Exam FX Chapter 1 Completing the Application, Underwriting, and Delivering the Policy

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

when the insurer approves a prepaid application

What is policy replacement?

A new policy is issued while an existing policy is terminated or reissued with a reduction in cash value

What are the four elements of an insurance contract?

Agreement (offer and acceptance) Consideration Competent Parties Legal Purpose

When must insurable interest exist in a life insurance policy?

At the time of application

Health contracts are prepared by insurers and must be accepted by the insured on an as is basis. This describes what aspect of a health insurance contract?

Contract of Adhesion

What type of report provides information about the applicant's hobbies, habits, and financial status?

Inspection report

What report is used to assess risk associated with a health insurance appicant's lifestyle and character?

Investigative Consumer Report

Insurance is a contract that protects the insured from what?

Loss

Health insurance contracts are unilateral. Wha does that mean?

Only one party makes a legally enforceable promise

What document describes the specific information about a policy

Policy summary

What is the best way to handle incomplete insurance applications?

Return the application to the applicant for completion

What is the main responsibility of a company's underwriting unit?

Risk Selection

Whose responsibility is it to determine that all the questions on an insurance application are answered?

The Agent's

What law protects consumers from the circulation of inaccurate or obsolete information?

The Fair Credit Reporting Act

Who must have insurable interest in the insured?

The policyowner

How is the information obtained for an investigative consumer report?

Through interviews with the applicant's associates, friends and neighbors.

When would a misrepresentation be considered material?

When it may alter the underwriting decision

At the time of policy delivery

When must the policy summary for a life insurance policy be delivered to the policy owner?

When does an insurance policy go into effect?

When the policy is delivered and the premium is paid

What is a warranty in an insurance contract?

An absolutely true statement upon which the validity of the insurance contract is based

When a change needs to be made on the application for insurance which is the best method for correcting the information?

Complete a new application or ask the applicant to initial the correction on the original application

At what point does coverage begin when an agent issues a conditional receipt for a life insurance policy?

Either on the date of the application or the date of the medical exam. (whichever occurs last)

What two elements are necessary for a life insurance contract to have a legal purpose?

Insurable interest and consent

What do individuals use to transfer their risk of loss to a larger group?

Insurance

What entities make up the Medical Information Bureau?

Insurers

What are the three main instances when insurable interest exists in life insurance?

Insuring your own life, the life of a family member, or the life of a business partners or someone who has a financial obligation to the policyowner.

What is Adverse Selection?

People who are more likely to submit insurance claims are seeking insurance more often than preferred risks.

What is adverse selection?

People who are more likely to submit insurance claims are seeking insurance more often than preferred risks.

How can health insurance policies be delivered to the insured?

Personally delivered by the agent or mailed

What risk classification would typically qualify for lower premiums?

Preferred risk

What term describes the fee a person pays an insurance company to receive coverage?

Premium

What is the main responsibility of a company's underwriting unit?

Risk selection

What are the three types of risk rating classification in life insurance?

Standard, substandard, and preferred

What is the purpose of the agents report during the application process?

The agent's report discusses the agent's personal observations about the proposed insured that may help in the underwriting process.

If an applicant for a life insurance policy and the potential insured are two different people, what would be the underwriter's main concern?

The existence of insurable interest between the applicant and the insured

What is insurance underwriting?

The process of risk selection and classification

During which stage in the insurance process do insurers evaluate information that identifies adverse selection risks?

Underwriting

During which stage of the insurance process do insurers evaluate information that identifies adverse selection risks?

Underwriting

what is the name of the process that insurance companies use to determine whether or not an applicant is insurable?

Underwriting

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

When it is intentional and material

In Insurance, when is the offer usually made on a contract?

When the insurance application is submitted

When must the policy summary for a life insurance policy be delivered to the policy owner?

At the time of policy delivery

If an insurer needs to obtain information about the applicant from investigators, what is the insurer required to do?

Provide the applicant a Disclosure Authorization Notice

If an applicant does not receive a copy of the new insurance policy, who would be held responsible?

The agent

In health insurance contracts, the insured is not legally bound to any particular action; however, the insurer is obligated to pay for losses covered by the policy. What contract element does this describe?

Unilateral