Unit 2: Life/Health Insurance Underwriting QBank

Chantal applied for life insurance on Nov 1, but she did not submit a premium payment with the application. She underwent a physical examination on Nov 10, which she passed, and the results of that exam were forwarded to the insurance company. The policy was issued by the company on Nov 15, and the agent delivered the policy to Chantal on Nov 17, at which time she was paid the first premium. When did Chanta;'s coverage become effective?

Nov 17

All of the following are forms of unfair discrimination EXCEPT

charging one person a higher premium than someone else of the same age and sex because of a higher risk represented by that person

All of the following factors influence an applicant's mortality EXCEPT

credit report

The overall purpose of the USA PATRIOT Act is to

deter terrorist activity

If a premium payment had not been given with the application, the policy becomes effective only when the producer delivers the policy and

explains its provisions and obtains the initial premium and a signed statement of continued good faith

Major risk factors in life and health insurance underwriting include all of the following EXCEPT

financial status

Coverage for a health insurance policy will take effect just as if the policy had already been issued if all of the following conditions have been met EXCEPT

the policy has been legally delivered to the applicant

Malik works as a dentists and mountain climbs, skis, and flies airplanes in his spare time. When he applies for a life insurance policy, the agent's and Malik's signatures will be required on all of the following documents EXCEPT

the report issued by the Medical Information Bureau

ERISA requires that certain benefit and insurance plan information be made available to all of the following EXCEPT

the state legislature

Jordan completed an application for life insurance and paid the initial premium. When his agent delivers the policy, the premium is higher. This is because

the underwriters determined Jordan to be substandard risk

An attending physician's statement (APS) requested by the underwriting department will normally contain all of the following applicant information EXCEPT

a Medical Information Bureau report

When Lisa applied for a life insurance policy, the agent issued a receipt stating that the coverage is effective as of the date of application, if the application is found to be insurable under the company's general underwriting rules. This type of receipt is known as

a conditional receipt

What is stranger-owned life insurance?

a life insurance transaction where investors persuade seniors to take out new life insurance policies, naming the investor as the beneficiary

If a medical report is required on an applicant, it is completed by

a paramedic or examining physician

If the first premium was not paid at the time of application, what must the producer also collect?

a signed statement of good health

An insured that meets the average health and life expectancy anticipated by the insurer for a person of that age and gender would be classified as

a standard risk

Which of the following statements pertaining to the Fair Credit Reporting Act is NOT correct?

the Fair Credit Reporting Act is a state law that helps ensure accurate reporting of information about consumers

Which of the following statements pertaining to the Medical Information Bureau (MIB) is NOT correct?

the MIB is organized and supported by private hospitals

If there are changes to an insurance application due to an error information, who must initial the corrections?

the applicant

Of the following, which is a situation that could results in the conditional receipt becoming void?

the applicant is found to be a substandard risk

An insurer will use all of the following to determine if a person should be issued a policy EXCEPT

the applicants work history

What is the basic source of information for life insurance underwriting and policy issue?

the application

Each application for life insurance requires the signature of all of the following EXCEPT

the beneficiary

James signed an application for a $50,000 life insurance policy and paid the first premium on Oct 1. The agent issued a conditional receipt. A week later, James took the required medical examination and was found to be insurable. If he dies before the insurer approves the application,

the coverage will be retroactively effective

If an application for insurance is sent to the insurer without the first premium, but the premium is paid when the policy is delivered, the effective date of coverage is

the date the policy was delivered

Upon issuance of a conditional receipt to an insurance applicant who has paid the insurer an initial premium,

the insurance company is conditionally assuming the risk

Which section of the application should contain a record of any injuries the applicant may have suffered?

the medical section

An applicant determined by underwriting to be declined would be

uninsurable at any price

During the underwriting process, an insurer may do all of the following EXCEPT

verify the applicant's militarys records, if any

Jia is applying for individual medical insurance coverage. All of the following factors will adversely affect her ability to obtain coverage at a reasonable premium EXCEPT

working at a desk every day

What is the purpose of the Fair Credit Reporting Act?

It requires consumer report agencies to adopt reasonable procedures when exchanging credit information

Which of the following statements regarding risk factors is NOT correct?

Jill is 15 years younger than her supervisor and therefore poses a higher risk to an insurance company

Which of the following would NOT constitute unfair discrimination in insurance underwriting?

Maria is charged a higher premium based on her poor health

Which of the following statements about policy delivery is CORRECT?

