Life Insurance Chapter Quiz Questions

Factual statements about the insured or the risk in an insurance policy are considered

Express warranty

Which of the following best details the underwriting process for life insurance?

Selection, classification, and rating of risks

A tornado that destroys property would be an example of which of the following?

a peril

Part 2 of the application for life insurance provides questions regarding all of the following EXCEPT

a) alcohol and tobacco consumption b) family health history c) other insurance coverages d) recent surgeries answer: c) other insurance coverages

The process of "post-selection" refers to which of the following?

an insurer is investigating the clients risk profile

When an insurer begins underwriting procedures for an applicant, what will be the main source for its underwriting information?

application

In comparison to consumer reports, which of the following describes a unique characteristic of investigative consumer reports?

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

What is a wrongful act or the violation of someone's rights that leads to legal liability called?

tort

Untrue statements on the application unintentionally made by insured that, if discovered, would alter the underwriting decision of the insurance company, are called

material misrepresentations

The agent is known as the "Field Underwriter" because of the information he/she gathers for the insurer. This helps the insurer

pre-select applicants that would present the lowest risk of loss for the insurer

Insurance is the transfer of

risk

Events in which a person has both the chance of winning or losing are classified as

speculative risk

All of the following are examples of risk retention EXCEPT

a) copayments b) self-insurance c) deductibles d) premiums answer: d) premiums

Which of the following is NOT an example of a business use of life insurance?

a) executive bonuses b) buy-sell funding c) workers compensation d) key person answer: c) workers compensation

Because an insurance policy is a contract between the insurer and the insured, it must conform to the state laws governing contracts which require all of the following elements EXCEPT

a) offer and acceptance b) legal purpose c) conditions d) competent parties answer: c) conditions

What does "liquidity" refer to in a life insurance policy?

cash values can be borrowed at any time

When both parties to a contract must perform certain duties and follow rules to make the contract enforceable, the contract is

conditional

When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?

consideration

Which of the following best describes the policy nonrenewal?

discontinuance of an insurance policy by the insured on the policy anniversary date

Which of the following is considered to be a morale hazard?

driving recklessly

Units with the same or similar exposure to loss are referred to as

homogeneous

A set of legal or regulatory conditions that affect an insurer's ability to collect premiums commensurate with the level of risk incurred would be considered a(n)

legal hazard

The growing tendency of individuals to file lawsuits and to claim tremendous amounts for alleged damages is known as

legal hazard

As a field underwriter, a producer is responsible for all of the following tasks EXCEPT

a) help prevent adverse selection b) issue the policy that is requested c) solicit business that will fall within the insurer's underwriting guidelines d) obtain appropriate signatures on the application for insurance answer: b) issue the policy that is requested

If an insurance company wishes to order a consumer report on an applicant 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) prior insurance b) habits c) ancestry d) credit history answer: c) ancestry

All of the following actions by a person could be described as risk avoidance EXCEPT

a) refusing to scuba dive b) not driving after being in an accident c) never flying in an airplane d) investing in the stock market answer: d) investing in the stock market

Which of the following is NOT a characteristic of pure risk?

a) the loss exposure must be large b) the loss must be due to chance c) the loss must be catastrophic d) the loss must be measurable in dollars answer: c) the loss must be catastrophic

Not all losses are insurable, and there are certain requirements that must be met before a risk is a proper subject for insurance. These requirements include all of the following EXCEPT

a) the loss must not be catastrophic b) the loss produced by the risk must be definite c) the loss may be intentional d)there must be a sufficient number of homogenous exposure units to make losses reasonably predictable answer: c) the loss may be intentional

Which of the following best describes the concept that the insured pays a small amount of premiums for a large amount of risk on the part of the insurance company?

aleatory

Representations are written or oral statements made by the applicant which

are considered true to the best of the applicants knowledge

A life insurance application is asking if the applicant has applied for any other life insurance within the past 6 months. The applicant states that they applied for $15k coverage from another company but fails to mention the $150k coverage with a second company. The applicant is guilty of

concealment

Every expressed warranty made at or before the execution of a policy must be

contained in and referred to in the policy or other document and signed by the insured

In determining how material a piece of information is to each party of a contract, the value is not determined by the event itself, but solely by which of the following?

influence this information would have in forming an estimate of the advantages or the disadvantages of the contract

Which of the following information about the applicant is NOT included in the General Information section of the application for insurance?

medical background

Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report

must be informed of the source of the report

A situation in which a person can only lose or have no change represents

pure risk