Insurance: Chapter 1 Questions

if an applicant for a life insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about 1. which individual will pay the premium 2. whether an insurable interest exists between the individuals 3. the gender of the applicant 4. the type of policy requested

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 must be delivered to the applicant 1. upon issuance 2. prior to accepting an initial premium 3. prior to filling out an application for insurance 4. with the policy

with the policy

an insurance contract must contain all of the following to be considered legally binding EXCEPT 1. offer and acceptance 2. consideration 3. competent parties 4. beneficiary's consent

beneficiary's consent

which of the following individuals must have insurable interest in the insured? 1. producer 2. policyowner 3. beneficiary 4. actuary

policyowner

who makes up the medical information bureau? 1. hospitals 2. former insured 3. physicians and paramedics 4. insurers

insurers

upon policy delivery, the producer may be required to obtain any of the following EXCEPT 1. delivery receipt 2. signed waiver of premium 3. statement of good health 4. payment of premium

signed waiver of premium

if consumer requests additional information concerning an investigative consumer report., how long does the insurer or reporting agency have to comply 1. 5 days 2. 7 days 3. 10 days 4. 3 days

5 days

insurance is a contract by which one seeks to protect another from 1. hazards 2. loss 3. exposure 4. uncertainty

loss

an underwriter may obtain information on applicant's hobbies, financial status, and habits by ordering a(n) 1. attending physician statement 2. inspection report 3. medical information bureau report 4. medical examination

inspection report

when is the earliest a policy may go into effect? 1. after the underwriter reviews the policy 2. when the application is signed and check is given to the agent 3. when the first premium is paid and the policy has been delivered 4. when the insurer approves the application

when the application is signed and a check is given to the agent

which is the primary source of information used for insurance underwriting? 1. applicant interviews 2. medical records 3. private investigations 4. application

application

which of the following reports will provide the underwriter with the information about an insurance applicant's credit? 1. any federal report 2. consumer report 3. inspection report 4. agent's report

consumer report

contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as 1. aleatory contracts 2. binding contracts 3. contracts of adhesion 4. unilateral contracts

contracts of adhesion

under the fair credit reporting act, individuals rejected for insurance due to information contained in a consumer report 1. must be informed of the source of the report 2. are entitled to obtain a copy of the report from the part who ordered it 3. must be advised that a copy of the report is available to anyone who requests it 4. may sue the reporting agency in order to get inaccurate data corrected

must be informed of the source of the report

which of the following statements is correct about a standard risk classification in the same age group and with similar lifestyles 1. standard risk is also known as high exposure risk 2. standard risk is representative of the majority of people 3. standard risk pays a higher premium than a substandard risk 4. standard risk requires extra rating

standard risk is representative of the majority of people

when an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following? 1. consideration 2. legal purpose 3. contract of adhesion 4. acceptance

consideration

in terms of parties to a contract, which of the following does NOT describe a competent party? 1. person must be mentally competent to understand the contract 2. the person must have at least completed secondary education 3. the person must not be under the influence of drugs or alcohol 4. the person must be legal age

person must have at least completed secondary education

which of the following documents delivered to the policyowner includes information about premium amounts, cash values, surrender values and death benefits for specific policy years? 1. privacy notice 2. buyer's guide 3. policy summary 4. notice regarding replacement

policy summary

according to the fair credit reporting act, all of the following would be considered negative information about a consumer EXCEPT 1. failure to pay off a loan 2. disputes regarding consumer report information 3. tax delinquencies 4. late payments

disputes regarding consumer report information

which of the following will be include in a policy summary? 1. comparisons with similar policies 2. primary and secondary beneficiary designations 3. premium amounts and surrender values 4. copies of illustrations and application

premium amounts and surrender values

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? 1. as of the policy delivery date 2. as of the first of the month after the policy issue 3. as of the policy issue date 4. 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 in the applicant in the decision making process 1. illustrations 2. buyer's guide 3. insurance index 4. policy summary

buyer's guide

something of value exchanged between the insurer and the insured is considered an 1. legal capacity 2. consideration 3. offer 4. acceptance

consideration

an application is denied insurance because of information found on a consumer report. which of the following requires that the insurance company supply the applicant with the name and address f the consumer reporting company 1. consumer privacy act 2. conditional receipt 3. disclosure rule 4. fair credit reporting act

fair credit reporting act

a life insurance policy has a legal purpose if both of which of the following elements exist? 1. offer and counteroffer 2. policyowners and named beneficiaries 3. insurable interest and consent 4. underwriting and reciprocity

insurable interest and consent

what is the purpose of a conditional receipt? 1. it is intended to provide coverage on a date earlier than the date of the issuance of the policy 2. it guarantees the applicant that a policy will be issued in the amount applied for in the application 3. it serves as proof that the agent has determined the applicant to be fully insurable for coverage by the insurance company 4. it is given by the agent only to applicants who fully prepay all scheduled premiums in advance of policy issue

