Completing the Application, Underwriting, and Delivering the Policy

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? A. Good health B. Adhesion C. Conditional D. Aleatory

Aleatory

What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act? A. Revocation of license B.$2,500 C. $1,000 D. $100 per violation

$2,500

Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained? A. 3 days B. 5 days C. 10 days D. 14 days

3 days

If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply? A. 7 days B. 10 days C. 5 days D. 3 days

5 days

An investor buys a life policy on an elderly person in order to sell it for a life settlement. This is an example of A. A prearranged funeral plan B. A viatical settlement C. Third-party ownership D. A STOLI policy

A STOLI policy

The term "illustration" in a life insurance policy refers to A. Pictures accompanying a policy B. Charts and graphs C. A presentation of nonguaranteed elements of a policy D. A depiction of policy benefits and guarantees

A presentation of nonguaranteed elements of a policy

What is material misrepresentation? A. Concealment B. A statement by the application that, upon discovery, would affect the underwriting decision of the insurance company C. Any misstatement made by an applicant for insurance D. Any misstatement by the producer

A statement by the application that, upon discovery, would affect the underwriting decision of the insurance company

If an insurance company wishes to order a consumer report on an application 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 A. Habits B. Prior insurance C. Ancestry D. Credit history

Ancestry

Which of the following is the basic source of information used by the company in the risk selection process? A. Warranty B. Consumer report C. Application D. Agent's report

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? A. As of the policy delivery date B. As of the first of the month after the policy issue C. As of the policy issue date D. As of the application date

As of the application date

Which of the following is a generic consumer publication that explains life insurance in general terms in order to assist the applicant in the decision-making process? A. Insurance index B. Policy Summary C. Illustrations D. Buyer's Guide

Buyer's Guide

If an applicant for a life insurance policy is found to be a substandard risk, the insurance company is most likely to A. Charge a higher premium B. Require a yearly medical examination C. Lower its insurability standards D. Refuse to issue the policy

Charge a higher premium

Representations are written or oral statements made by the applicant that are A. Immaterial to the actual acceptability of the insurance contract B. Considered true to the best of the applicants knowledge C. Guaranteed to be true D. Found to be false after further investigation

Considered true to the best of the applicants knowledge

Which of the following reports will provide the underwriter with the information about an insurance applicant's credit A. Any federal report B. Consumer report C. Inspection report D. Agent's report

Consumer report

Which of the following is NOT an example of a valid insurable interest? A. Employer in key employee's life B. Child in parents' lives C. Debtor in the life of the creditor D. Business partners in each other's lives

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 A. Collect any premium due B. Explain the rating procedures if the policy is rated differently than the applied for C. Disclose commissions earned from the sale of the policy D. Explain the policy provisions, riders, and exclusions

Disclose commissions earned from the sale of the policy

If a change needs to be made to the application for insurance, the agent may do all of the following EXCEPT A. Note on the application the reason for the change B. Destroy the application and complete a new one C. Erase the incorrect answer and record the correct answer D. Draw a line through the first answer, record the correct answer, and have the applicant initial the change

Erase the incorrect answer and record the correct answer

When would a misrepresentation on an insurance application be considered fraud? A. Any misrepresentation is considered fraud B. If it is intentional and material C. Never; statements by the applicant are only representations D. When the application is incomplete

If it is intentional and material

An underwriter may obtain information on an applicant's hobbies, financial status, and habits by ordering a(n) A. Inspection report B. Medical Information Bureau report C. Medical examination D. Attending Physician Statement

Inspection report

Stranger-oriented life insurance policies are in direct opposition to the principle of a. law of large numbers b. good faith c. indemnity d. insurable interest

Insurable interest

The Medical Information Bureau (MIB) was created to protect A. Medical examiners that perform insurance physical examinations B. Insurance companies from adverse selection by high risk persons C. Insurance departments from lawsuits by policyowners D. Insureds from unreasonable underwriting requirements by the insurance companies

Insurance companies from adverse selection by high risk persons

Who makes up the Medical Information Bureau? A. Hospitals B. Former insured C. Physicians and paramedics D. Insurers

