Life Insurance Chapter 3

A life insurance underwriter receives the greatest amount of insurability information from which of the following sources? A. The insurance application B. The medical information report C. An attending physician's statement D. A consumer report

A

Methods of policy delivery that are acceptable in most states would include all of the following except: A. First class mail B. Personal delivery by agent C. Certified, registered mail D. First class mail with delivery receipt

A

Which of the following receipts provides coverage for an insured immediately upon the payment of the premium? A. Binding receipt B. Approval receipt C. Conditional receipt D. Insurability receipt

A

Which of the following risk classifications is characterized by a lower annual premium? A. Preferred risk B. Substandard risk C. Standard risk D. Personal risk

A

Once a policy is issued, what becomes of the original application?

Attached to policy, becomes part of entire contract

An MIB contains information about: A. Consumer reports B. An applicant's previous health history C. Risk classifications D. Adverse Selection

B

If a policy can be issued without a medical exam requirement, when is the earliest date coverage could become effective?

Date listed on receipt

Jimmy completes a life insurance application on Delores and collects the initial premium. A Conditional Receipt is provided to the applicant. If the underwriting department approves the application without a medical exam, when will coverage become effective?

Date listed on receipt

Tom applies for life insurance but pays no initial premium. The application is sent to underwriting and is approved with a policy issued. When the agent delivers the policy Tom is in the hospital. What should she do?

Do not deliver the policy nor collect premium

It is a requirement that the application be attached to an approved policy and then provided to the policyowner. What mandatory provision requires that the policyowner receive both the policy and a copy of the original application?

Entire contract provision

Which risk category would provide for the lowest annual premium?

Preferred

An applicant who conceals material information from an insurance company may be subject to which of the following? A. Policy cancellation B. Warranty revocation C. Fine and imprisonment D. Policy cancellation with returned premium

D

Each of the following methods may be utilized to rate up a life insurance policy, EXCEPT: A. Flat rate increase B. Tabular rating C. Percentage of the standard rate D. Preferred risk method

D

What options does an underwriter have when an applicant for life insurance is deemed by the underwriter to be a substandard risk? A. Decline the application B. Issue the policy with exclusions C. Issue the policy with a rated up premium D. All of the above

D

John applies for life insurance and pays an initial premium. He is given a type of conditional receipt. The next day john dies in an accident. What action will the insurer take?

He will underwrite the policy and if insurable the insurer will pay the claim

Charles completes an application for a $2,000,000 life insurance policy on May 7th, which included a mandatory medical exam that he completed on May 12th. When applying for coverage, he provided the required initial premium and received a Conditional Receipt. The policy was approved and it was mailed to the producer on July 10th. The agent delivered the policy to Charles on July 22nd. Charlie's insurance protection actually began on:

May 12

The underwriting department of an insurer is a very important department with regard to company profitability. What is the primary purpose of this department?

Minimize/prevent Adverse Selection

Another term for a Binding Receipt is:

Temporary Insurance Agreement

If no premium is paid with an application for life insurance, what responsibilities does an agent possess when the policy is delivered?

Collect the premium and a statement of continued good health and issue a premium receipt

Yolanda applies for a life insurance policy on March 8th. The application is sent to underwriting on March 9th. Approval is provided by the insurer on March 17th. The policy is issued March 19th and the agent delivers the policy to Yolanda on March 22nd. What provision begins upon the policy delivery?

Free-look provision

A policy is approved on November 1st and is sent to the agent of record who receives the policy on November 5th. The agent then delivers the approved policy to her 30-year-old client on November 9th. When would the Free-Look period end?

Nov 19

Common pre-selection activities that an agent engages in would include:

Obtaining important information, contact information for applicant's doctor

When will an insurer request that an insured sign a Statement of Continued Good Health?

At the time of policy delivery

When a policyowner purchases a contract covering the life of another individual, how many total signatures will appear on the application?

3

An application completed where the applicant and proposed insured are different people, it would have to be signed by______

Agent, applicant, proposed insured

What is an example of a primary purpose of a Medical Information Bureau (MIB) report?

Allows insurer to avoid high risk applicants

If an applicant for life insurance is considered a substandard risk by an insurer but still insurable, it will probably take which of the following actions? A. Decline application B. Accept the risk and rate up the premium C. Accept the risk and increase the number of exclusions D. Issue a standard policy

B

What type of insurance receipt provides immediate coverage from the date of application, regardless of the underwriter's decision

Binding

All of the following are factors which affect a life insurance risk, EXCEPT: A. Age B. Occupation C. Unearned Income D. Family health history

C

All of the following are types of premium receipts, EXCEPT: A. Binding receipt B. Approval conditional receipt C. Countersignature receipt D. Insurability conditional receipt

C

The Medical Information Bureau (MIB) is an important resource for an underwriter. Which statement below is not true regarding the MIB? A. It contains privileged information. B. Information can be shared among member insurers. C. Creditors of the applicant can access the MIB. D. The MIB assists member insurers in detecting false application information.

C

Which of the following choices is not a source of information utilized by the underwriting department to evaluate the risk of an applicant? A. Attending Physician's Statement B. Consumer Reports C. Blood type D. Blood tests

C

Which of the following is true regarding the doctrine of insurable interest? A. Insurable interest must exist at the time of death B. Insurable interest must exist during policy delivery C. Insurable interest must exist at the time of application D. Insurable interest must exist at the time of loss

C

Which COBRA statement below is NOT CORRECT? A. COBRA is a federal law that applies to a company with 20 or more employees. B. COBRA allows an employee to continue their group insurance plan in certain circumstances. C. Premiums charged to the employee cannot exceed 102% of the policy premium. D. An 18-month extension is allowed for a child who leaves the family group plan.

D

Which of the following is not evaluated by the underwriting department when reviewing a possible application for insurance? A. Age B. Occupation C. Hobbies D. Marital status

D

If a premium is not paid at the time an application for life insurance is completed, when will coverage go into effect?

When the producer delivers the policy and collects the premium

Insurable Interest in a life insurance policy must exist:

At the time of original application

Which of the following statements regarding the Fair Credit Reporting Act of 1971 is NOT CORRECT? A. It is a federal law. B. It allows applicants the right to review collected information. C. It is only applicable in the health insurance industry. D. It created guidelines to follow when an insurer obtains underwriting information that the applicant believes is incorrect.

C

A consumer's privacy rights and the use or distribution of collected data by an insurer is outlined in which of the following? A. The Claims Notification Act B. The Federal Privacy Act C. The Fraud Detection Act of 1988 D. The Fair Credit Reporting Act

D

All of the following statements regarding AIDS/HIV testing are TRUE, except: A. An insurance company cannot discriminate in its AIDS testing requirements for people of the same classification. B. The insurance company pays for the cost of the testing. C. Full written consent must be obtained by the applicant prior to testing. D. Suspected marital status or sexual orientation can be used to determine who is most likely to test positive for AIDS/HIV.

D