Chapter 5 Exam

Under the USA Patriot Act, insurers are required to report receipt of cash payments in excess of:

$10,000

Any changes made on an insurance application requires the initials of whom?

Applicant

A student pilot can pay regular premium costs for her life insurance policy with the addition of which of the following?

Aviation exclusion

Who is NOT required to sign a life insurance application?

Beneficiary

On August 6, D submitted an application for a $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 tests were given by the doctor. The life policy was delivered by the producer on August 20 and Dexplains what had recently taken place with the doctor. What action should the producer then take?

Collect initial premium along with a signed health statement

K applies for a life insurance policy on herself and submits the initial premium with the application. She is given a receipt by the agent stating that coverage begins immediately if the application is approved. What kind of receipt was used?

Conditional

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. Assuming that T is an acceptable risk, what item is given to T?

Conditional receipt

From what authority derives the requirement that an insurance application contains a disclosure stating that an investigative consumer report may be obtained on an applicant?

Fair Credit Reporting Act

Which of these factors do NOT play a role in the underwriting of a life insurance policy?

Marital status

Which of these do NOT constitute policy delivery?

Policy issued with a rating

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?

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

Which of the following statements is CORRECT about an agent who is taking an insurance application?

The agent should have the applicant initial any changes made on the application

Upon policy delivery, a signed good health statement is requested from the applicant. Why would this be necessary?

The initial premium was NOT submitted with the application

When does a life insurance contract become effective if the initial premium is not collected during the application process?

When producer delivers policy and collects initial premium

The reason for backdating a policy is

to obtain a premium rate based on an earlier age

What action should a producer take if the initial premium is NOT submitted with the application?

Forward the application to the insurer without the initial premium

The underwriting process involves all of these, EXCEPT for:

Policy loan

Before a life insurance policy is issued, which of these components of the contract is required?

Applicant's signature on application

What is the initial source of underwriting for an insurance policy?

Application containing statements from the insured

An incomplete life insurance application submitted to an insurer will result in which of these actions?

Application will be returned to the writing agent

Which of the following correctly explains the actions an agent should take if a customer wants to apply for an insurance policy?

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

Q applied for life insurance and submitted the initial premium on January 1. The policy was issued February 1, but it was not delivered by the agent until February 7. Q is dissatisfied and returns the policy February 13. How will the insurer handle this situation?

Policy was returned within the free-look period, premium will be fully refunded

A Medical Information Report (MIB) report may disclose which of the following:

Prior use of marjuana

All of these are considered sources of underwriting information about an applicant, EXCEPT:

Rating Services

Which factors are taken into consideration when an insurance company determines the premium rate for a Whole Life policy on an applicant?

Risk classification

Which of these terms accurately defines an underwriter's assessment of information on a life insurance application?

Risk classification

P is a producer who notices 5 questions on a life application were not answered. What actions should P take?

Set up a meeting with the applicant to answer the remaining questions

Upon delivery of a rated life insurance policy, the Producer must obtain each of the following, EXCEPT:

Signed HIPAA disclosure

What would the Medical Information Bureau (MIB) identify?

Testing positive for marijuana use from a previous screening

A $20,000 life insurance policy application is completed, however the producer does not collect the initial premium. At what point does the coverage go into effect?

When the applicant receives the policy and pays the initial premium

An agent gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective?

When the conditions of the receipt are met

Why is an applicant's signature required on a life insurance application?

To attest that the statements on the application are accurate to the best of the applicant's knowledge

Which parts of a life insurance policy are guaranteed to be true?

Warranty

A statement made by an insured in an insurance application that must be true to the best of one's knowledge and which becomes a part of the contract is known as:

a representation

An applicant's medical information received from the Medical Information Bureau (MIB) may be furnished to the:

applicant's physician

Information obtained from a phone conversation to the proposed insured can be found in which of these reports?

Inspection report

What is being delivered during a policy delivery?

Insurance contract to the proposed insured

What is the purpose of a Policy Summary?

It highlights the critical parts of the policy issued

initial premium. The insurance company approved the application on January 14 and issued the policy On January 8, an applicant filled out an application for a life insurance policy but did not include the January 15. The producer delivered the policy on January 26 and collected the first premium. When did the coverage become effective?

January 26

Which of these actions should a producer take when submitting an insurance application to an insurer?

OInform insurer of relevant information not included on the application

A life insurance application may be rejected on the basis of all of these factors EXCEPT

Gender

The USA Patriot Act was enacted in:

2001

All are true statements regarding the underwriting process, EXCEPT:

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

When a policyowner cash surrenders a Universal Life insurance policy in it's early years, this may be considered a red flag for a(n):

Anti-Money Laundering violation

When an insurance application is taken by a producer, which of these statements is true?

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

At what time must a policyowner have insurable interest on the insured in order for the life policy to be valid?

At the time of application

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 then likely issue the coverage with a(n)

Aviation Exclusion

Which Federal law allows an insurer to obtain an inspection report on a potential insured?

Fair Credit Reporting Act

Kis 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?

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

What is the purpose of the U.S.A. Patriot Act?

detect and deter terrorism

A(n) _____ contained in a life insurance policy states that the policy will NOT cover certain risks.

exclusion

An underwriter determines that a life insurance applicant's risk should be reclassified due to a health issue. This policy may be issued with a(n):

extra premium

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:

free-look period has expired

Consumer reports requested by an underwriter during the application process of a life insurance policy can be used to determine:

probability of making timely premium payments

In order for coverage on a non-medical insurance application to take effect the same day, the producer must collect a signed application and

the initial premium

ABC Insurance Company has accepted a life insurance application which contains unanswered questions. The company then makes the application part of the life contract. In this situation, the insurer has:

waived one of its legal rights