Chapter 2 part 2

The MIB is used in the underwriting of all of the following types of insurance, except: A Auto and Homeowners B Life C Disability Income D Critical Illness

A Auto and Homeowners

When an insured decides to change her mode of premium payment from monthly to annually, the total premium due would: A Decrease B Fluctuate C Increase D Remain the same

A Decrease Additional charges are included in modes other than annual to offset the lost interest earnings and increased administration costs. For this reason, the annual mode is the least amount of total premium outlay.

An insurer has issued a new policy and mailed it to the producer. The producer should: A Deliver the policy to the insured in person and obtain a delivery receipt B Notify the insured by phone that a policy has been issued C Review the policy for accuracy and sign the receipt on behalf of the insured D Maintain the policy securely in his office files

A Deliver the policy to the insured in person and obtain a delivery receipt

In a replacement transaction, the insurer that is having its policy replaced is known as the _______ insurer. A Existing B Insolvent C Replacing D Conserving

A Existing

The insurance company must meet requirements under the _____ when gathering information about an applicant from a third party. A FCRA B FINRA C NAIC D SEC

A FCRA The insurance company must meet requirements under the FCRA when gathering information about an applicant from a third party.

Which of the following is included in Part II of a Life Insurance Application? A Family member's age and cause of death B Date of birth C Gender D Marital status

A Family member's age and cause of death Part II of the application contains questions pertaining to medical background, present health, any medical visits in recent years, medical status of family members and causes of death of deceased relatives.

Ultimately it is up to the _______ to determine if the proposed insured is an acceptable risk. A Home office underwriter B Home office actuary C Insured's primary care physician D Field underwriter

A Home office underwriter

Ultimately it is up to the _______ to determine if the proposed insured is an acceptable risk. A Home office underwriter B Insured's primary care physician C Field underwriter D Home office actuary

A Home office underwriter

Which of the following best describes a Statement of Good Health? A It verifies that the insured has not suffered a serious illness or injury since the application date if the premium was not paid at the time of application B It is a sworn oral statement made by the insured at time of application which allows for coverage to come into effect C It is the producer's authority to raise the rate if the insured does not appear to be in good health at the time of policy delivery D It is required with all policy deliveries to confirm the underwriting class that was assigned

A It verifies that the insured has not suffered a serious illness or injury since the application date if the premium was not paid at the time of application Generally, this is required when the policy was issued with an outstanding premium due to assure that the health status of the insured has not significantly changed since the time of application.

Which of the following is NOT a common rating classification? A Subrated B Preferred C Standard D Substandard

A Subrated

Why should a producer collect a premium at the time the application is completed? A Without it, coverage cannot go into effect, as there would be a lack of consideration B It allows the producer to get paid faster C It allows the insurer to afford to pay for any required medical records or tests D It helps the home office with its cash flow

A Without it, coverage cannot go into effect, as there would be a lack of consideration Collecting the premium at the time of application allows the producer to issue a conditional coverage receipt, which can bring coverage into effect as early as the date of the application, provided all the conditions have been satisfied.

Whose signature is not required on a life insurance application? A Insured B Beneficiary C Policyowner D Producer

B Beneficiary The policyowner has the right to name and change beneficiaries. Beneficiaries do not sign on the application as beneficiaries.

If a copy of the application, which led to a life insurance policy being issued, is attached to the policy: A It is a way for the insurer and policyowner to evidence who the producer was at the time of application B It is considered part of the entire contract C It can be used by the insurance company later on if the insured wants to increase their coverage instead of using a new one D It is provided merely as a convenience to the policyowner so that they will have a record of the transaction

B It is considered part of the entire contract If a copy of the application is attached to the policy it becomes part of the entire contract and information contained within or left out can be the basis upon which the insurance company can challenge a claim during the contestable period.

Which of the following is most likely to pay the highest premium for a disability income policy, all other factors being equal? A Female, age 40, firefighter B Male, age 40, firefighter C Female, age 40, banker D Male, age 40, banker

B Male, age 40, firefighter All things being equal, males have a higher mortality risk. The male with the higher risk occupation will most likely pay the highest premium.

The person who has ownership rights over the insurance policy is known as the ____________. A Beneficiary B Policyowner C Insurer D Insured

B Policyowner The individual who has ownership rights in a policy is the policyholder. The policyowner and insured are usually the same person, but not necessarily. Any changes made to a policy must be approved in writing by the policyholder.

