Tennessee Life Insurance Chapter 1: Completing the Application, Underwriting, and Delivering the Policy
who is a field underwriter?
Agent/Producer
when a change needs to be made on the application for insurance, which is the best method for correcting information?
Complete a new application or ask the applicant to initial the correction on the original application
what are three main instances when insurable interest exists in life insurance?
Insuring your own life, -the life of a family member, -or the life of business partners or someone who has financial obligation to the policyowner
Who must have insurable interest in the insured?
Policyowner
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
What is insurance underwriting?
The process of risk selection and classification
how is the information obtained for an investigative consumer report?
Through interviews with the applicant's associates, friends and neighbors
In forming an insurance contract, when does acceptance usually occur?
When the insurer approves a prepaid application
health insurance contracts are unilateral. what does that mean?
only one party makes a legally enforceable promise
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 the company's underwriting unit?
risk selection
what is the best way to handle incomplete insurance applications?
Return the application to the applicant for completion
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
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
General Information of the application includes
the general questions about the applicant, including name, age, address, birth date, gender, income, marital status, and occupation
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 law protects consumers from the circulation of inaccurate or obsolete information?
Fair Credit Reporting Act
What two elements are necessary for a life insurance contract to have a legal purpose?
Insurable interest and consent
What entities make up the Medical Information Bureau?
Insurers
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 document describes the specific information about a policy?
Policy summary
The insurer discovered that one of the applicants for life insurance missed a couple of questions on the application. What must the insurer do with the application?
Return to the applicant for completion
what are three types of risk rating classifications in life insurance
Standard, substandard, and preferred
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 material?
When it may alter the underwriting decision
in insurance, when is the offer usually made on a contract?
When the insurance application is submitted
When does an insurance policy go into effect?
When the policy is delivered and the premium is paid
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 insurance?
agreement (offer and acceptance), consideration, competent parties, and legal purpose
what is a warranty in an insurance contract?
an absolutely true statement upon which the validity of the insurance contract is based
when must the policy summary for a life insurance policy be delivered to the policyowner?
at the time of policy delivery
when must insurable interest exist in a life insurance policy?
at the time of the application
What do individuals use to transfer their risk of loss to a larger group?
insurance
what type of report provides information about the applicant's hobbies, habits, and financial status?
investigate consumer report
what report is used to asses risk associated with a health insurance applicant's lifestyle and character?
investigative consumer report
Insurance is a contract that protects the insured from what?
loss
when an agent fails to obtain the applicant's signature on the application, what must the insurer do?
send the application back to the applicant for a signature
What type of insurer is owned by stockholders?
stock
If an applicant does not receive a copy of the new insurance policy, who would be held responsible?
the agent
Whose responsibility is it to determine that all the questions on an insurance application are answered?
the agent's
what is the purpose of the agent's 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.
during which stage in the insurance process do insurers evaluate information that identifies adverse selection of risks?
underwriting
in health insurance contracts, the insured is not legally bound to any particular action; however, the the insurer is obligated to pay for losses covered by the policy. what contract element does this describe?
unilateral
when would a misrepresentation on an insurance application be considered fraud?
when it is intentional and material
