Examfx: Chp.1: Completing the Application, Underwriting, and Delivering the Policy

Untrue statements on the application unintentionally made by insureds that, if discovered, would alter the underwriting decision of the insurance company, are called... A. Common errors B. Fraudulent statements C. Warranties D. Material misrepresentations

Material misrepresentations

The Federal Fair Credit Reporting Act.. A. Regulates telemarketing B. Protects customer privacy C. Regulates consumer reports D. Prevents money laundering

Regulates consumer reports

Which is the appropriate action by the insurer if a prospective insured submitted an incomplete application? A. Return the application to the applicant for completion B. Ask the producer who solicited the policy to complete and resign the application C. Issue a policy anyway since the application has been submitted D. Fill in the blanks to the best of the insurer's knowledge

Return the application to the applicant for completion

Which employees of an insurance company are responsible for the final risk selection? A. Producers/Agents B. Underwriters C. Executive officers D. Accountants

Underwriters

Which of the following is a statement that is guaranteed to be true, and if untrue, may be reach an insurance contract? A. Indemnity B. Warranty C. Concealment D. Representation

Warranty

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. Obtain appropriate signatures on the application for insurance D. Solicit business that will fall within the. insurer's underwriting guidelines

Issue the policy that is requested

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 cost of the examination will be waived B. The examiner C. The insurer D. The applicant

The insurer

When is the earliest a policy may go into effect? A. After the underwriter reviews the policy B. When the first premium is paid and the policy has been delivered C. When the insurer approves the application D. When the application is signed and a check is given to the agent

When the application is signed and the policy has been delivered

Which of the following best describes the MIB? A. It is a member organization that protects insured against insolvent insurer's B. it is a nonprofit organization that maintains underwriting information on applicants for life and health insurance C. It is a rating organization for health insurance D. It is a government agency that collects medical information on the insured from the insurance companies

it is a nonprofit organization that maintains underwriting information on applicants for life and health insurance

What is a material misrepresentation? A. A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company B. Any misstatement made by an applicant for insurance C. Concealment D. Any misstatement by the producer

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 characteristics does this describe? A. Personal B. Adhesion C. Conditional D. Unilateral

Adhesion

Who makes up the Medical Information Bureau? A. Physicians and paramedics B. Former insured C. Hospitals D. Insurers

Insurers

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. Credit history D. Ancestry

Ancestry

When an insurer begins underwriting procedures for an applicant, what will be the main source for its underwriting information? A. Interviews B. Application C. Medical records D. Stete records

Application

Which is the primary source of information used for insurance underwriting? A. Application B. Applicant interviews C. Private investigations D. Medical records

Application

Which of the following is the basic source of information used by the company in the risk selection process? A. Application B. Consumer report C. Agent's report D. Warranty

Application

If an applicant for a life insurance policy is found to be a substandard risk, the insurance company is most likely to.. A. Charge a higher premium B. Lower its insurability standards C. Refuse to issue the policy D. Require a yearly medical examination

Charge a higher premium

When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is.. A. Conditional B. Personal C. Unilateral D. Aleatory

Conditional

Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPT A. Consideration B. Offer and acceptance C. Legal purpose D. Conditions

Conditions

Representations are written or oral statements made by the applicant that are.. A. Guaranteed to be true B. Found to be false after further investigation C. Immaterial to the actual acceptability of the insurance contract D. Considered true to the best of the applicant's knowledge

Considered true to the best of the applicant's knowledge

Representations are written or oral statements made by the applicant that are.. A. Guaranteed to be true B. Found to be false after further investigations C. Immaterial to the actual acceptability of the insurance contract D. Considered true to the best of the applicant's knowledge

Considered true to the best of the applicant's knowledge

Which of the following includes information regarding a person's credit. character, reputation, and habits? A. Insurability report B. Consumer history C. Agent's report D. Consumer report

Consumer report

Which of the following reports will provide the underwriter with the information about an insurance applicant's credit? A. Any federal report B. Agent's report C. Consumer report D. Inspection report

Consumer report

Which of the following is NOT an example of a valid insurable interest? A. Debtor in the life of the creditor B. Business partners in each other's lives C. Child in parents' lives D. Employer in key employee's life

Debtor in the life of the creditor

A producer must do all of the following when delivering a new policy to the insured EXCEPT A. Disclose commissions earned from the sale of the policy B. Explain the rating producers if the policy is rated differently than applied for C. Collect any premium due D.Explain the policy provisions, riders, and exclusions

Disclose commissions earned from the sale of the policy

According to the Fair Credit Reporting Act, all of the following would be considered negative information about a consumer EXCEPT.. A. Disputes regarding consumer report information B. Late payments C. Failure to pay off a loan D. Tax delinquencies