Most insurers require agents to personally deliver the policy so that they can explain the policy's terms, exclusions, and riders

If consumer information reports are obtained under false pretenses, the maximum penalty is

a $5,000 fine, imprisonment for 1 year, or both

A notice to Applicant must be issued to the consumer no later than

3 days after the report was requested

A consumer may make a written request for complete disclosure of the nature and scope of an investigative report regarding her credit history. The disclosure must be made within

5 days

Most state laws allow life insurance policies to be backdated up to

6 months

Which of the following acts helps ensure confidential, fair, and accurate reporting of consumer information?

A Fair Credit Reporting Act

Which of the following statements regarding the Fair Credit Reporting Act is TRUE?

A notice to Applicant is required

Which of the following criteria may be used when determining the premium rate for an insurance applicant?

Age

Elaine signs an application for a $50,000 life policy, pays the first premium, and receives a conditional receipt. If Elaine were killed in an auto accident 2 days later,

All her beneficiary would receive $50,000, if Elaine qualified for the policy as applied for

Which of the following statements pertaining to a life insurance policy application is CORRECT?

An agent must be very specific when listing an applicant's occupation on an application

Which of the following situations is the best example of unfair discrimination?

An insurer assigns a premium rating to an applicant's race have a shorter than average life expectancy

Why do most states ban STOLI transactions?

Because the investor, who is named as the beneficiary, does not have an insurable interest in the insured

Anna applied for a $2 million life insurance policy and paid the first premium but was later found to be uninsurable. The agent gave her a receipt that guarantees coverage until the insurer formally rejects her application. Which type of receipt did Anna receive?

Binding

Which of the following is NOT considered unfair discrimination?

Charging a higher individual life insurance premium for a 50-year-old than for a 25-year-old

Sam applied for a term life insurance policy, paid the initial premium, and received a conditional receipt on December 1. If the insurer issued the policy on January 1 and the agent delivered the policy on January 3, the policy effective date is

December 1

Which of the following statements regarding the delivery of a life insurance policy is NOT correct?

During the delivery appointment, the agent must have the application signed by the policy owner.

Which of the following situations would create a possible errors and omissions lability to the producer?

During the sale of a replacement health policy, the producer tells an applicant that the new policy will cover expenses ordinarily paid by Medicare

which of the following does NOT appear in the producer's report?

Education

What kind of policy will protect an insurance agent against liability arising out of acts committed in her professional capacity?

Errors and Omissions

Which of the following acts of legislation requires fair and accurate reporting of a consumer's buying and bill-paying history?

Fair Credit Reporting Act

Which of the following statements is CORRECT?

George's brother, father, and grandfather has diabetes during their lifetimes. Family history will be considered a risk factor when George applies for insurance

If a life insurance applicant is given a binding receipt, when does her coverage become effective?

On the date the receipt is given

Which of the following would be an authorized method of handling an initial premium payment?

Provide the applicant with a signed receipt of the appropriate type (binding or conditional)

All of the following are considered suspicious activities EXCEPT

Receipt of cash payments in excess of $5,000

Which of the following statements regarding consumer rights is NOT correct?

Reporting agencies may not delete information in reports when proved incorrect.

With regard to substandard life insurance risks, which of the following statements is CORRECT?

When the applicant represents a substandard risk, the policy may be modified to reduce the benefits provided

On August 1, Roger completed an application for a major medical policy, have his agent a check for the initial premium, and received a conditional receipt from the agent. No medical examination was required. On August 3, the agent submitted Roger's application and premium to the insurance company. On August 6, Roger was involved in an accident and admitted to a hospital. On August 12, the agent received Roger's policy from the insurance company. Which of the following statements concerning this situation is CORRECT?

Roger's coverage began when he received the conditional receipt

Lawrence signed an application for a life insurance policy on September 2 and took a required medical exam on September 4. He gave the agent a check for the initial premium and received a conditional receipt at the time of the application. The policy was issued as originally applied for and the agent delivered the policy to him on October 15. The earliest effective date for Lawrence's insurance policy is

September 4

All of the following are sources of insurability information about life insurance applicants EXCEPT

Social Security reports

Which of the following statements pertaining to sources of insurability information is CORRECT?

Special questionnaires are used to obtain additional information when an extra hazard or risk may be involved

Which of the following statements regarding life insurance applications is NOT correct?

