Nevada Life: Day 1
Which of the following documents delivered to the policyowner includes specific information about premium amounts, cash value, surrender values and death benefits?
A policy summary
A contract offered on a "take-it-or leave it" basis by the insurer, in which the insured's only option is to either accept or reject the contract.
Adhesion
Which of the following actions would be considered an offer?
An applicant submitting the application
A life insurance policy has a legal purpose if both of which of the following elements exist?
Insurable interest and consent
Changes to a written life insurance application must be
Initialed by the applicant.
A financial interest in the life of another person or the possibility of loosing something of value in the event of a loss is called
Insurable interest
For the purposes of life insurance underwriting, a 35 year-old male who is in excellent physical condition with no known medical problems or hazardous hobbies would most likely pay the lowest premium and be classified as a
Preferred risk
As a field underwriter, an agent has all of the following responsibilities EXCEPT
Issue the policy
Underwriting is a process of
Selection, classification, and rating of risks
The Suspicious Activity Reports Rules (SARs) makes it mandatory to report any transactions involving
$5,000 or more due to suspicious activities
All of the following are essential elements of a contract
1. Agreement 2. Consideration 3. Competent parties 4. Legal purpose
Field underwriter / Agent responsibilities:
1. Solicit business. 2. Help prevent adverse selection. 3. Obtain appropriate signatures on the application for insurance.
If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply?
5 days
The basic and main source of underwriting information for an insurer is the
Application
In life insurance, an insurable interest between the policyowner and the insured must exist
At the time of application
The consumer publication that explains life insurance in general terms to assist the applicant in making an informed decision at the time of application is called a
Buyer's guide
What is the purpose of a conditional receipt?
It is intended to provide coverage on a date earlier than the date of the issuance of the policy
The USA PATRIOT Act was enacted on
October 26, 2001
An insured submits the full premium along with a completed application, and the policy is issued 10 days later. When does the coverage begin?
On the date of the application
Information regarding the insured's general information can be found in which part of the application for life insurance?
Part 1
What is the risk classification of those who are average risk?
Standard
When an agent delivered an insurance policy to the insured, he collected the initial premium, as well as a document verifying that the insured had not had any injuries or illness since the application date. What is this document called?
Statement of good health
All of the following must sign the InsuraAce application EXCEPT
The insurer
In terms of parties to a contract, which of the following does NOT describe a competent party?
The person must have at least completed secondary education
If an insurer issued a policy based on the application that had unanswered questions, which of the following will be TRUE?
The policy will be interpreted as if the insurer waived its rights to have an answer on the application
Only one party, the insurer, is legally binded and obligated to pay losses covered by the policy. What contract element does this describe?
Unilateral
Which of the following is defined as an absolutely true statement upon which the validity of the insurance policy depends?
Warranty
All of the following are essential elements of a contract EXCEPT
Counteroffer
When would a misrepresentation on the insurance application be considered fraud?
If it is intentional and material
If the agent feels that there could be misrepresentation on the part of the applicant for insurance, what must the agent do?
Inform the insurance company through the Agent's report
Which of the following is considered a field underwriter?
an agent
The Medical Information Bureau is (MIB)
A nonprofit trade organization put together by insurance companies to alert insurers to adverse medical history
A presentation or depiction that distinguish between guaranteed and nonguaranteed elements of a policy is called
A policy illustration
The social mechanism for the transfer of risk
Insurance
Which of the following terms means the frequency of premium payment?
Mode
Which of the following premium payment modes would result in the highest overall premium for a year's worth of life insurance?
Monthly
Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report
Must be informed of the source of the report
Insurable interest exists in all of the following EXCEPT
A debtor insuring the life of a lender
A contract in which both parties exchange unequal values. For example, An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe?
Aleatory
Which of the following includes information regarding a person's credit, character, reputation, and habits?
Consumer Report
The federal law that protects consumers against the distribution of incorrect and obsolete personal or financial information and allows the consumer to challenge the validity and source of the information is called?
