Chapter 6- Life Insurance Underwriting and Policy Issue

Which of the following is NOT a reason for a business to buy key person life insurance?

An increased pension liability if the key employee dies

A policyowner pays the first annual premium for a $50,000 life insurance policy and dies one month after the policy effective date. Which of these statements is normally true?

Beneficiary receives $50,000 income tax-free

Which of these is NOT considered to be a cost connected with an individual's death?

Business expenses

Which of the following disability buy-sell agreements is best suited for businesses with a limited number of partners?

Cross-purchase agreement

All of these are typically sources of underwriting information for life or health insurance EXCEPT? A. Consumer reports B. Medical Information Bureau (MIB) reports C. Disclosure authorization response D. Attending physician's statement (APS)

Disclosure authorization response

Which of these is NOT used as selection criteria in the underwriting process of a life insurance application?

National origin

Where is the difference between a standard risk and a substandard risk reflected?

Premium charges

When must a producer provide disclosure about information practices to an applicant?

Prior to or at the time of signing the application

Which of these factors does NOT influence an individual's need for life insurance?

Self-maintenance expenses

XYZ Corp gives money to an employee to purchase a life insurance policy and allows the employee to select the beneficiary. What kind of plan is this?

Split-dollar

Which of the following describes a person who is NOT acceptable by an insurer at standard rates because of health history/ occupation/ or hobbies? A. Standard risk B. Preferred risk C. Unacceptable risk D. Substandard risk

Substandard risk

Which of the following is NOT considered to be an expense for surviving family members of a deceased wage earner?

Unemployment tax expenses

When does the producer give a premium receipt for a life insurance application?

When the initial premium has been paid with the application

The premiums paid by an employer for his employee's group life insurance are usually considered to be

tax-deductible to the employer

An applicant intentionally lying to an insurance company on an application in order to obtain a cheaper premium is an example of? A. rebating B. coercion C. fraud D. twisting

fraud

Insurable interest in one's own life is legally considered as

generally unlimited

With life insurance, the needs approach is used primarily in determining

how much life insurance a client should apply for

An insurance policy may be issued with a preferred insurance premium in all of these situations EXCEPT

living in a rural area

Employers often purchase life insurance on a key employee in order to

pay for finding and training a replacement if the employee dies prematurely

A signed good health statement may be requested by a life producer at the time of

policy delivery

Signatures for an insurance application MUST be obtained by the producer from all of the following sources EXCEPT? A. the producer B. the insured C. the policyowner D. the beneficiary

the beneficiary

In what situation could an insurance policy's coverage be modified?

Applicant is a substandard risk

In which of the following relationships would there NOT be an insurable interest? A. Parent to child B. Business partner to business partner C. Brother to sister D. Business owner to business customer

Business owner to business customer

The initial premium for a life insurance policy is typically paid in what way?

It is typically obtained by the producer and forwarded to the insurer

Preferred risk policies with reduced premiums are issued by insurance companies because the insured has? A. a higher face amount than average B. a better ability to pay premiums over a long period of time C. worse than average mortality or morbidity experience D. better than average mortality or morbidity experience

better than average mortality or morbidity experience

After an insurance application has been originated, the producer normally

is the major personal contact to the insured

How many months can a life insurance policy normally be backdated from the date of application? A. 3 B. 6 C. 9 D. 12

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What must be given to a life insurance applicant when the agent receives an application and the initial premium?

Conditional receipt

Field underwriting by a producer

may result in the disclosure of hazardous activities of the applicant

Upon policy delivery which of the following must a producer have an applicant sign if no initial premium was collected with the life insurance application? A. A waiver of premium B. A replacement form C. A good health statement D. An exclusion

A replacement form

An applicant submits a life insurance application where an investigative consumer report is used in the underwriting process. Which of these statements is true?

Applicant has a right to receive a copy of the report

Which of the following would be considered an underwriting duty of an agent? A. Requesting medical information from the Medical Information Bureau (MIB) B. Completing all applications and collecting initial premiums C. Accepting or declining an application D. Assigning a risk classification

Completing all applications and collecting initial premiums

Which report contains information regarding an individual's general reputation and credit standing?

Consumer report

When the disclosure of an insured's nonpublic information is involved, what is the insurer obligated to do?

