Chapter 2 study Q&A

Underwriting Process

1. MIB report may be requested. 2.insurability is determined 3.classification of risk and rating

Policy Delivery

1.Constructive delivery 2.Producer explains rating premiums, coverage, policy benefits 3.Statements of Good Health

Completing the Application

1.Formal request for the insurer to issue a policy 2.Required signatures 3..Conditional receipt may be issued

A typical life insurance app. contains how may parts?

2 -one is general info. & two is medical info.

All of the following become part of the entire contract EXCEPT:

A copy of the check

A personalized computer-generated illustration detailing premiums, cash values, interest rates and surrender values is called

A policy summary

A producer must include their name and address on which of the following?

A policy summary

A consumer investigative report is not completed by

A producer

If a client chooses to pay premiums other than annually, what can he or she expect?

Additional charges to offset lost interest, earnings and increased administrative cost

An __ is a personal statement submitted by the producer to the insurer regarding the applicants financial condition and any personal knowledge of the applicant

Agent Report -info about the applicant based on direct knowledge

An applicant claims they have no hazardous hobbies, but the agent sees a plaque proclaiming the applicant as president of a local skydiving club. The agent would need to include this information on the:

Agents Report - reports info., obtained through observation. May be material to the underwriting process

All of the following are true regarding an Attending Physician statement (APS) EXCEPT:

An MIB report can be used in place of an APS

Which of these modes would result in the insured paying the least annual outlay for life insurance?

Annual

In life insurance, which of these is the earliest point in time at which the Buyer's Guide is required?

Application

In order for a life insurance policy to be valid, insurable interest must exist at time of

Application -when the policy is issued

Which underwriting source is primarily used when an application reveals conditions for which more medical information is required?

Attending Physicians statement -to secure the additional medical info.

which of the following is NOT required to sign a completed application

Beneficiary

If a home office underwriter obtains MIB codes inconsistent with information provided on the application, what is the underwriter required to do?

Conduct further investigation to obtain more info. prior to making a decision

In a replacement transaction all of the following are insurer duties and Responsibilities EXCEPT:

Contract the client to assure that they understand the transaction.

An insurer has issued a new policy and mailed it to the producer. The producer should:

Deliver the policy to the insures in person and obtain a delivery receipt.

In a policy summary all of the following must be shown as being guaranteed EXCEPT

Dividends -never guaranteed

All of the following are underwriting criteria taken into account by the insurer in the underwriting of individual life insurance cases EXCEPT:

Education level completed

J buys a life insurance policy specifically intending for the death benefit to be used to cover estate taxes. What is the correct term for using life insurance in this way?

Estate conservation

The difference between Estate Creation and Estate Conservation is that

Estate creation occurs when policy proceed are paid to survivors. Estate conservation occurs when those proceeds are used to pay estate taxes -Estate conservation assumes wealth has already been created during ones life and needs to be protect from taxes and loans due to death of insured.

In a replacement transaction the insurer that is having its policy replaced is known as the ___ insurer

Existing insurer

Info from a third party collected by the the insurance company in the application for insurance and during underwriting of the policy may be subject to the jurisdiction of which of the following

Fair Credit Reporting Act

the term "mode" refers to the

Frequency of premium payments

When an insured denied to change her mode of premium payment from annually to monthly, the total premium due would

Increase

What is an insurer permitted to do if and when it discovers during the underwriting process that a proposed insured has AIDS?

Insures may refuse to issue a policy to individuals based on positive HIV test results

Medical exam are requested in all of the following situation, EXCEPT:

Low amount of premium -requested after determining amount of coverage, age, health history. -premium has nothing to do with it

which of the following reports cannot be used as the sole basis for rating or denying coverage to an applicant

MIB -Report reveals past medical concerns and cannot be used as only medical repot for rating or denying an app.

A producer provided a conditional receipt to an applicant on May 5 at the time of an application based on a standard risk. The insurer required a routine medical exam, which was completed on may 15. the policy Was issued based on a substandard risk on May 20 and the producer delivered the policy on Many 22. The effective date of coverage is :

May 22 -Since the policy was not issued as applied for, coverage is not effective until the producer delivers the policy on May 22 & explains changes in coverage or increased premium due to standard risk. Then, applicant must accept the counteroffer.