When an applicant does not smoke, exercises regularly, seldom drinks, and eats moderately and is considered to be a better-than-average risk, they would likely qualify for: A Standard status and pay a standard premium B Preferred status and pay a lower premium C Substandard status and pay a higher premium D Preferred status and pay a higher premium

B Preferred status and pay a lower premium

In a replacement sale all of the following are producer responsibilities, except: A Obtain information regarding the in force policies including name and policy numbers B Reimburse the applicant for any surrender charges that may be incurred as a result of the transaction C Provide copies of the notice regarding replacement and any sales proposals to the applicant and replacing insurer D Complete a notice regarding replacement with applicant and producer signatures

B Reimburse the applicant for any surrender charges that may be incurred as a result of the transaction Reimbursing the applicant for any surrender charges that may be incurred is not permitted, but may indicate an improper replacement.

What information must appear on the policy summary provided to a life insurance client? A The producer's name and home address B The producer's name and address C The producer's agency's name and address D A copy of the producer's license

B The producer's name and address

The person who submits an application for insurance is always referred to as the _______. A Owner B Beneficiary C Applicant D Insured

C Applicant The person who submits an application for insurance is always referred to as the applicant.

The MIB is used in the underwriting of all of the following types of insurance, except: A Critical Illness B Life C Auto and Homeowners D Disability Income

C Auto and Homeowners

All of the following are underwriting criteria taken into account by the insurer in the underwriting of individual life insurance cases, except: A Gender B Medical history C Education level completed D Physical condition

C Education level completed Underwriting for educational level completed would be discriminatory.

Which of the following is most likely to pay the highest premium for a disability income policy, all other factors being equal? A Female, age 40, firefighter B Female, age 40, banker C Male, age 40, firefighter D Male, age 40, banker

C Male, age 40, firefighter All things being equal, males have a higher mortality risk. The male with the higher risk occupation will most likely pay the highest premium.

If a client chooses to pay premiums other than annually, what can he or she expect? A Higher surrender charges on some policies B Lower overall total premium costs C Better client service D Additional charges to offset lost interest, earnings, and increased administrative costs

D Additional charges to offset lost interest, earnings, and increased administrative costs Additional charges are included in modes other than annual to offset the lost interest earnings and the increased administration costs.

In order for a life insurance policy to be valid, insurable interest must exist at time of _________. A Claim B Issuance change to expiration C Conversion D Application

D Application

All of the following signatures would be required on a life insurance application for an adult, except that of the: A Insured B Producer C Applicant D Beneficiary

D Beneficiary Both the producer and the applicant / insured must sign the application. If the applicant is a minor, a guardian must sign the application.

A(n) ________ report is a general report of the applicant's finances, character, morals, work, hobbies, and other habits. A Motor vehicle B Agent's C Attending physician's D Inspection

D Inspection

An applicant determined to have below average risk of loss would be: A Issued a rated policy B Declined for coverage C Issued a standard policy D Issued a preferred policy

D Issued a preferred policy In this case, 'below average' is a good thing. A below average risk is preferred because there is less of a chance of a claim being made.

What should a producer do if the policy applied for is issued at a higher rate than was expected? A Deliver the policy to the applicant and have the home office reduce the commission payout to cover the higher premium B Immediately return the policy to the home office because the applicant will never accept it C Have the home office re-issue the policy for a reduced amount of coverage for the original premium quoted so that it will be easier to explain at time of delivery D Personally deliver the policy, explain the rating, reinforce the value of the policy, and collect the additional premium

D Personally deliver the policy, explain the rating, reinforce the value of the policy, and collect the additional premium By personally delivering the policy the producer can explain the rating, reinforce the value of the policy and obtain any home office requirements such as signatures and additional premium in order to put the policy in force.

Which of the following best describes producer field underwriting? A Obtaining the applicant's medical records, conducting a credit history check, and logging in to the MIB B Interviewing the applicant's neighbors about the applicant's morals and character C Conducting blood pressure readings, taking the applicant's pulse, and drawing blood D Taking the time to probe beyond the stated questions on the application based upon the applicant's responses

D Taking the time to probe beyond the stated questions on the application based upon the applicant's responses Probing beyond the stated questions in the application based upon the applicant's responses is field underwriting. The producer does not engage in any of the other listed activities.

All of the following are true of a substandard risk, except: A The insured may have a flat additional premium added to their base premium B The insured may be rated as older than their actual age C The coverage could be reduced for a period of time D The premium would be discounted

D The premium would be discounted