt. If the applicant dies the following day what happens?

The conditional receipt provides that when the applicant pays the initial premium, coverage is effective on the condition that the applicant proves to be insurable

What is generally true regarding insureds who have been classified as preferred risks?

The preferred risk classification indicates that an insured is in excellent physical condition and employs healthy lifestyles and habits.

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

a premium receipt.

If an applicant for a life insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about

an insurable interest must exist

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 permium

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

if it is intentional and material

An underwriter may obtain information on an applicant's hobbies, financial status, and habits by ordering a

inspection report

An insurance contract must contain all of the following to be considered legally binding

offer and acceptance consideration competent parties legal purpose

Another name for a substandard risk classification is

rated

If an agent fails to obtain an applicant's signature on the application, the agent must

return the application to the applicant for a signature

Which of the following types of insurers is owned by stockholders?

stock companies are owned and controlled by stockholders

What type of risk will result in the highest premium?

substandard risk dicates that an individual represents an under-average insurance risk because of physical condition, personal or family history of disease, occupation, habits or hobbies.

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 policy is in effect on the date of the application or the date of the medical exam (whichever is later)

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?

they need to be returned to the applicants for completion.

The Gramm-Leach-Bliley Act was passed to

to protect private customer information that is filed with a financial institution.

Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract?

warranty

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

when an insurer's underwriter approves the application and issues a policy.

If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant

with the policy