A generic brochure was developed by the__ to assist prospective buyers of life insurance, which includes descriptions of all the basic types of life insurance and comparisons of their relative costs

NAIC

Which of the following is included in part 1 of Life insurance application

Name and occupation -general info. about applicant -ex: gender, marital status, residence, DOD, occupation, Past and present insurance

If it is known or should be known by the agent that an existing policy is going to be lapsed, forfeited, surrendered or terminated in favor of a new policy, the agent must submit a:

Notice regarding replacement.

If an insured pays a premium that is lower than others that are in the same class, this insured is considered to be rated as?

Preferred

When an applicant does not smoke, exercises regally, seldom drinks and eat moderately and is considered to be a better that avg. risk, they would like qualify for:

Preferred status and pay a lower premium

HIPAA's privacy rules are implemented to:

Protect the privacy of all individually identifiable health info.

In a replacement sales all of the following are producer responsibilities EXCEPT:

Reimburse the applicant for any surrender charges that may be incurred as a result of transaction

Any transaction in which new life insurance is purchased and, producer knows, or should know, that existing contact(s) will be: lapsed, forfeited, surrendered, terminated, reduced in value, amended with reduction in benefit or team have a reduced cash value or subjecting to borrowing is called:

Replacement

If a meeting with a client, a producer returns to the agency office and notices that the application has unanswered questions, what is the best course of action for the producer to take ?

Return the org. app. back to the applicant for completion prior to submission

If the producer discovers that the applicant is not in good health at time of policy delivery. If the initial premium has not been paid, it is the producers responsibility to?

Return the policy to insurer for further underwriting

If a client is unsure about whether or not he/she can obtain coverage or how much it would cost, what can the producer suggest to see what the insurer can do without tying up any of the clients funds?

Submit a trial application -trail app. is 1 submitted without a premium. Wont take effect until the policy is issued by insurer

which of the following is NOT a common rating classification?

Subrated -3 classifications for risks are standard, preferred and substandard

Which of the following best describes provider field underwriting?

Taking the time to probe beyond the stated questions on the application based upon the application responses.

Jay is named in a policy as the individual who is entitled to receive the policy proceeds upon the death of Tay. Which of the following statements best applies to this scenario?

Tay is the insured in the policy and Jay is the named beneficiary

What happens if an applicant discovers that there has been inaccurate or incomplete info in any report used during the underwriting process for life insurance?

The applicant has the right to challenge the inaccurate or incomplete info. -under (FCRA) Fair credit reporting act

When an applicant completes the insurance application in its entirety and provides the producer with a premium check what in effect has taken place?

The applicant is making an offer to the insurer

All of the following statements regarding sources of underwriting are correct, except:

The applicant may be denied coverage based solely on the MIB report.

Which of the following statements about policy roles is TRUE ?

The insurer and poliyowner are usually the same, but not necessarily

An application for insurance is completed and submitted to an insurance company. In order for coverage to be effective immediately, all of the following condition must be met EXCEPT:

The policy is issued at a higher risk than the standard risk applied for. -In order for coverage to be effective immediately, the policy must be issued as applied for.

if an applicant is a minor, who signs the application?

Their guardian

Why should a producer collect a premium at the time the application is completed?

Without it, coverage cannot go into effect, as there would be lack of consideration.

A life insurance policy is being applied for on Zion's life. In order for the contract to be valid, all of the following have an insurable interest and could be the owner of the policy except:

Zion's neighbor -not an example of party that defines insurable interest

Which of the following is used by an insurer to collect info. from the applicant/ insured for underwriting purposes?

an application

Producers

are the initial point of contact for most insurance transactions.

Which of the following is NOT TRUE about life insurance applications?

confidential communication between the agent and the insurer. -applicant gets a copy of application, therefore not confidential.

An __ report is a general report of the applicants finances, character, morals, work, hobbies and other habits

inspection report