Chapter 9 - Health Insurance Underwriting

P is self-employed and owns an Individual Disability Income policy. He becomes totally disabled on June 1 and receives $2,000 a month for the next 10 months. How much of this income is subject to federal income tax? $20,000 $14,000 $6,000 $0

$0 - individual policy

Before a health insurance policy is issued, which of these components of the contract is required? - applicant's signature on application - beneficiary's signature - a conditional receipt - attending physician statement (APS)

- applicant's signature on application

An incomplete health insurance application submitted to an insurer will result in which of these actions? - application will be returned to the writing producer - application will be approved with restrictions - application will be pending until a MIB report us sent to the insurer - application will be automatically declined

- application will be returned to the writing producer

K completes an application for a disability policy but does not pay the initial premium. The company approves the policy standard and the agent delivers the policy. K then pays her initial premium 3 days later. At what point does K's policy take effect?" - date in which the appointment was made - date the application was approved - date the application is signed - date the initial premium is collected

- date the initial premium is collected

An agent takes an individual Disability Income application, collects the appropriate premium, and issues the prospective insured a conditional receipt. The next step the insurance company will take is to: - issue the policy only when the initial premium check has cleared - determine if the applicant is insurable by investigating family health history - issue the policy on a standard basis - determine if the applicant is an acceptable risk by completing standard underwriting procedures

- determine if the applicant is an acceptable risk by completing standard underwriting procedures

An underwriter determines that an applicant's risk should be recategorized due to a health issue. This policy may be issued with a(n) - delayed effective date - exclusion for the medical condition - extended contestable period - concealment clause

- exclusion for the medical condition

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 - medical information bureau - part 3 of the application - life insurance buyer's guide

- fair credit reporting act

What action should a producer take if the initial premium is NOT submitted with the application? - keep the application until premium is paid - forward the application to the insurer after giving the applicant a binding receipt - forward the application to the insurer without the initial premium - forward the application to the insurer after giving the applicant a conditional receipt

- forward the application to the insurer without the initial 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: - policy is delivered - free look period has expired - insurance company issues policy - initial premium is collected

- free look period has expired

Which of the following actions will an insurance company most likely NOT take if an applicant, who has diabetes, applies for a disability income policy? - issue the policy with a diabetes exclusion - issue the policy with an altered Time of Payment of claims provision - issue the policy with a rating - decline the applicant

- issue the policy with an altered Time of Payment of claims provision

Which type of plan normally includes hospice benefits? - short term disability plans - group life plans - worker's compensation - managed care plans

- managed care plans

Consumer reports requested by an underwriter during the application process of a health insurance policy can be used to determine: - driving history - probability of making timely premium payments - if applicant Is a tobacco user - overall health of the applicant

- probability of making timely premium payments

Which of the following statements about the classification of applicants is INCORRECT? - substandard applicants are never declined by underwriters - substandard applicants are occasionally declined by underwriters - preferred risk applicants typically have better premium rates than standard risk applicants - an applicant can be classified as a substandard risk because of a hazardous job

- substandard applicants are never declined by underwriters --- in fact they are below average risk guidelines

What would the Medical Information Bureau (MIB) identify? - testing positive for marijuana use from a previous screening - existing life insurance coverage with other carriers - credit scores - primary physician

- testing positive for marijuana use from a previous screening

Which of the following BEST describes how pre-admission certifications are used? - used to assist in underwriting - used to prevent nonessential medical costs - used to minimize hospital lawsuits - used to help process claims

- used to prevent nonessential medical costs

Information obtained from a phone conversation to the proposed insured can be found in which of these reports? agent's report MIB report Inspection report attending physician's report

Inspection report

Any changes made on an insurance application requires the initials of whom? insured producer applicant beneficiary

applicant

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

conditional = certain conditions must be met in order for the insurance coverage to go into effect

Which of these factors do NOT play a role In the underwriting of a health insurance policy? avocations credit status marital status occupation

marital status

Which of these do NOT constitute policy delivery? policy mailed to applicant policy mailed to producer policy delivered to applicant by producer policy issued with a rating

policy issued with a rating

All of these are considered sources of underwriting information about an applicant EXCEPT: inspection report credit report rating services medical information bureau

rating services