Give notice, explain, and allow opting out

An insured may be required to sign which document at policy delivery to ensure there has not been any adverse medical conditions since the time of the application?

Good health statement

The principle of insurable interest in regards to a life insurance contract is accurately described in which statement? A. An agent establishes insurable interest B. An individual does not have insurable interest on his or her own life C. Insurable interest only pertains to business arrangements D. Insurable interest can be based on the love and affection of individuals related by blood or law

Insurable interest can be based on the love and affection of individuals related by blood or law

The Medical Information Bureau consists of members from which group?

Insurance companies

What is involved when a life insurance policy has been backdated? A. Setting a policy's effective date prior to a preexisting condition B. Redating a policy after it has been issued C. Reinstating a lapsed policy D. Making the policy effective on an earlier date than the present

Making the policy effective on an earlier date than the present

A field underwriter's main task is? A. assign a risk classification to the insured B. report medical information to the Medical Information Bureau (MIB) C. to ensure an applicant's medical information is accurate and complete D. to approve or decline an applicant

To ensure an applicant's medical information is accurate and complete

An agent gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective?

When the conditions of the receipt are met

After an applicant reads and signs an insurance application, he/she should be conscious of the fact that

a false statement could lead to loss of coverage

A change in an insurance application requires? A. an initial made by the producer B. an initial made by the applicant C. approval by the insurer D. submitting a new application

an initial made by the applicant

The principal source of information concerning an applicant's identity, age, and marital status is found in the

completed application

According to the needs approach, an emergency reserve fund's primary purpose is to

cover the cost of unexpected expenses

All of these are duties that a producer may be required to perform when delivering an insurance policy EXCEPT

Leave a conditional receipt with client

What happens when an insurance policy is backdated? A. The policy's elimination period is waived B. The time frame for reinstating a lapsed policy is extended C. The policy's probation period is earlier than the present D. The policy's effective date is earlier than the present

The policy's effective date is earlier than the present

The reason for backdating a policy is

to obtain a premium rate based on an earlier age

Mike applied for life insurance and was issued a conditional receipt. He is later found to be insurable and is issued a policy. When does his coverage become effective?

Date of issuance of the conditional receipt

Which of these is NOT considered the responsibility of a producer during the underwriting process?

Selecting the final approval date

When an individual is planning to protect his family with life insurance, one method of doing so is called needs analysis. What exactly does needs analysis involve?

Identifies the needs of an individual and the individual's dependents

Which of these is NOT considered to be a risk factor in life insurance underwriting? A. Number of children B. Health history C. Hobbies D. Occupation

Number of children

When a producer submits an application that discloses personal information regarding the applicant, who supplies the privacy notice?

Producer

An insurance producer is often responsible for field underwriting during the application process. All of these are possible field underwriting roles EXCEPT? A. providing disclosure information to the applicant B. collecting initial premium C. policy delivery D. providing commission information to the applicant

Providing commission information to the applicant

K is an agent who takes an application for individual life insurance and accepts a check from the client. He submits the application and check to the insurance company, however the check was never signed by the applicant. If the application is approved, when will coverage be effective?

The date the agent delivered the policy, collected the initial premium, and obtained a good health statement from the insured

Which of these is NOT an underwriting responsibility of a life insurance agent?

Determining the final rate classification

When using the needs approach for life insurance planning, a lump sum may be created to provide for all of the following EXCEPT

Employee benefits

When an applicant applies for a large amount of life insurance coverage, which of the following would likely NOT be an underwriting requirement?

Eye examination

What is considered a valid reason for small corporations to insure the lives of its major stockholders?

Fund a buy-sell agreement

Which of these is NOT relevant when determining the amount of personal life insurance needed?

Local unemployment rates

What is the purpose of the Medical Information Bureau (MIB)? A. To accept or decline insurance applicants B. To set the premium rates for insurers C. To help underwriters evaluate risk D. To perform physical examinations on applicant

To help underwriters evaluate risk

When does a life insurance policy typically become effective? A. When the policy is issued B. When initial premium is collected and policy is issued C. When the application is completed and signed D. When the completed application is signed and initial premium is collected

When initial premium is collected and policy is issued