CH 1
In classifying a risk, the Home Office underwriting department will look at all of the following EXCEPT A Applicant's present occupation. B Applicant's past income. C Applicant's past medical history. D Applicant's present physical condition.
B Applicant's past income.
The Federal Fair Credit Reporting Act A Prevents money laundering. B Regulates consumer reports. C Protects customer privacy. D Regulates telemarketing.
B Regulates consumer reports.
Which of the following is another term for an authorized insurer? A Licensed B Legal C Admitted D Certified
C Admitted
An underwriter may obtain information on an applicant's hobbies, financial status, and habits by ordering a(n) A Inspection report. B Medical Information Bureau report. C Medical examination. D Attending Physician Statement.
A Inspection report
As a field underwriter, a producer is responsible for all of the following tasks EXCEPT A Issue the policy that is requested. B Help prevent adverse selection. C Solicit business that will fall within the insurer's underwriting guidelines. D Obtain appropriate signatures on the application for insurance.
A Issue the policy that is requested.
Under the Fair Credit Reporting Act, if a consumer challenges the accuracy of the information contained in a consumer or investigative report, the reporting agency must A Respond to the consumer's complaint. B Defend the report if the agency feels it is accurate. C Change the report. D Send an actual certified copy of the entire report to the consumer.
A Respond to the consumer's complaint.
Which of the following would provide an underwriter with information concerning an applicant's health history? A The Medical Information Bureau B A medical examination C The agent's report D The inspection report
A The Medical Information Bureau
Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract? A Representation B Warranty C Concealment D Indemnity
B Warranty
What is the purpose of a conditional receipt? A It serves as proof that the applicant has been determined insurable. B It is given only to applicants who fully prepay the premium. C It is intended to provide coverage on a date prior to the policy issue. D It guarantees that a policy will be issued in the amount applied for.
C It is intended to provide coverage on a date prior to the policy issue.
Part 2 of the application for life insurance provides questions regarding all of the following EXCEPT A Alcohol and tobacco consumption. B Recent surgeries. C Other insurance coverages. D Family health history.
C Other insurance coverages.
What describes the specific information about a policy? A Buyer's guide B Producer's report C Policy summary D Illustrations
C Policy summary
Which of the following includes information regarding a person's credit, character, reputation, and habits? A Consumer history B Insurability report C Agent's report D Consumer report
D Consumer report
Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report A Are entitled to obtain a copy of the report from the party who ordered it. B Must be advised that a copy of the report is available to anyone who requests it. C May sue the reporting agency in order to get inaccurate data corrected. D Must be informed of the source of the report.
D) Must be informed of the source of the report
Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained? A 3 days B 5 days C 10 days D 14 days
A 3 days
All of the following information about the applicant is identified in the General Information section of a life insurance application EXCEPT A Education. B Age. C Gender. D Occupation.
A Education.
Which of the following is NOT the consideration in a policy? A The application given to a prospective insured B Something of value exchanged between parties C The premium amount paid at the time of application D The promise to pay covered losses
A The application given to a prospective insured
According to the Fair Credit Reporting Act, all of the following would be considered negative information about a consumer EXCEPT A Failure to pay off a loan. B Disputes regarding consumer report information. C Tax delinquencies. D Late payments.
B Disputes regarding consumer report information.
An applicant 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 of the consumer reporting company? A Disclosure rule B Fair Credit Reporting Act C Consumer Privacy Act D Conditional receipt
B Fair Credit Reporting Act
When an insurer begins underwriting procedures for an applicant, what will be the main source for its underwriting information? A State records B Medical records C Application D Interviews
C Application
If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered to be A Qualified. B Approved. C Authorized. D Certified.
C Authorized.
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 insurer violated? A Representation B Adhesion C Consideration D Good faith
C Consideration
Which of the following reports will provide the underwriter with the information about an insurance applicant's credit? A Agent's report B Any federal report C Consumer report D Inspection report
C Consumer report
A life insurance policy has a legal purpose if both of which of the following elements exist? A Offer and counteroffer B Policyowners and named beneficiaries C Insurable interest and consent D Underwriting and reciprocity
C Insurable interest and consent
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? A Acknowledge the missed questions with a signature and continue the policy issue process B Proceed with issuing a policy C Return to the applicant for completion D Answer the missed questions for the applicant
C Return to the applicant for completion
Which of the following is a risk classification used by underwriters for life insurance? A Normal B Excellent C Standard D Poor
C Standard
Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information? A The Guaranty Association B Consumer Privacy Act C The Fair Credit Reporting Act D Unfair Trade Practices Law
C The Fair Credit Reporting Act
If an insurer requires a medical examination of an applicant in connection with the application for life insurance, who is responsible for paying the cost of the examination? A The examiner B The applicant C The insurer D The cost of the examination will be waived.
C The insurer
If an insurer issued a policy based on the application that had unanswered questions, which of the following will be TRUE? A The policy will be void. B The insurer may deny coverage later, because of the information missing on the application. C The policy will be interpreted as if the insurer waived its right to have an answer on the application. D The policy will be interpreted as if the insured did not have an answer to the question.
C The policy will be interpreted as if the insurer waived its right to have an answer on the application.