Disputes regarding consumer report information

When would a misrepresentation on the application be considered fraud? A. If it is intentional and material B. Any misrepresentation is considered fraud C. When the application is complete D. Never: statements by the applicant are only representations

If it is intentional and material

An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies and habits. What type of a report is that? A. Medical information Bureau's report B. Agent's Report C. Underwriter's Report D. Inspection Report

Inspection Report

An underwriter may obtain information on an applicant's hobbies, financial status, and habits by ordering a(n).. A. Inspectors report B. Medical examination C. Attending Physician Statement D. Medical Information Bureau report

Inspectors report

Stranger-Originated Life Insurance (STOLI) policies are in direct opposition to the principle of.. A. Law of large numbers B.Indemnity C.Insurable interest D. Good faith

Insurable interest

Stranger-originated life (STOLI) insurance policies are indirect opposition to the principle of.. A. Law of large numbers B. Indemnity C. Insurable interest D. Good faith

Insurable interest

A life insurance policy has a legal purpose if both of which of the following elements exist? A. Policy owners and named beneficiaries B. Offer and counteroffer C. Insurable interest and consent D. Underwriting and reciprocity

Insurable interest and consent

The Medical Information Bureau (MIB) was created to project.. A. Insured's from unreasonable underwriting requirements by the insurance companies B. Insurance departments from lawsuits by policy owners C. Insurance companies from adverse selection by high risk persons D. Medical examiners that perform insurance physical examinations

Insurance companies from adverse selection by high risk persons

The Medical Information Bureau (MIB) was created to protect A. Insureds from unreasonable underwriting requirements by the insurance companies B. Insurance departments from lawsuits by policy owners C. Insurance companies from adverse selection by high risk persons D. Medical examiners that perform insurance physical examinations

Insurance companies from adverse selection by high risk persons

What is the purpose of a conditional receipt? A. It guarantees that a policy will be issued in the amount applied for B. It serves as proof that the applicant has been determined insurable C. It is intended to provide coverage on a date prior to the policy issue D. It is given only to applicants who fully prepay the premium

It is intended to provide coverage on a date prior to the policy issue

An applicant who receives a preferred risk classification qualifies for.. A. Higher premiums than a person who receives a sub-standard risk B. Higher premiums than a person who receives a standard risk C. Dividends payable for lack of claims D. Lower premiums than a person who receives a standard risk

Lower premiums than a person who receives a standard risk

Which part of an insurance application would contain information regarding the cause of death of the applicant's deceased relatives? A. General information B. Inspection Report C. Medical information D. Agent's report

Medical information

Part 2 of the application for life insurance provides questions regarding all of the following EXCEPT.. A. Other insurance coverages B. Family health history C. Alcohol and tobacco consumption D. Recent surgeries

Other insurance coverages

A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will.. A. Pay the policy proceeds up to an established limit B. Automatically pay the policy proceeds C. Not pay the policy proceeds under any circumstances D. Pay the policy proceeds only if it would have issued the policy

Pay the policy proceeds only if it would have issued the policy

Which of the following individuals must have insurable interest in the insured? A. Producer B. Beneficiary C. Policy owner D. Underwriter

Producer

Which of the following is a risk classification used by underwriting for life insurance? A. Excellent B. Standard C. Poor D. Normal

Standard

Which of the following would provide an underwriter with information concerning an applicant's health history? A. The inspection report B. The Medical Information Bureau C. A medical examination D. Agent's report

The Medical Information Bureau

Which of the following would provide an underwriter with information concerning an applicant's health history? A. The inspection report B. The Medical Information Bureau C. A medical examination D. The agent's report

The Medical Information Bureau

Which of the following in 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. Promise to pay covered losses

The application given to a prospective insured

In comparison to consumer reports, which of the following describes a unique characteristic of investigative consumer reports? A. They provide additional information from an outside source about a particular risk B. The consumer has no knowledge of this action C. They provide information about a customer's character and reputation D. The customer's associates, friends, and neighbors provide the report's data

The customer's associates, friends, and neighbors provide the report's data

Whose responsibility is it to make certain that an application for insurance is filled out completely and correctly? A. The insurance company B. The producer C. The beneficiary of the applicant D. The applicant

The producer

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. Wether an insurable interest exists between the individuals B. The gender of the applicant C. The type of policy requested D. Which individual will pay the premium

Wether an insurable interest exists between the individuals

In forming an insurance contract, when does acceptance usually occur? A. When an insurer's underwriter approves coverage B. When an insurer receives an application C. When an insurer delivers the policy D. When an insured submits an application

When an insurer's underwriter approves coverage

What is the timeframe for filing relevant Suspicious Activity Reports? A. Within 30 days of initial discovery B. Within 90 days of the suspicious transaction C. Within 90 days of initial discovery D. Within 30 days of the suspicious transaction

Within 30 days of initial discovery