Chapter 6 Life insurance Underwriting and Policy Issue
What is the initial source of underwriting for an insurance policy?
Answer: application containing statements from the insured
A student pilot can pay regular premium costs for her life insurance policy with the addition of which of the following?
Answer: Aviation Exclusion
Who is NOT required to sign a life insurance application?
Answer: Beneficiary
The reason for backdating a policy is
Answer: to obtain a premium rate based on an earlier age
What is the purpose of a policy summary?
Answer: It highlights the critical parts of the policy issued
The U S A patriot act was enacted in?
Answer: 2001
What is being delivered with a policy delivery?
Answer: Insurance contract to the proposed insured.
When an insurance application is taken by a producer, which of these statements is true?
Answer: Any changes made on the application require the applicant's initials
Which parts of a life insurance policy are guaranteed to be true?
Answer: Warranty
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
Answer: Free-look period has expired
Upon policy delivery, a signed good health statement is requested from the applicant. Why would this be necessary?
Answer: The initial premium was not submitted with the application.
In order for coverage on a non-medical insurance application to take effect the same day, the producer must collect a signed application and
Answer: Initial Premium
Which of these factors do Not play a role in the underwriting of a life insurance policy?
Answer: Marital Status
The entity whose sole purpose is sharing medical data among its member companies is called the
Answer: Medical Information Bureau (MIB)
Which of these does NOT constitute policy delivery?
Answer: Policy issued with a rating.
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?
Answer: Policy was returned within the free look period , premium will be fully refunded.
A statement made by an insured in an insurance application that must be true to the best of one's knowledge and which becomes part of the contract is called?
Answer: A representation
All are true statements regarding the underwriting process, EXCEPT:
Answer: AIDS and HIV virus exams can be conducted in a discriminatory fashion.
An agent gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective?
Answer: When the conditions of the receipt are met.
An applicant's medical information received from the Medical Information Bureau (MIB) may be furnished to the
Answer: applicant's physician
Before a life insurance policy is issued, which of these components of the contract is required?
Answer: applicant's signature on application
Which of the following correctly explains the actions an agent should take if a customer wants to apply for an insurance policy?
Answer: 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.
Which factors are taken into consideration when an insurance company determines the premium rate for a Whole Life policy on an applicant?
Answer: Risk Classifications
T cash surrenders a recently-issued whole life policy. He also requests that the proceeds be payable to an unrelated third party. T would likely be red-flagged for violation of
Answer: Anti-money laundering rules
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)
Answer: Anti-money laundering violation
An incomplete life insurance application submitted to an insurer will result in which of these actions?
Answer: Application will be returned to the writing agent.
A life insurance application must be signed by all of these Except?
Answer: Beneficiary
What is the purpose of the U.S.A Patriot Act?
Answer: Detect and deter terrorism
Which action should a producer take if the initial premium is NOT submitted with the application?
Answer: Forward the application to the insurer without the initial premium.
A life insurance application may be rejected on the basis of all these factors Except?
Answer: Gender
On January 8, an applicant filled out an application for a life insurance policy but did not include the initial premium. The insurance company approved the application on January 14, and issued the policy on January 15. The producer delivered the policy on January 26, and collected the first premium. When did the coverage become effective?
Answer: January 26
The underwriting process involves all of these Except for?
Answer: Policy Loan
A medical information report (MIB) may disclose which of the following?
Answer: Prior use of marijuana
All of these are considered sources of underwriting information about an applicant EXCEPT
Answer: Rating services
Why must an insurance applicant answer all questions on the application?
Answer: Statements and representations on the application are part of the consideration for issuing a policy.
Which of the following statements is Correct about an agent who is taking an insurance application?
Answer: The agent should have the applicant initial any changes made on the application
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?
Answer: The date in which the agent delivered the policy, collected initial premium, and obtained a good health statement from the insured
When does a life insurance contract become effective if the initial premium is not collected during the application process?
Answer: When producer delivers policy and collects initial premium.
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?
Answer: When the applicant receives the policy and pays the initial premium.
D the agent met with a prospect and ended up selling an insurance policy. While filling out the insurance application, D makes a mistake. In this situation, D MUST
Answer: correct the information and have the prospect initial the change.
Consumer reports requested by an underwriter during the application process of a life insurance policy can be used to determine?
Answer: probability of making timely premium payments
At what time must a policyowner have insurable interest on the insured in order for the life policy to be valid?
Answer: 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)
Answer: Aviation Exclusion
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?
Answer: 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 these terms accurately defines an underwriter's assessment of information on a life insurance application?
Answer: Risk Classification
Which of these actions should a producer take when submitting an insurance application to an insurer?
Answer: Inform the insurer of relevant information not included in the application.
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?
Answer: Conditional receipt
T is given a receipt After completing a life insurance application and paying the initial premium. Under this situation, T's coverage is
Answer: Conditional, depending on the insurer's underwriting guidelines.
Information obtained from a phone conversation to the proposed insured can be found in which of these reports?
Answer: Inspection Report
P is a producer who notices 5 questions on a life application were not answered. What actions should P take?
Answer: 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
Answer: Signed HIPPA disclosure
Life insurance companies are required to establish and maintain an anti-money laundering compliance program according to which federal regulation?
Answer: U. S. A .Patriot Act.
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
Answer: Waived one of its legal rights
Under the USA Patriot Act, insurers are required to report receipt of cash payments in excess of
Answer: $10,000
Before a life policy is issued, which of these contract elements is necessary?
Answer: A signed application by the prospect
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?
Answer: Conditional
A(n) ____ contained in a life insurance policy states that the policy will NOT cover certain risks?
Answer: Exclusion
An underwriter determines that an applicant's risk should be recategorized due to a health issue. This policy may be issued with a(n)
Answer: Extra Premium
P has recently signed an application for insurance. The insurer MUST advise her in writing that an investigative consumer report may be conducted according to the
Answer: Fair Credit Reporting Act
Which Federal law allows an insurer to obtain an inspection report on a potential insured?
Answer: Fair Credit Reporting Act
Why is the applicant required to sign the application?
Answer; To attest that the statements on the application are accurate to the best of the applicant's knowledge.
Any changes made on an insurance application requires the initials of whom?
Answer: Applicant
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 D explains what had recently taken place with his doctor. Which action should the producer then take?
Answer: collect initial premium along with a signed health statement.