Statements made by the applicant on the application are considered to be warranties

ERISA was enacted to

protect the interests of participants in employee benefit and health plans

An agent may do all of the following to comply with disclosure notification rules EXCEPT

provide a copy of the information disclosure procedures form to the state Department of Insurance

The concepts of agent accuracy and completeness would prohibit all of the following practices EXCEPT

reviewing the completed application with the applicant to ensure accuracy

Underwriting is a process of

selecting, classifying, and rating risks

Choua applied for a $100,000 whole life policy but did not pay the initial premium at the time of application. When the agent later delivers the policy, the agent must collect the premium and obtain which of the following statements from Choua?

A statement of good health

Louise applied for a $40,000 life insurance policy, paid the initial premium, and received a conditional receipt. All of the following statements pertaining to this situation are correct EXCEPT:

If Louise died of a heart attack day before takin the required medical exam, the insurer would still pay the beneficiary the coverage amount stated in the application

Which of the following statements pertaining to the Medical Information Bureau (MIB) is CORRECT?

Information obtained from the MIB by insurers may not be used as the sole reason to decline an applicant's request for insurance

Which of the following statements pertaining to inspection reports and credit reports on life insurance applicants is NOT correct?

Inspection reports only require consumer notification when they are conducted

What is the most common approach for rating life insurance applicants who are determined to be sustained risks?

Issuing a policy in the amount applied for, with a higher than standard premium.

An agent must notify the applicant that all of the following sources will be used to assess the applicant EXCEPT

personal references

What are life insurance transactions that are marketed to senior citizens and a possible method of fraud called?

Stranger - Owned life insurance (STOLI) or investor-owned life insurance (IOLI)

AGC Publishing applied for key-person life insurance on its chief executive officer. Which of the following parties must sign the application?

The CEO, another officer of AGC, and the agent handling the application

Which of the following statements regarding policy delivery is NOT true?

The agent may hold on to the policy for safekeeping without showing it to the policyowner

With regard to life insurance applications, which of the following statements is CORRECT?

The application includes the names of the insured and the beneficiary

Which of the following is NOT found in Part 1 of the application?

The name and address of the insured's current physician

Which of the following is an accurate statement for a producer to make regarding underwriting?

The primary source of information used in underwriting will be the application

When meeting with an applicant for health insurance, an insurance producer notices a pack of cigarettes in the applicant's shirt pockets, even though the applicant says he has been a nonsmoker for 10 years. Which of the following statements best describes the producer's responsibility?

The producer should provide an agent's report to the insurer explaining what she observed

Which of the following statements pertaining to inspection reports on life insurance applicants is NOT correct?

They provide information obtained principally from law enforcement officials

Which of the following statements best defines why an applicant would want to backdate an insurance application?

To have the policy's premium based on the insured's age at the earlier date

Which of the following statement's regarding how to fix a mistake in an insurance application is NOT correct?

Under no circumstances may an agent correct information on an insurance application once it has been completed by the applicant

When is a conditional receipt normally given to a applicant?

When the initial premium is paid

When applicable, all of the following forms require an applicant's signature EXCEPT

an agents report

An investigative consumer report is also called

an inspection report

All of the following may be done to determine insurability in regard to AIDS EXCEPT

asking questions regarding the applicant's sexual orientation

Underwriting techniques commonly used by insurers in issuing policies to applicants who do not measure up to a standard rating include all of the following EXCEPT

averaging total risks pending

For situations where no initial premium was paid when the application was taken, when delivering that policy the agent is generally required to do all of the following EXCEPT:

present the insured with a conditional receipt.

Penalties for violating the Fair Credit Reporting Act include

fines, actual damages suffered by the consumer, punitive damages, and reasonable attorney's fees

All of the following are found in the first part of the application EXCEPT

hobbies

Which of the following statements regarding a conditional receipt is CORRECT?

it is given only if the initial premium has been submitted with the signed application

Which of the following statements pertaining to a temporary insurance agreement is CORRECT?

it provides temporary coverage until an application is rejected or the policy is issued

An applicant for health insurance completes the application and satisfies all of the conditions of the conditional receipt. If the policy is eventually issued as applied for, coverage takes effect

just as if the policy had already been issued

All of the following are penalties for violating the Fair Credit Reporting Act EXCEPT

loss of license indefinitely

Delivering policies in person gives the agent an opportunity to do all of the following EXCEPT

make last-minute changes to the policy

All of the following can directly affect the amount of premium an individual insured pays EXCEPT

marital status

Major risk factors in health insurance underwriting include all of the following EXCEPT

marital status

The concept of agent confidentiality requires all of the following practices EXCEPT

notifying the applicant of a substandard rating decision by the insurer