it is intended to provide coverage on a date earlier than the date of the issuance of the policy

an applicant who receives preferred risk classification qualities for 1. higher premiums than a person who receives a sub-standard risk 2. higher premiums than a person who receives a standard risk 3. lower premiums than a person who receives a standard risk 4. dividends payable for lack of claims

lower premiums than a person who receives a standard risk

which of the following information about the applicant is NOT included on part 1 of the application for insurance? 1. gender 2. occupation 3. marital status 4. medical background

medical background

which of the following would provide an underwriter with infomration concerning an applicant's health history? 1. medical information bureau 2. medical examination 3. agent's report 4. inspection report

medical information bureau

what is a definition of a unilateral contract? 1. two or more parties go into a contract understanding there may be an unequal exchange of value 2. one author: the company wrote the contract; the insured must accept it as written 3. if one party makes a condition, the other party can counteroffer 4. one-sided: only one party makes an enforceable promise

one-sided: only one party makes an enforceable promise

a prospective insured receives a conditional receipt but dies before the policy is issued. the insurer will 1. automatically pay the policy proceeds 2. pay the policy proceeds only if it would have issued the policy 3. pay the policy proceeds up to an established limit 4. not pay the policy proceeds under any circumstances

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

most agents try to collect the initial premium for submission with the application. when an agent collects the initial premium from the applicant, the agent should issue the applicant a 1. statement of good health 2. backdated receipt 3. warranty 4. premium receipt

premium receipt

the responsibility of making certain that an application for insurance is filled out completely, correctly, and to the best of his or her knowledge is the responsibility of whom 1. applicant 2. producer 3. beneficiary of the applicant 4. insurance company

producer

the federal fair credit reporting act 1. regulates consumer reports 2. protects customer privacy 3. regulates telemarketing 4. prevents money laundering

regulates consumer reports

under the fair credit reporting act, if the consumer challenges the accuracy of the information contained in his or her report, the reporting agency must 1. send an actual certified copy of the entire report to the consumer 2. respond to the consumer's complaint 3. defend the report if the agency feels it is accurate 4. change the report

respond to the consumer's complaint

which is the appropriate action by the insurer if a prospective insured submitted an incomplete application? 1. issue a policy anyway since the application has been submitted 2. ask the producer who solicited the policy to complete and resign the application 3. fill in the blanks to the rest of the insurer's knowledge 4. return the application to the applicant for completion

return the application to the applicant for completion

which of the following best details the underwriting process for life insurance? 1. reporting and rejection of risk 2. selection, classification, and rating of risk 3. solicitation, negotiation, and rating of risk 4. issuance of policies

selection, classification, and rating of risk

an applicant signs an application for $25,000 life insurance policy, pays the initial premium, and receives a conditional receipt, if the applicant is killed in an automobile accident the next day 1. the beneficiary would receive $25,000 if it was determined that the insured qualified for the policy applied for 2. the premium would be returned to the insured's estate because the policy was not used 3. the company could reject the death claim because the underwriting process was never completed 4. the company could reject the application on the basis that the insured's death was not caused by an ongoing medical problem

the beneficiary would receive $25,000 if it was determined that the insured qualified for the policy applied for

if an insurer issued a policy based on the application that had unanswered questions, which of the following will be TRUE 1. the policy will be void 2. the insurer may deny coverage later, because of the information missing on the application 3. the policy will be interpreted as if the insurer waived its right to have an answer on the application 4. 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

all of the following are requirements for life insurance illustrations EXCEPT 1. they must differentiate between guaranteed and projected amounts 2. they must be part of the contract 3. they may only be used as approved 4. they must identify nonguaranteed values

they must be part of the contract

what is the purpose of a disclosure statement in life insurance policies? 1. to explain features and benefits of a proposed policy to the consumer 2. to obtain important underwriting information from the applicant 3. to help consumer compare policy prices 4. to protect agents and insurers against lawsuits