If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it? A Conditional B A legal (but unethical) contract C Unilateral D Adhesion
C Unilateral
Which of the following statements is NOT true concerning insurable interest as it applies to life insurance? A Business partners have an insurable interest in each other. B A married person has an insurable interest in their spouse. C An individual has an insurable interest in their own life. D A debtor has an insurable interest in the life of a lender.
D A debtor has an insurable interest in the life of a lender.
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? A As of the policy delivery date B As of the first of the month after the policy issue C As of the policy issue date D As of the application date
D As of the application date
Stranger-originated life insurance policies are in direct opposition to the principle of A Law of large numbers. B Good faith. C Indemnity. D Insurable interest.
D Insurable interest.
A participating insurance policy may do which of the following? A Provide group coverage B Pay dividends to the stockholder C Require 80% participation D Pay dividends to the policyowner
D Pay dividends to the policyowner
Which of the following will be included in a policy summary? A Copies of illustrations and application B Comparisons with similar policies C Primary and secondary beneficiary designations D Premium amounts and surrender values
D Premium amounts and surrender values
All of the following are requirements for life insurance illustrations EXCEPT A They may only be used as approved. B They must identify nonguaranteed values. C They must differentiate between guaranteed and projected amounts. D They must be part of the contract.
D They must be part of the contract.
Why should the producer personally deliver the policy when the first premium has already been paid? A To ensure the producer gets paid commission B To find out how the family has been doing since the initial presentation C To make sure the policy is not stolen or lost D To help the insured understand all aspects of the contract
D To help the insured understand all aspects of the contract
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 A The gender of the applicant. B The type of policy requested. C Which individual will pay the premium. D Whether an insurable interest exists between the individuals.
D 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 may be delivered to the applicant no later than A With the policy B Upon issuance of the policy C Within 30 days after the first premium payment was collected D Prior to filling out an application for insurance
A With the policy
An investor buys a life policy on an elderly person in order to sell it for a life settlement. This is an example of A Third-party ownership. B A STOLI policy. C A prearranged funeral plan. D A viatical settlement.
B A STOLI policy.
When must insurable interest exist in a life insurance policy? A At the time of loss B At the time of application C At the time of policy delivery D When there is a change of the beneficiary
B At the time of application
Representations are written or oral statements made by the applicant that are A Immaterial to the actual acceptability of the insurance contract. B Considered true to the best of the applicant's knowledge. C Guaranteed to be true. D Found to be false after further investigation.
B Considered true to the best of the applicant's knowledge.
Which of the following is NOT an example of a valid insurable interest? A Child in parents' lives B Debtor in the life of the creditor C Business partners in each other's lives D Employer in key employee's life
B Debtor in the life of the creditor
The Medical Information Bureau (MIB) was created to protect A Medical examiners that perform insurance physical examinations. B Insurance companies from adverse selection by high risk persons. C Insurance departments from lawsuits by policyowners. D Insureds from unreasonable underwriting requirements by the insurance companies.
B Insurance companies from adverse selection by high risk persons.
Which of the following best details the underwriting process for life insurance? A Reporting and rejection of risks B Selection, classification, and rating of risks C Solicitation, negotiation and sale of policies D Issuance of policies
B Selection, classification, and rating of risks
What is the purpose of a disclosure statement in life insurance policies? A To protect agents and insurers against lawsuits B To explain features and benefits of a proposed policy to the consumer C To obtain important underwriting information from the applicant D To help consumers compare policy prices
B To explain features and benefits of a proposed policy to the consumer
In forming an insurance contract, when does acceptance usually occur? A When an insured submits an application B When an insurer's underwriter approves coverage C When an insurer delivers the policy D When an insurer receives an application
B When an insurer's underwriter approves coverage
What is a material misrepresentation? A Any misstatement by the producer B Concealment C A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company D Any misstatement made by an applicant for insurance
C A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company
Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe? A Conditional B Personal C Adhesion D Unilateral
C Adhesion
Which is the primary source of information used for insurance underwriting? A Medical records B Private investigations C Application D Applicant interviews
C Application
Which of the following individuals must have insurable interest in the insured? A Producer B Policyowner C Beneficiary D Underwriter
B Policyowner
When is the earliest a policy may go into effect? A After the underwriter reviews the policy B When the application is signed and a check is given to the agent C When the first premium is paid and the policy has been delivered D When the insurer approves the application
B When the application is signed and a check is given to the agent
What is the timeframe for filing relevant Suspicious Activity Reports? A Within 90 days of the suspicious transaction B Within 30 days of initial discovery C Within 30 days of the suspicious transaction D Within 90 days of initial discovery
B Within 30 days of initial discovery
If a change needs to be made to the application for insurance, the agent may do all of the following EXCEPT A Erase the incorrect answer and record the correct answer. B Draw a line through the first answer, record the correct answer, and have the applicant initial the change. C Note on the application the reason for the change. D Destroy the application and complete a new one.
A Erase the incorrect answer and record the correct answer.
If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply? A 7 days B 10 days C 3 days D 5 days
D 5 days
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 Habits. B Prior insurance. C Ancestry. D Credit history.
C Ancestry.