Fair Credit Reporting Act
When Y applied for insurance and paid the initial premium on August 14, he was issued a conditional receipt. During the underwriting process, the insurance company found no reason to reject the application. Y was killed in an automobile accident on August 22, before the policy was issued. In this case, the insurer will
Issue the policy anyway and pay the death benefit to the beneficiary
The solicitation and sale of a life insurance contract to a third party who has no insurable interest in the insured is called a/an
Life Settlement
Untrue statements on the application that are discovered during the underwriting process that could void the contract are called
Misrepresentation
Statements in an insurance application that must be true to the best of the applicant's knowledge are called
Representations
Which is the appropriate action by the insurer if it receives an incomplete application?
Return the application to the applicant for completion
What is the purpose of a disclosure statement in life insurance policies?
To explain features and benefits of a proposed policy to the consumer
Which receipt issued at the time of application may provide coverage on the date the receipt is issued or after the results of medical tests?
Conditional
Which policy provision states that each party must provide something of value to each other in order for the contract to be valid?
Consideration
Which of the following is NOT the consideration in a life insurance policy?
The application given to a prospective insured
Medical examinations, when required by the insurance company, are conducted by physicians or paramedics. What is true regarding this process?
The insurer must disclose the use of testing to the applicant, and obtain written consent from the applicant on the approved form
Which of the following is used to compare the cost of one life insurance policy against another in order to guide prospective purchasers to policies that are competitively priced?
Cost comparison methods
An agent is filling out an insurance application for a client. The applicant realizes she should have answered an earlier question differently, which of the following methods should the agent use to make the change
Cross out the incorrect information, write in the correct answer, and have the applicant initial the change
Which of the following individuals must have insurable interest in the insured?
Policyowner
Insurers must provide applicants with a buyer's guide
At the time of application
If an applicant for a life insurance policy is found to be a substandard risk, the insurance company is most likely to
Charge a higher premium
What federal law protects health information?
Health Insurance Portability and Accountability Act (HIPAA)
The Medical Information Bureau (MIB) helps insurers compare medical information they have collected on a potential insured with the information received from
Other member insurers
information regarding the insured's medical history can be found in which part of the application for life insurance?
Part 2
An individual applied for an insurance policy and paid the initial premium. The insurer issued a onditional receipt. Five days later the applicant had to submit to a medical exam. If the policy issued, what would be the policy's effective date?
The date of the medical exam
If a medical exam is required for the underwriting of a life insurance application, who is responsible for the cost of the medical exam?
The insurer
A life insurance arrangement in which a person with no relationship to the insured purchases a life policy on the insured's life therefore violating the principle of insurable interest is called
STOLI
What is the risk classification for those who are insurable, but have a higher than average risk?
Substandard / Rated
In comparison to consumer reports, which of the following describes a unique characteristic of • investigative consumer reports?
The customer's associates, friends, and neighbors provide the report's data.
An individual applied for an insurance policy and paid the initial premium. The insurer issued a conditional receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued, what would be the policy's effective date?
The date of the medical exam
When is a statement of good health required?
When the policy is delivered and the initial premium is collected
An insurance contract requires that both the insured and the insurer meet certain conditions for the contract to be enforceable.
Conditional
Most agents try to collect the initial premium for submission with the application. When an agent collects the initial premium from the applicant, the agent should issue the applicant a
Premium receipt
Which of the following is considered to be the most important source of information available to the insurer?
The field underwriter(agent's report)
Which of the following best describes the purpose of the USA PATRIOT Act with regards to the insurance industry?
To prevent terrorism and money laundering activities through monitoring of financial transactions
In forming an insurance contract, when does acceptance usually occur?
When an insurer's underwriter approves coverage
If an agent accepts a completed application without the first premium, when does coverage become effective for the insured?
When the policy is delivered and the first premium is paid and the statement of good health is collected
An insurer mails a new policy to the policyowner. When the insurer relinquishes control of the policy, it is considered
Delivered
All of the following information about tr applicant is identified in the general information section of a life insurance application EXCEPT
Education