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

why should the producer personally deliver the policy when the first premium has already been paid? 1. to ensure the producer gets paid commission 2. to find out how the family has been doing since the initial presentation 3. to make sure the policy is not stolen or lost 4. to help the insured understand all aspects of the contract

to help the insured understand all aspects of the contract

which of the following is a statement to be true, and if untrue, may breach an insurance contract? 1. indemnity 2. representation 3. warranty 4. concealment

warranty

in forming an insurance contract, when does acceptance usually occur? 1. when an insured submits an application 2. when an insurer's underwriter approves coverage 3. when an insurer delivers the policy 4. when an insurer receives an application

when an insurer's underwriter approves coverage

an insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable. What contract characteristic does this describe? 1. aleatory 2. unilateral 3. conditional 4. contingent

conditional

the proposed insured makes the premium payment on a new insurance policy. if the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. this is example of what kind of contract 1. conditional 2. adhesion 3. personal 4. unilateral

conditional

because an insurance policy is a legal contract, it must conform to the state laws governing contracts to which require all of the following elements EXCEPT 1. conditions 2. consideration 3. legal purpose 4. offer and acceptance

conditions

an insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insured violated? 1. representation 2. adhesion 3. consideration 4. good faith

consideration

when an insured makes truthful statements on the application for insurance and pays the required premium, it is know as which of the following 1. contract of adhesion 2. acceptance 3. consideration 4. legal purpose

consideration

a producer agent must do all of the following when delivering a new policy to the insured EXCEPT 1. collect any premium due 2. explain the rating procedures if the policy is rated differently than applied for 3. disclose commissions earn from the sale of the policy 4. explain the policy provisions, riders, and exclusions

disclose commission earned from the sale of the policy

when would a misrepresentation on the insurance application be consider fraud? 1. when the application is incomplete 2. any misrepresentation is considered fraud 3. if it is intentional and material 4. never: statements by an applicant are only representations

if it is intentional and material

stranger-originated life insurance policies are in direct opposition to the principle of 1. insurable interest 2. law of large numbers 3. good faith 4. indemnity

insurable interest

the medical information bureau (MIB) was created to protect 1. insurance departments from lawsuits by policyowners 2. insureds from unreasonable underwriting requirements by the insurance companies 3. medical examiners that perform insurance physical examinations 4. insurance companies from adverse selections by high risk persons

insurance companies from adverse selection by high risk persons

an individual applied for an insurance policy and paid the initial premium. the insurer issued a conditional receipt. five days later the applicant had to submit to a medical exam, if the policy is issued, what would be the policy's effective date? 1. date of medical exam 2. date of policy delivery 3. date of issue 4. date of application

date of medical exam

in comparison to consumer reports, which of the following describes a unique characteristic of investigative consumer reports? 1. the customer has no knowledge of this action 2. the customer's associates, friends, and neighbors provide the report's data 3. they provide additional information from an outside source about a particular risk 4. they provide information about a customer's character and reputation

the customer's associates, friends, and neighbors provide the report's data

what is the purpose of the buyer's guide? 1. to list all policy riders 2. to provide information about the issued policy 3. to allow the consumer to compare the cost of different policies 4. to provide the name and address of the agent/producer issuing the policy

to allow the consumer to compare the costs of different polcies

which of the following is the basic source of information used by the company in the risk selection process 1. warranty 2. consumer report 3. application 4 agent's report

application

when must insurable interest exist in a life insurance policy? 1. at the time of loss 2. at the time of application 3. at the time of policy delivery 4. when there is a change of the beneficiary

at the time of application

as a field underwriter, a producer is responsible for all of the following tasks EXCEPT 1. obtain appropriate signatures on the application for insurance 2. issue the policy that is requested 3. help prevent adverse selection 4. solicit business that will fall within the insurer's underwriting guidelines

issue the policy that is requested

what describes the specific information about a policy? 1. illustrations 2. buyer's guide 3. producer's report 4. policy summary

policy summary

all of the following are duties and responsibilities of producers at the time of application EXCEPT 1. change any incorrect statement on the application by personally initialing next to the corrected statement 2. explain the nature and type of any receipt the producer is giving to the applicant 3. probe beyond the stated questions if the producer feels the applicant is misrepresenting or concealing information 4. check to make sure that there are no unanswered questions on the application

change any incorrect statement on the application by personally initialing next to the corrected statement

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? 1. aleatory 2. good health 3. adhesion 4. conditional

aleatory

which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company 1. warranty 2. aleatory 3. adhesion 4. subrogation

aleatory

what is the maximum penalty for habitual willful noncompliance with the fair credit reporting act? 1. revocation of license 2. $2,500 3. $1,000 4. $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? 1. 3 days 2. 5 days 3. 10 days 4. 14 days

3 days

if a change needs to be made to the application for insurance, the agent may do all of the following EXCEPT 1. note on the application the reason for the change 2. destroy the application and complete a new one 3. erase the incorrect answer and record the correct answer 4. 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

in which of the following examples would a contract between an insurer and prospective insured be legal? 1. applicant is intoxicated at the time of application 2. applicant is a 12-year old student 3. applicant is under the influence of medication at the time of application 4. applicant has prior felony conviction

applicant has a prior felony conviction

which of the following includes information regarding a person's credit, character, reputation, and habits 1. agent's report 2. consumer report 3. consumer history 4. insurability report

consumer report