Insurers

As a field underwriter, a producer is responsible for all of the following tasks EXCEPT A. Issue the policy that is requested B. Help prevent adverse selection C. Solicit business that will fall within the insurer's underwriting guidelines D. Obtain appropriate signatures on the application for insurance

Issue the policy that is requested

Which of the following best describes MIB? A. It is a member organization that protects insured against insolvent insurers B. It is a rating organization for health insurance C. It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance D. It is a government agency that collects medical information on the insured from the insurance company

It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance

Untrue statements on the application unintentionally made by insureds that, if discovered, would alter the underwriting decision of the insurance company, are called A. Fraudulent statements B. Warranties C. Common errors D. Material misrepresentations

Material misrepresentations

A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will A. Pay the policy proceeds only if it would have issued the policy B. Pay the policy proceeds up to an established limit C. Not pay the policy proceeds under any circumstances D. Automatically pay the policy proceeds

Pay the policy proceeds only if it would have issued the policy

Another name for a substandard risk classification is A. Declined B. Elevated C. Rated D. Controlled

Rated

Upon policy delivery, the producer may be required to obtain any of the following EXCEPT A. Signed waiver of premium B. Statement of good health C. Payment of premium D. Delivery receipt

Signed waiver of premium

Which of the following is a risk classification used by underwriters for life insurance? A. Excellent B. Standard C. Poor D. Normal

Standard

Which of the following types of risk will result in the highest premium? A. Substandard risk B. Standard risk C. Preferred risk D. All risks pay equal premiums

Substandard risk

In comparison to consumer reports, which of the following describes a unique characteristic of investigative consumer reports? A. They provide additional information from an outside source about a particular risk B. They provide information about a customer's character and reputation C. The customer has no knowledge of this action D. The customer's associates, friends, and neighbors provide the report's date

The customer's associates, friends, and neighbors provide the report's date

If an insurer requests a medical examination of an applicant in connection with the application for life insurance, who is responsible for paying the cost of the examination? A. The examiner B. The applicant C. The insurer D. The cost of the examination will be waived

The insurer

If an insurer issued a policy based on the application that had unanswered questions, which of the following will be TRUE? A. The policy will be void B. The insurer may deny coverage later, because of the information missing on the application C. The policy will be interpreted as if the insurer waived its right to have an answer on the application D. The policy will be interpreted as if the insured did not have an answer to the question

The policy will be interpreted as if the insurer waived its right to have an answer on the application

Whose responsibility is it to make certain that an application for insurance is filled out completely and correctly A. The applicant B. The producer C. The beneficiary of the applicant D. The insurance company

The producer

What is the purpose of a discloser statement in life insurance policies? A. To explain features and benefits of a proposed policy to the consumer B. To obtain important underwriting information from the applicant C. To help consumers compare policy prices D. To protect agents and insurers against lawsuits

To explain features and benefits of a proposed policy to the consumer

If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it? A. Unilateral B. Adhesion C. Conditional D. A legal (but unethical) contract

Unilateral

In forming an insurance contract, when does acceptance usually occur? A. When an insurer's underwriter approves coverage B. When an insurer delivers the policy C. When an insurer receives an application D. When an insured submits an application

When an insurer's underwriter approves coverage

In forming an insurance contract, when does acceptance usually occur? A. When an insurer delivers the policy B. When an insurer receives an application C. When an insured submits an application D. When an insurer's underwriting approves coverage

When an insurer's underwriting approves coverage

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? A. When the agent delivers the policy, collects the initial premium, and the applicant completes and acceptable Statement of Good Health B. On the designated effective date C. On the application date D. When the agent submits the application to the company and the company issues a conditional receipt

When the agent delivers the policy, collects the initial premium, and the applicant completes and acceptable Statement of Good Health

If an applicant for a life insurance policy and the potential insured are two different people, what would be the underwriter's main concern? A. The gender of the applicant B. The type of policy requested C. Which individual will pay the premium D. Whether an insurable interest exists between the individuals

Whether an insurable interest exists between the individuals

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 A. With the policy B. Upon issuance of the policy C. Within 30 days after the first premium payment was collected D. Prior to filling out an application for insurance

With the policy